-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, VAE/0IR3KPg0O+lEXPkO4u+Ey2Va4ry/PRJiHAJoqUhOcouGTgzd5F3GIBTQqqIM qSx8goMRc46QbJMAqTi/5Q== 0000893220-00-000577.txt : 20000502 0000893220-00-000577.hdr.sgml : 20000502 ACCESSION NUMBER: 0000893220-00-000577 CONFORMED SUBMISSION TYPE: 485BPOS PUBLIC DOCUMENT COUNT: 8 FILED AS OF DATE: 20000501 EFFECTIVENESS DATE: 20000501 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BISHOP STREET FUNDS CENTRAL INDEX KEY: 0000925737 STANDARD INDUSTRIAL CLASSIFICATION: [] STATE OF INCORPORATION: MA FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 485BPOS SEC ACT: SEC FILE NUMBER: 033-80514 FILM NUMBER: 614282 BUSINESS ADDRESS: STREET 1: 530 E SWEDESFORD RD CITY: WAYNE STATE: PA ZIP: 19087-1693 BUSINESS PHONE: 6102541000 MAIL ADDRESS: STREET 1: 530 E SWEDESFORD RD CITY: WAYNE STATE: PA ZIP: 19087-1693 485BPOS 1 FORM N-1A FOR BISHOP STREET FUNDS 1 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON May 1, 2000 File No. 811-8572 File No. 33-80514 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM N-1A REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 / / POST-EFFECTIVE AMENDMENT NO. 14 /X/ AND REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 / / AMENDMENT NO. 15 /X/ BISHOP STREET FUNDS (EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER) C/O THE CT CORPORATION SYSTEM 101 FEDERAL STREET BOSTON, MASSACHUSETTS 02110 (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES, ZIP CODE) REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE 1-888-462-5386 KEVIN P. ROBINS C/O SEI INVESTMENTS COMPANY OAKS, PENNSYLVANIA 19456 (NAME AND ADDRESS OF AGENT FOR SERVICE) Copies to: RICHARD W. GRANT, ESQUIRE JOHN H. GRADY, JR., ESQUIRE MORGAN, LEWIS & BOCKIUS LLP 1701 MARKET STREET PHILADELPHIA, PENNSYLVANIA 19103 It is proposed that this filing become effective (check appropriate box) /X/ immediately upon filing pursuant to paragraph (b) on May 1, 2000 pursuant to paragraph (b) / / 60 days after filing pursuant to paragraph (a) / / 75 days after filing pursuant to paragraph (a) / / on [date] pursuant to paragraph (a) of Rule 485. 2 INSTITUTIONAL CLASS SHARES BISHOP STREET FUNDS PROSPECTUS APRIL 30, 2000 EQUITY FUND HIGH GRADE INCOME FUND HAWAII MUNICIPAL BOND FUND MONEY MARKET FUND TREASURY MONEY MARKET FUND INVESTMENT ADVISER: BISHOP STREET CAPITAL MANAGEMENT THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THESE SECURITIES OR PASSED UPON THE ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. Page 1 of 33 3 ABOUT THIS PROSPECTUS Bishop Street Funds is a mutual fund family that offers different classes of shares in separate investment portfolios (Funds). The Funds have individual investment goals and strategies. This prospectus gives you important information about the Institutional Class Shares of the Bishop Street Funds that you should know about before investing. Please read this prospectus and keep it for future reference. THIS PROSPECTUS HAS BEEN ARRANGED INTO DIFFERENT SECTIONS SO THAT YOU CAN EASILY REVIEW THIS IMPORTANT INFORMATION. IN THE NEXT COLUMN, THERE IS SOME GENERAL INFORMATION YOU SHOULD KNOW ABOUT RISK AND RETURN THAT IS COMMON TO EACH OF THE FUNDS. IF YOU WOULD LIKE MORE DETAILED INFORMATION ABOUT THE FUNDS, PLEASE SEE:
PAGE ---- EQUITY FUND........................................................................ 2 HIGH GRADE INCOME FUND............................................................. 4 HAWAII MUNICIPAL BOND FUND......................................................... 6 MONEY MARKET FUND.................................................................. 8 TREASURY MONEY MARKET FUND......................................................... 10 MORE INFORMATION ABOUT RISK........................................................ 12 MORE INFORMATION ABOUT FUND INVESTMENTS............................................ 13 INVESTMENT ADVISER, INVESTMENT TEAM AND SUB-ADVISER................................ 13 PURCHASING, SELLING AND EXCHANGING FUND SHARES..................................... 14 DIVIDENDS AND DISTRIBUTIONS........................................................ 17 TAXES.............................................................................. 17 THE BOARD OF TRUSTEES.............................................................. 18 FINANCIAL HIGHLIGHTS............................................................... 19 HOW TO OBTAIN MORE INFORMATION ABOUT BISHOP STREET FUNDS .......................... Back Cover
Page 2 of 33 4 RISK/RETURN INFORMATION COMMON TO THE FUNDS Each Fund is a mutual fund. A mutual fund pools shareholders' money and, using professional investment managers, invests it in securities. Each Fund has its own investment goal and strategies for reaching that goal. The investment manager invests Fund assets in a way that they believe will help the Fund achieve its goal. Still, investing in each Fund involves risk and there is no guarantee that a Fund will achieve its goal. An investment manager's judgments about the markets, the economy, or companies may not anticipate actual market movements, economic conditions or company performance, and these judgments may affect the return on your investment. In fact, no matter how good a job an investment manager does, you could lose money on your investment in the Fund, just as you could with other investments. A FUND SHARE IS NOT A BANK DEPOSIT AND IT IS NOT INSURED OR GUARANTEED BY THE FDIC OR ANY GOVERNMENT AGENCY. The value of your investment in a Fund (other than a money market fund) is based on the market prices of the securities a Fund holds. These prices change daily due to economic and other events that affect particular companies and other issuers. These price movements, sometimes called volatility, may be greater or lesser depending on the types of securities a Fund owns and the markets in which they trade. The effect on a Fund of a change in the value of a single security will depend on how widely a Fund diversifies its holdings. Page 3 of 33 5 EQUITY FUND FUND SUMMARY INVESTMENT GOAL Long-term capital appreciation INVESTMENT FOCUS Common stocks and other equity securities SHARE PRICE VOLATILITY High PRINCIPAL INVESTMENT STRATEGY Investing in a diversified portfolio of U.S. equity securities INVESTOR PROFILE Investors seeking long-term capital appreciation, who are willing to accept the risk of share price volatility INVESTMENT STRATEGY The Equity Fund primarily invests (at least 65% of its assets) in common stocks and other equity securities that the Adviser believes have potential for capital appreciation. Such instruments include convertible securities. Generally, the Fund invests in securities of companies with market capitalizations in excess of $2 billion. The Fund seeks to be diversified across issuers and major economic sectors. In making a determination to buy, sell, or hold a security, the portfolio management team gives special consideration to the relationship of the security to the risk/reward measurement of the entire portfolio. The Fund's investment approach, with its emphasis on common stocks and other equity securities, is expected to provide returns consistent with the performance of the U.S. stock market, as generally measured by broad U.S. stock market indices such as the S&P 500. The Adviser employs a core equity investment style with a growth bias. PRINCIPAL RISKS OF INVESTING Since it purchases equity securities, the Fund is subject to the risk that stock prices will fall over short or extended periods of time. Historically, the equity markets have moved in cycles, and the value of the Fund's securities may fluctuate drastically from day to day. Individual companies may report poor results or be negatively affected by industry and/or economic trends and developments. The prices of securities issued by such companies may suffer a decline in response. These factors contribute to price volatility, which is the principal risk of investing in the Fund. The Fund is also subject to the risk that its market segment, equity securities, may underperform other market segments. Page 4 of 33 6 PERFORMANCE INFORMATION The bar chart and the performance table below illustrate the risks and volatility of an investment in the Fund. Of course, the Fund's past performance does not necessarily indicate how the Fund will perform in the future. This bar chart shows changes in performance of the Fund's Institutional Class Shares from year to year. 1998 33.05% 1999 24.37%
BEST QUARTER WORST QUARTER ------------ ------------- 23.34% -9.11% (12/31/98) (9/30/98)
THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED DECEMBER 31, 1999 TO THOSE OF THE S&P 500 COMPOSITE INDEX AND THE CONSUMER PRICE INDEX.
1 YEAR SINCE INCEPTION ------ --------------- EQUITY FUND 24.37% 27.05%* S&P 500 COMPOSITE INDEX 21.04% 25.81%* CONSUMER PRICE INDEX 2.63% 2.04%*
* Since January 31, 1997 WHAT IS AN INDEX? An index measures the market prices of a specific group of securities in a particular market or securities in a market sector. You cannot invest directly in an index. Unlike a mutual fund, an index does not have an investment adviser and does not pay any commissions or expenses. If an index had expenses, its performance would be lower. The S&P 500 Composite Index is a widely-recognized, market value-weighted (higher market value stocks have more influence than lower market value stocks) index of 500 stocks, designed to mimic the overall equity market's industry weightings. 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. FUND FEES AND EXPENSES THIS TABLE DESCRIBES THE FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND HOLD FUND SHARES. Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering price) None Maximum Deferred Sales Charge (Load) (as a percentage of net asset value) None Maximum Sales Charge (Load) Imposed on Reinvested Dividends and other Distributions (as a percentage of offering price) None Redemption Fee (as a percentage of amount redeemed, if applicable) None Exchange Fee None Page 5 of 33 7 ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS) Management Fees 0.74% Other Expenses 0.53% ----- Total Annual Fund Operating Expenses 1.27%*
* The Fund's total actual annual fund operating expenses for the most recent fiscal year were less than the amount shown above because the Adviser waived a portion of its fees in order to keep total operating expenses at a specified level. These fee waivers remain in place as of the date of this prospectus, but the Adviser may discontinue all or part of these waivers at any time. With these fee waivers, the Fund's actual total operating expenses are expected to be as follows: Equity Fund 1.00% For more information about these fees, see "Investment Adviser, Investment Team and Sub-Adviser." EXAMPLE: COST OF INVESTING This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated and that you sell your shares at the end of each period. The Example also assumes that each year your investment has a 5% return, Fund operating expenses remain the same and you reinvest all dividends and distributions. Although your actual costs and returns might be different, your approximate costs of investing $10,000 in the Fund would be:
1 YEAR 3 YEARS 5 YEARS 10 YEARS ------ ------- ------- -------- $129 $403 $697 $1,534
Page 6 of 33 8 HIGH GRADE INCOME FUND FUND SUMMARY INVESTMENT GOAL High total return INVESTMENT FOCUS Corporate and U.S. government debt obligations SHARE PRICE VOLATILITY Medium PRINCIPAL INVESTMENT STRATEGY Investing in high grade U.S. debt obligations of domestic corporations and the U.S. government INVESTOR PROFILE Conservative investors seeking income, who are willing to accept some degree of share price volatility INVESTMENT STRATEGY The High Grade Income Fund primarily invests (at least 65% of its assets) in high grade U.S. dollar-denominated debt obligations of domestic corporations and the U.S. government. High grade debt obligations are those rated in the three highest ratings categories by either S&P or other nationally recognized statistical rating organizations, and include mortgage-backed and variable and floating rate instruments. In determining to buy, sell, or hold a security, the portfolio management team analyzes the security in relationship to the risk characteristics of the portfolio as a whole. PRINCIPAL RISKS OF INVESTING The prices of the Fund's fixed income securities respond to economic developments, particularly interest rate changes, as well as to perceptions about the creditworthiness of individual issuers, including governments. Generally, the Fund's fixed income securities will decrease in value if interest rates rise and vice versa. Also, the volatility of lower rated securities is even greater than that of higher rated securities. Longer-term securities are generally more volatile, so the average maturity or duration of these securities affects risk. The Fund is also subject to the risk that its market segment, fixed income securities, may underperform other market segments. The mortgages underlying mortgage-backed securities may be paid off early, which makes it difficult to determine their actual maturity and therefore calculate how they will respond to changes in interest rates. The Fund may have to reinvest prepaid amounts at lower interest rates. This risk of prepayment is an additional risk of mortgage-backed securities. Although the Fund's U.S. government securities are considered to be among the safest investments, they are not guaranteed against price movements due to changing interest rates. Obligations issued by some U.S. government agencies are backed by the U.S. Treasury, while others are backed solely by the ability of the agency to borrow from the U.S. Treasury or by the agency's own resources. Page 7 of 33 9 The Fund's investment approach, with its emphasis on high quality corporate and U.S. government obligations of medium maturity, is expected to provide total return through income and some capital appreciation with moderate risk to principal and less sensitivity to changing interest rates than longer term or lower quality bond funds. PERFORMANCE INFORMATION The bar chart and the performance table below illustrate the risks and volatility of an investment in the Fund. Of course, the Fund's past performance does not necessarily indicate how the Fund will perform in the future. This bar chart shows changes in performance of the Fund's Institutional Class Shares from year to year. 1998 9.09% 1999 -4.34%
BEST QUARTER WORST QUARTER ------------ ------------- 5.42% -2.37% (9/30/98) (3/31/99)
THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED DECEMBER 31, 1999 TO THOSE OF THE LEHMAN BROTHERS GOVERNMENT/CORPORATE BOND INDEX AND THE CONSUMER PRICE INDEX.
1 YEAR SINCE INCEPTION ------ --------------- HIGH GRADE INCOME FUND -4.34% 4.17%* LEHMAN BROTHERS GOVERNMENT/CORPORATE BOND INDEX -2.15% 5.66%* CONSUMER PRICE INDEX 2.63% 2.04%*
* Since January 31, 1997 WHAT IS AN INDEX? An index measures the market prices of a specific group of securities in a particular market or securities in a market sector. You cannot invest directly in an index. Unlike a mutual fund, an index does not have an investment adviser and does not pay any commissions or expenses. If an index had expenses, its performance would be lower. The Lehman Brothers Government/Corporate Bond Index is a widely-recognized, market value-weighted (higher market value bonds have more influence than lower market value bonds) 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. 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. Page 8 of 33 10 FUND FEES AND EXPENSES THIS TABLE DESCRIBES THE FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND HOLD FUND SHARES. Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering price) None Maximum Deferred Sales Charge (Load) (as a percentage of net asset value) None Maximum Sales Charge (Load) Imposed on Reinvested Dividends and other Distributions (as a percentage of offering price) None Redemption Fee (as a percentage of amount redeemed, if applicable) None Exchange Fee None
ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS) Management Fees 0.55% Other Expenses 0.64% ----- Total Annual Fund Operating Expenses 1.19%*
* The Fund's total actual annual operating expenses for the most recent fiscal year were less than the amount shown above because the Adviser waived a portion of its fees in order to keep total operating expenses at a specified level. These fee waivers remain in place as of the date of this prospectus, but the Adviser may discontinue all or part of these waivers at any time. With these fee waivers, the Fund's actual total operating expenses are expected to be as follows: High Grade Income Fund 0.76%
For more information about these fees, see "Investment Adviser, Investment Team and Sub-Adviser." EXAMPLE: COST OF INVESTING This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated and that you sell your shares at the end of the period. The Example also assumes that each year your investment has a 5% return, Fund operating expenses remain the same and you reinvest all dividends and distributions. Although your actual costs and returns might be different, your approximate costs of investing $10,000 in the Fund would be:
1 YEAR 3 YEARS 5 YEARS 10 YEARS ------ ------- ------- -------- $121 $378 $654 $1,443
Page 9 of 33 11 HAWAII MUNICIPAL BOND FUND FUND SUMMARY INVESTMENT GOAL High current income exempt from federal and Hawaii income taxes INVESTMENT FOCUS Hawaii municipal bonds SHARE PRICE VOLATILITY Medium PRINCIPAL INVESTMENT STRATEGY Investing in a portfolio focused on investment grade municipal bonds INVESTOR PROFILE Investors seeking tax-exempt current income who are willing to accept the risk of investing in a portfolio of municipal securities
INVESTMENT STRATEGY The Hawaii Municipal Bond Fund primarily invests (at least 65% of its assets) in investment grade municipal bonds, the interest from which is exempt from federal and Hawaii state income taxes. While the Adviser attempts to maximize the portion of the Fund's assets invested in Hawaii issues, the Fund may also invest in the municipal bonds issued by other U.S. states, territories and possessions. There is no restriction upon the amount of the Fund's assets that may be invested in obligations that pay income subject to the federal alternative minimum tax. To the extent that the Fund invests in securities subject to the alternative minimum tax, the income received from these securities could be taxable. There are no limits on the average maturity of the Fund's portfolio. The Adviser will use its judgment to invest in securities that will provide a high level of current income in light of current market conditions. In making a determination to buy, sell, or hold a security, the portfolio manager gives special consideration to the relative value of the security in comparison to the available alternatives, consistent with the objectives of the portfolio. PRINCIPAL RISKS OF INVESTING The prices of the Fund's fixed income securities respond to economic developments, particularly interest rate changes, as well as to perceptions about the creditworthiness of individual issuers, including governments. Generally, the Fund's fixed income securities will decrease in value if interest rates rise and vice versa. Also, the volatility of lower rated securities is even greater than that of higher rated securities. Longer-term securities are generally more volatile, so the average maturity or duration of these securities affects risk. The Fund is also subject to the risk that its market segment, fixed income securities, may underperform other market segments. Page 10 of 33 12 There may be economic or political changes that impact the ability of municipal issuers to repay principal and to make interest payments on municipal securities. Changes in the financial condition or credit rating of municipal issuers also may adversely affect the value of the Fund's securities. The Fund's concentration of investments in securities of issuers located in Hawaii subjects the Fund to economic conditions and government policies within that state. As a result, the Fund will be more susceptible to factors that adversely affect issuers of Hawaii obligations than a mutual fund that does not have as great a concentration in Hawaii. The Fund is non-diversified, which means that it may invest in the securities of relatively few issuers. As a result, the Fund may be more susceptible to a single adverse economic or political/regulatory occurrence affecting one or more of these issuers, and may experience increased volatility due to its investments in those securities. The Fund's investment approach, with its emphasis on investment grade municipal bonds, is expected to provide current tax-exempt income with moderate risk to principal. The Fund is not expected to perform as well as a comparable taxable bond fund, but may do as well or better on an after-tax basis. PERFORMANCE INFORMATION The bar chart and the performance table below illustrate the risks and volatility of an investment in the Fund. Of course, the Fund's past performance does not necessarily indicate how the Fund will perform in the future. This bar chart shows changes in performance of the Fund's Institutional Class Shares from year to year. 1996 4.21% 1997 8.52% 1998 5.84% 1999 -2.65%
BEST QUARTER WORST QUARTER ------------ ------------- 3.39% -1.92%
(6/30/97) (6/30/99)
THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED DECEMBER 31, 1999 TO THOSE OF THE LEHMAN BROTHERS MUNICIPAL BOND INDEX AND THE CONSUMER PRICE INDEX.
1 YEAR SINCE INCEPTION ------ --------------- HAWAII MUNICIPAL BOND FUND -2.65% 5.12%* LEHMAN BROTHERS MUNICIPAL BOND INDEX -2.07% 5.91%** CONSUMER PRICE INDEX 2.63% 2.32%**
* Since February 15, 1995 ** Since February 28, 1995 Page 11 of 33 13 WHAT IS AN INDEX? An index measures the market prices of a specific group of securities in a particular market or securities in a market sector. You cannot invest directly in an index. Unlike a mutual fund, an index does not have an investment adviser and does not pay any commissions or expenses. If an index had expenses, its performance would be lower. The Lehman Brothers 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. FUND FEES AND EXPENSES THIS TABLE DESCRIBES THE FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND HOLD FUND SHARES. Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering price) None Maximum Deferred Sales Charge (Load) (as a percentage of net asset value) None Maximum Sales Charge (Load) Imposed on Reinvested Dividends and other Distributions (as a percentage of offering price) None Redemption Fee (as a percentage of amount redeemed, if applicable) None Exchange Fee None
ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS) Management Fees 0.35% Other Expenses 0.64% ----- Total Annual Fund Operating Expenses 0.99%*
* The Fund's total actual annual operating expenses for the most recent fiscal year were less than the amount shown above because the Adviser waived a portion of its fees in order to keep total operating expenses at a specified level. These fee waivers remain in place as of the date of this prospectus, but the Adviser may discontinue all or part of these waivers at any time. With these fee waivers, the Fund's actual total operating expenses are expected to be as follows: Hawaii Municipal Bond Fund 0.45%
For more information about these fees, see "Investment Adviser, Investment Team and Sub-Adviser." Page 12 of 33 14 EXAMPLE: COST OF INVESTING This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated and that you sell your shares at the end of the period. The Example also assumes that each year your investment has a 5% return, Fund operating expenses remain the same and you reinvest all dividends and distributions. Although your actual costs and returns might be different, your approximate costs of investing $10,000 in the Fund would be:
1 YEAR 3 YEARS 5 YEARS 10 YEARS ------ ------- ------- -------- $101 $315 $547 $1,213
Page 13 of 33 15 MONEY MARKET FUND FUND SUMMARY INVESTMENT GOAL Preserving principal and maintaining liquidity while providing current income INVESTMENT FOCUS Short-term money market instruments SHARE PRICE VOLATILITY Very low PRINCIPAL INVESTMENT STRATEGY Investing in high quality, U.S. dollar denominated short-term securities INVESTOR PROFILE Conservative investors seeking current income through a low risk liquid investment.
INVESTMENT STRATEGY The Money Market Fund is comprised of short-term U.S. dollar denominated debt obligations that are rated in one of the two highest categories by nationally recognized rating organizations or securities that the Sub-Adviser determines are of comparable quality. The Fund invests substantially all of its assets in short-term securities including: (i) commercial paper and other short-term corporate obligations of U.S. and foreign issuers (including asset-backed securities); (ii) certificates of deposit, time deposits, bankers' acceptances, bank notes and other obligations of U.S. and foreign savings and loan institutions and commercial banks (including foreign branches of such banks) that meet certain asset requirements; (iii) short-term obligations issued by state and local governments; (iv) obligations of foreign governments (including Canadian and Provincial Government, and Crown Agency Obligations); and (v) U.S. Treasury obligations and obligations issued or guaranteed as to principal and interest by agencies or instrumentalities of the U.S. government. The Fund may also enter into fully-collateralized repurchase agreements. The Adviser has engaged Wellington Management Company, LLP as Sub-Adviser (Sub-Adviser) to manage the Fund on a day-to-day basis. Using a top-down strategy and bottom-up security selection process, the Sub-Adviser seeks securities with an acceptable maturity, that are marketable and liquid, that offer competitive yields, and that are issued by issuers that are on a sound financial footing. The Sub-Adviser also considers factors such as the anticipated level of interest rates and the maturity of individual securities relative to the maturity of the Fund as a whole. The Fund follows strict SEC rules about credit quality, maturity and diversification of its investments. PRINCIPAL RISKS OF INVESTING An investment in the Fund is subject to income risk, which is the possibility that the Fund's yield will decline due to falling interest rates. A Fund share is not a bank deposit and is not insured or guaranteed by the FDIC or any government agency. In addition, although a money market fund seeks to maintain a constant price per share of $1.00, you may lose money by investing in the Fund. Page 14 of 33 16 Although the Fund's U.S. government securities are considered to be among the safest investments, they are not guaranteed against price movements due to changing interest rates. Obligations issued by some U.S. government agencies are backed by the U.S. Treasury, while others are backed solely by the ability of the agency to borrow from the U.S. Treasury or by the agency's own resources. Obligations issued by some U.S. government agencies are backed by the U.S. Treasury, while others are backed solely by the ability of the agency to borrow from the U.S. Treasury or by the agency's own resources. The Fund's investment approach, with its emphasis on short-term obligations, is expected to provide current income with low risk to principal and lower exposure to fluctuations in share price. The Fund can be expected to provide lower returns than fixed income funds which invest in longer-term securities. THE MONEY MARKET FUND TRIES TO MAINTAIN A CONSTANT PRICE PER SHARE OF $1.00, BUT THERE IS NO GUARANTEE THAT THE FUND WILL ACHIEVE THIS GOAL. PERFORMANCE INFORMATION The bar chart and the performance table below illustrate the risks and volatility of an investment in the Fund. Of course, the Fund's past performance does not necessarily indicate how the Fund will perform in the future. This bar chart shows changes in performance of the Fund's Institutional Class Shares from year to year. 1996 5.12% 1997 5.29% 1998 5.26% 1999 4.88%
BEST QUARTER WORST QUARTER ------------ ------------- 1.33% 1.12% (12/31/99) (6/30/99)
THIS TABLE COMPARES THE FUND'S RETURNS FOR THE PERIODS ENDED DECEMBER 31, 1999 TO THOSE OF THE IBC/FINANCIAL DATA FIRST TIER INSTITUTIONS-ONLY AVERAGE. 1 YEAR SINCE INCEPTION ------ --------------- MONEY MARKET FUND 4.88% 5.23%* IBC/FINANCIAL DATA FIRST TIER INSTITUTIONS-ONLY AVERAGE 4.94% 5.33%**
* Since January 30, 1995 ** Since January 31, 1995 For information concerning the Fund's 7-Day Yield, please call 1-800-262-9565. WHAT IS AN AVERAGE? An average represents the performance of a specific group of mutual funds with a particular investment objective. You cannot invest directly in an average. The IBC/Financial Data First Tier Institutions-Only Average is a composite of mutual funds with investment goals similar to the Fund's goal. Page 15 of 33 17 FUND FEES AND EXPENSES THIS TABLE DESCRIBES THE FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND HOLD FUND SHARES. Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering price) None Maximum Deferred Sales Charge (Load) (as a percentage of net asset value) None Maximum Sales Charge (Load) Imposed on Reinvested Dividends and other Distributions (as a percentage of offering price) None Redemption Fee (as a percentage of amount redeemed, if applicable) None Exchange Fee None
ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS) Management Fees 0.30% Other Expenses 0.54% ----- Total Annual Fund Operating Expenses 0.84%*
* The Fund's total actual annual operating expenses for the most recent fiscal year were less than the amount shown above because the Adviser waived a portion of its fees in order to keep total operating expenses at a specified level. These fee waivers remain in place as of the date of this prospectus, but the Adviser may discontinue all or part of these waivers at any time. With these fee waivers, the Fund's actual total operating expenses are expected to be as follows: Money Market Fund 0.50% For more information about these fees, see "Investment Adviser, Investment Team and Sub-Adviser." EXAMPLE: COST OF INVESTING This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated and that you sell your shares at the end of the period. The Example also assumes that each year your investment has a 5% return, Fund operating expenses remain the same and you reinvest all dividends and distributions. Although your actual costs and returns might be different, your approximate costs of investing $10,000 in the Fund would be:
1 YEAR 3 YEARS 5 YEARS 10 YEARS ------ ------- ------- -------- $86 $268 $466 $1,037
Page 16 of 33 18 TREASURY MONEY MARKET FUND FUND SUMMARY INVESTMENT GOAL Preserving principal value and maintaining a high degree of liquidity while providing current income INVESTMENT FOCUS Money market instruments issued or guaranteed by the U.S. Treasury SHARE PRICE VOLATILITY Very low PRINCIPAL INVESTMENT STRATEGY Investing in U.S. Treasury obligations and repurchase agreements INVESTOR PROFILE Conservative investors seeking current income through a low risk liquid investment
INVESTMENT STRATEGY The Fund invests exclusively in U.S. Treasury obligations and repurchase agreements fully-collateralized by U.S. Treasury obligations. The Adviser has engaged Wellington Management Company, LLP as Sub-Adviser (Sub-Adviser) to manage the Fund on a day-to-day basis. Using a top-down strategy and bottom-up security selection process, the Sub-Adviser seeks securities with an acceptable maturity, that are marketable and liquid and offer competitive yields. The Sub-Adviser also considers factors such as the anticipated level of interest rates and the maturity of individual securities relative to the maturity of the Fund as a whole. The Fund follows strict Investment Company Act rules about credit quality, maturity and diversification of its investments. PRINCIPAL RISKS OF INVESTING An investment in the Fund is subject to income risk, which is the possibility that the Fund's yield will decline due to falling interest rates. Although the Fund's U.S. Treasury securities are considered to be among the safest investments, they are not guaranteed against price movements due to changing interest rates. An investment in the Fund is not a bank deposit. Although the Fund seeks to maintain a constant price per share of $1.00, you may lose money by investing in the Fund. The Fund's investment approach with its emphasis on short-term U.S. Treasury obligations is expected to provide current income with low risk to principal and lower exposure to fluctuations in share price. The Fund can be expected to provide lower returns than fixed income funds which invest in longer term securities. Page 17 of 33 19 THE TREASURY MONEY MARKET FUND TRIES TO MAINTAIN A CONSTANT PRICE PER SHARE OF $1.00, BUT THERE IS NO GUARANTEE THAT THE FUND WILL ACHIEVE THIS GOAL. PERFORMANCE INFORMATION The bar chart and the performance table below illustrate the risks and volatility of an investment in the Fund. Of course, the Fund's past performance does not necessarily indicate how the Fund will perform in the future. This bar chart shows changes in performance of the Fund's Institutional Class Shares from year to year. 1997 5.22% 1998 5.10% 1999 4.65%
BEST QUARTER WORST QUARTER ------------ ------------- 1.32% 1.08% (12/31/97) (6/30/99)
THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED DECEMBER 31, 1999 TO THOSE OF THE IBC/FINANCIAL DATA U.S. TREASURY & REPO AVERAGE.
1 YEAR SINCE INCEPTION ------ --------------- TREASURY MONEY MARKET FUND 4.65% 5.00%* IBC/FINANCIAL DATA U.S. TREASURY & REPO AVERAGE 4.36% 4.70%**
* Since May 1, 1996 ** Since May 31, 1996 For more information concerning the Fund's 7-Day Yield, please call 1-800-262-9565. WHAT IS AN AVERAGE? An average represents the performance of a specific group of mutual funds with a particular investment objective. You cannot invest directly in an average. The IBC/Financial Data U.S. Treasury & Repo Average is a composite of mutual funds with investment goals similar to the Fund's goal. Page 18 of 33 20 FUND FEES AND EXPENSES THIS TABLE DESCRIBES THE FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND HOLD FUND SHARES. Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering price) None Maximum Deferred Sales Charge (Load) (as a percentage of net asset value) None Maximum Sales Charge (Load) Imposed on Reinvested Dividends and other Distributions (as a percentage of offering price) None Redemption Fee (as a percentage of amount redeemed, if applicable) None Exchange Fee None
ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS) Management Fees 0.30% Other Expenses 0.55% ----- Total Annual Fund Operating Expenses 0.85%*
* The Fund's total actual annual operating expenses for the most recent fiscal year were less than the amount shown above because the Adviser waived a portion of its fees in order to keep total operating expenses at a specified level. These fee waivers remain in place as of the date of this prospectus, but the Adviser may discontinue all or part of these waivers at any time. With these fee waivers, the Fund's actual total operating expenses are expected to be as follows: Treasury Money Market Fund 0.44% For more information about these fees, see "Investment Adviser, Investment Team and Sub-Adviser." EXAMPLE: COST OF INVESTING This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated and that you sell your shares at the end of the period. The Example also assumes that each year your investment has a 5% return, Fund operating expenses remain the same and you reinvest all dividends and distributions. Although your actual costs and returns might be different, your approximate costs of investing $10,000 in the Fund would be: 1 YEAR 3 YEARS 5 YEARS 10 YEARS ------ ------- ------- -------- $87 $271 $471 $1,049
Page 19 of 33 21 MORE INFORMATION ABOUT RISK MANAGEMENT RISK - The risk that a strategy used by the fund's All Funds management may fail to produce the intended result. EQUITY RISK - Equity securities include public and privately Equity Fund issued equity securities, common and preferred stocks, warrants, rights to subscribe to common stock and convertible securities, as well as instruments that attempt to track the price movement of equity indices. Investments in equity securities and equity derivatives in general are subject to market risks that may cause their prices to fluctuate over time. The value of securities convertible into equity securities, such as warrants or convertible debt, is also affected by prevailing interest rates, the credit quality of the issuer and any call provision. Fluctuations in the value of equity securities in which a mutual fund invests will cause a fund's net asset value to fluctuate. An investment in a portfolio of equity securities may be more suitable for long-term investors who can bear the risk of these share price fluctuations. FIXED INCOME RISK - The market value of fixed income High Grade Income Fund investments changes in response to interest rate changes and Hawaii Municipal Bond Fund other factors. During periods of falling interest rates, the Money Market Fund values of outstanding fixed income securities generally Treasury Money Market Fund rise. Moreover, while securities with longer maturities tend to produce higher yields, the prices of longer maturity securities are also subject to greater market fluctuations as a result of changes in interest rates. In addition to these fundamental risks, different types of fixed income securities may be subject to the following additional risks: CALL RISK - During periods of falling interest High Grade Income Fund rates, certain debt obligations with high interest Hawaii Municipal Bond Fund rates may be prepaid (or "called") by the Money Market Fund issuer prior to maturity. This may cause a Fund's average weighted maturity to fluctuate, and may require a Fund to invest the resulting proceeds at lower interest rates.
Page 20 of 33 22 CREDIT RISK - The possibility that an issuer will be High Grade Income Fund unable to make timely payments of either principal Hawaii Municipal Bond Fund or interest. Since the Fund purchases securities Money Market Fund backed by credit enhancements from banks and other financial institutions, changes in the credit ratings of these institutions could cause the Fund to lose money and may affect the Fund's share price. EVENT RISK - Securities may suffer declines in High Grade Income Fund credit quality and market value due to issuer Hawaii Municipal Bond Fund restructurings or other factors. This risk should Money Market Fund be reduced because of the Fund's multiple holdings. MUNICIPAL ISSUER RISK - There may be economic or Hawaii Municipal Bond Fund political changes that impact the ability of Money Market Fund municipal issuers to repay principal and to make interest payments on municipal securities. Changes to the financial condition or credit rating of municipal issuers may also adversely affect the value of the Fund's municipal securities. Constitutional or legislative limits on borrowing by municipal issuers may result in reduced supplies of municipal securities. Moreover, certain municipal securities are backed only by a municipal issuer's ability to levy and collect taxes. In addition, the Hawaii Municipal Bond Fund's concentration of investments in issuers located in a single state makes the Fund more susceptible to adverse political or economic developments affecting that state. The Fund also may be riskier than mutual funds that buy securities of issuers in numerous states.
Page 21 of 33 23 MORTGAGE-BACKED SECURITIES RISK - Mortgage-backed High Grade Income Fund securities are fixed income securities representing an interest in a pool of underlying mortgage loans. They are sensitive to changes in interest rates, but may respond to these changes differently from other fixed income securities due to the possibility of prepayment of the underlying mortgage loans. As a result, it may not be possible to determine in advance the actual maturity date or average life of a mortgage-backed security. Rising interest rates tend to discourage refinancings, with the result that the average life and volatility of the security will increase, exacerbating its decrease in market price. When interest rates fall, however, mortgage-backed securities may not gain as much in market value because of the expectation of additional mortgage prepayments that must be reinvested at lower interest rates. Prepayment risk may make it difficult to calculate the average maturity of a portfolio of mortgage-backed securities and, therefore, to assess the volatility risk of that portfolio.
