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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101 Federal Street
Boston, MA 02110
(Address of principal executive offices)
SEI Investments
One Freedom Valley Drive
Oaks, PA 19456
(Name and address of agent for service)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: 1-800-262-9565
DATE OF FISCAL YEAR END: DECEMBER 31, 2007
DATE OF REPORTING PERIOD: DECEMBER 31, 2007
ITEM 1. REPORTS TO STOCKHOLDERS.
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BISHOP STREET
FUNDS
ANNUAL REPORT
DECEMBER 31, 2007
STRATEGIC GROWTH FUND
LARGE CAP CORE EQUITY FUND
[GRAPHIC OMITTED] HIGH GRADE INCOME FUND
HAWAII MUNICIPAL BOND FUND
MONEY MARKET FUND
TREASURY MONEY MARKET FUND
INVESTMENT ADVISER
BISHOP STREET
CAPITAL MANAGEMENT
[BISHOP STREET FUNDS LOGO]
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The Funds file their complete schedules 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
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LETTER TO SHAREHOLDERS .................................................. 2
INVESTMENT ADVISER'S REPORT ............................................. 5
STRATEGIC GROWTH FUND
Management Discussion ................................................ 7
Schedule of Investments .............................................. 11
LARGE CAP CORE EQUITY FUND
Management Discussion ................................................ 14
Schedule of Investments .............................................. 18
HIGH GRADE INCOME FUND
Management Discussion ................................................ 24
Schedule of Investments .............................................. 26
HAWAII MUNICIPAL BOND FUND
Management Discussion ................................................ 34
Schedule of Investments .............................................. 36
MONEY MARKET & TREASURY MONEY MARKET FUNDS
Management Discussion ................................................ 45
Schedule of Investments .............................................. 47
STATEMENTS OF ASSETS AND LIABILITIES .................................... 51
STATEMENTS OF OPERATIONS ................................................ 53
STATEMENTS OF CHANGES IN NET ASSETS ..................................... 55
FINANCIAL HIGHLIGHTS .................................................... 58
NOTES TO FINANCIAL STATEMENTS ........................................... 62
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ................. 73
DISCLOSURE OF FUND EXPENSES ............................................. 74
NOTICE TO SHAREHOLDERS .................................................. 76
BOARD OF TRUSTEES AND OFFICERS .......................................... 78
1
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BISHOP STREET
LETTER TO SHAREHOLDERS
FUNDS
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[PHOTO OMITTED]
Dear Shareholder:
After years of relative calm and stability in the financial markets, volatility
soared as distress in the U.S. sub-prime mortgage market set off a global credit
and liquidity crisis not witnessed in years. The magnitude of the damage has not
yet been fully determined but one thing is clear. Uncertainty about future
economic growth both here and abroad has severely crippled investor confidence.
Despite rapid and successive central bank moves, investor confidence remains
fragile and risk premiums have ratcheted higher across the world's financial
markets.
U.S. economic activity is clearly slowing, hurt by a very weak housing market
and there is now pressure on consumers to increase their savings base to offset
the wealth destruction that has occurred in their real estate and financial
portfolios. This undoubtedly will weigh heavily on consumer spending in 2008 and
we are expecting the Federal Reserve (the "Fed") to respond with additional
interest rate cuts in the months ahead. Our expectation is for a slowdown in the
economy - not a recession, although that probability will increase if the Fed
remains too cautious. The months ahead will be key as the story continues to
unfold.
A WEAK FINISH FOR STOCKS
Despite the spike in volatility and uncertainty surrounding the credit markets,
the U.S. stock market produced surprisingly strong results for the year even in
the face of the significant correction in the second half of 2007. Ongoing
problems with low-quality mortgage loans continued to rattle the markets and
weighed heavily on investor confidence. Oil surged to record highs while the
U.S. dollar dipped to record lows against all major currencies.
Stocks finished the year on a soft note with the S&P 500 Composite Index and the
Dow Jones Industrial Average gaining just 5.49% and 8.87%,
Bishop Street Funds 2
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respectively, after posting double-digit gains earlier. The NASDAQ Composite
Index finished up 10.5%, reflecting a resurgence in the information technology
sector.
Meanwhile, international markets continued to outperform their domestic
counterparts with the emerging markets faring particularly well followed by the
European and Pacific regions. Japan was the exception. With the weak dollar,
returns of most foreign equity markets remained attractive to U.S.-based
investors.
BOND INVESTORS FLEE TO SAFETY
As troubles in the sub-prime credit markets rippled through the financial
markets here and abroad, bond investors rushed to the relative safety of U.S.
treasuries. The "flight to quality" drove Treasury yields lower and widened
credit spreads for riskier bonds. As a result, the yield curve steepened
dramatically as recession fears forced Federal Reserve Board actions. The
central bank lowered the target for short-term interest rates by 100 basis
points to 4.25% during 2007 in three separate moves. And after reaching a high
of 5.30% in June, the yield on the 10-year Treasury note fell to a low of 3.84%
on November, only to finish the year at 4.02%.
For 2007, the taxable bond market generated a return of 7.13% while tax-exempt
municipal bonds earned just a 4.93% return. This sector, as most other
non-Treasury spread sectors, did not benefit from the late year rally in
Treasuries. The tax-exempt municipal bond yield curve steepened as well with
short-term municipal yields falling while intermediate to long-term rates rose.
Money markets shared the spotlight, but for a different reason. The usually
safe, liquid commercial paper markets came unglued as the sub-prime mortgage
contagion continued to spread. As the flight to quality ensued, Treasury bill
yields fell and finished the year at 3.31% after spending most of the first half
of 2007 above 5%.
December 31, 2007 3 www.bishopstreetfunds.com
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BISHOP STREET
LETTER TO SHAREHOLDERS
FUNDS
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DIVERSIFICATION IS THE KEY IN VOLATILE MARKETS
The sharp increase in stock and bond market volatility in recent months shocked
many investors. While we at Bishop Street Capital Management have always
encouraged our shareholders to take a long-term view and apply sound
diversification principles across and within asset classes, these basic
investment tenets became ever more important during the recent uncertain and
turbulent environment.
Our Bishop Street Funds (the "Funds") are managed with these basic investment
principles in mind. Our Funds offer excellent diversification among individual
holdings and across sectors. But perhaps more importantly, our portfolio
managers focus on managing each Fund in a consistent manner against their
respective investment goals and objectives. And as we have advised our
shareholders in the past, we believe that a balanced portfolio comprised of a
combination of our Strategic Growth Fund, Large Cap Core Equity Fund, and other
fixed income funds should serve as a building block of your carefully designed,
balanced portfolio reflective of your investment goals, time horizon, and
appetite for risk.
Thank you for investing with Bishop Street Capital Management. We appreciate
your continued trust and confidence.
Sincerely,
/s/ Michael K. Hirai
Michael K. Hirai, CFA
President
January 15, 2008
Bishop Street Funds 4
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BISHOP STREET
INVESTMENT ADVISER'S REPORT
FUNDS
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INVESTMENT ADVISER'S REPORT
The markets have reeled over the past several months amid growing signs that
housing and credit market weakness was spilling out into the broader economy.
Fourth quarter economic growth was just 0.6%, perilously close to recession
territory. With weak data continuing to pour in during January, no one would be
surprised if the economy slipped into a recession in 2008. In response, the
Federal Reserve (the "Fed") is aggressively lowering short term interest rates,
and it seems likely that Congress will also quickly enact a fiscal stimulus
package. These policy moves provide hope that stronger growth will resume in the
second half of the year.
There is more pain to come, however. The housing industry downturn has further
to run, judging by the record level of unsold home inventories, which must be
whittled down before a housing recovery can begin. Further, despite over $100
billion in write-downs of subprime mortgage-related securities, we have not yet
worked through the follow-on effects of the credit binge that helped fuel the
housing bubble. Now, despite lower treasury rates, credit has become much
tighter for consumers and corporate borrowers alike.
Although housing is in a deep recession, home building is only about 5% of the
economy. It is the vulnerability of consumer spending, about 70% of the economy,
that most concerns the Fed and other economic forecasters. Month after month,
year after year, the American consumer has not faltered. Even during the last
recession in 2001, consumer spending never fell. Today, however, we are in
uncharted territory, with record food and energy prices, a negative savings
rate, and home prices falling nationally. We simply do not know how consumption
will be affected in these circumstances. We do know that employment and personal
income growth are crucial props to consumer
June 30, 2007 5 www.bishopstreetfunds.com
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BISHOP STREET
INVESTMENT ADVISER'S REPORT
FUNDS
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spending. It is for this reason that the Fed is so intent on preventing a
general and self-reinforcing loss of confidence in the economy. In these
perilous times, it can not be overstated how important the Fed's actions will be
to the outlook.
There are reasons for cautious optimism. The U.S. economy has been distinguished
by its flexibility, innovation and productivity growth. Over the years our
economy has proved its resilience time and again. Help in the form of
accommodative monetary policy and fiscal stimulus is on the way. There is no
capital stock or inventory overhang (outside of housing) that have presaged
previous recessions. Although a "soft landing" is no longer in the cards,
recession is by no means inevitable.
Looking ahead, the weakening economy seems to bode ill for the markets. But it
is precisely in times such as these, when markets are most volatile, that
investors with skill and nerve find opportunity. It also in times like these
that a well-diversified portfolio proves its value. We believe investors would
do well to keep these principles in mind during 2008.
Bishop Street Funds 6
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BISHOP STREET
MANAGEMENT DISCUSSION
FUNDS
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Strategic Growth Fund
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2007 saw a dramatic slowdown of the U.S. economy, which was very strong in the
first half, until developments of the "sub-prime crisis" undermined confidence
and spending.
The market started 2007 amid widespread expectations that economic expansion had
reached the end of its cycle. This belief, initially based on the expected
impact of the weakness in the housing sector, was supported by a gradual
deterioration in various indicators, such as the ISM indices and manufacturing
payrolls. The relatively vague guidance issued by company managers in that
period also contributed to the sentiment of uncertainty.
The slowdown however proved to be short-lived. In the absence of any other
inflationary trend, the U.S. economy showed a remarkable resilience despite high
energy prices. While officially maintaining a rather cautious stance, business
leaders kept investment and employment at reasonably high levels which, in turn,
had a favorable impact on consumer confidence and retails sales. As we had
expected, GDP growth was quite strong in both the second and the third quarter.
The crisis which developed during summer however derailed this favorable trend.
Starting from a slight rise in mortgage default rates among sub-prime borrowers,
the problem developed into a serious confidence crisis throughout the financial
sector. Large banking groups were led to report huge losses whose direct and
indirect consequences spiraled into a sharp slowdown of the economy.
Thanks to a good stock picking and a swift adjustment to the new economic
outlook, our portfolio outperformed in both periods of the year, and finished
2007 well ahead of the S&P 500 Composite Index.
December 31, 2007 7 www.bishopstreetfunds.com
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BISHOP STREET
MANAGEMENT DISCUSSION
FUNDS
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Given our strong belief that the U.S. economy would prove to be much more
resilient than anticipated by most investors, and that many growth companies
would benefit from the anticipated stabilization in interest rates, we started
the year with a significant exposure to economically-sensitive stocks. The
relatively defensive contribution of our continuing overweight in healthcare was
far from offsetting the exposure resulting from our many stock picks in consumer
discretionary, investment banking and technology, as well as our underweight in
consumer staples.
The cautious guidance issued by retailers later caused us to resell several
store chains and select slightly less exposed companies in services and other
areas. Thanks to a good stock picking and a relatively swift reaction to the
first loss announcements, we also managed to reduce our significant exposure to
investment banks without incurring excessive damages. If our bets on technology
and healthcare were maintained, we finished the year with a substantially lower
risk on consumer stocks and finance.
Thanks to this rapid adjustment to a fast-changing environment, we managed to
perform well in both parts of the year. As often, stock selection was the main
driver behind this result. The variety of sectors represented among the top
contributors to our strong out performance illustrates this situation: these
belonged to categories as diverse as healthcare (Express Scripts, Aetna, Gilead
Sciences), technology (MEMC Electronic Materials, Google, Nvidia, Western
Digital), engineering (McDermott International), agricultural products
(Monsanto), or consumer services (Apollo Group, Hilton, McDonald's).
At the eve of 2008, we remain in a "wait and see" mode as regards the evolution
of the economy. A slowdown is certain but the Federal Reserve's (the "Fed")
efforts to fight it through interest rate cuts should limit its magnitude.
Besides the risk of a higher inflation, driven by commodity prices, the question
is how long it will take for confidence to return.
Bishop Street Funds 8
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As illustrated by our current portfolio, where many of our recent decisions have
resulted in a reduction of the largest sector spreads, it is difficult to take
clear-cut active bets as long as market trends depend more on psychology than
fundamentals.
We view the current situation as very uncertain, and feel particularly concerned
about the evolution of employment. New jobless claims reported in the last few
weeks reflect a gradual deterioration, which had not been the case so far. As
explained several times in previous reports, confidence and employment were key
in allowing us to maintain a relatively optimistic view about the economy's
resilience. As long as employment was holding up well, we assumed that the
decline in confidence indicators was overstating actual pessimism, under the
influence of media reports.
The next few weeks will be key in helping us refine this analysis. More details
will be released about the strength of consumer demand in the Holidays season,
and will help us make a first opinion before retailers (whose fiscal year often
ends on Jan 31) start pre-announcing their earnings.
Should the threat of a recession in the U.S. become more significant, the Fed's
stance would be key for the market. Further interest rate cuts would be
expected, but the central bank's leeway in this respect would depend on
inflation, which has also given signs of a resumption lately.
This difficult environment may not necessarily be bad for equities but will
certainly cause more volatility. As usual, a reliable stock selection focused on
long term views, which are easier to predict than short term emotional factors,
will be key to achieving a good performance. Our strategy has usually done
reasonably well in this respect.
December 31, 2007 9 www.bishopstreetfunds.com
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
COMPOSITE INDEX, THE CONSUMER PRICE INDEX AND THE LIPPER MULTI CAP CORE
CLASSIFICATION.
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE MATERIAL.]
Strategic Growth S&P 500/Citigroup S&P 500 Consumer Price Lipper Multi Cap
Fund Class I# Growth Index Composite Index Index Core Classification++
7/1/02 $ 10,000 $ 10,000 $ 10,000 $ 10,000 $ 10,000
12/02 8,639 9,398 9,166 10,056 8,908
6/03 10,309 10,585 10,244 10,214 10,011
12/03 11,928 11,943 11,795 10,246 11,641
6/04 12,328 12,264 12,201 10,545 12,087
12/04 13,077 12,775 13,078 10,580 13,036
6/05 12,968 12,468 12,972 10,811 13,015
12/05 14,585 12,921 13,719 10,938 13,932
6/06 14,331 12,799 14,091 11,279 14,333
12/06 16,011 14,343 15,886 11,218 15,837
6/07 17,370 15,280 16,992 11,583 17,101
12/07 17,629 15,653 16,759 11,676 16,846
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE.
# Account value if you reinvested income and capital gains.
++ Performance begins on June 30, 2002.
AVERAGE ANNUAL TOTAL RETURNS+
---------------------------------
ONE ANNUALIZED ANNUALIZED
YEAR 3 YEAR INCEPTION
RETURN RETURN TO DATE
---------------------------------
10.10% 10.46% 10.87% 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. Fee waivers are in
effect; if they had not been in effect, performance would have been lower.
Bishop Street Funds 10
Strategic Growth Fund
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TOP TEN EQUITY HOLDINGS+
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Percentage of
Investments
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1. GameStop, Cl A 2.1%
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2. Intuit 2.1%
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3. Suncor Energy 2.1%
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4. Thermo Fisher Scientific 2.1%
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5. Accenture Ltd., Cl A 2.1%
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6. Allegheny Technologies 2.1%
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7. Akamai Technologies 2.0%
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8. Coach 2.0%
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9. McDermott International 2.0%
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10. Express Scripts 2.0%
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SECTOR WEIGHTINGS (UNAUDITED)+
[THE FOLLOWING TABLE WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.]
25.2% Information Technology
17.3% Health Care
16.9% Financials
13.6% Industrials
9.7% Consumer Discretionary
6.0% Energy
4.0% Materials
3.9% Consumer Staples
3.4% Short-Term Investments
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+ PERCENTAGES ARE BASED ON TOTAL INVESTMENTS.
SCHEDULE OF INVESTMENTS
Market
Value
Shares (000)
------ --------
COMMON STOCK -- 98.1%++
CONSUMER DISCRETIONARY -- 9.9%
32,500 Apollo Group, Cl A* $ 2,280
85,700 Coach* 2,621
44,300 GameStop, Cl A* 2,752
43,700 McDonald's 2,574
95,640 Wyndham Worldwide 2,253
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12,480
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CONSUMER STAPLES -- 4.0%
62,813 CVS 2,497
December 31, 2007 11 www.bishopstreetfunds.com
Strategic Growth Fund
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SCHEDULE OF INVESTMENTS
(CONTINUED)
Market
Value
Shares (000)
------ --------
CONSUMER STAPLES -- (CONTINUED)
56,300 Hansen Natural* $ 2,493
--------
4,990
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ENERGY -- 6.1%
33,600 National Oilwell Varco* 2,468
24,600 Suncor Energy 2,675
17,821 Transocean 2,551
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7,694
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FINANCIALS -- 17.1%
20,400 Affiliated Managers Group* 2,396
40,000 American International Group 2,332
23,000 Everest Re Group Ltd. 2,309
19,400 Franklin Resources 2,220
11,300 Goldman Sachs Group 2,430
52,300 JPMorgan Chase 2,283
52,600 Nasdaq Stock Market* 2,603
18,600 Nymex Holdings 2,485
31,900 State Street 2,591
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21,649
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HEALTH CARE -- 17.5%
40,600 Aetna 2,344
43,200 Baxter International 2,508
48,000 Cigna 2,579
35,700 Express Scripts* 2,606
34,000 Genzyme* 2,531
50,800 Gilead Sciences* 2,337
82,100 ScheringPlough 2,187
46,200 Thermo Fisher Scientific* 2,665
41,000 UnitedHealth Group 2,386
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22,143
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INDUSTRIALS -- 13.8%
28,300 Danaher 2,483
24,200 Lockheed Martin 2,547
45,600 Manpower 2,595
44,300 McDermott International* 2,615
16,100 Precision Castparts 2,233
32,200 United Technologies 2,465
29,000 W.W. Grainger 2,538
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17,476
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Bishop Street Funds 12
Strategic Growth Fund
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SCHEDULE OF INVESTMENTS
(CONTINUED)
Market
Value
Shares (000)
------ --------
INFORMATION TECHNOLOGY -- 25.6%
73,400 Accenture Ltd., Cl A $ 2,645
75,900 Akamai Technologies* 2,626
84,700 Cisco Systems* 2,293
3,400 Google, Cl A* 2,351
46,700 HewlettPackard 2,357
85,000 Intuit* 2,687
27,500 MEMC Electronic Materials* 2,433
68,300 Microsoft 2,432
76,200 Nvidia* 2,592
110,100 Oracle* 2,486
63,700 Qualcomm 2,507
120,400 Red Hat* 2,509
80,600 Western Digital* 2,435
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32,353
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MATERIALS -- 4.1%
30,500 Allegheny Technologies 2,635
23,000 Monsanto 2,568
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5,203
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TOTAL COMMON STOCK (Cost $102,085) 123,988
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CASH EQUIVALENTS (A) -- 3.4%
2,168,647 Dreyfus Cash Management Fund, Institutional
Shares, 4.740% 2,169
2,168,647 Fidelity Institutional Money Market Portfolio,
Institutional Shares, 4.870% 2,169
--------
TOTAL CASH EQUIVALENTS (Cost $4,338) 4,338
--------
TOTAL INVESTMENTS (Cost $106,423) -- 101.5% $128,326
========
PERCENTAGES ARE BASED ON NET ASSETS OF $126,384 ($ THOUSANDS).
