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, 2009
DATE OF REPORTING PERIOD: DECEMBER 31, 2009
ITEM 1. REPORTS TO STOCKHOLDERS.
BISHOP STREET FUNDS
ANNUAL REPORT
DECEMBER 31, 2009
(GRAPHIC)
STRATEGIC GROWTH FUND
LARGE CAP CORE EQUITY FUND
HIGH GRADE INCOME FUND
HAWAII MUNICIPAL BOND FUND
GOVERNMENT MONEY MARKET FUND
INVESTMENT ADVISER
BISHOP STREET
CAPITAL MANAGEMENT
(BISHOP STREET FUNDS LOGO)
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.
BISHOP STREET
TABLE OF CONTENTS
FUNDS
LETTER TO SHAREHOLDERS ................................................. 2
DEFINITION OF COMPARATIVE INDICES ...................................... 4
STRATEGIC GROWTH FUND
Management Discussion ............................................... 6
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
GOVERNMENT MONEY MARKET FUND
Management Discussion ............................................... 47
Schedule of Investments ............................................. 49
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 ................ 76
DISCLOSURE OF FUND EXPENSES ............................................ 77
NOTICE TO SHAREHOLDERS ................................................. 80
BOARD OF TRUSTEES AND OFFICERS ......................................... 82
SHAREHOLDER VOTING RESULTS ............................................. 90
1
BISHOP STREET
LETTER TO SHAREHOLDERS
FUNDS
Dear Shareholder:
(PHOTO OF MICHAEL K. HIRAI)
What a difference a year makes. On the heels of the gut wrenching sell-off in
2008 and the first few months in 2009 that witnessed stock portfolio values cut
by more than half, a stock investor's faith and commitment in the principles of
investing were put to the test. Perhaps, this past year will go down in history
as truly remarkable as the Fed and finance ministers around the globe struggled
to find a solution to revive economies and companies on the verge of collapse.
It does appear that we have avoided a global depression of massive proportions;
however, it is still unclear if we are out of the woods since many of the
factors that brought about the crisis remain, namely excessive debt and huge
risk appetites, and the financial institutions that lay at the heart of the
problem still probably believe that they are "too big to fail".
That said, 2010 does appear to be looking better than 2009 in that global growth
is likely to accelerate and provide much needed support to the markets. The key
will rest in the ability of our central governments to unwind the easy money
policies and rescue programs that are still in place today. Once removed,
fundamentals and more normalized asset pricing will dominate as they have in the
past.
THE YEAR AHEAD
With short-term interest rates and money market yields stubbornly low,
investment in alternative asset classes such as stocks and commodities have
become increasingly attractive. Improved corporate earnings, strong commodity
demand, and improving investor confidence should help to drive asset prices and
the stock market higher. Meanwhile, the bond market will be challenged - the
result of high debt levels, long-standing "easy money" policies, and inflation.
Perhaps the biggest driver of performance in 2010 will be the influx of cash
away from safety (i.e., money markets and bonds) into the equity markets,
commodities, real estate, and alternative asset classes as investors become
Bishop Street Funds
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increasingly less risk averse. Today, investors still remain cautious but as we
transition into the growth phase, revenue and profit margin expansion should
serve to drive the global stock markets higher.
DIVERSIFICATION REMAINS THE KEY
Following a year in which nothing appeared to work, diversification once again
becomes our focus as an important cornerstone for building investment
portfolios. While it is always difficult to predict the future, especially
during these difficult and challenging times, Bishop Street Capital Management
continues to encourage shareholders to apply sound investment principles that
include diversification across and within asset classes. As such, we continue to
believe that these basic fundamentals will prove important as we navigate
through the uncertain and turbulent times ahead.
Our Bishop Street Funds are managed with these tenets in mind and our Funds
continue to offer our shareholders excellent investment options. Our portfolio
management team continues to focus on managing each Fund in a consistent manner
and in accordance with its respective investment goals and objectives. Lastly,
we continue to believe that a balanced portfolio comprised of a combination of
our equity, fixed income, and money market funds can serve as a valuable
building block of your carefully designed and balanced investment portfolio.
Thank you for investing with the Bishop Street Funds. We value your continued
trust and confidence.
Sincerely,
/s/ Michael K. Hirai
Michael K. Hirai, CFA
President and Chief Investment Officer
Bishop Street Capital Management
January 18, 2010
December 31, 2009 www.bishopstreetfunds.com
3
BISHOP STREET
DEFINITION OF COMPARATIVE INDICES
FUNDS
Definition of Comparative Indices
BARCLAYS U.S. GOVERNMENT/CREDIT INDEX is a widely-recognized, market value
weighted index of U.S. Treasury securities, U.S. government agency obligations,
corporate debt backed by the U.S. government and fixed-rate non-convertible
corporate debt securities issued or guaranteed by foreign governments and
agencies. All securities in the Index are rated investment grade (BBB) or
higher, with maturities of at least one year.
BARCLAYS MUNICIPAL BOND INDEX is a widely-recognized index of municipal bonds
with maturities of at least one year. The Consumer Price Index measures prices
of goods bought by a typical consumer such as food, gas, shelter and clothing.
It is widely used as a cost-of-living benchmark.
LIPPER CORPORATE DEBT A - RATED OBJECTIVE - Funds that invest primarily in
corporate debt issues rated "A" or better or government issues.
LIPPER LARGE CAP CORE CLASSIFICATION - Funds that, by portfolio practice, invest
at least 75% of their equity assets in companies with market capitalizations (on
a three-year weighted basis) greater than 300% of the dollar-weighted median
market capitalization of the middle 1,000 securities of the S&P Super Composite
1500 Index. Large-cap core funds have more latitude in the companies in which
they invest. These funds typically have an average price-to-earnings ratio,
price-to book ratio, and three-year sales-per-share growth value, compared to
the S&P 500 Composite Index.
LIPPER MULTI CAP CORE CLASSIFICATION - Funds that, by portfolio practice, invest
in a variety of market capitalization ranges without concentrating 75% of their
equity assets in any one market capitalization range over an extended period of
time. Multi-cap funds typically have between 25% and 75% of their assets
invested in companies with market capitalizations (on a three year weighted
basis) above 300% of the dollar-weighted median market capitalization of the
middle 1,000 securities of the S&P Super Composite 1500 Index. Multi-cap core
funds have more latitude in the companies in which they invest. These funds
typically have an average price-to- earnings ratio, price-to-book ratio, and
three-year sales-per-share growth value, compared to the S&P Super Composite
1500 Index.
LIPPER OTHER STATES MUNICIPAL DEBT FUNDS OBJECTIVE - Funds that invest in
municipal debt issues with dollar-weighted average maturities of five to ten
years and are exempt from taxation on a specified city or state basis.
Bishop Street Funds
4
(BISHOP STREET FUNDS LOGO)
THE CONSUMER PRICE INDEX measures prices of goods bought by a typical consumer
such as food, gas, shelter and clothing. It is widely used as a cost-of-living
benchmark.
THE S&P 500/CITIGROUP GROWTH INDEX is a subset of the S&P 500 Index and consists
of those companies with the highest price-to book ratios.
THE S&P 500 COMPOSITE INDEX is a widely recognized index of 500 stocks designed
to mimic the overall U.S. equity market's industry weightings.
December 31, 2009 www.bishopstreetfunds.com
5
BISHOP STREET
MANAGEMENT DISCUSSION
FUNDS
Strategic Growth Fund
DESPITE A VERY BAD START IN THE FIRST TWO MONTHS OF 2009, THE S&P 500 COMPOSITE
INDEX RETURNED AN UNEXPECTED 26% OVER THE WHOLE YEAR. AS THE STIMULUS PACKAGES
IMPLEMENTED THROUGHOUT THE WORLD PRODUCED THEIR EFFECTS ON ECONOMIC GROWTH,
INVESTORS GAINED A SENSE OF RELIEF, WHICH CONTINUED TO SUPPORT THE MARKET UNTIL
THE END OF THE YEAR.
The first two months of 2009 were very similar to the end of 2008. In the wake
of the Lehman shock, the future of many other large financial groups appeared to
be at stake. Investors remained worried that even the authorities' swift
reaction and the emergency bail out deals involving solid foreign institutions
would not manage to prevent the financial crisis from spreading, and ultimately
spiraling out of control. Corporations of all kinds were hit by both by the
direct impact of tough lending conditions on their financing and by the
fast-deteriorating economic outlook. Car-makers were particularly impacted, with
rumors of bankruptcy looming all along this period. This trouble pushed equities
into a sharp decline, only interrupted by a few short-lived rallies triggered by
the announcement of new rescue packages, and the somewhat irrational surge in
hope that typically comes with a new President taking office.
Confidence however gradually came back from March onwards, as the effects of the
stimulus measures started to become visible. Various economic indicators
appeared to stabilize and companies, although still cautious, also pointed to a
better operating environment. Banks, in particular, led the rebound as positive
rumors were spreading about their results in stress tests, while results were
already showing the benefits of restructurings and supportive policies.
Solutions also appeared to have been found for most other fragile industries,
and worries about foreign economies also receded for similar reasons. Investors
were relieved to see that things seemed to be under better control and that the
economy was responding, and this was enough to cause a sharp rally in the
following few months. More surprisingly, the rebound did not lose too much steam
later in the year, despite clear evidence that the economy was still extremely
weak and dependent on stimulus measures. The aggressive cost adjustment
solutions implemented by American companies largely contributed to fuel this
optimism; as productivity gains allowed a vast majority of quarterly earnings
announcements to produce positive surprises.
Bishop Street Funds
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(BISHOP STREET FUNDS LOGO)
This is how the S&P 500 Composite Index finished 2009 up roughly 26%, and 65%
higher than the lows it had reached in March.
Our strategy outperformed very strongly in the first half of the year, and then
gave back part of its advance to finish 2009 approximately 600 bps ahead of the
benchmark. Our best performers were in industries as diverse as technology
(Western Digital, Broadcom), energy (Suncor Energy, Transocean), consumer
discretionary (TJX), industrials (Tyco International) and health care (Express
Scripts).
Despite the market's fast style rotation in 2009, our structural growth bias
proved marginally favorable. Our defensive stance (including a very low exposure
to banks and cyclical companies, and a clear overweight on healthcare) was a
solid contributor to performance in the first few months. This profile then
penalized us in the second part of the year: our shift towards the current,
neutral to moderately aggressive stance had intentionally been slow as we
thought the rebound was overdone given the poor fundamentals, but the correction
we had expected did not come, and our lack of economically-sensitive exposure
penalized us in the summer.
OUR STOCK SELECTION DECISIONS CAUSED THE REPLACEMENT OF 36% OF THE PORTFOLIO'S
HOLDINGS, A LEVEL VERY SIMILAR TO THAT OBSERVED IN 2008, AND SLIGHTLY LOWER THAN
THE STRATEGY'S HISTORICAL AVERAGE.
In line with the evolution of our scenario, our first few trades of the year
were meant to preserve the rather defensive profile of the selection, whereas
decisions made later in the year were clearly introducing a more
economically-sensitive bias.
In the first quarter, the sales of rather defensive names such as Molson Coors
Brewing led to the purchase of companies also expected to offer a stable growth
profile, like Stericycle in the medical waste management field. A few more
economically-sensitive picks, such as Accenture, Precision Castparts or the
employment-dependent Cigna, even were sold between April and May, but their
replacements (Best Buy, Yum! Brands, etc) were not significantly less reliant on
GDP growth.
The trades made during the second half of the year reflect a clearer confidence
in the recovery, with the purchase of companies in sectors as diverse as
investment banking (Goldman Sachs Group, Lazard), home furnishing (Bed Bath &
Beyond), travel agency (Priceline.com) and IT (International Business Machines,
Amphenol, NetApp).
December 31, 2009 www.bishopstreetfunds.com
7
BISHOP STREET
MANAGEMENT DISCUSSION
FUNDS
This evolution preserved our portfolio's attractive style balance which, as of
year-end, mixed the advantages of a clear-cut growth bias (a long term earnings
growth of 13.93% vs 9.90% for the index according to the Institutional Brokus
Estimate System consensus) and those of an attractive valuation (a multiple of
14.08 on forward earnings, vs 14.52 for the index).
Our stock selection resulted in strong exposures to technology and consumer
discretionary holdings. In both of these sectors, the 10% maximum overweight
spread accepted under our strategy's implementation principles was almost
reached. We also had a significant overexposure to industrials. It should be
noted however that many of our holdings in these economically-sensitive sectors
were less aggressive choices than average in their respective industry
classifications. The portfolio's Beta, which stands slightly below 1 according
to a Barra model, confirms this slightly defensive stance. While we have clearly
moved away from the very cautious outlook we had one year ago, we have been
reluctant to accelerate the pace of our shift to a more aggressive profile
because we feared that a market correction would be likely after the strong
rally of the last nine months.
WE BELIEVE THAT 2010 WILL BE AN INTERESTING BUT DIFFICULT YEAR. THE MARKET WILL
LIKELY HESITATE BETWEEN TWO FACTORS WITH OPPOSITE INFLUENCES: THE SLUGGISHNESS
OF THE ECONOMIC RECOVERY, AND THE STRENGTH OF PROFIT MARGINS. WE TRUST THAT THE
LATTER WILL BE A POWERFUL MARKET MOVER, ESPECIALLY FOR COMPANIES OFFERING SOME
EXPOSURE TO OVERSEAS DEMAND.
While we understand that relief played a big supporting role in the rally, we
think that the 65% rise of the U.S. equity market since last March lows is more
than the current pace the economy calls for. Notwithstanding that even the
strongest bull markets always involve correction periods, our concern comes from
the fact that the recovery remains somewhat artificial so far. Should the
stimulus measures be removed at this stage, the U.S. GDP would be very unlikely
to manage any sort of growth in 2010. The sustainability of the recovery
therefore remains very dependent on how smoothly the authorities will manage
this removal. Uncertainty will be high during this key period and will, as
always, trigger ups and downs in investors' mood.
In the meantime, we count on two positive factors to limit the downside and, in
the longer term, support a continuation of the market rebound:
- - a large part of the aggressive cost cuts implemented by U.S. companies
during the crisis appear unlikely to be reversed when demand recovers. The
slightest
Bishop Street Funds
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(BISHOP STREET FUNDS LOGO)
improvement in top lines will therefore be leveraged immediately into a
strong earnings growth, and this could help mitigate the effects of the
rally on valuations.
- - investors' exposure to equities remains low and the above strength in
earnings, if it materializes as we expect, could encourage a reallocation.
We therefore intend to keep increasing the economically-sensitive profile of our
portfolio. In doing so, we will have a preference for companies offering a
steady earnings growth that can be boosted by both domestic factors and the
favorable exchange rates. While our shift in that direction has been slow so
far, any market correction would be seen as an opportunity to accelerate the
move, unless it is triggered by economic news that we think should lead us to
reconsider the scenario.
THIS REPRESENTS THE MANAGEMENT'S ASSESSMENT OF THE FUNDS AND THE MARKET
ENVIRONMENT AT A SPECIFIC POINT IN TIME AND SHOULD NOT BE RELIED UPON BY THE
READER AS RESEARCH OR INVESTMENT ADVICE.
December 31, 2009 www.bishopstreetfunds.com
9
Strategic Growth Fund
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.
(PERFORMANCE GRAPH)
Initial Investment Date 7/1/02 Dec 02 Dec 03 Dec 04 Dec 05 Dec 06 Dec 07 Dec 08 Dec 09
- ----------------------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Bishop Street Strategic Growth Fund $10,000 $ 8,640 $11,930 $13,080 $14,587 $16,013 $17,631 $10,322 $13,592
S&P 500 Growth Index $10,000 $ 9,398 $11,943 $12,775 $12,921 $14,343 $15,652 $10,186 $13,402
S&P 500 Index $10,000 $ 9,166 $11,795 $13,079 $13,721 $15,888 $16,761 $10,560 $13,354
Consumer Price Index $10,000 $10,056 $10,245 $10,579 $10,937 $11,217 $11,675 $11,686 $12,004
Lipper Multi Cap Core Classification $10,000 $ 8,940 $11,737 $13,158 $14,140 $16,098 $17,212 $10,596 $13,987
CPI & LIPPER BENCHMARK DATA START DATE: 6/30/02
Strategic Growth Fund, Class I#
S&P 500/Citigroup Growth Index(1)
S&P 500 Composite Index(1)
Consumer Price Index++(1)
Lipper Multi Cap Core Classification++(1)
# Account value if you reinvested income and capital gains.
++ Performance begins on June 30, 2002.
(1) See page 4 for definition of comparative indices.
AVERAGE ANNUAL TOTAL RETURNS+
ONE ANNUALIZED ANNUALIZED ANNUALIZED
YEAR 3 YEAR 5 YEAR INCEPTION
RETURN RETURN RETURN TO DATE
- ------ ---------- ---------- ----------
31.68% (5.32)% 0.77% 4.18% 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
TOP TEN EQUITY HOLDINGS+
Percentage of
Investments
------------
1. Western Digital 2.3%
2. First Solar 2.2%
3. Red Hat 2.2%
4. General Mills 2.2%
5. Priceline.com 2.2%
6. Amphenol, Cl A 2.2%
7. Oracle 2.2%
8. International Business Machines 2.1%
9. Apple 2.1%
10. Broadcom, Cl A 2.1%
SECTOR WEIGHTINGS (UNAUDITED)+
(BAR-CHART)
Information Technology 29.1%
Consumer Discretionary 17.3%
Industrials 15.7%
Health Care 14.1%
Financials 9.9%
Energy 9.5%
Consumer Staples 4.1%
Short-Term Investments 0.3%
+ PERCENTAGES ARE BASED ON TOTAL INVESTMENTS.