MORE INFORMATION ABOUT FUND INVESTMENTS In addition to the principal investments and strategies described in this prospectus, each Fund also may invest in other securities, use other strategies and engage in other investment practices. These investments and strategies, as well as those described in this prospectus, are described in detail in our Statement of Additional Information. Of course, we cannot guarantee that any Fund will achieve its investment goal. The investments and strategies described in this prospectus are those that we use under normal conditions. During unusual economic or market conditions, or for temporary defensive or liquidity purposes, each Fund may invest up to 100% of its assets in taxable money market instruments, repurchase agreements and short-term obligations. When a Fund is investing for temporary defensive purposes, it is not pursuing its investment goal. Page 22 of 33 24 INVESTMENT ADVISER, INVESTMENT TEAM AND SUB-ADVISER INVESTMENT ADVISER The Investment Adviser makes investment decisions for the Funds and continuously reviews, supervises and administers each Fund's respective investment program. The Adviser oversees the Sub-Adviser to ensure compliance with the Money Market and Treasury Money Market Funds' investment policies and guidelines, and monitors the Sub-Adviser's adherence to its investment style. The Adviser pays the Sub-Adviser out of the Investment Advisory fees it receives (described below). The Board of Trustees of the Bishop Street Funds supervises the Adviser and Sub-Adviser and establishes policies that the Adviser and Sub-Adviser must follow in their management activities. Bishop Street Capital Management, a registered investment adviser and independent subsidiary of First Hawaiian Bank, serves as Adviser to the Funds. Prior to February 22, 2000, First Hawaiian Bank served as Adviser to the Funds. As of December 31, 1999, First Hawaiian Bank had approximately $10.9 billion in assets under management. For the fiscal year ended December 31, 1999, First Hawaiian Bank received advisory fees at the following rates: Equity Fund 0.71% High Grade Income Fund 0.42% Hawaii Municipal Bond Fund 0.07% Money Market Fund 0.26% Treasury Money Market Fund 0.17%
ADDITIONAL COMPENSATION Bishop Street Capital Management and its affiliates may act as fiduciary or provide services in various non-fiduciary capacities with respect to plans subject to the Employee Retirement Income Security Act of 1974 (ERISA) and other trust and agency accounts that invest in the Funds. Bishop Street Capital Management may also receive compensation for acting as the Funds' investment adviser in cases where the compensation is not duplicative of the compensation those accounts pay for fiduciary and non-fiduciary services. First Hawaiian Bank and its affiliates also receive compensation in connection with the following: SHAREHOLDER SERVICING FEES The Funds have adopted a Shareholder Servicing Plan that allows the Funds to pay shareholder servicing fees of up to 0.25% of a Fund's average daily net assets for the servicing of its shares, and for services provided to shareholders. First Hawaiian Bank or any of its affiliates providing brokerage or investment-related services may receive shareholder servicing fees, payable from the Funds' assets, of up to 0.25% of each Fund's average daily net assets. INVESTMENT TEAM The Equity and High Grade Income Funds are managed by a team of investment professionals from the Adviser. No one person is primarily responsible for making investment recommendations to the team. Louis M. Levitas has managed the Hawaii Municipal Bond Fund since its inception in February 1995. He manages the Fund pursuant to an agreement between the Adviser and Bank of the West. Mr. Levitas has been a municipal bond specialist since 1970. INVESTMENT SUB-ADVISER Wellington Management Company, LLP serves as the Sub-Adviser and manages the Money Market and Treasury Money Market Funds on a day-to-day basis. The Sub-Adviser selects, buys and sells securities for the Money Market Fund and Treasury Money Market Fund under the supervision of the Adviser and the Board of Trustees. As of December 31, 1999, Wellington Management Company, LLP had approximately $235 billion in assets under management. Page 23 of 33 25 PURCHASING, SELLING AND EXCHANGING FUND SHARES This section tells you how to purchase, sell (sometimes called "redeem") and exchange shares of the Funds. HOW TO PURCHASE FUND SHARES You may purchase shares directly by: - - Mail; - - Telephone; - - Wire; or - - Direct Deposit. To purchase shares directly from us, complete and send in an account application. If you need an application or have questions, please call 1-800-262-9565. Write your check, payable in U.S. dollars, to Bishop Street Funds and mail to Bishop Street Funds, P.O. Box 219721, Kansas City, MO 24121-9721. We cannot accept third-party checks, credit cards, credit card checks or cash. Institutional Class Shares may be purchased by: (i) holders of fiduciary, advisory, agency, custodial and other similar accounts maintained with BancWest Corporation and its banking and non-banking subsidiaries; (ii) shareholders of the Bishop Street Funds with an existing Fund account prior to June 14, 1999; (iii) registered investment advisors, regulated by a federal or state governmental authority, or financial planners who purchase shares for an account for which they are authorized to make investment decisions and who are compensated by their clients for their services; (iv) retirement and other benefit plans sponsored by governmental entities; and (v) financial institutions, which may purchase shares on their own account or as record owner on behalf of their fiduciary, agency or custodial accounts. You may also purchase Institutional Class Shares of the Bishop Street Money Market Fund through a representative of BancWest Corporation and its banking and non-banking subsidiaries. GENERAL INFORMATION You may purchase shares on any day that the New York Stock Exchange (NYSE) and the Federal Reserve are open for business (a Business Day). Page 24 of 33 26 A Fund may reject any purchase order if it is determined that accepting the order would not be in the best interests of the Fund or its shareholders. The price per share (the offering price) will be the net asset value per share (NAV) next determined after a Fund receives your purchase order. A Fund is deemed to have received your order upon receipt of a completed account application and a check or money order. If you already have an existing account, a Fund is deemed to have received your order upon receipt of your order and your check or money order. The Funds calculate each bond and equity fund's NAV once each Business Day at the regularly-scheduled close of normal trading on the NYSE (normally, 4:00 p.m., Eastern time). So for you to receive the current Business Day's NAV, generally we must receive your purchase order before 4:00 p.m., Eastern time. The Funds calculate each money market fund's NAV once each Business Day at 2:00 p.m., Eastern time. So for you to be eligible to receive dividends declared on the day you submit your purchase order, the Funds generally must receive your order before 2:00 p.m., Eastern time and federal funds (readily available funds) before 4:00 p.m., Eastern time. HOW WE CALCULATE NAV NAV for one Fund share is the value of that share's portion of the net assets of the Fund. In calculating NAV, a Fund generally values its investment portfolio at market price (except the Money Market Fund and Treasury Money Market Fund). If market prices are unavailable or a Fund thinks that they are unreliable, fair value prices may be determined in good faith using methods approved by the Board of Trustees. In calculating NAV for the Money Market Fund and Treasury Money Market Fund, the Funds generally value their investment portfolios using the amortized cost valuation method, which is described in detail in our Statement of Additional Information. If this method is determined to be unreliable during certain market conditions or for other reasons, a Fund may value its portfolio at market price or fair value prices may be determined in good faith using methods approved by the Board of Trustees. MINIMUM PURCHASES & AUTOMATIC INVESTMENT PLANS You may open an account with a $1,000 minimum initial investment per Fund ($500 for those investing in retirement plans). The minimum initial investment may be reduced with an Automatic Investment Plan (AIP). If you have a checking or savings account, you may establish an AIP and open an account with a $100 minimum initial investment per Fund. You may then begin regularly scheduled investments of at least $50 per month through automatic deductions from your checking or savings accounts. HOW TO SELL YOUR FUND SHARES If you own your shares directly, you may sell your shares on any Business Day by contacting the Fund by mail at P.O. Box 219721, Kansas City, MO 64121-9721 or by telephone at 1-800-262-9565. Page 25 of 33 27 If you are requesting to sell $5,000 or more of your shares, your request must be in writing and must include a signature guarantee by a bank or other financial institution (a notarized signature is not sufficient). The sale price of each share will be the next NAV determined after the Fund receives your request. If you are a shareholder of the Treasury Money Market Fund, and hold the shares directly, you may redeem shares by writing checks for $1,000 or more on an existing account. You can obtain a checkwriting application by calling 1-800-262-9565. The checks may be made payable to any person or entity and your account will continue to earn dividends until the check clears. Because of the difficulty of determining in advance the exact value of your Fund account, you may not use a check to close your account. There is no fee for the checkwriting privilege, but if payment on a check is stopped upon your request, or if the check cannot be honored because of insufficient funds or other valid reasons, you may be charged a fee by the financial institution where you presented your check for payment. SYSTEMATIC WITHDRAWAL PLAN If you have at least $10,000 in the Equity Fund, High Grade Income Fund or Hawaii Municipal Bond Fund; or $20,000 in the Money Market Fund or Treasury Money Market Fund in your account, you may use the Systematic Withdrawal Plan. Under the plan you may arrange monthly, quarterly, semi-annual or annual automatic withdrawals of at least $50 from any Fund. The proceeds of each withdrawal will be mailed to you by check or electronically transferred to your bank account. RECEIVING YOUR MONEY Normally, we will send your sale proceeds within seven days after we receive your request. Your proceeds can be wired to your bank account if your redemption proceeds are in excess of $500 (subject to a $15 fee) or sent to you by check. If you recently purchased your shares by check, redemption proceeds may not be available until your check has cleared (which may take up to 15 days from your date of purchase). REDEMPTIONS IN KIND The Fund generally pays sale (redemption) proceeds in cash. However, under unusual conditions that make the payment of cash unwise (and for the protection of the Fund's remaining shareholders) we might pay all or part of your redemption proceeds in liquid securities with a market value equal to the redemption price (redemption in kind). It is highly unlikely that your shares would ever be redeemed in kind, but if they were you would probably have to pay transaction costs to sell the securities distributed to you, as well as taxes on any capital gains from the sale as with any redemption. INVOLUNTARY SALES OF YOUR SHARES If your account balance drops below $1,000 ($500 for those investing in retirement plans; $100 for officers, directors and employees of BancWest Corporation and its banking and non-banking subsidiaries who have arranged to purchase shares through the AIP) because of redemptions you may be required to sell your shares. Page 26 of 33 28 But, we will always give you at least 60 days' written notice to give you time to add to your account and avoid the sale of your shares. SUSPENSION OF YOUR RIGHT TO SELL YOUR SHARES A Fund may suspend your right to sell your shares during times when trading on the NYSE is restricted or halted or otherwise as permitted by the SEC. More information about this is in our Statement of Additional Information. HOW TO EXCHANGE YOUR SHARES You may exchange your Institutional Class Shares for Institutional Class Shares of any other Bishop Street Fund on any Business Day by contacting us directly by mail or telephone. You may also exchange shares through your financial institution by mail or telephone. IF YOU RECENTLY PURCHASED SHARES BY CHECK, YOU MAY NOT BE ABLE TO EXCHANGE YOUR SHARES UNTIL YOUR CHECK HAS CLEARED (WHICH MAY TAKE UP TO 15 DAYS FROM YOUR DATE OF PURCHASE). THIS EXCHANGE PRIVILEGE MAY BE CHANGED OR CANCELED AT ANY TIME UPON 60 DAYS' NOTICE. When you exchange shares, you are really selling your shares and buying other Fund shares. So, your sale price and purchase price will be based on the NAV next calculated after the Fund receives your exchange request. TELEPHONE TRANSACTIONS Purchasing, selling and exchanging Fund shares over the telephone is extremely convenient, but not without risk. Although the Fund has certain safeguards and procedures to confirm the identity of callers and the authenticity of instructions, the Fund is not responsible for any losses or costs incurred by following telephone instructions we reasonably believe to be genuine. If you or your financial institution transact with the Fund over the telephone, you will generally bear the risk of any loss. Page 27 of 33 29 DIVIDENDS AND DISTRIBUTIONS Each Fund distributes its income, if any, as follows: DECLARED DAILY AND PAID MONTHLY High Grade Income Fund Hawaii Municipal Bond Fund Money Market Fund Treasury Money Market Fund DECLARED AND PAID QUARTERLY Equity Fund Each Fund makes distributions of capital gains, if any, at least annually. If you own Fund shares on a Fund's record date, you will be entitled to receive the distribution. You will receive dividends and distributions in the form of additional Fund shares unless you elect to receive payment in cash. To elect cash payment, you must notify the Fund in writing prior to the date of the distribution. Your election will be effective for dividends and distributions paid after the Fund receives your written notice. To cancel your election, simply send the Fund written notice. TAXES PLEASE CONSULT YOUR TAX ADVISOR REGARDING YOUR SPECIFIC QUESTIONS ABOUT FEDERAL, STATE AND LOCAL INCOME TAXES. Below we have summarized some important tax issues that affect the Funds and their shareholders. This summary is based on current tax laws, which may change. Each Fund will distribute substantially all of its income and capital gains, if any. The dividends and distributions you receive may be subject to federal, state and local taxation, depending upon your tax situation. Distributions you receive from a Fund may be taxable whether or not you reinvest them. Income distributions are generally taxable at ordinary income tax rates. Capital gains distributions are generally taxable at the rates applicable to long-term capital gains. EACH SALE OR EXCHANGE OF FUND SHARES IS A TAXABLE EVENT. The Hawaii Municipal Bond Fund intends to distribute income that is exempt from both federal taxes and Hawaii state taxes. The Fund may invest a portion of its assets in securities that generate taxable income for federal or state income taxes. Income exempt from federal tax may be subject to state and local taxes. Any capital gains distributed by the Fund may be taxable. MORE INFORMATION ABOUT TAXES IS IN THE STATEMENT OF ADDITIONAL INFORMATION. Page 28 of 33 30 THE BOARD OF TRUSTEES The Board of Trustees supervises the management and affairs of the Trust. The Trustees have approved contracts with certain companies that provide us with essential management services. The Trustees of the Trust are as follows:
NAME BUSINESS HISTORY - ---- ---------------- Martin Anderson Partner, Goodsill Anderson Quinn & Stifel since 1951 Charles E. Carlbom Chairman, BPI, Inc. since 1999; President and CEO, United Grocers, Inc. (1997-1999); President and CEO, Western Family Food, Inc., Western Family Holdings Inc. (1982-1997) Philip H. Ching Vice Chairman, First Hawaiian Bank (1968-1996) James L. Huffman Dean and Professor, Lewis & Clark Law School since 1973 Shunichi Kimura Mediator, Mediation Specialists of Hawaii (1994-1997); Judge, State of Hawaii Judiciary (1974-1994) Robert A. Nesher Chairman, SEI Mutual Funds since 1974; Director and Executive Vice President of the Administrator and the Distributor (1981-1994) William S. Richardson Trustee, Kamehameha Schools Bishop Estate (1982-1992); Chief Justice, Supreme Court of Hawaii (1966-1983) Peter F. Sansevero Regional Director of the Northwestern Region and First Vice President, Merrill Lynch (1958-1997) Manual R. Sylvester Managing Partner, Coopers & Lybrand L.L.P. (1978-1992); Executive Partner, Coopers & Lybrand L.L.P. (1992) Joyce S. Tsunoda Senior Vice President, University of Hawaii System since 1989; Chancellor, Community Colleges-University of Hawaii since 1983
Page 29 of 33 31 FINANCIAL HIGHLIGHTS The tables that follow present performance information about each Fund. This information is intended to help you understand each Fund's financial performance for the past five years, or, if shorter, the period of the Fund's operations. Some of this information reflects financial information for a single Fund share. The total returns in the table represent the rate that you would have earned (or lost) on an investment in a Fund, assuming you reinvested all of your dividends and distributions. This information has been audited by PricewaterhouseCoopers LLP, independent public accountants. Their report, along with each Fund's financial statements, appears in the annual report that accompanies our Statement of Additional Information. You can obtain the annual report, which contains more performance information, at no charge by calling 1-800-262-9565. Page 30 of 33 32 FOR A SHARE OUTSTANDING THROUGHOUT THE PERIODS ENDED DECEMBER 31.
INVESTMENT ACTIVITIES DISTRIBUTIONS FROM ----------------------------------------------------------- NET RATIO OF NET REALIZED NET NET EXPENSES ASSET AND ASSET ASSETS, TO VALUE NET UNREALIZED NET VALUE END OF AVERAGE BEGINNING INVESTMENT GAIN INVESTMENT CAPITAL END OF TOTAL PERIOD NET OF PERIOD INCOME (LOSSES) ON INCOME GAINS PERIOD RETURN (000) ASSETS INVESTMENTS (LOSSES) - --------------------------------------------------------------------------------------------------------------------------- EQUITY FUND 1999 $15.28 -- $3.68 -- $(1.08) $17.88 24.37% $391,227 1.00% 1998 $12.06 $0.05 $3.88 $(0.05) $(0.66) $15.28 33.05% $101,817 1.00% 1997(1) $10.00 $0.08 $2.06 $(0.08) -- $12.06 21.52%+ $ 69,967 0.99%* HIGH GRADE INCOME FUND 1999 $10.43 $0.48 $(0.92) $(0.50) $(0.10) $ 9.39 (4.34)% $127,881 0.80% 1998 $10.23 $0.54 $0.37 $(0.54) $(0.17) $10.43 9.09% $ 24,901 0.80% 1997(1) $10.00 $0.51 $0.26 $(0.51) $(0.03) $10.23 7.94%+ $ 26,242 0.80%* HAWAII MUNICIPAL BOND FUND 1999 $10.77 $0.48 $(0.75) $(0.50) $(0.02) $9.98 (2.65)% $141,341 0.41% 1998 $10.67 $0.51 $ 0.10 $(0.51) -- $10.77 5.84% $ 35,751 0.41% 1997 $10.34 $0.53 $ 0.33 $(0.53) -- $10.67 8.52% $ 29,005 0.34% 1996 $10.47 $0.55 $(0.12) $(0.55) $(0.01) $10.34 4.21% $ 15,408 0.21% 1995(2) $10.00 $0.45 $ 0.47 $(0.45) -- $10.47 10.91%++ $ 9,411 0.27%* MONEY MARKET FUND 1999 $1.00 $0.05 -- $(0.05) -- $ 1.00 4.88% $284,291 0.50% 1998 $1.00 $0.05 -- $(0.05) -- $ 1.00 5.26% $268,318 0.50% 1997 $1.00 $0.05 -- $(0.05) -- $ 1.00 5.29% $246,671 0.51% 1996 $1.00 $0.05 -- $(0.05) -- $ 1.00 5.12% $274,125 0.49% 1995(3) $1.00 $0.05 -- $(0.05) -- $ 1.00 5.67%++ $305,120 0.50%* TREASURY MONEY MARKET FUND 1999 $1.00 $0.05 -- $(0.05) -- $1.00 4.65% $331,064 0.44% 1998 $1.00 $0.05 -- $(0.05) -- $1.00 5.10% $299,844 0.44% 1997 $1.00 $0.05 -- $(0.05) -- $1.00 5.22% $273,919 0.43% 1996(4) $1.00 $0.03 -- $(0.03) -- $1.00 5.08%++ $180,201 0.42%*
RATIO OF RATIO OF NET EXPENSES TO RATIO OF INVESTMENT AVERAGE NET INCOME TO NET ASSETS INVESTMENT AVERAGE EXCLUDING FEE INCOME TO NET ASSETS PORTFOLIO WAIVERS AND AVERAGE EXCLUDING FEE TURNOVER REIMBURSEMENTS NET ASSETS WAIVERS AND RATE REIMBURSEMENTS - ------------------------------------------------------------------------ EQUITY FUND 1999 1.27% (0.01)% (0.28)% 58% 1998 1.32% 0.38% 0.06% 41% 1997(1) 1.39%* 0.83%* 0.43%* 30% HIGH GRADE INCOME FUND 1999 1.19% 5.12% 4.73% 56% 1998 1.21% 5.21% 4.80% 98% 1997(1) 1.30%* 5.58%* 5.08%* 32% HAWAII MUNICIPAL BOND FUND 1999 0.99% 4.79% 4.21% 14% 1998 1.01% 4.74% 4.14% 21% 1997 0.99% 5.05% 4.40% 29% 1996 0.85% 5.33% 4.68% 27% 1995(2) 1.10%* 5.24%* 4.40%* 68% MONEY MARKET FUND 1999 0.84% 4.78% 4.44% n/a 1998 0.81% 5.12% 4.81% n/a 1997 0.85% 5.18% 4.84% n/a 1996 0.60% 5.01% 4.90% n/a 1995(3) 0.66%* 5.50%* 5.34%* n/a TREASURY MONEY MARKET FUND 1999 0.85% 4.56% 4.15% n/a 1998 0.84% 4.98% 4.58% n/a 1997 0.86% 5.11% 4.68% n/a 1996(4) 0.65%* 4.96%* 4.74%* n/a
+ TOTAL RETURN IS FOR THE PERIOD INDICATED AND HAS NOT BEEN ANNUALIZED. ++ TOTAL RETURN HAS BEEN ANNUALIZED. * ANNUALIZED. AMOUNTS DESIGNATED AS " -- " ARE EITHER $0 OR HAVE BEEN ROUNDED TO $0. (1) COMMENCED OPERATIONS ON JANUARY 31, 1997. (2) COMMENCED OPERATIONS ON FEBRUARY 15, 1995. (3) COMMENCED OPERATIONS ON JANUARY 30, 1995. (4) COMMENCED OPERATIONS ON MAY 1, 1996. Page 31 of 33 33 BISHOP STREET FUNDS INVESTMENT ADVISER Bishop Street Capital Management 999 Bishop Street, 10th Floor Honolulu, Hawaii 96813 SUB-ADVISER Wellington Management Company, LLP 75 State Street Boston, Massachusetts 02109 DISTRIBUTOR SEI Investments Distribution Co. One Freedom Valley Drive Oaks, Pennsylvania 19456 LEGAL COUNSEL Morgan, Lewis & Bockius LLP More information about the Funds is available without charge through the following: STATEMENT OF ADDITIONAL INFORMATION (SAI) The SAI dated April 30, 2000, includes detailed information about the Bishop Street Funds. The SAI is on file with the SEC and is incorporated by reference into this prospectus. This means that the SAI, for legal purposes, is a part of this prospectus. ANNUAL AND SEMI-ANNUAL REPORTS These reports list each Fund's holdings and contain information from the Fund's managers about strategies, and recent market conditions and trends and their impact on Fund performance. The reports also contain detailed financial information about the Funds. TO OBTAIN AN SAI, ANNUAL OR SEMI-ANNUAL REPORT, OR MORE INFORMATION: BY TELEPHONE: CALL 1-800-262-9565 BY MAIL: Write to the Funds Bishop Street Funds c/o SEI Investments Distribution Co. One Freedom Valley Drive Oaks, Pennsylvania 19456 Page 32 of 33 34 FROM THE SEC: You can also obtain the SAI or the Annual and Semi-Annual reports, as well as other information about the Bishop Street Funds, from the EDGAR Database on the SEC's website ("http://www.sec.gov"). You may review and copy documents at the SEC Public Reference Room in Washington, DC (for information on the operation of the Public Reference Room, call 1-202-942-8090). You may request documents by mail from the SEC, upon payment of a duplicating fee, by writing to: Securities and Exchange Commission, Public Reference Section, Washington, DC 20549-0102. You may also obtain this information, upon payment of a duplicating fee, by e-mailing the SEC at the following address: publicinfo@sec.gov. The Funds' Investment Company Act registration number is 811-08572. Page 33 of 33 35 CLASS A SHARES BISHOP STREET FUNDS PROSPECTUS APRIL 30, 2000 EQUITY FUND HIGH GRADE INCOME FUND HAWAII MUNICIPAL BOND FUND INVESTMENT ADVISER: BISHOP STREET CAPITAL MANAGEMENT THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THESE SECURITIES OR PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. Page 1 of 30 36 ABOUT THIS PROSPECTUS The Bishop Street Funds is a mutual fund family that offers different classes of shares in separate investment portfolios (Funds). The Funds have individual investment goals and strategies. This prospectus gives you important information about the Class A Shares of the Bishop Street Funds that you should know about before investing. Please read this prospectus and keep it for future reference. THIS PROSPECTUS HAS BEEN ARRANGED INTO DIFFERENT SECTIONS SO THAT YOU CAN EASILY REVIEW THIS IMPORTANT INFORMATION. IN THE NEXT COLUMN, THERE IS SOME GENERAL INFORMATION YOU SHOULD KNOW ABOUT RISK AND RETURN THAT IS COMMON TO EACH OF THE FUNDS. IF YOU WOULD LIKE MORE DETAILED INFORMATION ABOUT THE FUNDS, PLEASE SEE:
PAGE EQUITY FUND............................................................. 2 HIGH GRADE INCOME FUND.................................................. 4 HAWAII MUNICIPAL BOND FUND.............................................. 6 MORE INFORMATION ABOUT RISK............................................. 8 MORE INFORMATION ABOUT FUND INVESTMENTS................................. 9 INVESTMENT ADVISER AND INVESTMENT TEAM.................................. 9 PURCHASING, SELLING AND EXCHANGING FUND SHARES.......................... 10 DISTRIBUTION OF FUND SHARES............................................. 15 DIVIDENDS AND DISTRIBUTIONS............................................. 15 TAXES................................................................... 15 THE BOARD OF TRUSTEES................................................... 16 FINANCIAL HIGHLIGHTS.................................................... 17 HOW TO OBTAIN MORE INFORMATION ABOUT BISHOP STREET FUNDS................ Back Cover
Page 2 of 30 37 RISK/RETURN INFORMATION COMMON TO THE FUNDS Each Fund is a mutual fund. A mutual fund pools shareholders' money and, using professional investment managers, invests it in securities. Each Fund has its own investment goal and strategies for reaching that goal. The investment manager invests Fund assets in a way that they believe will help the Fund achieve its goal. Still, investing in each Fund involves risk and there is no guarantee that a Fund will achieve its goal. An investment manager's judgments about the markets, the economy, or companies may not anticipate actual market movements, economic conditions or company performance, and these judgments may affect the return on your investment. In fact, no matter how good a job an investment manager does, you could lose money on your investment in the Fund, just as you could with other investments. A FUND SHARE IS NOT A BANK DEPOSIT AND IT IS NOT INSURED OR GUARANTEED BY THE FDIC OR ANY GOVERNMENT AGENCY. The value of your investment in a Fund is based on the market value of the securities a Fund holds. These prices change daily due to economic and other events that affect particular companies and other issuers. These price movements, sometimes called volatility, may be greater or lesser depending on the types of securities a Fund owns and the markets in which they trade. The effect on a Fund of a change in the value of a single security will depend on how widely a Fund diversifies its holdings. Page 3 of 30 38 EQUITY FUND FUND SUMMARY INVESTMENT GOAL Long-term capital appreciation INVESTMENT FOCUS Common stocks and other equity securities SHARE PRICE VOLATILITY High PRINCIPAL INVESTMENT STRATEGY Investing in a diversified portfolio of U.S. equity securities INVESTOR PROFILE Investors seeking long-term capital appreciation, who are willing to accept the risk of share price volatility INVESTMENT STRATEGY The Equity Fund primarily invests (at least 65% of its assets) in common stocks and other equity securities that the Adviser believes have potential for capital appreciation. Such instruments include convertible securities. Generally, the Fund invests in securities of companies with market capitalizations in excess of $2 billion. The Fund seeks to be diversified across issuers and major economic sectors. In making a determination to buy, sell, or hold a security, the portfolio management team gives special consideration to the relationship of the security to the risk/reward measurement of the entire portfolio. The Fund's investment approach, with its emphasis on common stocks and other equity securities, is expected to provide returns consistent with the performance of the U.S. stock market, as generally measured by broad U.S. stock market indices such as the S&P 500. The Adviser employs a core equity investment style with a growth bias. PRINCIPAL RISKS OF INVESTING Since it purchases equity securities, the Fund is subject to the risk that stock prices will fall over short or extended periods of time. Historically, the equity markets have moved in cycles, and the value of the Fund's securities may fluctuate drastically from day to day. Individual companies may report poor results or be negatively affected by industry and/or economic trends and developments. The prices of securities issued by such companies may suffer a decline in response. These factors contribute to price volatility, which is the principal risk of investing in the Fund. The Fund is also subject to the risk that its market segment, equity securities, may underperform other market segments. Page 4 of 30 39 PERFORMANCE INFORMATION The bar chart and the performance table below illustrate the risks and volatility of an investment in the Fund. Of course, the Fund's past performance does not necessarily indicate how the Fund will perform in the future. This bar chart shows changes in the performance of the Fund from year to year.* The period from June 14, 1999 through December 31, 1999 reflects the performance of the Class A Shares. Periods prior to June 14, 1999 reflect the performance of the Fund's Institutional Shares. Institutional Shares are not offered by this prospectus; however, because they are invested in the same portfolio of securities, the annual returns for the two classes would be substantially similar. The chart does not reflect Class A Shares' sales charges. If sales charges had been reflected, returns would be less than those shown below. 1998 33.05% 1999 24.21% BEST QUARTER WORST QUARTER 23.34% -9.11% (12/31/98) (9/30/98)
*THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. This table compares the fund's average annual total returns for the periods ended December 31, 1999 to those of the S&P 500 Composite Index and the Consumer Price Index.
1 YEAR SINCE INCEPTION ------ --------------- EQUITY FUND 17.08%* 24.44%* S&P 500 COMPOSITE INDEX 21.04% 25.81%** CONSUMER PRICE INDEX 2.63% 2.04%**
* Class A Shares of the Fund were offered beginning June 14, 1999. The performance information shown prior to that date represents performance of the Fund's Institutional Class Shares, which were offered beginning January 31, 1997. Institutional Class Shares are not offered by this prospectus; however, because they are invested in the same portfolio of securities, the annual returns for the two classes would be substantially similar. The performance of the Institutional Class Shares has been adjusted for the maximum sales charge applicable to Class A Shares, but has not been adjusted to reflect the Class A Shares' Rule 12b-1 fees and expenses. Had that adjustment been made, performance would be lower than that shown. ** Since January 31, 1997 WHAT IS AN INDEX? An index measures the market prices of a specific group of securities in a particular market or securities in a market sector. You cannot invest directly in an index. Unlike a mutual fund, an index does not have an investment adviser and does not pay any commissions or expenses. If an index had expenses, its performance would be lower. The S&P 500 Composite Index is a widely-recognized, market value-weighted (higher market value stocks have more influence than lower market value stocks) index of 500 stocks, designed to mimic the overall equity market's industry weightings. 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. Page 5 of 30 40 FUND FEES AND EXPENSES THIS TABLE DESCRIBES THE SHAREHOLDER FEES THAT YOU MAY PAY IF YOU PURCHASE OR SELL CLASS A SHARES. YOU WOULD PAY THESE FEES DIRECTLY FROM YOUR INVESTMENT IN THE FUND. Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering price) 5.75% Maximum Deferred Sales Charge (Load) (as a percentage of net asset value) None Maximum Sales Charge (Load) Imposed on Reinvested Dividends and other Distributions (as a percentage of offering price) None Redemption Fee (as a percentage of amount redeemed, if applicable) None Exchange Fee None
ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS) Management Fees 0.74% Distribution Fees (12b-1 fees) 0.25% Other Expenses 0.53% ---- Total Annual Fund Operating Expenses 1.52%*
* The Fund's total actual annual fund operating expenses are less than the amount shown above because the Adviser waived a portion of its fees in order to keep total operating expenses at a specified level. These fee waivers remain in place as of the date of this prospectus, but the Adviser may discontinue all or part of these waivers at any time. With these fee waivers, the Fund's actual total operating expenses are as follows: Equity Fund 1.25%
For more information about these fees, see "Investment Adviser and Investment Team." EXAMPLE: COST OF INVESTING This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated and that you sell your shares at the end of each period. The Example also assumes that each year your investment has a 5% return, Fund operating expenses remain the same and you reinvest all dividends and distributions. Although your actual costs and returns might be different, your approximate costs of investing $10,000 in the Fund would be:
1 YEAR 3 YEARS 5 YEARS 10 YEARS $721 $1,028 $1,356 $2,283
Page 6 of 30 41 HIGH GRADE INCOME FUND FUND SUMMARY INVESTMENT GOAL High total return INVESTMENT FOCUS Corporate and U.S. government debt obligations SHARE PRICE VOLATILITY Medium PRINCIPAL INVESTMENT STRATEGY Investing in high grade U.S. debt obligations of domestic corporations and the U.S. government INVESTOR PROFILE Conservative investors seeking income, who are willing to accept some degree of share price volatility INVESTMENT STRATEGY The High Grade Income Fund primarily invests (at least 65% of its assets) in high grade U.S. dollar-denominated debt obligations of domestic corporations and the U.S. government. High grade debt obligations are those rated in the three highest ratings categories by either S&P or other nationally recognized statistical rating organizations, and include mortgage-backed and variable and floating rate instruments. In determining to buy, sell, or hold a security, the portfolio management team analyzes the security in relationship to the risk characteristics of the portfolio as a whole. PRINCIPAL RISKS OF INVESTING The prices of the Fund's fixed income securities respond to economic developments, particularly interest rate changes, as well as to perceptions about the creditworthiness of individual issuers, including governments. Generally, the Fund's fixed income securities will decrease in value if interest rates rise and vice versa. Also, the volatility of lower rated securities is even greater than that of higher rated securities. Longer-term securities are generally more volatile, so the average maturity or duration of these securities affects risk. The Fund is also subject to the risk that its market segment, fixed income securities, may underperform other market segments. The mortgages underlying mortgage-backed securities may be paid off early, which makes it difficult to determine their actual maturity and therefore calculate how they will respond to changes in interest rates. The Fund may have to reinvest prepaid amounts at lower interest rates. This risk of prepayment is an additional risk of mortgage-backed securities. Although the Fund's U.S. government securities are considered to be among the safest investments, they are not guaranteed against price movements due to changing interest rates. Obligations issued by some U.S. government agencies are backed by the U.S. Treasury, while others are backed solely by the ability of the agency to borrow from the U.S. Treasury or by the agency's own resources. Page 7 of 30 42 The Fund's investment approach, with its emphasis on high quality corporate and U.S. government obligations of medium maturity, is expected to provide total return through income and some capital appreciation with moderate risk to principal and less sensitivity to changing interest rates than longer term or lower quality bond funds. PERFORMANCE INFORMATION The bar chart and the performance table below illustrate the risks and volatility of an investment in the Fund. Of course, the Fund's past performance does not necessarily indicate how the Fund will perform in the future. This bar chart shows changes in the performance of the Fund from year to year.* The period from June 14, 1999 through December 31, 1999 reflects the performance of the Class A Shares. Periods prior to June 14, 1999 reflect the performance of the Fund's Institutional Shares. Institutional Shares are not offered by this prospectus; however, because they are invested in the same portfolio of securities, the annual returns for the two classes would be substantially similar. The chart does not reflect Class A Shares' sales charges. If sales charges had been reflected, returns would be less than those shown below. 1998 9.09% 1999 -5.04% BEST QUARTER WORST QUARTER 5.42% -2.37% (9/30/98) (3/31/99)
*THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. This table compares the Fund's average annual total returns for the periods ended December 31, 1999 to those of the Lehman Brothers Government/Corporate Bond Index and the Consumer Price Index.