* NON-INCOME PRODUCING SECURITY.
++ NARROW INDUSTRIES ARE UTILIZED FOR COMPLIANCE PURPOSES, WHEREAS BROAD
SECTORS ARE UTILIZED FOR REPORTING.
(A) THE RATE SHOWN REPRESENTS THE 7-DAY EFFECTIVE YIELD AS OF DECEMBER 31,
2007.
CL -- CLASS
LTD. -- LIMITED
COST FIGURES ARE SHOWN IN THOUSANDS.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
December 31, 2007 13 www.bishopstreetfunds.com
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BISHOP STREET
MANAGEMENT DISCUSSION
FUNDS
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Large Cap Core Equity Fund
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U.S. equities were mixed during the year. The first half of the year produced
strong gains, led by private equity activity and continued strong earnings
reports. Earnings significantly exceeded analysts' forecasts, but other economic
news was considerably less rosy as sales of existing homes plunged due mainly to
the fallout in the subprime sector. The Federal Reserve, (the "Fed")
acknowledged that the troubled housing sector would take longer to recover than
originally anticipated, while maintaining its prediction of moderate economic
growth. Inflation pressures appeared to be waning, with the economy growing at a
mediocre 0.7% during the first quarter. Bond yields rose and spreads widened
based on expectations for continued moderate growth and anticipated weakening
foreign demand for U.S. assets.
During the second half of the year, equities suffered as the fallout from the
mortgage and credit markets continued to take its toll on companies both
directly and indirectly related to these markets. The Fed cut interest rates
three times during the six month period in an attempt to bolster the economy.
While banks began aggressively taking write-offs and recapitalizing in light of
the mortgage turmoil, the Fed coordinated with world banks to address the global
credit crunch. The downturn in sub-prime housing engaged the interests of
Washington, which implied that interest rate relief was just around the corner.
Ultimately, we believe this was a positive development for the economy. However
uncertainties regarding the health of the financial system continued to dominate
equities despite what we believe were positive signs the market was recovering
faster than anticipated.
After expenses, the Large Cap Core Equity Fund (the "Fund") returned 5.24% for
the year versus 5.49% for the S&P 500 Composite Index. The Fund benefited from
our exposures in agriculture, alternative energy, consumer
Bishop Street Funds 14
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[BISHOP STREET FUNDS LOGO OMITTED]
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technology, and global industrials. These industries performed extremely well in
2007, as strong global growth continued to drive up demand on everything from
food and energy to materials and capital equipment. However, our exposures in
the mortgage and homebuilding markets suffered as fallout from sub-prime
mortgage paper and the ensuing tightening of credit weighed on results for a
handful of holdings.
We believe our approach to managing the Fund is a fairly conservative one with a
focus on risk control. We maintain a very well diversified portfolio both in
terms of the number of stocks held as well as the sector weights of the Fund. As
of December 31, 2007, the Fund held about 120 stocks, with no position larger
than 3% of the Fund. In addition, the portfolio sector allocation is very close
to the sector allocation of the benchmark. This means that we did not take
significantly larger positions relative to the benchmark, making judgments as to
which sector will be the next "hot" sector. Only small over- and under-weights
existed compared to the benchmark, with differences being less than 2.50% for
any sector. The largest sector over-weight was information technology. The two
largest sector under-weights were utilities and consumer staples.
Because the Fund's sector weights are intended to be similar to the benchmark,
most value added (i.e. return value over the benchmark return) comes from the
stock selection process. Ideally, we seek to invest in companies where market
values are low relative to imputed valuations, there are good indications that
the market values are likely to increase over time through efficiency gains and
growth, and the companies have management teams with a proven track record.
Our stock selection process is evident in the characteristics of the Fund.
Traditional measures of value such as the price-to-earnings ratio usually show a
"value" bias relative to the benchmark, while the traditional measures of
December 31, 2007 15 www.bishopstreetfunds.com
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BISHOP STREET
MANAGEMENT DISCUSSION
FUNDS
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growth such as earnings growth tend to indicate a "growth" bias. As of December
31, 2007, the price-to-earnings measure on a 12-month trailing basis was 16.4
for the Fund versus 17.2 for the benchmark. This measure shows that overall we
were able to find stocks that appear to be undervalued in the market while
reflecting potentially superior growth characteristics.
In conclusion, our focus in managing the Fund always will be on selecting
companies we believe have the attributes that indicate a superior chance of
being successful investments and on seeking to control risk relative to the
benchmark.
Bishop Street Funds 16
Large Cap Core Equity Fund
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PERFORMANCE COMPARISON
COMPARISON OF CHANGE IN THE VALUE OF A $10,000 INVESTMENT IN THE
LARGE CAP CORE 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 MATERIAL.]
Large Cap Core S&P 500 Consumer Price Lipper Large Cap
Equity Fund, Class I# Composite Index Index Core Classificiation++
5/1/06 $ 10,000 $ 10,000 $ 10,000 $ 10,000
6/06 9,646 9,766 10,071 9,661
12/06 10,662 11,010 10,017 10,789
6/07 11,486 11,776 10,342 11,563
12/07 11,221 11,615 10,426 11,433
# Account value if you reinvested income and capital gains.
++ Performance begins on April 30, 2006.
AVERAGE ANNUAL TOTAL RETURNS+
----------------------------
ONE ANNUALIZED
YEAR INCEPTION
RETURN TO DATE
----------------------------
5.24% 7.17% Class I*
----------------------------
* Commenced operations on 05/03/06.
+ Returns shown do not reflect the deduction of taxes that a shareholder would
pay on Fund distributions or the redemption of Fund shares. Fee waivers are in
effect; if they had not been in effect, performance would have been lower.
December 31, 2007 17 www.bishopstreetfunds.com
Large Cap Core Equity Fund
- --------------------------------------------------------------------------------
TOP TEN EQUITY HOLDINGS+
-----------------------------------------------------------------------
Percentage of
Investments
-----------------------------------------------------------------------
1. Microsoft 3.0%
-----------------------------------------------------------------------
2. JPMorgan Chase 2.2%
-----------------------------------------------------------------------
3. American International Group 2.1%
-----------------------------------------------------------------------
4. Johnson & Johnson 2.1%
-----------------------------------------------------------------------
5. Cisco Systems 1.8%
-----------------------------------------------------------------------
6. Chevron 1.8%
-----------------------------------------------------------------------
7. Apple 1.8%
-----------------------------------------------------------------------
8. Procter & Gamble 1.8%
-----------------------------------------------------------------------
9. Google, Cl A 1.7%
-----------------------------------------------------------------------
10. Bank of America 1.6%
-----------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECTOR WEIGHTINGS (UNAUDITED)+
[THE FOLLOWING TABLE WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.]
18.7% Information Technology
17.0% Financials
13.2% Health Care
12.9% Energy
11.6% Industrials
9.3% Consumer Discretionary
8.7% Consumer Staples
3.5% Materials
2.7% Telecommunications
1.4% Utilities
0.6% Short-Term Investments
0.4% Exchange Traded Fund
- --------------------------------------------------------------------------------
+ PERCENTAGES ARE BASED ON TOTAL INVESTMENTS. EXCLUDES SECURITIES PURCHASED
WITH CASH COLLATERAL RECEIVED FROM SECURITIES LENDING.
SCHEDULE OF INVESTMENTS
Market
Value
Shares (000)
------ --------
COMMON STOCK -- 99.0%
CONSUMER DISCRETIONARY -- 9.2%
15,610 Best Buy (A) $ 822
7,800 Carnival 347
10,610 Coach* 324
24,420 Comcast, Cl A* 446
7,430 EchoStar Communications, Cl A* 280
20,900 Expedia* 661
3,400 Garmin(A) 330
10,770 Harman International Industries 794
Bishop Street Funds 18
Large Cap Core Equity Fund
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
(CONTINUED)
Market
Value
Shares (000)
------ --------
CONSUMER DISCRETIONARY -- (CONTINUED)
14,600 Hasbro $ 373
9,100 International Game Technology 400
9,700 Kohl's* 444
5,605 Liberty Media Capital, Ser A* 653
19,140 Lowe's 433
9,700 Omnicom Group 461
23,500 Pulte Homes (A) 248
19,100 Staples 441
26,220 Time Warner 433
16,760 Viacom, Cl B* 736
7,990 Whirlpool 652
--------
9,278
--------
CONSUMER STAPLES -- 8.7%
18,910 Altria Group 1,429
26,590 Archer-Daniels-Midland 1,235
5,100 Colgate-Palmolive 398
9,050 Costco Wholesale 631
16,010 PepsiCo 1,215
24,850 Procter & Gamble 1,824
24,230 Walgreen 923
25,330 Wal-Mart Stores 1,204
--------
8,859
--------
ENERGY -- 12.9%
12,470 Apache 1,341
9,700 Canadian Natural Resources 709
17,700 Chesapeake Energy 694
20,160 Chevron 1,882
12,790 ConocoPhillips 1,129
11,180 Devon Energy 994
30,700 El Paso 529
20,500 Halliburton 777
12,490 Marathon Oil 760
10,620 National Oilwell Varco* 780
11,700 Peabody Energy 721
8,100 Suncor Energy 881
15,220 Valero Energy 1,066
12,400 Weatherford International* 851
--------
13,114
--------
December 31, 2007 19 www.bishopstreetfunds.com
Large Cap Core Equity Fund
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
(CONTINUED)
Market
Value
Shares (000)
------ --------
FINANCIALS -- 17.1%
12,570 ACE $ 777
7,800 Allstate 407
36,870 American International Group 2,150
39,290 Bank of America 1,621
11,160 Capital One Financial 527
51,530 Citigroup 1,517
9,530 Franklin Resources 1,090
27,220 Genworth Financial, Cl A 693
3,550 Goldman Sachs Group 763
10,170 Hartford Financial Services Group 887
16,600 Host Hotels & Resorts (A)+ 283
51,720 JPMorgan Chase 2,258
7,530 Legg Mason 551
7,830 Lehman Brothers Holdings 512
9,850 Merrill Lynch 529
19,220 Morgan Stanley 1,021
14,540 Travelers 782
23,930 Wachovia 910
--------
17,278
--------
HEALTH CARE -- 13.2%
11,500 Abbott Laboratories 646
9,400 Allergan 604
11,200 Amgen* 520
13,580 Biogen Idec* 773
5,100 Celgene* 236
14,640 Coventry Health Care* 867
5,100 Genentech* 342
10,690 Genzyme* 796
9,800 Gilead Sciences* 451
32,010 Johnson & Johnson 2,135
9,320 Laboratory Corp of America Holdings* (A) 704
18,600 Merck 1,081
22,250 Pfizer 506
26,860 Schering-Plough 715
20,000 St. Jude Medical* 813
19,370 UnitedHealth Group 1,127
11,510 Wyeth 508
8,070 Zimmer Holdings* 534
--------
13,358
--------
Bishop Street Funds 20
Large Cap Core Equity Fund
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
(CONTINUED)
Market
Value
Shares (000)
------ --------
INDUSTRIALS -- 11.6%
8,600 Boeing $ 752
9,500 C.H. Robinson Worldwide 514
11,320 Caterpillar 821
11,840 Danaher 1,039
17,120 Dover 789
15,120 General Dynamics 1,346
21,700 General Electric 804
16,850 Illinois Tool Works 902
11,560 Ingersoll-Rand, Cl A 537
8,330 L-3 Communications Holdings 883
27,840 Norfolk Southern 1,404
12,235 Parker Hannifin 921
7,300 Precision Castparts 1,013
--------
11,725
--------
INFORMATION TECHNOLOGY -- 18.7%
17,120 Adobe Systems* 731
9,340 Apple* 1,850
8,870 Autodesk* 441
16,300 Broadcom, Cl A* 426
69,510 Cisco Systems* 1,882
16,300 Citrix Systems* 620
35,460 Corning 851
7,400 eBay* 246
12,340 Electronic Arts* (A) 721
37,350 EMC* 692
2,490 Google, Cl A* 1,722
38,200 Intel 1,018
7,920 International Business Machines 856
5,230 MEMC Electronic Materials* 463
85,420 Microsoft 3,041
18,135 Nvidia* 617
45,840 Oracle* 1,035
16,480 SanDisk* 547
19,200 Sun Microsystems* 348
25,550 Texas Instruments 853
--------
18,960
--------
MATERIALS -- 3.5%
17,290 Alcoa 632
6,690 Allegheny Technologies 578
8,200 Dow Chemical 323
December 31, 2007 21 www.bishopstreetfunds.com
Large Cap Core Equity Fund
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
(CONTINUED)
Shares/Face Market
Amount Value
(000) (000)
- ----------- --------
MATERIALS -- (CONTINUED)
7,660 Freeport-McMoRan Copper & Gold, Cl B $ 785
10,690 Teck Cominco Ltd., Cl B 382
6,980 United States Steel 844
--------
3,544
--------
TELECOMMUNICATION SERVICES -- 2.7%
33,850 AT&T 1,407
9,300 NII Holdings* 449
20,420 Verizon Communications 892
--------
2,748
--------
UTILITIES -- 1.4%
3,800 Entergy 455
12,290 Exelon 1,004
--------
1,459
--------
TOTAL COMMON STOCK (Cost $94,702) 100,323
--------
MASTER NOTES (C) -- 0.5%
$305 Bear Stearns
4.700%, 01/02/08 305
204 JPMorgan Securities
4.600%, 01/15/08 204
--------
TOTAL MASTER NOTES (Cost $509) 509
--------
EXCHANGE TRADED FUND -- 0.4%
2,900 SPDR Trust, Ser 1 424
--------
TOTAL EXCHANGE TRADED FUND (Cost $436) 424
--------
BANK NOTE (C) -- 0.2%
204 National City, 4.572%, 04/18/08 204
--------
TOTAL BANK NOTE (Cost $204) 204
--------
COMMERCIAL PAPER (C) (D) -- 0.1%
102 Queens Health, 5.333%, 1/23/08 100
--------
TOTAL COMMERCIAL PAPER (Cost $100) 100
--------
Bishop Street Funds 22
Large Cap Core Equity Fund
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
(CONTINUED)
Shares/Face Market
Amount Value
(000) (000)
- ----------- --------
CASH EQUIVALENTS (B) -- 0.6%
302,391 Dreyfus Cash Management Fund, Institutional Shares,
4.740% $ 302
302,391 Fidelity Institutional Money Market Portfolio,
Institutional Shares, 4.870% 302
--------
TOTAL CASH EQUIVALENTS (Cost $604) 604
--------
REPURCHASE AGREEMENT (C) -- 0.7%
$656 Lehman Brothers 4.580%, dated 12/31/07, to be
repurchased on 01/02/08, repurchase price $656,527
(collateralized by a U.S. Government obligation, par
value $792,529, 7.000%, 03/01/37, with a total market
value of $669,586)
TOTAL REPURCHASE AGREEMENT (Cost $656) 656
--------
TOTAL INVESTMENTS (Cost $97,211) -- 101.5% $102,820
========
PERCENTAGES ARE BASED ON NET ASSETS OF $101,342 ($ THOUSANDS).
* NON-INCOME PRODUCING SECURITY.
(A) THIS SECURITY OR PORTION OF THIS SECURITY IS ON LOAN AT DECEMBER 31, 2007.
THE TOTAL VALUE OF SECURITIES ON LOAN AT DECEMBER 31, 2007 WAS $1,410 ($
THOUSANDS).
(B) THE RATE SHOWN REPRESENTS THE 7-DAY EFFECTIVE YIELD AS OF DECEMBER 31,
2007.
(C) THESE SECURITIES WERE PURCHASED WITH CASH COLLATERAL RECEIVED FROM
SECURITIES LENDING. THE TOTAL VALUE OF SUCH SECURITIES AS OF DECEMBER 31,
2007 WAS $1,469 ($ THOUSANDS).
(D) SECURITY EXEMPT FROM REGISTRATION UNDER RULE 144A OF THE SECURITIES ACT OF
1933. THESE SECURITIES MAY BE RESOLD IN TRANSACTIONS EXEMPT FROM
REGISTRATION, NORMALLY TO QUALIFIED INSTITUTIONS. AT DECEMBER 31, 2007,
THE VALUE OF THESE SECURITIES AMOUNTED TO $100 ($ THOUSANDS), REPRESENTING
0.1% OF NET ASSETS OF THE FUND.
+ -- REAL ESTATE INVESTMENT TRUST
CL -- CLASS
LTD. -- LIMITED
SER -- SERIES
SPDR -- STANDARD & POOR'S DEPOSITARY RECEIPTS
COST FIGURES ARE SHOWN IN THOUSANDS.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
December 31, 2007 23 www.bishopstreetfunds.com
- --------------------------------------------------------------------------------
BISHOP STREET
MANAGEMENT DISCUSSION
FUNDS
- --------------------------------------------------------------------------------
High Grade Income Fund
- --------------------------------------------------------------------------------
Interest rate volatility increased sharply in 2007 as the sub-prime mortgage
meltdown turned into a full-blown global liquidity crisis. Investors hoping to
side step the damage fled to the safety of the U.S. Treasury market, driving
yields significantly lower and widening credit spreads on riskier bonds. As a
result, the yield curve steepened dramatically as recession fears mounted
forcing Federal Reserve Board action to lower its key interest rate target. The
central bank moved quickly and decisively lowering the target rate by 100 basis
points to 4.25% in three separate moves late in the year.
Treasury sector returns outpaced all other sectors for the year as the "flight
to quality" trade prevailed. Treasury inflation protected securities (TIPS)
outperformed with a return of 11.63% while broad taxable investment grade bond
indices gained more than 7% for the year. As would be expected, the credit
sector posted its worst performance on record as yield spreads gapped wider due
in part to a poorly performing financial sector and increased uncertainty about
the safety and soundness of the world's capital markets.
The High Grade Income Fund (The "Fund") returned 6.67% for the year compared to
the 4.47% return and 7.25%, respectively, for the Fund's benchmarks - the Lipper
Corporate Debt A-Rated Objective and the Lehman Brothers U.S. Government/Credit
Index. The Fund's higher credit quality bias and its underweighting in the
financial sector were positive contributors to performance but could not
compensate for the underweighting in the Treasury sector.
Looking ahead, we expect volatility to persist until the financial industries
problems are resolved. We will continue to focus on credit quality and strategic
yield curve positioning as we navigate through the uncertain times ahead.
Bishop Street Funds 24
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
High Grade Income U.S. Government/ Consumer Price Lipper Corporate Debt
Fund, Class I# Credit Index Index A-Rated Objective++
12/31/97 $ 10,000 $ 10,000 $ 10,000 $ 10,000
12/98 10,909 10,947 10,161 10,743
12/99 10,436 10,712 10,432 10,451
12/00 11,505 11,980 10,784 11,483
12/01 12,329 12,999 10,951 12,379
12/02 13,752 14,432 11,214 13,452
12/03 14,207 15,106 11,425 14,247
12/04 14,691 15,739 11,797 14,860
12/05 14,985 16,112 12,197 15,145
12/06 15,429 16,719 12,509 15,736
12/07 16,458 17,931 13,020 16,439
# 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
- ----------------------------------------------------------------------
6.67% 3.86% 3.66% 5.11% 5.41% 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. Fee waivers are in
effect; if they had not been in effect, performance would have been lower.