SCHEDULE OF INVESTMENTS
Value
Shares (000)
- -------- --------
COMMON STOCK+ -- 99.7%
CONSUMER DISCRETIONARY -- 17.3%
21,100 Apollo Group, Cl A* $ 1,278
32,500 Bed Bath & Beyond* 1,256
26,083 Best Buy 1,029
48,600 GameStop, Cl A* 1,066
20,400 Kohl's* 1,100
18,700 McDonald's 1,168
6,100 Priceline.com* 1,333
31,900 TJX 1,166
32,500 Yum! Brands 1,137
-------
10,533
-------
December 31, 2009 www.bishopstreetfunds.com
11
Strategic Growth Fund
SCHEDULE OF INVESTMENTS
(CONTINUED)
Value
Shares (000)
- --------- ---------
CONSUMER STAPLES -- 4.1%
18,900 General Mills $ 1,338
24,400 Philip Morris International 1,176
---------
2,514
---------
ENERGY -- 9.5%
28,000 National Oilwell Varco 1,234
14,400 Occidental Petroleum 1,171
24,500 Southwestern Energy* 1,181
32,500 Suncor Energy 1,148
12,921 Transocean* 1,070
---------
5,804
---------
FINANCIALS -- 9.9%
24,400 ACE 1,230
29,200 American Express 1,183
6,900 Goldman Sachs Group 1,165
30,600 Lazard, Cl A 1,162
64,700 Nasdaq Stock Market* 1,282
---------
6,022
---------
HEALTH CARE -- 14.1%
22,600 Amgen* 1,278
20,500 Baxter International 1,203
15,200 Becton Dickinson 1,199
14,800 Express Scripts, Cl A* 1,279
25,500 Gilead Sciences* 1,104
20,800 Quest Diagnostics 1,256
26,900 Thermo Fisher Scientific* 1,283
---------
8,602
---------
INDUSTRIALS -- 15.7%
10,100 First Solar* 1,367
45,500 Iron Mountain* 1,035
24,300 ITT 1,209
23,000 Stericycle* 1,269
31,100 Tyco International 1,110
18,900 Union Pacific 1,208
17,500 United Technologies 1,215
11,800 W.W. Grainger 1,142
---------
9,555
---------
Bishop Street Funds
12
Strategic Growth Fund
SCHEDULE OF INVESTMENTS
(CONTINUED)
Value
Shares (000)
- --------- ---------
INFORMATION TECHNOLOGY -- 29.1%
28,600 Amphenol, Cl A $ 1,321
6,200 Apple* 1,307
40,800 Broadcom, Cl A* 1,283
16,900 Factset Research Systems 1,113
2,050 Google, Cl A* 1,271
22,600 Hewlett-Packard 1,164
10,000 International Business Machines 1,309
36,600 NetApp* 1,259
53,500 Oracle 1,313
43,800 Red Hat* 1,354
65,600 Symantec* 1,174
48,200 Texas Instruments 1,256
31,600 Western Digital* 1,395
63,293 Western Union 1,193
---------
17,712
---------
TOTAL COMMON STOCK (Cost $55,029) 60,742
---------
CASH EQUIVALENTS (A) -- 0.3%
98,276 Dreyfus Cash Management Fund, Institutional Shares,
0.260% 98
98,276 Fidelity Institutional Money Market Portfolio,
Institutional Shares, 0.260% 98
---------
TOTAL CASH EQUIVALENTS (Cost $196) 196
---------
TOTAL INVESTMENTS (Cost $55,225) -- 100.0% $ 60,938
=========
PERCENTAGES ARE BASED ON NET ASSETS OF $60,929 ($ THOUSANDS).
* NON-INCOME PRODUCING SECURITY.
+ MORE NARROW INDUSTRIES ARE UTILIZED FOR COMPLIANCE PURPOSES, WHEREAS BROAD
SECTORS ARE UTILIZED FOR REPORTING.
(A) THE RATE REPORTED IS THE 7-DAY EFFECTIVE YIELD AS OF DECEMBER 31, 2009.
CL -- CLASS
COST FIGURES ARE SHOWN IN THOUSANDS.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
December 31, 2009 www.bishopstreetfunds.com
13
BISHOP STREET
MANAGEMENT DISCUSSION
FUNDS
Large Cap Core Equity Fund
Market conditions have changed dramatically over the last year. The turmoil that
began in September 2008, and reached a fevered pitch in March 2009, has greatly
subsided. Market participants are now debating whether the recovery will
continue or will we enter another recession. While we were confident the Federal
Reserve would be able to bring order to the U.S. economy, we were surprised by
the magnitude of the downturn in 2008. Although we are not out of the woods yet,
we are becoming increasingly confident that the U.S. economy will be able to
successfully weather the downturn and emerge stronger than before. Corporations
have been actively fortifying their balance sheets with capital raises, while at
the same time reducing costs to support earnings. Looking out to 2011-2012, we
believe the potential for earnings growth is significant. Businesses have become
more efficient and productive, which should lead to earnings growth that will
exceed the general economic growth. Equity prices do not yet reflect a recovery
in the market that we feel is inevitable. Time will tell.
After expenses, the Large Cap Core Equity Fund (the "Fund") returned 31.28% for
the year versus 26% for the S&P 500 Composite Index. Almost all of the sectors
contributed to the relative outperformance with the strongest performance coming
from the energy, materials and industrials sectors. The consumer discretionary
and health care sectors contributed the least as they were essentially flat to
the benchmark for the year.
We continued with our previously held decision to remain significantly
underweight large integrated oil companies, while overweighting the smaller
specialized exploration and production companies (E&Ps). This has been the right
decision for 2009, as our energy positions accounted for roughly 250 bps of the
portfolios outperformance on the year. While short-term oil prices have likely
stabilized around $70-$80 per barrel, we believe long-term prices will
Bishop Street Funds
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(BISHOP STREET FUNDS LOGO)
continue to rise at a slow, yet steady pace. We believe upside potential for
smaller E&Ps and drillers remains far greater relative to large integrated oil
companies, who may likely be forced to buy the companies we hold to enhance
their reserves. A number of large acquisitions recently in this space give us
added comfort that this trend should continue.
We follow a fairly conservative approach in managing the Fund with a focus on
risk control. We maintain a diversified portfolio both in terms of the number of
stocks held as well as the sector weights of the Fund. As of December 31, 2009,
the Fund held about 135 stocks, with no position larger than 3.5% of the Fund.
Thus, no company-specific event had a significant effect on performance. In
addition, the portfolio sector allocation is very close to the sector allocation
of the benchmark with differences being less than 2% for any sector. The largest
sector over-weights were health care, consumer discretionary and information
technology while under-weights existed in utilities and consumer staples. These
small divergences from the benchmark reflect our belief that the market's focus
on yield has driven down the relative attractiveness of slow-growth,
high-dividend paying companies.
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. We look for companies that offer high rates of return,
solid growth prospects, and attractive valuations.
We have been able to move into premium franchises as the pricing in many
industries has become very compressed. We've also made a conscious effort to
reduce our exposure to names with high debt/equity ratios and debt that needs to
be refinanced. We are trying to further control tracking error, in light of the
tremendous market volatility and we think we can do so without reducing our
upside potential. We have a significant value advantage versus the benchmark
with greater growth potential than the benchmark. We believe the holdings in the
portfolio will continue to perform well coming into 2010.
December 31, 2009 www.bishopstreetfunds.com
15
BISHOP STREET
MANAGEMENT DISCUSSION
FUNDS
Our stock selection methodology looks for companies that are undervalued based
on the projected cash flows of the company over a long period of time combined
with various indicators that the company is moving toward improving value. The
market environment had not been favorable for our strategy for a few years. The
building up of the asset value bubble (real estate, stocks, commodities, etc)
and the subsequent meltdown was a period of distortion when viewed through the
lens of economic rationality on which we base our decisions. We believe that the
events of 2008 have been sobering for investors and economic recovery will be
slow. However, we believe that these events have brought about more focus on the
fundamental foundation of a stock's value and more economic rationality in
considering investments of all types. We have adhered to our investment
principles and, as we expected, as the debris clears and risk aversion abates
our investment process is proving to be one that adds significant value.
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. We thank you for the confidence and trust you place in us and we
pledge to continue our hard work to bring value to our investors.
THIS REPRESENTS THE MANAGEMENT'S ASSESSMENT OF THE FUNDS AND THE MARKET
ENVIRONMENT AT A SPECIFIC POINT IN TIME AND SHOULD NOT BE RELIED UPON BY THE
READER AS RESEARCH OR INVESTMENT ADVICE.
Bishop Street Funds
16
Large Cap Core Equity Fund
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, THE LIPPER LARGE CAP CORE CLASSIFICATION.
(PERFORMANCE GRAPH)
Initial Investment Date 5/1/06 JUN 06 DEC 06 JUN 07 DEC 07 JUN 08 DEC 08 JUN 09 DEC 09
- ----------------------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Bishop Street Large Cap Core Equity Fund $10,000 $ 9,647 $10,663 $11,487 $11,222 $ 9,902 $ 6,506 $ 6,990 $ 8,541
S&P 500 Index $10,000 $ 9,766 $11,010 $11,776 $11,615 $10,231 $ 7,318 $ 7,549 $ 9,254
Consumer Price Index $10,000 $10,071 $10,017 $10,342 $10,425 $10,861 $10,435 $10,706 $10,719
Lipper Large Cap Core Classification $10,000 $ 9,690 $10,811 $11,584 $11,453 $10,189 $ 7,251 $ 7,581 $ 9,212
Large Cap Core Equity Fund, Class I#
S&P 500 Composite Index
Consumer Price Index++(1)
Lipper Large Cap Core Classification++(1)
# Account value if you reinvested income and capital gains.
++ Performance begins on April 30, 2006.
(1) See page 4 for definition of comparative indices.
AVERAGE ANNUAL TOTAL RETURNS+
ONE ANNUALIZED ANNUALIZED
YEAR 3 YEAR INCEPTION
RETURN RETURN TO DATE
- ------ ---------- ----------
31.28% (7.13)% (4.21)% 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, 2009 www.bishopstreetfunds.com
17
Large Cap Core Equity Fund
TOP TEN EQUITY HOLDINGS+
Percentage of
Investments
-------------
1. Microsoft 2.5%
2. Apple 2.5%
3. SPDR Trust, Ser 1 2.4%
4. Johnson & Johnson 2.1%
5. Google, Cl A 2.0%
6. JPMorgan Chase 2.0%
7. Chevron 1.8%
8. Cisco Systems 1.8%
9. Hewlett-Packard 1.7%
10. AT&T 1.6%
SECTOR WEIGHTINGS (UNAUDITED)+
(PERFORMANCE GRAPH)
Information Technology 19.4%
Health Care 13.7%
Financials 13.4%
Energy 12.0%
Consumer Discretionary 10.0%
Industrials 10.0%
Consumer Staples 9.9%
Materials 3.2%
Telecommunication Services 2.9%
Exchange Traded Fund 2.4%
Utilities 2.1%
Short-Term Investments 1.0%
+ PERCENTAGES ARE BASED ON TOTAL INVESTMENTS. EXCLUDES SECURITIES PURCHASED
WITH CASH COLLATERAL RECEIVED FROM SECURITIES LENDING.
SCHEDULE OF INVESTMENTS
Value
Shares (000)
- --------- ---------
COMMON STOCK -- 96.6%
CONSUMER DISCRETIONARY -- 10.0%
5,390 Apollo Group, Cl A* $ 327
6,450 Best Buy (A) 254
5,840 Carnival* 185
6,280 Coach 229
20,420 Comcast, Cl A 344
11,030 DIRECTV, Cl A* (A) 368
Bishop Street Funds
18
Large Cap Core Equity Fund
SCHEDULE OF INVESTMENTS
(CONTINUED)
Value
Shares (000)
- --------- ---------
CONSUMER DISCRETIONARY -- (CONTINUED)
12,900 Expedia* (A) $ 332
10,690 GameStop, Cl A* (A) 235
4,530 Johnson Controls 123
5,000 Kohl's* 270
10,860 Lowe's 254
3,690 Nike, Cl B 244
12,270 Staples (A) 302
6,671 Time Warner Cable, Cl A 276
8,416 Time Warner 245
4,120 TJX 151
3,840 VF 281
10,400 Viacom, Cl B* 309
8,900 Yum! Brands 311
---------
5,040
---------
CONSUMER STAPLES -- 9.9%
12,840 Altria Group 252
14,190 Archer-Daniels-Midland (A) 444
2,700 Colgate-Palmolive (A) 222
14,200 CVS 457
5,130 Kimberly-Clark 327
11,230 PepsiCo 683
7,330 Philip Morris International 353
10,360 Procter & Gamble 628
8,210 SYSCO (A) 230
19,260 Tyson Foods, Cl A (A) 236
10,320 Walgreen 379
14,030 Wal-Mart Stores 750
---------
4,961
---------
ENERGY -- 12.0%
5,224 Anadarko Petroleum 326
4,148 Apache 428
12,920 Chesapeake Energy 334
11,850 Chevron 912
5,359 ConocoPhillips 274
5,190 Consol Energy 258
4,800 Devon Energy 353
24,570 El Paso 242
8,840 Exxon Mobil 603
6,890 National Oilwell Varco 304
8,760 Nexen 210
4,390 Noble Energy 313
December 31, 2009 www.bishopstreetfunds.com
19
Large Cap Core Equity Fund
SCHEDULE OF INVESTMENTS
(CONTINUED)
Value
Shares (000)
- --------- ---------
ENERGY -- (CONTINUED)
9,300 Noble $ 379
4,320 Range Resources 215
4,570 Schlumberger 297
10,462 Valero Energy (A) 175
8,340 XTO Energy 388
---------
6,011
---------
FINANCIALS -- 13.4%
5,906 ACE 298
5,300 Aflac (A) 245
8,780 Allstate 264
9,110 Annaly Capital Management+ (A) 158
48,524 Bank of America (A) 731
7,280 Bank of New York Mellon 203
2,670 Boston Properties+ (A) 179
4,700 Capital One Financial (A) 180
6,530 Chubb 321
67,360 Citigroup (A) 223
4,700 Equity Residential+ (A) 159
2,800 Goldman Sachs Group 473
10,620 Host Hotels & Resorts+ (A) 124
13,980 Hudson City Bancorp 192
3,030 IntercontinentalExchange* 340
23,630 JPMorgan Chase 985
27,200 Keycorp (A) 151
6,877 Loews 250
10,140 MetLife 358
9,500 Morgan Stanley 281
8,090 State Street 352
5,070 Travelers 253
---------
6,720
---------
HEALTH CARE -- 13.7%
7,887 Abbott Laboratories 426
6,420 Aetna 204
4,117 Allergan (A) 259
4,670 Amgen* 264
5,310 Baxter International 312
6,038 Biogen Idec* 323
14,230 Bristol-Myers Squibb 359
5,630 Celgene* 314
6,320 Cephalon* (A) 394
5,530 Forest Laboratories* 178
Bishop Street Funds
20
Large Cap Core Equity Fund
SCHEDULE OF INVESTMENTS
(CONTINUED)
Value
Shares (000)
- --------- ---------
HEALTH CARE -- (CONTINUED)
4,260 Genzyme* $ 209
8,460 Gilead Sciences* (A) 366
16,210 Johnson & Johnson 1,044
6,150 McKesson 384
3,410 Medco Health Solutions* (A) 218
8,390 Medtronic 369
23,630 Pfizer 430
5,100 Thermo Fisher Scientific* 243
6,160 Varian Medical Systems* (A) 289
5,170 WellPoint* 301
---------
6,886
---------
INDUSTRIALS -- 10.0%
8,320 Boeing 450
4,400 C.H. Robinson Worldwide (A) 258
8,120 Caterpillar (A) 463
5,600 Deere (A) 303
8,470 Fluor 382
6,070 General Dynamics 414
25,877 General Electric 392
8,570 Honeywell International 336
4,190 L-3 Communications Holdings, Cl 3 (A) 364
5,630 Norfolk Southern 295
5,550 Rockwell Collins 307
7,320 Union Pacific (A) 468
8,880 United Technologies 616
---------
5,048
---------
INFORMATION TECHNOLOGY -- 19.4%
5,790 Adobe Systems* 213
7,200 Analog Devices 227
765 AOL* 18
5,850 Apple* 1,233
9,150 Broadcom, Cl A* (A) 288
37,050 Cisco Systems* (A) 887
6,380 Cognizant Technology Solutions, Cl A* 289
12,890 eBay* 303
22,280 EMC* 389
7,300 FLIR Systems* (A) 239
1,640 Google, Cl A* (A) 1,017
5,690 Harris 271
16,170 Hewlett-Packard 833
31,970 Intel 652
December 31, 2009 www.bishopstreetfunds.com
21
Large Cap Core Equity Fund
SCHEDULE OF INVESTMENTS
(CONTINUED)
Value
Shares (000)
- --------- ---------
INFORMATION TECHNOLOGY -- (CONTINUED)
1,230 Mastercard, Cl A (A) $ 315
41,090 Microsoft 1,253
28,330 Oracle 695
13,940 Qualcomm 645
---------
9,767
---------
MATERIALS -- 3.2%
11,650 Dow Chemical (A) 322
6,360 Freeport-McMoRan Copper & Gold 511
3,160 Monsanto 258
2,940 Mosaic 175
5,500 PPG Industries (A) 322
---------
1,588
---------
TELECOMMUNICATION SERVICES -- 2.9%
28,540 AT&T 800
8,250 NII Holdings* 277
11,220 Verizon Communications (A) 372
---------
1,449
---------
UTILITIES -- 2.1%
17,630 AES* 235
7,700 Edison International 268
2,200 Entergy 180
3,470 Exelon 170
5,520 Questar 229
---------
1,082
---------
TOTAL COMMON STOCK (Cost $48,540) 48,552
---------
EXCHANGE TRADED FUND -- 2.4%
10,800 SPDR Trust, Ser 1 1,203
---------
TOTAL EXCHANGE TRADED FUND (Cost $1,541) 1,203
---------
CASH EQUIVALENTS (B) -- 10.3%
242,734 Dreyfus Cash Management Fund, Institutional Shares,
0.260% 243
242,734 Fidelity Institutional Money Market Portfolio,
Institutional Shares, 0.260% 243
2,302,627 Fidelity Institutional Prime Money Market,
Institutional Shares, 0.273% (C) 2,302
2,417,759 RBC Prime Money Market Fund, 0.362% (C) 2,418
---------
TOTAL CASH EQUIVALENTS (Cost $5,206) 5,206
---------
Bishop Street Funds
22
Large Cap Core Equity Fund
SCHEDULE OF INVESTMENTS
(CONTINUED)
Face
Amount Value
(000) (000)
- ---------- ---------
REPURCHASE AGREEMENT (C) -- 13.5%
$ 6,775 Bank of America 0.143%, dated 12/31/09, to be
repurchased on 01/04/10, repurchase price $6,775,169
(collateralized by a Corporate obligation, par value
$7,049,956, 5.94%, 1/15/53, with a total market
value of $6,920,801)
TOTAL REPURCHASE AGREEMENT (Cost $6,775) $ 6,775
---------
TOTAL INVESTMENTS (Cost $62,062) -- 122.8% $ 61,736
=========
PERCENTAGES ARE BASED ON NET ASSETS OF $50,259 ($ THOUSANDS).
* NON-INCOME PRODUCING SECURITY.
(A) THIS SECURITY OR PORTION OF THIS SECURITY IS ON LOAN AT DECEMBER 31, 2009.
THE TOTAL VALUE OF SECURITIES ON LOAN AT DECEMBER 31, 2009 WAS $11,048 ($
THOUSANDS).
(B) THE RATE SHOWN IS THE 7-DAY EFFECTIVE YIELD AS OF DECEMBER 31, 2009.
(C) THIS SECURITY WAS PURCHASED WITH CASH COLLATERAL HELD FROM SECURITIES ON
LOAN. THE TOTAL VALUE OF SUCH SECURITIES AS OF DECEMBER 31, 2009 WAS
$11,495 ($ THOUSANDS).
+ REAL ESTATE INVESTMENT TRUST.
CL -- CLASS
SER -- SERIES
SPDR -- STANDARD & POOR'S DEPOSITORY RECEIPTS
COST FIGURES ARE SHOWN IN THOUSANDS.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
December 31, 2009 www.bishopstreetfunds.com
23
BISHOP STREET
MANAGEMENT DISCUSSION
FUNDS
High Grade Income Fund
During the first six months of the year, interest rates remained low as fears of
a double-dip recession and deflation forced the Federal Reserve (the "Fed") to
keep its targeted rate near zero. Investors continued to flock to the safety of
U.S. treasuries and higher quality assets fearing further weakness in the
economy. In addition to traditional easing measures, the Fed continued to
provide additional liquidity to the markets through quantitative easing,
interjecting liquidity in support of the weak housing market. These programs
helped serve to restore economic growth and confidence in the financial system.