1 YEAR SINCE INCEPTION ------ --------------- HIGH GRADE INCOME FUND -9.55%* 2.18%* LEHMAN BROTHERS GOVERNMENT/CORPORATE BOND INDEX -2.15% 5.66%** CONSUMER PRICE INDEX 2.63% 2.04%**
* Class A Shares of the Fund were offered beginning June 14, 1999. The performance information shown prior to that date represents performance of the Fund's Institutional Class Shares, which were offered beginning January 31, 1997. Institutional Class Shares are not offered by this prospectus; however, because they are invested in the same portfolio of securities, the annual returns for the two classes would be substantially similar. The performance of the Institutional Class Shares has been adjusted for the maximum sales charge applicable to Class A Shares, but has not been adjusted to reflect the Class A Shares' Rule 12b-1 fees and expenses. Had that adjustment been made, performance would be lower than that shown. ** Since January 31, 1997 WHAT IS AN INDEX? An index measures the market prices of a specific group of securities in a particular market or securities in a market sector. You cannot invest directly in an index. Unlike a mutual fund, an index does not have an investment adviser and does not pay any commissions or expenses. If an index had expenses, its performance would be lower. The Lehman Brothers Page 8 of 30 43 Government/Corporate Bond Index is a widely-recognized, market value-weighted (higher market value bonds have more influence than lower market value bonds) 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. 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. FUND FEES AND EXPENSES THIS TABLE DESCRIBES THE SHAREHOLDER FEES THAT YOU MAY PAY IF YOU PURCHASE OR SELL CLASS A SHARES. YOU WOULD PAY THESE FEES DIRECTLY FROM YOUR INVESTMENT IN THE FUND. Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering price) 4.75% Maximum Deferred Sales Charge (Load) (as a percentage of net asset value) None Maximum Sales Charge (Load) Imposed on Reinvested Dividends and other Distributions (as a percentage of offering price) None Redemption Fee (as a percentage of amount redeemed, if applicable) None Exchange Fee None
ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS) Management Fees 0.55% Distribution Fees (12b-1 fees) 0.25% Other Expenses 0.64% ---- Total Annual Fund Operating Expenses 1.44%*
* The Fund's total actual annual fund operating expenses are less than the amount shown above because the Adviser waived a portion of its fees in order to keep total operating expenses at a specified level. These fee waivers remain in place as of the date of this prospectus, but the Adviser may discontinue all or part of these waivers at any time. With these fee waivers, the Fund's actual total operating expenses are as follows: High Grade Income Fund 1.01%
For more information about these fees, see "Investment Adviser and Investment Team." Page 9 of 30 44 EXAMPLE: COST OF INVESTING This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated and that you sell your shares at the end of the period. The Example also assumes that each year your investment has a 5% return, Fund operating expenses remain the same and you reinvest all dividends and distributions. Although your actual costs and returns might be different, your approximate costs of investing $10,000 in the Fund would be:
1 YEAR 3 YEARS 5 YEARS 10 YEARS $615 $909 $1,225 $2,117
Page 10 of 30 45 HAWAII MUNICIPAL BOND FUND FUND SUMMARY INVESTMENT GOAL High current income exempt from federal and Hawaii income taxes INVESTMENT FOCUS Hawaii municipal bonds SHARE PRICE VOLATILITY Medium PRINCIPAL INVESTMENT STRATEGY Investing in a portfolio focused on investment grade municipal bonds INVESTOR PROFILE Investors seeking tax-exempt current income who are willing to accept the risk of investing in a portfolio of municipal securities INVESTMENT STRATEGY The Hawaii Municipal Bond Fund primarily invests (at least 65% of its assets) in investment grade municipal bonds, the interest from which is exempt from federal and Hawaii state income taxes. While the Adviser attempts to maximize the portion of the Fund's assets invested in Hawaii issues, the Fund may also invest in the municipal bonds issued by other U.S. states, territories and possessions. There is no restriction upon the amount of the Fund's assets that may be invested in obligations that pay income subject to the federal alternative minimum tax. To the extent that the Fund invests in securities subject to the alternative minimum tax, the income received from these securities could be taxable. There are no limits on the average maturity of the Fund's portfolio. The Adviser will use its judgment to invest in securities that will provide a high level of current income in light of current market conditions. In making a determination to buy, sell, or hold a security, the portfolio manager gives special consideration to the relative value of the security in comparison to the available alternatives, consistent with the objectives of the portfolio. PRINCIPAL RISKS OF INVESTING The prices of the Fund's fixed income securities respond to economic developments, particularly interest rate changes, as well as to perceptions about the creditworthiness of individual issuers, including governments. Generally, the Fund's fixed income securities will decrease in value if interest rates rise and vice versa. Also, the volatility of lower rated securities is even greater than that of higher rated securities. Longer-term securities are generally more volatile, so the average maturity or duration of these securities affects risk. The Fund is also subject to the risk that its market segment, fixed income securities, may underperform other market segments. There may be economic or political changes that impact the ability of municipal issuers to repay principal and to make interest payments on municipal securities. Changes in the financial Page 11 of 30 46 condition or credit rating of municipal issuers also may adversely affect the value of the Fund's securities. The Fund's concentration of investments in securities of issuers located in Hawaii subjects the Fund to economic conditions and government policies within that state. As a result, the Fund will be more susceptible to factors that adversely affect issuers of Hawaii obligations than a mutual fund that does not have as great a concentration in Hawaii. The Fund is non-diversified, which means that it may invest in the securities of relatively few issuers. As a result, the Fund may be more susceptible to a single adverse economic or political/regulatory occurrence affecting one or more of these issuers, and may experience increased volatility due to its investments in those securities. The Fund's investment approach, with its emphasis on investment grade municipal bonds, is expected to provide current tax-exempt income with moderate risk to principal. The Fund is not expected to perform as well as a comparable taxable bond fund, but may do as well or better on an after-tax basis. PERFORMANCE INFORMATION The bar chart and the performance table below illustrate the risks and volatility of an investment in the Fund. Of course, the Fund's past performance does not necessarily indicate how the Fund will perform in the future. This bar chart shows changes in the performance of the Fund from year to year.* The period from June 14, 1999 through December 31, 1999 reflects the performance of the Class A Shares. Periods prior to June 14, 1999 reflect the performance of the Fund's Institutional Shares. Institutional Shares are not offered by this prospectus; however, because they are invested in the same portfolio of securities, the annual returns for the two classes would be substantially similar. The chart does not reflect Class A Shares' sales charges. If sales charges had been reflected, returns would be less than those shown below. 1996 4.21% 1997 8.52% 1998 5.84% 1999 -2.91% BEST QUARTER WORST QUARTER 3.39% -2.01% (6/30/97) (6/30/99)
* THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. Page 12 of 30 47 This table compares the Fund's average annual total returns for the periods ended December 31, 1999 to those of the Lehman Brothers Municipal Bond Index and the Consumer Price Index. 1 YEAR SINCE INCEPTION ------ --------------- HAWAII MUNICIPAL BOND FUND -7.05%* 4.13%* LEHMAN BROTHERS MUNICIPAL BOND INDEX -2.07% 5.91%** CONSUMER PRICE INDEX 2.63% 2.32%**
* Class A Shares of the Fund were offered beginning June 14, 1999. The performance information shown prior to that date represents performance of the Fund's Institutional Class Shares, which were offered beginning February 15, 1995. Institutional Class Shares are not offered by this prospectus; however, because they are invested in the same portfolio of securities, the annual returns for the two classes would be substantially similar. The performance of the Institutional Class Shares has been adjusted for the maximum sales charge applicable to Class A Shares, but has not been adjusted to reflect the Class A Shares' Rule 12b-1 fees and expenses. Had that adjustment been made, performance would be lower than that shown. ** Since February 28, 1995 WHAT IS AN INDEX? An index measures the market prices of a specific group of securities in a particular market or securities in a market sector. You cannot invest directly in an index. Unlike a mutual fund, an index does not have an investment adviser and does not pay any commissions or expenses. If an index had expenses, its performance would be lower. The Lehman Brothers 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. FUND FEES AND EXPENSES THIS TABLE DESCRIBES THE SHAREHOLDER FEES THAT YOU MAY PAY IF YOU PURCHASE OR SELL CLASS A SHARES. YOU WOULD PAY THESE FEES DIRECTLY FROM YOUR INVESTMENT IN THE FUND. Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering price) 4.25% Maximum Deferred Sales Charge (Load) (as a percentage of net asset value) None Maximum Sales Charge (Load) Imposed on Reinvested Dividends and other Distributions (as a percentage of offering price) None Redemption Fee (as a percentage of amount redeemed, if applicable) None Exchange Fee None
Page 13 of 30 48 ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS) Management Fees 0.35% Distribution Fees (12b-1 fees) 0.25% Other Expenses 0.64% ---- Total Annual Fund Operating Expenses 1.24%*
* The Fund's total actual annual fund operating expenses are less than the amount shown above because the Adviser waived a portion of its fees in order to keep total operating expenses at a specified level. These fee waivers remain in place as of the date of this prospectus, but the Adviser may discontinue all or part of these waivers at any time. With these fee waivers, the Fund's actual total operating expenses are as follows: Hawaii Municipal Bond Fund 0.70%
For more information about these fees, see "Investment Adviser and Investment Team." EXAMPLE: COST OF INVESTING This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated and that you sell your shares at the end of the period. The Example also assumes that each year your investment has a 5% return, Fund operating expenses remain the same and you reinvest all dividends and distributions. Although your actual costs and returns might be different, your approximate costs of investing $10,000 in the Fund would be:
1 YEAR 3 YEARS 5 YEARS 10 YEARS $546 $802 $1,077 $1,861
Page 14 of 30 49 MORE INFORMATION ABOUT RISK MANAGEMENT RISK - The risk that a strategy used by a All Funds fund's management may fail to produce the intended result. EQUITY RISK - Equity securities include public and Equity Fund privately issued equity securities, common and preferred stocks, warrants, rights to subscribe to common stock and convertible securities, as well as instruments that attempt to track the price movement of equity indices. Investments in equity securities and equity derivatives in general are subject to market risks that may cause their prices to fluctuate over time. The value of securities convertible into equity securities, such as warrants or convertible debt, is also affected by prevailing interest rates, the credit quality of the issuer and any call provision. Fluctuations in the value of equity securities in which a mutual fund invests will cause a fund's net asset value to fluctuate. An investment in a portfolio of equity securities may be more suitable for long-term investors who can bear the risk of these share price fluctuations. FIXED INCOME RISK - The market value of fixed income High Grade Income Fund investments changes in response to interest rate changes Hawaii Municipal Bond Fund and other factors. During periods of falling interest rates, the values of outstanding fixed income securities generally rise. Moreover, while securities with longer maturities tend to produce higher yields, the prices of longer maturity securities are also subject to greater market fluctuations as a result of changes in interest rates. In addition to these fundamental risks, different types of fixed income securities may be subject to the following additional risks: CALL RISK - During periods of falling interest High Grade Income Fund rates, certain debt obligations with high interest Hawaii Municipal Bond Fund rates may be prepaid (or "called") by the issuer prior to maturity. This may cause a Fund's average weighted maturity to fluctuate, and may require a Fund to invest the resulting proceeds at lower interest rates.
Page 15 of 30 50 CREDIT RISK - The possibility that an issuer will be High Grade Income Fund unable to make timely payments of either Hawaii Municipal Bond Fund principal or interest. Since a Fund purchases securities backed by credit enhancements from banks and other financial institutions, changes in the credit ratings of these institutions could cause a Fund to lose money and may affect a Fund's share price. EVENT RISK - Securities may suffer declines in High Grade Income Fund credit quality and market value due to issuer Hawaii Municipal Bond Fund restructurings or other factors. The overall risk of these declines should be reduced because of a Fund's multiple holdings. MUNICIPAL ISSUER RISK - There may be economic Hawaii Municipal Bond Fund or political changes that impact the ability of municipal issuers to repay principal and to make interest payments on municipal securities. Changes to the financial condition or credit rating of municipal issuers may also adversely affect the value of the Fund's municipal securities. Constitutional or legislative limits on borrowing by municipal issuers may result in reduced supplies of municipal securities. Moreover, certain municipal securities are backed only by a municipal issuer's ability to levy and collect taxes. In addition, the Hawaii Municipal Bond Fund's concentration of investments in issuers located in a single state makes the Fund more susceptible to adverse political or economic developments affecting that state. The Fund also may be riskier than mutual funds that buy securities of issuers in numerous states. MORTGAGE-BACKED SECURITIES - Mortgage-backed High Grade Income Fund securities are fixed income securities representing an interest in a pool of underlying mortgage loans. They are sensitive to changes in interest rates, but may respond to these changes differently from other fixed income securities due to the possibility of prepayment of the underlying mortgage loans. As a result, it may not be possible to determine in advance the actual maturity date or average life of a mortgage-backed security. Rising interest rates
Page 16 of 30 51 tend to discourage refinancings, with the result that the average life and volatility of the security will increase, exacerbating its decrease in market price. When interest rates fall, however, mortgage-backed securities may not gain as much in market value because of the expectation of additional mortgage prepayments that must be reinvested at lower interest rates. Prepayment risk may make it difficult to calculate the average maturity of a portfolio of mortgage-backed securities and, therefore, to assess the volatility risk of that portfolio. MORE INFORMATION ABOUT FUND INVESTMENTS In addition to the principal investments and strategies described in this prospectus, each Fund also may invest in other securities, use other strategies and engage in other investment practices. These investments and strategies, as well as those described in this prospectus, are described in detail in our Statement of Additional Information. Of course, we cannot guarantee that any Fund will achieve its investment goal. The investments and strategies described in this prospectus are those that we use under normal conditions. During unusual economic or market conditions, or for temporary defensive or liquidity purposes, each Fund may invest up to 100% of its assets in taxable money market instruments, repurchase agreements and short-term obligations. When a Fund is investing for temporary defensive purposes, it is not pursuing its investment goal. INVESTMENT ADVISER AND INVESTMENT TEAM INVESTMENT ADVISER The Investment Adviser makes investment decisions for the Funds and continuously reviews, supervises and administers each Fund's respective investment program. The Board of Trustees of the Bishop Street Funds supervises the Adviser and establishes policies that the Adviser must follow in its management activities. Bishop Street Capital Management, a registered investment adviser and independent subsidiary of First Hawaiian Bank, serves as Adviser to the Funds. Prior to February 22, 2000, First Hawaiian Bank served as Adviser to the Funds. As of December 31, 1999, First Hawaiian Bank had approximately $10.9 billion in assets under management. For the fiscal year ended December 31, 1999, First Hawaiian Bank received advisory fees at the following rates: Equity Fund 0.71% High Grade Income Fund 0.42% Hawaii Municipal Bond Fund 0.07%
Page 17 of 30 52 ADDITIONAL COMPENSATION. Bishop Street Capital Management and its affiliates may act as fiduciary or provide services in various non-fiduciary capacities with respect to plans subject to the Employee Retirement Income Security Act of 1974 (ERISA) and other trust and agency accounts that invest in the Funds. Bishop Street Capital Management may also receive compensation for acting as the Funds' investment adviser in cases where the compensation is not duplicative of the compensation those accounts pay for fiduciary and non-fiduciary services. First Hawaiian Bank and its affiliates also receive compensation in connection with the following: SHAREHOLDER SERVICING FEES. The Funds have adopted a Shareholder Servicing Plan that allows the Funds to pay shareholder servicing fees of up to 0.25% of a Fund's average daily net assets for the servicing of its shares, and for services provided to shareholders. First Hawaiian Bank or any of its affiliates providing brokerage or investment-related services may receive shareholder servicing fees, payable from the Funds' assets, of up to 0.25% of each Fund's average daily net assets. INVESTMENT TEAM The Equity and High Grade Income Funds are managed by a team of investment professionals from the Adviser. No one person is primarily responsible for making investment recommendations to the team. Louis M. Levitas has managed the Hawaii Municipal Bond Fund since its inception in February 1995. He manages the Fund pursuant to an agreement between the Adviser and Bank of the West. Mr. Levitas has been a municipal bond specialist since 1970. PURCHASING, SELLING AND EXCHANGING FUND SHARES This section tells you how to purchase, sell (sometimes called "redeem") and exchange shares of the Funds. HOW TO PURCHASE FUND SHARES You may purchase shares directly by: - - Mail; - - Telephone; - - Wire; or - - Direct Deposit. To purchase shares directly from us complete and send in an account application. If you need an application or have questions, please call 1-800-262-9565. Write your check, payable in U.S. dollars, to Bishop Street Funds and mail to Bishop Street Funds, P.O. Box 219721, Kansas City, MO 64121-9721. We cannot accept third-party checks, credit cards, credit card checks or cash. You may also purchase shares through a representative of BancWest Corporation and its banking and non-banking subsidiaries, or other financial institutions that have executed dealer agreements. Page 18 of 30 53 GENERAL INFORMATION You may purchase shares on any day that the New York Stock Exchange (NYSE) and the Federal Reserve are open for business (a Business Day). A Fund may reject any purchase order if it is determined that accepting the order would not be in the best interests of the Fund or its shareholders. The price per share (the offering price) will be the net asset value per share (NAV) next determined after a Fund receives your purchase order plus the applicable front-end sales charge. A Fund is deemed to have received your order upon receipt of a completed account application and a check or money order. If you already have an existing account, a Fund is deemed to have received your order upon receipt of your order and your check or money order. The Funds calculate each bond and equity fund's NAV once each Business Day at the regularly scheduled close of normal trading on the NYSE (normally 4:00 p.m., Eastern time). So, for you to receive the current Business Day's NAV, generally we must receive your order before 4:00 p.m., Eastern time. HOW WE CALCULATE NAV NAV for one Fund share is the value of that share's portion of the net assets of the Fund. In calculating NAV, a Fund generally values its investment portfolio at market price. If market prices are unavailable or a Fund thinks that they are unreliable, fair value prices may be determined in good faith using methods approved by the Board of Trustees. MINIMUM PURCHASES & AUTOMATIC INVESTMENT PLANS You may open an account with a $1,000 minimum initial investment per Fund ($500 for those investing in retirement plans and for officers, directors and employees of BancWest Corporation and its banking and non-banking subsidiaries). The minimum initial investment may be reduced with an Automatic Investment Plan (AIP). If you have a checking or savings account, you may establish an AIP and open an account with a $100 minimum initial investment per Fund ($50 for officers, directors and employees of BancWest Corporation and its banking and non-banking subsidiaries). You may then begin regularly scheduled investments of at least $50 per month through automatic deductions from your checking or savings accounts. Purchases made through the AIP are subject to the applicable front-end sales charge. Page 19 of 30 54 SALES CHARGES FRONT-END SALES CHARGES - CLASS A SHARES The offering price of Class A Shares is the NAV next calculated after a Fund receives your request, plus the front-end sales load. The amount of any front-end sales charge included in your offering price varies, depending on the amount of your investment: EQUITY FUND
YOUR SALES CHARGE AS A PERCENTAGE YOUR SALES CHARGES AS A IF YOUR INVESTMENT IS: OF OFFERING PRICE PERCENTAGE OF YOUR NET INVESTMENT - ---------------------- --------------------------------- --------------------------------- Less than $50,000 5.75% 6.10% $50,000 but less than $100,000 4.50% 4.71% $100,000 but less than $250,000 3.50% 3.63% $250,000 but less than $500,000 2.50% 2.56% $500,000 but less than $1,000,000 2.00% 2.04% $1,000,000 and over* 0.00% 0.00%
* Even though you do not pay a sales charge on purchases of $1,000,000 or more, the Distributor may pay dealers a 1% commission for these transactions. HIGH GRADE INCOME FUND
YOUR SALES CHARGE AS A YOUR SALES CHARGES AS A PERCENTAGE IF YOUR INVESTMENT IS: PERCENTAGE OF OFFERING PRICE OF YOUR NET INVESTMENT - ---------------------- ---------------------------- ---------------------------------- Less than $50,000 4.75% 4.99% $50,000 but less than $100,000 4.50% 4.71% $100,000 but less than $250,000 3.50% 3.63% $250,000 but less than $500,000 2.50% 2.56% $500,000 but less than $1,000,000 2.00% 2.04% $1,000,000 and over* 0.00% 0.00%
* Even though you do not pay a sales charge on purchases of $1,000,000 or more, the Distributor may pay dealers a 1% commission for these transactions. HAWAII MUNICIPAL BOND FUND
YOUR SALES CHARGE AS A YOUR SALES CHARGES AS A IF YOUR INVESTMENT IS: PERCENTAGE OF OFFERING PRICE PERCENTAGE OF YOUR NET INVESTMENT - ---------------------- ---------------------------- --------------------------------- Less than $50,000 4.25% 4.44% $50,000 but less than $100,000 4.00% 4.17% $100,000 but less than $250,000 3.50% 3.63% $250,000 but less than $500,000 2.50% 2.56% $500,000 but less than $1,000,000 2.00% 2.04% $1,000,000 and over* 0.00% 0.00%
* Even though you do not pay a sales charge on purchases of $1,000,000 or more, the Distributor may pay dealers a 1% commission for these transactions. Page 20 of 30 55 WAIVER OF FRONT-END SALES CHARGE -- CLASS A SHARES The front-end sales charge will be waived on Class A Shares purchased: - - by reinvestment of dividends and distributions; - - by persons repurchasing shares they redeemed within the last 30 days (see "Repurchase of Class A Shares"); - - by investors who purchase shares with redemption proceeds (but only to the extent of such redemption proceeds) from another investment company within 30 days of such redemption, provided that, the investors paid either a front-end or contingent deferred sales charge on the original shares redeemed; - - by present and retired Trustees of the Funds and officers, directors and employees (and members of their immediate family) of BancWest Corporation and its banking and non-banking subsidiaries; - - by persons reinvesting distributions from qualified employee benefit retirement plans and rollovers from individual retirement accounts ("IRAs") previously with BancWest Corporation and its banking and non-banking subsidiaries; - - by persons investing an amount less than or equal to the value of an account distribution when an account for which a bank affiliated with BancWest Corporation and its banking and non-banking subsidiaries acted in a fiduciary, administrative, custodial or investment advisory capacity is closed; or - - through dealers, retirement plans, asset allocation programs and financial institutions that, under their dealer agreements with the Distributor or otherwise, do not receive any portion of the front-end sales charge. REPURCHASE OF CLASS A SHARES You may repurchase any amount of Class A Shares of any Fund at NAV (without the normal front-end sales charge), up to the limit of the value of any amount of Class A Shares (other than those which were purchased with reinvested dividends and distributions) that you redeemed within the past 30 days. In effect, this allows you to reacquire shares that you may have had to redeem, without re-paying the front-end sales charge. To exercise this privilege, the Fund must receive your purchase order within 30 days of your redemption. In addition, you must notify the Fund when you send in your purchase order that you are repurchasing shares. REDUCED SALES CHARGES -- CLASS A SHARES RIGHTS OF ACCUMULATION. In calculating the appropriate sales charge rate, this right allows you to add the value of the Class A Shares you already own to the amount that you are currently purchasing. The Fund will combine the value of your current purchases with the current value of any Class A Shares you purchased previously for (i) your account, (ii) your spouse's account, (iii) a joint account with your spouse, or (iv) your minor children's trust or custodial accounts. A fiduciary purchasing shares for the same fiduciary account, trust or estate may also use this right of accumulation. The Fund will only consider the value of Class A Shares purchased previously that were sold subject to a sales charge. To be entitled to a reduced sales charge based on shares already owned, you must ask us for the reduction at the time of purchase. You must provide the Fund with your account number(s) and, if applicable, the account numbers for your spouse and/or children (and provide the children's ages). The Fund may amend or terminate this right of accumulation at any time. Page 21 of 30 56 LETTER OF INTENT. You may purchase Class A Shares at the sales charge rate applicable to the total amount of the purchases you intend to make over a 13-month period. In other words, a Letter of Intent allows you to purchase Class A Shares of a Fund over a 13-month period and receive the same sales charge as if you had purchased all the shares at the same time. The Fund will only consider the value of Class A Shares sold subject to a sales charge. As a result, Class A Shares purchased with dividends or distributions will not be included in the calculation. To be entitled to a reduced sales charge based on shares you intend to purchase over the 13-month period, you must send the Fund a Letter of Intent. In calculating the total amount of purchases, you may include in your letter purchases made up to 90 days before the date of the Letter. The 13-month period begins on the date of the first purchase, including those purchases made in the 90-day period before the date of the Letter. Please note that the purchase price of these prior purchases will not be adjusted. You are not legally bound by the terms of your Letter of Intent to purchase the amount of your shares stated in the Letter. The Letter does, however, authorize the Fund to hold in escrow 5% of the total amount you intend to purchase. If you do not complete the total intended purchase at the end of the 13-month period, the Fund's transfer agent will redeem the necessary portion of the escrowed shares to make up the difference between the reduced rate sales charge (based on the amount you intended to purchase) and the sales charge that would normally apply (based on the actual amount you purchased). COMBINED PURCHASE/QUANTITY DISCOUNT PRIVILEGE. When calculating the appropriate sales charge rate, the Fund will combine same day purchases of Class A Shares (that are subject to a sales charge) made by you, your spouse and your minor children (under age 21). This combination also applies to Class A Shares you purchase with a Letter of Intent. GENERAL INFORMATION ABOUT SALES CHARGES Your securities dealer is paid a commission when you buy your shares and is paid a distribution fee as long as you hold your shares. Your securities dealer or servicing agent may receive different levels of compensation depending on which Class of shares you buy. From time to time, some financial institutions, including brokerage firms affiliated with the Adviser, may be reallowed up to the entire sales charge. Firms that receive a reallowance of the entire sales charge may be considered underwriters for the purpose of federal securities law. HOW TO SELL YOUR FUND SHARES If you own your shares directly, you may sell your shares on any Business Day by contacting the Fund by mail at P.O. Box 219721, Kansas City, MO 64121-9721 or by telephone at 1-800-262-9565. If you are requesting to sell $5,000 or more of your shares, your request must be in writing and include a signature guarantee by a bank or other financial institution (a notarized signature is not sufficient). The sale price of each share will be the next NAV determined after the Fund receives your request. Page 22 of 30 57 SYSTEMATIC WITHDRAWAL PLAN If you have at least $10,000 in the Equity Fund, High Grade Income Fund or Hawaii Municipal Bond Fund in your account, you may use the Systematic Withdrawal Plan. Under the plan you may arrange monthly, quarterly, semi-annual or annual automatic withdrawals of at least $50 from any Fund. The proceeds of each withdrawal will be mailed to you by check or electronically transferred to your bank account. RECEIVING YOUR MONEY Normally, we will send your sale proceeds within seven days after we receive your request. Your proceeds can be wired to your bank account if your redemption proceeds are in excess of $500 (subject to a $15 fee) or sent to you by check. IF YOU RECENTLY PURCHASED YOUR SHARES BY CHECK, REDEMPTION PROCEEDS MAY NOT BE AVAILABLE UNTIL YOUR CHECK HAS CLEARED (WHICH MAY TAKE UP TO 15 DAYS FROM YOUR DATE OF PURCHASE). REDEMPTIONS IN KIND The Fund generally pays sale (redemption) proceeds in cash. However, under unusual conditions that make the payment of cash unwise (and for the protection of the Fund's remaining shareholders) we might pay all or part of your redemption proceeds in liquid securities with a market value equal to the redemption price (redemption in kind). It is highly unlikely that your shares would ever be redeemed in kind, but if they were you would probably have to pay transaction costs to sell the securities distributed to you, as well as taxes on any capital gains from the sale as with any redemption. INVOLUNTARY SALES OF YOUR SHARES If your account balance drops below $1,000 ($500 for those investing in retirement plans; $100 for officers, directors and employees of BancWest Corporation and its banking and non-banking subsidiaries who have arranged to purchase shares through the AIP) because of redemptions you may be required to sell your shares. But, we will always give you at least 60 days' written notice to give you time to add to your account and avoid the sale of your shares. SUSPENSION OF YOUR RIGHT TO SELL YOUR SHARES A Fund may suspend your right to sell your shares during times when trading on the NYSE is restricted or halted or otherwise as permitted by the SEC. More information about this is in our Statement of Additional Information. HOW TO EXCHANGE YOUR SHARES You may exchange your Retail Class A Shares for Retail Class A Shares of any other Bishop Street Fund contained in this prospectus on any Business Day by contacting us directly by mail or telephone. You may also exchange shares through your financial institution by mail or telephone. Page 23 of 30 58 IF YOU RECENTLY PURCHASED SHARES BY CHECK, YOU MAY NOT BE ABLE TO EXCHANGE YOUR SHARES UNTIL YOUR CHECK HAS CLEARED (WHICH MAY TAKE UP TO 15 DAYS FROM YOUR DATE OF PURCHASE). THIS EXCHANGE PRIVILEGE MAY BE CHANGED OR CANCELED AT ANY TIME UPON 60 DAYS' NOTICE. When you exchange shares, you are really selling your shares and buying other Fund shares. So, your sale price and purchase price will be based on the NAV next calculated after the Fund receives your exchange request. If you exchange shares that you purchased without a sales charge or with a lower sales charge into a Fund with a sales charge or with a higher sales charge, the exchange is subject to an incremental sales charge (e.g., the difference between the lower and higher applicable sales charges). If you exchange shares into a Fund with the same, lower or no sales charge there is no incremental sales charge for the exchange. TELEPHONE TRANSACTIONS Purchasing, selling and exchanging Fund shares over the telephone is extremely convenient, but not without risk. Although the Fund has certain safeguards and procedures to confirm the identity of callers and the authenticity of instructions, the Fund is not responsible for any losses or costs incurred by following telephone instructions we reasonably believe to be genuine. If you or your financial institution transact with the Fund over the telephone, you will generally bear the risk of any loss. DISTRIBUTION OF FUND SHARES Each Fund has adopted a Class A distribution plan that allows the Fund to pay distribution and service fees for the sale and distribution of its shares, and for services provided to shareholders. Because these fees are paid out of a Fund's assets continuously, over time these fees will increase the cost of your investment and may cost you more than paying other types of sales charges. Distribution fees, as a percentage of average daily net assets for the Class A Shares for each of the Funds is 0.25%. The Distributor may, from time to time in its sole discretion, institute one or more promotional incentive programs for dealers, which will be paid for by the Distributor from any sales charge it receives or from any other source available to it. Under any such program, the Distributor may provide cash or non-cash compensation as recognition for past sales or encouragement of future sales that may include the following: merchandise, travel, expenses, prizes, meals, and lodgings, and gifts that do not exceed $100 per year, per individual. Page 24 of 30 59 DIVIDENDS AND DISTRIBUTIONS Each Fund distributes its income, if any, as follows: DECLARED DAILY AND PAID MONTHLY High Grade Income Fund Hawaii Municipal Bond Fund DECLARED AND PAID QUARTERLY Equity Fund Each Fund makes distributions of capital gains, if any, at least annually. If you own Fund shares on a Fund's record date, you will be entitled to receive the distribution. You will receive dividends and distributions in the form of additional Fund shares unless you elect to receive payment in cash. To elect cash payment, you must notify the Fund in writing prior to the date of the distribution. Your election will be effective for dividends and distributions paid after the Fund receives your written notice. To cancel your election, simply send the Fund written notice. TAXES PLEASE CONSULT YOUR TAX ADVISOR REGARDING YOUR SPECIFIC QUESTIONS ABOUT FEDERAL, STATE AND LOCAL INCOME TAXES. Below we have summarized some important tax issues that affect the Funds and their shareholders. This summary is based on current tax laws, which may change. Each Fund will distribute substantially all of its income and capital gains, if any. The dividends and distributions you receive may be subject to federal, state and local taxation, depending upon your tax situation. Distributions you receive from a Fund may be taxable whether or not you reinvest them. Income distributions are generally taxable at ordinary income tax rates. Capital gains distributions are generally taxable at the rates applicable to long-term capital gains. EACH SALE OR EXCHANGE OF FUND SHARES IS A TAXABLE EVENT. The Hawaii Municipal Bond Fund intends to distribute income that is exempt from both federal taxes and Hawaii state taxes. The Fund may invest a portion of its assets in securities that generate taxable income for federal or state income taxes. Income exempt from federal tax may be subject to state and local taxes. Any capital gains distributed by the Fund may be taxable. MORE INFORMATION ABOUT TAXES IS IN THE STATEMENT OF ADDITIONAL INFORMATION. Page 25 of 30 60 THE BOARD OF TRUSTEES The Board of Trustees supervises the management and affairs of the Trust. The Trustees have approved contracts with certain companies that provide us with essential management services. The Trustees of the Trust are as follows:
NAME BUSINESS HISTORY Martin Anderson Partner, Goodsill Anderson Quinn & Stifel since 1951 Charles E. Carlbom Chairman, BPI, Inc., since 1999; President and CEO, United Grocers, Inc. (1997-1999); President and CEO, Western Family Food, Inc., Western Family Holdings Inc. (1982-1997) Philip H. Ching Vice Chairman, First Hawaiian Bank (1968-1996) James L. Huffman Dean and Professor, Lewis & Clark Law School since 1973 Shunichi Kimura Mediator, Mediation Specialists of Hawaii (1994-1997); Judge, State of Hawaii Judiciary (1974-1994) Robert A. Nesher Chairman, SEI Mutual Funds since 1974; Director and Executive Vice President of the Administrator and the Distributor (1981-1994) William S. Richardson Trustee, Kamehameha Schools Bishop Estate (1982-1992); Chief Justice, Supreme Court of Hawaii (1966-1983) Peter F. Sansevero Regional Director of the Northwestern Region and First Vice President, Merrill Lynch (1958-1997) Manual R. Sylvester Managing Partner, Coopers & Lybrand L.L.P. (1978-1992); Executive Partner, Coopers & Lybrand L.L.P. (1992) Joyce S. Tsunoda Senior Vice President, University of Hawaii System since 1989; Chancellor, Community Colleges-University of Hawaii since 1983
Page 26 of 30 61 FINANCIAL HIGHLIGHTS The tables that follow present performance information of the Class A Shares which commenced operations on June 14, 1999. This information is intended to help you understand each Fund's financial performance for the past five years, or, if shorter, the period of the Fund's operations. Some of this information reflects financial information for a single Fund share. The total returns in the table represent the rate that you would have earned (or lost) on an investment in a Fund, assuming you reinvested all of your dividends and distributions. This information has been audited by PricewaterhouseCoopers LLP, independent public accountants. Their report, along with each Fund's financial statements, appears in the annual report that accompanies our Statement of Additional Information. You can obtain the annual report, which contains more performance information, at no charge by calling 1-800-262-9565. Page 27 of 30 62 FINANCIAL HIGHLIGHTS For a Share Outstanding Throughout the Periods Ended December 31,
INVESTMENT ACTIVITIES Distribution from ------------------------------------------------------- NET REALIZED RATIO OF NET AND NET NET EXPENSES ASSET UNREALIZED ASSET ASSETS, TO VALUE NET GAINS NET CAPITAL VALUE END OF AVERAGE BEGINNING INVESTMENT (LOSSES) INVESTMENT GAINS END OF TOTAL PERIOD NET OF PERIOD INCOME SECURITIES INCOME (LOSSES) PERIOD RETURN** (000) ASSETS --------- ---------- ---------- ---------- -------- ------ -------- ------- -------- EQUITY FUND CLASS A SHARES 1999(1): $15.74 -- $3.19 -- $(1.06) $17.87 20.52%+ $583 1.25%* HIGH GRADE INCOME FUND CLASS A SHARES 1999(1): $9.69 $0.19 $(0.19) $(0.24) $(0.10) $9.35 (0.05)%+ $1 1.05%* HAWAII MUNICIPAL BOND FUND CLASS A SHARES 1999(1): $10.42 $0.26 $(0.44) $(0.25) $(0.02) $9.97 (1.76)%+ $6,131 0.66%*
RATIO OF NET RATIO OF INVESTMENT EXPENSES TO INCOME TO AVERAGE RATIO OF AVERAGE NET ASSETS NET NET ASSETS EXCLUDING INVESTMENT EXCLUDING FEE INCOME TO FEE PORTFOLIO WAIVERS AND AVERAGE WAIVERS AND TURNOVER REIMBURSEMENTS NET ASSETS REIMBURSEMENTS RATE -------------- ---------- -------------- --------- EQUITY FUND CLASS A SHARES 1999(1): 1.61%* (0.33)%* (0.69)%* 58% HIGH GRADE INCOME FUND CLASS A SHARES 1999(1): 1.87%* 4.89%* 4.07%* 56% HAWAII MUNICIPAL BOND FUND CLASS A SHARES 1999(1): 1.24%* 4.89%* 4.31%* 14%
+ TOTAL RETURN IS FOR THE PERIOD INDICATED AND HAS NOT BEEN ANNUALIZED. * ANNUALIZED. ** TOTAL RETURN DOES NOT REFLECT THE SALES CHARGE ON CLASS A SHARES. AMOUNTS DESIGNATED AS " -- " ARE EITHER $0 OR HAVE BEEN ROUNDED TO $0. (1) COMMENCED OPERATIONS ON JUNE 14, 1999 Page 28 of 30 63 BISHOP STREET FUNDS INVESTMENT ADVISER Bishop Street Capital Management 999 Bishop Street, 10th Floor Honolulu, Hawaii 96813 DISTRIBUTOR SEI Investments Distribution Co. One Freedom Valley Drive Oaks, Pennsylvania 19456 LEGAL COUNSEL Morgan, Lewis & Bockius LLP More information about the Funds is available without charge through the following: STATEMENT OF ADDITIONAL INFORMATION (SAI) The SAI dated April 30, 2000, includes detailed information about the Bishop Street Funds. The SAI is on file with the SEC and is incorporated by reference into this prospectus. This means that the SAI, for legal purposes, is a part of this prospectus. ANNUAL AND SEMI-ANNUAL REPORTS These reports list each Fund's holdings and contain information from the Fund's managers about strategies, and recent market conditions and trends and their impact on Fund performance. The reports also contain detailed financial information about the Funds. TO OBTAIN AN SAI, ANNUAL OR SEMI-ANNUAL REPORT, OR MORE INFORMATION: BY TELEPHONE: CALL 1-800-262-9565 BY MAIL: Write to the Funds Bishop Street Funds c/o SEI Investments Distribution Co. One Freedom Valley Drive Oaks, Pennsylvania 19456 Page 29 of 30 64 FROM THE SEC: You can also obtain the SAI or the Annual and Semi-annual reports, as well as other information about the Bishop Street Funds, from the EDGAR Database on the SEC's website ("http://www.sec.gov"). You may review and copy documents at the SEC Public Reference Room in Washington, DC (for information on the operation of the Public Reference Room, call 1-202-942-8090). You may request documents by mail from the SEC, upon payment of a duplicating fee, by writing to: Securities and Exchange Commission, Public Reference Section, Washington, DC 20549-0102. You may also obtain this information, upon payment of a duplicating fee, by e-mailing the SEC at the following address: publicinfo@sec.gov. The Funds' Investment Company Act registration number is 811-08572. Page 30 of 30 65 BISHOP STREET FUNDS PROSPECTUS APRIL 30, 2000 MONEY MARKET FUND INVESTMENT ADVISER BISHOP STREET CAPITAL MANAGEMENT THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THESE SECURITIES OR PASSED UPON THE ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. Page 1 of 16 66 ABOUT THIS PROSPECTUS Bishop Street Funds is a mutual fund family that offers different classes of shares in separate investment portfolios (Funds). The Funds have individual investment goals and strategies. This prospectus gives you important information about the Institutional Class of the Money Market Fund that you should know about before investing. Please read this prospectus and keep it for future reference. THIS PROSPECTUS HAS BEEN ARRANGED INTO DIFFERENT SECTIONS SO THAT YOU CAN EASILY REVIEW THIS IMPORTANT INFORMATION. IF YOU WOULD LIKE MORE DETAILED INFORMATION ABOUT THE FUND, PLEASE SEE:
PAGE PRINCIPAL INVESTMENT STRATEGIES AND RISKS, PERFORMANCE INFORMATION AND EXPENSES............................ 2 MORE INFORMATION ABOUT RISK......................................... 5 MORE INFORMATION ABOUT FUND INVESTMENTS............................. 6 INVESTMENT ADVISER AND SUB-ADVISER.................................. 6 PURCHASING, SELLING AND EXCHANGING FUND SHARES...................... 7 DIVIDENDS AND DISTRIBUTIONS......................................... 9 TAXES............................................................... 9 THE BOARD OF TRUSTEES............................................... 10 FINANCIAL HIGHLIGHTS................................................ 11 HOW TO OBTAIN MORE INFORMATION ABOUT BISHOP STREET FUNDS............................................. Back Cover
Page 2 of 16 67 BISHOP STREET MONEY MARKET FUND FUND SUMMARY INVESTMENT GOAL Preserving principal and maintaining liquidity while providing current income INVESTMENT FOCUS Short-term money market instruments SHARE PRICE VOLATILITY Very low PRINCIPAL INVESTMENT STRATEGY Investing in high quality, U.S. dollar denominated short-term securities INVESTOR PROFILE Conservative investors seeking current income through a low risk liquid investment.