December 31, 2007 25 www.bishopstreetfunds.com
High Grade Income Fund
- --------------------------------------------------------------------------------
TOP TEN HOLDINGS+
- --------------------------------------------------------------------------------
Percentage
Coupon Maturity of
Rate Date Investments
- --------------------------------------------------------------------------------
1. U.S. Treasury Bond 7.250% 05/15/16 3.3%
- --------------------------------------------------------------------------------
2. U.S. Treasury Bond 7.500% 11/15/16 2.0%
- --------------------------------------------------------------------------------
3. U.S. Treasury Bond 6.250% 08/15/23 2.0%
- --------------------------------------------------------------------------------
4. U.S. Treasury Bond 4.500% 02/15/36 1.8%
- --------------------------------------------------------------------------------
5. FNMA MTN 7.250% 01/15/10 1.5%
- --------------------------------------------------------------------------------
6. General Electric Capital MTN, Ser A 5.450% 01/15/13 1.4%
- --------------------------------------------------------------------------------
7. FHLMC 5.125% 10/15/08 1.4%
- --------------------------------------------------------------------------------
8. Bank of America 4.875% 01/15/13 1.4%
- --------------------------------------------------------------------------------
9. Abbott Laboratories 5.600% 05/15/11 1.3%
- --------------------------------------------------------------------------------
10. U.S. Treasury Bond 6.375% 08/15/27 1.3%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECTOR WEIGHTINGS (UNAUDITED)+
[THE FOLLOWING TABLE WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.]
24.1% U.S. Government Agency Obligations
23.7% U.S. Treasury Obligations
11.1% Financials
7.8% Consumer Discretionary
5.6% Information Technology
5.5% Energy
5.5% Health Care
3.4% Industrials
2.8% U.S. Government Mortgage-Backed Obligations
2.6% Short-Term Investments
2.2% Utilities
1.9% Consumer Staples
1.9% Telecommunications
1.2% Materials
0.7% Asset-Backed Security
- --------------------------------------------------------------------------------
+PERCENTAGES ARE BASED ON TOTAL INVESTMENTS. EXCLUDES SECURITIES PURCHASED
WITH CASH COLLATERAL RECEIVED FROM SECURITIES LENDING.
SCHEDULE OF INVESTMENTS
Face Market
Amount Value
(000) (000)
- ----------- ---------
CORPORATE OBLIGATIONS -- 45.5%
AEROSPACE & DEFENSE -- 2.7%
General Dynamics
$ 1,000 4.500%, 08/15/10 $ 1,007
Rockwell Automation
1,200 6.700%, 01/15/28 1,372
United Technologies
1,200 6.350%, 03/01/11 1,278
--------
3,657
--------
Bishop Street Funds 26
High Grade Income Fund
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
(CONTINUED)
Face Market
Amount Value
(000) (000)
- ----------- --------
AUTO FINANCE -- 1.1%
Toyota Motor Credit
$ 1,500 5.450%, 05/18/11 $ 1,562
--------
AUTOMOTIVE -- 0.6%
DaimlerChrysler NA Holding
700 8.000%, 06/15/10 747
--------
BANKS -- 3.4%
Bank of America
2,350 4.875%, 01/15/13 2,328
BHP Billiton Finance
850 5.250%, 12/15/15 823
JPMorgan Chase
1,400 5.875%, 06/13/16 1,410
--------
4,561
--------
BROADCASTING & CABLE -- 1.8%
TCI Communications
1,200 7.875%, 08/01/13 1,315
Turner Broadcasting System
975 8.375%, 07/01/13 1,095
--------
2,410
--------
COMPUTER HARDWARE -- 4.6%
Cisco Systems
1,400 5.500%, 02/22/16 1,424
Dell
1,325 6.550%, 04/15/08 1,330
IBM
500 4.250%, 09/15/09 503
1,400 8.375%, 11/01/19 1,746
Oracle (A)
1,200 5.250%, 01/15/16 1,198
--------
6,201
--------
FINANCIALS -- 5.7%
Boeing Capital
1,400 6.500%, 02/15/12 1,503
CIT Group (A)
1,350 5.000%, 11/24/08 1,336
General Electric Capital MTN, Ser A (A)
2,350 5.450%, 01/15/13 2,422
Goldman Sachs Group
650 6.600%, 01/15/12 688
December 31, 2007 27 www.bishopstreetfunds.com
High Grade Income Fund
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
(CONTINUED)
Face Market
Amount Value
(000) (000)
- ----------- --------
FINANCIALS -- (CONTINUED)
Jefferies Group
$ 675 6.250%, 01/15/36 $ 603
Merrill Lynch MTN
1,200 5.000%, 02/03/14 1,145
--------
7,697
--------
FOOD & BEVERAGE -- 1.9%
ConAgra Foods
1,475 7.875%, 09/15/10 1,583
General Mills
1,000 6.000%, 02/15/12 1,026
--------
2,609
--------
FOREIGN GOVERNMENTS -- 0.8%
Republic of Italy
1,000 5.375%, 06/12/17 1,060
--------
GENERAL MERCHANDISE -- 1.2%
Office Depot
600 6.250%, 08/15/13 626
Target
1,000 6.350%, 01/15/11 1,048
--------
1,674
--------
HEALTH CARE -- 1.2%
Johnson & Johnson
1,400 6.950%, 09/01/29 1,671
--------
HEALTHCARE - DISTRIBUTION/SERVICES -- 0.8%
Hillenbrand Industries
1,125 4.500%, 06/15/09 1,134
--------
HOUSEHOLD PRODUCTS -- 1.1%
Procter & Gamble
1,200 8.000%, 10/26/29 1,530
--------
INDEPENDENT POWER PRODUCERS & ENERGY TRADERS -- 0.4%
Constellation Energy Group
500 7.000%, 04/01/12 535
--------
MEDIA -- 1.9%
News America
1,200 7.250%, 05/18/18 1,321
Walt Disney MTN
1,200 6.200%, 06/20/14 1,275
--------
2,596
--------
Bishop Street Funds 28
High Grade Income Fund
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
(CONTINUED)
Face Market
Amount Value
(000) (000)
- ----------- --------
OIL & GAS - EQUIPMENT/SERVICES -- 1.0%
Baker Hughes
$ 1,400 6.000%, 02/15/09 $ 1,418
--------
OIL & GAS - EXPLORATION/PRODUCTION -- 1.8%
Anadarko Petroleum
1,250 7.200%, 03/15/29 1,346
Occidental Petroleum
1,000 6.750%, 01/15/12 1,082
--------
2,428
--------
OIL & GAS - INTEGRATED -- 2.2%
Atlantic Richfield
1,385 9.125%, 03/01/11 1,569
ConocoPhillips
1,400 4.750%, 10/15/12 1,412
--------
2,981
--------
PHARMACEUTICALS -- 3.3%
Abbott Laboratories
2,100 5.600%, 05/15/11 2,175
Genentech
1,200 4.750%, 07/15/15 1,181
Teva Pharmaceutical Finance LLC
1,200 5.550%, 02/01/16 1,185
--------
4,541
--------
RETAIL - FOOD -- 1.1%
McDonald's MTN
1,400 6.000%, 04/15/11 1,480
--------
SEMI-CONDUCTORS -- 0.9%
Duke Energy (A)
1,275 4.200%, 10/01/08 1,267
--------
STEEL & STEEL WORKS -- 1.3%
Nucor
1,800 4.875%, 10/01/12 1,796
--------
TELECOMMUNICATIONS -- 1.9%
AT&T Wireless Services
1,200 8.125%, 05/01/12 1,334
Sprint Capital
1,200 7.625%, 01/30/11 1,251
--------
2,585
--------
December 31, 2007 29 www.bishopstreetfunds.com
High Grade Income Fund
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
(CONTINUED)
Face Market
Amount Value
(000) (000)
- ----------- --------
TRANSPORTATION SERVICES -- 0.6%
FedEx
$ 800 7.250%, 02/15/11 $ 852
--------
UTILITIES -- 2.2%
Dominion Resources
1,350 4.125%, 02/15/08 1,348
Hydro-Quebec
1,325 7.500%, 04/01/16 1,583
--------
2,931
--------
TOTAL CORPORATE OBLIGATIONS (Cost $61,796) 61,923
--------
U.S. GOVERNMENT AGENCY OBLIGATIONS -- 23.8%
FHLB
1,000 6.000%, 07/10/13 1,031
1,000 3.875%, 07/24/09 1,003
FHLB, Ser GH10
200 6.875%, 08/13/10 216
FHLB, Ser KU10
1,300 4.750%, 08/13/10 1,337
FHLB, Ser RH10
1,750 3.875%, 02/12/10 1,761
FHLMC
875 8.250%, 06/01/16 1,094
2,400 5.125%, 10/15/08 2,419
1,000 5.000%, 01/30/14 1,046
1,400 4.750%, 05/06/13 1,402
500 4.625%, 08/15/08 501
1,400 4.375%, 03/01/10 1,422
1,100 4.000%, 06/12/13 1,099
FHLMC MTN
1,400 5.750%, 05/23/11 1,406
1,400 5.500%, 02/22/13 1,401
1,400 5.500%, 03/22/22 1,449
1,000 5.400%, 01/11/12 1,000
1,400 5.400%, 02/01/16 1,402
1,000 5.000%, 10/27/14 1,050
200 5.000%, 06/18/18 (B) 200
1,800 4.250%, 05/22/13 1,821
1,000 4.000%, 01/28/19 1,000
FHLMC REMIC, Ser R010, Cl AB
1,111 5.500%, 12/15/19 1,123
Bishop Street Funds 30
High Grade Income Fund
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
(CONTINUED)
Face Market
Amount Value
(000) (000)
- ----------- --------
U.S. GOVERNMENT AGENCY OBLIGATIONS -- (CONTINUED)
FNMA
$ 400 6.000%, 08/22/16 $ 404
1,400 5.650%, 04/10/13 1,406
625 4.750%, 03/30/09 (B) 632
FNMA MTN
2,400 7.250%, 01/15/10 2,572
FNMA, Ser B1, Cl BE
1,237 5.450%, 12/25/20 1,248
--------
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS (Cost $31,838) 32,445
--------
U.S. TREASURY OBLIGATIONS -- 23.4%
U.S. Treasury Bonds
2,750 7.500%, 11/15/16 (A) 3,452
4,500 7.250%, 05/15/16 (A) 5,534
1,500 7.250%, 08/15/22 (A) 1,948
1,700 6.375%, 08/15/27 (A) 2,110
2,800 6.250%, 08/15/23 (A) 3,352
800 6.250%, 05/15/30 998
1,000 6.000%, 02/15/26 (A) 1,183
1,300 5.250%, 11/15/28 (A) 1,430
400 4.750%, 02/15/37 (A) 419
3,100 4.500%, 02/15/36 (A) 3,116
U.S. Treasury Notes (A)
700 4.750%, 08/15/17 740
1,250 4.250%, 11/15/14 1,290
1,400 4.250%, 08/15/15 1,437
1,000 4.250%, 11/15/17 1,017
1,325 4.125%, 08/31/12 1,364
1,200 4.000%, 02/15/14 1,226
1,200 4.000%, 02/15/15 1,217
--------
TOTAL U.S. TREASURY OBLIGATIONS (Cost $29,615) 31,833
--------
U.S. GOVERNMENT MORTGAGE-BACKED OBLIGATIONS -- 2.8%
FHLMC
49 3.500%, 05/01/08 48
FHLMC, Ser 2844, Cl VB
188 5.500%, 12/15/19 175
FHLMC, Ser 3070, Cl DH
492 5.500%, 11/15/35 484
December 31, 2007 31 www.bishopstreetfunds.com
High Grade Income Fund
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
(CONTINUED)
Face Market
Amount Value
(000) (000)
- ----------- --------
U.S. GOVERNMENT MORTGAGE-BACKED OBLIGATIONS -- (CONTINUED)
FHLMC, Ser 3196, Cl CB
$ 811 5.250%, 08/15/11 $ 809
FNMA
822 3.500%, 08/01/10 809
GNMA, Ser 7
1,400 5.500%, 11/16/31 1,420
--------
TOTAL U.S. GOVERNMENT MORTGAGE-BACKED OBLIGATIONS (Cost $3,744) 3,745
--------
MASTER NOTES (D) -- 8.8%
Bear Stearns
7,195 4.700%, 01/02/08 7,195
JPMorgan Securities
4,796 4.600%, 01/15/08 4,796
--------
TOTAL MASTER NOTES (Cost $11,991) 11,991
--------
BANK NOTE (D) -- 3.5%
National City
4,796 4.572%, 04/18/08 4,798
--------
TOTAL BANK NOTE (Cost $4,798) 4,798
--------
COMMERCIAL PAPER (D) (E) -- 1.7%
2,398 Queens Health
5.222%, 1/23/08 2,365
--------
TOTAL COMMERCIAL PAPER (Cost $2,365) 2,365
--------
ASSET-BACKED SECURITY -- 0.7%
1,000 Citibank Omni Master Trust, Ser 2007, Cl A9
5.996%, 12/23/13 1,000
--------
TOTAL ASSET-BACKED SECURITY (Cost $1,000) 1,000
--------
Bishop Street Funds 32
High Grade Income Fund
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
(CONTINUED)
Market
Shares/Face Value
Amount (000) (000)
- ------------ --------
CASH EQUIVALENTS (C) -- 2.5%
1,726,993 Dreyfus Cash Management Fund, Institutional Shares,
4.740% $ 1,727
1,726,993 Fidelity Institutional Money Market Portfolio,
Institutional Shares, 4.870% 1,727
--------
TOTAL CASH EQUIVALENTS (Cost $3,454) 3,454
--------
REPURCHASE AGREEMENT (D) -- 11.4%
$15,460 Lehman Brothers 4.580%, dated 12/31/07, to be
repurchased on 01/02/08, repurchase price $15,464,049
(collateralized by a U.S. Government obligation,
par value $15,771,633, 7.000%,
03/01/37, with a total market value of $15,771,633)
TOTAL REPURCHASE AGREEMENT (Cost $15,460) 15,460
--------
TOTAL INVESTMENTS (Cost $166,061) -- 124.1% $169,014
========
PERCENTAGES ARE BASED ON NET ASSETS OF $136,223 ($ THOUSANDS).
(A) THIS SECURITY OR PORTION OF THIS SECURITY IS ON LOAN AT DECEMBER 31, 2007.
THE TOTAL VALUE OF SECURITIES ON LOAN AT DECEMBER 31, 2007 WAS $33,818
($ THOUSANDS).
(B) STEP BOND -- COUPON RATE INCREASES IN INCREMENTS TO MATURITY. RATE
DISCLOSED IS AS OF DECEMBER 31, 2007.
(C) THE RATE SHOWN REPRESENTS THE 7-DAY EFFECTIVE YIELD AS OF DECEMBER 31,
2007.
(D) THESE SECURITIES WERE PURCHASED WITH CASH COLLATERAL RECEIVED FROM
SECURITIES LENDING. THE TOTAL VALUE OF SUCH SECURITIES AS OF DECEMBER 31,
2007 WAS $34,614 ($ THOUSANDS).
(E) SECURITY EXEMPT FROM REGISTRATION UNDER RULE 144A OF THE SECURITIES ACT OF
1933. THESE SECURITIES MAY BE RESOLD IN TRANSACTIONS EXEMPT FROM
REGISTRATION, NORMALLY TO QUALIFIED INSTITUTIONS. AT DECEMBER 31, 2007,
THESE SECURITIES AMOUNTED TO $2,365 ($ THOUSANDS), REPRESENTING 1.7% OF
NET ASSETS OF THE FUND.
CL -- CLASS
FHLB -- FEDERAL HOME LOAN BANK
FHLMC -- FEDERAL HOME LOAN MORTGAGE CORPORATION
FNMA -- FEDERAL NATIONAL MORTGAGE ASSOCIATION
GNMA -- GOVERNMENT NATIONAL MORTGAGE ASSOCIATION
LLC -- LIMITED LIABILITY COMPANY
MTN -- MEDIUM TERM NOTE
NA -- NORTH AMERICA
REMIC -- REAL ESTATE MORTGAGE INVESTMENT CONDUIT
SER -- SERIES
COST FIGURES ARE SHOWN IN THOUSANDS.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
December 31, 2007 33 www.bishopstreetfunds.com
- --------------------------------------------------------------------------------
BISHOP STREET
MANAGEMENT DISCUSSION
FUNDS
- --------------------------------------------------------------------------------
Hawaii Municipal Bond Fund
- --------------------------------------------------------------------------------
The sub-prime contagion that originated in the high grade fixed income markets
spread to the municipal bond markets as bond insurers disclosed similar
mortgage-related problems in their investment portfolios. With the values of
their investment portfolios in rapid decline, monoline insurers faced the
possibility of credit downgrades thereby creating another liquidity crisis in
the tax-free municipal bond world.
The news created a panic as investors attempted to determine the extent of the
damage and the ability of these bond insurers to maintain the capital base
required. Fears of credit downgrades of these municipal bond issuers rippled
through the market as it was no longer clear if these insurer's could provide a
backstop in the event of default. This placed municipal bond investors in an
unfamiliar position.
Prior to this credit crisis, little attention had been paid to the underlying
credit rating and strength of the bond's issuer. But with investors now focused
on the underlying financial strength and credit risk of each bond issuer,
municipal bond prices have had to readjust to reflect these "new" factors.
During the year, Treasury yields fell precipitously as investors rushed to the
safety of the U.S. Treasury market. And while municipal bond yields fell as
well, municipal bonds generally lagged the Treasury market as municipal yields
as a percentage of treasury yields hit all-time highs.
As a result, nominal municipal bond returns were the worst since 1999. The
Hawaii Municipal Bond Fund, Class I (the "Fund") generated a return of 2.47%,
outperforming the Lipper Hawaii Municipal Debt Objective Index by 78 basis
points. Excess returns were captured through yield curve positioning in
intermediate maturities and our continued focus on the underlying credit quality
of the issuers.
Looking ahead, we expect the volatility to persist so long as the Federal
Reserve's policy is unclear and the outlook for monocline bond insurers is
resolved. And with a stable Hawaii economy and strong underlying credit quality
of its issuers, we look to continue to add value by maintaining our focus on
sound credit analysis and strategic positioning on the yield curve.