By the second half of the year, investors regained their confidence and searched
for higher returns in the stock market and elsewhere, reversing the panic that
gripped the markets early in the year.
Credit spreads, which had widened dramatically as a result of the
flight-to-quality, offered extremely attractive yields relative to money market
and U.S. government bonds. The best returns were earned in riskier assets such
as high yield and corporate bonds, as investors' appetite for risk increased.
But as prospects for future economic growth improved and inflation expectations
increased, the yield curve steepened dramatically offsetting some of the bond
market gains earned earlier.
For the year, the Bishop Street High Grade Income Fund (the "Fund")
significantly outperformed the Barclays U.S. Government/Credit Index,
maintaining its "5-Star" Morningstar rating. The Fund benefited from investments
in corporate bonds and an underweight in longer-dated maturities. Looking ahead,
we anticipate stronger growth in 2010 and higher interest rates towards the
latter half of the year. The Fund is positioned to perform well as we continue
to hold a defensive posture on the yield curve and a sound position in credit.
THIS REPRESENTS THE MANAGEMENT'S ASSESSMENT OF THE FUNDS AND THE MARKET
ENVIRONMENT AT A SPECIFIC POINT IN TIME AND SHOULD NOT BE RELIED UPON BY THE
READER AS RESEARCH OR INVESTMENT ADVICE.
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 BARCLAYS U.S. GOVERNMENT/CREDIT INDEX, THE
CONSUMER PRICE INDEX AND THE LIPPER CORPORATE DEBT A-RATED OBJECTIVE.
(PERFORMANCE GRAPH)
Initial Investment Date 12/31/99 Dec 00 Dec 01 Dec 02 Dec 03 Dec 04 Dec 05 Dec 06 Dec 07 Dec 08 Dec 09
- ----------------------- -------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Bishop Street High Grade Income
Fund $10,000 $11,025 $11,815 $13,179 $13,615 $14,079 $14,361 $14,786 $15,773 $17,117 $18,557
Barclays US Government/Credit
Index $10,000 $11,185 $12,136 $13,475 $14,105 $14,696 $15,044 $15,613 $16,741 $17,696 $18,496
Consumer Price Index $10,000 $10,337 $10,498 $10,750 $10,952 $11,309 $11,692 $11,992 $12,481 $12,493 $12,833
Lipper Corporate Debt A-Rated
Objective $10,000 $10,988 $11,857 $12,876 $13,643 $14,231 $14,503 $15,076 $15,751 $14,767 $17,008
High Grade Income Fund, Class I #
Barclays U.S. Government/Credit Index(1)
Consumer Price Index(1)
Lipper Corporate Debt A-Rated Objective(1)
# Account value if you reinvested income and capital gains.
(1) See page 4 for definition of comparitive indices.
AVERAGE ANNUAL TOTAL RETURNS+
ONE ANNUALIZED ANNUALIZED ANNUALIZED
YEAR 3 YEAR 5 YEAR 10 YEAR
RETURN RETURN RETURN RETURN
- ------ ---------- ---------- ----------
8.41% 7.87% 5.68% 6.38% Class I
+ 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, 2009 www.bishopstreetfunds.com
25
High Grade Income Fund
TOP TEN HOLDINGS+
Percentage
Coupon Maturity of
Rate Date Investments
------ -------- -----------
1. Countrywide Asset-Backed Certificates, Cl 1A4 5.323% 02/25/36 2.3%
2. Bank of America, MTN 7.375% 05/15/14 2.3%
3. Citibank Credit Card Issuance Trust, Cl A3 2.700% 06/23/13 2.1%
4. Ford Credit Auto Owner Trust, Cl A3 1.000% 01/15/14 2.0%
5. GSR Mortgage Loan Trust, Cl 3A2 2.152% 04/25/32 1.9%
6. Potash Corp of Saskatchewan 5.250% 05/15/14 1.9%
7. Dow Chemical 8.550% 05/15/19 1.9%
8. Xerox 8.250% 05/15/14 1.8%
9. General Electric Capital MTN, Ser A 5.450% 01/15/13 1.7%
10. Rio Tinto Finance USA 9.000% 05/01/19 1.7%
SECTOR WEIGHTINGS (UNAUDITED)+
(BAR CHART)
Banks 16.8%
Asset-Backed Security 14.7%
Materials 10.9%
Information Technology 8.2%
Industrials 7.4%
U.S. Government Agency Obligations 7.1%
Consumer Discretionary 6.8%
Financials 5.2%
U.S. Treasury Obligations 4.8%
U.S. Government Mortgage-Backed Obligations 4.4%
Municipal Bond 2.9%
Telecommunication Services 2.7%
Health Care 2.7%
Energy 2.5%
Consumer Staples 2.1%
Short-Term Investments 0.8%
+ PERCENTAGES ARE BASED ON TOTAL INVESTMENTS. EXCLUDES SECURITIES PURCHASED
WITH CASH COLLATERAL RECEIVED FROM SECURITIES LENDING.
SCHEDULE OF INVESTMENTS
Face
Amount Value
(000) (000)
- -------- --------
CORPORATE OBLIGATIONS -- 64.7%
BANKS -- 16.6%
American Express Bank
$ 600 5.500%, 04/16/13 $ 640
Australia & New Zealand Banking Group (A)
1,500 0.534%, 06/18/12 1,488
Bank of America MTN (B)
2,500 7.375%, 05/15/14 2,837
Bishop Street Funds
26
High Grade Income Fund
SCHEDULE OF INVESTMENTS
(CONTINUED)
Face
Amount Value
(000) (000)
- -------- --------
BANKS -- (CONTINUED)
Bank of New York Mellon (B)
$ 1,325 4.300%, 05/15/14 $ 1,395
Bank of Oklahoma (A) (G)
500 5.750%, 05/15/17 465
Barclays Bank PLC (B)
1,150 6.750%, 05/22/19 1,283
500 5.200%, 07/10/14 530
Bear Stearns LLC
1,500 7.250%, 02/01/18 1,722
Citigroup
1,500 6.500%, 08/19/13 1,599
Goldman Sachs Group
1,300 7.500%, 02/15/19 1,516
JPMorgan Chase (B)
1,400 5.875%, 06/13/16 1,469
750 5.125%, 09/15/14 791
JPMorgan Chase Capital XXVII (B)
1,000 7.000%, 11/01/39 1,009
Morgan Stanley (B)
1,300 7.300%, 05/13/19 1,460
1,400 4.200%, 11/20/14 1,401
Wells Fargo Bank (A)
1,600 0.483%, 05/16/16 1,416
--------
21,021
--------
CONSUMER DISCRETIONARY -- 6.8%
Comcast (B)
1,000 6.500%, 01/15/17 1,107
Home Depot (B)
1,400 5.875%, 12/16/36 1,351
McDonald's MTN (B)
1,525 4.125%, 06/01/13 1,594
Time Warner Cable (B)
1,350 8.250%, 04/01/19 1,608
Walt Disney MTN
1,300 6.200%, 06/20/14 1,456
Whirlpool MTN (B)
1,275 8.600%, 05/01/14 1,444
--------
8,560
--------
December 31, 2009 www.bishopstreetfunds.com
27
High Grade Income Fund
SCHEDULE OF INVESTMENTS
(CONTINUED)
Face
Amount Value
(000) (000)
- -------- --------
CONSUMER STAPLES -- 2.0%
Costco Wholesale (B)
$ 1,100 5.500%, 03/15/17 $ 1,174
Wal-Mart Stores (B)
1,300 5.375%, 04/05/17 1,399
--------
2,573
--------
ENERGY -- 2.5%
Anadarko Petroleum
1,250 7.200%, 03/15/29 1,291
BP Capital Markets PLC
725 3.625%, 05/08/14 742
ConocoPhillips (B)
1,000 4.750%, 10/15/12 1,072
--------
3,105
--------
FINANCIALS --5.1%
Capital One Financial (B)
1,000 7.375%, 05/23/14 1,132
General Electric Capital MTN (A)
1,325 0.425%, 05/08/13 1,268
General Electric Capital MTN, Ser A (B)
2,050 5.450%, 01/15/13 2,179
Jefferies Group (B)
675 6.250%, 01/15/36 538
WEA Finance LLC
1,300 5.750%, 09/02/15 1,370
--------
6,487
--------
HEALTH CARE -- 2.7%
Bristol-Myers Squibb (B)
680 5.450%, 05/01/18 727
Genentech
1,300 4.750%, 07/15/15 1,391
Merck (B)
1,200 5.000%, 06/30/19 1,248
--------
3,366
--------
INDUSTRIALS -- 7.3%
Boeing
500 4.875%, 02/15/20 501
Bunge Finance
1,300 8.500%, 06/15/19 1,482
Bishop Street Funds
28
High Grade Income Fund
SCHEDULE OF INVESTMENTS
(CONTINUED)
Face
Amount Value
(000) (000)
- -------- --------
INDUSTRIALS -- (CONTINUED)
Caterpillar (B)
$ 1,250 7.900%, 12/15/18 $ 1,525
Continental Airlines
1,300 9.000%, 07/08/16 1,378
Emerson Electric (B)
500 5.250%, 10/15/18 525
John Deere Capital
550 7.000%, 03/15/12 610
News America (B)
1,000 6.650%, 11/15/37 1,056
President and Fellows of Harvard College
1,300 3.700%, 04/01/13 1,337
Rockwell Automation
800 6.700%, 01/15/28 844
--------
9,258
--------
INFORMATION TECHNOLOGY -- 8.2%
Cisco Systems (B)
1,500 5.500%, 02/22/16 1,647
Dell (B)
400 5.625%, 04/15/14 436
Hewlett-Packard (B)
1,375 4.500%, 03/01/13 1,458
IBM
1,500 8.375%, 11/01/19 1,913
Nokia
1,250 5.375%, 05/15/19 1,276
Oracle (B)
1,200 5.250%, 01/15/16 1,296
Xerox
2,000 8.250%, 05/15/14 2,293
--------
10,319
--------
MATERIALS -- 10.8%
ArcelorMittal (B)
1,050 9.850%, 06/01/19 1,358
BHP Billiton Finance
950 5.250%, 12/15/15 1,029
Boeing Capital
1,250 3.250%, 10/27/14 1,241
Dow Chemical (B)
1,950 8.550%, 05/15/19 2,327
200 5.900%, 02/15/15 215
December 31, 2009 www.bishopstreetfunds.com
29
High Grade Income Fund
SCHEDULE OF INVESTMENTS
(CONTINUED)
Face
Amount Value
(000) (000)
- -------- --------
MATERIALS -- (CONTINUED)
Monsanto
$ 1,400 7.375%, 08/15/12 $ 1,587
Nucor (B)
1,300 4.875%, 10/01/12 1,401
Potash Corp of Saskatchewan
2,200 5.250%, 05/15/14 2,363
Rio Tinto Finance USA (B)
1,700 9.000%, 05/01/19 2,152
--------
13,673
--------
TELECOMMUNICATION SERVICES -- 2.7%
AT&T (B)
500 5.800%, 02/15/19 533
AT&T Wireless Services
1,300 8.125%, 05/01/12 1,469
Cellco Partnership (B)
1,300 5.550%, 02/01/14 1,410
--------
3,412
--------
TOTAL CORPORATE OBLIGATIONS (Cost $76,227) 81,774
--------
ASSET-BACKED SECURITIES -- 14.6%
Ally Auto Receivables Trust, Cl A3 (D)
1,750 1.980%, 10/15/13 1,747
Capital One Multi-Asset Execution Trust
1,600 3.200%, 04/15/14 1,636
Chase Issuance Trust, Ser A5, Cl A5 (A)
2,000 1.033%, 06/15/12 2,006
Citibank Credit Card Issuance Trust, Cl A3
2,600 2.700%, 06/23/13 2,643
Countrywide Asset-Backed Certificates, Cl 1A4 (A)
3,281 1.000%, 02/25/36 2,845
Ford Credit Auto Owner Trust, Cl A3
2,500 1.510%, 01/15/14 2,487
GSR Mortgage Loan Trust, Cl 3A2
2,556 2.152%, 04/25/32 (A) 2,397
Mercedes-Benz Auto Receivables, Cl A3
1,250 1.670%, 01/15/14 1,250
WaMu Mortgage Pass-Through Certificates, Cl 2A
1,532 2.509%, 07/25/42 (A) 1,424
--------
TOTAL ASSET-BACKED SECURITIES (Cost $18,127) 18,435
--------
Bishop Street Funds
30
High Grade Income Fund
SCHEDULE OF INVESTMENTS
(CONTINUED)
Face
Amount Value
(000) (000)
- -------- --------
U.S. GOVERNMENT MORTGAGE-BACKED OBLIGATIONS -- 4.4%
FHLMC REMIC, Ser 2844, Cl VB
$ 146 5.500%, 12/15/19 $ 150
FHLMC REMIC, Ser 3196, Cl CB
492 5.250%, 08/15/11 489
FHLMC REMIC, Ser R010, Cl AB
704 5.500%, 12/15/19 738
FNMA REMIC, Ser B1, Cl BE
859 5.450%, 12/25/20 910
FNMA, Ser 33, Cl AB
1,844 3.750%, 03/25/33 1,883
FNMA, Ser 84, Cl KA
131 5.000%, 09/25/36 131
GNMA, Ser 7, Cl PE
1,175 5.500%, 11/16/31 1,232
--------
TOTAL U.S. GOVERNMENT MORTGAGE-BACKED OBLIGATIONS (Cost $5,342) 5,533
--------
U.S. GOVERNMENT AGENCY OBLIGATIONS -- 7.1%
FHLMC
875 8.250%, 06/01/16 1,052
1,000 5.875%, 05/23/16 1,056
FHLMC MTN
1,000 4.250%, 05/22/13 1,066
FNMA
1,400 5.550%, 02/16/17 1,408
700 5.000%, 03/02/15 769
733 5.000%, 10/01/23 767
410 3.500%, 08/01/10 417
1,200 3.500%, 08/25/14 1,209
1,200 2.125%, 06/24/13 1,194
--------
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS (Cost $8,745) 8,938
--------
U.S. TREASURY OBLIGATIONS -- 4.8%
U.S. TIPS
1,700 2.125%, 01/15/19 1,815
U.S. Treasury Bonds
1,200 7.250%, 05/15/16 (B) 1,485
1,070 4.500%, 08/15/39 (B) 1,046
December 31, 2009 www.bishopstreetfunds.com
31
High Grade Income Fund
SCHEDULE OF INVESTMENTS
(CONTINUED)
Face
Amount
(000)/ Value
Shares (000)
- -------- --------
U.S. TREASURY OBLIGATIONS -- (CONTINUED)
U.S. Treasury Notes
$ 500 3.375%, 11/15/19 (B) $ 481
800 3.125%, 05/15/19 (B) 758
500 2.125%, 11/30/14 (B) 488
--------
TOTAL U.S. TREASURY OBLIGATIONS (Cost $5,905) 6,073
--------
MUNICIPAL BONDS -- 2.9%
MUNICIPAL -- 2.9%
California State, GO
1,500 7.550%, 04/01/39 1,454
Michigan Municipal Bond Authority, RB, Merrill Lynch
Insured (A)
500 3.205%, 09/01/48 500
New Jersey State, Turnpike Authority, Ser B, RB, AMBAC
Insured, Pre-Refunded @ 100 (C)
1,250 4.252%, 01/01/16 1,243
New Mexico Mortgage Finance Authority, RB, AMT,
GNMA/FNMA/FHLMC Collateral
455 4.200%, 07/01/28 453
--------
TOTAL MUNICIPAL BONDS (Cost $3,690) 3,650
--------
CASH EQUIVALENTS (F) - 13.2%
454,870 Dreyfus Cash Management Fund, Institutional Shares,
0.260% 455
454,870 Fidelity Institutional Money Market Portfolio,
Institutional Shares, 0.260% 455
7,697,373 Fidelity Prime Money Market, Institutional Shares,
0.273% (E) 7,698
8,082,241 RBC Prime Money Market Fund, 0.362% (E) 8,082
--------
TOTAL CASH EQUIVALENTS (Cost $16,690) 16,690
--------
REPURCHASE AGREEMENT (E) -- 17.9%
22,648 Bank of America 0.143%, dated 12/31/09, to be
repurchased on 01/04/10, repurchase price $22,648,478
(collateralized by a Corporate obligation, par value
$23,567,055, 5.94%, 1/15/53, with a total market value
of $23,135,306)
TOTAL REPURCHASE AGREEMENT (Cost $22,648) 22,648
--------
TOTAL INVESTMENTS (Cost $157,374) -- 129.6% $163,741
========
Bishop Street Funds
32
High Grade Income Fund
SCHEDULE OF INVESTMENTS
(CONTINUED)
PERCENTAGES ARE BASED ON NET ASSETS OF $126,334 ($ THOUSANDS).
(A) FLOATING RATE SECURITY -- THE RATE REFLECTED ON THE SCHEDULE OF INVESTMENTS
IS THE RATE IN EFFECT ON DECEMBER 31, 2009. THE MATURITY DATE SHOWN IS THE
FINAL MATURITY DATE.
(B) THIS SECURITY OR PORTION OF THIS SECURITY IS ON LOAN AT DECEMBER 31, 2009.
THE TOTAL VALUE OF SECURITIES ON LOAN AT DECEMBER 31, 2009 WAS $36,948 ($
THOUSANDS).
(C) PRE-REFUNDED SECURITY -- THE MATURITY DATE SHOWN IS THE PRE-REFUNDED DATE.
(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, 2009,
THESE SECURITIES AMOUNTED TO $1,747 ($ THOUSANDS), REPRESENTING 1.38% OF
NET ASSETS OF THE FUND.
(E) THIS SECURITY WAS PURCHASED WITH CASH COLLATERAL HELD FROM SECURITIES ON
LOAN. THE TOTAL VALUE OF SUCH SECURITIES AS OF DECEMBER 31, 2009 WAS
$38,428 ($ THOUSANDS).
(F) THE RATE SHOWN IS THE 7-DAY EFFECTIVE YIELD AS OF DECEMBER 31, 2009.
(G) STEP BOND -- COUPON RATE INCREASES IN INCREMENTS TO MATURITY. RATE
DISCLOSED IS THE RATE IN EFFECT AS OF DECEMBER 31, 2009.
AMBAC -- AMERICAN MUNICIPAL BOND ASSURANCE COMPANY
AMT -- ALTERNATIVE MINIMUM TAX
CL -- CLASS
FHLMC -- FEDERAL HOME LOAN MORTGAGE ASSOCIATION
FNMA -- FEDERAL NATIONAL MORTGAGE ASSOCIATION
GNMA -- GOVERNMENT NATIONAL MORTGAGE ASSOCIATION
GO -- GENERAL OBLIGATION
LLC -- LIMITED LIABILITY COMPANY
MTN -- MEDIUM TERM NOTE
PLC -- PUBLIC LIMITED COMPANY
RB -- REVENUE BOND
REMIC -- REAL ESTATE MORTGAGE INVESTMENT CONDUIT
SER -- SERIES
TIPS -- TREASURY INFLATION-PROTECTED SECURITIES
COST FIGURES ARE SHOWN IN THOUSANDS.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
December 31, 2009 www.bishopstreetfunds.com
33
BISHOP STREET
MANAGEMENT DISCUSSION
FUNDS
Hawaii Municipal Bond Fund
Municipal bond returns in 2009 were outstanding as the market experienced its
sharpest rally in fourteen years. Confidence improved from the panic in 2008 as
investors unwound the flight-to-quality trade. Riskier sectors outperformed all
others led by industrial development, hospital and housing revenue bonds. Demand
for municipal bonds remained high in anticipation of higher federal income tax
rates and a decrease in issuance of tax-exempt bonds due to the increased
issuance of taxable Build America Bonds. By year end, yields returned to more
normal valuation levels; however, the yield curve remained very steep with a 357
basis points difference in yield between the 2-year note and 30-year bond.