INVESTMENT STRATEGY The Money Market Fund is comprised of short-term U.S. dollar denominated debt obligations that are rated in one of the two highest categories by nationally recognized rating organizations or securities that the Sub-Adviser determines are of comparable quality. The Fund invests substantially all of its assets in short-term securities including: (i) commercial paper and other short-term corporate obligations of U.S. and foreign issuers (including asset-backed securities); (ii) certificates of deposit, time deposits, bankers' acceptances, bank notes and other obligations of U.S. and foreign savings and loan institutions and commercial banks (including foreign branches of such banks) that meet certain asset requirements; (iii) short-term obligations issued by state and local governments; (iv) obligations of foreign governments (including Canadian and Provincial Government, and Crown Agency Obligations); and (v) U.S. Treasury obligations and obligations issued or guaranteed as to principal and interest by agencies or instrumentalities of the U.S. government. The Fund may also enter into fully-collateralized repurchase agreements. The Adviser has engaged Wellington Management Company, LLP as Sub-Adviser (Sub-Adviser) to manage the Fund on a day-to-day basis. Using a top-down strategy and bottom-up security selection process, the Sub-Adviser seeks securities with an acceptable maturity, that are marketable and liquid, that offer competitive yields, and that are issued by issuers that are on a sound financial footing. The Sub-Adviser also considers factors such as the anticipated level of interest rates and the maturity of individual securities relative to the maturity of the Fund as a whole. The Fund follows strict SEC rules about credit quality, maturity and diversification of its investments. PRINCIPAL RISKS OF INVESTING An investment in the Fund is subject to income risk, which is the possibility that the Fund's yield will decline due to falling interest rates. A Fund share is not a bank deposit and is not insured or guaranteed by the FDIC or any government agency. In addition, although a money market fund seeks to maintain a constant price per share of $1.00, you may lose money by investing in the Fund. Page 3 of 16 68 Although the Fund's U.S. government securities are considered to be among the safest investments, they are not guaranteed against price movements due to changing interest rates. Obligations issued by some U.S. government agencies are backed by the U.S. Treasury, while others are backed solely by the ability of the agency to borrow from the U.S. Treasury or by the agency's own resources. The Fund's investment approach, with its emphasis on short-term obligations, is expected to provide current income with low risk to principal and lower exposure to fluctuations in share price. The Fund can be expected to provide lower returns than fixed income funds which invest in longer-term securities. THE MONEY MARKET FUND TRIES TO MAINTAIN A CONSTANT PRICE PER SHARE OF $1.00, BUT THERE IS NO GUARANTEE THAT THE FUND WILL ACHIEVE THIS GOAL. PERFORMANCE INFORMATION The bar chart and the performance table below illustrate the risks and volatility of an investment in the Fund. Of course, the Fund's past performance does not necessarily indicate how the Fund will perform in the future. This bar chart shows changes in the performance of the Fund's Institutional Class Shares from year to year. 1996 5.12% 1997 5.29% 1998 5.26% 1999 4.88% BEST QUARTER WORST QUARTER 1.33% 1.12% (12/31/99) (6/30/99)
THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED DECEMBER 31, 1999 TO THOSE OF THE IBC/FINANCIAL DATA FIRST TIER INSTITUTIONS-ONLY AVERAGE.
1 YEAR SINCE INCEPTION - ------------------------------------------------------------------------------------ MONEY MARKET FUND 4.88% 5.23%* IBC/FINANCIAL DATA FIRST TIER INSTITUTIONS-ONLY AVERAGE 4.94% 5.33%**
* Since January 30, 1995 ** Since January 31, 1995 For information concerning the Fund's 7-Day Yield, please call 1-800-262-9565. WHAT IS AN AVERAGE? An average represents the performance of a specific group of mutual funds with a particular investment objective. You cannot invest directly in an average. The IBC/Financial Data First Tier Institutions-Only Average is a composite of mutual funds with investment goals similar to the Fund's goals. Page 4 of 16 69 FUND FEES AND EXPENSES THIS TABLE DESCRIBES THE FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND HOLD FUND SHARES. Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering price) None Maximum Deferred Sales Charge (Load) (as a percentage of net asset value) None Maximum Sales Charge (Load) Imposed on Reinvested Dividends and other Distributions (as a percentage of offering price) None Redemption Fee (as a percentage of amount redeemed, if applicable) None Exchange Fee None
ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS) Management Fees 0.30% Other Expenses 0.54% ----- Total Annual Fund Operating Expenses 0.84%*
- ------------------------------------------------------------------------------- * The Fund's total actual annual operating expenses for the most recent fiscal year were less than the amount shown above because the Adviser waived a portion of its fees in order to keep total operating expenses at a specified level. These fee waivers remain in place as of the date of this prospectus, but the Adviser may discontinue all or part of these waivers at any time. With these fee waivers, the Fund's actual total operating expenses are expected to be as follows: Money Market Fund 0.50%
For more information about these fees, see "Investment Adviser and Sub-Adviser." EXAMPLE: COST OF INVESTING This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated and that you sell your shares at the end of the period. The Example also assumes that each year your investment has a 5% return, Fund operating expenses remain the same and you reinvest all dividends and distributions. Although your actual costs and returns might be different, your approximate costs of investing $10,000 in the Fund would be:
1 YEAR 3 YEARS 5 YEARS 10 YEARS $86 $268 $466 $1,037
Page 5 of 16 70 MORE INFORMATION ABOUT RISK The Fund is a mutual fund. A mutual fund pools shareholders' money and, using professional investment managers, invests it in securities. The Fund has its own investment goal and strategies for reaching that goal. The investment manager invests Fund assets in a way that they believe will help the Fund achieve its goal. Still, investing in the Fund involves risk and there is no guarantee that the Fund will achieve its goal. An investment manager's judgments about the markets, the economy, or companies may not anticipate actual market movements, economic conditions or company performance, and these judgments may affect the return on your investment. In fact, no matter how good a job an investment manager does, you could lose money on your investment in the Fund, just as you could with other investments. A Fund share is not a bank deposit and it is not insured or guaranteed by the FDIC or any government agency. MANAGEMENT RISK - The risk that a strategy used by the Fund's management may fail to produce the intended result. FIXED INCOME RISK - The market value of fixed income investments changes in response to interest rate changes and other factors. During periods of falling interest rates, the values of outstanding fixed income securities generally rise. Moreover, while securities with longer maturities tend to produce higher yields, the prices of longer maturity securities are also subject to greater market fluctuations as a result of changes in interest rates. In addition to these fundamental risks, different types of fixed income securities may be subject to the following additional risks: CALL RISK - During periods of falling interest rates, certain debt obligations with high interest rates may be prepaid (or "called") by the issuer prior to maturity. This may cause a Fund's average weighted maturity to fluctuate, and may require a Fund to invest the resulting proceeds at lower interest rates. CREDIT RISK - The possibility that an issuer will be unable to make timely payments of either principal or interest. Since the Fund purchases securities backed by credit enhancements from banks and other financial institutions, changes in the credit ratings of these institutions could cause the Fund to lose money and may affect the Fund's share price. EVENT RISK - Securities may suffer declines in credit quality and market value due to issuer restructurings or other factors. This risk should be reduced because of the Fund's multiple holdings. MUNICIPAL ISSUER RISK - There may be economic or political changes that impact the ability of municipal issuers to repay principal and to make interest payments on municipal securities. Changes to the financial condition or credit rating of municipal issuers may also adversely affect the value of the Fund's municipal securities. Constitutional or legislative limits on borrowing by municipal issuers may result in reduced supplies of municipal securities. Moreover, certain municipal securities are backed only by a municipal issuer's ability to levy and collect taxes. Page 6 of 16 71 MORE INFORMATION ABOUT FUND INVESTMENTS In addition to the principal investments and strategies described in this prospectus, the Fund also may invest in other securities, use other strategies and engage in other investment practices. These investments and strategies, as well as those described in this prospectus, are described in detail in our Statement of Additional Information. Of course, we cannot guarantee that it will achieve its investment goal. The investments and strategies described in this prospectus are those that we use under normal conditions. During unusual economic or market conditions, or for temporary defensive or liquidity purposes, the Fund may invest up to 100% of its assets in cash or cash equivalents. When a Fund is investing for temporary defensive purposes, it is not pursuing its investment goal. INVESTMENT ADVISER AND SUB-ADVISER The Investment Adviser oversees the Sub-Adviser to ensure compliance with the Money Market Fund's investment policies and guidelines and monitors the Sub-Adviser's adherence to its investment style. The Adviser pays the Sub-Adviser out of the advisory fees it receives (described below). The Board of Trustees of the Bishop Street Funds supervises the Adviser and Sub-Adviser and establishes policies that the Adviser and Sub-Adviser must follow in their management activities. Bishop Street Capital Management, a registered investment adviser and independent subsidiary of First Hawaiian Bank, serves as Adviser to the Fund. Prior to February 22, 2000, First Hawaiian Bank served as Adviser to the Fund. As of December 31, 1999, First Hawaiian Bank had approximately $10.9 billion in assets under management. For the fiscal year ended December 31, 1999, First Hawaiian Bank received advisory fees from the Money Market Fund at the annual rate of 0.26%. ADDITIONAL COMPENSATION Bishop Street Capital Management and its affiliates may act as fiduciary or provide services in various non-fiduciary capacities with respect to plans subject to the Employee Retirement Income Security Act of 1974 (ERISA) and other trust and agency accounts that invest in the Funds, Bishop Street Capital Management may also receive compensation for acting as the Funds' investment adviser in cases where the compensation is not duplicative of the compensation those accounts pay for fiduciary and non-fiduciary services. First Hawaiian Bank and its affiliates also receive compensation in connection with the following: SHAREHOLDER SERVICING FEES. The Funds have adopted a Shareholder Servicing Plan that allows the Funds to pay shareholder servicing fees of up to 0.25% of a Fund's average daily net assets for the servicing of its shares, and for services provided to shareholders. First Hawaiian Bank or any of its affiliates providing brokerage or investment-related services may receive shareholder servicing fees, payable from the Funds' assets, of up to 0.25% of each Fund's average daily net assets. INVESTMENT SUB-ADVISER The Sub-Adviser, Wellington Management Company, LLP, serves as the Sub-Adviser and manages the Money Market Fund on a day-to-day basis. The Sub-Adviser selects, buys, and sells securities for the Money Market Fund under the supervision of the Adviser and the Board of Trustees. As of December 31, 1999, Wellington Management Company, LLP had approximately $235 billion in assets under management. Page 7 of 16 72 PURCHASING, SELLING AND EXCHANGING FUND SHARES This section tells you how to purchase, sell (sometimes called "redeem") and exchange shares of the Fund. HOW TO PURCHASE FUND SHARES You may purchase shares directly by: - - Mail; - - Telephone; - - Wire; or - - Direct Deposit. To purchase shares directly from us, complete and send in an account application. If you need an application or have any questions, please call 1-800-262-9565. Write your check, payable in U.S. dollars, to Bishop Street Funds and mail to Bishop Street Funds, P.O. Box 219721, Kansas City, MO 64121-9721. We cannot accept third-party checks, credit cards, credit card checks or cash. Institutional Class Shares may be purchased by: (i) holders of fiduciary, advisory, agency, custodial and other similar accounts maintained with BancWest Corporation and its banking and non-banking subsidiaries; (ii) shareholders of the Bishop Street Funds with an existing Fund account prior to June 14, 1999; (iii) registered investment advisors, regulated by a federal or state governmental authority, or financial planners who purchase shares for an account for which they are authorized to make investment decisions and who are compensated by their clients for their services; (iv) retirement and other benefit plans sponsored by governmental entities; and (v) financial institutions, which may purchase shares on their own account or as record owner on behalf of their fiduciary, agency or custodial accounts. You may also purchase Institutional Class Shares of the Bishop Street Money Market Fund through a representative of BancWest Corporation and its banking and non-banking subsidiaries. GENERAL INFORMATION You may purchase shares on any day that the New York Stock Exchange (NYSE) and the Federal Reserve are open for business (a Business Day). A Fund may reject any purchase order if it is determined that accepting the order would not be in the best interests of the Fund or its shareholders. The price per share (the offering price) will be the net asset value per share (NAV) next determined after a Fund receives your purchase order. A Fund is deemed to have received your order upon receipt of a completed account application and a check or money order. If you already have an existing account, a Fund is deemed to have received your order upon receipt of your order and your check or money order. Page 8 of 16 73 The Money Market Fund calculates its NAV once each business day at 2:00 p.m., Eastern time. So, for you to be eligible to receive dividends from the Money Market Fund declared on the day you submit your purchase order, generally we must receive your order before 2:00 p.m., Eastern time and federal funds (readily available funds) before 4:00 p.m., Eastern time. HOW WE CALCULATE NAV NAV for one Fund share is the value of that share's portion of all of the assets in the Fund. In calculating NAV for the Money Market Fund, we generally value the Fund's investment portfolio using the amortized cost valuation method, which is described in detail in our Statement of Additional Information. If this method is determined to be unreliable during certain market conditions or for other reasons, the Fund may value its portfolio at market price or fair value prices may be determined in good faith using methods approved by the Board of Trustees. MINIMUM PURCHASES & AUTOMATIC INVESTMENT PLANS You may open an account with a $1,000 minimum initial investment per fund ($500 for those investing in retirement plans). The minimum initial investment may be reduced with an Automatic Investment Plan (AIP). If you have a checking or savings account, you may establish an AIP and open an account with a $100 minimum initial investment per fund. You may then begin regularly scheduled investments of at least $50 per month through automatic deductions from your checking or savings accounts. HOW TO SELL YOUR FUND SHARES If you own your shares directly, you may sell your shares on any Business Day by contacting the Fund by mail at P.O. Box 219721, Kansas City, MO 64121-9721 or by telephone at 1-800-262-9565. If you are requesting to sell $5,000 or more of your shares, your request must be in writing and must include a signature guarantee by a bank or other financial institution (a notarized signature is not sufficient). The sale price of each share will be the next NAV determined after the Fund receives your request. SYSTEMATIC WITHDRAWAL PLAN If you have at least $20,000 in the Money Market Fund in your account, you may use the Systematic Withdrawal Plan. Under the plan you may arrange monthly, quarterly, semi-annual or annual automatic withdrawals of at least $50 from the Fund. The proceeds of the withdrawal will be mailed to you by check or electronically transferred to your bank account. Page 9 of 16 74 RECEIVING YOUR MONEY Normally, we will send your sale proceeds within seven days after we receive your request. Your proceeds can be wired to your bank account if your redemption proceeds are in excess of $500 (subject to a $15 fee) or sent to you by check. IF YOU RECENTLY PURCHASED YOUR SHARES BY CHECK, REDEMPTION PROCEEDS MAY NOT BE AVAILABLE UNTIL YOUR CHECK HAS CLEARED (WHICH MAY TAKE UP TO 15 DAYS FROM YOUR DATE OF PURCHASE). REDEMPTIONS IN KIND The Fund generally pays sale (redemption) proceeds in cash. However, under unusual conditions that make the payment of cash unwise (and for the protection of the Fund's remaining shareholders) we might pay all or part of your redemption proceeds in liquid securities with a market value equal to the redemption price (redemption in kind). It is highly unlikely that your shares would ever be redeemed in kind, but if they were you would probably have to pay transaction costs to sell the securities distributed to you, as well as taxes on any capital gains from the sale as with any redemption. INVOLUNTARY SALES OF YOUR SHARES If your account balance drops below $1,000 ($500 for those investing in retirement plans; $100 for officers, directors and employees of BancWest Corporation and its banking and non-banking subsidiaries, who have arranged to purchase shares through the AIP) because of redemptions, you may be required to sell your shares. But, we will always give you at least 60 days' written notice to give you time to add to your account and avoid the sale of your shares. SUSPENSION OF YOUR RIGHT TO SELL YOUR SHARES The Fund may suspend your right to sell your shares during times when trading on the NYSE is restricted or halted or otherwise as permitted by the SEC. More information about this is in our Statement of Additional Information. HOW TO EXCHANGE YOUR SHARES You may exchange your Institutional Class Shares for Institutional Class Shares of any other Bishop Street Fund on any Business Day by contacting us directly by mail or telephone at 1-800-262-9565. The Bishop Street Funds offers Institutional Class Shares of the Equity Fund, High Grade Income Fund, Hawaii Municipal Bond Fund and Treasury Money Market Fund. You may also exchange shares through your financial institution by mail or telephone. IF YOU RECENTLY PURCHASED SHARES BY CHECK, YOU MAY NOT BE ABLE TO EXCHANGE YOUR SHARES UNTIL YOUR CHECK HAS CLEARED (WHICH MAY TAKE UP TO 15 DAYS FROM YOUR DATE OF PURCHASE). THIS EXCHANGE PRIVILEGE MAY BE CHANGED OR CANCELED AT ANY TIME UPON 60 DAYS' NOTICE. When you exchange shares, you are really selling your shares and buying other Fund shares. So, your sale price and purchase price will be based on the NAV next calculated after the Fund receives your exchange request. Page 10 of 16 75 TELEPHONE TRANSACTIONS Purchasing, selling and exchanging Fund shares over the telephone is extremely convenient, but not without risk. Although the Fund has certain safeguards and procedures to confirm the identity of callers and the authenticity of instructions, the Fund is not responsible for any losses or costs incurred by following telephone instructions we reasonably believe to be genuine. If you or your financial institution transact with the Fund over the telephone, you will generally bear the risk of any loss. DIVIDENDS AND DISTRIBUTIONS The Fund declares its income, if any, daily and distributes its income monthly. The Fund makes distributions of capital gains, if any, at least annually. If you own Fund shares on the Fund's record date, you will be entitled to receive the distribution. You will receive dividends and distributions in the form of additional Fund shares unless you elect to receive payment in cash. To elect cash payment, you must notify the Fund in writing prior to the date of the distribution. Your election will be effective for dividends and distributions paid after the Fund receives your written notice. To cancel your election, simply send the Fund written notice. TAXES PLEASE CONSULT YOUR TAX ADVISOR REGARDING YOUR SPECIFIC QUESTIONS ABOUT FEDERAL, STATE AND LOCAL INCOME TAXES. Below we have summarized some important tax issues that affect the Fund and its shareholders. This summary is based on current tax laws, which may change. The Fund will distribute substantially all of its income and capital gains, if any. The dividends and distributions you receive may be subject to federal, state and local taxation, depending upon your tax situation. Distributions you receive from the Fund may be taxable whether or not you reinvest them. Income distributions are generally taxable at ordinary income tax rates. Capital gains distributions are generally taxable at the rates applicable to long-term capital gains. EACH SALE OR EXCHANGE OF FUND SHARES IS A TAXABLE EVENT. MORE INFORMATION ABOUT TAXES IS IN THE STATEMENT OF ADDITIONAL INFORMATION. Page 11 of 16 76 THE BOARD OF TRUSTEES The Board of Trustees supervises the management and affairs of the Trust. The Trustees have approved contracts with certain companies that provide us with essential management services. The Trustees of the Trust are as follows:
NAME BUSINESS HISTORY Martin Anderson Partner, Goodsill Anderson Quinn & Stifel since 1951 Charles E. Carlbom Chairman, BPI, Inc. since 1999; President and CEO, United Grocers, Inc. (1997-1999); President and CEO, Western Family Food, Inc., Western Family Holdings Inc. (1982-1997) Philip H. Ching Vice Chairman, First Hawaiian Bank (1968-1996) James L. Huffman Dean and Professor, Lewis & Clark Law School since 1973 Shunichi Kimura Mediator, Mediation Specialists of Hawaii (1994-1997); Judge, State of Hawaii Judiciary (1974-1994) Robert A. Nesher Chairman, SEI Mutual Funds since 1974; Director and Executive Vice President of the Administrator and the Distributor (1981-1994) William S. Richardson Trustee, Kamehameha Schools Bishop Estate (1982-1992); Chief Justice, Supreme Court of Hawaii (1966-1983) Peter F. Sansevero Regional Director of the Northwestern Region and First Vice President, Merrill Lynch (1958-1997) Manual R. Sylvester Managing Partner, Coopers & Lybrand L.L.P. (1978-1992); Executive Partner, Coopers & Lybrand L.L.P. (1992) Joyce S. Tsunoda Senior Vice President, University of Hawaii System since 1989; Chancellor, Community Colleges-University of Hawaii since 1983
Page 12 of 16 77 FINANCIAL HIGHLIGHTS The table that follows presents performance information about the Fund. This information is intended to help you understand the Fund's financial performance for the period of the Fund's operations. Some of this information reflects financial information for a single Fund share. The total returns in the table represent the rate that you would have earned (or lost) on an investment in the Fund, assuming you reinvested all of your dividends and distributions. This information has been audited by PricewaterhouseCoopers LLP, independent public accountants. Their report, along with the Fund's financial statements, appears in the annual report that accompanies our Statement of Additional Information. You can obtain the annual report, which contains more performance information, at no charge by calling 1-800-262-9565. Page 13 of 16 78 FOR A SHARE OUTSTANDING THROUGHOUT THE PERIODS ENDED DECEMBER 31,
INVESTMENT ACTIVITIES DISTRIBUTIONS FROM ------------------------------------- -------------------- NET REALIZED RATIO OF NET AND NET NET EXPENSES ASSET UNREALIZED ASSET ASSETS TO VALUE NET GAINS NET CAPITAL VALUE END OF AVERAGE BEGINNING INVESTMENT (LOSSES) INVESTMENT GAINS END OF TOTAL PERIOD NET OF PERIOD INCOME ON SECURITIES INCOME (LOSSES) PERIOD RETURN (000) ASSETS - ------------------------------------------------------------------------------------------------------------------------ MONEY MARKET FUND 1999: $ 1.00 $0.05 -- $(0.05) -- $1.00 4.88% $284,291 0.50% 1998: $ 1.00 $0.05 -- $(0.05) -- $1.00 5.26% $268,318 0.50% 1997: $ 1.00 $0.05 -- $(0.05) -- $1.00 5.29% $246,671 0.51% 1996: $ 1.00 $0.05 -- $(0.05) -- $1.00 5.12% $274,125 0.49% 1995(1): $ 1.00 $0.05 -- $(0.05) -- $1.00 5.67%+ $305,120 0.50%*
RATIO OF RATIO OF NET INVESTMENT EXPENSES TO RATIO OF INCOME TO AVERAGE NET AVERAGE NET ASSETS INVESTMENT NET ASSETS EXCLUDING FEE INCOME TO EXCLUDING FEE WAIVERS AND AVERAGE WAIVERS AND REIMBURSEMENTS NET ASSETS REIMBURSEMENTS - ------------------------------------------------------------------- MONEY MARKET FUND 1999: 0.84% 4.78% 4.44% 1998: 0.81% 5.12% 4.81% 1997: 0.85% 5.18% 4.84% 1996: 0.60% 5.01% 4.90% 1995(1): 0.66%* 5.50%* 5.34%*
+ TOTAL RETURN HAS BEEN ANNUALIZED. * ANNUALIZED. AMOUNTS DESIGNATED AS " -- " ARE EITHER $0 OR HAVE BEEN ROUNDED TO $0. (1) COMMENCED OPERATIONS ON JANUARY 30, 1995. Page 14 of 16 79 BISHOP STREET FUNDS INVESTMENT ADVISER Bishop Street Capital Management 999 Bishop Street, 10th Floor Honolulu, Hawaii 96813 SUB-ADVISER Wellington Management Company, LLP 75 State Street Boston, Massachusetts 02109 DISTRIBUTOR SEI Investments Distribution Co. One Freedom Valley Drive Oaks, Pennsylvania 19456 LEGAL COUNSEL Morgan, Lewis & Bockius LLP More information about the Fund is available without charge through the following: STATEMENT OF ADDITIONAL INFORMATION (SAI) The SAI dated April 30, 2000 includes detailed information about the Bishop Street Funds. The SAI is on file with the SEC and is incorporated by reference into this prospectus. This means that the SAI, for legal purposes, is a part of this prospectus. ANNUAL AND SEMI-ANNUAL REPORTS These reports list the Fund's holdings and contain information from the Fund's managers about strategies, and recent market conditions and trends and their impact on Fund performance. The reports also contain detailed financial information about the Fund. TO OBTAIN AN SAI, ANNUAL OR SEMI-ANNUAL REPORT, OR MORE INFORMATION: BY TELEPHONE: Call 1-800-262-9565 Page 15 of 16 80 BY MAIL: Write to the Fund Bishop Street Funds c/o SEI Investments Distribution Co. One Freedom Valley Drive Oaks, Pennsylvania 19456 FROM THE SEC: You can also obtain the SAI or the Annual and Semi-Annual reports, as well as other information about the Bishop Street Funds, from the EDGAR Database on the SEC's website ("http://www.sec.gov"). You may review and copy documents at the SEC Public Reference Room in Washington, DC (for information on the operation of the Public Reference Room, call 1-202-942-8090). You may request documents by mail from the SEC, upon payment of a duplicating fee, by writing to: Securities and Exchange Commission, Public Reference Section, Washington, DC 20549-0102. You may also obtain this information, upon payment of a duplicating fee, by e-mailing the SEC at the following address: publicinfo@sec.gov. The Fund's Investment Company Act registration number is 811-08572. Page 16 of 16 81 BISHOP STREET FUNDS A MUTUAL FUND FAMILY ADVISED BY BISHOP STREET CAPITAL MANAGEMENT EQUITY FUND, HIGH GRADE INCOME FUND, HAWAII MUNICIPAL BOND FUND, MONEY MARKET FUND AND TREASURY MONEY MARKET FUND STATEMENT OF ADDITIONAL INFORMATION INSTITUTIONAL CLASS SHARES CLASS A SHARES APRIL 30, 2000 This Statement of Additional Information is not a prospectus. It is intended to provide additional information regarding the activities and operations of the Bishop Street Funds. Please read this in conjunction with the Bishop Street Funds' prospectuses dated April 30, 2000. Prospectuses may be obtained without charge through the Distributor, SEI Investments Distribution Co., Oaks, Pennsylvania 19456, or by calling 1-800-262-9565. TABLE OF CONTENTS Page The Trust...................................................... S-2 Description of Permitted Investments........................... S-2 Investment Limitations......................................... S-12 The Adviser.................................................... S-14 The Sub-Adviser................................................ S-15 The Administrator.............................................. S-16 The Distributor................................................ S-17 The Transfer Agent............................................. S-20 The Custodian.................................................. S-20 Independent Auditors........................................... S-20 Legal Counsel.................................................. S-21 Trustees and Officers of the Trust............................. S-21 Reporting...................................................... S-24 Performance.................................................... S-24 Calculation of Total Return.................................... S-26 Purchasing Shares.............................................. S-28 Redeeming Shares............................................... S-28 Determination of Net Asset Value............................... S-28 Taxes.......................................................... S-29 Fund Transactions.............................................. S-35 Description of Shares.......................................... S-39 Voting......................................................... S-39 Shareholder Liability.......................................... S-39 Limitation of Trustees' Liability.............................. S-40 5% and 25% Shareholders........................................ S-40 Financial Information.......................................... S-41 BSF-F-011-01 S-1 82 THE TRUST Bishop Street Funds (the "Trust") is an open-ended management investment company. The Trust is organized under Massachusetts law, as a Massachusetts business trust, under an Amended and Restated Agreement and Declaration of Trust dated September 1, 1994. The Agreement and Declaration of Trust permits the Trust to offer separate series of units of beneficial interest (the "shares") and separate classes of funds. Shareholders may purchase shares in certain funds through two separate classes, Class A and Institutional Class, which provide for variations in sales charges, distribution costs, transfer agent fees, voting rights and dividends. Except for differences between the Class A Shares and the Institutional Class Shares pertaining to sales charges, distribution and shareholder servicing, voting rights, dividends and transfer agent expenses, each share of each series represents an equal proportionate interest in that series. Please see "Description of Shares" for more information. This Statement of Additional Information relates to the Institutional Class Shares of the Trust's Equity Fund, High Grade Income Fund, Hawaii Municipal Bond Fund, Money Market Fund and Treasury Money Market Fund, and the Class A Shares of the Trust's Equity Fund, High Grade Income Fund and Hawaii Municipal Bond Fund (the "Funds"). DESCRIPTION OF PERMITTED INVESTMENTS The following information supplements the information about permitted investments set forth in the Prospectus. FUND INVESTMENTS & PRACTICES LEGEND % - Maximum percentage permissible. All percentages shown are of total assets unless otherwise noted. x - No Policy limitation; Fund may be currently using. * - Permitted, but not typically used. - - Not permitted MONEY MARKET FUNDS
TREASURY MONEY MARKET MONEY MARKET FUND FUND - --------------------------------------------------------------------------------------------------------------- TRADITIONAL INVESTMENTS Asset-Backed Securities x(1) - Bank Obligations x - Commercial Paper x(1) - Corporate Debt Obligations x(2) - Municipal Securities x(3) -
S-2 83 Repurchase Agreements x x(4) U.S. Government Agency and Treasury Obligations x x(5) Zero Coupon Obligations x - Variable & Floating Rate Instruments x - Yankee Bonds x - INVESTMENT PRACTICES Borrowing 33% 33% Illiquid Securities 10%(5) 10%(6) Securities Lending 50% 50% Standby Commitments 33% 33% When-Issued Securities 33% 33%
1. Rated in the highest short-term rating category by S&P or Moody's, or unrated equivalent. 2. With remaining maturities of not more than 397 days of issuers that issue commercial paper rated in the highest short-term rating category by S&P or Moody's, or unrated equivalent. 3. Rated in the two highest ratings categories by S&P or Moody's, or unrated equivalent. 4. Limited to repurchase agreements involving U.S. Treasury Obligations. 5. Limited to U.S. Treasury Obligations. 6. Percentage based on net assets, not total assets. NON-MONEY MARKET FUNDS
HAWAII MUNICIPAL HIGH GRADE EQUITY FUND BOND FUND INCOME FUND - ---------------------------------------------------------------------------------------------------------------- TRADITIONAL INVESTMENTS ADRs 35% - x Asset-Backed Securities - - 35%(7) Bank Obligations - - 35%(1) Commercial Paper - - 35%(1) Convertible Securities 35% - - Corporate Debt Obligations - 20%(3) x(1),(2) Equity Securities x - - Investment Company Shares 10% 10% 10% Mortgage-Backed Securities - - 35%(4)
S-3 84 Municipal Securities - x(5) - Repurchase Agreements 35% 20%(3) 35% Restricted Securities 15% 15% 15% Securities of Foreign Issuers * - x(1) Supranational Agency Obligations - - 35% U.S. Government Agency and Treasury Obligations - 20%(3) x(6) Variable & Floating Rate Instruments - x x Zero Coupon Obligations - x x INVESTMENT PRACTICES Borrowing 33% 33% 33% Illiquid Securities 15%(3) 15%(3) 15%(3) Securities Lending 15% 15% 50% Standby commitments 33% 33% 33% When-Issued Securities 33% 33% 33%
1. Rated in the two highest ratings category by S&P or Moody's, or unrated equivalent. 2. May invest up to 5% in securities rated BBB by S&P or BAA by Moody's, or unrated equivalent. 3. Percentage is based on net assets, not total assets. 4. Includes privately issued mortgage-backed securities rated A or higher by S&P or Moody's, or unrated equivalents. 5. Will invest at least 65% of its assets in municipal securities issued by the State of Hawaii. Will invest at least 80% of its net assets in investment grade securities that pay income exempt from regular federal income tax. 6. May invest in U.S. Treasury Receipts. 7. Rated in the three highest ratings categories by S&P or Moody's, or unrated equivalents. AMERICAN DEPOSITARY RECEIPTS (ADRS) - ADRs are securities typically issued by U.S. financial institutions (depositaries). ADRs represent ownership interests in a security, or a pool of securities, issued by a foreign issuer and deposited with the depositary. ADRs may be available through "sponsored" or "unsponsored" facilities. A sponsored facility is established jointly by the issuer of the security underlying the receipt and a depositary. An unsponsored facility may be established by a depositary without the participation of the issuer of the underlying security. ARMS (ADJUSTABLE RATE MORTGAGE SECURITIES) are pass-through certificates representing ownership in a pool of adjustable rate mortgages. ARMs make monthly payments based on a pro rata share of interest and principal payments, and prepayments S-4 85 of principal on the pool of underlying mortgages. The adjustable rate feature reduces, but does not eliminate, price fluctuations in this type of mortgage-backed security. ASSET-BACKED SECURITIES are securities backed by non-mortgage assets such as company receivables, truck and auto loans, leases, and credit card receivables. These securities are generally issued as pass-through certificates, which represent undivided fractional ownership interests in the underlying pools of assets. Asset-backed securities may also be obligations, which are also known as collateralized obligations and are generally issued as the debt of a special purpose entity, such as a trust, organized solely for the purpose of owning these assets and issuing debt obligations. BANK OBLIGATIONS are SHORT-TERM OBLIGATIONS issued by U.S. and foreign banks, including bankers' acceptances, certificates of deposit, custodial receipts, and time deposits. COMMERCIAL PAPER is a term used to describe unsecured short-term promissory notes issued by municipalities, corporations, and other entities that have maturities generally from a few days to nine months. FOREIGN SECURITIES - U.S. dollar denominated obligations of foreign issuers may consist of obligations of foreign branches of U.S. banks and of foreign banks, including European Certificates of Deposit, European Time Deposits, Canadian Time Deposits and Yankee Certificates of Deposits, and investments in Canadian Commercial Paper, foreign securities and Europaper. American Depositary Receipts have investment risks that differ in some respects from those related to investments in obligations of U.S. domestic issuers. Such risks include future adverse political and economic developments, the possible imposition of withholding taxes on interest or other income, possible seizure, nationalization, or expropriation of foreign deposits, the possible establishment of exchange controls or taxation at the source, greater fluctuations in value due to changes in exchange rates, or the adoption of other foreign governmental restrictions which might adversely affect the payment of principal and interest on such obligations. Such investments may also entail higher custodial fees and sales commissions than domestic investments. Foreign issuers of securities or obligations are often subject to accounting treatment and engage in business practices different from those respecting domestic issuers of similar securities or obligations. Foreign branches of U.S. banks and foreign banks may be subject to less stringent reserve requirements than those applicable to domestic branches of U.S. banks. GNMA SECURITIES - Securities issued by the Government National Mortgage Association ("GNMA"), a wholly-owned U.S. government corporation, guarantee the timely payment of principal and interest. The market value and interest yield of these instruments can vary due to market interest rate fluctuations and early prepayments of underlying mortgages. These securities represent ownership in a pool of federally insured mortgage loans. GNMA certificates consist of underlying mortgages with a maximum maturity of 30 years. However, due to scheduled and unscheduled principal S-5 86 payments, GNMA certificates have a shorter average maturity and, therefore, less principal volatility than a comparable 30-year bond. Since prepayment rates vary widely, it is not possible to accurately predict the average maturity of a particular GNMA pool. GNMA securities differ from conventional bonds in that principal is paid back to the certificate holders over the life of the loan rather than at maturity. The scheduled monthly interest and principal payments relating to mortgages in the pool are "passed through" to investors. In addition, there may be unscheduled principal payments representing prepayments on the underlying mortgages. Although GNMA certificates may offer yields higher than those available from other types of U.S. government securities, GNMA certificates may be less effective than other types of securities as a means of "locking in" attractive long-term rates because of the prepayment feature. For instance, when interest rates decline, the value of a GNMA certificate likely will not rise as much as comparable debt securities due to the prepayment feature. In addition, these prepayments can cause the price of a GNMA certificate originally purchased at a premium to decline in price to its par value, which may result in a loss. GOVERNMENT PASS-THROUGH SECURITIES are securities issued or guaranteed by a U.S. government agency representing an interest in a pool of mortgage loans. Government and private guarantees do not extend to the securities' value, which is likely to vary inversely with fluctuations in interest rates. ILLIQUID SECURITIES are securities that cannot be disposed of within seven days at approximately the price at which they are being carried on a mutual fund's books. INVESTMENT COMPANY SHARES - Shares of other mutual funds which may be purchased by the Funds to the extent consistent with applicable law. Under these rules and regulations of the Investment Company Act of 1940 (the "1940 Act"), a Fund is prohibited from acquiring the securities of other investment companies if, as a result of such acquisition, the Fund would own more than 3% of the total voting stock of the company; securities issued by any one investment company represented more than 5% of the Fund's assets; or securities (other than treasury stock) issued by all investment companies would represent more than 10% of the total assets of the Fund. These investment companies typically incur fees that are separate from those fees incurred directly by the Fund. A Fund's purchase of such investment company securities results in the layering of expenses, such that shareholders of the Funds would indirectly bear a proportionate share of the operating expenses of such investment companies, including advisory fees. MORTGAGE-BACKED SECURITIES - Two principal types of mortgage-backed securities are collateralized mortgage obligations ("CMOs") and real estate mortgage investment conduits ("REMICs"). CMOs are securities collateralized by mortgages, mortgage pass-through certificates, mortgage pay-through bonds (bonds representing an interest in a pool of mortgages where the cash flow generated from the mortgage collateral pool is dedicated to bond repayment), and mortgage-backed bonds (general obligations of issuers payable out of the issuers' general funds and additional secured by a first lien on a pool of single family properties). S-6 87 Many CMOs are issued with a number of classes or series which have different maturities and are retired in sequence. Investors purchasing CMOs in the shortest maturities receive or are credited with their pro rata portion of the scheduled payments of interest and principal on