Bishop Street Funds 34
Hawaii Municipal Bond Fund
- --------------------------------------------------------------------------------
PERFORMANCE COMPARISON
COMPARISON OF CHANGE IN THE VALUE OF A $10,000 INVESTMENT IN THE HAWAII
MUNICIPAL BOND FUND, CLASS I OR CLASS A, VERSUS THE 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 Bond Hawaii Municipal Lehman Brothers Municipal Consumer Price Lipper Hawaii Municipal
Fund, Class I# Bond Fund, Class A# Bond Index Index Debt Objective
12/31/97 $ 10,000 $ 9,700 $ 10,000 $ 10,000 $ 10,000
12/98 10,584 10,266 10,648 10,161 10,556
12/99 10,304 9,968 10,428 10,432 10,125
12/00 11,603 11,198 11,647 10,784 11,260
12/01 12,095 11,660 12,244 10,951 11,714
12/02 13,307 12,797 13,419 11,214 12,719
12/03 14,008 13,438 14,133 11,425 13,351
12/04 14,479 13,855 14,765 11,797 13,772
12/05 14,842 14,167 15,283 12,197 14,058
12/06 15,498 14,756 16,025 12,509 14,663
12/07 15,881 15,082 16,565 13,020 14,911
# 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
- --------------------------------------------------------------------
2.47% 3.13% 3.60% 4.73% 5.39% Class I
- --------------------------------------------------------------------
2.21% 2.87% 3.34% 4.51%* 5.22%* Class A
- --------------------------------------------------------------------
- -0.82% 1.84% 2.71% 4.20%* 4.97%* 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 3.00% sales charge.
+ Returns shown do not reflect the deduction of taxes that a shareholder
would pay on Fund distributions or the redemption of Fund shares. Fee
waivers are in effect; if they had not been in effect, performance would
have been lower.
December 31, 2007 35 www.bishopstreetfunds.com
Hawaii Municipal Bond Fund
- --------------------------------------------------------------------------------
TOP TEN HOLDINGS+
- --------------------------------------------------------------------------------------
Percentage
Coupon Maturity of
Rate Date Investments
- --------------------------------------------------------------------------------------
1. University of Hawaii RB 4.625% 07/15/31 2.9%
- --------------------------------------------------------------------------------------
2. Hawaii State RB 5.000% 07/01/12 2.5%
- --------------------------------------------------------------------------------------
3. Puerto Rico Public Buildings Authority RB 5.250% 07/01/25 2.3%
- --------------------------------------------------------------------------------------
4. Hawaii State Department of Budget & Finance RB 5.650% 10/01/27 2.1%
- --------------------------------------------------------------------------------------
5. Hawaii State Housing Finance & Development RB 5.400% 07/01/29 1.8%
- --------------------------------------------------------------------------------------
6. Honolulu City & County RB 5.000% 07/01/31 1.7%
- --------------------------------------------------------------------------------------
7. Honolulu City & County GO 5.000% 07/01/19 1.5%
- --------------------------------------------------------------------------------------
8. Hawaii State RB 5.000% 07/01/16 1.5%
- --------------------------------------------------------------------------------------
9. Hawaii State GO 6.500% 12/01/13 1.4%
- --------------------------------------------------------------------------------------
10. Honolulu City & County, Board of Water Supply RB 4.750% 07/01/14 1.3%
- --------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECTOR WEIGHTINGS (UNAUDITED)+
[THE FOLLOWING TABLE WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.]
31.7% General Obligations
13.0% Transportation
9.7% Housing
9.7% Water
8.9% Facilities
4.9% Airport
4.7% Utilities
4.6% Power
4.3% General Revenue
3.2% Medical
2.9% Single-Family Housing
1.0% Development
0.8% School District
0.5% Short-Term Investments
0.1% Multi-Family Housing
- --------------------------------------------------------------------------------
+ PERCENTAGES ARE BASED ON TOTAL INVESTMENTS.
SCHEDULE OF INVESTMENTS
Face Market
Amount Value
(000) (000)
- ----------- -------
MUNICIPAL BONDS -- 98.0%
CALIFORNIA -- 1.1%
Highland, Redevelopment Agency, Project Area No. 1,
TA, AMBAC Insured
$1,440 5.650%, 12/01/24 $ 1,679
La Mesa-Spring Valley, School District, Electric of 2002
Project, Ser B, GO, FGIC Insured (A)
630 5.017%, 08/01/27 237
-------
1,916
-------
Bishop Street Funds 36
Hawaii Municipal Bond Fund
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
(CONTINUED)
Face Market
Amount Value
(000) (000)
- ----------- -------
GEORGIA -- 1.2%
Main Street, Natural Gas, Ser B, RB
$2,000 5.000%, 03/15/18 $ 1,995
-------
HAWAII -- 79.8%
Hawaii County, Refunding & Improvement Project, Ser A,
GO, FGIC Insured
450 5.600%, 05/01/12 491
430 5.600%, 05/01/13 476
400 5.550%, 05/01/09 413
Hawaii County, Ser A, GO, AMBAC Insured
1,000 5.000%, 07/15/15 1,096
500 4.250%, 07/15/26 484
Hawaii County, Ser A, GO, FSA Insured
1,500 5.000%, 07/15/23 1,565
Hawaii County, Ser A, GO, FSA Insured, Pre-Refunded @ 101 (B)
500 5.400%, 05/15/09 521
Hawaii County, Ser A, GO, MBIA Insured
1,055 5.250%, 07/15/18 1,141
1,205 5.000%, 07/15/15 1,298
1,470 5.000%, 07/15/24 1,530
Hawaii State, Airport System, RB, AMT, FGIC Insured
1,000 5.750%, 07/01/15 1,052
280 5.250%, 07/01/21 285
Hawaii State, Airport System, Second Ser, RB, AMT, ETM
60 6.900%, 07/01/12 65
Hawaii State, Airport System, Second Ser, RB, AMT, ETM,
MBIA Insured
1,505 6.900%, 07/01/12 1,628
Hawaii State, Airport System, Ser B, RB, AMT, FGIC Insured
1,500 6.625%, 07/01/18 1,597
1,500 6.500%, 07/01/14 1,602
500 6.000%, 07/01/19 524
Hawaii State, Department of Budget & Finance,
Chaminade University, RB, Radian Insured
1,000 5.000%, 01/01/26 984
1,000 4.750%, 01/01/36 927
1,000 4.700%, 01/01/31 937
Hawaii State, Department of Budget & Finance, Electric
Company & Subsidiary Project, RB, AMT, MBIA Insured
170 5.450%, 11/01/23 170
Hawaii State, Department of Budget & Finance, Electric
Company & Subsidiary Project, Ser A, RB, AMT, FGIC Insured
1,500 4.800%, 01/01/25 1,497
December 31, 2007 37 www.bishopstreetfunds.com
Hawaii Municipal Bond Fund
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
(CONTINUED)
Face Market
Amount Value
(000) (000)
- --------- --------
HAWAII -- (CONTINUED)
Hawaii State, Department of Budget & Finance, Electric
Company & Subsidiary Project, Ser B, RB, AMT, XLCA
Insured
$1,025 5.000%, 12/01/22 $ 1,046
Hawaii State, Department of Budget & Finance, Hawaiian
Electric, Ser A, RB, AMT, AMBAC Insured
675 5.100%, 09/01/32 684
Hawaii State, Department of Budget & Finance, Hawaiian
Electric, Ser A, RB, AMT, FGIC Insured
1,000 4.650%, 03/01/37 912
Hawaii State, Department of Budget & Finance, Hawaiian
Electric, Ser A, RB, AMT, MBIA Insured
3,380 5.650%, 10/01/27 3,557
Hawaii State, Department of Budget & Finance, Hawaiian
Electric, Ser C, RB, AMT, AMBAC Insured
1,000 6.200%, 11/01/29 1,054
Hawaii State, Department of Budget & Finance, Mid
Pacific Institute, RB, Radian Insured
1,000 5.000%, 01/01/26 984
1,000 4.625%, 01/01/31 927
Hawaii State, Department of Budget & Finance, Queens
Health Systems, Ser B, RB, MBIA Insured, Pre-Refunded @
101 (B)
750 5.250%, 07/01/08 766
Hawaii State, Department of Hawaiian Home Lands,
Kapolei Office Facilities, Ser A, COP, FSA Insured
2,000 5.000%, 11/01/31 2,072
Hawaii State, Harbor System, Ser A, RB, AMT, FSA Insured
2,025 5.750%, 07/01/17 2,133
670 5.750%, 07/01/29 698
1,210 5.700%, 07/01/16 1,275
1,000 5.600%, 07/01/15 1,054
500 5.000%, 01/01/31 508
Hawaii State, Harbor System, Ser B, RB, AMT, AMBAC
Insured
200 5.500%, 07/01/19 211
Hawaii State, Harbor System, Ser B, RB, AMT, FSA Insured
1,000 5.000%, 01/01/13 1,059
Hawaii State, Highway, RB
1,000 6.000%, 07/01/08 1,015
2,000 6.000%, 07/01/09 2,085
Hawaii State, Highway, RB, FSA Insured
4,000 5.000%, 07/01/12 4,280
Hawaii State, Highway, Ser A, RB, FSA Insured
725 5.000%, 07/01/21 772
1,565 5.000%, 07/01/22 1,659
1,805 5.000%, 07/01/23 1,906
Bishop Street Funds 38
Hawaii Municipal Bond Fund
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
(CONTINUED)
Face Market
Amount Value
(000) (000)
- --------- --------
HAWAII -- (CONTINUED)
Hawaii State, Highway, Ser B, RB, FSA Insured
$2,300 5.000%, 07/01/16 $ 2,500
Hawaii State, Housing Finance & Development, Ser A, RB,
AMT, FNMA Collateral
3,000 5.400%, 07/01/29 3,029
Hawaii State, Housing Finance & Development,
Single-Family Housing, Ser A, RB, AMT, FNMA Collateral
285 5.750%, 07/01/30 292
620 5.400%, 07/01/30 624
Hawaii State, Housing Finance & Development,
Single-Family Housing, Ser B, RB, FNMA Collateral
1,000 5.450%, 07/01/17 1,015
Hawaii State, Housing Finance & Development, University
of Hawaii Faculty Housing Project, RB, AMBAC Insured
645 5.650%, 10/01/16 646
Hawaii State, Kapolei Office Building, Ser A, COP,
AMBAC Insured
1,475 5.250%, 05/01/13 1,513
1,000 5.000%, 05/01/08 1,006
1,100 5.000%, 05/01/15 1,125
1,000 5.000%, 05/01/16 1,023
1,000 5.000%, 05/01/17 1,023
500 5.000%, 05/01/18 511
Hawaii State, No. 1 Capitol District State Office, COP,
MBIA Insured
1,000 5.200%, 05/01/14 1,035
175 5.000%, 05/01/11 181
Hawaii State, Ser CM, GO, FGIC Insured
2,000 6.500%, 12/01/13 2,320
500 6.000%, 12/01/09 526
1,500 6.000%, 12/01/11 1,647
Hawaii State, Ser CP, GO, FGIC Insured
90 5.000%, 10/01/16 91
Hawaii State, Ser CU, GO, MBIA Insured
550 5.750%, 10/01/12 584
Hawaii State, Ser CU, GO, MBIA Insured, Pre-Refunded @
100 (B)
25 5.750%, 10/01/10 27
Hawaii State, Ser CV, GO, FGIC Insured
1,000 5.250%, 08/01/21 1,052
Hawaii State, Ser CX, GO, FSA Insured
1,000 5.500%, 02/01/21 1,066
Hawaii State, Ser DD, GO, MBIA Insured
1,000 5.000%, 05/01/16 1,069
Hawaii State, Ser DF, GO, AMBAC Insured
1,250 5.000%, 07/01/21 1,326
December 31, 2007 39 www.bishopstreetfunds.com
Hawaii Municipal Bond Fund
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
(CONTINUED)
Face Market
Amount Value
(000) (000)
- --------- --------
HAWAII -- (CONTINUED)
Hawaii State, Ser DG, GO, AMBAC Insured
$1,000 5.000%, 07/01/16 $ 1,084
Honolulu City & County, 1st Board Resolution, Senior
Ser C, RB, MBIA Insured
2,850 5.000%, 07/01/31 2,950
Honolulu City & County, 2nd Board Resolution, Junior
Ser A-1, RB, MBIA Insured
815 5.000%, 07/01/22 864
1,130 5.000%, 07/01/23 1,192
Honolulu City & County, 2nd Board Resolution, Junior
Ser B-1, RB, MBIA Insured
865 5.000%, 07/01/23 913
1,485 5.000%, 07/01/24 1,560
Honolulu City & County, Board of Water Supply,
Ser A, RB, FGIC Insured
2,000 5.000%, 07/01/33 2,053
Honolulu City & County, Board of Water Supply, Ser A,
RB, FGIC Insured, Pre-Refunded @ 100 (B)
1,700 4.750%, 07/01/14 1,834
2,000 4.750%, 07/01/14 2,157
Honolulu City & County, Board of Water Supply, Ser B,
RB, AMT, MBIA Insured
1,000 5.250%, 07/01/20 1,068
1,000 5.250%, 07/01/21 1,063
325 5.000%, 07/01/15 345
Honolulu City & County, GO, ETM
230 6.000%, 12/01/09 243
Honolulu City & County, Senior Ser A, RB, FGIC Insured
2,000 5.000%, 07/01/18 2,139
1,280 5.000%, 07/01/20 1,359
Honolulu City & County, Ser A, GO
55 6.000%, 01/01/10 58
1,000 5.750%, 04/01/12 1,096
Honolulu City & County, Ser A, GO, ETM
500 6.000%, 01/01/09 515
95 6.000%, 01/01/10 100
Honolulu City & County, Ser A, GO, MBIA Insured
625 5.250%, 03/01/17 669
500 5.250%, 03/01/28 522
1,000 5.000%, 07/01/14 1,082
Honolulu City & County, Ser B, GO, ETM, FGIC Insured
635 5.500%, 10/01/11 687
Bishop Street Funds 40
Hawaii Municipal Bond Fund
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
(CONTINUED)
Face Market
Amount Value
(000) (000)
- -------- --------
HAWAII -- (CONTINUED)
Honolulu City & County, Ser C, GO, FGIC Insured
$ 565 5.125%, 07/01/11 $ 585
1,100 5.125%, 07/01/15 1,138
2,500 5.000%, 07/01/19 2,579
Honolulu City & County, Ser C, GO, MBIA Insured
500 5.000%, 07/01/16 542
Honolulu City & County, Ser D, GO, AMT, FGIC Insured
245 4.850%, 02/01/10 252
Honolulu City & County, Ser D, GO, MBIA Insured
885 5.000%, 07/01/19 945
2,000 5.000%, 07/01/23 2,106
Honolulu City & County, Ser E, GO, FGIC Insured
1,500 5.250%, 07/01/20 1,626
Honolulu City & County, Waipahu Towers Project, Ser A,
RB, AMT, GNMA Collateral
200 6.900%, 06/20/35 201
Honolulu City & County, Waste Water, 2nd Board
Resolution, Junior Ser, RB, FGIC Insured
1,000 5.000%, 07/01/23 1,027
Honolulu Hawaii City & County, Ser A, GO, MBIA Insured
2,000 5.000%, 07/01/21 2,122
Kauai County, Ser A, GO, FGIC Insured
1,610 5.000%, 08/01/21 1,703
1,440 5.000%, 08/01/23 1,512
Kauai County, Ser A, GO, FGIC Insured, Pre-Refunded @
100 (B)
1,135 6.250%, 08/01/10 1,223
1,480 6.250%, 08/01/10 1,595
1,335 6.250%, 08/01/10 1,439
1,050 6.250%, 08/01/10 1,132
Kauai County, Ser A, GO, MBIA Insured
490 5.625%, 08/01/18 526
1,500 5.000%, 08/01/25 1,536
Kauai County, Ser A, GO, MBIA Insured, Pre-Refunded @
100 (B)
260 5.625%, 08/01/11 281
Maui County, GO, MBIA Insured
1,100 5.000%, 03/01/24 1,148
Maui County, Ser A, GO
260 5.375%, 03/01/12 276
Maui County, Ser A, GO, FGIC Insured, Pre-Refunded @
101 (B)
50 5.000%, 03/01/08 51
Maui County, Ser A, GO, MBIA Insured
1,000 4.750%, 07/01/25 1,023
Maui County, Ser A, GO, Pre-Refunded @ 100 (B)
225 5.375%, 03/01/11 240
December 31, 2007 41 www.bishopstreetfunds.com
Hawaii Municipal Bond Fund
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
(CONTINUED)
Face Market
Amount Value
(000) (000)
- --------- --------
HAWAII -- (CONTINUED)
Maui County, Ser B, GO, MBIA Insured
$ 500 5.000%, 09/01/17 $ 533
University of Hawaii, Ser A, RB, FGIC Insured,
Pre-Refunded @ 100 (B)
1,605 5.500%, 07/15/12 1,757
500 5.125%, 07/15/12 539
University of Hawaii, Ser A, RB, MBIA Insured
5,000 4.625%, 07/15/31 5,009
750 4.500%, 07/15/32 735
500 3.625%, 10/01/12 504
University of Hawaii, Ser B, RB, FSA Insured
320 5.250%, 10/01/16 338
775 5.250%, 10/01/17 817
--------
138,764
--------
ILLINOIS -- 1.9%
Chicago O'Hare International Airport, General Airport,
Ser E, RB, CIFG Insured
1,550 5.250%, 01/01/22 1,636
Illinois State, Educational Facilities Authority,
Northwestern University, RB
670 5.000%, 12/01/38 689
Illinois State, Finance Authority, Hospital Sisters
Services, Ser A, RB
1,000 5.000%, 03/15/27 1,013
--------
3,338
--------
INDIANA -- 1.5%
Indiana Finance Authority, Highway Revenue, Ser A, RB,
FGIC Insured
1,200 4.500%, 06/01/27 1,186
Indiana State, Health & Educational Facilities Financing
Authority, Clarian Health Obligation, Ser A, RB
1,500 5.000%, 02/15/39 1,408
--------
2,594
--------
MASSACHUSETTS -- 0.3%
Massachusetts State, Water Resources Authority,
Ser J, RB
565 5.000%, 08/01/42 576
--------
NEVADA -- 0.6%
Las Vegas New Convention & Visitors Authority, RB,
AMBAC Insured
1,055 5.000%, 07/01/28 1,098
--------
Bishop Street Funds 42
Hawaii Municipal Bond Fund
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
(CONTINUED)
Face Market
Amount Value
(000) (000)
- ----------- --------
OKLAHOMA -- 2.3%
Tulsa County, Oklahoma Industrial Authority, St.