The Bishop Street Hawaii Municipal Bond Fund underperformed the Barclays
Municipal Bond Index for the year but performed relatively in line with the
performance of Hawaii bonds. The lag in performance was primarily due to the
high quality bias of the Fund and its shorter duration relative to its
benchmark.
Looking ahead, concerns over impending budget deficits and the prospect of
further credit rating downgrades will likely keep risk premiums high over the
near term. As we anticipate interest rates moving higher in 2010, we will
continue to apply a disciplined and defensive approach with a bias for higher
credit quality.
THIS REPRESENTS THE MANAGEMENT'S ASSESSMENT OF THE FUNDS AND THE MARKET
ENVIRONMENT AT A SPECIFIC POINT IN TIME AND SHOULD NOT BE RELIED UPON BY THE
READER AS RESEARCH OR INVESTMENT ADVICE.
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 BARCLAYS MUNICIPAL BOND
INDEX, THE CONSUMER PRICE INDEX AND THE LIPPER OTHER STATES MUNICIPAL DEBT FUNDS
OBJECTIVE.
(PERFORMANCE GRAPH)
Initial Investment Date 12/31/99 Dec 00 Dec 01 Dec 02 Dec 03 Dec 04 Dec 05 Dec 06 Dec 07 Dec 08 Dec 09
- ----------------------- -------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Bishop Street Hawaii Municipal
Bond Fund, Institutional $10,000 $11,261 $11,739 $12,915 $13,595 $14,052 $14,405 $15,042 $15,413 $15,256 $16,724
Bishop Street Hawaii Municipal
Bond Fund, Synthetic Retail $ 9,700 $10,897 $11,347 $12,452 $13,076 $13,481 $13,785 $14,359 $14,677 $14,491 $15,846
Barclays Municipal Bond Index $10,000 $11,168 $11,741 $12,869 $13,552 $14,159 $14,657 $15,367 $15,883 $15,490 $17,491
Consumer Price Index $10,000 $10,337 $10,498 $10,750 $10,952 $11,309 $11,692 $11,992 $12,481 $12,493 $12,833
Lipper Other States Municipal
Debt Funds $10,000 $11,063 $11,535 $12,484 $13,072 $13,545 $13,905 $14,528 $14,810 $13,635 $15,863
Hawaii Municipal Bond Fund, Class I#
Hawaii Municipal Bond Fund, Class A#
Barclays Municipal Bond Index(1)
Consumer Price Index(1)
Lipper Other States Municipal Debt Funds Objective(1)
# Account value if you reinvested income and capital gains.
(1) See page 4 for definition of comparative indices.
AVERAGE ANNUAL TOTAL RETURNS+
ONE ANNUALIZED ANNUALIZED ANNUALIZED
YEAR 3 YEAR 5 YEAR 10 YEAR
RETURN RETURN RETURN RETURN
- ------ ---------- ---------- ----------
9.63% 3.60% 3.54% 5.28% Class I
9.35% 3.34% 3.29% 5.03% Class A
Class A,
6.08% 2.31% 2.66% 4.71% with load**
** 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, 2009 www.bishopstreetfunds.com
35
Hawaii Municipal Bond Fund
TOP TEN HOLDINGS+
Percentage
Coupon Maturity of
Rate Date Investments
------ -------- -----------
1. Honolulu Hawaii City & County, GO 5.000% 07/01/17 3.3%
2. Honolulu Hawaii City & County, GO 5.000% 07/01/26 1.7%
3. Hawaii State, RB 5.000% 07/01/16 1.5%
4. Honolulu City & County, Board of Water Supply, RB 4.750% 07/01/17 1.4%
5. Honolulu Hawaii City & County, GO 5.000% 07/01/15 1.4%
6. Hawaii State, RB 5.000% 07/01/12 1.3%
7. Hawaii State, Housing Finance & Development, RB 6.500% 07/01/33 1.3%
8. Hawaii State, Housing Finance & Development, RB 5.350% 07/01/18 1.3%
9. Hawaii State, Department of Hawaiian Home Lands, COP 5.000% 11/01/31 1.3%
10. Honolulu City & County, Board of Water Supply, RB 5.000% 07/01/33 1.2%
SECTOR WEIGHTINGS (UNAUDITED)+
(BAR-CHART)
General Obligation 49.9%
Transportation 11.5%
Water 10.4%
Higher Education 7.8%
Airport 4.4%
Power 3.9%
General Revenue 3.9%
Single-Family Housing 2.6%
Housing 1.3%
Facilities 0.8%
Utilities 0.7%
Education 0.6%
Pollution 0.6%
School District 0.6%
Short-Term Investments 0.5%
Beneficiary Bank 0.4%
Medical 0.1%
+ PERCENTAGES ARE BASED ON TOTAL INVESTMENTS.
SCHEDULE OF INVESTMENTS
Face
Amount Value
(000) (000)
- -------- --------
MUNICIPAL BONDS -- 98.2%
ALASKA -- 0.1%
City of Anchorage Alaska, Water Department, RB,
NPFGC Re-insures Insured
$ 200 5.000%, 05/01/37 $ 205
--------
Bishop Street Funds
36
Hawaii Municipal Bond Fund
SCHEDULE OF INVESTMENTS
(CONTINUED)
Face
Amount Value
(000) (000)
- ---------- ---------
ARIZONA -- 0.9%
Phoenix Civic Improvement, Ser A, RB
$ 1,435 5.000%, 07/01/21 $ 1,534
---------
CALIFORNIA -- 0.2%
San Jose Evergreen Community College District, Ser B,
GO, FSA Insured (A)
1,000 6.052%, 09/01/28 318
---------
GEORGIA -- 0.6%
Main Street, Natural Gas, Ser B, RB
1,000 5.000%, 03/15/18 1,005
---------
HAWAII -- 81.2%
Hawaii County, Refunding & Improvement Project, Ser A,
GO, NPFGC Re-insures FGIC Insured
430 5.600%, 05/01/13 486
Hawaii County, Ser A, GO, AGM Insured
125 5.000%, 07/15/21 132
1,500 5.000%, 07/15/23 1,570
Hawaii County, Ser A, GO, NPFGC Re-Insured
1,055 5.250%, 07/15/18 1,133
1,000 5.000%, 07/15/24 1,050
Hawaii County, Unlimited Public Improvements, Ser A,
GO, AMBAC Insured
1,000 5.000%, 07/15/15 1,134
Hawaii County, Unlimited Public Improvements, Ser A,
GO, NPFGC Insured
505 5.000%, 07/15/21 550
1,000 5.000%, 07/15/22 1,083
Hawaii State, Airport System, RB, AMT, NPFGC Re-insures
FGIC Insured
1,000 5.750%, 07/01/15 1,036
Hawaii State, Airport System, Ser B, RB, AMT, ETM
40 6.900%, 07/01/12 42
Hawaii State, Airport System, Ser B, RB, AMT, NPFGC
Re-insures FGIC Insured
1,500 6.625%, 07/01/18 1,531
500 6.000%, 07/01/19 508
Hawaii State, Department of Budget & Finance,
Chaminade University, RB, Radian Insured
1,000 4.750%, 01/01/36 877
December 31, 2009 www.bishopstreetfunds.com
37
Hawaii Municipal Bond Fund
SCHEDULE OF INVESTMENTS
(CONTINUED)
Face
Amount Value
(000) (000)
- ---------- ---------
HAWAII -- (CONTINUED)
Hawaii State, Department of Budget & Finance, Electric
Company & Subsidiary Project, Ser A, RB, AMT, FGIC
Insured
$ 750 4.800%, 01/01/25 $ 687
Hawaii State, Department of Budget & Finance, Electric
Company & Subsidiary Project, Ser B, RB, AMT, XLCA
Insured
1,025 5.000%, 12/01/22 977
Hawaii State, Department of Budget & Finance, Hawaiian
Electric, Ser A, RB, AMT, AMBAC Insured
445 5.100%, 09/01/32 404
Hawaii State, Department of Budget & Finance, Hawaiian
Electric, Ser A, RB, AMT, FGIC Insured
1,000 4.650%, 03/01/37 826
Hawaii State, Department of Budget & Finance, Hawaiian
Electric, Ser A, RB, AMT, NPFGC Re-Insured
2,000 5.650%, 10/01/27 1,987
Hawaii State, Department of Budget & Finance, Hawaiian
Electric, Ser C, RB, AMT, AMBAC Insured
1,000 6.200%, 11/01/29 1,005
Hawaii State, Department of Budget & Finance, Mid
Pacific Institute, RB, Radian Insured
1,000 5.000%, 01/01/26 982
Hawaii State, Department of Hawaiian Home Lands,
Kapolei Office Facilities, Ser A, COP, AGM Insured
2,000 5.000%, 11/01/31 2,078
Hawaii State, Harbor System, Ser A, RB, AMT, AGM
Insured
2,025 5.750%, 07/01/17 2,062
770 5.750%, 07/01/29 779
1,210 5.700%, 07/01/16 1,233
1,000 5.600%, 07/01/15 1,020
Hawaii State, Harbor System, Ser B, RB, AMT, AGM
Insured
1,000 5.000%, 01/01/13 1,078
500 5.000%, 01/01/23 521
Hawaii State, Harbor System, Ser B, RB, AMT, AMBAC
Insured
200 5.500%, 07/01/19 208
Hawaii State, Highway, RB
300 5.500%, 07/01/18 350
500 5.500%, 01/01/25 578
Hawaii State, Highway, RB, AGM Insured
2,000 5.000%, 07/01/12 2,191
Hawaii State, Highway, Ser A, RB, AGM Insured
1,725 5.000%, 07/01/21 1,834
1,565 5.000%, 07/01/22 1,661
1,805 5.000%, 07/01/23 1,910
Bishop Street Funds
38
Hawaii Municipal Bond Fund
SCHEDULE OF INVESTMENTS
(CONTINUED)
Face
Amount Value
(000) (000)
- ---------- ---------
HAWAII -- (CONTINUED)
Hawaii State, Highway, Ser B, RB, AGM Insured
$ 2,300 5.000%, 07/01/16 $ 2,515
Hawaii State, Housing Finance & Development, Ser B, RB,
AGM Insured
2,000 6.500%, 07/01/33 2,179
Hawaii State, Housing Finance & Development,
Single-Family Housing, Ser A, RB, AMT, FNMA Collateral
510 5.400%, 07/01/30 511
2,145 5.350%, 07/01/18 2,151
Hawaii State, Housing Finance & Development,
Single-Family Housing, Ser B, RB, FNMA Collateral
555 5.450%, 07/01/17 557
Hawaii State, Improvements Authority, GO, FGIC-TCRS
Insured
1,000 6.000%, 03/01/11 1,063
Hawaii State, Improvements Authority, Ser DA, GO,
NPFGC Re-Insured
850 5.250%, 09/01/23 922
Hawaii State, Improvements Authority, Ser DB, GO, NPFGC
Re-Insured
200 5.250%, 09/01/15 225
Hawaii State, Improvements Authority, Ser DD, GO, NPFGC
Re-Insured
1,500 5.250%, 05/01/15 1,702
Hawaii State, Improvements Authority, Ser DF, GO, AMBAC
Insured
1,250 5.000%, 07/01/18 1,369
1,250 5.000%, 07/01/21 1,364
90 5.000%, 07/01/22 98
Hawaii State, No. 1 Capitol District State Office, COP,
NPFGC Re-Insured, Pre-Refunded @ 100 (B)
1,000 5.200%, 05/01/14 1,016
Hawaii State, Ser CM, GO, AGM FGIC Insured
1,000 6.500%, 12/01/14 1,218
Hawaii State, Ser CU, GO, NPFGC Re-Insured,
Pre-Refunded @ 100 (B)
25 5.750%, 10/01/11 26
Hawaii State, Ser CV, GO, NPFGC Re-insures FGIC Insured
350 5.375%, 08/01/19 369
Hawaii State, Ser CV, GO, NPFGC Re-insures FGIC
Insured, Pre-Refunded @ 100 (B)
650 5.375%, 08/01/19 699
Hawaii State, Ser CX, GO, FSA Insured
1,000 5.500%, 02/01/16 1,070
580 5.500%, 02/01/21 614
Hawaii State, Ser CX, GO, FSA Insured, Pre-Refunded @
100 (B)
420 5.500%, 02/01/21 461
December 31, 2009 www.bishopstreetfunds.com
39
Hawaii Municipal Bond Fund
SCHEDULE OF INVESTMENTS
(CONTINUED)
Face
Amount Value
(000) (000)
- ---------- ---------
HAWAII -- (CONTINUED)
Hawaii State, Ser CZ, GO, FSA Insured
$ 225 5.250%, 07/01/16 $ 242
Hawaii State, Ser DI, GO, AGM Insured
1,000 5.000%, 03/01/26 1,071
Hawaii State, Ser DK, GO
350 5.000%, 05/01/24 386
225 5.000%, 05/01/25 247
Hawaii State, Ser DN, GO
1,000 5.500%, 08/01/26 1,124
Hawaii State, Ser DO, GO
1,000 5.000%, 08/01/16 1,147
Hawaii State, Ser DQ, GO
500 5.000%, 06/01/27 545
1,100 5.000%, 06/01/28 1,194
Hawaii State, Ser DV, GO
600 2.000%, 11/01/12 616
Hawaii State, Unlimited Public Improvements, Ser DD,
GO, NPFGC Re-Insured
1,000 5.000%, 05/01/16 1,100
Hawaii State, Unlimited Public Improvements, Ser DJ,
GO, AMBAC Insured
500 5.000%, 04/01/13 559
Honolulu City & County, Board of Water Supply, Ser A,
RB,
FGIC Insured, Pre-Refunded @ 100 (B)
1,300 4.750%, 07/01/16 1,489
2,000 4.750%, 07/01/17 2,290
Honolulu City & County, Board of Water Supply, Ser A,
RB, NPFGC Re-insures FGIC Insured
2,000 5.000%, 07/01/33 2,063
Honolulu City & County, Board of Water Supply, Ser B,
RB, AMT, NPFGC Re-Insured
1,000 5.250%, 07/01/20 1,059
1,000 5.250%, 07/01/21 1,058
325 5.000%, 07/01/15 347
Honolulu Hawaii City & County, 1st Board Resolution,
Ser A, RB
1,300 4.000%, 07/01/25 1,303
Honolulu Hawaii City & County, 2nd Board Resolution,
Ser A, RB, AGM Insured
1,000 5.000%, 07/01/23 1,089
1,900 5.000%, 07/01/27 2,040
Honolulu Hawaii City & County, Ser A, GO
200 5.250%, 04/01/31 217
1,100 5.250%, 04/01/32 1,188
550 5.000%, 04/01/27 591
1,000 5.000%, 04/01/33 1,054
Bishop Street Funds
40
Hawaii Municipal Bond Fund
SCHEDULE OF INVESTMENTS
(CONTINUED)
Face
Amount Value
(000) (000)
- ---------- ---------
HAWAII -- (CONTINUED)
Honolulu Hawaii City & County, Ser A, GO, AGM Insured
$ 375 5.000%, 07/01/20 $ 414
1,070 5.000%, 07/01/23 1,160
275 5.000%, 07/01/24 296
1,000 5.000%, 07/01/30 1,051
Honolulu Hawaii City & County, Ser A, GO, NPFGC
Re-Insured
725 5.250%, 03/01/18 787
1,000 5.250%, 03/01/20 1,078
1,500 5.250%, 03/01/24 1,605
500 5.250%, 03/01/28 532
1,800 5.000%, 07/01/21 1,944
1,500 5.000%, 07/01/23 1,618
550 5.000%, 07/01/25 587
540 5.000%, 07/01/26 578
1,000 5.000%, 07/01/27 1,058
Honolulu Hawaii City & County, Ser B, GO, NPFGC
Re-Insured
2,000 5.000%, 07/01/15 2,242
1,500 5.000%, 07/01/16 1,676
Honolulu Hawaii City & County, Ser D, GO
1,000 4.000%, 09/01/25 1,008
1,000 4.000%, 09/01/26 1,003
Honolulu Hawaii City & County, Ser D, GO, NPFGC
Re-Insured
885 5.000%, 07/01/19 962
1,700 5.000%, 07/01/23 1,829
Honolulu Hawaii City & County, Ser E, GO, NPFGC
Re-insures FGIC Insured
1,500 5.250%, 07/01/20 1,670
Honolulu Hawaii City & County, Ser F, GO, AGM FGIC
Insured
820 5.000%, 07/01/24 885
Honolulu Hawaii City & County, Sewer Improvements, 1st
Board Resolution, Ser C, RB, NPFGC Re-Insured
250 5.000%, 07/01/31 261
Honolulu Hawaii City & County, Sewer Improvements, 2nd
Board Resolution, Ser A-1, RB, NPFGC Re-Insured
815 5.000%, 07/01/22 861
630 5.000%, 07/01/23 663
Honolulu Hawaii City & County, Sewer Improvements, 2nd
Board Resolution, Ser B-1, RB, NPFGC Re-Insured
865 5.000%, 07/01/23 910
Honolulu Hawaii City & County, Valorem Tax Project,
Ser A, GO, NPFGC Re-Insured