the underlying mortgages plus all unscheduled prepayments of principal up to a predetermined portion of the total CMO obligation. Until that portion of such CMO obligation is repaid, investors in the longer maturities receive interest only. Accordingly, CMOs in longer maturity series are less likely than other mortgage pass-throughs to be prepaid prior to their stated maturity. Although some of the mortgages underlying CMOs may be supported by various types of insurance, and while some CMOs may be backed by GNMA certificates or other mortgage pass-throughs issued or guaranteed by U.S. government agencies or instrumentalities, CMOs themselves are not generally guaranteed by the U.S. government or any other entity. REMICs, which were authorized under the Tax Reform Act of 1986, are private entities formed for the purpose of holding a fixed pool of mortgages secured by an interest in real property. REMICs are similar to CMOs in that they issue multiple classes of securities. MUNICIPAL SECURITIES - Municipal notes include, but are not limited to, general obligation notes, tax anticipation notes (notes sold to finance working capital needs of the issuer in anticipation of receiving taxes on a future date), revenue anticipation notes (notes sold to provide needed cash prior to receipt of expected non-tax revenues from a specific source), bond anticipation notes, certificates of indebtedness, demand notes and construction loan notes. Private activity bonds are issued by or on behalf of states or political subdivisions thereof to finance privately owned or operated facilities for business and manufacturing housing, sports, and pollution control and to finance activities of and facilities for charitable institutions. Private activity bonds are also used to finance public facilities such as airports, mass transit systems, ports parking and low income housing. The payment of the principal and interest on private activity bonds is dependent solely on the ability of the facility's user to meet its financial obligations and may be secured by a pledge of real and personal property so financed. Investments in floating rate instruments will normally involve industrial development or revenue bonds which provide that the rate of interest is set as a specific percentage of a designated base rate (such as the prime rate) at a major commercial bank, and that the Fund can demand payment of the obligation at all times or at stipulated dates on short notice (not to exceed 30 days) at par plus accrued interest. Such obligations are frequently secured by letters of credit or other credit support arrangements provided by banks. The quality of the underlying credit or of the bank, as the case may be, must, in the Adviser's opinion be equivalent to the long-term bond or commercial paper ratings stated above. The Adviser will monitor the earning power, cash flow and liquidity ratios of the issuers of such instruments and the ability of an issuer of a demand instrument to pay principal and interest on demand. The Adviser may purchase other types of tax- S-7 88 exempt instruments as long as they are of a quality equivalent to the bond or commercial paper ratings stated above. The Adviser has the authority to purchase securities at a price which would result in a yield to maturity lower than that generally offered by the seller at the time of purchase when they can simultaneously acquire the right to sell the securities back to the seller, the issuer, or a third party (the "writer") at an agreed-upon price at any time during a stated period or on a certain date. Such a right is generally denoted as a "standby commitment" or a "put." The purpose of engaging in transactions involving puts is to maintain flexibility and liquidity in order to meet redemptions and remain as fully invested as possible in municipal securities. The right to put the securities depends on the writer's ability to pay for the securities at the time the put is exercised. The Funds will limit their put transactions to those with institutions which the Adviser believes present minimum credit risks, and the Adviser will use its best efforts to initially determine and thereafter monitor the financial strength of the put providers by evaluating their financial statements and such other information as is available in the marketplace. It may, however, be difficult to monitor the financial strength of the writers where adequate current financial information is not available. In the event that any writer is unable to honor a put for financial reasons, the affected Fund would be a general creditor (i.e., on a parity with all other unsecured creditors) of the writer. Furthermore, particular provisions of the contract between a Fund and the writer may excuse the writer from repurchasing the securities in certain circumstances (for example, a change in the published rating of the underlying municipal securities or any similar event that has an adverse effect on the issuer's credit); or a provision in the contract may provide that the put will not be exercised except in certain special cases, for example, to maintain portfolio liquidity. A Fund could, however, sell the underlying portfolio security in the open market or wait until the portfolio security matures, at which time it should realize the full par value of the security. Municipal securities purchased subject to a put may be sold to third persons at any time, even though the put is outstanding, but the put itself, unless it is an integral part of the security as originally issued, may not be marketable or otherwise assignable. Sale of the securities to third parties or lapse of time with the put unexercised may terminate the right to put the securities. Prior to the expiration of any put option, a Fund could seek to negotiate terms for the extension of such an option. If such a renewal cannot be negotiated on terms satisfactory to a Fund, such Fund could, of course, sell the portfolio security. The maturity of the underlying security will generally be different from that of the put. There will be no limit to the percentage of portfolio securities that the Funds may purchase subject to a put. For the purpose of determining the "maturity" of securities purchased subject to an option to put, and for the purpose of determining the dollar-weighted average maturity of the Funds including such securities, the Trust will consider "maturity" to be the first date on which it has the right to demand payment from the writer of the put although the final maturity of the security is later than such date. S-8 89 SPECIAL CONSIDERATIONS RELATING TO HAWAII MUNICIPAL SECURITIES The ability of issues to pay interest on, and repay principal of, Hawaii Municipal Securities may be affected by: (1) the general financial condition of the State of Hawaii; (2) amendments to the Hawaii Constitution and related statutes that limit the taxing and spending authority of Hawaii government entities; (3) voter initiatives; (4) civil actions; and (5) a wide variety of Hawaii laws and regulations. Municipal securities which are payable only from the revenues derived from a particular facility may be adversely affected by Hawaii laws or regulations which make it more difficult for the particular facility to generate revenues sufficient to pay such interest and principal including, among others, laws and regulations which limit the amount of fees, rates or other charges which may be imposed for use of the facility or which increase competition among facilities of that type or which limit or otherwise have the effect of reducing the use of such facilities generally, thereby reducing the revenues generated by the particular facility. Municipal securities, the payment of interest and principal on which is insured in whole or in part by a Hawaii governmentally created fund, may be adversely affected by Hawaii laws or regulations which restrict the aggregate proceeds available for payment of principal and interest in the event of a default on such municipal securities. Similarly, municipal securities, the payment of interest and principal on which is secured, in whole or in part, by an interest in real property may be adversely affected by Hawaii laws which limit the availability of remedies or the scope of remedies available in the event of a default on such municipal securities. Because of the diverse nature of such laws and regulations and the impossibility of either predicting in which specific municipal securities the Hawaii Municipal Bond Fund will invest from time to time or predicting the nature or extent of future changes in existing laws or regulations or the future enactment or adoption of additional laws or regulations, it is not presently possible to determine the impact of such laws and regulations on the securities in which the Fund may invest and, therefore, on the shares of the Fund. OTHER INVESTMENTS - The Funds are not prohibited from investing in obligations of banks which are clients of SEI Investments Company ("SEI"). However, the purchase of shares of the Trust by them or by their customers will not be a consideration in determining which bank obligations the Funds will purchase. The Funds will not purchase obligations of the Adviser or the Sub-Adviser. PRIVATE PASS-THROUGH SECURITIES are mortgage-backed securities issued by a non-governmental entity, such as a trust. While they are generally structured with one or more types of credit enhancement, private pass-through securities typically lack a guarantee by an entity having the credit status of a governmental agency or instrumentality. S-9 90 REPURCHASE AGREEMENTS are agreements by which a person (e.g., a Fund) obtains a security and simultaneously commits to return the security to the seller (a financial institution deemed to present minimal risk of bankruptcy during the term of the agreement based on guidelines established and periodically reviewed by the Trustees) at an agreed upon price (including principal and interest) on an agreed upon date within a number of days (usually not more than seven) from the date of purchase. The resale price reflects the purchase price plus an agreed upon market rate of interest which is unrelated to the coupon rate or maturity date of the underlying security. A repurchase agreement involves the obligation of the seller to pay the agreed upon price, which obligation is in effect secured by the value of the underlying security. Repurchase agreements are considered to be loans by the participating Fund for purposes of its investment limitations. Repurchase agreements entered into by the Funds will provide that the underlying security at all times shall have a value at least equal to 102% of the resale price stated in the agreement. Under all repurchase agreements entered into by the Funds, the Fund takes actual or constructive possession of the underlying collateral. However, if the seller defaults, the Fund could realize a loss on the sale of the underlying security to the extent that the proceeds of sale including accrued interest are less than the resale price provided in the agreement including interest. In addition, even though the Bankruptcy Code provides protection for most repurchase agreements, if the seller should be involved in bankruptcy or insolvency proceedings, the Fund may incur delay and costs in selling the underlying security or may suffer a loss of principal and interest if the Fund is treated as an unsecured creditor and required to return the underlying security to the seller's estate. SECURITIES LENDING - Each of the Funds may lend securities pursuant to agreements requiring that the loans be continuously secured by cash or liquid securities as collateral equal to 100% of the market value at all times of the securities lent. Such loans will not be made if, as a result, the aggregate amount of all outstanding securities loans for a Fund exceed one-third of the value of its total assets taken at fair market value. A Fund will continue to receive interest on the securities lent while simultaneously earning interest on the investment of the cash collateral in U.S. government securities. However, a Fund will normally pay lending fees to broker-dealers and related expenses from the interest earned on invested collateral. There may be risks of delay in receiving additional collateral or risks of delay in recovery of the securities or even loss of rights in the collateral should the borrower of the securities fail financially. However, loans are made only to borrowers deemed by the Adviser to be of good standing and when, in the judgment of the Adviser, the consideration which can be earned currently from such securities loans justifies the attendant risk. Any loan may be terminated by either party upon reasonable notice to the other party. STANDBY COMMITMENTS AND PUTS permit the holder to sell securities subject to the standby commitment or put at a fixed price prior to maturity. Securities subject to a standby commitment or put may be sold at any time at the current market price. However, unless the standby commitment or put was an integral part of the security as originally issued, it may not be marketable or assignable. S-10 91 STRIPPED MORTGAGE-BACKED SECURITIES (SMBs) are usually structured with two classes that receive specified proportions of monthly interest and principal payments from a pool of mortgage securities. One class may receive all of the interest payments, and the other class may receive all of the principal payments. SMBs are extremely sensitive to changes in interest rates because of the impact of prepayment of principal on the underlying mortgage securities. SUPRANATIONAL AGENCY OBLIGATIONS are debt obligations established through the joint participation of several governments, and include the Asian Development Bank, the Inter-American Development Bank, International Bank for Reconstruction and Development (World Bank), African Development Bank, European Economic Community, European Investment Bank, and the Nordic Investment Bank. U.S. GOVERNMENT AGENCY OBLIGATIONS are obligations issued or guaranteed by agencies or instrumentalities of the U.S. government. Some of these securities are supported by the full faith and credit of the U.S. Treasury, others are supported by the right of the issuer to borrow from the U.S. Treasury, and others are supported only by the credit of the agency or instrumentality. U.S. TREASURY OBLIGATIONS consist of bills, notes, and bonds issued by the U.S. Treasury. They also consist of separately traded interest and principal component parts of these obligations that are transferable through the Federal book-entry system known as Separately Traded Registered Interest and Principal Securities (STRIPS). Receipts are similar to STRIPS, but are issued by banks or broker-dealers, and are created by depositing U.S. Treasury obligations into a special account at a custodian bank. The custodian holds the income from the receipts for the benefit of the receipt owners. VARIABLE AMOUNT MASTER DEMAND NOTES are debt obligations which may or may not be backed by bank letters of credit. These notes permit the investment of fluctuating amounts at varying market rates of interest pursuant to direct arrangements between the Trust, as lender, and the borrower. Such notes provide that the interest rate on the amount outstanding varies on a daily, weekly or monthly basis depending upon a stated short-term interest rate index. Both the lender and the borrower have the right to reduce the amount of outstanding indebtedness at any time. There is no secondary market for the notes. It is not generally contemplated that such instruments will be traded. VARIABLE AND FLOATING RATE INSTRUMENTS involve certain debt obligations that may carry variable or floating rates of interest, and may involve a conditional or unconditional demand feature. Such instruments bear interest at rates which are not fixed, but which vary with changes in specified market rates or indices. S-11 92 WHEN-ISSUED SECURITIES involve the purchase of debt obligations on a when-issued basis, in which case delivery and payment normally take place within 45 days after the date of commitment to purchase. The Funds will only make commitments to purchase obligations on a when-issued basis with the intention of actually acquiring the securities, but may sell them before the settlement date. The when-issued securities are subject to market fluctuation, and no interest accrues on the security to the purchaser during this period. The payment obligation and the interest rate that will be received on the securities are each fixed at the time the purchaser enters into the commitment. Purchasing obligations on a when-issued basis is a form of leveraging and can involve a risk that the yields available in the market when the delivery takes place may actually be higher than those obtained in the transaction itself. In that case there could be an unrealized loss at the time of delivery. Segregated accounts will be established with the custodian, and the Funds will maintain liquid assets in an amount at least equal in value to the Funds' commitments to purchase when-issued securities. If the value of these assets declines, the Funds will place additional liquid assets in the account on a daily basis so that the value of the assets in the account is equal to the amount of such commitments. YANKEE BONDS are U.S. dollar denominated debt obligations issued by the U.S. by foreign banks and corporations. ZERO COUPON OBLIGATIONS are debt obligations that do not bear any interest, but instead are issued at a deep discount from face value or par. The value of a zero coupon obligation increases over time to reflect the interest accredited. Such obligations will not result in the payment of interest until maturity, and will have greater price volatility than similar securities that are issued at face value or par and pay interest periodically. INVESTMENT LIMITATIONS FUNDAMENTAL POLICIES The following investment limitations are fundamental policies of each Fund and cannot be changed with respect to a Fund without the consent of the holders of a majority of that Fund's outstanding shares. The term "majority of the outstanding shares" means the vote of (I) 67% or more of a Fund's shares present at a meeting, if more than 50% of the outstanding shares of a Fund are present or represented by proxy, or (ii) more than 50% of a Fund's outstanding shares, whichever is less. A Fund may not: 1. Invest more than 25% of its assets in any one industry, except that the money market funds may do so with respect to U.S. government obligations and U.S. bank obligations. This limitation does not apply to the Hawaii Municipal Bond Fund, but S-12 93 the Fund will not invest more than 25% of its assets in securities of non-governmental entities that are in the same industry. 2. Invest more than 5% of its assets in the securities of any one issuer (except for the Hawaii Municipal Bond Fund). 3. Acquire more than 10% of the voting securities of any one issuer, provided that this limitation shall apply only to 75% of the Fund's net assets (except that this restriction does not apply to the Hawaii Municipal Bond Fund). 4. Invest in companies for the purpose of exercising control. 5. Borrow money except for temporary or emergency purposes and then only in an amount not exceeding one-third of the value of total assets. To the extent that such borrowing exceeds 5% of the value of the borrowing Fund's assets, asset coverage of at least 300% is required. No Fund will purchase securities while its borrowings exceed 5% of its total assets. 6. Make loans, except that (a) each Fund may purchase or hold debt instruments in accordance with its investment objective and policies; (b) each Fund may enter into repurchase agreements; and (c) the Equity, High Grade Income, Hawaii Municipal Bond, Money Market and Treasury Money Market Funds may engage in securities lending. 7. Pledge, mortgage or hypothecate assets except to secure borrowings permitted by (5) above in aggregate amounts not to exceed 33% of total assets taken at current value at the time of the incurrence of such loan. 8. Purchase or sell real estate, real estate limited partnership interests, commodities or commodities contracts. However, each of the Funds (other than the Money Market and Treasury Money Market Funds) may invest in companies which invest in real estate, and in commodities contracts. 9. Make short sales of securities or purchase securities on margin, except that each Fund may obtain short-term credits as necessary for the clearance of security transactions. 10. Act as an underwriter of securities of other issuers except as it may be deemed an underwriter in selling a portfolio security. 11. Purchase securities of other investment companies, except as permitted by the 1940 Act and the rules and regulations thereunder. S-13 94 12. Issue senior securities (as defined in the 1940 Act) except in connection with permitted borrowings as described above or as permitted by rule, regulation or order of the Securities and Exchange Commission (the "SEC"). 13. Invest in interests in oil, gas or other mineral exploration or development programs and oil, gas or mineral leases. NON-FUNDAMENTAL POLICY No Fund may invest in illiquid securities in an amount exceeding, in the aggregate, 15%of the Fund's net assets (except for all money market funds, for which the limit is 10%). The foregoing percentages will apply at the time the Fund purchases the security and shall not be considered violated unless an excess occurs or exists immediately after and as a result of a purchase of such security. THE ADVISER The Trust and First Hawaiian Bank entered into an advisory agreement (the "Advisory Agreement") dated March 31, 1999. BancWest Corporation, the entity formed by the merger of First Hawaiian, Inc., the parent of First Hawaiian Bank, and BancWest Corporation, has created an investment advisory subsidiary entitled Bishop Street Capital Management. On November 9, 1999, the Board of Trustees of the Trust approved Bishop Street Capital Management as the new adviser to the Funds. This change became effective on February 22, 2000. The Advisory Agreement between First Hawaiian Bank and the Bishop Street Funds, and the obligations contained in that Agreement have been assumed by Bishop Street Capital Management (the "Adviser"). Bishop Street Capital Management employs the same investment personnel that managed the Funds under First Hawaiian Bank and the management and control of the Adviser, as well as the services provided, remain the same. The Advisory Agreement provides that the Adviser shall not be protected against any liability to the Trust or its Shareholders by reason of willful misfeasance, bad faith or gross negligence on its part in the performance of its duties or from reckless disregard of its obligations or duties thereunder. The Advisory Agreement provides that if, for any fiscal year, the ratio of expenses of any Fund (including amounts payable to the Adviser but excluding interest, taxes, brokerage, litigation, and other extraordinary expenses) exceeds limitations established by any state, the Adviser will bear the amount of such excess. The Adviser will not be required to bear expenses of the Trust to an extent which would result in a Fund's inability to qualify as a regulated investment company under provisions of the Internal Revenue Code. The continuance of the Advisory Agreement, after the first two years, must be specifically approved at least annually (i) by the vote of a majority of the Trustees who S-14 95 are not parties to the Agreement or "interested persons" of any party thereto, cast in person at a meeting called for the purpose of voting on such approval, and (ii) by the vote of the Trustees or a majority of outstanding shares of the Funds, as defined in the 1940 Act. The Advisory Agreement will terminate automatically in the event of its assignment, and is terminable at any time without penalty by the Trustees of the Trust or, with respect to the Funds by a majority of the outstanding shares of the Funds, on not less than 30 days' nor more than 60 days' written notice to the Adviser, or by the Adviser on 90 days' written notice to the Trust. The Adviser is entitled to a fee which is calculated daily and paid monthly at an annual rate of 0.74% of the daily average net assets of the Equity Fund, 0.55% of the daily average net assets of the High Grade Income Fund, 0.35% of the daily average net assets of the Hawaii Municipal Bond Fund, 0.30% of the daily average net assets of the Money Market Fund and 0.30% of the daily average net assets of the Treasury Money Market Fund. For the fiscal years ended December 31, 1997, 1998 and 1999, the Funds paid the following advisory fees:
ADVISORY FEES PAID ADVISORY FEES WAIVED ------------------ -------------------- FUND 1997 1998 1999 1997 1998 1999 ---- ---- ---- ---- ---- ---- ---- Equity Fund $311,840 $514,451 $1,309,175 $121,268 $ 75,127 $ 45,745 High Grade Income Fund $ 77,201 $ 94,508 $ 229,757 $ 49,860 $ 47,128 $ 72,395 Hawaii Municipal Bond Fund $ 8,620 $ 16,208 $ 46,278 $ 84,732 $ 94,685 $197,280 Money Market Fund $445,870 $558,662 $ 718,953 $328,496 $209,398 $126,033 Treasury Money Market Fund $192,621 $421,356 $ 537,371 $469,439 $545,821 $437,223
THE SUB-ADVISER First Hawaiian Bank entered into a sub-advisory agreement (the "Sub-Advisory Agreement") with Wellington Management Company, LLP (the "Sub-Adviser") dated March 31, 1999, relating to the Money Market and Treasury Money Market Funds. Bishop Street Capital Management, the new investment advisory subsidiary created by BancWest Corporation, has assumed all investment advisory duties and responsibilities of First Hawaiian Bank. All obligations and responsibilities of the Adviser to the Sub-Adviser under the existing sub-advisory contract have been assumed by Bishop Street Capital Management. S-15 96 Under the Sub-Advisory Agreement, the Sub-Adviser is entitled to fees which are calculated daily and paid monthly at an annual rate of 0.075% of the aggregate average daily net assets of the Money Market and Treasury Money Market Funds, respectively, up to $500 million and 0.020% of the aggregate average daily net assets of the Money Market and Treasury Money Market Funds, respectively, in excess of $500 million. Such fees are paid by the Adviser and the Sub-Adviser receives no fees directly from these Funds. For the fiscal years ended December 31, 1997, 1998 and 1999, the Money Market and Treasury Money Market Funds paid the following sub-advisory fees:
SUB-ADVISORY FEES PAID SUB-ADVISORY FEES WAIVED ---------------------- ------------------------ FUND 1997 1998 1999 1997 1998 1999 - ---- ---- ---- ---- ---- ---- ---- Money Market Fund $193,585 $172,523 $184,189 $0 $0 $0 Treasury Money Market Fund $165,499 $214,421 $212,117 $0 $0 $0
THE ADMINISTRATOR The Trust and SEI Investments Mutual Funds Services (the "Administrator") have entered into an administration agreement (the "Administration Agreement") dated January 27, 1995. Under the Administration Agreement, the Administrator provides the Trust with administrative services, including fund accounting, regulatory reporting, necessary office space, equipment, personnel and facilities. The Administrator also acts as shareholder servicing agent for the Funds. The Administration Agreement provides that the Administrator shall not be liable for any error of judgment or mistake of law or for any loss suffered by the Trust in connection with the matters to which the Administration Agreement relates, except a loss resulting from willful misfeasance, bad faith or negligence on the part of the Administrator in the performance of its duties or from reckless disregard by it of its duties and obligations thereunder. The Administrator is entitled to a fee, calculated daily and paid monthly, at an annual rate of 0.20% of average daily net assets of each of the Funds. For the fiscal years ended December 31, 1997, 1998 and 1999, the Funds paid the following administrative fees: S-16 97
ADMINISTRATIVE FEES PAID ADMINISTRATIVE FEES WAIVED ------------------------ -------------------------- 1997 1998 1999 1997 1998 1999 -------- -------- -------- -------- -------- -------- FUND Equity Fund $ 78,619 $ 95,607 $182,269 $ 38,478 $ 63,739 $183,926 High Grade Income Fund $ 31,706 $ 30,902 $ 50,012 $ 14,505 $ 20,602 $ 59,861 Hawaii Municipal Bond Fund $ 8,621 $ 15,841 $ 32,391 $ 44,724 $ 47,526 $106,785 Money Market Fund $298,045 $307,224 $151,357 $218,415 $204,816 $411,967 Treasury Money Market Fund $255,368 $386,871 $243,787 $186,006 $257,914 $405,942
The Administrator, a Delaware business trust, has its principal business offices at Oaks, Pennsylvania 19456. SEI Investments Management Corporation ("SIMC"), a wholly-owned subsidiary of SEI Investments Company ("SEI Investments"), is the owner of all beneficial interest in the Administrator. SEI Investments and its subsidiaries and affiliates, including the Administrator, are leading providers of funds evaluation services, trust accounting systems, and brokerage and information services to financial institutions, institutional investors, and money managers. The Administrator and its affiliates also serve as administrator or sub-administrator to the following other mutual funds: The Achievement Funds Trust, The Advisors' Inner Circle Fund, Alpha Select Funds, Amerindo Funds, Inc., The Arbor Fund, ARK Funds, Armada Funds, The Armada Advantage Fund, Boston 1784 Funds(R), CNI Charter Funds, CUFUND, The Expedition Funds, First American Funds, Inc., First American Investment Funds, Inc., First American Strategy Funds, Inc., Friends Ivory Funds, HighMark Funds, Huntington Funds, Huntington VA Fund, The Nevis Fund, Inc., Oak Associates Funds, The Parkstone Group of Funds, The PBHG Funds, Inc., PBHG Insurance Series Fund, Inc., The Pillar Funds, SEI Asset Allocation Trust, SEI Daily Income Trust, SEI Index Funds, SEI Institutional International Trust, SEI Institutional Investments Trust, SEI Institutional Products Trust, SEI Institutional Managed Trust, SEI Liquid Asset Trust, SEI Tax Exempt Trust, STI Classic Funds, STI Classic Variable Trust, TIP Funds, UAM Funds Trust, UAM Funds, Inc. II, and UAM Funds, Inc. THE DISTRIBUTOR SEI Investments Distribution Co. (the "Distributor"), One Freedom Valley Drive, Oaks, Pennsylvania 19456 a wholly-owned subsidiary of SEI, serves as the distributor. Financial institutions that are the record owner of shares for the account of their customers may impose separate fees for account services to their customers. S-17 98 Class A Shares of the Funds are sold with a front-end sales charge. The Distributor collected and retained sales charges in the amounts shown for the fiscal period ended December 31, 1999*:
Fund Dollar Amount of Loads Dollar Amounts of Loads Retained by SEI Investments 1999 1999 ---- ---- Equity Fund $22,000 $0 High Grade Income Fund $0 $0 Hawaii Municipal Bond Fund $161,000 $0
*Class A Shares of the Funds were initially offered beginning June 14, 1999. Depending upon the amount of an investment in the Class A Shares, the front-end sales load reallowed to dealers will vary: EQUITY FUND
DEALER REALLOWANCE AS A INVESTMENT AMOUNT: PERCENTAGE OF OFFERING PRICE - ----------------------------------------- ------------------------------ Less than $50,000 5.75% $50,000 but less than $100,000 4.50% $100,000 but less than $250,000 3.50% $250,000 but less than $500,000 2.50% $500,000 but less than $1,000,000 2.00% $1,000,000 and over 0.00%
HIGH GRADE INCOME FUND
DEALER REALLOWANCE AS A INVESTMENT AMOUNT: PERCENTAGE OF OFFERING PRICE - ----------------------------------------- ------------------------------ Less than $50,000 4.75% $50,000 but less than $100,000 4.50% $100,000 but less than $250,000 3.50% $250,000 but less than $500,000 2.50% $500,000 but less than $1,000,000 2.00% $1,000,000 and over 0.00%
HAWAII MUNICIPAL BOND FUND
DEALER REALLOWANCE AS A INVESTMENT AMOUNT: PERCENTAGE OF OFFERING PRICE - ----------------------------------------- ------------------------------ Less than $50,000 4.25% $50,000 but less than $100,000 4.00% $100,000 but less than $250,000 3.50% $250,000 but less than $500,000 2.50% $500,000 but less than $1,000,000 2.00% $1,000,000 and over 2.00%
Each Fund has adopted a shareholder servicing plan (the "Service Plan") under which a shareholder servicing fee of up to 0.25% of average daily net assets attributable to each Fund will be paid to the Distributor. Under the Service Plan, the Distributor may perform, or may compensate other service providers for performing, the following S-18 99 shareholder and administrative services: maintaining client accounts; arranging for bank wires; responding to client inquiries concerning services provided on investments; assisting clients in changing dividend options, account designations and addresses; sub-accounting; providing information on share positions to clients; forwarding shareholder communications to clients; processing purchase, exchange and redemption orders; and processing dividend payments. Under the Service Plan, the Distributor may retain as profit any difference between the fee it receives and amount is pays to third parties. For the fiscal year ended December 31, 1999, the Distributor paid the entire amount of fees received under the shareholder service plan to First Hawaiian Bank for shareholder services performed for the Funds. DISTRIBUTION PLAN The Trust has adopted a Distribution Plan (the "Plan") for the Class A shares of each Fund that offers Class A shares (only the Equity Fund, High Grade Income Fund and Hawaii Municipal Bond Fund) in accordance with the provisions of Rule 12b-1 under the 1940 Act, which regulates circumstances under which an investment company may directly or indirectly bear expenses relating to the distribution of its shares. In this regard, the Board of Trustees has determined that the Plan is in the best interests of the shareholders. Continuance of the Plan must be approved annually by a majority of the Trustees of the Trust and by a majority of the Trustees who are not "interested persons" of the Trust as that term is defined in the 1940 Act, and who have no direct or indirect financial interest in the operation of a Plan or in any agreements related thereto ("Qualified Trustees"). The Plan may not be amended to increase materially the amount that may be spent thereunder without approval by a majority of the outstanding shares of the Fund or class affected. All material amendments of the Plans will require approval by a majority of the Trustees of the Trust and of the Qualified Trustees. The Plan adopted by the Class A shares provides that the Trust will pay the Distributor a fee of up to 0.25% of the average daily net assets of a Fund's Class A shares that the Distributor can use to compensate broker-dealers and service providers, including affiliates of the Distributor, that provide distribution-related services to Class A shareholders or to their customers who beneficially own Class A shares. Payments may be made under the Plan for distribution services, including reviewing of purchase and redemption orders, assisting in processing purchase, exchange and redemption requests from customers, providing certain shareholder communications requested by the Distributor, forwarding sales literature and advertisements provided by the Distributor, and arranging for bank wires. Except to the extent that the Administrator and/or Adviser benefited through increased fees from an increase in the net assets of the Trust which may have resulted in part from the expenditures, no interested person of the Trust nor any Trustee of the Trust S-19 100 who is not an interested person of the Trust has or had a direct or indirect financial interest in the operation of the Distribution Plan or related agreements. For the fiscal year ended December 31, 1999, the Funds' Class A Shares incurred the following expenses under the plan:
AMOUNT PAID TO 3RD PARTIES BY THE DISTRIBUTOR FOR TOTAL DISTRIBUTOR (AS A % OF NET TOTAL RELATED SALES PRINTING ASSETS) ($ AMOUNT) SERVICES EXPENSES COSTS OTHER COSTS FUND ($AMOUNT) CLASS A Equity Fund 0.25% $ 428 $ 428 N/A N/A N/A High Grade Income Fund 0.25% $ 2 $ 2 N/A N/A N/A Hawaii Municipal Bond Fund 0.25% $5,178 $5,178 N/A N/A N/A
Although banking laws and regulations prohibit banks from distributing shares of open-end investment companies such as the Trust, according to an opinion issued to the staff of the Securities and Exchange Commission ("SEC") by the Office of the Comptroller of the Currency, financial institutions are not prohibited from acting in other capacities for investment companies, such as providing shareholder services. Should future legislative, judicial or administrative action prohibit or restrict the activities of financial institutions in connection with providing shareholder services, the Trust may be required to alter materially or discontinue its arrangements with such financial institutions. THE TRANSFER AGENT DST Systems, Inc. (the "Transfer Agent"), 330 W. 9th Street, Kansas City, Missouri 64105 serves as the Funds' transfer agent. THE CUSTODIAN Chase Manhattan Bank (the "Custodian"), New York, New York 10041 serves as the Funds' custodian. INDEPENDENT AUDITORS PricewaterhouseCoopers LLP, 2400 Eleven Penn Center, Philadelphia, Pennsylvania 19103 serves as the Funds' independent auditors. S-20 101 LEGAL COUNSEL Morgan, Lewis & Bockius LLP, 1701 Market Street, Philadelphia, Pennsylvania 19103 serves as legal counsel to the Funds. TRUSTEES AND OFFICERS OF THE TRUST The management and affairs of the Trust are supervised by the Trustees under the laws governing business trusts in the Commonwealth of Massachusetts. The Trustees and executive officers of the Trust and their principal occupations for the last five years are set forth below. Unless otherwise noted, the business address of each Trustee and each Executive Officer is SEI Investments Company, Oaks, Pennsylvania 19456. Certain officers of the Trust also serve as officers of some or all of the following: The Achievement Funds Trust, The Advisors' Inner Circle Fund, Alpha Select Funds, The Arbor Fund, ARK Funds, Armada Funds, The Armada Advantage Fund, Bishop Street Funds, Boston 1784 Funds(R), CNI Charter Funds, CUFUND, The Expedition Funds, First American Funds, Inc., First American Investment Funds, Inc., First American Strategy Funds, Inc., HighMark Funds, Huntington Funds, The Nevis Fund, Inc., Oak Associates Funds, The Parkstone Group of Funds, The PBHG Funds, Inc., PBHG Insurance Series Fund, Inc., The Pillar Funds, SEI Asset Allocation Trust, SEI Daily Income Trust, SEI Index Funds, SEI Institutional International Trust, SEI Institutional Investments Trust, SEI Institutional Managed Trust, SEI Liquid Asset Trust, SEI Tax Exempt Trust, STI Classic Funds and STI Classic Variable Trust, each of which is an open-end management investment company managed by SEI Investments Mutual Funds Services or its affiliates and distributed by SEI Investments Distribution Co. An asterisk (*) indicates an interested person as defined by the 1940 Act. MARTIN ANDERSON (DOB 11/16/23) - Trustee - Partner, Goodsill, Anderson, Quinn & Stifel since 1951. CHARLES E. CARLBOM (DOB 08/20/34) - Trustee - Chairman, BPI, Inc. since 1999; President and CEO, United Grocers Inc. (1997-1999); President and CEO, Western Family Food Inc., Western Family Holding Inc. (1982-1997). *PHILIP H. CHING (DOB 01/11/31) - Trustee - Retired since 1996; Vice Chairman, First Hawaiian Bank (1968-1996). TODD B. CIPPERMAN (DOB 02/14/66) - Vice President and Assistant Secretary - General Counsel of SEI Investments since 2000; Vice President and Assistant Secretary of SEI Investments, the Administrator and the Distributor since 1995; Associate, Dewey Ballantine (law firm) (1994-1995). JAMES R. FOGGO (DOB 06/30/64) - Vice President and Assistant Secretary - Vice President and Assistant Secretary of SEI Investments since January 1998; Vice President and Secretary of the Adviser, Administrator and Distributor since S-21 102 May 1999; Associate, Paul, Weiss, Rifkind, Wharton & Garrison (law firm), 1998; Associate, Baker & McKenzie (law firm), (1995-1998); Associate, Battle Fowler L.L.P. (law firm), (1993-1995). LYDIA A. GAVALIS (DOB 06/05/64) - Vice President and Assistant Secretary - Vice President and Assistant Secretary of SEI Investments, the Administrator and the Distributor since 1998; Assistant General Counsel and Director of Arbitration, Philadelphia Stock Exchange (1989-1998). JOHN H. GRADY, JR. (DOB 06/01/61) - Secretary; 1701 Market Street, Philadelphia, PA 19103, Partner since 1995, Morgan, Lewis & Bockius LLP (law firm), counsel to the Trust, SEI Investments, the Administrator and the Distributor. KATHY HEILIG (DOB 12/21/58) - Vice President and Assistant Secretary - Treasurer of SEI Investments since 1997; Vice President of SEI Investments since 1991; Vice President and Treasurer of the Adviser and the Administrator since 1997; Assistant Controller of SEI Investments and Vice President of the Distributor since 1995. JAMES L. HUFFMAN (DOB 03/25/45) - Trustee - Dean and Professor, Lewis & Clark Law School since 1973. SHUNICHI KIMURA (DOB 03/15/30) - Trustee - Mediator - Mediation Specialists of Hawaii from (1994-1997); Regent - University of Hawaii (1995-1996). *ROBERT A. NESHER (DOB 08/17/46) - Chairman and President of the Board of Trustees - Currently performs various services on behalf of SEI Investments for which Mr. Nesher is compensated; Trustee of The Advisors' Inner Circle Fund, The Arbor Fund, Boston 1784 Funds(R), The Expedition Funds, Oak Associates Funds, Pillar Funds, SEI Asset Allocation Trust, SEI Daily Income Trust, SEI Index Funds, SEI Institutional Investments Trust, SEI Institutional Managed Trust, SEI Institutional International Trust, SEI Insurance Products Trust, SEI Liquid Asset Trust and SEI Tax Exempt Trust; Chairman SEI Mutual Funds since 1974. *WILLIAM S. RICHARDSON (DOB 12/22/19) - Trustee - Retired since 1992. CHRISTOPHER F. SALFI (DOB 11/28/63) - Controller and Chief Financial Officer - Director, Fund Accounting, SEI Investments since January 1998; Fund Accounting Manager of SEI Investments, (1994-1997). PETER F. SANSEVERO (DOB 01/06/33) - Trustee - Regional Director of the Northwestern Region and First Vice President, Merrill Lynch (1958-1997). LYNDA J. STRIEGEL (DOB 10/30/48) - Vice President and Assistant Secretary of SEI Investments, the Adviser, the Administrator and the Distributor since 1998; Senior Asset Management Counsel, Barnett Banks, Inc., 1997-1998. Partner, Groom and Nordberg, chartered, 1996-1997. Associate General Counsel, Riggs Banks, N.A., 1991-1995. MANUEL R. SYLVESTER (DOB 06/20/30) - Trustee - Retired since 1992. S-22 103 JOYCE S. TSUNODA (DOB 01/01/38) - Trustee - Chancellor - Community Colleges - University of Hawaii since 1983; Senior Vice President - University of Hawaii System since 1989.