Francis Health System, RB
$2,000 5.000%, 12/15/36 $ 1,970
Tulsa Industrial Authority, University of Tulsa, RB
2,000 5.000%, 10/01/37 1,975
--------
3,945
--------
PUERTO RICO -- 5.8%
Commonwealth of Puerto Rico, GO, MBIA Insured
500 6.500%, 07/01/14 578
1,500 6.000%, 07/01/15 1,706
Commonwealth of Puerto Rico, Public Improvement, GO,
FSA Insured
380 5.000%, 07/01/21 391
Commonwealth of Puerto Rico, Public Improvement, GO,
FSA Insured, Pre-Refunded @ 100 (B)
55 5.000%, 07/01/11 58
Puerto Rico Municipal Finance Agency, Ser B, GO, CIFG
Insured
970 5.250%, 07/01/20 1,055
Puerto Rico, Electric Power Authority, Ser HH, RB, FSA
Insured, Pre-Refunded @ 101 (B)
500 5.250%, 07/01/10 531
Puerto Rico, Industrial Tourist Educational Medical
Environmental Control Facilities, Hospital Auxilio
Mutuo Obligation Group, Ser A, RB, MBIA Insured
300 6.250%, 07/01/24 301
Puerto Rico, Public Buildings Authority, Government
Facilities, Ser F, RB, CIFG Insured
3,650 5.250%, 07/01/25 3,924
University of Puerto Rico, Ser O, RB, MBIA Insured,
Pre-Refunded @ 100 (B)
1,500 5.750%, 06/01/10 1,594
--------
10,138
--------
SOUTH CAROLINA -- 1.2%
Edisto Beach, GO
735 5.000%, 04/01/37 740
Sumter South Carolina, Waterworks & Sewer Improvement
Systems, RB, XLCA Insured
500 5.000%, 12/01/21 533
840 5.000%, 12/01/24 884
--------
2,157
--------
December 31, 2007 43 www.bishopstreetfunds.com
Hawaii Municipal Bond Fund
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
(CONTINUED)
Market
Shares/Face Value
Amount (000) (000)
- ------------ ---------
TEXAS -- 2.3%
Harris County, Houston Texas Sports Authority, Ser A,
RB, MBIA Insured (A)
$5,000 5.400%, 11/15/40 $ 794
Rockdale, Independent School District, School
Building, GO
1,140 5.000%, 02/15/27 1,193
University of Texas, Permanent University Fund, Ser
B, RB
2,000 4.500%, 07/01/33 1,957
--------
3,944
--------
TOTAL MUNICIPAL BONDS (Cost $168,342) 170,465
--------
CASH EQUIVALENTS (C) -- 0.5%
457,840 Dreyfus Cash Management Fund, Institutional Shares,
3.030% 458
457,840 Fidelity Institutional Tax-Exempt Portfolio,
Institutional Shares, 2.990% 458
--------
TOTAL CASH EQUIVALENTS (Cost $916) 916
--------
TOTAL INVESTMENTS (Cost $169,258) -- 98.5% $171,381
========
PERCENTAGES ARE BASED ON NET ASSETS OF $173,943 ($ THOUSANDS).
(A) ZERO COUPON SECURITY -- THE RATE REPORTED ON THE SCHEDULE OF INVESTMENTS IS
THE EFFECTIVE YIELD AT TIME OF PURCHASE.
(B) PRE-REFUNDED SECURITY -- THE MATURITY DATE SHOWN IS THE PRE-REFUNDED DATE.
(C) THE RATE SHOWN REPRESENTS THE 7-DAY EFFECTIVE YIELD AS OF DECEMBER 31, 2007.
AMBAC -- AMERICAN MUNICIPAL BOND ASSURANCE COMPANY
AMT -- ALTERNATIVE MINIMUM TAX
CIFG -- CDC IXIS FINANCIAL GUARANTEE
COP -- CERTIFICATE OF PARTICIPATION
ETM -- ESCROWED TO MATURITY
FGIC -- FINANCIAL GUARANTEE INSURANCE 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
TA -- TAX ALLOCATION
XLCA -- XL CAPITAL
COST FIGURES ARE SHOWN IN THOUSANDS.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
Bishop Street Funds 44
- --------------------------------------------------------------------------------
BISHOP STREET
MANAGEMENT DISCUSSION
FUNDS
- --------------------------------------------------------------------------------
Money Market & Treasury Money Market Funds
- --------------------------------------------------------------------------------
The most notable event of 2007 was the emergence of a credit crisis in the
summer months. Panic induced investors, reacting to difficulties in the mortgage
market, shunned short term credit securities for the safety of U.S. Treasury
Bills. Commercial paper yields soared in a traditional investor "flight to
quality." Central banks in the US and Europe injected liquidity in to the system
in an effort to control overnight lending rates and calm markets. In successive
steps, the Federal Reserve reduced policy rates at each meeting through year
end.
Tightening credit markets coupled with declining home prices negatively impacted
the U.S. economy. Unemployment rose as fewer jobs were created in the labor
sector. Manufacturing sector expanded at a much slower rate. On the inflation
front, energy prices continued to soar resulting in elevated headline inflation
figures. Core inflation measures remained above the comfort zone of policy
makers, despite a decline in the third and fourth quarter.
The market responded to difficulties in the economy with a rally short duration
treasuries. Falling short term yields resulted in steeper yield curve. At year
end, the Federal Open Market Committee indicated that additional action may be
necessary to address the challenges in the credit markets. The direction of
future interest rates in the U.S. has become very dependent on the health of the
credit markets. Markets are forecasting continued reduction in policy rates in
2008.
December 31, 2007 45 www.bishopstreetfunds.com
- --------------------------------------------------------------------------------
BISHOP STREET
MANAGEMENT DISCUSSION
FUNDS
- --------------------------------------------------------------------------------
During the year the Money Market and Treasury Money Market Funds (the "Funds")
were maintained at a conservative maturity stance which provided the opportunity
to continually reinvest at attractive yield levels throughout 2007. Though, with
monetary policy rates declining we expect that opportunities to capture
additional yield premium by extending the average maturity of the Funds may
emerge in 2008. Meanwhile, we continue to strive to improve the yield of the
Funds while maintaining a high level of credit quality.
Bishop Street Funds 46
Money Market Fund
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECTOR WEIGHTINGS (UNAUDITED)+
[THE FOLLOWING TABLE WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.]
66.4% Commercial Paper
15.5% Repurchase Agreements
12.8% U.S. Government Agency Obligations
5.3% Certificates of Deposit/Bank Notes
- --------------------------------------------------------------------------------
+ PERCENTAGES ARE BASED ON TOTAL INVESTMENTS.
SCHEDULE OF INVESTMENTS
Face
Amount Value
(000) (000)
- ------------ ----------
COMMERCIAL PAPER (A) -- 69.1%
BANKS -- 49.7%
Bank of Montreal
$11,000 4.808%, 02/07/08 $ 10,946
Danske (B)
2,500 4.716%, 01/07/08 2,498
9,000 4.418%, 02/04/08 8,964
Deutsche Bank Financial
12,000 3.501%, 01/02/08 11,999
Dresdner Funding
11,500 4.980%, 01/02/08 11,498
Fortis Banque Luxembourg
7,000 5.174%, 01/04/08 6,997
5,000 4.691%, 01/15/08 4,991
JPMorgan Chase
10,000 5.093%, 01/15/08 9,980
Lloyds TSB Bank
6,500 4.658%, 01/04/08 6,498
Royal Bank of Scotland PLC
11,000 5.015%, 01/07/08 10,991
Societe General
12,500 4.779%, 02/07/08 12,439
Svenska Handelsbanken
12,500 4.737%, 02/07/08 12,440
UBS Finance
7,200 4.413%, 01/24/08 7,180
Westpac Capital (B)
3,500 4.708%, 02/05/08 3,484
----------
120,905
----------
FINANCIALS -- 19.4%
Abbey National Treasury Services
11,500 4.352%, 01/04/08 11,496
ABN Amro North American Finance
5,000 5.157%, 01/09/08 4,994
December 31, 2007 47 www.bishopstreetfunds.com
Money Market Fund
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
(CONTINUED)
Face
Amount Value
(000) (000)
- ----------- --------
FINANCIALS -- (CONTINUED)
CBA Delaware Finance
$ 6,100 4.706%, 01/30/08 $ 6,077
Dexia Delaware
12,000 4.756%, 01/02/08 11,999
ING Funding
5,000 4.700%, 01/04/08 4,998
7,600 5.074%, 01/16/08 7,584
--------
47,148
--------
TOTAL COMMERCIAL PAPER (Cost $168,053) 168,053
--------
U.S. GOVERNMENT AGENCY OBLIGATIONS (A) -- 13.3%
FHLB
12,000 4.348%, 01/30/08 11,958
15,000 4.053%, 01/04/08 14,995
FNMA
5,400 4.273%, 01/22/08 5,387
--------
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS (Cost $32,340) 32,340
--------
CERTIFICATES OF DEPOSIT/BANK NOTES -- 5.5%
UBS Finance
1,500 5.128%, 01/14/08 1,497
JPMorgan Chase
2,000 5.130%, 01/10/08 2,000
Toronto Dominion New York Yankee
10,000 4.840%, 04/21/08 10,000
--------
TOTAL CERTIFICATES OF DEPOSIT/BANK NOTES (Cost $13,497) 13,497
--------
Bishop Street Funds 48
Money Market Fund
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
(CONTINUED)
Face
Amount Value
(000) (000)
- ----------- --------
REPURCHASE AGREEMENTS -- 16.1%
$12,000 Bank of America 4.300%, dated 12/31/07, to be
repurchased on 01/02/08, repurchase price
$12,002,867 (collateralized by a U.S.
Government obligation, par value $16,313,950, 5.000%,
07/01/35 with a total market value $12,240,001) $ 12,000
15,000 Barclays Bank 1.350%, dated 12/31/07, to be
repurchased on 01/02/08, repurchase price
$15,001,125 (collateralized by a U.S.
Government obligation, par value $11,186,000, 7.875%,
02/15/21 with a total market value $15,301,232)
12,100 Barclays Bank 4.500%, dated 12/31/07, to be
repurchased on 01/02/08, repurchase price 15,000
$12,103,025 (collateralized by a U.S.
Government obligation, par value $12,783,337, 6.000%,
03/01/37, with a total market value of $12,342,001) 12,100
--------
TOTAL REPURCHASE AGREEMENTS (Cost $39,100) 39,100
--------
TOTAL INVESTMENTS (Cost $252,990) -- 104.0% $252,990
========
PERCENTAGES ARE BASED ON NET ASSETS OF $243,293 ($ THOUSANDS).
(A) THE RATE REPORTED ON THE SCHEDULE OF INVESTMENTS IS THE EFFECTIVE YIELD AT
TIME OF PURCHASE.
(B) SECURITY EXEMPT FROM REGISTRATION UNDER RULE 144A OF THE SECURITIES ACT OF
1933. THESE SECURITIES MAY BE RESOLD IN TRANSACTIONS EXEMPT FROM
REGISTRATION, NORMALLY TO QUALIFIED INSTITUTIONS. AT DECEMBER 31, 2007,
THE VALUE OF THESE SECURITIES AMOUNTED TO $14,946 ($THOUSANDS),
REPRESENTING 6.1% OF THE NET ASSETS OF THE FUND.
FHLB -- FEDERAL HOME LOAN BANK
FNMA -- FEDERAL NATIONAL MORTGAGE ASSOCIATION
PLC -- PUBLIC LIMITED COMPANY
COST FIGURES ARE SHOWN IN THOUSANDS.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
December 31, 2007 49 www.bishopstreetfunds.com
Treasury Money Market Fund
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECTOR WEIGHTINGS (UNAUDITED)+
[THE FOLLOWING TABLE WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.]
67.2% U.S. Treasury Obligations
32.8% Repurchase Agreement
- --------------------------------------------------------------------------------
+PERCENTAGES BASED ON TOTAL INVESTMENTS.
SCHEDULE OF INVESTMENTS
Face
Amount Value
(000) (000)
- ----------- ---------
U.S. TREASURY OBLIGATIONS (A) -- 67.4%
U.S. Treasury Bills
$20,000 1.851%, 01/10/08 $ 19,991
30,000 2.372%, 01/31/08 29,941
30,000 3.119%, 03/27/08 29,778
20,000 3.249%, 05/15/08 19,759
---------
TOTAL U.S. TREASURY OBLIGATIONS (Cost $99,469) 99,469
---------
REPURCHASE AGREEMENT -- 32.9%
48,500 Barclays Bank 1.350%, dated 12/31/07, to be repurchased
on 01/02/08, repurchase price $48,503,638 (collateralized by a
U.S. Treasury obligation, par value $36,166,000, 7.875%,
02/15/21, with a total market value of $49,471,155)
TOTAL REPURCHASE AGREEMENT (Cost $48,500) 48,500
---------
TOTAL INVESTMENTS (Cost $147,969) -- 100.3% $ 147,969
=========
PERCENTAGES ARE BASED ON NET ASSETS OF $147,512 ($ THOUSANDS).
(A) THE RATE REPORTED ON THE SCHEDULE OF INVESTMENTS IS THE EFFECTIVE YIELD AT
TIME OF PURCHASE.
COST FIGURES ARE SHOWN IN THOUSANDS.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
Bishop Street Funds 50
Bishop Street Funds
- --------------------------------------------------------------------------------
STATEMENTS OF ASSETS AND LIABILITIES
DECEMBER 31, 2007
(IN THOUSANDS)
Large High
Strategic Cap Core Grade
Growth Equity Income
Fund Fund Fund
- ----------------------------------------------------------------------------------------------------------
ASSETS:
Investments, at Cost $ 106,423 $ 96,555 $150,601
Repurchase Agreements, at Cost -- 656 15,460
==========================================================================================================
Investments, at Value $ 128,326 $ 102,164(1) $153,554(1)
Repurchase Agreements, at Value -- 656 15,460
Dividends and Interest Receivable 43 89 1,992
Receivable for Fund Shares Sold 10 27 181
Prepaid Expenses 2 2 2
- ----------------------------------------------------------------------------------------------------------
Total Assets 128,381 102,938 171,189
- ----------------------------------------------------------------------------------------------------------
LIABILITIES:
Payable for Investment Securities Purchased 1,471 -- --
Payable for Fund Shares Redeemed 378 -- 7
Income Distribution Payable -- -- 219
Collateral on Securities Loaned -- 1,469 34,614
Advisory Fees Payable 80 71 54
Administrative Fees Payable 13 10 14
Shareholder Servicing Fees Payable 11 9 11
Chief Compliance Officer Fees Payable 2 2 2
Trustees' Fees Payable 1 1 1
Accrued Expenses Payable 41 34 44
- ----------------------------------------------------------------------------------------------------------
Total Liabilities 1,997 1,596 34,966
- ----------------------------------------------------------------------------------------------------------
Net Assets $ 126,384 $ 101,342 $136,223
==========================================================================================================
Fund Shares $ 102,860 $ 95,652 $134,279
Undistributed Net Investment Income 2 -- 2
Accumulated Net Realized Gain (Loss) on Investments 1,619 81 (1,011)
Net Unrealized Appreciation on Investments 21,903 5,609 2,953
- ----------------------------------------------------------------------------------------------------------
Net Assets $ 126,384 $ 101,342 $136,223
==========================================================================================================
Class I Shares:
Net Assets $ 126,384 $ 101,342 $136,223
Outstanding Shares of Beneficial Interest
(unlimited authorization -- no par value) 8,997 9,617 13,416
Net Asset Value, Offering and Redemption Price Per Share
(Net Assets / Shares Outstanding) $ 14.05 $ 10.54 $ 10.15
==========================================================================================================
(1) INCLUDED IN "INVESTMENTS, AT VALUE" IS THE MARKET VALUE OF SECURITIES ON
LOAN IN THE AMOUNTS OF $1,410 ($ THOUSANDS), AND $33,818 ($ THOUSANDS) FOR
THE LARGE CAP CORE EQUITY AND HIGH GRADE INCOME FUNDS, RESPECTIVELY.
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, 2007 51 www.bishopstreetfunds.com
Bishop Street Funds
- --------------------------------------------------------------------------------
STATEMENTS OF ASSETS AND LIABILITIES
DECEMBER 31, 2007
(IN THOUSANDS)
Hawaii Treasury
Municipal Money Money
Bond Market Market
Fund Fund Fund
- -------------------------------------------------------------------------------------------------------
ASSETS:
Investments, at Cost $ 169,258 $ 213,890 $ 99,469
Repurchase Agreements, at Cost -- 39,100 48,500
=======================================================================================================
Investments, at Value $ 171,381 $ 213,890 $ 99,469
Repurchase Agreements, at Value -- 39,100 48,500
Cash -- 20 74
Interest Receivable 3,386 30 2
Receivable for Fund Shares Sold -- 1 --
Prepaid Expenses 3 4 3
- -------------------------------------------------------------------------------------------------------
Total Assets 174,770 253,045 148,048
- -------------------------------------------------------------------------------------------------------
LIABILITIES:
Payable for Investment Securities Purchased -- 8,964 --
Income Distribution Payable 474 610 431
Payable for Fund Shares Redeemed 211 -- --
Advisory Fees Payable 45 41 22
Administrative Fees Payable 11 24 16
Shareholder Servicing Fees Payable 15 20 13
Distribution Fees Payable 6 14 --
Chief Compliance Officer Fees Payable 2 3 2
Trustees' Fees Payable 2 3 2
Accrued Expenses Payable 61 73 50
- -------------------------------------------------------------------------------------------------------
Total Liabilities 827 9,752 536
- -------------------------------------------------------------------------------------------------------
Net Assets $ 173,943 $ 243,293 $147,512
=======================================================================================================
Fund Shares $ 171,858 $ 243,312 $147,490
Undistributed Net Investment Income 2 -- --
Accumulated Net Realized Gain (Loss) on Investments (40) (19) 22
Net Unrealized Appreciation on Investments 2,123 -- --
- -------------------------------------------------------------------------------------------------------
Net Assets $ 173,943 $ 243,293 $147,512
=======================================================================================================
Class I Shares:
Net Assets $ 144,828 $ 179,725 $147,512
Outstanding Shares of Beneficial Interest
(unlimited authorization -- no par value) 13,717 179,749 147,491
Net Asset Value, Offering and Redemption Price Per Share
(Net Assets / Shares Outstanding) $ 10.56 $ 1.00 $ 1.00
=======================================================================================================
Class A Shares:
Net Assets $ 29,115 $ 63,568 --
Outstanding Shares of Beneficial Interest
(unlimited authorization -- no par value) 2,757 63,566 --
Net Asset Value, Offering and Redemption Price Per Share
(Net Assets / Shares Outstanding) $ 10.56 $ 1.00 $ --
=======================================================================================================
Maximum Offering Price Per Shares -- Class A
($10.56 / 97.00%) $ 10.89 -- --
=======================================================================================================
AMOUNTS DESIGNATED AS "--" ARE EITHER $0 OR HAVE BEEN ROUNDED TO $0.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
Bishop Street Funds 52
Bishop Street Funds
- --------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2007
(IN THOUSANDS)
Large High
Strategic Cap Core Grade
Growth Equity Income
Fund Fund Fund
- --------------------------------------------------------------------------------
INVESTMENT INCOME:
Dividend Income $ 1,158 $ 1,520 $ 107
Interest Income -- -- 6,743
Securities Lending, Net -- 9 77
Foreign Taxes Withheld (2) (5) --
- --------------------------------------------------------------------------------
Total Investment Income 1,156 1,524 6,927
- --------------------------------------------------------------------------------
EXPENSES:
Investment Adviser Fees 1,010 788 741
Shareholder Servicing Fee 341 266 337
Administrative Fees 273 213 270
Chief Compliance Officer Fees 3 3 3
Transfer Agent Fees 43 39 42
Professional Fees 40 32 37
Printing Fees 25 20 25
Custody Fees 14 11 13
Trustees' Fees 9 7 9
Registration Fees 3 2 2
Line of Credit 3 2 --
Miscellaneous Expenses 11 9 19
- --------------------------------------------------------------------------------
Total Expenses 1,775 1,392 1,498
- --------------------------------------------------------------------------------
Less Waivers:
Investment Adviser Fees -- (21) (158)
Shareholder Servicing Fees (205) (160) (202)
Administrative Fees (116) (91) (115)
- --------------------------------------------------------------------------------
Total Waivers (321) (272) (475)
- --------------------------------------------------------------------------------
Total Net Expenses 1,454 1,120 1,023
- -------------------------------------------------------------------------------
Net Investment Income (Loss) (298) 404 5,904
- --------------------------------------------------------------------------------
Net Realized Gain (Loss) on Investments 19,654 5,352 (237)
Change in Unrealized Appreciation
(Depreciation) on Investments (6,388) (407) 3,129
- --------------------------------------------------------------------------------
Net Realized and Unrealized Gain
on Investments 13,266 4,945 2,892
- --------------------------------------------------------------------------------
Increase in Net Assets Resulting from Operations $ 12,968 $ 5,349 $ 8,796
================================================================================
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, 2007 53 www.bishopstreetfunds.com
Bishop Street Funds
- --------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2007
(IN THOUSANDS)
Hawaii Treasury
Municipal Money Money
Bond Market Market
Fund Fund Fund
- --------------------------------------------------------------------------------------------
INVESTMENT INCOME:
Interest Income $ 7,646 $ 11,956 $ 7,789
Dividend Income 46 -- --
- --------------------------------------------------------------------------------------------
Total Investment Income 7,692 11,956 7,789
- --------------------------------------------------------------------------------------------
EXPENSES:
Investment Adviser Fees 602 683 485
Shareholder Servicing Fee 430 569 404
Administrative Fees 344 455 323
Distribution Fees, Class A 74 156 --
Chief Compliance Officer Fees 3 5 2
Transfer Agent Fees 71 76 46
Professional Fees 51 67 45
Printing Fees 32 43 30
Custody Fees 17 22 16
Trustees' Fees 12 15 11
Registration Fees 4 5 4
Line of Credit 1 1 3
Miscellaneous Expenses 34 23 47
- --------------------------------------------------------------------------------------------
Total Expenses 1,675 2,120 1,416
- --------------------------------------------------------------------------------------------
Less Waivers:
Investment Adviser Fees (172) (286) (324)
Shareholder Servicing Fees (258) (342) (242)
Administrative Fees (224) (194) (138)
- --------------------------------------------------------------------------------------------
Total Waivers (654) (822) (704)
- --------------------------------------------------------------------------------------------
Total Net Expenses 1,021 1,298 712
- --------------------------------------------------------------------------------------------
Net Investment Income 6,671 10,658 7,077
- --------------------------------------------------------------------------------------------
Net Realized Gain on Investments 502 3 121
Change in Unrealized Depreciation on Investments (3,000) -- --
- --------------------------------------------------------------------------------------------
Net Realized and Unrealized Gain (Loss) on Investments (2,498) 3 121
- --------------------------------------------------------------------------------------------
Increase in Net Assets Resulting from Operations $ 4,173 $ 10,661 $ 7,198
============================================================================================
AMOUNTS DESIGNATED AS "--" ARE EITHER $0 OR HAVE BEEN ROUNDED TO $0.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
Bishop Street Funds 54
Bishop Street Funds
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEARS OR PERIOD ENDED DECEMBER 31,
(IN THOUSANDS)
Strategic Large Cap Core
Growth Fund Equity Fund
- ------------------------------------------------------------------------------------------------------------------
2007 2006 2007 2006*
- ------------------------------------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES FROM OPERATIONS:
Net Investment Income (Loss) $ (298) $ (316) $ 404 $ 310
Net Realized Gain on Investments 19,654 7,651 5,352 300
Change in Unrealized Appreciation (Depreciation)
on Investments (6,388) 5,124 (407) 6,016
- ------------------------------------------------------------------------------------------------------------------
Increase in Net Assets Resulting from Operations 12,968 12,459 5,349 6,626
- ------------------------------------------------------------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS:
Net Investment Income:
Class I Shares -- -- (404) (318)
Capital Gains:
Class I Shares (18,469) (8,326) (5,563) --
- ------------------------------------------------------------------------------------------------------------------
Total Dividends and Distributions (18,469) (8,326) (5,967) (318)
- ------------------------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS:
Class I Shares:
Proceeds from Shares Issued 11,212 32,077 11,637 100,103
Reinvestments of Cash Distributions 13,283 5,766 4,516 275
Cost of Shares Redeemed (35,539) (22,388) (17,043) (3,836)
- ------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Net Assets
From Capital Share Transactions (11,044) 15,455 (890) 96,542
- ------------------------------------------------------------------------------------------------------------------
Total Increase (Decrease) in Net Assets (16,545) 19,588 (1,508) 102,850
- ------------------------------------------------------------------------------------------------------------------
NET ASSETS:
Beginning of Period 142,929 123,341 102,850 --
- ------------------------------------------------------------------------------------------------------------------
End of Period $126,384 $142,929 $101,342 $102,850
==================================================================================================================
Undistributed Net Investment Income
(Accumulated Net Investment Loss) $ 2 $ (2) $ -- $ --
==================================================================================================================
SHARE TRANSACTIONS:
Class I Shares:
Shares Issued 733 2,180 1,053 10,032
Shares Issued in Lieu of Cash Distributions 933 395 422 27
Shares Redeemed (2,301) (1,539) (1,542) (375)
- ------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Shares Outstanding from
Share Transactions (635) 1,036 (67) 9,684
==================================================================================================================
* COMMENCED OPERATIONS ON MAY 3, 2006.