2,680 5.000%, 07/01/26 2,852
December 31, 2009 www.bishopstreetfunds.com
41
Hawaii Municipal Bond Fund
SCHEDULE OF INVESTMENTS
(CONTINUED)
Face
Amount Value
(000) (000)
- ---------- ---------
HAWAII -- (CONTINUED)
Honolulu Hawaii City & County, Valorem Tax Project,
Ser B, GO, NPFGC Re-Insured
$ 4,950 5.000%, 07/01/17 $ 5,459
Honolulu Hawaii City & County, Waipahu Towers Project,
Ser A, RB, AMT, GNMA Collateral
195 6.900%, 06/20/35 197
Honolulu Hawaii City & County, Water Utility
Improvement, GO, ETM, FGIC-TCRS Insured
1,000 6.000%, 12/01/12 1,146
Kauai County, Ser A, GO, NPFGC Re-insures FGIC Insured
1,610 5.000%, 08/01/21 1,709
1,440 5.000%, 08/01/23 1,517
Kauai County, Ser A, GO, NPFGC Re-Insured
1,500 5.000%, 08/01/25 1,529
Maui County, GO, NPFGC Re-Insured
100 5.000%, 03/01/17 110
1,100 5.000%, 03/01/24 1,172
Maui County, Hawaii, Ser A, GO, NPFGC Re-Insured
1,000 5.000%, 07/01/19 1,105
Maui County, Ser A, GO, FSA Insured
1,000 3.500%, 07/01/16 1,048
Maui County, Ser A, GO, NPFGC Re-Insured
1,000 4.750%, 07/01/25 1,047
Maui County, Ser B, GO, NPFGC Re-Insured
500 5.000%, 07/01/16 568
500 5.000%, 09/01/17 544
University of Hawaii, College Improvements Project, Ser
A, RB, FGIC Insured, Pre-Refunded @ 100 (B)
1,605 5.500%, 07/15/14 1,791
500 5.125%, 07/15/32 553
University of Hawaii, College Improvements Project,
Ser A, RB, NPFGC Re-Insured
200 5.000%, 07/15/19 214
University of Hawaii, Ser A, RB
500 5.000%, 10/01/14 560
University of Hawaii, Ser A, RB, AGC MBIA Insured
1,400 5.000%, 10/01/23 1,515
University of Hawaii, Ser A, RB, MBIA Insured
400 4.500%, 07/15/32 391
University of Hawaii, Ser A, RB, NPFGC Re-Insured
975 5.000%, 07/15/21 1,044
150 5.000%, 07/15/22 160
1,300 3.500%, 07/15/27 1,158
Bishop Street Funds
42
Hawaii Municipal Bond Fund
SCHEDULE OF INVESTMENTS
(CONTINUED)
Face
Amount Value
(000) (000)
- ---------- ---------
HAWAII -- (CONTINUED)
University of Hawaii, Ser B, RB, FSA Insured
$ 320 5.250%, 10/01/16 $ 333
775 5.250%, 10/01/17 803
---------
134,854
---------
ILLINOIS -- 1.0%
Chicago O'Hare International Airport, General Airport,
Ser E, RB, CIFG Insured
1,550 5.250%, 01/01/22 1,619
---------
INDIANA -- 1.7%
Indiana Bond Bank, Ser B, RB, AGM Insured (A)
2,125 5.483%, 06/01/32 629
Indiana Finance Authority, Highway Revenue, Ser A, RB,
NPFGC Re-insures FGIC Insured
1,200 4.500%, 06/01/27 1,208
Wayne Township School Building, RB, NPFGC Re-insures
FGIC Insured
1,000 3.500%, 07/15/24 912
---------
2,749
---------
NEVADA -- 0.8%
Las Vegas New Convention & Visitors Authority, RB,
AMBAC Insured
1,055 5.000%, 07/01/28 1,091
Nevada State, Municipal Bond Bank Project, Ser F, GO,
FSA Insured
250 5.000%, 12/01/24 262
---------
1,353
---------
NEW MEXICO -- 0.6%
New Mexico Mortgage Finance Authority, RB, AMT,
GNMA/FNMA/FHLMC Insured
1,005 4.200%, 07/01/28 999
---------
NEW YORK -- 1.3%
New York City Municipal Water Finance Authority, Ser
BB, RB
1,000 5.000%, 06/15/27 1,072
New York State, Dormitory Authority, Ser A, RB
1,000 3.100%, 07/01/17 1,005
---------
2,077
---------
December 31, 2009 www.bishopstreetfunds.com
43
Hawaii Municipal Bond Fund
SCHEDULE OF INVESTMENTS
(CONTINUED)
Face
Amount Value
(000) (000)
- ---------- ---------
NORTH CAROLINA -- 0.9%
Mecklenburg County, Public Facilities, RB
$ 1,300 5.000%, 03/01/27 $ 1,409
---------
OKLAHOMA -- 1.7%
Durant Community Facilities Authority, GO, XLCA Insured
1,730 5.750%, 11/01/24 1,854
Tulsa Airports Improvement Trust, Ser B, RB
1,000 5.375%, 06/01/24 980
---------
2,834
---------
OREGON -- 0.6%
Oregon State, Ser C, GO
1,000 4.100%, 08/01/28 990
---------
PUERTO RICO -- 1.3%
Commonwealth of Puerto Rico, GO, NPFGC Re-Insured
1,500 6.000%, 07/01/15 1,624
Commonwealth of Puerto Rico, Public Improvement, GO,
FSA Insured, Pre-Refunded @ 100 (B)
55 5.000%, 07/01/11 59
Puerto Rico, Electric Power Authority, Ser HH, RB, FSA
Insured, Pre-Refunded @ 101 (B)
500 5.250%, 07/01/29 517
---------
2,200
---------
SOUTH CAROLINA -- 1.3%
College of Charleston, Ser D, RB, XLCA Insured
765 4.500%, 04/01/37 715
Sumter South Carolina, Waterworks & Sewer Improvement
Systems, RB, XLCA Insured
500 5.000%, 12/01/21 535
840 5.000%, 12/01/24 887
---------
2,137
---------
TEXAS -- 3.0%
Alamo Community College District, Improvements
Authority, GO, NPFGC Re-insures FGIC Insured
1,000 4.500%, 08/15/26 1,017
City of El Paso Texas, GO
500 4.000%, 08/15/16 536
Bishop Street Funds
44
Hawaii Municipal Bond Fund
SCHEDULE OF INVESTMENTS
(CONTINUED)
Face
Amount Value
(000) (000)
- ---------- ---------
TEXAS -- (CONTINUED)
City of Fort Worth Texas, RB
$ 1,000 4.300%, 02/15/35 $ 943
North Texas Tollway Authority, Highway Revenue, RB,
Assured Guarantee Insured (A)
3,000 3.345%, 01/01/30 933
University of Texas, Permanent University Fund, Ser B,
RB
1,600 4.500%, 07/01/33 1,612
---------
5,041
---------
WASHINGTON -- 0.3%
Washington State, Motor Vehicles Tax Authority, Ser F
GO, AMBAC Insured (A)
1,000 4.725%, 12/01/25 490
---------
WISCONSIN -- 0.7%
Wisconsin State, Ser D, GO, FSA Insured
1,000 5.000%, 05/01/21 1,095
---------
TOTAL MUNICIPAL BONDS (Cost $159,246) 162,909
---------
CASH EQUIVALENTS (C) -- 0.5%
420,738 Dreyfus Cash Management Fund, Institutional Shares,
0.120% 421
420,738 Fidelity Institutional Tax-Exempt Portfolio,
Institutional Shares, 0.260% 421
---------
TOTAL CASH EQUIVALENTS (Cost $842) 842
---------
TOTAL INVESTMENTS (Cost $160,088) -- 98.7% $ 163,751
=========
PERCENTAGES ARE BASED ON NET ASSETS OF $165,977 ($ THOUSANDS).
December 31, 2009 www.bishopstreetfunds.com
45
Hawaii Municipal Bond Fund
SCHEDULE OF INVESTMENTS
(CONTINUED)
(A) ZERO COUPON SECURITY -- THE RATE SHOWN 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 IS THE 7-DAY EFFECTIVE YIELD AS OF DECEMBER 31, 2009.
AGC -- AMERICAN GUARANTEE CORPORATION
AGM -- ASSURED GUARANTY MUNICIPAL CORP.
AMBAC -- AMERICAN MUNICIPAL BOND ASSURANCE COMPANY
AMT -- ALTERNATIVE MINIMUM TAX
CIFG -- CIFG ASSURANCE NORTH AMERICA, INC.
COP -- CERTIFICATE OF PARTICIPATION
ETM -- ESCROWED TO MATURITY
FGIC -- FINANCIAL GUARANTEE INSURANCE CORPORATION
FHLMC -- FEDERAL HOME LOAN MORTGAGE ASSOCIATION
FNMA -- FEDERAL NATIONAL MORTGAGE ASSOCIATION
FSA -- FINANCIAL SECURITY ASSURANCE
GNMA -- GOVERNMENT NATIONAL MORTGAGE ASSOCIATION
GO -- GENERAL OBLIGATION
MBIA -- MUNICIPAL BOND INVESTORS ASSURANCE
NPFGC -- NATIONAL PUBLIC FINANCE GUARANTEE CORPORATION
RB -- REVENUE BOND
SER -- SERIES
TCRS -- TAX CREDIT RETURN SUMMARY
XLCA -- XL CAPITAL
COST FIGURES ARE SHOWN IN THOUSANDS.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
Bishop Street Funds
46
BISHOP STREET
MANAGEMENT DISCUSSION
FUNDS
Government Money Market Fund
The world changed significantly in the last twelve months. We started the fiscal
year in the depths of a recession, precipitated largely by the credit crisis
that emerged following the Lehman Brothers bankruptcy. Market conditions were
extremely challenging during this difficult period. Ultimately, the Federal
Reserve helped stabilize the market with the creation of a funding facility
designed to provide liquidity to money market investors. Funding pressures
abated and markets calmed. In the months following the liquidity crisis, the
economic environment slowly improved as the credit markets stabilized. Risky
assets rebounded sharply as systemic risks declined. Despite positive
developments in the financial markets, the money market industry continued to
experience an extremely low interest rate environment.
Economic growth resumed in the second half of the year as the financial markets
stabilized. Evidence of the recovery was most apparent in data from the
manufacturing sector which exhibited steady monthly increases throughout the
year. Consumption rebounded from low levels as the year progressed. The labor
sector, however, continued to lag. Job losses were more severe in this
contraction than in others experienced in the post war period and continued to
mount late in the cycle. A significant increase in consumption would seem
unlikely to occur until after the unemployment rate peaks.
A consequence of monetary stimulus is depressed short-term interest rates. In
the past year, short term government yields remained at the lowest levels in
history. The low interest rate environment can be attributed to the near-zero
Federal Funds target rate. The challenges of low interest rates are most evident
in the money market industry which has significant exposure to short term U.S.
Treasury bills. Money market funds increased their allocation to risk-free
December 31, 2009 www.bishopstreetfunds.com
47
BISHOP STREET
MANAGEMENT DISCUSSION
FUNDS
government securities in the period following the liquidity crisis. The elevated
allocation to low yielding Treasury bills has pushed fund yields toward single
digit levels.
During the year the Money Market Funds were converted to a government fund and
the allocation to commercial paper and bank deposits was eliminated in favor of
government securities. The maturity of the portfolio was extended slightly to
take advantage of yield opportunities further out the yield curve. Given the
uncertain environment, maturities were structured in a laddered format across
the curve to allow for continued opportunities to reinvest at attractive yield
levels. Meanwhile, we continue to strive to improve the yield while maintaining
a high level of credit quality.
THIS REPRESENTS THE MANAGEMENT'S ASSESSMENT OF THE FUNDS AND THE MARKET
ENVIRONMENT AT A SPECIFIC POINT IN TIME AND SHOULD NOT BE RELIED UPON BY THE
READER AS RESEARCH OR INVESTMENT ADVICE.
Bishop Street Funds
48
Government Money Market Fund
SECTOR WEIGHTINGS (UNAUDITED)+
(PERFORMANCE GRAPH)
U.S. Government Agency Obligations 91.6%
Cash Equivalents 5.3%
U.S. Treasury Obligation 3.1%
+ PERCENTAGES ARE BASED ON TOTAL INVESTMENTS.
SCHEDULE OF INVESTMENTS
Face
Amount Value
(000) (000)
- ------------ ----------
U.S. GOVERNMENT AGENCY OBLIGATIONS -- 91.6%
FFCB (B)
$ 4,500 0.266%, 12/27/10 $ 4,499
FHLB (A)
1,800 0.180%, 01/11/10 1,800
1,775 0.155%, 05/21/10 1,774
1,000 0.120%, 01/13/10 1,000
3,362 0.110%, 01/07/10 3,362
5,000 0.105%, 03/17/10 4,999
12,000 0.100%, 01/04/10 12,000
2,857 0.100%, 01/21/10 2,857
FHLMC (A)
5,000 0.270%, 02/16/10 4,998
1,059 0.261%, 06/01/10 1,058
2,000 0.245%, 03/15/10 1,999
1,100 0.170%, 01/26/10 1,100
5,400 0.170%, 02/23/10 5,399
3,000 0.170%, 05/17/10 2,998
4,600 0.160%, 01/21/10 4,599
3,000 0.150%, 01/06/10 3,000
4,000 0.150%, 03/30/10 3,998
9,816 0.133%, 01/27/10 9,815
2,000 0.110%, 03/23/10 1,999
3,849 0.100%, 01/20/10 3,849
4,100 0.100%, 01/28/10 4,100
2,000 0.080%, 03/22/10 2,000
2,600 0.065%, 02/08/10 2,600
FNMA (A)
1,300 0.150%, 05/05/10 1,299
3,000 0.150%, 05/12/10 2,998
7,948 0.117%, 02/24/10 7,947
5,000 0.110%, 03/17/10 4,999
5,000 0.100%, 03/10/10 4,999
3,000 0.080%, 02/17/10 3,000
2,500 0.080%, 03/03/10 2,500
3,434 0.050%, 01/13/10 3,434
----------
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS (Cost $116,979) 116,979
----------
December 31, 2009 www.bishopstreetfunds.com
49
Government Money Market Fund
SCHEDULE OF INVESTMENTS
(CONTINUED)
Face
Amount Value
(000)/Shares (000)
- ------------ ----------
U.S. TREASURY OBLIGATION (A) -- 3.1%
U.S. Government Cash Management Bills
$ 4,000 0.277%, 06/10/10 $ 3,995
----------
TOTAL U.S. TREASURY OBLIGATION (Cost $3,995) 3,995
----------
CASH EQUIVALENTS (C) -- 5.3%
2,216,154 AIM STIT-Government & Agency Portfolio, 0.020% 2,216
2,283,310 Dreyfus Government Cash Management Fund, Institutional
Shares, 0.020% 2,283
2,216,154 Fidelity Institutional Money Market Funds, Institutional
Shares, 0.060% 2,216
----------
TOTAL CASH EQUIVALENTS (Cost $6,715) 6,715
----------
TOTAL INVESTMENTS (Cost $127,689) + -- 100.0% $ 127,689
==========
PERCENTAGES ARE BASED ON NET ASSETS OF $127,638 ($ THOUSANDS).
+ FOR FEDERAL TAX PURPOSES, THE FUND'S AGGREGATE TAX COST IS EQUAL TO ITS
BOOK COST.
(A) ZERO COUPON SECURITY -- THE RATE SHOWN ON THE SCHEDULE OF INVESTMENTS IS
THE EFFECTIVE YIELD AT TIME OF PURCHASE.
(B) FLOATING RATE SECURITY -- THE RATE REFLECTED ON THE SCHEDULE OF INVESTMENTS
IS THE RATE IN EFFECT ON DECEMBER 31, 2009. THE MATURITY DATE SHOWN IS THE
NEXT SCHEDULED RESET DATE.
(C) THE RATE SHOWN IS THE 7-DAY EFFECTIVE YIELD AS OF DECEMBER 31, 2009.