AGGREGATE TOTAL COMPENSATION FROM COMPENSATION REGISTRANT AND FUND COMPLEX FROM REGISTRANT PAID TO DIRECTORS FOR FYE NAME OF PERSON AND POSITION FOR FYE 12/31/99 12/31/99 ---------------- -------- Martin Anderson, Trustee $9,000 $ 9,000 for services on 1 board Charles E. Carlbom, Trustee $10,000 $10,000 for services on 1 board Philip H. Ching, Trustee* $10,000 $10,000 for services on 1 board James L. Huffman, Trustee $10,000 $10,000 for services on 1 board Shunichi Kimura, Trustee $10,000 $10,000 for services on 1 board Robert A. Nesher, Trustee* $0 $0 for services on 1 board William S. Richardson, Trustee* $10,000 $10,000 for services on 1 board Peter S. Sansevero, Trustee $10,000 $10,000 for services on 1 board Manuel R. Sylvester, Trustee $10,000 $10,000 for services on 1 board Joyce S. Tsunoda, Trustee $10,000 $10,000 for services on 1 board
* Messrs. Ching, Nesher, and Richardson are Trustees who may be deemed to be "interested" persons of the Trust as the term is defined in the 1940 Act. The Trustees and officers of the Trust own less than 1% of the outstanding shares of the Trust. CODES OF ETHICS The Board of Trustees of the Trust has adopted a Code of Ethics pursuant to Rule 17j-1 under the Investment Company Act of 1940. In addition, the Investment Adviser, Sub-Adviser and Distributor have adopted Codes of Ethics pursuant to Rule 17j-1. These Codes of Ethics apply to the personal investing activities of trustees, officers and certain employees ("access persons"). Rule 17j-1 and the Codes are designed to prevent unlawful practices in connection with the purchase or sale of securities by access persons. Under each Code of Ethics, access persons are permitted to engage in personal securities transactions, but are required to report their personal securities transactions for monitoring purposes. In addition, certain access persons are required to obtain approval before investing in initial public offerings or private placements. A copy of the Trust's Code of Ethics is on file with the Securities and Exchange Commission, and is available to the public. S-23 104 REPORTING The Trust issues unaudited financial information semi-annually and audited financial statements annually. The Trust furnishes proxy statements and other shareholder reports to shareholders of record. PERFORMANCE YIELDS. Yields are one basis upon which investors may compare the Funds with other funds; however, yields of other funds and other investment vehicles may not be comparable because of the factors set forth below and differences in the methods used in valuing portfolio instruments. The yield of a money market fund fluctuates, and the annualization of a week's dividend is not a representation by the Trust as to what an investment in a money market fund will actually yield in the future. Actual yields will depend on such variables as asset quality, average asset maturity, the type of instruments the Fund invests in, changes in interest rates on money market instruments, changes in the expenses of the Fund and other factors. MONEY MARKET FUND YIELDS. From time to time the Money Market and Treasury Money Market Funds advertise their "current yield" and "effective yield" (also called "effective compound yield"). Both yield figures are based on historical earnings and are not intended to indicate future performance. The "current yield" of these Funds refers to the income generated by an investment in the Funds over a seven-day period (which period will be stated in the advertisement). This income is then "annualized." That is, the amount of income generated by the investment during that week is assumed to be generated each week over a 52-week period and is shown as a percentage of the investment. The "effective yield" is similarly calculated but, when annualized, the income earned by an investment in the Funds is assumed to be reinvested. The "effective yield" will be slightly higher than the "current yield" because of the compounding effect of this assumed reinvestment. The current yield of the Money Market and Treasury Money Market Funds will be calculated daily based upon the seven days ending on the date of calculation ("base period"). The yield is computed by determining the net change (exclusive of capital changes) in the value of a hypothetical pre-existing shareholder account having a balance of one share at the beginning of the period, subtracting a hypothetical charge reflecting deductions from shareholder accounts, and dividing such net change by the value of the account at the beginning of the same period to obtain the base period return and multiplying the result by (365/7). Realized and unrealized gains and losses are not included in the calculation of the yield. The effective compound yield of these Funds is determined by computing the net change, exclusive of capital changes, in the value of a hypothetical pre-existing account S-24 105 having a balance of one share at the beginning of the period, subtracting a hypothetical charge reflecting deductions from shareholder accounts, and dividing the difference by the value of the account at the beginning of the base period to obtain the base period return, and then compounding the base period return by adding 1, raising the sum to a power equal to 365 divided by 7, and subtracting 1 from the result, according to the following formula: Effective Yield = (Base Period Return + 1) to the power of 365/7) - 1. The current and the effective yields reflect the reinvestment of net income earned daily on portfolio assets. For the seven-day period ended December 31, 1999, the seven-day yield and seven-day effective yield for the Institutional Class Shares of the Money Market Fund were 5.47% and 5.62%, respectively. For the seven-day period ended December 31, 1999, the seven-day yield and seven-day effective yield for the Institutional Class Shares of the Treasury Money Market Fund were 4.44% and 4.54%, respectively. OTHER YIELDS. The Hawaii Municipal Bond Fund and the High Grade Income Fund may advertise a 30-day yield. The Hawaii Municipal Bond Fund also may advertise a 30-day tax-equivalent yield. Tax equivalent yields are computed by dividing that portion of the Fund's yield which is tax-exempt by 1 minus a stated federal and state income tax rate and adding the product to that portion, if any, of the Fund's yield that is not tax-exempt. (Tax equivalent yields assume the payment of Federal income taxes at a rate of 31% and Hawaii income taxes at a rate of 10%.) These figures will be based on historical earnings and are not intended to indicate future performance. The 30-day yield of these Funds refers to the annualized income generated by an investment in the Funds over a specified 30-day period. The yield is calculated by assuming that the income generated by the investment during that period generated each period over one year and is shown as a percentage of the investment. In particular, yield will be calculated according to the following formula: Yield = (2 (a - b/cd + 1) to the power of 6 - 1) where a = dividends and interest earned during the period; b = expenses accrued for the period (net of reimbursements); c = the average daily number of shares outstanding during the period that were entitled to receive dividends; and d = the maximum offering price per share on the last day of the period. Tax equivalent yields are computed by dividing that portion of a Fund's yield which is tax-exempt by one minus a stated federal and state income tax rate and adding the product to that portion, if any, of the Fund's yield that is not tax-exempt. For the 30-day period ended December 31, 1999, the 30-day yield and 30-day tax equivalent yield for the Hawaii Municipal Bond Fund were 5.07% and 8.59%, respectively, for the Institutional Class Shares, and 4.62% and 7.83%, respectively, for the Class A Shares. S-25 106 For the 30-day period ended December 31, 1999, the 30-day yield for the High Grade Income Fund was 5.90 % for the Institutional Class Shares, and 5.14% for the Class A Shares. CALCULATION OF TOTAL RETURN From time to time, certain of the Funds may advertise total return on an "average annual total return" basis and on an "aggregate total return" basis for various periods. Average annual total return reflects the average annual percentage change in the value of an investment in a Fund over a particular measuring period. Aggregate total return reflects the cumulative percentage change in value over the measuring period. Aggregate total return is computed according to a formula prescribed by the SEC. The formula can be expressed as follows: P (1 + T) to the power of n = ERV, where P = a hypothetical initial payment of $1,000; T = average annual total return; n = number of years; and ERV = ending redeemable value of a hypothetical $1,000 payment made at the beginning of the designated time period as of the end of such period or the life of the fund. The formula for calculating aggregate total return can be expressed as (ERV/P) - 1. The calculation of total return assumes reinvestment of all dividends and capital gain distribution on the reinvestment dates during the period and that the entire investment is redeemed at the end of the period. The performance results listed below refer to results for the fiscal year and the period from each Fund's inception ended December 31, 1999. AVERAGE ANNUAL TOTAL RETURN
SINCE FUND 1 YEAR INCEPTION ---- ------ --------- INSTITUTIONAL CLASS Equity Fund 24.37% 27.05%(1) High Grade Income Fund -4.34% 4.17%(1) Hawaii Municipal Bond Fund -2.65% 5.12%(2) Money Market Fund 4.88% 5.23%(3) Treasury Money Market Fund 4.65% 5.00%(4) CLASS A Equity Fund 17.08% 24.44%(5) (with sales loads)
S-26 107 Equity Fund 24.21% 26.99% (without sales loads High Grade Income Fund -9.55% 2.18%(5) (with sales loads) High Grade Income Fund -5.04% 3.90% (without sales loads) Hawaii Municipal Bond Fund -7.05% 4.13%(5) (with sales loads) Hawaii Municipal Bond Fund -2.91% 5.06% (without sales loads)
(1) Commenced operations on January 31, 1997. (2) Commenced operations on February 15, 1995. (3) Commenced operations on January 30, 1995. (4) Commenced operations on May 1, 1996. (5) Commenced operations on June 14, 1999. The Funds' performance may from time to time be compared to other mutual funds tracked by mutual fund rating services (such as Lipper Analytical Services), financial and business publications and periodicals, to broad groups of comparable mutual funds or to unmanaged indices which may assume investment of dividends but generally do not reflect deductions for administrative and management costs. The Funds may quote Morningstar, Inc., a service that ranks mutual funds on the basis of risk-adjusted performance. The Funds may quote Ibbotson Associates of Chicago, Illinois, which provides historical returns of the capitals markets in the U.S. The Funds may use long term performance of these capital markets to demonstrate general long-term risk vs. reward scenarios and could include the value of a hypothetical investment in any of the capital markets. The Funds may also quote financial and business publications and periodicals as they relate to fund management, investment philosophy, and investment techniques. The Funds may quote various measures of volatility and benchmark correlation in advertising and may compare these measures to those of other funds. Measures of volatility attempt to compare historical share price fluctuations or total returns to a benchmark while measures of benchmark correlation indicate how valid a comparative benchmark might be. Measures of volatility and correlation are calculated using averages of historical data and cannot be calculated precisely. S-27 108 PURCHASING SHARES Purchases and redemptions of shares of the Funds may be made on any day the New York Stock Exchange and the Federal Reserve wire system are open for business. Currently, the weekdays on which the Trust is closed for business are: New Year's Day, Martin Luther King, Jr.'s Day, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day, Columbus Day, Veterans' Day, Thanksgiving Day and Christmas Day. Purchases and redemptions will be made in full and fractional shares that are calculated to three decimal places. REDEEMING SHARES It is the Trust's policy to pay for redemptions in cash. The Trust retains the right, however, to provide for redemptions in whole or in part by a distribution in-kind of securities held by the Funds in lieu of cash. Shareholders may incur brokerage charges on the sale of any such securities so received in payment of redemptions. A Shareholder will at all times be entitled to aggregate cash redemptions from all Funds of the Trust during any 90-day period of up to the lesser of $250,000 or 1% of the Trust's net assets. The Trust reserves the right to suspend the right of redemption and/or to postpone the date of payment upon redemption for any period on which trading on the New York Stock Exchange is restricted, or during the existence of an emergency (as determined by the SEC by rule or regulation) as a result of disposal or valuation of the Fund's securities is not reasonably practicable, or for such other periods as the SEC has by order permitted. The Trust also reserves the right to suspend sales of shares of the Funds for any period during which the New York Stock Exchange, the Adviser, the Administrator and/or the Custodian are not open for business. DETERMINATION OF NET ASSET VALUE The net asset value per share of the Money Market and Treasury Money Market Funds is calculated by adding the value of securities and other assets, subtracting liabilities and dividing by the number of outstanding shares. Securities will be valued by the amortized cost method which involves valuing a security at its cost on the date of purchase and thereafter (absent unusual circumstances) assuming a constant amortization to maturity of any discount or premium, regardless of the impact of fluctuations in general market rates of interest on the value of the instrument. While this method provides certainty in valuation, it may result in periods during which a security's value, as determined by this method, is higher or lower than the price these Funds would receive if they sold the instrument. During periods of declining interest rates, the daily yield of the Funds may tend to be higher than a like computation made by a company with identical investments utilizing a method of valuation based upon market prices and estimates of market prices for all of its portfolio securities. Thus, if the use of amortized cost by these Funds resulted in a lower aggregate portfolio value on a particular day, a prospective investor in these Funds would be able to obtain a somewhat higher yield than would S-28 109 result from investment in a company utilizing solely market values, and existing investors in these Funds would experience a lower yield. The converse would apply in a period of rising interest rates. The Money Market and Treasury Money Market Funds' use of amortized cost and the maintenance of these Funds' net asset value at $1.00 are permitted by regulations promulgated by Rule 2a-7 under the 1940 Act, provided that certain conditions are met. These conditions currently require that the Funds maintain a dollar-weighted average maturity of 90 days or less, not purchase any instrument having a remaining maturity of more than 397 days, and will limit their investments to those U.S. dollar-denominated instruments which the Trustees determine to present minimal credit risks and which are of "eligible" quality. The regulations also require the Trustees to establish procedures which are reasonably designed to stabilize the net asset value per share at $1.00 for the Funds. Such procedures include the determination of the extent of deviation, if any, of the Funds' current net asset value per share calculated using available market quotations from the Funds' amortized cost price per share at such intervals as the Trustees deem appropriate and reasonable in light of market conditions and periodic reviews of the amount of the deviation and the methods used to calculate such deviation. In the event that such deviation exceeds 1/2 of 1%, the Trustees are required to consider promptly what action, if any, should be initiated, and, if the Trustees believe that the extent of any deviation may result in material dilution or other unfair results to Shareholders, the Trustees are required to take such corrective action as they deem appropriate to eliminate or reduce such dilution or unfair results to the extent reasonably practicable. Such actions may include the sale of portfolio instruments prior to maturity to realize capital gains or losses or to shorten average portfolio maturity; withholding dividends; redeeming shares in kind; or establishing a net asset value per share by using available market quotations. In addition, if the Funds incur a significant loss or liability, the Trustees have the authority to reduce pro rata the number of shares of these Funds in each shareholder's account and to offset each shareholder's pro rata portion of such loss or liability from the shareholder's accrued but unpaid dividends or from future dividends. The securities of the Equity, High Grade Income and Hawaii Municipal Bond Funds are valued pursuant to prices and valuations provided by an independent pricing service. The pricing service relies primarily on prices of actual market transactions as well as trader quotations. However, the service may also use a matrix system to determine valuations, which system considers such factors as security prices, yields, maturities, call features, ratings and developments relating to specific securities in arriving at valuations. The procedures of the pricing service and its valuations are reviewed by the officers of the Trust under the general supervision of the Trustees. TAXES The following is only a summary of certain additional federal income tax considerations generally affecting the Funds and their shareholders that are not described in the Funds' prospectus. No attempt is made to present a detailed explanation of the tax treatment of the Funds or their shareholders, and the discussion here and in the Funds' S-29 110 prospectus is not intended as a substitute for careful tax planning. Shareholders are urged to consult with their tax advisors with specific reference to their own tax situation, including their state and local tax liabilities. The following general discussion of certain federal income tax consequences is based on the Internal Revenue Code of 1986, as amended (the "Code") and the regulations issued thereunder as in effect on the date of this Statement of Additional Information. New legislation, as well as administrative changes or court decisions, may significantly change the conclusions expressed herein, and may have a retroactive effect with respect to the transactions contemplated herein. Each Fund is generally treated as a separate corporation for federal income tax purposes. Thus, the provisions of the Code generally will be applied to each Fund separately. QUALIFICATION AS A REGULATED INVESTMENT COMPANY Each Fund intends to qualify and elect to be treated as a "regulated investment company" ("RIC") as defined under Subchapter M of the Code. By following such a policy, each Fund expects to eliminate or reduce to a nominal amount the federal taxes to which they may be subject. In order to qualify as a RIC, a Fund must distribute at least 90% of its net investment income (that generally includes dividends, taxable interest, and the excess of net short-term capital gains over net long-term capital losses less operating expenses) and at least 90% of its net tax exempt interest income, for each tax year, if any, to its shareholders (the "Distribution Requirement"). In addition, a Fund must meet the following additional requirements: (i) at least 90% of the Fund's gross income each taxable year must be derived from dividends, interest, payments with respect to securities loans, and gains from the sale or other disposition of stock or securities, or foreign currencies, or other income derived with respect to its business of investing in such stock, securities, or currencies; (ii) at the close of each quarter of the Fund's taxable year, at least 50% of the value of its total assets must be represented by cash and cash items, U.S. government securities, securities of other RICs and other securities, with such other securities limited, in respect to any one issuer, to an amount that does not exceed 5% of the value of the Fund's assets and that does not represent more than 10% of the outstanding voting securities of such issuer; and (iii) at the close of each quarter of the Fund's taxable year, not more than 25% of the value of its assets may be invested in securities (other than U.S. government securities or the securities of other RICs) of any one issuer or of two or more issuers which the Fund controls and which are engaged in the same, similar or related trades or businesses. For purposes of the 90% gross income requirement described in (i) above, foreign currency gains which are not directly related to a Fund's principal business of investing in stock or securities ( or options or futures with respect to stock or securities may be excluded from income that qualifies under the 90% requirement. Some of the Funds may make investments in securities (such as STRIPS) that bear "original issue discount" or "acquisition discount" (collectively, "OID Securities"). S-30 111 The holder of such securities is deemed to have received interest income even though no cash payments have been received. Accordingly, OID Securities may not produce sufficient current cash receipts to match the amount of net investment income the Funds must distribute to satisfy the distribution requirement. In some cases, the Funds may have to borrow money or dispose of other investments in order to make sufficient cash distributions to satisfy the Distribution Requirement. Although each Fund intends to distribute substantially all of its net investment income and may distribute its capital gains for any taxable year, each Fund will be subject to federal income taxation to the extent any such income or gains are not distributed. If the Funds fail to qualify for any taxable year as a RIC, all of their taxable income will be subject to tax at regular corporate income tax rates without any deduction for distributions to shareholders and such distributions generally will be taxable to shareholders as ordinary dividends to the extent of a Fund's current and accumulated earnings and profits. In this event, distributions generally will be eligible for the dividends-received deduction for corporate shareholders. FUND DISTRIBUTIONS Distributions of net investment company taxable income will be taxable to shareholders as ordinary income, regardless of whether such distributions are paid in cash or are reinvested in additional Shares, to the extent of a Fund's earnings and profits. Each Fund anticipates that it will distribute substantially all of its net investment for each taxable year. Each Fund may either retain or distribute to shareholders its excess of net long-term capital gains over net short-term capital losses ("net capital gains"). If such gains are distributed as a capital gains distribution, they are taxable to shareholders who are individuals at a maximum rate of 20%, regardless of the length of time the shareholder has held the shares. If any such gains are retained, a Fund will pay federal income tax thereon, and if the Fund makes an election, the shareholders will include such undistributed gains in their income, will increase their tax basis in the Fund's shares by 65% of the amount included in their income and will be able to claim their share of the tax paid by the Fund as a refundable credit. In the case of corporate shareholders, distributions (other than capital gains distributions) from a RIC generally qualify for the dividends-received deduction to the extent of the gross amount of qualifying dividends received by a Fund for the year. Generally, and subject to certain limitations, a dividend will be treated as a qualifying dividend if it has been received from a domestic corporation. Accordingly, it is not expected that any distribution from High Grade Income Fund, Hawaii Municipal Bond Fund, Money Market Fund, or Treasury Money Market Fund will qualify for the corporate dividends-received deduction. Conversely, distributions from the Equity Fund generally will qualify for the corporate dividends-received deduction. S-31 112 Ordinarily, investors should include all dividends as income in the year of payment. However, dividends declared and payable to shareholders of record in October, November, or December of one year, but paid in January of the following year, will be deemed for tax purposes to have been received by the shareholder and paid by the Fund on December 31 of the year in which the dividends were declared. Each Fund will provide a statement annually to shareholders as to the federal tax status of distributions paid (or deemed to be paid) by the Fund during the year, including the amount of dividends eligible for the corporate dividends-received deduction. SALE OR EXCHANGE OF FUND SHARES Generally, gain or loss on the sale or exchange of a share will be capital gain or loss that will be long-term if the Share has been held for more than twelve months and otherwise will be short-term. For individuals, long-term capital gains are currently taxed at a maximum rate of 20% and short-term capital gains are currently taxed at ordinary income tax rates. However, if a shareholder realizes a loss on the sale, exchange or redemption of a Share held for six months or less and has previously received a capital gains distribution with respect to the Share (or inclusion of undistributed net capital gains with respect to such Share), the shareholder must treat the loss as a long-term capital loss to the extent of the amount of the prior capital gains distribution (or inclusion of undistributed net capital gains). In addition, any loss realized on a sale or other disposition of Shares will be disallowed to the extent an investor repurchases (or enters into a contract or option to repurchase) Shares within a period of 61 days (beginning 30 days before and ending 30 days after the disposition of the Shares). This loss disallowance rule will apply to Shares received through the reinvestment of dividends during the 61-day period. In certain cases, a Fund will be required to withhold, and remit to the United States Treasury, 31% of any distributions paid to a shareholder who (1) has failed to provide a correct taxpayer identification number, (2) is subject to backup withholding by the Internal Revenue Service, or (3) has failed to certify to the Fund that such shareholder is not subject to backup withholding. FEDERAL EXCISE TAX If a Fund fails to distribute in a calendar year at least 98% of its ordinary income for the year and 98% of its capital gain net income (the excess of short and long term capital gains over short and long term capital losses) for the one-year period ending October 31 of that year (and any retained amount from the prior calendar year), the Fund will be subject to a nondeductible 4% Federal excise tax on the undistributed amounts. Each Fund intends to make sufficient distributions to avoid imposition of this tax, or to retain, at most its net capital gains and pay tax thereon. S-32 113 ADDITIONAL CONSIDERATIONS FOR HAWAII MUNICIPAL BOND FUND The Fund intends to qualify to pay "exempt interest dividends" to its shareholders by satisfying the Code's requirement that at the close of each quarter of its taxable year at least 50% of the value of its total assets consist of obligations the interest on which is exempt from federal income tax. As long as this and certain other requirements are met, dividends derived from the Fund's net tax-exempt interest income will be "exempt interest dividends" that may be excluded from shareholders' gross income for federal income tax purposes. Exempt interest dividends may, however, have collateral deferral income tax consequences, including alternative minimum tax consequences, as discussed below. Exempt-interest dividends may be subject to the alternative minimum tax imposed by Section 55 of the Code (the "Alternative Minimum Tax"). The Alternative Minimum Tax is imposed at a rate of up to 28% in the case of non-corporate taxpayers and at the rate of 20% in the case of corporate taxpayers, to the extent it exceeds the taxpayer's regular tax liability. The Alternative Minimum Tax may be affected by the receipt of exempt-interest dividends in two circumstances. First, exempt-interest dividends derived from certain "private activity bonds" issued after August 7, 1986, will generally be an item of tax preference and therefore potentially subject to the Alternative Minimum Tax. The Fund intends, when possible, to avoid investing in private activity bonds. Second, in the case of exempt-interest dividends received by corporate shareholders, all exempt-interest dividends, regardless of when the bonds from which they are derived were issued or whether they are derived from private activity bonds, will be included in the corporation's "adjusted current earnings," as defined in Section 56(g) of the Code, in calculating the corporation's alternative minimum taxable income for purposes of determining the Alternative Minimum Tax. The percentage of income that constitutes exempt-interest dividends will be determined for each year for the Fund and will be applied uniformly to all dividends declared with respect to the Fund during that year. This percentage may differ from the actual percentage for any particular day. Interest on indebtedness incurred or continued by shareholders to purchase or carry Shares of the Fund will be limited for federal income tax purposes to the extent that any portion of such Fund's distributions consist of exempt-interest dividends. The deduction otherwise allowable to property and casualty insurance companies for "losses incurred" will be reduced by an amount equal to a portion of exempt-interest dividends received or accrued during any taxable year. Foreign corporations engaged in a trade or business in the United States will be subject to a "branch profits tax" on their "dividend equivalent amount" for the taxable year, which will include exempt-interest dividends. Certain Subchapter S corporations may also be subject to taxes on their "passive investment income," which could include exempt-interest dividends. Up to 85% of the Social Security benefits or railroad retirement benefits received by an individual during any taxable year will be included in the gross income of such individual if the individual's S-33 114 "modified adjusted gross income" (which includes exempt-interest dividends) plus one-half of the Social Security benefits or railroad retirement benefits received by such individual during that taxable year exceeds the base amount described in Section 86 of the Code. Any loss on the sale or exchange of shares of the Fund held for six months or less will be disallowed to the extent of any exempt-interest dividends received by the selling shareholder with respect to such shares. Entities or persons who are "substantial users" (or persons related to "substantial users") of facilities financed by industrial development bonds or private activity bonds should consult their tax advisors before purchasing Shares of the Fund. "Substantial user" is defined generally as including a "non-exempt person" who regularly uses in trade or business a part of such a facility. Current federal law limits the types and volume of bonds qualifying for the federal income tax exemption of interest, which may have an effect on the ability of the Fund to purchase sufficient amounts of tax-exempt securities to satisfy the Code's requirements for the payment of exempt interest dividends. Issuers of bonds purchased by the Fund (or the beneficiary of such bonds) may have made certain representations or covenants in connection with the issuance of such bonds to satisfy certain requirements of the Code that must be satisfied subsequent to the issuance of such bonds. Investors should be aware that exempt-interest dividends derived from such bonds may become subject to federal income taxation retroactively to the date thereof if such representations are determined to have been inaccurate or if the issuer of such bonds (or the beneficiary of such bonds) fails to comply with such covenants. The Fund may not be a suitable investment for tax-exempt shareholders and plans because such shareholders and plans would not gain any additional tax benefit from the receipt of exempt-interest dividends. The state and local tax consequences of an investment in the Fund may differ from the federal consequences described above and shareholders are urged to consult their tax advisers with respect to such consequence. STATE AND LOCAL TAXES A Fund is not liable for any income or franchise tax in Massachusetts if it qualifies as a RIC for federal income tax purposes. Depending upon state and local law, distributions by the Funds to shareholders and the ownership of shares may be subject to state and local taxes. Shareholders are urged to consult their tax advisors as to the consequences of these and other state and local tax rules affecting an investment in the Funds. S-34 115 HAWAII TAXATION The State of Hawaii has specifically adopted Sections 852 through 855 of the Code, which provisions provide for pass-through treatment of exempt interest dividends and capital gains, i.e., distributions by the Hawaii Municipal Bond Fund of dividends representing exempt interest and capital gains retain their original character in the hands of shareholders. As the State of Hawaii's Department of Taxation has confirmed in response to a request by special counsel for the Trust, distributions from the Hawaii Municipal Bond Fund to its shareholders which are attributable to interest on obligations exempt from income tax in the State of Hawaii will not be subject to Hawaii income tax in the hands of shareholders so long as at least 50% of the Hawaii Municipal Bond Fund's assets are invested in securities the interest from which is exempt from Hawaii state taxation. In addition, the Department of Taxation has confirmed that interest income on obligations issued by the U.S. government and its territories is exempt from State of Hawaii income taxation. While the Hawaii Municipal Bond Fund intends to invest primarily in obligations which produce tax-exempt interest, if the Fund invests in obligations that are not exempt for Hawaii purposes, a portion of the Fund's distribution will be subject to Hawaii income tax. FUND TRANSACTIONS Subject to policies established by the Trustees, the Adviser (and, where applicable, the Sub-Adviser) are responsible for placing the orders to execute transactions for the Funds. In placing orders, it is the policy of the Adviser to seek to obtain the best net results taking into account such factors as price (including the applicable dealer spread), the size, type and difficulty of the transaction involved, the firm's general execution and operational facilities, and the firm's risk in positioning the securities involved. While the Adviser generally seeks reasonably competitive spreads or commissions, the Funds will not necessarily be paying the lowest spread or commission available. The Funds will not purchase portfolio securities from any affiliated person acting as principal except in conformity with the regulations of the SEC. The money market securities in which the Funds invest are traded primarily in the over-the-counter market. Bonds and debentures are usually traded over-the-counter, but may be traded on an exchange. Where possible, the Adviser will deal directly with the dealers who make a market in the securities involved except in those circumstances where better prices and execution are available elsewhere. Such dealers usually are acting as principal for their own account. On occasion, securities may be purchased directly from the issuer. Money market securities are generally traded on a net basis and do not normally involve either brokerage commissions or transfer taxes. The cost of executing portfolio securities transactions of the Trust will primarily consist of dealer spreads and underwriting commissions. The Trust selects brokers or dealers to execute transactions for the purchase or sale of portfolio securities on the basis of its judgment of their professional capability to S-35 116 provide the service. The primary consideration is to have brokers or dealers provide transactions at best price and execution for the Trust. Best price and execution includes many factors, including the price paid or received for a security, the commission charged, the promptness and reliability of execution, the confidentiality and placement accorded the order and other factors affecting the overall benefit obtained by the account on the transaction. The Trust's determination of what are reasonably competitive rates is based upon the professional knowledge of its trading department as to rates paid and charged for similar transactions throughout the securities industry. In some instances, the Trust pays a minimal share transaction cost when the transaction presents no difficulty. Some trades are made on a net basis where the Trust either buys securities directly from the dealer or sells them to the dealer. In these instances, there is no direct commission charged but there is a spread (the difference between the buy and sell price) which is the equivalent of a commission. The Trust may allocate out of all commission business generated by all of the Funds and accounts under management by the Adviser, brokerage business to brokers or dealers who provide brokerage and research services. These research services include advice, either directly or through publications or writings, as to the value of securities, the advisability of investing in, purchasing or selling securities, and the availability of securities or purchasers or sellers of securities; furnishing of analyses and reports concerning issuers, securities or industries; providing information on economic factors and trends, assisting in determining portfolio strategy, providing computer software used in security analyses, and providing portfolio performance evaluation and technical market analyses. Such services are used by the Adviser in connection with its investment decision-making process with respect to one or more funds and accounts managed by it, and may not be used exclusively with respect to the Fund or account generating the brokerage. As provided in the Securities Exchange Act of 1934 (the "1934 Act"), higher commissions may be paid to broker-dealers who provide brokerage and research services than to broker-dealers who do not provide such services if such higher commissions are deemed reasonable in relation to the value of the brokerage and research services provided. Although transactions are directed to broker-dealers who provide such brokerage and research services, the Trust believes that the commissions paid to such broker-dealers are not, in general, higher than commissions that would be paid to broker-dealers not providing such services and that such commissions are reasonable in relation to the value of the brokerage and research services provided. In addition, portfolio transactions which generate commissions or their equivalent are directed to broker-dealers who provide daily portfolio pricing services to the Trust. Subject to best price and execution, commissions used for pricing may or may not be generated by the Funds receiving the pricing service. The Adviser may place a combined order for two or more accounts or Funds engaged in the purchase or sale of the same security if, in its judgment, joint execution is in the best interest of each participant and will result in best price and execution. Transactions involving commingled orders are allocated in a manner deemed equitable S-36 117 to each account or Fund. It is believed that the ability of the accounts to participate in volume transactions will generally be beneficial to the accounts and Funds. Although it is recognized that, in some cases, the joint execution of orders could adversely affect the price or volume of the security that a particular account or Fund may obtain, it is the opinion of the Adviser and the Trust's Board of Trustees that the advantages of combined orders outweigh the possible disadvantages of separate transactions. Consistent with the Conduct Rules of the National Association of Securities Dealers, Inc., and subject to seeking best price and execution, the Funds, at the request of the Distributor, give consideration to sales of shares of the Trust as a factor in the selection of brokers and dealers to execute Trust portfolio transactions. The Funds may execute brokerage or other agency transactions through the Distributor, which is a registered broker-dealer in conformity with the 1940 Act, the 1934 Act and rules promulgated by the SEC. Under these provisions, the Distributor is permitted to receive and retain compensation for effecting portfolio transactions for the Funds on an exchange if a written contract is in effect between the Distributor and the Trust expressly permitting the Distributor to receive and retain such compensation. These rules further require that commissions paid to the Distributor by the Trust for exchange transactions not exceed "usual and customary" brokerage commissions. The rules define "usual and customary" commissions to include amounts which are "reasonable and fair compared to the commission, fee or other remuneration received or to be received by other brokers in connection with comparable transactions involving similar securities being purchased or sold on a securities exchange during a comparable period of time." In addition, the Funds may direct commission business to one or more designated broker/dealers, including the Distributor, in connection with such broker/dealer's payment of certain of the Funds' expenses. The Trustees, including those who are not "interested persons" of the Trust, have adopted procedures for evaluating the reasonableness of commissions paid to the Distributor and will review the procedures periodically. Since the Trust does not market its shares through intermediary broker-dealers, it is not the Trust's practice to allocate brokerage business on the basis of sales of its shares which may be made through such firms. However, the Adviser may place Fund orders with qualified broker-dealers who recommend the Trust to clients, and may, when a number of brokers and dealers can provide best price and execution on a particular transaction, consider such recommendations by a broker or dealer in selecting among broker-dealers. For the fiscal year ended December 31, 1999, the following commissions were paid on brokerage transactions, pursuant to an agreement or understanding, to brokers because of research services provided by the brokers: S-37 118