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, 2007 55 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
- ------------------------------------------------------------------------------------------------------------------
2007 2006 2007 2006
- ------------------------------------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES FROM OPERATIONS:
Net Investment Income $ 5,904 $ 5,601 $ 6,671 $ 6,726
Net Realized Gain (Loss) on Investments (237) (681) 502 842
Change in Unrealized Appreciation (Depreciation)
on Investments 3,129 (1,041) (3,000) (354)
- ------------------------------------------------------------------------------------------------------------------
Increase in Net Assets Resulting from Operations 8,796 3,879 4,173 7,214
- ------------------------------------------------------------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS:
Net Investment Income:
Class I Shares (5,901) (5,603) (5,627) (5,556)
Class A Shares -- -- (1,099) (1,160)
Capital Gains:
Class I Shares -- -- (665) (486)
Class A Shares -- -- (134) (107)
- ------------------------------------------------------------------------------------------------------------------
Total Dividends and Distributions (5,901) (5,603) (7,525) (7,309)
- ------------------------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS:
Class I Shares:
Proceeds from Shares Issued 17,815 21,382 23,661 18,308
Reinvestments of Cash Distributions 3,274 3,249 818 838
Cost of Shares Redeemed (29,209) (22,898) (15,222) (25,935)
- ------------------------------------------------------------------------------------------------------------------
Total Class I Capital Share Transactions (8,120) 1,733 9,257 (6,789)
- ------------------------------------------------------------------------------------------------------------------
Class A Shares:
Proceeds from Shares Issued -- -- 1,924 1,111
Reinvestments of Cash Distributions -- -- 540 543
Cost of Shares Redeemed -- -- (3,180) (2,744)
- ------------------------------------------------------------------------------------------------------------------
Total Class A Capital Share Transactions -- -- (716) (1,090)
- ------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Net Assets from
Capital Share Transactions (8,120) 1,733 8,541 (7,879)
- ------------------------------------------------------------------------------------------------------------------
Total Increase (Decrease) in Net Assets (5,225) 9 5,189 (7,974)
- ------------------------------------------------------------------------------------------------------------------
NET ASSETS:
Beginning of Year 141,448 141,439 168,754 176,728
- ------------------------------------------------------------------------------------------------------------------
End of Year $136,223 $141,448 $173,943 $168,754
==================================================================================================================
Undistributed Net Investment Income $ 2 $ 3 $ 2 $ 58
==================================================================================================================
SHARE TRANSACTIONS:
Class I Shares:
Shares Issued 1,789 2,158 2,226 1,709
Shares Issued in Lieu of Cash Distributions 329 328 77 78
Shares Redeemed (2,934) (2,320) (1,434) (2,425)
- ------------------------------------------------------------------------------------------------------------------
Total Class I Share Transactions (816) 166 869 (638)
- ------------------------------------------------------------------------------------------------------------------
Class A Shares:
Shares Issued -- -- 181 104
Shares Issued in Lieu of Cash Distributions -- -- 51 51
Shares Redeemed -- -- (300) (256)
- ------------------------------------------------------------------------------------------------------------------
Total Class A Share Transactions -- -- (68) (101)
- ------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Shares Outstanding
from Share Transactions (816) 166 801 (739)
==================================================================================================================
AMOUNTS DESIGNATED AS "--" ARE EITHER $0 OR HAVE BEEN ROUNDED TO $0.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
Bishop Street Funds 56
Bishop Street Funds
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED DECEMBER 31,
(IN THOUSANDS)
Money Market Treasury Money
Fund Market Fund
- ------------------------------------------------------------------------------------------------------------------
2007 2006 2007 2006
- ------------------------------------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES FROM OPERATIONS:
Net Investment Income $ 10,658 $ 9,883 $ 7,077 $ 8,671
Net Realized Gain (Loss) on Investments 3 1 121 (3)
- ------------------------------------------------------------------------------------------------------------------
Increase in Net Assets Resulting from Operations 10,661 9,884 7,198 8,668
- ------------------------------------------------------------------------------------------------------------------
DIVIDENDS TO SHAREHOLDERS:
Net Investment Income:
Class I Shares (7,832) (7,975) (7,077) (8,671)
Class A Shares (2,826) (1,904) -- --
Capital Gains:
Class I Shares -- -- (42) --
Class A Shares -- -- -- --
- ------------------------------------------------------------------------------------------------------------------
Total Dividends (10,658) (9,879) (7,119) (8,671)
- ------------------------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS (ALL AT $1.00 PER SHARE):
Class I Shares:
Proceeds from Shares Issued 428,470 434,439 543,810 410,744
Reinvestments of Cash Distributions 305 284 11 17
Cost of Shares Redeemed (408,095) (446,137) (554,752) (476,008)
- ------------------------------------------------------------------------------------------------------------------
Total Class I Capital Share Transactions 20,680 (11,414) (10,931) (65,247)
- ------------------------------------------------------------------------------------------------------------------
Class A Shares:
Proceeds from Shares Issued 110,288 164,007 -- --
Reinvestments of Cash Distributions 2.826 1,905 -- --
Cost of Shares Redeemed (108,760) (142,232) -- --
- ------------------------------------------------------------------------------------------------------------------
Total Class A Capital Share Transactions 4,354 23,680 -- --
- ------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Net Assets
from Capital Share Transactions 25,034 12,266 (10,931) (65,247)
- ------------------------------------------------------------------------------------------------------------------
Total Increase (Decrease) in Net Assets 25,037 12,271 (10,852) (65,250)
- ------------------------------------------------------------------------------------------------------------------
NET ASSETS:
Beginning of Year 218,256 205,985 158,364 223,614
- ------------------------------------------------------------------------------------------------------------------
End of Year $ 243,293 $ 218,256 $ 147,512 $ 158,364
==================================================================================================================
Undistributed Net Investment Income $ -- $ -- $ -- $ --
==================================================================================================================
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, 2007 57 www.bishopstreetfunds.com
Bishop Street Funds
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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
--------- ------------- --------------- ---------- ---------- ------- --------------
- ---------------------
STRATEGIC GROWTH FUND
- ---------------------
CLASS I SHARES:
2007(1) $ 14.84 $ (0.03) $ 1.53 $ 1.50 $ -- $ (2.29) $ (2.29)
2006(1) 14.35 (0.03) 1.41 1.38 -- (0.89) (0.89)
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 -- -- --
- --------------------------
LARGE CAP CORE EQUITY FUND
- --------------------------
CLASS I SHARES:
2007(1) $ 10.62 $ 0.04 $ 0.52 $ 0.56 $ (0.04) $ (0.60) $ (0.64)
2006(1)(2) 10.00 0.04 0.62 0.66 (0.04) -- (0.04)
- ----------------------
HIGH GRADE INCOME FUND
- ----------------------
CLASS I SHARES:
2007(1) $ 9.94 $ 0.44 $ 0.21 $ 0.65 $ (0.44) $ -- $ (0.44)
2006(1) 10.06 0.41 (0.12) 0.29 (0.41) -- (0.41)
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)
- --------------------------
HAWAII MUNICIPAL BOND FUND
- --------------------------
CLASS I SHARES:
2007(1) $ 10.77 $ 0.42 $ (0.16) $ 0.26 $ (0.42) $ (0.05) $ (0.47)
2006(1) 10.77 0.43 0.04 0.47 (0.43) (0.04) (0.47)
2005(1) 11.02 0.43 (0.16) 0.27 (0.43) (0.09) (0.52)
2004(1) 11.21 0.44 (0.07) 0.37 (0.44) (0.12) (0.56)
2003(1) 11.20 0.45 0.13 0.58 (0.45) (0.12) (0.57)
CLASS A SHARES:
2007(1) $ 10.77 $ 0.39 $ (0.16) $ 0.23 $ (0.39) $ (0.05) $ (0.44)
2006(1) 10.77 0.40 0.04 0.44 (0.40) (0.04) (0.44)
2005(1) 11.02 0.41 (0.16) 0.25 (0.41) (0.09) (0.50)
2004(1) 11.21 0.41 (0.07) 0.34 (0.41) (0.12) (0.53)
2003(1) 11.20 0.42 0.13 0.55 (0.42) (0.12) (0.54)
+ TOTAL RETURN IS FOR THE PERIOD INDICATED AND HAS NOT BEEN ANNUALIZED.
RETURNS SHOWN DO NOT REFLECT THE DEDUCTION OF TAXES THAT A SHAREHOLDER
WOULD PAY ON FUND DISTRIBUTIONS OR THE REDEMPTION OF FUND SHARES. FEE
WAIVERS ARE IN EFFECT; IF THEY HAD NOT BEEN IN EFFECT, PERFORMANCE WOULD
HAVE BEEN LOWER.
(1) PER SHARE NET INVESTMENT INCOME AMOUNT CALCULATED USING AVERAGE SHARES.
(2) COMMENCED OPERATIONS ON MAY 3, 2006.
* ANNUALIZED.
AMOUNTS DESIGNATED AS "--" ARE EITHER $0 OR HAVE BEEN ROUNDED TO $0.
Bishop Street Funds 58
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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
--------- ------- ----------- ----------- ----------------- ------------- ----------
- ---------------------
STRATEGIC GROWTH FUND
- ---------------------
CLASS I SHARES:
2007(1) $ 14.05 10.10% $ 126,384 1.07% 1.30% (0.22)% 61%
2006(1) 14.84 9.78 142,929 1.06 1.30 (0.23) 53
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
- --------------------------
LARGE CAP CORE EQUITY FUND
- --------------------------
CLASS I SHARES:
2007(1) $ 10.54 5.24% $ 101,342 1.05% 1.31% 0.38% 65%
2006(1)(2) 10.62 6.63 102,850 1.05* 1.32* 0.64* 51
- ----------------------
HIGH GRADE INCOME FUND
- ----------------------
CLASS I SHARES:
2007(1) $ 10.15 6.67% $ 136,223 0.76% 1.11% 4.38% 26%
2006(1) 9.94 2.96 141,448 0.76 1.12 4.12 41
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
- --------------------------
HAWAII MUNICIPAL BOND FUND
- --------------------------
CLASS I SHARES:
2007(1) $ 10.56 2.47% $ 144,828 0.55% 0.93% 3.92% 25%
2006(1) 10.77 4.42 138,333 0.55 0.93 3.99 47
2005(1) 10.77 2.51 145,213 0.55 0.93 3.97 41
2004(1) 11.02 3.36 148,575 0.55 0.92 3.97 40
2003(1) 11.21 5.27 150,373 0.45 0.91 4.01 38
CLASS A SHARES:
2007(1) $ 10.56 2.21% $ 29,115 0.80% 1.18% 3.67% 25%
2006(1) 10.77 4.16 30,421 0.80 1.18 3.74 47
2005(1) 10.77 2.25 31,515 0.80 1.18 3.72 41
2004(1) 11.02 3.10 30,484 0.80 1.17 3.72 40
2003(1) 11.21 5.01 30,975 0.70 1.16 3.76 38
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
December 31, 2007 59 www.bishopstreetfunds.com
Bishop Street Funds
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FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED DECEMBER 31,
INVESTMENT ACTIVITIES DIVIDENDS AND DISTRIBUTIONS
--------------------------- TOTAL ---------------------------
NET ASSET NET REALIZED INVESTMENT
VALUE, NET AND UNREALIZED ACTIVITIES NET
BEGINNING INVESTMENT GAIN (LOSS) ON FROM INVESTMENT CAPITAL TOTAL
OF PERIOD INCOME INVESTMENTS OPERATIONS INCOME GAINS DIVIDENDS
---------- ---------- -------------- ----------- ----------- ----------- ----------
- -----------------
MONEY MARKET FUND
- -----------------
CLASS I SHARES:
2007(1) $ 1.00 $ 0.05 $ -- $ 0.05 $ (0.05) $ -- $ (0.05)
2006(1) 1.00 0.05 -- 0.05 (0.05) -- (0.05)
2005(1) 1.00 0.03 -- 0.03 (0.03) -- (0.03)
2004(1) 1.00 0.01 -- 0.01 (0.01) -- (0.01)
2003(1) 1.00 0.01 -- 0.01 (0.01) -- (0.01)
CLASS A SHARES:
2007(1) $ 1.00 $ 0.05 $ -- $ 0.05 $ (0.05) $ -- $ (0.05)
2006(1) 1.00 0.04 -- 0.04 (0.04) -- (0.04)
2005(1) 1.00 0.03 -- 0.03 (0.03) -- (0.03)
2004(1) 1.00 0.01 -- 0.01 (0.01) -- (0.01)
2003(1) 1.00 0.01 -- 0.01 (0.01) -- (0.01)
- --------------------------
TREASURY MONEY MARKET FUND
- --------------------------
CLASS I SHARES:
2007(1) $ 1.00 $ 0.04 $ -- $ 0.04 $ (0.04) $ --* $ (0.04)
2006(1) 1.00 0.04 -- 0.04 (0.04) -- (0.04)
2005(1) 1.00 0.03 -- 0.03 (0.03) -- (0.03)
2004(1) 1.00 0.01 -- 0.01 (0.01) -- (0.01)
2003(1) 1.00 0.01 -- 0.01 (0.01) -- (0.01)
+ TOTAL RETURN IS FOR THE PERIOD INDICATED AND HAS NOT BEEN ANNUALIZED.
RETURNS SHOWN DO NOT REFLECT THE DEDUCTION OF TAXES THAT A SHAREHOLDER
WOULD PAY ON FUND DISTRIBUTIONS OR THE REDEMPTION OF FUND SHARES. FEE
WAIVERS ARE IN EFFECT; IF THEY HAD NOT BEEN IN EFFECT, PERFORMANCE WOULD
HAVE BEEN LOWER.
* AMOUNT REPRESENTS LESS THAN $0.01.