FFCB -- FEDERAL FARM CREDIT BANK
FHLB -- FEDERAL HOME LOAN BANK
FHLMC -- FEDERAL HOME LOAN MORTGAGE ASSOCIATION
FNMA -- FEDERAL NATIONAL MORTGAGE ASSOCIATION
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, 2009
(IN THOUSANDS)
Large High
Strategic Cap Core Grade
Growth Equity Income
Fund Fund Fund
--------- -------- --------
ASSETS:
Investments, at Cost $ 55,225 $ 55,287 $134,726
Repurchase Agreements, at Cost -- 6,775 22,648
======== ======== ========
Investments, at Value $ 60,938 $ 54,961(1) $141,093(1)
Repurchase Agreements, at Value -- 6,775 22,648
Dividends and Interest Receivable 51 70 1,260
Reclaim Receivable 5 1 2
Receivable for Fund Shares Sold 4 -- 36
Prepaid Expenses 4 3 17
-------- -------- --------
Total Assets 61,002 61,810 165,056
-------- -------- --------
LIABILITIES:
Advisory Fees Payable 38 26 45
Administrative Fees Payable 6 5 12
Shareholder Servicing Fees Payable 5 4 11
Chief Compliance Officer Fees Payable 1 -- 1
Payable for Fund Shares Redeemed -- -- 23
Income Distribution Payable -- -- 153
Collateral on Securities Loaned -- 11,495 38,428
Accrued Expenses Payable 23 21 49
-------- -------- --------
Total Liabilities 73 11,551 38,722
-------- -------- --------
Net Assets $ 60,929 $ 50,259 $126,334
======== ======== ========
Paid-in Capital $ 69,258 $ 72,386 $118,786
Undistributed Net Investment Income 2 -- 2
Accumulated Net Realized Gain (Loss) on Investments (14,044) (21,801) 1,179
Net Unrealized Appreciation (Depreciation) on Investments 5,713 (326) 6,367
-------- -------- --------
Net Assets $ 60,929 $ 50,259 $126,334
======== ======== ========
Class I Shares:
Net Assets $ 60,929 $ 50,259 $126,334
Outstanding Shares of Beneficial Interest
(unlimited authorization -- no par value) 5,727 6,420 11,861
Net Asset Value, Offering and Redemption Price Per
Share -- Class I (Net Assets / Shares Outstanding) $ 10.64 $ 7.83 $ 10.65
======== ======== ========
(1) INCLUDED IN "INVESTMENTS, AT VALUE" IS THE MARKET VALUE OF SECURITIES ON
LOAN IN THE AMOUNTS OF $11,048 ($ THOUSANDS), AND $36,948 ($ 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, 2009 www.bishopstreetfunds.com
51
Bishop Street Funds
STATEMENTS OF ASSETS AND LIABILITIES
DECEMBER 31, 2009
(IN THOUSANDS)
Hawaii Government
Municipal Money
Bond Market
Fund Fund
--------- ----------
ASSETS:
Investments, at Cost $160,088 $127,689
======== ========
Investments, at Value $163,751 $127,689
Interest Receivable 3,090 1
Prepaid Expenses 11 11
-------- --------
Total Assets 166,852 127,701
-------- --------
LIABILITIES:
Income Distribution Payable 395 --
Payable for Fund Shares Redeemed 345 2
Advisory Fees Payable 35 24
Shareholder Servicing Fees Payable 14 11
Administrative Fees Payable 10 14
Distribution Fees Payable 6 10
Chief Compliance Officer Fees Payable 2 1
Accrued Expenses Payable 68 1
-------- --------
Total Liabilities 875 63
-------- --------
Net Assets $165,977 $127,638
======== ========
Paid-in Capital $163,354 $127,638
Undistributed Net Investment Income 7 --
Accumulated Net Realized Loss on Investments (1,047) --
Net Unrealized Appreciation on Investments 3,663 --
-------- --------
Net Assets $165,977 $127,638
======== ========
Class I Shares:
Net Assets $139,872 $ 82,405
Outstanding Shares of Beneficial Interest
(unlimited authorization -- no par value) 13,176 82,410
Net Asset Value, Offering and Redemption Price Per Share
-- Class I (Net Assets / Shares Outstanding) $ 10.62 $ 1.00
======== ========
Class A Shares:
Net Assets $ 26,105 $ 45,233
Outstanding Shares of Beneficial Interest
(unlimited authorization -- no par value) 2,459 45,231
Net Asset Value, Offering and Redemption Price Per Share
-- Class A (Net Assets / Shares Outstanding) $ 10.62 $ 1.00
======== ========
Maximum Offering Price Per Shares -- Class A
($10.62 / 97.00%) $ 10.95 --
======== ========
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, 2009
(IN THOUSANDS)
Large High
Strategic Cap Core Grade
Growth Equity Income
Fund Fund Fund
--------- -------- -------
INVESTMENT INCOME:
Dividend Income $ 678 $ 912 $ --
Interest Income -- -- 6,000
Securities Lending, Net of commissions paid
to lending agent -- 23 57
------- -------- -------
Total Investment Income 678 935 6,057
------- -------- -------
EXPENSES:
Investment Adviser Fees 454 356 688
Shareholder Servicing Fee 153 120 313
Administrative Fees 123 96 250
Chief Compliance Officer Fees 2 1 3
Transfer Agent Fees 38 35 50
Professional Fees 19 18 40
Printing Fees 13 11 26
Trustees' Fees 5 4 8
Custody Fees 4 4 6
Registration Fees 3 2 8
Line of Credit 2 -- --
Miscellaneous Expenses 4 5 27
------- -------- -------
Total Expenses 820 652 1,419
------- -------- -------
Less Waivers:
Investment Adviser Fees -- (37) (181)
Shareholder Servicing Fees (92) (72) (188)
Administrative Fees (49) (38) (100)
------- -------- -------
Total Waivers (141) (147) (469)
------- -------- -------
Total Net Expenses 679 505 950
------- -------- -------
Net Investment Income (Loss) (1) 430 5,107
------- -------- -------
Net Realized Gain (Loss) on Investments (7,091) (13,050) 6,222
Change in Unrealized Appreciation
(Depreciation) on Investments 24,203 25,495 (1,128)
------- -------- -------
Net Realized and Unrealized Gain on Investments 17,112 12,445 5,094
------- -------- -------
Increase in Net Assets Resulting from Operations $17,111 $ 12,875 $10,201
======= ======== =======
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, 2009 www.bishopstreetfunds.com
53
Bishop Street Funds
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2009
(IN THOUSANDS)
Hawaii Government
Municipal Money
Bond Market
Fund Fund
--------- ----------
INVESTMENT INCOME:
Interest Income $ 6,864 $ 650
Dividend Income 5 33
-------- -------
Total Investment Income 6,869 683
-------- -------
EXPENSES:
Investment Adviser Fees 569 567
Shareholder Servicing Fee 406 472
Administrative Fees 325 378
Distribution Fees, Class A 63 130
Chief Compliance Officer Fees 4 4
Transfer Agent Fees 82 87
Professional Fees 52 61
Printing Fees 35 37
Trustees' Fees 13 17
Custody Fees 8 9
Registration Fees 6 10
Rating Expense -- 21
Miscellaneous Expenses 49 18
-------- -------
Total Expenses 1,612 1,811
-------- -------
Less Waivers/Reimbursements:
Investment Adviser Fees (201) (567)
Shareholder Servicing Fees (244) (436)
Administrative Fees (211) (151)
Expenses Reimbursed by Advisor -- (21)
-------- -------
Total Waivers (656) (1,175)
-------- -------
Total Net Expenses 956 636
-------- -------
Net Investment Income 5,913 47
-------- -------
Net Realized Gain (Loss) on Investments (634) 55
-------- -------
Change in Unrealized Appreciation on Investments 9,340 --
-------- -------
Net Realized and Unrealized Gain on Investments 8,706 55
-------- -------
Increase in Net Assets Resulting from Operations $ 14,619 $ 102
======== =======
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 ENDED DECEMBER 31,
(IN THOUSANDS)
Strategic Large Cap Core
Growth Fund Equity Fund
------------------- -------------------
2009 2008 2009 2008
-------- -------- -------- --------
INVESTMENT ACTIVITIES FROM OPERATIONS:
Net Investment Income (Loss) $ (1) $ (179) $ 430 $ 657
Net Realized Loss on Investments (7,091) (6,780) (13,050) (8,415)
Change in Unrealized Appreciation
(Depreciation) on Investments 24,203 (40,393) 25,495 (31,430)
-------- -------- -------- --------
Increase (Decrease) in Net Assets Resulting
from Operations 17,111 (47,352) 12,875 (39,188)
-------- -------- -------- --------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS:
Net Investment Income:
Class I Shares -- -- (437) (663)
Capital Gains:
Class I Shares -- (1,792) -- (405)
-------- -------- -------- --------
Total Dividends and Distributions -- (1,792) (437) (1,068)
-------- -------- -------- --------
CAPITAL SHARE TRANSACTIONS:
Class I Shares:
Proceeds from Shares Issued 3,665 7,881 2,362 7,026
Reinvestments of Cash Distributions -- 1,339 296 802
Cost of Shares Redeemed (22,084) (24,223) (16,696) (17,055)
-------- -------- -------- --------
Net Decrease in Net Assets From
Capital Share Transactions (18,419) (15,003) (14,038) (9,227)
-------- -------- -------- --------
Total Decrease in Net Assets (1,308) (64,147) (1,600) (49,483)
-------- -------- -------- --------
NET ASSETS:
Beginning of Year 62,237 126,384 51,859 101,342
-------- -------- -------- --------
End of Year $ 60,929 $ 62,237 $ 50,259 $ 51,859
======== ======== ======== ========
Undistributed Net Investment Income $ 2 $ 2 $ -- $ --
======== ======== ======== ========
SHARE TRANSACTIONS:
Class I Shares:
Shares Issued 411 713 394 906
Shares Issued in Lieu of Cash Distributions -- 110 46 100
Shares Redeemed (2,386) (2,118) (2,629) (2,014)
-------- -------- -------- --------
Net Decrease in Shares Outstanding from
Share Transactions (1,975) (1,295) (2,189) (1,008)
======== ======== ======== ========
AMOUNTS DESIGNATED AS "--" ARE EITHER $0 OR ZERO SHARES, OR HAVE BEEN ROUNDED TO
$0 OR ZERO SHARES.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
December 31, 2009 www.bishopstreetfunds.com
55
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
------------------- -------------------
2009 2008 2009 2008
-------- -------- -------- --------
INVESTMENT ACTIVITIES FROM OPERATIONS:
Net Investment Income $ 5,107 $ 5,575 $ 5,913 $ 6,375
Net Realized Gain (Loss) on Investments 6,222 (29) (634) (373)
Change in Unrealized Appreciation (Depreciation)
on Investments (1,128) 4,542 9,340 (7,800)
-------- -------- -------- --------
Increase (Decrease) in Net Assets Resulting
from Operations 10,201 10,088 14,619 (1,798)
-------- -------- -------- --------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS:
Net Investment Income:
Class I Shares (5,099) (5,571) (5,052) (5,387)
Class A Shares -- -- (864) (980)
Capital Gains:
Class I Shares (4,015) -- -- --
Class A Shares -- -- -- --
-------- -------- -------- --------
Total Dividends and Distributions (9,114) (5,571) (5,916) (6,367)
-------- -------- -------- --------
CAPITAL SHARE TRANSACTIONS:
Class I Shares:
Proceeds from Shares Issued 27,826 15,292 15,742 13,137
Reinvestments of Cash Distributions 5,616 3,249 704 685
Cost of Shares Redeemed (30,171) (37,305) (14,730) (20,981)
-------- -------- -------- --------
Total Class I Capital Share Transactions 3,271 (18,764) 1,716 (7,159)
-------- -------- -------- --------
Class A Shares:
Proceeds from Shares Issued -- -- 2,270 1,938
Reinvestments of Cash Distributions -- -- 413 423
Cost of Shares Redeemed -- -- (1,639) (6,466)
-------- -------- -------- --------
Total Class A Capital Share Transactions -- -- 1,044 (4,105)
-------- -------- -------- --------
Net Increase (Decrease) in Net Assets from
Capital Share Transactions 3,271 (18,764) 2,760 (11,264)
-------- -------- -------- --------
Total Increase (Decrease) in Net Assets 4,358 (14,247) 11,463 (19,429)
-------- -------- -------- --------
NET ASSETS:
Beginning of Year 121,976 136,223 154,514 173,943
-------- -------- -------- --------
End of Year $126,334 $121,976 $165,977 $154,514
======== ======== ======== ========
Undistributed Net Investment Income $ 2 $ 2 $ 7 $ 10
======== ======== ======== ========
SHARE TRANSACTIONS:
Class I Shares:
Shares Issued 2,641 1,504 1,507 1,294
Shares Issued in Lieu of Cash Distributions 524 320 67 67
Shares Redeemed (2,851) (3,693) (1,412) (2,064)
-------- -------- -------- --------
Total Class I Share Transactions 314 (1,869) 162 (703)
-------- -------- -------- --------
Class A Shares:
Shares Issued -- -- 218 188
Shares Issued in Lieu of Cash Distributions -- -- 39 41
Shares Redeemed -- -- (156) (628)
-------- -------- -------- --------
Total Class A Share Transactions -- -- 101 (399)
-------- -------- -------- --------
Net Increase (Decrease) in Shares Outstanding
from Share Transactions 314 (1,869) 263 (1,102)
======== ======== ======== ========
AMOUNTS DESIGNATED AS "--" ARE EITHER $0 OR ZERO SHARES, OR HAVE BEEN ROUNDED TO
$0 OR ZERO SHARES.
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)
Government
Money Market
Fund
---------------------
2009 2008
--------- ---------
INVESTMENT ACTIVITIES FROM OPERATIONS:
Net Investment Income $ 47 $ 4,965
Net Realized Gain on Investments 55 5
--------- ---------
Increase in Net Assets Resulting from Operations 102 4,970
--------- ---------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS:
Net Investment Income:
Class I Shares (47) (3,629)
Class A Shares -- (1,336)
Capital Gains:
Class I Shares (26) --
Class A Shares (15) --
--------- ---------
Total Dividends and Distributions (88) (4,965)
--------- ---------
CAPITAL SHARE TRANSACTIONS (ALL AT $1.00 PER SHARE):
Class I Shares:
Proceeds from Shares Issued 384,869 497,017
Reinvestments of Cash Distributions 51 952
Cost of Shares Redeemed (466,696) (513,532)
--------- ---------
Total Class I Capital Share Transactions (81,776) (15,563)
--------- ---------
Class A Shares:
Proceeds from Shares Issued 47,093 93,907
Reinvestments of Cash Distributions 15 1,336
Cost of Shares Redeemed (62,319) (98,367)
--------- ---------
Total Class A Capital Share Transactions (15,211) (3,124)
--------- ---------
Net Decrease in Net Assets from Capital Share Transactions (96,987) (18,687)
--------- ---------
Total Decrease in Net Assets (96,973) (18,682)
--------- ---------
NET ASSETS:
Beginning of Year 224,611 243,293
--------- ---------
End of Year $ 127,638 $ 224,611
========= =========
AMOUNTS DESIGNATED AS "--" ARE EITHER $0 OR HAVE BEEN ROUNDED TO $0.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
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57
Bishop Street Funds
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED DECEMBER 31,
DIVIDENDS AND
INVESTMENT ACTIVITIES DISTRIBUTIONS FROM
---------------------------- TOTAL --------------------
NET ASSET NET NET REALIZED INVESTMENT TOTAL
VALUE, INVESTMENT AND UNREALIZED ACTIVITIES NET DIVIDENDS
BEGINNING INCOME GAIN (LOSS) ON FROM INVESTMENT CAPITAL AND
OF YEAR (LOSS)(1) INVESTMENTS OPERATIONS INCOME GAINS DISTRIBUTIONS
--------- ---------- --------------- ---------- ---------- ------- -------------
STRATEGIC GROWTH FUND
CLASS I SHARES:
2009 $ 8.08 $ --** $ 2.56 $ 2.56 $ -- $ -- $ --
2008 14.05 (0.02) (5.73) (5.75) -- (0.22) (0.22)
2007 14.84 (0.03) 1.53 1.50 -- (2.29) (2.29)
2006 14.35 (0.03) 1.41 1.38 -- (0.89) (0.89)
2005 13.08 (0.05) 1.56 1.51 -- (0.24) (0.24)
LARGE CAP CORE EQUITY FUND
CLASS I SHARES:
2009 $ 6.02 $ 0.06 $ 1.81 $ 1.87 $(0.06) $ -- $(0.06)
2008 10.54 0.07 (4.47) (4.40) (0.07) (0.05) (0.12)
2007 10.62 0.04 0.52 0.56 (0.04) (0.60) (0.64)
2006(2) 10.00 0.04 0.62 0.66 (0.04) -- (0.04)
HIGH GRADE INCOME FUND
CLASS I SHARES:
2009 $10.56 $ 0.43 $ 0.44 $ 0.87 $(0.43) $(0.35) $(0.78)
2008 10.15 0.43 0.41 0.84 (0.43) -- (0.43)
2007 9.94 0.44 0.21 0.65 (0.44) -- (0.44)
2006 10.06 0.41 (0.12) 0.29 (0.41) -- (0.41)
2005 10.33 0.39 (0.19) 0.20 (0.39) (0.08) (0.47)
HAWAII MUNICIPAL BOND FUND
CLASS I SHARES:
2009 $10.05 $ 0.38 $ 0.57 $ 0.95 $(0.38) $ -- $(0.38)
2008 10.56 0.40 (0.51) (0.11) (0.40) -- (0.40)
2007 10.77 0.42 (0.16) 0.26 (0.42) (0.05) (0.47)
2006 10.77 0.43 0.04 0.47 (0.43) (0.04) (0.47)
2005 11.02 0.43 (0.16) 0.27 (0.43) (0.09) (0.52)
CLASS A SHARES:
2009 $10.05 $ 0.36 $ 0.57 $ 0.93 $(0.36) $ -- $(0.36)
2008 10.56 0.38 (0.51) (0.13) (0.38) -- (0.38)
2007 10.77 0.39 (0.16) 0.23 (0.39) (0.05) (0.44)
2006 10.77 0.40 0.04 0.44 (0.40) (0.04) (0.44)
2005 11.02 0.41 (0.16) 0.25 (0.41) (0.09) (0.50)
+ TOTAL RETURN IS FOR THE PERIOD INDICATED AND HAS NOT BEEN ANNUALIZED.
RETURNS SHOWN DO NOT REFLECT THE DEDUCTION OF TAXES THAT A SHAREHOLDER
WOULD PAY ON FUND DISTRIBUTIONS OR THE REDEMPTION OF FUND SHARES. FEE
WAIVERS ARE IN EFFECT; IF THEY HAD NOT BEEN IN EFFECT, PERFORMANCE WOULD
HAVE BEEN LOWER.
* ANNUALIZED.
** AMOUNT REPRESENTS LESS THAN $0.01.
(1) PER SHARE NET INVESTMENT INCOME AMOUNT CALCULATED USING AVERAGE SHARES.
(2) COMMENCED OPERATIONS ON MAY 3, 2006.
AMOUNTS DESIGNATED AS "--" ARE EITHER $0 OR HAVE BEEN ROUNDED TO $0.
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58
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
YEAR RETURN+ (000) ASSETS WAIVERS NET ASSETS RATE
- --------- ------- ----------- ----------- ----------------- ------------- ---------
$10.64 31.68% $ 60,929 1.11% 1.34% 0.00% 54%
8.08 (41.46) 62,237 1.06 1.29 (0.19) 73
14.05 10.10 126,384 1.07 1.30 (0.22) 61
14.84 9.78 142,929 1.06 1.30 (0.23) 53
14.35 11.52 123,341 1.07 1.31 (0.35) 55
$ 7.83 31.28% $ 50,259 1.05% 1.36% 0.89% 82%
6.02 (42.02) 51,859 1.05 1.30 0.84 75
10.54 5.24 101,342 1.05 1.31 0.38 65
10.62 6.63 102,850 1.05* 1.32* 0.64* 51
$10.65 8.41% $126,334 0.76% 1.13% 4.08% 82%
10.56 8.53 121,976 0.76 1.10 4.22 28
10.15 6.67 136,223 0.76 1.11 4.38 26
9.94 2.96 141,448 0.76 1.12 4.12 41
10.06 2.00 141,439 0.76 1.13 3.82 45
$10.62 9.63% $139,872 0.55% 0.95% 3.68% 27%
10.05 (1.02) 130,807 0.55 0.92 3.91 36
10.56 2.47 144,828 0.55 0.93 3.92 25
10.77 4.42 138,333 0.55 0.93 3.99 47
10.77 2.51 145,213 0.55 0.93 3.97 41
$10.62 9.35% $ 26,105 0.80% 1.20% 3.43% 27%
10.05 (1.27) 23,707 0.80 1.17 3.66 36
10.56 2.21 29,115 0.80 1.18 3.67 25
10.77 4.16 30,421 0.80 1.18 3.74 47
10.77 2.25 31,515 0.80 1.18 3.72 41
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
December 31, 2009 www.bishopstreetfunds.com
59
Bishop Street Funds
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS 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 YEAR INCOME(1) INVESTMENTS OPERATIONS INCOME GAINS DISTRIBUTIONS
--------- ---------- -------------- ---------- ---------- ------- -------------
GOVERNMENT MONEY MARKET FUND
CLASS I SHARES:
2009 $1.00 $ --* $--* $ --* $ --* $--* $ --*
2008 1.00 0.02 --* 0.02 (0.02) -- (0.02)
2007 1.00 0.05 -- 0.05 (0.05) -- (0.05)
2006 1.00 0.05 -- 0.05 (0.05) -- (0.05)
2005 1.00 0.03 -- 0.03 (0.03) -- (0.03)
CLASS A SHARES:
2009 $1.00 $ --* $--* $ --* $ --* $--* $ --*
2008 1.00 0.02 --* 0.02 (0.02) -- (0.02)
2007 1.00 0.05 -- 0.05 (0.05) -- (0.05)
2006 1.00 0.04 -- 0.04 (0.04) -- (0.04)
2005 1.00 0.03 -- 0.03 (0.03) -- (0.03)
+ 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.
(2) THE RATIO OF EXPENSES TO AVERAGE NET ASSETS INCLUDES THE IMPACT OF THE COST
OF THE TREASURY GUARANTEE PROGRAM. IF THIS EXPENSE HAD BEEN SUBJECT TO THE
ADVISER'S VOLUNTARY EXPENSE LIMITATION, THE RATIO WOULD HAVE BEEN .50% FOR
CLASS I SHARES AND .75% FOR CLASS A SHARES, FOR FISCAL YEAR ENDED 2008.
(SEE NOTE 8).
AMOUNTS DESIGNATED AS "--" ARE EITHER $0 OR HAVE BEEN ROUNDED TO $0.
Bishop Street Funds
60
RATIO OF RATIO OF EXPENSES RATIO OF NET
NET ASSET NET ASSETS, EXPENSES TO TO AVERAGE INVESTMENT
VALUE, END OF AVERAGE NET ASSETS INCOME
END OF TOTAL PERIOD NET EXCLUDING FEE TO AVERAGE
YEAR RETURN+ (000) ASSETS WAIVERS NET ASSETS
- --------- ------- ----------- ----------- ----------------- ------------
$1.00 0.05% $ 82,405 0.33% 0.89% 0.04%
1.00 2.18 164,165 0.51(2) 0.88 2.19
1.00 4.86 179,725 0.50 0.86 4.75
1.00 4.63 159,044 0.50 0.86 4.55
1.00 2.78 170,455 0.50 0.87 2.73
$1.00 0.03% $ 45,233 0.35% 1.14% 0.00%
1.00 1.93 60,446 0.76(2) 1.13 1.94
1.00 4.60 63,568 0.75 1.11 4.50
1.00 4.37 59,212 0.75 1.11 4.33
1.00 2.53 35,530 0.75 1.12 2.60
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
December 31, 2009 www.bishopstreetfunds.com
61
Bishop Street Funds
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2009
THE AMOUNTS INCLUDED IN THE NOTES TO FINANCIAL STATEMENTS ARE IN THOUSANDS
UNLESS OTHERWISE NOTED.