Total Dollar Amount of Total Dollar Amount of Brokerage Transactions Involving Directed Fund Commissions for Research Services Brokerage Commissions for Research Services Equity Fund $83,568.54 $83,177,406.38 High Grade Income Fund $0 $0 Hawaii Municipal Bond Fund $0 $0 Money Market Fund $0 $0 Treasury Money Market Fund $0 $0
For the years indicated, the Funds paid the following brokerage commissions:
% of Total % of Total Brokerage Total $ Amount of Brokerage Brokerage Transactions Fund Total $ Amount of Brokerage Commissions Paid to Commissions Effected Commissions Paid Affiliate Brokers Paid to Through Affiliated Affiliated Brokers Brokers 1997 1998 1999 1997 1998 1999 1999 1999 ---- ---- ---- ---- ---- ---- ---- ---- Equity Fund $40,380 $58,933 $181,838 $6,548 $19,863 $6,265 3% 1% High Grade Income Fund -- -- -- -- -- -- -- -- Hawaii Municipal Bond Fund -- -- -- -- -- -- -- -- Money Market Fund -- -- -- -- -- -- -- -- Treasury Money Market Fund -- -- -- -- -- -- -- --
"Regular brokers or dealers" of the Trust are the ten brokers or dealers that, during the most recent fiscal year, (i) received the greatest dollar amounts of brokerage commissions from the Trust's portfolio transactions, (ii) engaged as principal in the largest dollar amounts of portfolio transactions of the Trust, or (iii) sold the largest dollar amounts of the Trust's shares. On December 31, 1999, the following Funds held securities of the Trust's "regular brokers or dealers" as follows:
Total $ Amount of Securities of Each Regular Broker-Dealer Fund Name of Broker/Dealer Held - ---- --------------------- -------------------------------- Money Market Fund* J.P. Morgan $ 4,913,000 Morgan Stanley Dean Witter $ 7,976,000 Paribas Capital Markets $11,879,000 Bear Stearns $ 4,968,000 Goldman Sachs Group $ 7,929,000 Merrill Lynch $ 7,976,000
Total $ Amount of Securities of Each Regular Broker-Dealer Fund Name of Broker/Dealer Held - ---- --------------------- -------------------------------- Treasury Money Market Fund** Barclays Capital $70,000,000 J.P. Morgan $40,000,000 Paribas Capital Markets $22,343,000 ABN AMRO $40,000,000 Warburg Dillon $40,000,000
- ------------ * All of the broker-dealer securities held by the Money Market Fund represent commercial paper issued by the broker-dealer, with the exception of Paribas Capital Markets which is a repurchase agreement. ** All of the broker-dealer securities held by the Treasury Money Market Fund represent repurchase agreements fully collateralized by U.S. Treasury securities. The portfolio turnover rate for the Equity Fund was 30% for the fiscal year ended December 31, 1997, 41% for the fiscal year ended December 31, 1998, and 58% for the fiscal year ended 1999. The portfolio turnover rate for the Hawaii Municipal Bond Fund was 29% for the fiscal year ended December 31, 1997, 21% for the fiscal year ended December 31, 1998, and 14% for the fiscal year ended December 31, 1999. The portfolio turnover rate for the High Grade Income Fund was 32% for the fiscal year ended December 31, 1997, 98% for the fiscal year ended December 31, 1998, and 56% for the fiscal year ended December 31, 1999. S-38 119 DESCRIPTION OF SHARES The Agreement and Declaration of Trust ("Declaration of Trust") authorizes the issuance of an unlimited number of each series. Each share of each Fund represents an equal proportionate interest in that Fund with each other share of that Fund. Each share upon liquidation entitles a shareholder to a pro rata share in the net assets of that Fund, after taking into account additional distribution and transfer agency expenses attributable to Class A shares. Shareholders have no preemptive rights. The Agreement and Declaration of Trust provides that the Trustees of the Trust may create additional series of shares or separate classes of funds. All consideration received by the Trust for shares of any additional series or separate class and all assets in which such consideration is invested would belong to that series or separate class and would be subject to the liabilities related thereto. Share certificates representing shares will not be issued. VOTING Each share held entitles the shareholder of record to one vote. The shareholders of each Fund or class will vote separately on matters pertaining solely to that Fund or class, such as any distribution plan. As a Massachusetts business trust, the Trust is not required to hold annual meetings of shareholders, but approval will be sought for certain changes in the operation of the Trust and for the election of Trustees under certain circumstances. In addition, a Trustee may be removed by the remaining Trustees or by shareholders at a special meeting called upon written request of shareholders owning at least 10% of the outstanding shares of the Trust. In the event that such a meeting is requested, the Trust will provide appropriate assistance and information to the shareholders requesting the meeting. Where the Trust's Prospectuses or Statements of Additional Information state that an investment limitation or a fundamental policy may not be changed without shareholder approval, such approval means the vote of (1) 67% or more of the affected Fund's shares present at a meeting if the holders of more than 50% of the outstanding shares of the Fund are present or represented by proxy, or (ii) more than 50% of the affected Fund's outstanding shares, whichever is less. SHAREHOLDER LIABILITY The Trust is an entity of the type commonly known as a "Massachusetts business trust." Under Massachusetts law, shareholders of such a trust could, under certain circumstances, be held personally liable as partners for the obligations of the Trust. Even if, however, the Trust were held to be a partnership, the possibility of the shareholders' incurring financial loss for that reason appears remote because the Trust's Declaration of Trust contains an express disclaimer of shareholder liability for obligations of the Trust and requires that notice of such disclaimer be given in each agreement, obligation or S-39 120 instrument entered into or executed by or on behalf of the Trust or the Trustees, and because the Declaration of Trust provides for indemnification out of the Trust property for any shareholder held personally liable for the obligations of the Trust. LIMITATION OF TRUSTEES' LIABILITY The Declaration of Trust provides that a Trustee shall be liable only for his or her own willful defaults and, if reasonable care has been exercised in the selection of officers, agents, employees or investment advisers, shall not be liable for any neglect or wrongdoing of any such person. The Declaration of Trust also provides that the Trust will indemnify its Trustees and officers against liabilities and expenses incurred in connection with actual or threatened litigation in which they may be involved because of their Offices with the Trust unless it is determined in the manner provided in the Declaration of Trust that they have not acted in good faith in the reasonable belief that their actions were in the best interests of the Trust. However, nothing in the Declaration of Trust shall protect or indemnify a Trustee against any liability for his or her willful misfeasance, bad faith, gross negligence or reckless disregard of his or her duties. 5% AND 25% SHAREHOLDERS A shareholder owning of record or beneficially more than 25% of a particular Fund's shares may be considered to be a "controlling person" of that Fund. Accordingly, its vote could have a more significant effect on matters presented at shareholder meetings than the votes of the Fund's other shareholders. As of April 3, 2000, the following persons were the only persons who were record owners (or to the knowledge of the Adviser, beneficial owners) of 5% and 25% or more of the Fund's shares:
FUND SHAREHOLDER % - ---- ----------- - Equity Fund Mark K. Fu TTEE 10.10% Class A Shares Mark Kealoha QUOC Thin FU Rev LIV Trust DTD 04/26/93 6430 Hawaii Kai Dr. Honolulu, HI 96825-1112 BISYS BD Services, Inc. 48.16% P.O. Box 4054 Concord, CA 94524-4054 Rose Lewis Blalock TR 30.18% U/A STD 03/19/1984 Rose Lewis Blalock Trust 20503 96th Ave. S. Kent, WA 98031-1456
S-40 121 High Grade Income Fund BISYS BD Services, Inc. 80.49% Class A Shares P.O. Box 4054 Concord, CA 94524-4054 SEI Corporation 9.77% SEED Account 530 E. Swedesford Rd. Wayne, PA 19087-1607 Hawaii Municipal Bond Fund BISYS BD Services, Inc. 91.89% Class A Shares P.O. Box 4054 Concord, CA 94524-4054 Equity Fund FIDAC 58.97% Institutional Class Shares c/o Marshall & Ilsley Trust Co. P.O. Box 2977 Milwaukee, WI 53201-2977 Miter & Co. 37.48% FBO TA c/o Marshall & Ilsley Trust Co. P.O. Box 2977 Milwaukee, WI 53201-2977 High Grade Income Fund FIDAC 76.31% Institutional Class Shares c/o Marshall & Ilsley Trust Co. P.O. Box 2977 Milwaukee, WI 53201-2977 Miter & Co. 18.61% FBO TA c/o Marshall & Ilsley Trust Co. P.O. Box 2977 Milwaukee, WI 53201-2977 Hawaii Municipal Bond Fund FIDAC 86.64% Institutional Class Shares c/o Marshall & Ilsley Trust Co. P.O. Box 2977 Milwaukee, WI 53201-2977 Money Market Fund Maril & Co. 75.95% Institutional C/O First Hawaiian Bank Class Shares Trust & Investments Division P.O. Box 3708 Honolulu, HI 96811-3708 Maril & Co. 22.23% C/O First Hawaiian Bank Trust & Investments Division P.O. Box 3708 Honolulu, HI 96811-3708 Treasury Money Market Fund Maril & Co. 64.75% Institutional Class Shares C/O First Hawaiian Bank Trust & Investments Division P.O. Box 3708 Honolulu, HI 96811-3708 Maril & Co. 34.99% C/O First Hawaiian Bank Trust & Investments Division P.O. Box 3708 Honolulu, HI 96811-3708
FINANCIAL INFORMATION The Trust's financial statements for the fiscal year ended December 31, 1999, including notes thereto and the report of PricewaterhouseCoopers LLP thereon, are herein incorporated by reference. A copy of the 1999 Annual Report must accompany the delivery of this Statement of Additional Information. S-41 122 BISHOP STREET FUNDS PART C: OTHER INFORMATION ITEM 23. EXHIBITS: (a)(1) Agreement and Declaration of Trust dated May 25, 1994 as originally filed with the Registrant's Registration Statement on Form N-1A (File No. 33-80514) filed with the SEC on June 20, 1994, is incorporated herein by reference to Exhibit 1 of Post-Effective Amendment No. 3 to the Registrant's Registration Statement, as filed February 29, 1996. (a)(2) Amended and Restated Agreement and Declaration of Trust dated September 1, 1994 as originally filed with the Registrant's Pre-Effective Amendment No. 1 on Form N-1A (File No. 33-80514) filed with the SEC on September 7, 1994, is incorporated herein by reference to Post-Effective Amendment No. 3 to the Registrant's Registration Statement, as filed February 29, 1996. (b)(1) By-Laws of the Registrant as originally filed with the Registrant's Registration Statement filed with the SEC on Form N-1A (File No. 33-80514) on June 20, 1994, are incorporated herein by reference to Exhibit 2 of Post-Effective Amendment No. 3 to the Registrant's Registration Statement, as filed February 29, 1996. (b)(2) Amended By-Laws of the Registrant as originally filed with the Registrant's Pre-Effective Amendment No. 1 filed with the SEC on Form N-1A (File No. 33-80514) on September 7, 1994, are incorporated herein by reference to Exhibit 2(a) of Post-Effective Amendment No. 3 to the Registrant's Registration Statement, as filed February 29, 1996. (b)(3) Amended By-Laws of the Registrant are incorporated herein by reference to Exhibit 2(b) of Post-Effective Amendment No. 7 to the Registrant's Registration Statement filed with the SEC on Form N-1A (File No. 33-80514), as filed February 26, 1998. (c) Not applicable. (d)(1) Investment Advisory Agreement between the Registrant and First Hawaiian Bank dated January 25, 1995, is incorporated herein by reference to Exhibit 5(a) of Post-Effective Amendment No. 3 to the Registrant's Registration Statement filed with the SEC on Form N-1A (File No. 33-80514), as filed February 29, 1996. (d)(2) Investment Sub-Advisory Agreement by and among the Registrant, First Hawaiian Bank and Wellington Management Company, LLP dated January 27, 1995, is incorporated herein by reference to Exhibit 5(b) of Post-Effective Amendment No. 3 to the Registrant's Registration Statement filed with the SEC on Form N-1A (File No. 33-80514), as filed February 29, 1996. (d)(3) Amended and Restated Investment Sub-Advisory Agreement by and among the Registrant, First Hawaiian Bank and Wellington Management Company, LLP dated April 30, 1996, is incorporated herein by reference to Exhibit 5(c) of Post-Effective Amendment No. 5 to the Registrant's Registration Statement filed with the SEC on Form N-1A (File No. 33-80514), as filed April 30, 1997. (d)(4) Schedule B dated April 30, 1996, to the Investment Advisory Agreement dated January 27, 1995, between the Registrant and First Hawaiian Bank, is incorporated herein by reference to Exhibit 5(d) of Post-Effective Amendment No. 5 to the Registrant's Registration Statement filed with the SEC on Form N-1A (File No. 33-80514), as filed April 30, 1997. 123 (d)(5) Investment Advisory Agreement between the Registrant and First Hawaiian Bank dated March 31, 1999, is incorporated herein by reference to Exhibit (d)5 of Post-Effective Amendment No. 12 to the Registrants Registration Statement filed with the SEC on Form N-1A (File No. 33-80514), as filed April 30, 1999. (d)(6) Investment Sub-Advisory Agreement by and among the Registrant, First Hawaiian Bank and Wellington Management Company, LLP dated March 31, 1999, is incorporated herein by reference to Post-Effective Amendment No. 12 to the Registrant's Registration Statement on Form N-1A (File No. 33-80514), as filed April 30, 1999. (d)(7) Assignment and Assumption Agreement between First Hawaiian Bank and Bishop Street Capital Management dated February 22, 2000 is filed herewith. (d)(8) Consent to Assignment and Assumption of the Investment Advisory Agreement between the Bishop Street Funds and First Hawaiian Bank is filed herewith. (d)(9) Consent to Assignment and Assumption of the Investment Sub-Advisory Agreement between First Hawaiian Bank and Wellington Management Company, LLP is filed herewith. (e)(1) Distribution Agreement between the Registrant and SEI Financial Services Company dated January 27, 1995, is incorporated herein by reference to Exhibit 6 of Post-Effective Amendment No. 3 to the Registrant's Registration Statement filed with the SEC on Form N-1A (File No. 33-80514), as filed February 29, 1996. (e)(2) Amended and Restated Distribution Agreement between the Registrant and SEI Investments Distribution Co. dated June 10, 1999, is incorporated herein by reference to Exhibit (e)2 of Post-Effective Amendment No. 13 to the Registrant's Registration Statement filed with the SEC on Form N-1A (File No. 33-80514), as filed June 11, 1999. (f) Not Applicable. (g) Custodian Agreement between the Registrant and Chemical Bank, N.A. dated October 24, 1994, is incorporated herein by reference to Exhibit 8 of Post-Effective Amendment No. 3 to the Registrant's Registration Statement filed with the SEC on Form N-1A (File No. 33-80514), as filed February 29, 1996. (h)(1) Administration Agreement between the Registrant and SEI Financial Management Corporation dated January 27, 1995, is incorporated herein by reference to Exhibit 9(a) of Post-Effective Amendment No. 3 to the Registrant's Registration Statement filed with the SEC on Form N-1A (File No. 33-80514), as filed February 29, 1996. (h)(2) Transfer Agent Agreement between the Registrant and Supervised Service Company, Inc. dated January 30, 1995, is incorporated herein by reference to Exhibit 9(b) of Post-Effective Amendment No. 3 to the Registrant's Registration Statement filed with the SEC on Form N-1A (File No. 33-80514), as filed February 29, 1996. (h)(3) Consent to Assignment and Assumption of the Administration Agreement between the Trust and SEI Financial Management Corporation to SEI Fund Resources dated June 1, 1996, is incorporated herein by reference to Exhibit 9(c) of Post-Effective Amendment No. 5 to the Registrant's Registration Statement filed with the SEC on Form N-1A (File No. 33-80514), as filed April 30, 1997. (i)(1) Opinion and Consent of Counsel as originally filed with the Registrant's Pre-Effective Amendment No. 1 on September 7, 1994, is incorporated herein by reference to Exhibit 124 10 of Post-Effective Amendment No. 3 to the Registrant's Registration Statement filed with the SEC on Form N-1A (File No. 33-80514), as filed February 29, 1996. (i)(2) Consent of Counsel is incorporated herein by reference to Exhibit (i)2 of Post-Effective Amendment No. 12 to the Registrant's Registration Statement filed with the SEC on Form N-1A (File No. 33-80514), as filed April 30, 1999. (i)(3) Opinion and Consent of Counsel is filed herewith. (j) Consent of Independent Auditors (PricewaterhouseCoopers LLP) is filed herewith. (k) Not Applicable. (l) Not Applicable. (m)(1) 12b-1 Plan (Class B) dated January 27, 1995 as originally filed with the Registrant's Pre-Effective Amendment No. 1 on September 7, 1994, is incorporated herein by reference to Exhibit 15 of Post-Effective Amendment No. 3 to the Registrant's Registration Statement filed with the SEC on Form N-1A (File No. 33-80514), as filed February 29, 1996. (m)(2) 12b-1 Plan (Class A) dated January 27, 1995, is incorporated herein by reference to Exhibit (m)2 of Post-Effective Amendment No. 13 to the Registrant's Registration Statement filed with the SEC on Form N-1A (File No. 33-80514), as filed June 11, 1999. (o)(1) Rule 18f-3 Plan (Class B) as originally filed with the Registrant's Post-Effective Amendment No. 1 on July 31, 1995, is incorporated herein by reference to Exhibit 18 of Post-Effective Amendment No. 3 to the Registrant's Registration Statement filed with the SEC on Form N-1A (File No. 33-80514), as filed February 29, 1996. (o)(2) Rule 18f-3 Plan (Class A) dated May 13, 1999, is incorporated herein by reference to Exhibit (o)2 of Post-Effective Amendment No. 13 to the Registrant's Registration Statement filed with the SEC on Form N-1A (File No. 33-80514), as filed June 11, 1999. (p)(1) Code of Ethics for the Bishop Street Funds is filed herewith. (p)(2) Code of Ethics for First Hawaiian Bank is filed herewith. (p)(3) Code of Ethics for Wellington Management Company, LLP dated March 1, 2000 is incorporated herein by reference to Exhibit (p)4 of Post-Effective Amendment No. 26 of the Arbor Fund's Registration Statement filed with the SEC on Form N-1A (File No. 33-50718), as filed March 16, 2000. (q) Powers of Attorney for Martin Anderson, Charles E. Carlbom, Philip H. Ching, James L. Huffman, Shunichi Kimura, William S. Richardson, Peter F. Sansevero, Manuel R. Sylvester and Joyce S. Tsunoda are incorporated herein by reference to Exhibit (p) of Post-Effective Amendment No. 12 to the Registrant's Registration Statement filed with the SEC on Form N-1A (File No. 33-80514), as filed April 30, 1999. 125 ITEM 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT: See the Statement of Additional Information regarding the Registrant's control relationships. The Administrator is a subsidiary of SEI Investments Company, which also controls the distributor of the Registrant, SEI Investments Distribution Co., other corporations engaged in providing various financial and record keeping services, primarily to bank trust departments, pension plan sponsors, and investment managers. ITEM 25. INDEMNIFICATION: Article VIII of the Agreement and Declaration of Trust filed as Exhibit 1 to the Registration Statement is incorporated by reference. Insofar as indemnification liabilities arising under the Securities Act of 1933, as amended, may be permitted to trustees, directors, officers and controlling persons of the Registrant by the Registrant pursuant to the Declaration of Trust or otherwise, the Registrant is aware that in the opinion of the Securities and Exchange Commission, such indemnification is against public policy as expressed in the Act and, therefore, is unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by trustees, directors, officers or controlling persons of the Registrant in connection with the successful defense of any act, suit or proceeding) is asserted by such trustees, directors, officers or controlling persons in connection with the shares being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issues. ITEM 26. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER AND INVESTMENT SUB-ADVISER: Other business, profession, vocation, or employment of a substantial nature in which each director or principal executive officer of the Adviser is or has been, at any time during the last two fiscal years, engaged for his own account or in the capacity of director, officer, employee, partner or trustee are as follows: FIRST HAWAIIAN BANK As of February 22, 2000, Bishop Street Capital Management serves as adviser to the Funds. Bishop Street Capital Management is an investment adviser registered under the Investment Advisers Act of 1940. For the fiscal year ended December 31, 1999, First Hawaiian Bank was the adviser for the Registrant's Equity Fund, High Grade Income Fund, Hawaii Municipal Bond Fund, Money Market Fund and Treasury Money Market Fund. First Hawaiian Bank is an investment adviser registered under the Investment Advisers Act of 1940. The principal business address of First Hawaiian Bank and BancWest Corporation is 999 Bishop Street, Honolulu, Hawaii 96813. The principal business address for Bank of the West is 180 Montgomery Street, San Francisco, California 94104. The principal business address for HighMark Capital Management, Inc. is 475 Sansome Street, Suite 1400, San Francisco, CA 94111.
NAME AND POSITION WITH INVESTMENT NAME OF OTHER COMPANY CONNECTION WITH OTHER COMPANY ADVISER Robert A. Alm First Hawaiian Bank Executive Vice President President William E. Atwater First Hawaiian Bank Executive Vice President, General Vice President & Assistant Counsel, Assistant Secretary Secretary
126 Walter A. Dods, Jr. BancWest Corporation Chairman & Chief Executive Officer Director First Hawaiian Bank Chairman & Chief Executive Officer James D. Dresser HighMark Capital Management Vice President, Institutional Vice President & Regional Sales Company, Inc. Sales and Marketing Manager Anthony D. Goo First Hawaiian Bank Senior Vice President, Senior Senior Vice President & Chief Portfolio Manager Investment Officer Bradford L. Harrison First Hawaiian Bank Vice President, Institutional Vice President, Marketing & Client Investment Marketing Servicing Donald G. Horner First Hawaiian Bank Vice Chairman Director Howard H. Karr First Hawaiian Bank Vice Chairman Director Michael R. Masuda First Hawaiian Bank Vice President Senior Vice President & Senior Operating Officer T. Mark McCamley First Hawaiian Bank Investment Officer Client Service Director Don J. McGrath BancWest Corporation President & Chief Operating Director Officer Bank of the West President & Chief Operating Officer John K. Tsui First Hawaiian Bank President & Chief Operating Director, Chairman & Chief Officer Executive Officer Herbert E. Wolff BancWest Corporation Senior Vice President & Secretary Secretary First Hawaiian Bank Senior Vice President & Secretary Albert M. Yamada First Hawaiian Bank Executive Vice President & Chief Treasurer Financial Officer
127 WELLINGTON MANAGEMENT COMPANY, LLP Wellington Management Company, LLP ("Wellington") is a sub-adviser for the Registrant's Money Market Fund and Treasury Money Market Fund. The principal business address of Wellington is 75 State Street, Boston, Massachusetts 02109. Wellington is an investment adviser registered under the Investment Advisers Act of 1940. The principal business address for Wellington Hedge Management, Inc., Wellington Management International, Wellington Sales Corporation and Wellington Trust Company, NA is the same as Wellington Management Company. The principal business for Wellington International Management Company Pte Ltd. is Six Battery Road, Ste. 17-06, Singapore 049909. The principal business address for Wellington Global Administrator, Ltd., Wellington Global Holdings, Ltd. and Wellington Management Global Holdings, Ltd. is Clarendon House, 2 Church Street, PO Box HM 666, Hamilton HMCX, Bermuda. The principal business address for Wellington Luxembourg SCA is 33, Boulevard Prince Henri, L-2014 Luxembourg.
NAME AND POSITION WITH INVESTMENT NAME OF OTHER COMPANY CONNECTION WITH OTHER COMPANY ADVISER Kenneth Lee Abrams -- -- General Partner Nicholas Charles Adams Wellington Hedge Management, Inc. Senior Vice President General Partner Wellington Global Administrator, Senior Vice President Ltd. Rand Charles Alexander -- -- General Partner Deborah Louise Allison Wellington Trust Company, NA Vice President General Partner James Halsey Averill -- -- General Partner Karl E. Bandtel Wellington Hedge Management, Inc. Senior Vice President General Partner Wellington Global Holdings, Ltd. Senior Vice President Wellington Global Administrator, Ltd. Senior Vice President Mark James Beckwith -- -- General Partner Marie-Claude Petit Bernal -- -- General Partner William Nicholas Booth -- -- General Partner Paul Braverman Wellington International Director General Partner Management Company Pte Ltd.
128 Wellington Management General Partner & CEO International Wellington Sales Corporation President & Treasurer Wellington Trust Company, NA Vice President & Treasurer/Cashier Wellington Hedge Management, Inc. Senior Vice President & Treasurer Wellington Global Holdings, Ltd. Senior Vice President & Treasurer Wellington Global Administrator, Senior Vice President & Treasurer Ltd. Wellington Management Global Senior Vice President & Treasurer Holdings, Ltd. Robert A. Bruno -- -- General Partner Maryann Evelyn Carroll -- -- General Partner Pamela Dippel -- -- General Partner Robert Lloyd Evans -- -- General Partner Lisa de la Fuente Finkel Wellington Sales Corporation Senior Vice President & Director General Partner Wellington Hedge Management, Inc. Senior Vice President Charles Townsend Freeman -- -- General Partner Laurie Allen Gabriel Wellington Hedge Management, Inc. Director General Partner Wellington Trust Company, NA Vice President John Herrick Gooch Wellington Management General Partner General Partner International Wellington Trust Company, NA Director & Vice President Wellington Hedge Management, Inc. President Wellington Global Holdings, Ltd. Director & President Wellington Global Administrator, Director & President Ltd.
129 Wellington Management Global Director & President Holdings, Ltd. Nicholas Peter Greville Wellington Management General Partner General Partner International Wellington International Director Management Company Pte Ltd. Wellington Global Holdings, Ltd. Senior Vice President Wellington Administrator, Ltd. Senior Vice President Paul J. Hammel -- -- General Partner Lucius Tuttle Hill, III -- -- General Partner Paul David Kaplan Wellington Global Holdings, Ltd. Director General Partner Wellington Global Administrator, Director Ltd. Wellington Management Global Director Holdings, Ltd. John Charles Keogh Wellington Trust Company, NA Director & Vice President General Partner George Cabot Lodge, Jr. Wellington Global Holdings, Ltd. Senior Vice President General Partner Wellington Hedge Management, Inc. Senior Vice President Nancy Therese Lukish Wellington Trust Company, NA Director & Vice President General Partner Wellington Hedge Management, Inc. Senior Vice President Wellington Global Administrator, Senior Vice President Ltd. Mark Thomas Lynch Wellington Hedge Management, Inc. Senior Vice President General Partner Christine Smith Manfredi Wellington Trust Company, NA Director & Vice President General Partner Wellington Hedge Management, Inc. Senior Vice President Wellington Global Holdings, Ltd. Senior Vice President Wellington Global Administrator, Senior Vice President Ltd.
130 Patrick John McCloskey -- -- General Partner Earl Edward McEvoy -- -- General Partner Duncan Mathieu McFarland Wellington Management General Partner General Partner International Wellington Trust Company, NA Director & Chairman Wellington Hedge Management, Inc. Director & Chairman Wellington International Director Management Company Pte Ltd. Wellington Global Holdings, Ltd. Chairman & Director Wellington Global Administrator, Chairman & Director Ltd. Wellington Management Global Chairman & Director Holdings Ltd. Paul Mulford Mecray, III -- -- General Partner Matthew Edward Megargel -- -- General Partner James Nelson Mordy -- -- General Partner Diane Carol Nordin Wellington Hedge Management, Inc. Senior Vice President General Partner Wellington Global Administrator, Senior Vice President Ltd. Stephen T. O'Brien -- -- General Partner Edward Paul Owens Wellington Hedge Management, Inc. Senior Vice President General Partner Wellington Global Administrator, Senior Vice President Ltd. Saul Joseph Pannell Wellington Hedge Management, Inc. Senior Vice President General Partner Wellington Global Administrator, Senior Vice President Ltd.
131 Thomas Louis Pappas -- -- General Partner Jonathan Martin Payson Wellington Trust Company, NA Director & President General Partner Wellington Sales Corporation Senior Vice President Wellington Global Holdings, Ltd. Director Wellington Global Administrator, Director Ltd. Wellington Management Global Director Holdings, Ltd. Stephen Michael Pazuk Wellington Management Partner General Partner International Wellington International Director Management Company Pte Ltd. Wellington Sales Corporation Senior Vice President Wellington Trust Company, NA Vice President Wellington Hedge Management, Inc. Senior Vice President Wellington Global Holdings, Ltd. Director Wellington Global Administrator, Director Ltd. Wellington Management Global Director Holdings, Ltd. Wellington Luxembourg SCA Supervisory Board Philip H. Perelmuter -- -- General Partner Robert Douglas Rands Wellington Hedge Management, Inc. Senior Vice President General Partner Wellington Global Administrator, Senior Vice President Ltd. Eugene Edward Record, Jr. Wellington Trust Company, NA Vice President General Partner James Albert Rullo -- -- General Partner John Robert Ryan Wellington Hedge Management, Inc. Director General Partner
132 Joseph Harold Schwartz -- -- General Partner Theodore E. Shasta Wellington Hedge Management, Inc. Senior Vice President General Partner Binkley Calhoun Shorts -- -- General Partner Trond Skramstad -- -- General Partner Catherine Anne Smith Wellington Hedge Management, Inc. Senior Vice President General Partner Wellington Global Administrator, Senior Vice President Ltd. Stephen Albert Soderberg -- -- General Partner Eric Stromquist Wellington Hedge Management, Inc. Senior Vice President General Partner Brendan James Swords Wellington Hedge Management, Inc. Senior Vice President General Partner Harriett Tee Taggart -- -- General Partner Perry Marques Traquina -- -- General Partner Gene Roger Tremblay -- -- General Partner Michael Aaron Tyler -- -- General Partner Mary Ann Tynan Wellington Management General Partner & Compliance General Partner International Officer Wellington Sales Corporation Senior Vice President, Clerk & Director Wellington Trust Company, NA Vice President, Secretary & Trust Officer Wellington Hedge Management, Inc. Senior Vice President & Clerk Wellington Luxembourg SCA Supervisory Board Clare Villari Wellington Hedge Management, Inc. Senior Vice President General Partner
133 Wellington Global Holdings, Ltd. Senior Vice President Wellington Global Administrator, Senior Vice President Ltd. Ernst Hans von Metzsch Wellington Hedge Management, Inc. Senior Vice President General Partner Wellington Global Holdings, Ltd. Senior Vice President Wellington Global Administrator, Senior Vice President Ltd. James Leland Walters Wellington Trust Company, NA Director, Senior Trust Officer & General Partner Trust Counsel Wellington International Director Management Company Pte Ltd. Wellington Sales Corporation Senior Vice President, Assistant Clerk & Director Wellington Global Holdings, Ltd. Director & Deputy Chairman Wellington Global Administrator, Director & Deputy Chairman Ltd. Wellington Management Global Director, Senior Vice President & Holdings, Inc. Deputy Chairman Wellington Luxembourg SCA Supervisory Board Kim Williams -- -- General Partner Francis Vincent Wisneski, Jr. -- -- General Partner
ITEM 27. PRINCIPAL UNDERWRITER: (a) Furnish the name of each investment company (other than the Registrant) for which each principal underwriter currently distributing the securities of the Registrant also acts as a principal underwriter, distributor or investment adviser. Registrant's distributor, SEI Investments Distribution Co. (the "Distributor"), acts as distributor for: SEI Daily Income Trust July 15, 1982 SEI Liquid Asset Trust November 29, 1982 SEI Tax Exempt Trust December 3, 1982 SEI Index Funds July 10, 1985 SEI Institutional Managed Trust January 22, 1987 SEI Institutional International Trust August 30, 1988 The Advisors' Inner Circle Fund November 14, 1991 The Pillar Funds February 28, 1992
134 CUFUND May 1, 1992 STI Classic Funds May 29, 1992 First American Funds, Inc. November 1, 1992 First American Investment Funds, Inc. November 1, 1992 The Arbor Fund January 28, 1993 Boston 1784 Funds-Registered Trademark June 1, 1993 The PBHG Funds, Inc. July 16, 1993 Morgan Grenfell Investment Trust January 3, 1994 The Achievement Funds Trust December 27, 1994 STI Classic Variable Trust August 18, 1995 ARK Funds November 1, 1995 Huntington Funds January 11, 1996 SEI Asset Allocation Trust April 1, 1996 TIP Funds April 28, 1996 SEI Institutional Investments Trust June 14, 1996 First American Strategy Funds, Inc. October 1, 1996 HighMark Funds February 15, 1997 Armada Funds March 8, 1997 PBHG Insurance Series Fund, Inc. April 1, 1997 The Expedition Funds June 9, 1997 Alpha Select Funds January 1, 1998 Oak Associates Funds February 27, 1998 The Nevis Fund, Inc. June 29, 1998 The Parkstone Group of Funds September 14, 1998 CNI Charter Funds April 1, 1999 The Armada Advantage Fund May 1, 1999 Amerindo Funds, Inc. July 13, 1999 Huntington VA Fund October 15, 1999 Friends Ivory Funds December 16, 1999
The Distributor provides numerous financial services to investment managers, pension plan sponsors, and bank trust departments. These services include portfolio evaluation, performance measurement and consulting services ("Funds Evaluation") and automated execution, clearing and settlement of securities transactions ("MarketLink"). (b) Furnish the Information required by the following table with respect to each director, officer or partner of each principal underwriter named in the answer to Item 21 of Part B. Unless otherwise noted, the business address of each director or officer is SEI Investments Distribution Co., Oaks, PA 19456.