(1) 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 60
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RATIO OF RATIO OF EXPENSES RATIO OF NET
NET ASSET NET ASSETS, EXPENSES TO TO AVERAGE INVESTMENT
VALUE, END OF AVERAGE NET ASSETS INCOME
END OF TOTAL PERIOD NET EXCLUDING FEE TO AVERAGE
PERIOD RETURN+ (000) ASSETS WAIVERS NET ASSETS
--------- ------- ----------- ------------ ------------------ --------------
- -----------------
MONEY MARKET FUND
- -----------------
CLASS I SHARES:
2007(1) $ 1.00 4.86% $ 179,725 0.50% 0.86% 4.75%
2006(1) 1.00 4.63 159,044 0.50 0.86 4.55
2005(1) 1.00 2.78 170,455 0.50 0.87 2.73
2004(1) 1.00 0.92 167,910 0.50 0.84 0.90
2003(1) 1.00 0.76 182,166 0.50 0.83 0.76
CLASS A SHARES:
2007(1) $ 1.00 4.60% $ 63,568 0.75% 1.11% 4.50%
2006(1) 1.00 4.37 59,212 0.75 1.11 4.33
2005(1) 1.00 2.53 35,530 0.75 1.12 2.60
2004(1) 1.00 0.67 17,824 0.75 1.09 0.65
2003(1) 1.00 0.50 17,440 0.75 1.08 0.41
- --------------------------
TREASURY MONEY MARKET FUND
- --------------------------
CLASS I SHARES:
2007(1) $ 1.00 4.49% $ 147,512 0.44% 0.88% 4.38%
2006(1) 1.00 4.51 158,364 0.44 0.87 4.39
2005(1) 1.00 2.62 223,614 0.44 0.87 2.61
2004(1) 1.00 0.91 208,153 0.44 0.84 0.89
2003(1) 1.00 0.74 270,365 0.44 0.83 0.75
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
December 31, 2007 61 www.bishopstreetfunds.com
Bishop Street Funds
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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 six funds (each a Fund,
collectively the "Funds") which includes the Strategic Growth Fund, Large Cap
Core 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.
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. Debt securities are priced based upon valuations provided by
independent, third-party pricing agents, if available. Such values generally
reflect the last reported sales price if the security is actively traded. The
third-party pricing agents may also value debt securities at an evaluated bid
price by employing methodologies that utilize actual market transactions,
broker-supplied valuations, or other methodologies designed to identify the
market value for such securities. Debt obligations with remaining maturities of
sixty days or less may be valued at their amortized cost, which approximates
market value. Prices for most securities held in the Funds are provided daily by
recognized independent pricing agents. If a security price cannot be obtained
from an independent, third-party pricing agent, the Funds seek to obtain a bid
price from at least one independent broker.
Bishop Street Funds 62
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Securities for which market prices are not "readily available" are valued
in accordance with Fair Value Procedures established by the Funds' Board of
Trustees (the "Board"). The Funds' Fair Value Procedures are implemented through
a Fair Value Pricing Committee (the "Committee") designated by the Funds' Board.
Some of the more common reasons that may necessitate that a security be valued
using Fair Value Procedures include: the security's trading has been halted or
suspended; the security has been delisted from a national exchange; the
security's primary trading market is temporarily closed at a time when under
normal conditions it would be open; or the security's primary pricing source is
not able or willing to provide a price. When a security is valued in accordance
with the Fair Value Procedures, the Committee will determine the value after
taking into consideration relevant information reasonably available to the
Committee.
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 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 (as defined in 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 Funds may be delayed or limited.
December 31, 2007 63 www.bishopstreetfunds.com
Bishop Street Funds
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CLASSES
Class-specific expenses are borne by the applicable class of shares.
Income, realized and unrealized gains/losses and non class-specific expenses are
allocated to the respective class on the basis of relative daily net assets.
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 Strategic Growth and Large Cap Core Equity
Funds declare and pay dividends from any net investment income, if available, 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, 2007, 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 Statements
of Operations. For the year ended December 31, 2007, there were no cash
overdrafts.
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 Strategic
Growth and the Large Cap Core 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
Bishop Street Funds 64
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are as follows: Strategic Growth Fund (Class I) 1.07%, Large Cap Core Equity
Fund (Class I) 1.05%, High Grade Income Fund (Class I) 0.76%, Hawaii Municipal
Bond Fund (Class I) 0.55%, Hawaii Municipal Bond Fund (Class A) 0.80%, 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, Inc. ("FFTW") serves as the investment
sub-adviser for the Treasury and Money Market Funds, pursuant to a sub-adviser
agreement dated December 15, 2006 as approved by shareholders on December 15,
2006. 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.
Lotsoff Capital Management ("Lotsoff") serves as the investment
sub-adviser for the Large Cap Core Equity Fund pursuant to a sub-adviser
agreement dated April 28, 2006. Lotsoff is entitled to receive from the Adviser
a fee, computed daily and paid monthly, at the annual rate of 0.24% of the
average daily net assets of the Large Cap Core Equity Fund up to (but not
including) $300 million, 0.225% of the average daily net assets of the Large Cap
Core Equity Fund up to (but not including) $1 billion and 0.20% of the average
daily net assets of the Large Cap Core Equity Fund in excess of, and including
$1 billion.
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.
December 31, 2007 65 www.bishopstreetfunds.com
Bishop Street Funds
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SEI Investments Distribution Co. ("SIDCO"), a wholly owned subsidiary of
SEI Investments Company, acts as the Trust's Distributor pursuant to a
distribution agreement dated June 10, 1999. The Funds have adopted a
Distribution Plan (the "Plan") on behalf of Class A Shares pursuant to Rule
12b-1 under the Investment Company Act of 1940. The Plan provides that Class A
Shares will bear the cost of their distribution expenses. SIDCO, as compensation
for its services under the Plan, receives a distribution fee, computed daily and
payable monthly, of 0.25% of the average daily net assets attributable to each
Fund's Class A Shares.
The Trust has adopted and entered into a shareholder service plan and
agreement with SIDCO. Each Fund pays to SIDCO a shareholder servicing fee at an
annual rate of 0.25% of the average daily net asset value of all shares of each
fund, which is computed daily and paid monthly. Under the shareholder service
plan, SIDCO may perform, or may compensate other service providers for
performing various shareholder and administrative services. SIDCO may also
retain as profit any difference between the fee it receives and amount it pays
to third parties. For the period, SIDCO paid the entire amount of fees received
under the shareholder service plan to First Hawaiian Bank, the Parent Company of
Bishop Street Capital Management, for shareholder services performed for the
Funds. SIDCO has voluntarily agreed to waive a portion of its 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, a 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 Statements of
Operations is presented net of commissions to the security lending agent.
Bishop Street Funds 66
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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, 2007 are presented below for the Funds.
Strategic Large High Grade Hawaii
Growth Cap Core Income Municipal
Fund Equity Fund Fund Bond Fund
(000) (000) (000) (000)
--------- ----------- ---------- ---------
Purchases
U.S.
Government
Securities $ -- $ -- $ 16,955 $ --
Other 81,587 68,391 14,243 48,045
Sales and Maturities
U.S.
Government
Securities $ -- $ -- $ 18,877 $ --
Other 114,184 74,209 14,614 41,270
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 undistributed net investment income/(loss),
paid-in capital or accumulated net realized gain/(loss), as appropriate, in the
period that the differences arise.
December 31, 2007 67 www.bishopstreetfunds.com
Bishop Street Funds
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Accordingly, the following permanent differences, primarily attributable
to paydown gains and losses have been reclassified:
Undistributed Accumulated
Net Investment Net Realized
Income (Loss) Gain (Loss)
(000) (000)
-------------- ------------
Strategic Growth Fund $ 302 $ (302)
High Grade Income Fund (4) 4
Hawaii Municipal Bond Fund (1) 1
These reclassifications had no effect on net assets or net asset value per
share.
The tax character of dividends and distributions declared during the years
ended December 31, 2007 and December 31, 2006 were as follows:
Ordinary Tax Exempt Long-Term
Income Income Capital Gain Total
(000) (000) (000) (000)
-------- ---------- ------------ --------
Strategic Growth Fund
2007 $ 1,827 $ -- $ 16,642 $ 18,469
2006 93 -- 8,233 8,326
Large Cap Core Equity Fund
2007 $ 4,190 $ -- $ 1,777 $ 5,967
2006 318 -- -- 318
High Grade Income Fund
2007 $ 5,901 $ -- $ -- $ 5,901
2006 5,603 -- -- 5,603
Hawaii Municipal Bond Fund
2007 $ 181 $ 6,697 $ 647 $ 7,525
2006 67 6,717 525 7,309
Money Market Fund
2007 $ 10,658 $ -- $ -- $ 10,658
2006 9,879 -- -- 9,879
Treasury Money Market Fund
2007 $ 7,119 $ -- $ -- $ 7,119
2006 8,671 -- -- 8,671
Bishop Street Funds 68
- --------------------------------------------------------------------------------
As of December 31, 2007, the components of Distributable Earnings
(Accumulated Losses) on a tax basis were as follows:
Large Cap Treasury
Strategic Core High Grade Hawaii Money Money
Growth Equity Income Municipal Market Market
Fund Fund Fund Bond Fund Fund Fund
(000) (000) (000) (000) (000) (000)
--------- --------- ---------- ---------- ------ --------
Undistributed net
investment income $ -- $ -- $ -- $ -- $ -- $ 22
Undistributed
long-term
capital gain 1,793 404 -- -- -- --
Capital loss
carryforwards -- -- (958) -- (19) --
Post-October losses -- -- -- (37) -- --
Other temporary
differences -- -- 2 -- -- --
Unrealized
appreciation 21,731 5,286 2,900 2,122 -- --
-------- ------- ------- ------- ----- ----
Total Distributable
Earnings
(Accumulated
Losses) $ 23,524 $ 5,690 $ 1,944 $ 2,085 $ (19) $ 22
======== ======= ======= ======= ===== ====
Post-October losses represent losses realized on investment transactions
from November 1, 2007 through December 31, 2007 that, in accordance with Federal
income tax regulations, the Funds have elected to defer and treat as having
arisen in the following fiscal year.
December 31, 2007 69 www.bishopstreetfunds.com
Bishop Street Funds
- --------------------------------------------------------------------------------
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:
High
Grade Money
Income Market
Fund Fund
(000) (000)
------ ------
Dec. 2009 $ -- $ 16
Dec. 2013 -- 3
Dec. 2014 642 --
Dec. 2015 316 --
----- ----
Total $ 958 $ 19
===== ====
During the year ended December 31, 2007, the Money Market Fund and
Treasury Money Market Fund, utilized capital loss carryforwards of $3 and $57,
respectively, to offset realized capital gains.
The aggregate gross unrealized appreciation and depreciation of securities
held by the Strategic Growth, Large Cap Core Equity, High Grade Income, and
Hawaii Municipal Bond Funds for Federal income tax purposes at December 31, 2007
were as follows:
Strategic Large Cap High Grade Hawaii
Growth Core Income Municipal
Fund Equity Fund Fund Bond Fund
(000) (000) (000) (000)
--------- ----------- ---------- ---------
Federal Tax Cost $ 106,595 $ 97,534 $ 166,114 $ 169,259
--------- -------- --------- ---------
Gross
Unrealized
Appreciation 26,507 12,004 3,598 3,333
Gross
Unrealized
Depreciation (4,776) (6,718) (698) (1,211)
--------- -------- --------- ---------
Net
Unrealized
Appreciation $ 21,731 $ 5,286 $ 2,900 $ 2,122
========= ======== ========= =========
Bishop Street Funds 70
- --------------------------------------------------------------------------------
8. RISKS
The Hawaii Municipal Bond Fund invests primarily in debt instruments in
the state of Hawaii. The issuers' ability to meet their obligations may be
affected by economic developments in that state.
In 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. LINE OF CREDIT
The Funds entered into an agreement which enables them to participate in a
$5 million unsecured committed revolving line of credit with Union Bank of
California, N.A. (the "Bank"). The proceeds from the borrowings shall be used to
finance the Funds short term general working capital requirements, including the
funding of shareholder redemptions. Interest is charged to the Funds based on
their borrowings at the current reference rate minus 1%. For the year ended
December 31, 2007, the Funds had borrowings costs of $3,444 for the Strategic
Growth Fund, $1,895 for the Large Cap Core Equity Fund, $844 for the Hawaii
Municipal Bond Fund, and $3,208 for the Treasury Money Market Fund. As of
December 31, 2007, there are no outstanding borrowings by the Funds.
10. OTHER
At December 31, 2007, the percentage of total shares outstanding held by
shareholders for each Fund, which comprised an omnibus account that was held on
behalf of several individual shareholders, was as follows:
Number of % of Outstanding
Shareholders Shares
------------ ----------------
Strategic Growth Fund, Class I Shares 1 93.31%
Large Cap Core Equity Fund, Class I Shares 1 94.72
High Grade Income Fund, Class I Shares 2 95.14
Hawaii Municipal Bond Fund, Class I Shares 1 90.84
Hawaii Municipal Bond Fund, Class A Shares 2 25.88
Money Market Fund, Class I Shares 1 96.24
Money Market Fund, Class A Shares 2 100.00
Treasury Money Market Fund, Class I Shares 1 99.81
December 31, 2007 71 www.bishopstreetfunds.com
Bishop Street Funds
- --------------------------------------------------------------------------------
11. NEW ACCOUNTING PRONOUNCEMENTS
On July 13, 2006, the Financial Accounting Standards Board ("FASB")
released FASB INTERPRETATION NO. 48, "ACCOUNTING FOR UNCERTAINTY IN INCOME
TAXES" ("FIN 48"). FIN 48 provides guidance for how uncertain tax positions
should be recognized, measured, presented and disclosed in the financial
statements. FIN 48 requires the evaluation of tax positions taken or expected to
be taken in the course of preparing the Funds' tax returns to determine whether
the tax positions are "more-likely-than-not" of being sustained by the
applicable tax authority. Tax benefits of positions not deemed to meet the
more-likely-than-not threshold would be recorded as a tax expense in the current
year. Adoption of FIN 48 was required for fiscal years beginning after December
15, 2006 and is to be applied to all open tax years as of the effective date.
Based on its analysis, management has determined that the adoption of FIN 48 did
not have a material impact to the Fund's financial statements upon adoption.
However, management's conclusions regarding FIN 48 may be subject to review and
adjustment at a later date based on factors including, but not limited to,
further implementation guidance expected from the FASB, and on-going analyses of
and changes to tax laws, regulations and interpretations thereof.
In September 2006, the FASB issued STATEMENT ON FINANCIAL ACCOUNTING
STANDARDS ("SFAS") NO. 157, "FAIR VALUE MEASUREMENTS." This standard establishes
a single authoritative definition of fair value, sets out a framework for
measuring fair value and requires additional disclosures about fair value
measurements. SFAS No. 157 applies to fair value measurements already required
or permitted by existing standards. SFAS No. 157 is effective for financial
statements issued for fiscal years beginning after November 15, 2007 and interim
periods within those fiscal years. The changes to current generally accepted
accounting principles from the application of this Statement relate to the
definition of fair value, the methods used to measure fair value, and the
expanded disclosures about fair value measurements. As of December 31, 2007, the
Funds do not believe the adoption of SFAS No. 157 will impact the amounts
reported in the financial statements; however, additional disclosures may be
required about the inputs used to develop the measurements and the effect of
certain of the measurements reported on the Statements of Changes in net assets
for a fiscal period.
Bishop Street Funds 72
Bishop Street Funds
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Trustees and Shareholders of Bishop Street Funds:
In our opinion, the accompanying statements of assets and liabilities, including
the schedules of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Strategic Growth Fund, Large Cap
Core Equity Fund, High Grade Income Fund, Hawaii Municipal Bond Fund, Money
Market Fund and Treasury Money Market Fund (constituting Bishop Street Funds,
hereafter referred to as the "Trust") at December 31, 2007, the results of their
operations for the year then ended, and the changes in their net assets and the
financial highlights for each of the periods indicated, in conformity with
accounting principles generally accepted in the United States of America. These
financial statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Trust's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with the standards of the Public Company Accounting Oversight Board (United
States). Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at December 31, 2007 by
correspondence with the custodian and brokers, provide a reasonable basis for
our opinion.
PricewaterhouseCoopers LLP
Philadelphia, Pennsylvania
February 22, 2008
December 31, 2007 73 www.bishopstreetfunds.com
Bishop Street Funds
- --------------------------------------------------------------------------------
DISCLOSURE OF FUND EXPENSES (UNAUDITED)
All mutual funds have operating expenses. As a shareholder of a mutual fund,
your investment is affected by these ongoing costs, which include (among others)
costs for portfolio management, administrative services, and shareholder reports
like this one. It is important for you to understand the impact of these costs
on your investment returns.
Operating expenses such as these are deducted from a mutual fund's gross income
and directly reduce 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 74
- --------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
Beginning Ending Expenses
Account Account Annualized Paid
Value Value Expense During
7/1/07 12/31/07 Ratios Period*
======================================================================================================================
STRATEGIC GROWTH FUND -- CLASS I
- ----------------------------------------------------------------------------------------------------------------------
ACTUAL FUND RETURN $1,000.00 $1,014.90 1.07% $5.43
HYPOTHETICAL 5% RETURN 1,000.00 1,019.81 1.07 5.45
- ----------------------------------------------------------------------------------------------------------------------
LARGE CAP CORE EQUITY FUND -- CLASS I
- ----------------------------------------------------------------------------------------------------------------------
ACTUAL FUND RETURN $1,000.00 $ 976.90 1.05% $5.23
HYPOTHETICAL 5% RETURN 1,000.00 1,019.91 1.05 5.35
- -----------------------------------------------------------------------------------------------------------------------
HIGH GRADE INCOME FUND -- CLASS I
- -----------------------------------------------------------------------------------------------------------------------
ACTUAL FUND RETURN $1,000.00 $1,059.80 0.76% $3.95
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 $1,028.40 0.55% $2.81
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 $1,026.20 0.80% $4.09
HYPOTHETICAL 5% RETURN 1,000.00 1,021.17 0.80 4.08
- ----------------------------------------------------------------------------------------------------------------------
MONEY MARKET FUND -- CLASS I
- ----------------------------------------------------------------------------------------------------------------------
ACTUAL FUND RETURN $1,000.00 $1,023.70 0.50% $2.55
HYPOTHETICAL 5% RETURN 1,000.00 1,022.68 0.50 2.55
- ----------------------------------------------------------------------------------------------------------------------
MONEY MARKET FUND -- CLASS A
- ----------------------------------------------------------------------------------------------------------------------
ACTUAL FUND RETURN $1,000.00 $1,022.50 0.75% $3.82
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 $1,020.60 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, 2007 75 www.bishopstreetfunds.com
Bishop Street Funds
- --------------------------------------------------------------------------------
NOTICE TO SHAREHOLDERS OF BISHOP STREET FUNDS (UNAUDITED)
For shareholders that do not have a December 31, 2007 taxable year end,
this notice is for informational purposes only. For shareholders with a December
31, 2007 tax year end, please consult your tax advisor as to the pertinence of
this notice.
(A)* (B)*
LONG TERM ORDINARY (C)*
CAPITAL GAINS INCOME TAX
DISTRIBUTIONS DISTRIBUTIONS EXEMPT
FUND (TAX BASIS) (TAX BASIS) INTEREST
- --------- ------------- ------------- ---------
Strategic Growth Fund 90% 10% 0%
Large Cap Core Equity Fund 30% 70% 0%
High Grade Income Fund 0% 100% 0%
Hawaii Municipal Bond Fund 9% 2% 89%
Money Market Fund 0% 100% 0%
Treasury Money Market Fund 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 THRESHOLD
REQUIREMENTS WERE NOT SATISFIED TO PERMIT EXEMPTION OF THESE AMOUNTS FROM
STATE INCOME.