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 five 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, and the
Government 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
FINANCIAL ACCOUNTING STANDARDS BOARD ("FASB") has issued FASB ASC 105
(formerly FASB Statement No. 168), The "FASB ACCOUNTING STANDARDS
CODIFICATION(TM)" AND THE HIERARCHY OF GENERALLY ACCEPTED ACCOUNTING PRINCIPLES
("ASC 105"). ASC 105 established the FASB Accounting Standards Codification(TM)
("Codification" or "ASC") as the single source of authoritative U.S. generally
accepted accounting principles ("GAAP") recognized by the FASB to be applied by
non-governmental entities. Rules and interpretive releases of the Securities and
Exchange Commission ("SEC") under authority of federal securities laws are also
sources of authoritative GAAP for SEC registrants. The Codification supersedes
all existing non-SEC accounting and reporting standards. All other
non-grandfathered, non-SEC accounting literature not included in the
Codification will become non-authoritative.
Following the Codification, the FASB will not issue new standards in the
form of Statements, FASB Staff Positions or Emerging Issues Task Force
Abstracts. Instead, it will issue Accounting Standards Updates, which will serve
to update the Codification, provide background information about the guidance
and provide the basis for conclusions on the changes to the Codification.
GAAP is not intended to be changed as a result of the FASB's Codification
project, but it will change the way the guidance is organized and presented. As
a result, these changes will have a significant impact on how companies
reference GAAP in their financial statements and in their accounting policies
for financial statements issued for interim and annual periods ending after
September 15, 2009. The Trust has implemented the Codification as of December
31, 2009.
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
Bishop Street Funds
62
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 NAS-DAQ 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 in the most advantageous market, 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 fair 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.
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 Government Money Market Fund 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.
In accordance with the authoritative guidance on fair value measurements
and disclosure under GAAP, ASC 820 (formerly FASB Statement No. 157), the Fund
discloses
December 31, 2009 www.bishopstreetfunds.com
63
Bishop Street Funds
fair value of its investments in a hierarchy that prioritizes the inputs to
valuation techniques used to measure the fair value. The objective of a fair
value measurement is to determine the price that would be received to sell an
asset or paid to transfer a liability in an orderly transaction between market
participants at the measurement date (an exit price). Accordingly, the fair
value hierarchy gives the highest priority to quoted prices (unadjusted) in
active markets for identical assets or liabilities (Level 1) and the lowest
priority to unobservable inputs (Level 3). The three levels of the fair value
hierarchy under ASC 820 are described below:
- Level 1 -- Unadjusted quoted prices in active markets for identical,
unrestricted assets or liabilities that the Funds have the ability to
access at the measurement date;
- Level 2 -- Quoted prices which are not active, or inputs that are
observable (either directly or indirectly) for substantially the full
term of the asset or liability; and
- Level 3 -- Prices, inputs or exotic modeling techniques which are both
significant to the fair value measurement and unobservable (supported
by little or no market activity).
Investments are classified within the level of the lowest significant input
considered in determining fair value. Investments classified within Level 3
whose fair value measurement considers several inputs may include Level 1 or
Level 2 inputs as components of the overall fair value measurement.
As of December 31, 2009, all the investments for the Strategic Growth Fund
are Level 1. For the Large Cap Core Equity Fund all of the investments are Level
1, except for the Repurchase Agreement which is Level 2. For the High Grade
Income Fund, the Hawaii Municipal Bond Fund and the Government Money Market
Fund, all of the investments are Level 2, except for the Short-Term Investments,
which are Level 1. All cash equivalents are considered Short Term Investments.
For details of investment classifications, reference the Schedule of
Investments.
For the year ended December 31, 2009, there have been no significant
changes to the Funds' fair value methodologies.
FEDERAL INCOME TAXES
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 Funds evaluate tax positions taken or expected to be taken in the
course of preparing the Funds' tax returns to determine whether it is
"more-likely-than- not" (i.e., greater than 50-percent) that each tax position
will be sustained upon examination by a taxing authority based on the technical
merits of the position. Tax positions not deemed to meet the
more-likely-than-not threshold are recorded as a tax benefit or expense in the
Bishop Street Funds
64
current year. The Funds did not record any tax provision in the current period.
However, management's conclusions regarding tax positions taken may be subject
to review and adjustment at a later date based on factors including, but not
limited to, examination by tax authorities (i.e., the last 3 tax year ends, as
applicable), on-going analysis of and changes to tax laws, regulations and
interpretations thereof.
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 and 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 effective interest method. The Government Money
Market Fund uses the straight line method, which approximates the effective
interest method.
REPURCHASE AGREEMENTS
In connection with transactions involving repurchase agreements, a third
party custodian bank takes possession of the underlying securities
("collateral"), the value of which exceeds the principal amount of the
repurchase transaction, including accrued interest. In the event of default on
the obligation to repurchase, the Funds have the right to liquidate the
collateral and apply the proceeds in satisfaction of the obligation. In the
event of default or bankruptcy by the counterparty to the agreement, realization
and/or retention of the collateral or proceeds may be subject to legal
proceedings.
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.
Distribution fees are the only class-specific expense.
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
The Strategic Growth and Large Cap Core Equity Funds declare and pay
dividends from any net investment income, if available, on a quarterly basis.
Dividends from net investment income are declared daily and paid on a monthly
basis for the High Grade Income, Hawaii Municipal Bond, and the Government Money
Market Fund. Any net realized capital gains will be distributed at least
annually for all Funds. Distributions to shareholders are recorded on the
ex-dividend date.
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65
Bishop Street Funds
FRONT-END SALES COMMISSION
Front-end sales commissions (the "sales charge") are not recorded as
expenses of the Hawaii Municipal Bond Fund. Front-end sales commissions are
deducted from proceeds from the sales of Hawaii Municipal Bond Fund shares prior
to investment in Class A shares. During the year ended December 31, 2009 the
Hawaii Municipal Bond Fund retained $13 in front-end sales commissions from the
sales of Class A shares imposed on redemptions by shareholders.
CASH OVERDRAFT CHARGES
Per the terms of an informal agreement with Union Bank, 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, 2009, 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
Government Money Market Fund. The Adviser has voluntarily agreed to waive a
portion of its advisory fee to the extent necessary to keep operating expenses
at or below certain percentages of the respective average daily net assets. The
voluntary expense limitations are as follows: Strategic Growth Fund (Class I)
1.25%, 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%, Government Money Market Fund (Class I) 0.50%, and Government
Money Market Fund (Class A) 0.75%. These fees and waivers are labeled on the
Statement of Operations as "Investment Adviser Fees."
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 Government Money Market Fund, pursuant to a sub-adviser
agreement dated December 15, 2006 as approved by shareholders on December 15,
2006. FFTW is entitled
Bishop Street Funds
66
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 Government Money
Market Fund up to $500 million and 0.020% of the average daily net assets of the
Government Money Market Fund 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, 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. These fees are
disclosed on the Statement of Operations as "Custodian Fees."
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 each Fund's respective average daily
net assets. These fees and waivers are labeled as "Administrative Fees" on the
Statement of Operations.
Pursuant to an agreement dated January 30, 1995, DST Systems, Inc. ("DST")
acts as the Transfer Agent of the Trust. As such, DST provides transfer agency,
dividend disbursing and shareholder services to the Trust. These fees are
disclosed on the Statement of Operations as "Transfer Agent Fees."
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. This fee is disclosed as "Distribution Fees, Class A" on
the Statement of Operations.
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67
Bishop Street Funds
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 each Fund's respective average daily net assets.
Additionally, SIDCO has voluntarily agreed to waive a portion of its shareholder
servicing fee in order to limit the one-day net income yield of the Government
Money Market Fund, to not less than 0.0000% of the average daily net assets.
These fees and waivers are represented as "Shareholder Servicing Fees" on the
Statement of Operations.
The Adviser and SIDCO have voluntarily agreed to further waive and reduce
their fees and/or reimburse certain expenses of the Government Money Market Fund
in order to maintain a one-day net income yield (yield floor) of the Fund of not
less than 0.00% of the Fund's average daily net assets. The following table
shows waivers, with respect to such yield floor for the year ended December 31,
2009:
Investment Shareholder
Advisory Fee Servicing Fee
Waived/Reimbursed (000) Waiver (000)
- ----------------------- -------------
$286 $153
5. TRANSACTIONS WITH AFFILIATES
Certain officers of the Trust are also officers of SEI Investments Global
Funds Services (the "Administrator"), a wholly owned subsidiary of SEI
Investments Company, and/or SEI Investments Distribution Co. (the
"Distributor"). Such officers are paid no fees by the Trust for serving as
officers of the Trust.
A portion of the services provided by the Chief Compliance Officer ("CCO")
and his staff, whom are employees of the Administrator, are paid for by the
Trust as incurred. The services include regulatory oversight of the Trust's
Advisers and service providers as required by SEC regulations. The CCO's
services have been approved by and are reviewed by the Board. These fees are
disclosed on the Statement of Operations as "Chief Compliance Officer Fees."
Bishop Street Funds
68
6. SECURITIES LENDING
The Funds may lend securities having a market value up to one-third of each
Fund's total assets. Such loans are secured by collateral equal to no less than
the market value of the loaned securities determined daily. Such collateral will
be cash or debt securities issued or guaranteed by the U.S. Government or any
agencies. Cash collateral received in connection with these loans is invested in
short-term money market instruments. It is each Fund's policy to obtain
additional collateral from or return excess collateral to the borrower by the
end of the next business day, following the valuation date of the securities
loaned. Therefore, the value of the collateral held may be temporarily less than
the value of the securities on loan. Lending securities entails a risk of loss
to the Funds if and to the extent that the market value of the securities loans
were to increase and the borrower did not increase the collateral accordingly,
and the borrower fails to return the securities. The Funds could also experience
delays and costs in gaining access to the collateral. The Funds bears the risk
of any deficiency in the amount of the collateral available for return to the
borrower due to any loss on the collateral invested. At December 31, 2009, four
counterparties held 84.64% of the total securities on loan of the Large Cap Core
Equity Fund and three counterparties held 83.09% of the total securities on loan
of the High Grade Income Fund.
7. 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, 2009 are presented below for the Funds.
Strategic Large High Grade Hawaii
Growth Cap Core Income Municipal
Fund Equity Fund Fund Bond Fund
--------- ----------- ---------- ----------
Purchases
U.S.
Government
Securities $ -- $ -- $16,263 $ --
Other 32,634 38,881 79,747 48,079
Sales and Maturities
U.S.
Government
Securities $ -- $ -- $51,464 $ --
Other 50,642 53,080 47,988 42,245
December 31, 2009 www.bishopstreetfunds.com
69
Bishop Street Funds
8. TREASURY GUARANTEE PROGRAM
The Government Money Market Fund ("Government Fund"), with the approval of
the Board of Trustees of Bishop Street Funds, applied to participate in the
Temporary Guarantee Program for Money Market Funds (the "Program") established
by the U.S. Treasury Department (the "Treasury"). The Treasury has accepted the
Government Fund application to participate in the Program and has entered into a
Guarantee Agreement with the Government Fund dated September 19, 2008.
Under the Program, the Treasury guaranteed the share price of shares of the
Government Fund outstanding as of September 19, 2008 at $1.00 per share if the
Government Fund's net asset value fell below $0.995 (a "Guarantee Event").
Recovery under the Program was subject to certain conditions and limitations,
including the following:
- For each shareholder of the Government Fund, the Program provides a
guarantee for the lesser of (a) the number of shares of the Government
Fund owned by the shareholder as of the close on September 19, 2008,
or (b) the number of shares of the Government Fund owned by the
shareholder on the date of the Guarantee Event. The Program did not
protect investors who were not shareholders of the Government Fund on
September 19, 2008.
- The total amount of coverage available for all participants in the
Program was limited to the amount of funds available under the Federal
Exchange Stabilization Government Fund at the time of a Guarantee
Event (which was approximately $50 billion).
- Recovery under the Program requires the Government Fund to liquidate.
- In order to recover, a Guarantee Event must occur during the term of
the Program (discussed below).
The initial term of the Program expired on December 18, 2008. The Program
was extended through April 30, 2009 at the sole discretion of the Treasury, but
expired on September 18, 2009. In order to participate in the Program during the
initial term, the Fund was required to pay a participation fee of $22,000. The
cost of participating in the Program was borne by the Fund and was not subject
to any expense limitation or reimbursement agreement.
9. FEDERAL TAX INFORMATION
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.
Bishop Street Funds
70
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.
Accordingly, the following permanent differences, primarily attributable to
paydown gains and losses, net operating losses, REIT adjustments, and
distributions have been reclassified:
Undistributed Accumulated
Paid in Net Investment Net Realized
Capital Income Loss
------- -------------- -----------
Strategic Growth Fund (1) 1 --
Large Cap Core Equity Fund -- 7 (7)
High Grade Income Fund -- (8) 8
The tax character of dividends and distributions declared during the years
ended December 31, 2009 and 2008 were as follows:
Ordinary Tax Exempt Long-Term
Income Income Capital Gain Total
-------- ---------- ------------ ------
Strategic Growth
Fund
2009 $ -- $ -- $ -- $ --
2008 -- -- 1,792 1,792
Large Cap Core
Equity Fund
2009 $ 437 $ -- $ -- $ 437
2008 663 -- 405 1,068
High Grade
Income Fund
2009 $5,220 $ -- $3,894 $9,114
2008 5,571 -- -- 5,571
Hawaii Municipal
Bond Fund
2009 $ -- $5,916 $ -- $5,916
2008 -- 6,367 -- 6,367
Government Money
Market Fund
2009 $ 88 $ -- $ -- $ 88
2008 4,965 -- -- 4,965
December 31, 2009 www.bishopstreetfunds.com
71
Bishop Street Funds
As of December 31, 2009, the components of Distributable Earnings
(Accumulated Losses) on a tax basis were as follows:
Large Cap
Strategic Core High Grade Hawaii
Growth Equity Income Municipal
Fund Fund Fund Bond Fund
--------- --------- ---------- ---------
Undistributed net
investment income -- -- 620 --
Undistributed long term
capital gain income -- -- 557 --
Undistributed tax exempt income -- -- -- 2
Capital loss carryforwards (12,703) (20,193) -- (1,020)
Post-October losses (830) (584) -- (24)
Unrealized appreciation
(depreciation) 5,204 (1,350) 6,371 3,665
-------- -------- ------ -------
Total Distributable Earnings
(Accumulated Losses) $ (8,329) $(22,127) $7,548 $ 2,623
======== ======== ====== =======
Post-October losses represent losses realized on investment transactions
from November 1, 2009 through December 31, 2009 that, in accordance with Federal
income tax regulations, the Funds have elected to defer and treat as having
arisen in the following fiscal year.
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:
Large
Strategic Cap Core Hawaii
Growth Growth Municipal
Fund Fund Bond Fund
--------- -------- ---------
Dec. 2016 $ 839 $ 5,569 $ 410
Dec. 2017 11,864 14,624 610
------- ------- ------
Total $12,703 $20,193 $1,020
======= ======= ======
During the year ended December 31, 2009, the High Grade Income Fund and the
Government Money Market Fund utilized capital loss carryforwards of $983 and
$14, respectively, to offset realized capital gains.
Bishop Street Funds
72
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, 2009
were as follows:
Strategic Large Cap High Grade Hawaii
Growth Core Income Municipal
Fund Equity Fund Fund Bond Fund
--------- ----------- ---------- ---------
Federal Tax Cost $55,734 $63,086 $157,370 $160,086
------- ------- -------- --------
Gross
Unrealized Appreciation 10,053 5,551 6,878 4,608
Gross
Unrealized Depreciation (4,849) (6,901) (507) (943)
------- ------- -------- --------
Net Unrealized Appreciation
(Depreciation) $ 5,204 $(1,350) $ 6,371 $ 3,665
======= ======= ======== ========
For Federal income tax purposes, the Government Money Market Fund's
aggregate tax cost is equal to its book cost.
10. 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 addition, each Fund's investments in
debt securities are subject to "credit risk," which is the risk that an issuer
will be unable, or will be perceived to be unable, to repay its obligations at
maturity. Funds that invest primarily in high quality debt securities generally
are subject to less credit risk than funds that invest in lower quality debt
securities.
Certain debt securities are backed by credit enhancements from various
financial institutions and financial guarantee assurance agencies. These credit
enhancements reinforce the credit quality of the individual securities; however,
if any of the financial institutions or financial guarantee assurance agencies'
credit quality should deteriorate, it could cause the individual security's
credit quality to change. Additionally, if any of the Funds concentrate their
credit enhancements in any one financial institution, the risk of credit quality
deterioration increases.
The value of asset-backed securities may be affected by the credit risk of
the servicing agent for the pool, the originator of the loans or receivables, or
the financial institution(s)
December 31, 2009 www.bishopstreetfunds.com
73
Bishop Street Funds
providing the credit support. In addition to credit risk, asset-backed
securities and other securities with early redemption features are subject to
pre-payment risk. During periods of declining interest rates, prepayment of
loans underlying asset-backed securities can be expected to accelerate or an
issuer may retire an outstanding bond early to reduce interest costs. A Fund's
ability to maintain positions in such securities will be affected by reductions
in the principal amount of such securities resulting from prepayments, and its
ability to reinvest the returns of principal at comparable yields is subject to
generally prevailing interest rates at that time.
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 claims are considered remote.
11. LINE OF CREDIT
The Funds entered into an agreement which enables them to participate in a
$5 million unsecured committed revolving line of credit on a first come, first
serve basis, with Union Bank, N.A. (the "Bank") which expires June 11, 2010. 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 during
the year at the Bank current reference rate minus 1%. As of December 31, 2009
the Funds had no borrowings outstanding. For the year ended December 31, 2009,
the Funds had borrowings costs of $2,072 for the Strategic Growth Fund, $426 for
the Large Cap Core Equity Fund, $254 for the High Grade Income Fund, and $394
for the Hawaii Municipal Bond Fund, over a period of 124 days at a weighted
average interest rate of 2.25%.
12. OTHER
At December 31, 2009, 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 94.07%
Large Cap Core Equity Fund, Class I Shares 1 99.47
High Grade Income Fund, Class I Shares 2 97.08
Hawaii Municipal Bond Fund, Class I Shares 1 90.69
Hawaii Municipal Bond Fund, Class A Shares 1 29.17
Government Money Market Fund, Class I Shares 2 96.50
Government Money Market Fund, Class A Shares 1 99.77
Bishop Street Funds
74
13. ACCOUNTING PRONOUNCEMENT
In January 2010, the Financial Accounting Standards Board issued Accounting
Standards Update (ASU) No. 2010-6, FAIR VALUE MEASUREMENTS AND DISCLOSURES
(TOPIC 820): IMPROVING DISCLOSURES ABOUT FAIR VALUE MEASUREMENTS. ASU No. 2010-6
enhances and clarifies existing fair value measurement disclosure requirements
and is effective for interim and annual periods beginning after December 15,
2009. The Fund is currently evaluating the impact, if any, of applying the
provisions of ASU No. 2010-6.