Bishop Street Funds 76
- --------------------------------------------------------------------------------
For the fiscal year ended December 31, 2007, each fund has designated the
following items with regard to distributions paid during the year:
(E)
DIVIDENDS
QUALIFYING
(D) FOR (I)
(A+B+C) CORPORATE (F) (G) (H) QUALIFIED
TOTAL DIVIDENDS QUALIFYING U.S. QUALIFIED SHORT-TERM
DISTRIBUTIONS RECEIVABLE DIVIDEND GOVERNMENT INTEREST CAPITAL
FUND (TAX BASIS) DEDUCTION(1) INCOME(2) INTEREST (3) INCOME (4) GAIN (5)
- --------- ------------- ------------ ---------- ------------ ---------- ----------
Strategic Growth Fund 100% 68% 59% 0% 0% 100%
Large Cap Core Equity Fund 100% 40% 31% 0% 0% 100%
High Grade Income Fund 100% 0% 0% 24% 100% 0%
Hawaii Municipal Bond Fund 100% 0% 0% 0% 100% 100%
Money Market Fund 100% 0% 0% 1% 100% 0%
Treasury Money Market Fund 100% 0% 0% 32% 97% 100%
(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) AND (C) ARE BASED ON THE PERCENTAGE OF EACH FUND'S TOTAL
DISTRIBUTION.
December 31, 2007 77 www.bishopstreetfunds.com
Bishop Street Funds
- --------------------------------------------------------------------------------
BOARD OF TRUSTEES AND OFFICERS
Set forth below are the names, age, position with the Trust, length of term of
office, and the principal occupations for the last five years of each of the
persons currently serving as Trustees and Officers of the Trust. Trustees who
are deemed not to be "interested persons" of the Trust are referred to as
"Independent Board Members." Messrs. Nesher and Doran are Trustees who may be
deemed to be "interested" persons of the Trust as that term
TERM OF
POSITION(S) OFFICE AND
NAME, ADDRESS, HELD WITH LENGTH OF
AGE 1 THE TRUST TIME SERVED 2
- -----------------------------------------------------------------------------
INTERESTED
BOARD MEMBERS
- -------------
ROBERT A. NESHER Chairman (Since 1998)
61 yrs. old of the Board
of Trustees
- -----------------------------------------------------------------------------
WILLIAM M. DORAN Trustee (Since 2006)
1701 Market Street
Philadelphia, PA 19103
67 yrs. old
- -----------------------------------------------------------------------------
Bishop Street Funds 78
(UNAUDITED)
- --------------------------------------------------------------------------------
is defined in the 1940 Act by virtue of their affiliation with the Trust's
Distributor. The Trust's Statement of Additional Information ("SAI") includes
additional information about the Trustees and Officers. The SAI may be obtained
without charge by calling 1-800-262-9565. The following chart lists Trustees and
Officers as of February 1, 2007.
NUMBER OF
PORTFOLIOS
IN BISHOP
STREET FUNDS
NAME, ADDRESS, PRINCIPAL OCCUPATION(S) OVERSEEN BY OTHER DIRECTORSHIPS
AGE 1 DURING PAST 5 YEARS BOARD MEMBER HELD BY BOARD MEMBER 3
- ------------------------------------------------------------------------------------------------------------------------------------
INTERESTED
BOARD MEMBERS
- -------------
ROBERT A. NESHER SEI employee 1974-present. Currently performs 6 Trustee of The Advisors' Inner Circle Fund, The
61 yrs. old various services on behalf of SEI Investments Advisors' Inner Circle Fund II, SEI Asset
for which Mr. Nesher is compensated. Executive Allocation Trust, SEI Daily Income Trust, SEI
Vice President of SEI Investments, 1986-1994. Index Funds, SEI Institutional International
Director and Executive Vice President of the Trust, SEI Institutional Investments Trust, SEI
Administrator and the Distributor, 1981-1994. Institutional Managed Trust, SEI Liquid Asset
Trust, SEI Tax Exempt Trust, SEI Opportunity
Master Fund, L.P., SEI Opportunity Fund, L.P., SEI
Global Master Fund, PLC, SEI Global Assets Fund,
PLC, SEI Global Investments Fund, PLC, SEI
Investments Global, Limited, SEI
Investments-Global Fund Services, Limited, SEI
Investments (Europe) Ltd., SEI Investments-Unit
Trust Management (UK) Limited, and SEI Global
Nominee Ltd.
- ------------------------------------------------------------------------------------------------------------------------------------
WILLIAM M. DORAN Self-employed consultant since 2003. Partner, 6 Director of SEI Investments Company and SEI
1701 Market Street Morgan, Lewis & Bockius LLP (law firm) from Investments Distribution Co., SEI
Philadelphia, 1976-2003, counsel to the Trust, SEI Investments-Global Fund Services, Limited, SEI
PA 19103 Investments, the Administrator and the Investments Global Limited, SEI Investments
67 yrs. old Distributor. Director of SEI Investments since (Europe), Limited, SEI Investments (Asia) Limited,
1974; Secretary of SEI Investments since 1978. SEI Asset Korea Co., Ltd., Trustee of The
Advisors' Inner Circle Fund, The Advisors' Inner
Circle Fund II, SEI Investments, SEI Asset
Allocation Trust, SEI Daily Income Trust, SEI
Index Funds, SEI Institutional International
Trust, SEI Institutional Investments Trust, SEI
Institutional Managed Trust, SEI Liquid Asset
Trust and SEI Tax Exempt Trust.
- ------------------------------------------------------------------------------------------------------------------------------------
December 31, 2007 79 www.bishopstreetfunds.com
Bishop Street Funds
- --------------------------------------------------------------------------------
TERM OF
POSITION(S) OFFICE AND
NAME, ADDRESS, HELD WITH LENGTH OF
AGE 1 THE TRUST TIME SERVED 2
- --------------------------------------------------------------------------------------------------------------------
INDEPENDENT
BOARD MEMBERS
- -------------
JAMES M. STOREY Trustee (Since 2006)
76 yrs. old
- --------------------------------------------------------------------------------------------------------------------
GEORGE J. SULLIVAN, JR. Trustee (Since 2006)
65 yrs. old
- --------------------------------------------------------------------------------------------------------------------
BETTY L. KRIKORIAN Trustee (Since 2006)
65 yrs. old
- --------------------------------------------------------------------------------------------------------------------
CHARLES E. CARLBOM Trustee (Since 2006)
73 yrs. old
- --------------------------------------------------------------------------------------------------------------------
MITCHELL A. JOHNSON Trustee (Since 2006)
65 yrs. old
- --------------------------------------------------------------------------------------------------------------------
Bishop Street Funds 80
(UNAUDITED)
- --------------------------------------------------------------------------------
NUMBER OF
PORTFOLIOS
IN BISHOP
STREET FUNDS
NAME, ADDRESS, PRINCIPAL OCCUPATION(S) OVERSEEN BY OTHER DIRECTORSHIPS
AGE 1 DURING PAST 5 YEARS BOARD MEMBER HELD BY BOARD MEMBER 3
- ------------------------------------------------------------------------------------------------------------------------------------
INDEPENDENT
BOARD MEMBERS
- -------------
JAMES M. STOREY Attorney, Solo Practitioner since 1994. 6 Trustee of The Advisors' Inner Circle Fund, The
76 yrs. old Partner, Dechert (law firm), September Advisors' Inner Circle Fund II, SEI Asset
1987-December 1993. Allocation Trust, SEI Daily Income Trust, SEI
Index Funds, SEI Institutional International
Trust, SEI Institutional Investments Trust, SEI
Institutional Managed Trust, SEI Liquid Asset
Trust, SEI Tax Exempt Trust and U.S. Charitable
Gift Trust.
- ------------------------------------------------------------------------------------------------------------------------------------
GEORGE J. Chief Executive Officer, Newfound Consultants, 6 Trustee, State Street Navigator Securities Lending
SULLIVAN, JR. Inc. since April 1997. General Partner, Teton Trust, since 1995. Trustee of The Fulcrum Trust.
65 yrs. old Partners, L.P., June 1991-December 1996; Chief Trustee of The Advisors' Inner Circle Fund, The
Financial Officer, Nobel Partners, L.P., March Advisors' Inner Circle Fund II, SEI Asset
1991-December 1996; Treasurer and Clerk, Peak Allocation Trust, SEI Daily Income Trust, SEI
Asset Management, Inc., since 1991. Index Funds, SEI Institutional International
Trust, SEI Institutional Investments Trust, SEI
Institutional Managed Trust, SEI Liquid Asset
Trust, SEI Tax Exempt Trust, SEI Opportunity
Master Fund, L.P., SEI Absolute Return Fund, L.P.
and SEI Opportunity Fund, L.P.
- ------------------------------------------------------------------------------------------------------------------------------------
BETTY L. KRIKORIAN Self-Employed Legal and Financial Services 6 Trustee of The Advisors' Inner Circle Fund and The
65 yrs. old Consultant since 2003. State Street Bank Global Advisors' Inner Circle Fund II.
Securities and Cash Operations from 1995 to
2003.
- ------------------------------------------------------------------------------------------------------------------------------------
CHARLES E. CARLBOM Self-Employed Business Consultant, Business 6 Director, Crown Pacific, Inc. and Trustee of The
73 yrs. old Project Inc. since 1997. CEO and President, Advisors' Inner Circle Fund and The Advisors'
United Grocers Inc. from 1997 to 2000. Inner Circle Fund II.
- ------------------------------------------------------------------------------------------------------------------------------------
MITCHELL A. Retired. 6 Director, Federal Agricultural Mortgage
JOHNSON Corporation. Trustee of The Advisors' Inner Circle
65 yrs. old Fund and The Advisors' Inner Circle Fund II.
- ------------------------------------------------------------------------------------------------------------------------------------
December 31, 2007 81 www.bishopstreetfunds.com
Bishop Street Funds
- --------------------------------------------------------------------------------
TERM OF
POSITION(S) OFFICE AND
NAME, ADDRESS, HELD WITH LENGTH OF
AGE 1 THE TRUST TIME SERVED 2
- --------------------------------------------------------------------------------
OFFICERS
- --------
JAMES F. VOLK, CPA President (Since 2006)
45 yrs. old
- --------------------------------------------------------------------------------
MICHAEL LAWSON Controller (Since 2005)
47 yrs. old and Chief
Financial Officer
- --------------------------------------------------------------------------------
RUSSELL EMERY Chief Compliance (Since 2006)
45 yrs. old Officer
- --------------------------------------------------------------------------------
CAROLYN F. MEAD Vice President (Since 2007)
50 yrs. old and Secretary
- --------------------------------------------------------------------------------
JAMES NDIAYE Vice President and (Since 2005)
39 yrs. old Assistant Secretary
- --------------------------------------------------------------------------------
Bishop Street Funds 82
(UNAUDITED)
- --------------------------------------------------------------------------------
NUMBER OF
PORTFOLIOS
IN BISHOP
STREET FUNDS
NAME, ADDRESS, PRINCIPAL OCCUPATION(S) OVERSEEN BY OTHER DIRECTORSHIPS
AGE 1 DURING PAST 5 YEARS BOARD MEMBER HELD BY BOARD MEMBER 3
- ------------------------------------------------------------------------------------------------------------
OFFICERS
- --------
JAMES F. VOLK, CPA Senior Operations Officer, SEI Investments, N/A N/A
45 yrs. old Fund Accounting and Administration
(1996-present); Assistant Chief Accountant
for the U.S. Securities and Exchange
Commission's Division of Investment
Management (1993-1996).
- ------------------------------------------------------------------------------------------------------------
MICHAEL LAWSON Director, SEI Investments, Fund N/A N/A
47 yrs. old Accounting since July 2005. Manager,
SEI Investments AVP from April 1995
to February 1998 and November 1998
to July 2005.
- ------------------------------------------------------------------------------------------------------------
RUSSELL EMERY Director of Investment Product Management N/A N/A
45 yrs. old and Development at SEI Investments
since February 2003. Senior Investment
Analyst, Equity team at SEI Investments
from March 2000 to February 2003.
- ------------------------------------------------------------------------------------------------------------
CAROLYN F. MEAD Corporate Counsel of SEI since 2007; N/A N/A
50 yrs. old Associate, Stradley, Ronon, Steven & Young
2004-2007; Counsel, ING Variable Annuities,
1999-2002.
- ------------------------------------------------------------------------------------------------------------
JAMES NDIAYE Employed by SEI Investments Company N/A N/A
39 yrs. old since 2004. Vice President, Deutsche
Asset Management from 2003-2004.
Associate, Morgan, Lewis & Bockius LLP
from 2000-2003. Counsel, Assistant Vice
President, ING Variable Annuities
Group from 1999-2000.
- ------------------------------------------------------------------------------------------------------------
December 31, 2007 83 www.bishopstreetfunds.com
Bishop Street Funds
- --------------------------------------------------------------------------------
TERM OF
POSITION(S) OFFICE AND
NAME, ADDRESS, HELD WITH LENGTH OF
AGE 1 THE TRUST TIME SERVED 2
- --------------------------------------------------------------------------------
OFFICERS (CONTINUED)
- --------------------
TIMOTHY D. BARTO Vice President and (Since 2000)
39 yrs. old Assistant Secretary
- --------------------------------------------------------------------------------
SOFIA ROSALA Vice President and (Since 2005)
34 yrs. old Assistant Secretary
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JOSEPH M. GALLO Vice President and (Since 2007)
34 yrs. old Assistant Secretary
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NICOLE WELCH AML Officer (Since 2006)
30 yrs. old
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1 UNLESS OTHERWISE NOTED, THE BUSINESS ADDRESS OF EACH TRUSTEE IS SEI
INVESTMENTS COMPANY, 1 FREEDOM VALLEY DRIVE, OAKS, PENNSYLVANIA 19456.
2 EACH TRUSTEE SHALL HOLD OFFICE DURING THE LIFETIME OF THIS TRUST UNTIL THE
ELECTION AND QUALIFICATION OF HIS OR HER SUCCESSOR, OR UNTIL HE OR SHE
SOONER DIES, RESIGNS OR IS REMOVED IN ACCORDANCE WITH THE TRUST'S
DECLARATION OF TRUST.
Bishop Street Funds 84
(UNAUDITED)
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NUMBER OF
PORTFOLIOS
IN BISHOP
STREET FUNDS
NAME, ADDRESS, PRINCIPAL OCCUPATION(S) OVERSEEN BY OTHER DIRECTORSHIPS
AGE 1 DURING PAST 5 YEARS BOARD MEMBER HELD BY BOARD MEMBER 3
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OFFICERS (CONTINUED)
- --------------------
TIMOTHY D. BARTO General Counsel, Vice President and Assistant N/A N/A
39 yrs. old Secretary of SEI Investments Global Funds
Services since 1999; Associate, Dechert
(law firm) from 1997-1999; Associate, Richter,
Miller & Finn (law firm) from 1994-1997.
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SOFIA ROSALA Vice President and Assistant Secretary of SEI N/A N/A
34 yrs. old Investments Management Corp. and SEI
Global Funds Services since 2005. Compliance
Officer of SEI Investments from 2001-2004.
Account and Product Consultant SEI Private
Trust Company, 1998-2001.
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JOSEPH M. GALLO Corporate Counsel of SEI since 2007; N/A N/A
34 yrs. old Associate Counsel, ICMA Retirement
Corporation 2004-2007; Federal Investigator,
U.S. Department of Labor 2002-2004;
U.S. Securities and Exchange Commission -
Division of Investment Management, 2003
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NICOLE WELCH Assistant Vice President and AML Compliance N/A N/A
30 yrs. old Officer of SEI Investments since January 2005.
Compliance Analyst at TD Waterhouse from
January 2004 to November 2004. Senior
Compliance Analyst at UBS Financial Services
from October 2002 to January 2004.
Knowledge Management Analyst at
PricewaterhouseCoopers Consulting from
September 2000 to October 2002.
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3 DIRECTORSHIPS OF COMPANIES REQUIRED TO REPORT TO THE SECURITIES AND
EXCHANGE COMMISSION UNDER THE SECURITIES EXCHANGE ACT OF 1934 (I.E.,
"PUBLIC COMPANIES") OR OTHER INVESTMENT COMPANIES REGISTERED UNDER THE
INVESTMENT COMPANY ACT OF 1940.
December 31, 2007 85 www.bishopstreetfunds.com
NOTES
NOTES
NOTES
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INVESTMENT ADVISER
BISHOP STREET CAPITAL MANAGEMENT
HONOLULU, HI 96813
ADMINISTRATOR
SEI INVESTMENTS GLOBAL FUNDS SERVICES [GRAPHIC OMITTED]
OAKS, PA 19456
DISTRIBUTOR
SEI INVESTMENTS DISTRIBUTION CO.
OAKS, PA 19456
TRANSFER AGENT
DST SYSTEMS, INC.
KANSAS CITY, MO 64121
CUSTODIAN
UNION BANK OF CALIFORNIA, N.A.
SAN FRANCISCO, CA 94101
LEGAL COUNSEL
MORGAN, LEWIS & BOCKIUS LLP
PHILADELPHIA, PA 19103
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
PRICEWATERHOUSECOOPERS LLP
PHILADELPHIA, PA 19103
[BISHOP STREET FUNDS LOGO]
FOR MORE INFORMATION ABOUT BISHOP STREET FUNDS, CALL 1-800-262-9565
OR YOUR INVESTMENT SPECIALIST
VISIT US ONLINE AT WWW.BISHOPSTREETFUNDS.COM
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[BISHOP STREET FUNDS LOGO] BISHOP STREET FUNDS
P.O. BOX 219721
KANSAS CITY, MO 64121-9721
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-006-1300
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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 George Sullivan 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:
- ------------------ ----------------------------------------------------- -----------------------------------------------------
2007 2006
- ------- ---------- ----------------- ----------------- ----------------- ----------------- ----------------- -----------------
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 $109,200 N/A N/A $102,900 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:
---------------------------- ----------------- ----------------
2007 2006
---------------------------- ----------------- ----------------
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 2007 and 2006, respectively.
(h) During the past fiscal year, all non-audit services provided by
Registrant's principal accountant to either Registrant's investment adviser or
to any entity controlling, controlled by, or under common control with
Registrant's investment adviser that provides ongoing services to Registrant
were pre-approved by the audit committee of Registrant's Board of Trustees.
Included in the audit committee's pre-approval was the review and consideration
as to whether the provision of these non-audit services is compatible with
maintaining the principal accountant's independence.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable to open-end management investment companies.
ITEM 6. SCHEDULE OF INVESTMENTS
Schedule of Investments is included as part of the Report to Shareholders filed
under Item 1 of this form.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not applicable to open-end management investment companies.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES
Not applicable. Effective for closed-end management investment companies for
fiscal years ending on or after December 31, 2005
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT COMPANY AND
AFFILIATED PURCHASERS.
Not applicable to open-end management investment companies.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not applicable.
ITEM 11. CONTROLS AND PROCEDURES.
(a) The 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 have materially affected, or are reasonably likely to materially affect,
the registrant's internal control over financial reporting.
ITEMS 12. EXHIBITS.
(a)(1) Code of Ethics attached hereto.
(a)(2) A separate certification for the principal executive officer and the
principal financial officer of the registrant as required by Rule 30a-2(a) under
the Investment Company Act of 1940, as amended (17 CFR 270.30a-2(a)), is filed
herewith.
(b) Officer certifications as required by Rule 30a-2(b) under the Investment
Company Act of 1940, as amended (17 CFR 270.30a-2(b)) also accompany this filing
as an exhibit.
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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/ James F. Volk
------------------------
James F. Volk, President
Date: March 6, 2008
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By (Signature and Title)* /s/ James F. Volk
------------------------
James F. Volk, President
Date: March 6, 2008
By (Signature and Title)* /s/ Michael Lawson
------------------------
Michael Lawson
Controller & CFO
Date: March 6, 2008
* Print the name and title of each signing officer under his or her signature.