14. SUBSEQUENT EVENT
The Funds have evaluated the need for disclosures and/or adjustments
resulting from subsequent events through March 1, 2010, the date the financial
statements were available to be issued. This evaluation resulted in the
following subsequent event that necessitated disclosures and/or adjustments: On
November 12, 2009, the Trust approved a new sub-advisory agreement with Columbia
Management Advisors, LLC ("Columbia") on behalf of the Large Cap Core Equity
Fund (the "Fund"). In connection with the approval of Columbia as the Fund's new
sub-adviser, the Board also approved a new investment goal, principal investment
strategy and name for the Fund. Effective on January 30, 2010, and subject to
shareholder approval of the new sub-advisory agreement with Columbia and the new
investment goal for the Fund, the Fund will change its name to the Bishop Street
Dividend Value Fund. At the same time, the Fund will change its strategy of
investing at least 80% of its net assets in common stocks and other equity
securities of large capitalization companies to a strategy of investing at least
80% of its net assets in income-producing (dividend-paying) equity securities.
Under the new investment strategy, the Fund may invest in companies that have
market capitalizations of any size. In addition, the Fund will change its
benchmark from the S&P 500 Composite Index and the Consumer Price Index to the
Russell 1000 Value Index.
December 31, 2009 www.bishopstreetfunds.com
75
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, and
Government Money Market Fund (constituting Bishop Street Funds, hereafter
referred to as the "Funds") at December 31, 2009, the results of each of their
operations for the year then ended, the changes in each of their net assets for
each of the two years in the period then ended and the financial highlights for
each of the periods indicated, in conformity with accounting principles
generally accepted in the United States of America. These financial statements
and financial highlights (hereafter referred to as "financial statements") are
the responsibility of the Funds' management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those standards
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at December 31, 2009 by correspondence with the
custodian and brokers, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
Philadelphia, Pennsylvania
March 1, 2010
Bishop Street Funds
76
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, distribution fees, 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:
- - 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."
- - 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.
December 31, 2009 www.bishopstreetfunds.com
77
Bishop Street Funds
DISCLOSURE OF FUND EXPENSES (UNAUDITED)
Beginning Ending Expenses
Account Account Annualized Paid
Value Value Expense During
7/1/09 12/31/09 Ratios Period*
--------- --------- ---------- --------
STRATEGIC GROWTH FUND -- CLASS I
ACTUAL FUND RETURN $1,000.00 $1,134.30 1.10% $5.92
HYPOTHETICAL 5% RETURN 1,000.00 1,019.66 1.10 5.60
LARGE CAP CORE EQUITY FUND -- CLASS I
ACTUAL FUND RETURN $1,000.00 $1,222.00 1.05% $5.88
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 $1,063.40 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 $1,049.90 0.55% $2.84
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 $1,048.60 0.80% $4.13
HYPOTHETICAL 5% RETURN 1,000.00 1,021.17 0.80 4.08
GOVERNMENT MONEY MARKET FUND -- CLASS I
ACTUAL FUND RETURN $1,000.00 $1,000.30 0.20% $1.01
HYPOTHETICAL 5% RETURN 1,000.00 1,024.20 0.20 1.02
GOVERNMENT MONEY MARKET FUND -- CLASS A
ACTUAL FUND RETURN $1,000.00 $1,000.30 0.21% $1.06
HYPOTHETICAL 5% RETURN 1,000.00 1,024.15 0.21 1.07
* Expenses are equal to the Funds' annualized expense ratio multiplied by the
average account value over the period, multiplied by 184/365 (to reflect
the one-half year period).
Bishop Street Funds
78
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Bishop Street Funds
NOTICE TO SHAREHOLDERS OF BISHOP STREET FUNDS (UNAUDITED)
For shareholders that do not have a December 31, 2009 taxable year end,
this notice is for informational purposes only. For shareholders with a December
31, 2009 tax year end, please consult your tax adviser 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 0% 0% 0%
Large Cap Core Equity Fund 0% 100% 0%
High Grade Income Fund 43% 57% 0%
Hawaii Municipal Bond Fund 0% 0% 100%
Government Money Market Fund 0% 100% 0%
* ITEMS (A), (B) AND (C) ARE BASED ON THE PERCENTAGE OF EACH FUND'S TOTAL
DISTRIBUTION.
(1) QUALIFYING DIVIDENDS REPRESENT DIVIDENDS WHICH QUALIFY FOR THE CORPORATE
DIVIDENDS RECEIVED DEDUCTION. THIS AMOUNT IS REFLECTED AS A PERCENTAGE OF
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 CREATED 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
80
For the fiscal year ended December 31, 2009, 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) SHORT-TERM
TOTAL DIVIDENDS QUALIFYING U.S. INTEREST CAPITAL
DISTRIBUTIONS RECEIVABLE DIVIDEND GOVERNMENT RELATED GAIN
(TAX BASIS) DEDUCTION(1) INCOME(2) INTEREST (3) DIVIDENDS (4) DIVIDENDS(5)
- ------------- ------------ ---------- ------------ ------------- ------------
0% 0% 0% 0% 0% 0%
100% 100% 100% 0% 0% 0%
100% 0% 0% 13% 99% 100%
100% 0% 0% 0% 0% 0%
100% 0% 0% 16% 100% 100%
(4) THE PERCENTAGE IN THIS COLUMN REPRESENTS THE AMOUNT OF "INTEREST RELATED
DIVIDENDS" AS CREATED BY THE AMERICAN JOBS CREATION ACT OF 2004 AND IS
REFLECTED AS A PERCENTAGE OF NET INVESTMENT INCOME DISTRIBUTIONS THAT IS
EXEMPT FROM U.S. WITHHOLDING TAX WHEN PAID TO FOREIGN INVESTORS. THIS
PROVISION OF THE IRC WILL BE EXPIRING FOR YEARS BEGINNING AFTER JANUARY 1,
2010.
(5) THE PERCENTAGE IN THIS COLUMN REPRESENTS THE AMOUNT OF "SHORT-TERM CAPITAL
GAIN DIVIDENDS" 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. THIS
PROVISION OF THE IRC WILL BE EXPIRING FOR YEARS BEGINNING AFTER JANUARY 1,
2010.
December 31, 2009 www.bishopstreetfunds.com
81
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 of the Board of Trustees (Since 1998)
63 yrs. old
WILLIAM M. DORAN Trustee (Since 2006)
1701 Market Street
Philadelphia, PA 19103
69 yrs. old
Bishop Street Funds
82
(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 December 31, 2008.
NUMBER OF
PORTFOLIOS IN
BISHOP STREET FUNDS
PRINCIPAL OCCUPATION(S) OVERSEEN BY OTHER DIRECTORSHIPS
DURING PAST 5 YEARS BOARD MEMBER HELD BY BOARD MEMBER(3)
----------------------- ------------------- -----------------------------------------
Currently performs various services 5 Trustee of The Advisors' Inner Circle
on behalf of SEI Investments for Fund, The Advisors' Inner Circle Fund II,
which Mr. Nesher is compensated. SEI Asset Allocation Trust, SEI Daily
Income Trust, SEI Institutional
International Trust, SEI Institutional
Investments Trust, SEI Institutional
Managed Trust, SEI Liquid Asset Trust,
SEI Tax Exempt Trust, and SEI Alpha
Strategy Portfolios, L.P., Director of
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), Limited, SEI Investments-Unit
Trust Management (UK), Limited, SEI
Global Nominee Ltd., SEI Opportunity
Fund, L.P., SEI Structured Credit Fund,
L.P., and SEI Multi-Strategy Funds plc.,
SEI Islamic Investment Fund plc.
Self-employed consultant since 2003. 5 Trustee of The Advisors' Inner Circle
Partner, Morgan, Lewis & Bockius LLP (law Fund, The Advisors' Inner Circle Fund II,
firm) from 1976-2003, counsel to the SEI Asset Allocation Trust, SEI Daily
Trust, SEI, SIMC, the Administrator and Income Trust, SEI Institutional
the Distributor. Secretary of SEI since International Trust, SEI Institutional
1978. Investments Trust, SEI Institutional
Managed Trust, SEI Liquid Asset Trust and
SEI Tax Exempt Trust, and SEI Alpha
Strategy Portfolios, LP., Director of SEI
since 1974. Director of the Distributor
since 2003. Director of SEI
Investments-Global Fund Services,
Limited, SEI Investments Global, Limited,
SEI Investments (Europe), Limited, SEI
Investments (Asia), Limited, SEI Asset
Korea Co., Ltd., SEI Global Nominee
Limited and SEI Investments Unit Trust
Management (UK) Limited.
December 31, 2009 www.bishopstreetfunds.com
83
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)
78 yrs. old
GEORGE J. SULLIVAN, JR. Trustee (Since 2006)
66 yrs. old
BETTY L. KRIKORIAN Trustee (Since 2006)
66 yrs. old
CHARLES E. CARLBOM Trustee (Since 2006)
75 yrs. old
Bishop Street Funds
84
(UNAUDITED)
NUMBER OF
PORTFOLIOS
IN BISHOP
STREET FUNDS
PRINCIPAL OCCUPATION(S) OVERSEEN BY OTHER DIRECTORSHIPS
DURING PAST 5 YEARS BOARD MEMBER HELD BY BOARD MEMBER(3)
----------------------- ------------ ------------------------------------------------
Attorney, solo practitioner since 1994. 5 Trustee of The Advisors' Inner Circle Fund, The
Partner, Dechert Price & Rhoads (law Advisors' Inner Circle Fund II, Massachusetts
firm) September 1987-December 1993. Health and Education Tax-Exempt Trust, U.S.
Charitable Gift Trust, SEI Asset Allocation
Trust, SEI Daily Income Trust, SEI Institutional
International Trust, SEI Institutional
Investments Trust, SEI Institutional Managed
Trust, SEI Liquid Asset Trust, SEI Tax Exempt
Trust, and SEI Alpha Strategy Portfolios, L.P.
Self-Employed consultant, Newfound 5 Trustee of The Advisors' Inner Circle Fund, The
Consultants, Inc. since April 1997. Advisors' Inner Circle Fund II, State Street
Navigator Securities Lending Trust, SEI Asset
Allocation Trust, SEI Daily Income Trust, SEI
Institutional International Trust, SEI
Institutional Investments Trust, SEI
Institutional Managed Trust, SEI Liquid Asset
Trust, SEI Tax Exempt Trust, and SEI Alpha
Strategy Portfolios, L.P., Director of SEI
Opportunity Fund, L.P., and SEI Structured
Credit Fund, L.P., member of the independent
review committee for SEI Canadian-registered
mutual funds.
Vice President Compliance, AARP 5 Trustee of The Advisors' Inner Circle Fund and
Financial Inc. since September 2008. The Advisors' Inner Circle Fund II.
Self-Employed Legal and Financial
Services Consultant since 2003.
In-house counsel, State Street Bank
Global Securities and Cash Operations
from 1995 to 2003.
Self-Employed Business Consultant, 5 Director, Crown Pacific, Inc. and Trustee of The
Business Project Inc. since 1997. CEO Advisors' Inner Circle Fund and The Advisors'
and President, United Grocers Inc. from Inner Circle Fund II.
1997 to 2000.
December 31, 2009 www.bishopstreetfunds.com
85
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 (CONTINUED)
MITCHELL A. JOHNSON Trustee (Since 2006)
67 yrs. old
JOHN K. DARR Trustee (Since 2008)
65 yrs. old
OFFICERS
PHILLIP T. MASTERSON President (Since 2008)
45 yrs. old
MICHAEL LAWSON Treasurer, Controller (Since 2005)
49 yrs. old and Chief
Financial Officer
RUSSELL EMERY Chief Compliance (Since 2006)
46 yrs. old Officer
JOSEPH M. GALLO Vice President (Since 2007)
36 yrs. old and Secretary
Bishop Street Funds
86
(UNAUDITED)
NUMBER OF
PORTFOLIOS
IN BISHOP
STREET FUNDS
PRINCIPAL OCCUPATION(S) OVERSEEN BY OTHER DIRECTORSHIPS
DURING PAST 5 YEARS BOARD MEMBER HELD BY BOARD MEMBER(3)
----------------------- ------------ -------------------------------------------
Private Investor since 1994. 5 Trustee of The Advisors' Inner Circle Fund,
The Advisors' Inner Circle Fund II, SEI
Asset Allocation Trust, SEI Daily Income
Trust, SEI Institutional International
Trust, SEI Institutional Investments Trust,
SEI Institutional Managed Trust, SEI Liquid
Asset Trust, SEI Tax Exempt Trust, and SEI
Alpha Strategies Portfolios, L.P.
CEO, Office of Finance, FHL Banks from 1992 to 5 Director of Federal Home Loan Bank of
2007. Pittsburgh and Manna, Inc. and Trustee of
The Advisors' Inner Circle Fund and The
Advisors' Inner Circle Fund II.
Managing Director of SEI Investments since 2006, N/A N/A
Vice President and Assistant Secretary of the
Administration from 2004 to 2006. General
Counsel of Citco Mutual Fund Services from 2003
to 2004. Vice President and Associate Counsel
for the Oppenheimer Funds from 2001-2003.
Director, SEI Investments, Fund Accounting since N/A N/A
July 2005. Manager, SEI Investments AVP from
April 1995 to February 1998 and November 1998 to
July 2005.
Director of Investment Product Management and N/A N/A
Development at SEI Investments since February
2003. Senior Investment Analyst, Equity team at
SEI Investments from March 2000 to February 2003.
Corporate Counsel of SEI since 2007; Associate N/A N/A
Counsel, ICMA Retirement Corporation, 2004-2007;
Federal Investigator, U.S. Department of Labor,
2002-2004; U.S. Securities and Exchange
Commission - Department of Investment
Management, 2003.
December 31, 2009 www.bishopstreetfunds.com
87
Bishop Street Funds
TERM OF
POSITION(S) OFFICE AND
NAME, ADDRESS, HELD WITH LENGTH OF
AGE(1) THE TRUST TIME SERVED(2)
-------------- ------------------------ --------------
OFFICERS (CONTINUED)
CAROLYN F. MEAD Vice President (Since 2007)
52 yrs. old and Secretary
JAMES NDIAYE Vice President and (Since 2005)
41 yrs. old Assistant Secretary
TIMOTHY D. BARTO Assistant Vice President (Since 2000)
41 yrs. old and Assistant Secretary
ANDREW S. DECKER AML Officer (Since 2008)
46 yrs. old
(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
88
(UNAUDITED)
NUMBER OF
PORTFOLIOS
IN BISHOP
STREET FUNDS
PRINCIPAL OCCUPATION(S) OVERSEEN BY OTHER DIRECTORSHIPS
DURING PAST 5 YEARS BOARD MEMBER HELD BY BOARD MEMBER(3)
----------------------- ------------ -----------------------
Corporate Counsel of SEI since 2007; Associate, N/A N/A
Stradley, Ronon, Steven & Young 2004-2007; Counsel, ING
Variable Annuities, 1999-2002.
Employed by SEI Investments Company since 2004. Vice N/A N/A
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.
General Counsel, Vice President and Assistant Secretary N/A N/A
of SEI Investments Global Funds Services since 1999;
Associate, Dechert (law firm) from 1997-1999;
Associate, Richter, Miller & Finn (law firm) from
1994-1997.
Compliance Officer and Product Manager, of SEI N/A N/A
2005-2008. Vice President, Old Mutual Capital
2000-2005. Operations Director, Prudential Investments,
1998-2000.
(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, 2009 www.bishopstreetfunds.com
89
Bishop Street Funds
SHAREHOLDER VOTING RESULTS
At a special meeting held on January 15, 2010, the shareholders of the Large Cap
Core Equity Fund (the "Fund") voted to approve a new investment sub-advisory
agreement between Bishop Street Funds, on behalf of the Fund, Bishop Street
Capital Management, and Columbia Management Advisors, LLC, a new investment goal
for the Fund, which in the future would be changeable by the Board of Trustees
of Bishop Street Funds (the "Trust") without shareholder approval and an interim
sub-advisory agreement among the Trust, on behalf of the Fund, the Adviser and
Lotsoff Capital Management ("Lotsoff").
The results of the voting were as follows:
BISHOP STREET LARGE CAP CORE EQUITY FUND
% OF % OF
SHARES OUTSTANDING SHARES
VOTED SHARES PRESENT
--------- ----------- ------
AFFIRMATIVE 6,212,154 96.28% 100.00%
AGAINST -- --% --%
ABSTAIN -- --% --%
--------- ----- ------
TOTAL 6,212,154 96.28% 100.00%
Bishop Street Funds
90
NOTES
NOTES
INVESTMENT ADVISER
BISHOP STREET CAPITAL MANAGEMENT
HONOLULU, HI 96813
ADMINISTRATOR
SEI INVESTMENTS GLOBAL FUNDS SERVICES
OAKS, PA 19456
DISTRIBUTOR
SEI INVESTMENTS DISTRIBUTION CO.
OAKS, PA 19456
TRANSFER AGENT
DST SYSTEMS, INC.
KANSAS CITY, MO 64121
CUSTODIAN
UNION BANK, 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
(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-006-1500
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 experts are George Sullivan and John Darr,
and are 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:
2009 2008
------------------------------------------------- -------------------------------------------------
All fees and All other fees All fees and All other fees
services to and services to services to and services to
All fees and service service All fees and service service
services to the affiliates that affiliates that services to the affiliates that affiliates that
Trust that were were did not require Trust that were were did not require
pre-approved pre-approved pre-approval pre-approved pre-approved pre-approval
--------------- --------------- --------------- --------------- --------------- ---------------
(a) Audit $89,820 N/A N/A $103,140 N/A N/A
Fees(1)
(b) Audit- N/A N/A N/A N/A N/A N/A
Related
Fees
(c) Tax Fees N/A N/A N/A N/A N/A N/A
(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:
2009 2008
---- ----
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 2009 and 2008, 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 registrant's principal executive and principal financial officers, or
persons performing similar functions, have concluded that the Registrant's
disclosure controls and procedures (as defined in Rule 30a-3(c) under the
Investment Company Act of 1940 (the "1940 Act")) are effective, based on the
evaluation of these controls and procedures required by Rule 30a-3(b) under the
1940 Act and Rules 13a-15(b) or 15d-15(b) under the Securities Exchange Act of
1934 as of a date within 90 days of the filing date of this report. The
registrant's fund accountant identified a weakness in its internal controls
relating to the application of fair value pricing for certain international
equity securities held by international equity funds that used an automated fair
valuation process.
(b) Except for the corrections noted above, there were no significant changes in
the registrant's internal control over financial reporting (as defined in Rule
30a-3(d) under the 1940 Act) that occurred during the second fiscal quarter of
the period covered by this report 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.
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\ Philip T. Masterson
---------------------------------------
Philip T. Masterson, President
Date: March 8, 2010
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\ Philip T. Masterson
---------------------------------------
Philip T. Masterson, President
Date: March 8, 2010
By (Signature and Title)* \s\ Michael Lawson
---------------------------------------
Michael Lawson
Treasurer, Controller & CFO
Date: March 8, 2010
* Print the name and title of each signing officer under his or her
signature.