Name Position and Office with Underwriter Positions and Offices with Registrant Alfred P. West, Jr. Director, Chairman of the Board of -- Directors Richard B. Lieb Director, Executive Vice President -- Carmen V. Romeo Director -- Mark J. Held President & Chief Operating Officer -- Gilbert L. Beebower Executive Vice President -- Dennis J. McGonigle Executive Vice President -- Robert M. Silvestri Chief Financial Officer & Treasurer -- Leo J. Dolan, Jr. Senior Vice President -- Carl A Guarino Senior Vice President -- Larry Hutchison Senior Vice President -- Jack May Senior Vice President --
135 Hartland J. McKeown Senior Vice President -- Kevin P. Robins Senior Vice President & General Counsel Vice President & Assistant Secretary Patrick K. Walsh Senior Vice President -- Robert Aller Vice President -- Timothy D. Barto Vice President & Assistant Secretary -- Gordon W. Carpenter Vice President -- Todd Cipperman Vice President & Assistant Secretary Vice President & Assistant Secretary S. Courtney E. Collier Vice President & Assistant Secretary -- Robert Crudup Vice President & Managing Director -- Richard A. Deak Vice President & Assistant Director -- Barbara Doyne Vice President -- Jeff Drennen Vice President -- James R. Foggo Vice President & Assistant Secretary Vice President & Assistant Secretary Vic Galef Vice President & Managing Director -- Lydia A. Gavalis Vice President & Assistant Secretary Vice President & Assistant Secretary Greg Gettinger Vice President & Assistant Secretary -- Kathy Heilig Vice President Vice President & Assistant Secretary Jeff Jacobs Vice President -- Samuel King Vice President -- Kim Kirk Vice President & Managing Director -- John Krzeminski Vice President & Managing Director -- Christine M. McCullough Vice President & Assistant Secretary -- Carolyn McLaurin Vice President & Managing Director -- Mark Nagle Vice President -- Joanne Nelson Vice President -- Cynthia M. Parrish Vice President & Secretary -- Rob Redican Vice President -- Maria Rinehart Vice President -- Steve Smith Vice President -- Daniel Spaventa Vice President -- Kathryn L. Stanton Vice President -- Lynda J. Striegel Vice President & Assistant Secretary Vice President & Assistant Secretary Lori L. White Vice President & Assistant Secretary -- Wayne M. Withrow Vice President & Managing Director --
ITEM 28. LOCATION OF ACCOUNTS AND RECORDS: Books or other documents required to be maintained by Section 31(a) of the Investment Company Act of 1940, and the rules promulgated thereunder, are maintained as follows: (a) With respect to Rules 31a-1(a); 31(a)-1(b); (2)(a) and (b); (3); (6); (8); (12); and 31a-1(d), the required books and records will be maintained at the offices of Registrant's Custodian: Chase Manhattan Bank 4 New York Plaza New York, New York 10004 (b)/(c) With respect to Rules 31a-1(a); 31a-1(b)(1), (4); (2)(C) and (D); (4); (5); (6); (8); (9); (10); (11); and 31a-1(f), the required books and records are maintained at the offices of Registrant's Administrator: 136 SEI Investments Mutual Funds Services Oaks, Pennsylvania 19456 (c) With respect to Rules 31a-1(b)(5), (6), (9) and (10) and 31a-1(f), the required books and records are maintained at the principal offices of the Registrant's Adviser and Sub-Adviser: Bishop Street Capital Management Wellington Management Company, LLP 999 Bishop Street 75 State Street Honolulu, Hawaii 96813 Boston, Massachusetts 02109
ITEM 29. MANAGEMENT SERVICES: None. ITEM 30: UNDERTAKINGS: Registrant hereby undertakes that whenever shareholders meeting the requirements of Section 16(c) of the Investment Company Act of 1940 inform the Board of Trustees of their desire to communicate with Shareholders of the Trust, the Trustees will inform such Shareholders as to the appropriate number of Shareholders of record and the approximate costs of mailing or afford said Shareholders access to a list of Shareholders. Registrant hereby undertakes to call a meeting of Shareholders for the purpose of voting upon the question of removal of a Trustee(s) when requested in writing to do so by the holders of at least 10% of Registrant's outstanding shares and in connection with such meetings to comply with the provisions of Section 16(c) of the Investment Company Act of 1940 relating to Shareholder communications. Registrant undertakes to furnish each person to whom a prospectus for any series of the Registrant is delivered with a copy of the Registrant's latest annual report to shareholders for such series, when such annual report is issued containing information called for by Item 5A of Form N-1A, upon request and without charges. 137 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, as amended, and the Investment Company Act of 1940, as amended, the Registrant certifies that it meets all of the requirements for effectiveness of this Registration Statement pursuant to Rule 485(b) under the Securities Act of 1933 and has duly caused this Post-Effective Amendment No. 14 to Registration Statement No. 33-80514 to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Honolulu, State of Hawaii on the 26 day of April, 2000. By: /s/ Robert A. Nesher ______________________________ Robert A. Nesher President Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed below by the following persons in the capacity on the dates indicated. * Trustee April 26, 2000 - --------------------------------------------- Martin Anderson * Trustee April 26, 2000 - --------------------------------------------- Charles E. Carlbom * Trustee April 26, 2000 - --------------------------------------------- Philip H. Ching * Trustee April 26, 2000 - --------------------------------------------- James L. Huffman * Trustee April 26, 2000 - --------------------------------------------- Shunichi Kimura * Trustee April 26, 2000 - --------------------------------------------- William S. Richardson * Trustee April 26, 2000 - --------------------------------------------- Peter F. Sansevero * Trustee April 26, 2000 - --------------------------------------------- Manuel R. Sylvester * Trustee April 26, 2000 - --------------------------------------------- Joyce S. Tsunoda /s/ Christopher F. Salfi Treasurer and Controller April 26, 2000 - --------------------------------------------- Christopher F. Salfi /s/ Robert A. Nesher President and Trustee April 26, 2000 - --------------------------------------------- Robert A. Nesher
*By: /s/ Robert A. Nesher ___________________________ Robert A. Nesher Attorney-in-Fact 138 EXHIBIT INDEX NAME EXHIBIT EX-99.A(1) Agreement and Declaration of Trust of the Registrant dated May 25, 1994, as originally filed with the Registrant's Registration on June 20, 1994, is incorporated herein by reference to Exhibit 1 of Post-Effective Amendment No. 3 to the Registrant's Registration Statement filed with the SEC on Form N-1A (File No. 33-80514), as filed February 29, 1996. EX-99.A(2) Amended and Restated Agreement and Declaration of Trust as originally filed with the Registrant's Pre-Effective Amendment No. 1 on Form N-1A (File No. 33-80514) with the SEC on September 7, 1994, is incorporated herein by reference to Post-Effective Amendment No. 3 to the Registrant's Registration Statement, as filed February 29, 1996. EX-99.B(1) By-Laws of the Registrant as originally filed with the Registrant's Registration Statement with SEC on Form N-1A (File No. 33-80514) on June 20, 1994, are incorporated herein by reference to Exhibit 2 of Post-Effective Amendment No. 3 to the Registrant's Registration Statement, as filed February 29, 1996. EX-99.B(2) Amended By-Laws of the Registrant as originally filed with the Registrant's Pre-Effective Amendment No. 1 filed with the SEC on Form N-1A (File No. 33-80514) on September 7, 1994, are incorporated herein by reference to Exhibit 2(a) of Post-Effective Amendment No. 3 to the Registrant's Registration Statement, as filed February 29, 1996. EX-99.B(3) Amended By-Laws of the Registrant are incorporated herein by reference to Exhibit 2(b) of Post-Effective Amendment No. 7 to the Registrant's Registration Statement filed with the SEC on Form N-1A (File No. 33-80514), as filed February 26, 1998. EX-99.D(1) Investment Advisory Agreement between the Registrant and First Hawaiian Bank dated January 25, 1995, is incorporated herein by reference to Exhibit 5(a) of Post-Effective Amendment No. 3 to the Registrant's Registration Statement filed with the SEC on Form N-1A (File No. 33-80514), as filed February 29, 1996. EX-99.D(2) Investment Sub-Advisory Agreement by and among the Registrant, First Hawaiian Bank and Wellington Management Company, LLP dated January 27, 1995, is incorporated herein by reference to Exhibit 5(b) of Post-Effective Amendment No. 3 to the Registrant's Registration Statement filed with the SEC on Form N-1A (File No. 33-80514), as filed February 29, 1996. EX-99.D(3) Amended and Restated Investment Sub-Advisory Agreement by and among the Registrant, First Hawaiian Bank and Wellington Management Company, LLP dated April 30, 1996, is incorporated herein by reference to Exhibit 5(c) of Post-Effective Amendment No. 5 to the Registrant's Registration Statement filed with the SEC on Form N-1A (File No. 33-80514), as filed April 30, 1997. EX-99.D(4) Schedule B dated April 30, 1996, to the Investment Advisory Agreement dated January 27, 1995, between the Registrant and First Hawaiian Bank, is incorporated herein by reference to Exhibit 5(d) of Post-Effective Amendment No. 5 to the Registrant's Registration Statement filed with the SEC on Form N-1A (File No. 33-80514), as filed April 30, 1997. 139 EX-99.D(5) Investment Advisory Agreement between the Registrant and First Hawaiian Bank dated March 31, 1999, is incorporated herein by reference to Exhibit (d)5 of Post-Effective Amendment No. 12 to the Registrant's Registration Statement filed with the SEC on Form N-1A (File No. 33-80514), as filed April 30, 1999. EX-99.D(6) Investment Sub-Advisory Agreement by and among the Registrant, First Hawaiian Bank and Wellington Management Company, LLP dated March 31, 1999, is incorporated herein by reference to Exhibit (d)6 of Post-Effective Amendment No. 12 to the Registrant's Registration Statement filed with the SEC on Form N-1A (File No. 33-80514), as filed April 30, 1999. EX.99.D(7) Assignment and Assumption Agreement between First Hawaiian Bank and Bishop Street Capital Management dated February 22, 2000 is filed herewith. EX.99.D(8) Consent to Assignment and Assumption of the Investment Advisory Agreement between the Bishop Street Funds and First Hawaiian Bank is filed herewith. EX.99.D(9) Consent to Assignment and Assumption of the Investment Sub-Advisory Agreement between First Hawaiian Bank and Wellington Management Company, LLP is filed herewith. EX-99.E(1) Distribution Agreement between the Registrant and SEI Financial Services Company dated January 27, 1995, is incorporated herein by reference to Exhibit 6 of Post-Effective Amendment No. 3 to the Registrant's Registration Statement filed with the SEC on Form N-1A (File No. 33-80514), as filed February 29, 1996. EX-99E(2) Amended and Restated Distribution Agreement between the Registrant and SEI Investments Distribution Co. dated June 10, 1999, is incorporated herein by reference to Exhibit (e)2 of Post-Effective Amendment No. 13 to the Registrant's Registration Statement filed with the SEC on Form N-1A (File No. 33-80514), as filed June 11, 1999. EX.99.G Custodian Agreement between the Registrant and Chemical Bank, N.A., is incorporated herein by reference to Exhibit 8 of Post-Effective Amendment No. 3 to the Registrant's Registration Statement filed with the SEC on Form N-1A (File No. 80514), as filed February 29, 1996. EX-99.H(1) Administration Agreement between the Registrant and SEI Financial Management Corporation dated January 20, 1995, is incorporated herein by reference to Exhibit 9(a) of Post-Effective Amendment No. 3 to the Registrant's Registration Statement filed with the SEC on Form N-1A (File No. 33-80514), as filed February 29, 1996. EX-99.H(2) Transfer Agent Agreement between the Registrant and Supervised Service Company, Inc. dated January 30, 1995, is incorporated herein by reference to Exhibit 9(b) of Post-Effective Amendment No. 3 to the Registrant's Registration Statement on Form N-1A (File No. 33-80514), as filed February 29, 1996. EX-99.H(3) Consent to Assignment and Assumption of the Administration Agreement between the Trust and SEI Financial Management Corporation to SEI Fund Resources dated June 1, 1996, is incorporated herein by reference to Exhibit 9(c) of Post-Effective Amendment No. 5 to the Registrant's Registration Statement filed with the SEC on Form N-1A (File No. 33-80514), as filed April 30, 1997. 140 EX-99.I(1) Opinion and Consent of Counsel as originally filed with the Registrant's Pre-Effective Amendment No. 1 on September 7, 1994, is incorporated herein by reference to Exhibit 10 of Post-Effective Amendment No. 3 to the Registrant's Registration Statement filed with the SEC on Form N-1A (File No. 33-80514), as filed February 29, 1996. EX-99.I(2) Consent of Counsel is incorporated herein by reference to Exhibit (i)2 of Post-Effective Amendment No. 12 to the Registrant's Registration Statement on file with the SEC on Form N-1A (File No. 33-80514), as filed April 30, 1999. EX-99.I(3) Opinion and Consent of Counsel is filed herewith. EX-99.J Consent of Independent Auditors (PricewaterhouseCoopers LLP) is filed herewith. EX-99.M(1) 12b-1 Plan (Class B) dated January 27, 1995 as originally filed with the Registrant's Pre-Effective Amendment No. 1 on September 7, 1994, is incorporated herein by reference to Exhibit 15 of Post-Effective Amendment No. 3 to the Registrant's Registration Statement filed with the SEC on Form N-1A (File No. 33-80514), as filed February 29, 1996. EX-99.M(2) 12b-1 Plan (Class A) dated January 27, 1995, is incorporated herein by reference to Exhibit (m)2 of Post-Effective Amendment No. 13 to the Registrant's Registration Statement filed with the SEC on Form N-1A (File No. 33-80514), as filed June 11, 1999. EX-99.O(1) Rule 18f-3 Plan (Class B) as originally filed with the Registrant's Post-Effective Amendment No. 1 on July 31, 1995, is incorporated herein by reference to Exhibit 18 of Post-Effective Amendment No. 3 to the Registrant's Registration Statement filed with the SEC on Form N-1A (File No. 33-80514), as filed February 29, 1996. EX-99.O(2) Rule 18f-3 Plan (Class A) dated May 13, 1999, is incorporated herein by reference to Exhibit (o)2 of Post-Effective Amendment No. 13 to the Registrant's Registration Statement filed with the SEC on Form N-1A (File No. 33-80514), as filed June 11, 1999. EX.99.P(1) Code of Ethics for the Bishop Street Funds is filed herewith. EX.99.P(2) Code of Ethics for First Hawaiian Bank is filed herewith. EX.99.P(3) Code of Ethics for Wellington Management Company, LLP dated March 1, 2000 is incorporated herein by reference to Exhibit (p)4 of Post-Effective Amendment No. 26 of the Arbor Fund's Registration Statement filed with the SEC on Form N-1A (File No. 33-50718), as filed March 16, 2000. EX-99.Q Power of Attorney for Martin Anderson, Charles E. Carlbom, Philip H. Ching, James L. Huffman, Shunichi Kimura, William S. Richardson, Peter F. Sansevero, Manuel R. Sylvester and Joyce S. Tsunoda are incorporated herein by reference to Exhibit (p) of Post-Effective Amendment No. 12 to the Registrant's Registration Statement on Form N-1A (File No. 33-80514), as filed April 30, 1999. EX-99.D(7) 2 ASSIGNMENT AND ASSUMPTION AGREEMENT 1 Exhibit (d)(7) ASSIGNMENT AND ASSUMPTION AGREEMENT THIS ASSIGNMENT AND ASSUMPTION AGREEMENT ("Agreement"), dated as of February 22, 2000, is made by and between First Hawaiian Bank ("Assignor") and Bishop Street Capital Management ("Assignee") with reference to the following Recitals. a. Assignor serves as the Adviser to the Bishop Street Funds (the "Trust") pursuant to an Investment Advisory Agreement with the Trust dated March 31, 1999 (the "Advisory Agreement"); b. Assignor has agreed to assign all of its rights and delegate all of its obligations (the "Assignment") under the Advisory Agreement to Assignee, as of the date first set forth above; and c. Assignee has agreed, that at the time of the Assignment, to assume all rights and obligations of Assignor under the Advisory Agreement. NOW THEREFORE, in consideration of the terms and conditions of the Agreement and other good and valuable consideration, the receipt of which is hereby acknowledged, and intending to be legally bound, the parties hereto agree as follows: a. Assignor hereby grants, sells, conveys, transfers and delivers to Assignee all of Assignor's right, title and interest in and to the Advisory Agreement. b. Assignee hereby assumes and agrees to perform or to pay or discharge the obligations and liabilities of Assignor described in the Advisory Agreement and agrees to be liable to the Trust for any default or breach of the Advisory Agreement to the extent the default or breach occurs on or after the date of execution of this Agreement. c. This Agreement shall inure to the benefit of and shall be binding upon the successors and assigns of the respective parties. It is specifically intended that the Trust shall remain a beneficiary of this Agreement, and it is hereby acknowledged that the Trust retains all of its rights under the Advisory Agreement. This Agreement shall be governed and interpreted in accordance with the law of the State of Hawaii without reference to the conflicts of law principles of such state. This Agreement may be executed in counterparts, each of which shall be deemed an original, but which together shall constitute one and the same instrument. IN WITNESS WHEREOF, the undersigned have caused this instrument to be duly executed as of the date first set forth above.
BISHOP STREET CAPITAL MANAGEMENT FIRST HAWAIIAN BANK By: /s/ Michael R. Masuda By: /s/ Robert A. Alm -------------------------------- ------------------------------ Title: Vice President Title: Executive Vice President -------------------------------- ------------------------------ Date: February 22, 2000 Date: February 22, 2000 -------------------------------- ------------------------------
EX-99.D(8) 3 CONSENT TO ASSIGNMENT AND ASSUMPTION 1 Exhibit (d)(8) CONSENT TO ASSIGNMENT AND ASSUMPTION 1. First Hawaiian Bank ("Assignor") hereby notifies Bishop Street Funds ("Trust") that it intends to assign all of its rights and delegate all of its obligations under the Investment Advisory Agreement between the Trust and the Assignor, dated March 31, 1999 (the "Advisory Agreement"), to Bishop Street Capital Management ("Assignee"), no later than February 22, 2000, in connection with the transition of Assignor"s fund advisory business to Assignee; 2. Trust releases Assignor from its rights and obligations under the Advisory Agreement on or after the date the Assignment and Assumption Agreement is executed and any liability or responsibility for (i) breach of the Advisory Agreement by Assignee, or (ii) demands and claims made against the Trust or damages, losses or expenses incurred by the Trust on or after the date of the Assignment and Assumption Agreement, unless such demands, claims, losses, damages or expenses arose out of or resulted from an act or omission of Assignor prior to the date of the Assignment and Assumption Agreement. 3. This consent is not a waiver or estoppel with respect to any rights the Trust may have by reason of the past performance or failure to perform by Assignor. 4. This consent is conditioned upon the execution of an Assignment and Assumption Agreement between Assignor and Assignee that requires Assignee (i) to assume all rights and obligations of Assignor under the Advisory Agreement, and (ii) to be liable to the Trust for any default or breach of the Advisory Agreement to the extent the default or breach occurs on or after the date of execution of the Assignment and Assumption Agreement. 5. Except as provided herein, neither this consent nor the Assignment and Assumption Agreement shall alter or modify the terms or conditions of the Advisory Agreement. The Bishop Street Funds By: /s/ Lynda J. Striegel ----------------------------------- Title: Vice President & Assistant Secretary ----------------------------------- Date: February 22, 2000 ----------------------------------- First Hawaiian Bank By: /s/ Robert A. Alm ------------------------ Title: Executive Vice President ------------------------ Date: February 22, 2000 ------------------------ EX-99.D(9) 4 CONSENT TO ASSIGNMENT AND ASSUMPTION 1 Exhibit (d)(9) CONSENT TO ASSIGNMENT AND ASSUMPTION 1. First Hawaiian Bank ("Assignor") hereby notifies Wellington Management Company, LLP ("WMC") that it intends to assign all of its rights and delegate all of its obligations under the Sub-Advisory Agreement between WMC and the Assignor, dated March 31, 1999 (the "Sub-Advisory Agreement"), to Bishop Street Capital Management ("Assignee"), no later than February 22, 2000, in connection with the transition of Assignor's fund advisory business to Assignee; 2. The "assignment" discussed in this Consent does not constitute an assignment as that term is defined in Section 2(a)(4) of the Investment Company Act of 1940. The assignment discussed herein falls under the exception contained in Rule 2a-6 under the 1940 Act because there has been no change of actual control or management within the meaning of Rule 2a-6 under the 1940 Act; 3. WMC releases Assignor from its rights and obligations under the Sub-Advisory Agreement on or after the date the Assignment and Assumption Agreement is executed and any liability or responsibility for (i) breach of the Sub-Advisory Agreement by Assignee, or (ii) demands and claims made against WMC for damages, losses or expenses incurred by WMC on or after the date of the Assignment and Assumption Agreement, unless such demands, claims, losses, damages or expenses arose out of or resulted from an act or omission of Assignor prior to the date of the Assignment and Assumption Agreement. 4. This consent is not a waiver or estoppel with respect to any rights WMC may have by reason of the past performance or failure to perform by Assignor. 5. This consent is conditioned upon the execution of an Assignment and Assumption Agreement between Assignor and Assignee that requires Assignee (i) to assume all rights and obligations of Assignor under the Sub-Advisory Agreement, and (ii) to be liable to WMC for any default or breach of the Sub-Advisory Agreement to the extent the default or breach occurs on or after the date of execution of the Assignment and Assumption Agreement. 6. Except as provided herein, neither this consent nor the Assignment and Assumption Agreement shall alter or modify the terms or conditions of the Sub-Advisory Agreement.
Wellington Management Company, LLP First Hawaiian Bank By: /s/ John Gooch By: /s/ Robert A. Alm ------------------------------ -------------------------------- Title: Senior Vice President Title: Executive Vice President ------------------------------ -------------------------------- Date: March 6, 2000 Date: March 6, 2000 ------------------------------ --------------------------------
EX-99.I(3) 5 OPINION AND CONSENT OF COUNSEL 1 April 26, 2000 Bishop Street Funds Bishop Street Capital Management 999 Bishop Street Honolulu, Hawaii 96813 Re: Opinion of Counsel regarding Post-Effective Amendment No. 14 to the Registration Statement filed on Form N-1A under the Securities Act of 1933 (File No. 2-80514). Ladies and Gentlemen: We have acted as counsel to Bishop Street Funds, a Massachusetts business trust (the "Trust"), in connection with the above-referenced Registration Statement (as amended, the "Registration Statement") which relates to the Trust's units of beneficial interest, without par value (collectively, the "Shares"). This opinion is being delivered to you in connection with the Trust's filing of Post-Effective Amendment No. 14 to the Registration Statement (the "Amendment") to be filed with the Securities and Exchange Commission pursuant to Rule 485(b) of the Securities Act of 1933 (the "1933 Act"). With your permission, all assumptions and statements of reliance herein have been made without any independent investigation or verification on our part except to the extent otherwise expressly stated, and we express no opinion with respect to the subject matter or accuracy of such assumptions or items relied upon. In connection with this opinion, we have reviewed, among other things, executed copies of the following documents: (a) a certificate of the Commonwealth of Massachusetts as to the existence and good standing of the Trust; (b) the Agreement and Declaration of Trust for the Trust and all amendments and supplements thereto (the "Declaration of Trust"); (c) a certificate executed by Todd B. Cipperman, Vice President and Assistant Secretary of the Trust, certifying as to, and attaching copies of, the Trust's Declaration of Trust and By-Laws (the "By-Laws"), and certain resolutions 2 Bishop Street Funds April 26, 2000 Page 2 adopted by the Board of Trustees of the Trust authorizing the issuance of the Shares; and (d) a printer's proof of the Amendment. In our capacity as counsel to the Trust, we have examined the originals, or certified, conformed or reproduced copies, of all records, agreements, instruments and documents as we have deemed relevant or necessary as the basis for the opinion hereinafter expressed. In all such examinations, we have assumed the legal capacity of all natural persons executing documents, the genuineness of all signatures, the authenticity of all original or certified copies, and the conformity to original or certified copies of all copies submitted to us as conformed or reproduced copies. As to various questions of fact relevant to such opinion, we have relied upon, and assume the accuracy of, certificates and oral or written statements of public officials and officers or representatives of the Fund. We have assumed that the Amendment, as filed with the Securities and Exchange Commission, will be in substantially the form of the printer's proof referred to in paragraph (d) above. Based upon, and subject to, the limitations set forth herein, we are of the opinion that the Shares, when issued and sold in accordance with the Declaration of Trust and By-Laws, and for the consideration described in the Registration Statement, will be legally issued, fully paid and nonassessable under the laws of the Commonwealth of Massachusetts. We hereby consent to the filing of this opinion as an exhibit to the Registration Statement. In giving this consent, we do not concede that we are in the category of persons whose consent is required under Section 7 of the 1933 Act. Very truly yours, /s/ Morgan, Lewis & Bockius LLP Morgan, Lewis & Bockius LLP 3 Bishop Street Funds April 26, 2000 Page 3 Prepared by: /s/ Ursula Robinson - --------------------------- Ursula Robinson Reviewed by: /s/ John H. Grady - --------------------------- John H. Grady Signed by: /s/ Richard W. Grant - --------------------------- Richard W. Grant EX-99.J 6 CONSENT OF INDEPENDENT AUDITORS 1 CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the incorporation by reference in this Registration Statement on Form N-1A of our report dated February 15, 2000, relating to the financial statements and financial highlights which appears in the December 31, 1999 Annual Report to the Board of Trustees and Shareholders of The Bishop Street Funds, which are also incorporated by reference into the Registration Statement. We also consent to the references to us under the headings "Financial Highlights", "Experts", "Independent Accountants" and "Financial Statements" in such Registration Statement. /s/ PricewaterhouseCoopers LLP PricewaterhouseCoopers LLP Philadelphia, Pennsylvania April 25, 2000 EX-99.P(1) 7 CODE OF ETHICS FOR THE BISHOP STREET FUNDS 1 AMENDED CODE OF ETHICS ADOPTED UNDER RULE 17j-1 While affirming its confidence in the integrity and good faith of all of its officers and trustees, the Bishop Street Funds (the "Trust"), recognize that the knowledge of present or future portfolio transactions and, in certain instances, the power to influence portfolio transactions which may be possessed by certain of their officers, employees and trustees could place such individuals, if they engage in personal transactions in securities which are eligible for investment by the Trust, in a position where their personal interest may conflict with that of the Trust. In view of the foregoing and of the provisions of Rule 17j-1(b)(1) under the Investment Company Act of 1940 (the "1940 Act"), the Trust has determined to adopt this Code of Ethics to specify and prohibit certain types of transactions deemed to create conflicts of interest (or at least the potential for or the appearance of such a conflict), and to establish reporting requirements and enforcement procedures. I. STATEMENT OF GENERAL PRINCIPLES. In recognition of the trust and confidence placed in the Trust by its shareholders, and to give effect to the Trust's belief that their operations should be directed to the benefit of their shareholders, the Trust hereby adopts the following general principles to guide the actions of their trustees, officers and employees. (1) The interests of the Trust's shareholders are paramount, and all of the Trust's personnel must conduct themselves and their operations to give maximum effect to this tenet by assiduously placing the interests of the shareholders before their own. (2) All personal transactions in securities by the Trust's personnel must be accomplished so as to avoid even the appearance of a conflict of interest on the part of such personnel with the interests of the Trust and its shareholders. (3) All of the Trust's personnel must avoid actions or activities that allow (or appear to allow) a person to profit or benefit from his or her position with respect to the Trust, or that otherwise bring into question the person's independence or judgment. II. DEFINITIONS. (1) "Access Person" shall mean: (i) each director, trustee or officer of the Trust; (ii) each employee of the Trust (or of any company in a control relationship to the Trust) who, in connection with his or her regular functions or duties, makes, participates in, or obtains information regarding the purchase or sale of a security by the Trust or any series thereof (herein a "Fund"), or whose functions relate to the making of 2 any recommendations with respect to such purchases or sales; (iii) each officer, director or general partner of each adviser or sub-adviser to the Trust and any employee of any such adviser or sub-adviser who, in connection with his or her regular functions or duties, makes, participates in, or obtains information regarding the purchase or sale of a security by a Fund, or whose functions relate to the making of any recommendations with respect to such purchases or sales; (iv) each director, officer or general partner of any principal underwriter for the Trust, but only where such person in the ordinary course either makes, participates in, or obtains information regarding the purchase or sale of securities by the Fund(s), or whose functions relate to the making of recommendations regarding securities to the Fund(s); and (v) any natural person in a control relationship with the Trust or any of the Trust's advisers or sub-advisers who obtains information concerning recommendations made to the Fund(s) with regard to the purchase or sale of a security. (2) "Beneficial ownership" of a security is to be determined in the same manner as it is for purposes of Section 16 of the Securities Exchange Act of 1934 and Rule 16a-1(a)(2) thereunder. This means that a person should generally consider himself or herself the beneficial owner of any securities in which he or she has a direct or indirect pecuniary interest. In addition, a person should consider himself or herself the beneficial owner of securities held by his or her spouse, his or her minor children, a relative who shares his or her home, or other persons by reason of any contract, arrangement, understanding or relationship that provides him or her with sole or shared voting or investment power. (3) "Control" shall have the same meaning as that set forth in Section 2(a)(9) of the 1940 Act. Section 2(a)(9) provides that "control" means the power to exercise a controlling influence over the management or policies of a company, unless such power is solely the result of an official position with such company. Ownership of 25% or more of a company's outstanding voting security is presumed to give the holder thereof control over the company. Such presumption may be countered by the facts and circumstances of a given situation. (4) "Independent Trustee" means a Trustee of the Trust who is not an "interested person" of the Trust within the meaning of Section 2(a)(19) of the 1940 Act. (5) "Initial Public Offering" ("IPO") means an offering of securities registered under the Securities Act of 1933, the issuer of which, immediately before registration, was not subject to the reporting requirements of Section 13 or Section 15(d) of the Securities Exchange Act of 1934. (6) "Special Purpose Investment Personnel" means each Access Person who, in connection with his or her regular functions (including, where appropriate, 2 3 attendance at Board meetings and other meetings at which the official business of the Trust or any Fund is discussed or carried on), obtains contemporaneous information regarding the purchase or sale of a security by a Fund. Special Purpose Investment Personnel shall occupy this status only with respect to those securities as to which he or she obtains such contemporaneous information. (7) "Private Placement (or Limited Offering)" means an offering that is exempt from registration under the Securities Act of 1933 pursuant to Section 4(2) or Section 4(6) of the Securities Act of 1933. (8) "Purchase or sale of a security" includes, among other things, the writing of an option to purchase or sell a security. (9) "Security" shall have the same meaning as that set forth in Section 2(a)(36) of the 1940 Act, except that it shall not include securities issued by the Government of the United States or an agency thereof, bankers' acceptances, bank certificates of deposit, commercial paper and registered, open-end mutual funds. (10) A "Security held or to be acquired" by the Trust (or any Fund) means any Security, any option to purchase or sell, and any Security convertible into or exchangeable for any Security which, within the most recent 15 days, (i) is or has been held by the Trust (or any Fund), or (ii) is being or has been considered by the Trust's adviser or sub-adviser for purchase by the Trust (or any Fund). (11) A Security is "being purchased or sold" by the Trust from the time when a purchase or sale program has been communicated to the person who places the buy and sell orders for the Trust until the time when such program has been fully completed or terminated. III. PROHIBITED PURCHASES AND SALES OF SECURITIES. (1) No Access Person shall, in connection with the purchase or sale, directly or indirectly, by such person of a Security held or to be acquired by any Fund: (A) employ any device, scheme or artifice to defraud such Fund; (B) make to such Fund any untrue statement of a material fact or omit to state to such Fund a material fact necessary in order to make the statements made, in light of the circumstances under which they are made, not misleading; (C) engage in any act, practice or course of business which would operate as a fraud or deceit upon such Fund; or 3 4 (D) engage in any manipulative practice with respect to such Fund. (2) No Special Purpose Investment Personnel may purchase or sell, directly or indirectly, any Security as to which such person is a Special Purpose Investment Personnel in which he or she had (or by reason of such transaction acquires) any Beneficial Ownership at any time within seven calendar days before or after the time that the same (or a related) Security is being purchased or sold by any Fund. (3) No Special Purpose Investment Personnel may sell a Security as to which he or she is a Special Purpose Investment Personnel within 60 days of acquiring beneficial ownership of that Security. (4) Special Purpose Investment Personnel must obtain approval from the Trust's President before acquiring Beneficial Ownership of any Securities offered in connection with an IPO or a Private Placement. IV. ADDITIONAL RESTRICTIONS AND REQUIREMENTS (1) No Access Person shall accept or receive any gift of more than de minimis value from any person or entity that does business with or on behalf of the Trust. (2) Each Access Person (other than the Trust's Independent Trustees and its Trustees and officers who are not currently affiliated with or employed by the Trust's investment adviser or principal underwriter) who is not required to provide such information under the terms of a code of ethics described in Section VII hereof must provide to the Review Officer a complete listing of all securities owned by such person as of December 31, 1997. Thereafter, each such person shall submit a revised list of such holdings to the Review Officer as of December 31st of each subsequent year. The initial listing must be submitted within 10 days of the date upon which such person first becomes an Access Person of the Trust, and each update thereafter must be provided no later than 30 days after the start of the subsequent year. V. REPORTING OBLIGATION. (1) Each Access Person (other than the Trust's Independent Trustees) shall report all transactions in Securities in which the person has, or by reason of such transaction acquires, any direct or indirect beneficial ownership. Reports shall be filed with the Review Officer quarterly. The Review Officer shall submit confidential quarterly reports with respect to his or her own personal securities transactions to an officer designated to receive his or her reports ("Alternate Review Officer"), who shall act in all respects in the manner prescribed herein for the Review Officer. 4 5 (2) Every report shall be made not later than 10 days after the end of the calendar quarter in which the transaction to which the report relates was effected, and shall contain the following information: (A) The date of the transaction, the title and the number of shares or the principal amount of each security involved; (B) The nature of the transaction (i.e., purchase, sale or any other type of acquisition or disposition); (C) The price at which the transaction was effected; (D) The name of the broker, dealer or bank with or through whom the transaction was effected; and (E) The date the report was signed. (3) In the event no reportable transactions occurred during the quarter, the report should be so noted and returned signed and dated. (4) An Access Person who would otherwise be required to report his or her transactions under this Code shall not be required to file reports pursuant to this Section VI where such person is required to file reports pursuant to a code of ethics described in Section VII, hereof. (5) An Independent Trustee shall report transactions in Securities only if the Trustee knew at the time of the transaction or, in the ordinary course of fulfilling his or her official duties as a Trustee, should have known, that during the 15 day period immediately preceding or following the date of the transaction, such security was purchased or sold, or was being considered for purchase or sale, by any Fund of the Trust. (The "should have known" standard implies no duty of inquiry, does not presume there should have been any deduction or extrapolation from discussions or memoranda dealing with tactics to be employed meeting the Funds' investment objectives, or that any knowledge is to be imputed because of prior knowledge of the Funds' portfolio holdings, market considerations, or the Trust's investment policies, objectives and restrictions.) (6) Any such report may contain a statement that the report shall not be construed as an admission by the person making such report that he has any direct or indirect beneficial ownership in the security to which the report relates. VI. REVIEW AND ENFORCEMENT. 5 6 (1) The Review Officer shall compare all reported personal securities transactions with completed portfolio transactions of the Trust and a list of securities being considered for purchase or sale by the Trust's adviser(s) to determine whether a violation of this Code may have occurred. Before making any determination that a violation has been committed by any person, the Review Officer shall give such person an opportunity to supply additional explanatory material. (2) If the Review Officer determines that a violation of this Code may have occurred, he or she shall submit his or her written determination, together with the confidential monthly report and any additional explanatory material provided by the individual, to the President of the Trust and outside counsel, who shall make an independent determination as to whether a violation has occurred. (3) If the President and outside counsel find that a violation has occurred, the President shall impose upon the individual such sanctions as he or she deems appropriate and shall report the violation and the sanction imposed to the Board of Trustees of the Trust. (4) No person shall participate in a determination of whether he or she has committed a violation of the Code or of the imposition of any sanction against himself or herself. If a securities transaction of the President is under consideration, any Vice President shall act in all respects in the manner prescribed herein for the President. VII. INVESTMENT ADVISER'S, ADMINISTRATOR'S OR PRINCIPAL UNDERWRITER'S CODE OF ETHICS. (1) A person who is both a Fund Trustee and an Access Person of an investment adviser or principal underwriter is only required to report under and otherwise comply with the adviser's or principal underwriter's code of ethics. [Note: While persons reporting under an investment adviser's or principal underwriter's code are subject to that code's requirements, they are still subject to the principles and prohibitions contained herein at Sections I and III(1).] (2) Each investment adviser (including, where applicable, any sub-adviser), administrator or manager (where applicable), and principal underwriter of the Trust shall: (A) Submit to the Board of Trustees of the Trust a copy of its code of ethics adopted pursuant to Rule 17j-1; (B) Promptly report to the Trust in writing any material amendments to such code of ethics; 6 7 (C) Promptly furnish to the Trust upon request copies of any reports made pursuant to such code of ethics by any person who is an Access Person as to the Trust; and (D) Shall immediately furnish to the Trust, without request, all material information regarding any violation of such code of ethics by any person who is an Access Person as to the Trust. VIII. RECORDS. The Trust shall maintain records in the manner and to the extent set forth below, which records may be maintained under the conditions described in Rule 31a-2 under the 1940 Act and shall be available for examination by representatives of the Securities and Exchange Commission. (1) A copy of this Code and any other code which is, or at any time within the past five years has been, in effect shall be preserved in an easily accessible place; (2) A record of any violation of this Code and of any action taken as a result of such violation shall be preserved in an easily accessible place for a period of not less than five years following the end of the fiscal year in which the violation occurs; (3) A copy of each report made by an officer or Trustee pursuant to this Code shall be preserved for a period of not less than five years from the end of the fiscal year in which it is made, the first two years in an easily accessible place; (4) A list of all persons who are, or within the past five years have been, required to make reports pursuant to this Code shall be maintained in an easily accessible place; and (5) A record of any decision, and the reasons supporting the decision, to approve the acquisition of securities acquired in an IPO or a Private Placement, for at least five years after the end of the fiscal year in which the approval is granted. 7 8 IX. MISCELLANEOUS (1) Confidentiality. All reports of securities transactions and any other information filed with the Trust pursuant to this Code shall be treated as confidential. (2) Interpretation of Provisions. The Boards of Trustees may from time to time adopt such interpretations of this Code as it deems appropriate. (3) Periodic Review and Reporting. The President of the Trust shall report to the Board of Trustees at least annually as to the operation of this Code and shall address in any such report the need (if any) for further changes or modifications to this Code. Adopted December 15, 1994 Revised August 13, 1998 Revised February 10, 2000 8 EX-99.P(2) 8 CODE OF ETHICS FOR FIRST HAWAIIAN BANK 1 Exhibit P(2) FIRST HAWAIIAN BANK INVESTMENT ADVISER CODE OF ETHICS ADOPTED AS OF OCTOBER 20, 1994 While affirming its confidence in the integrity and good faith of all of its employees, officers and directors, First Hawaiian Bank recognizes that the knowledge of present or future portfolio transactions and the power to influence portfolio transactions made by or for Bishop Street Funds (the "Trust") which may be possessed by certain of its personnel could place such individuals, if they engage in personal transactions in securities which are eligible for investment by the Trust, in a position where their personal interest may conflict with that of the Trust. In view of the foregoing and of the provisions of Rule 17j-1(b)(1) under the Investment Company Act of 1940 (the "1940 Act"), First Hawaiian Bank has determined to adopt this Code of ethics to specify and prohibit certain types of transactions deemed to create conflicts of interest (or at least the potential for or the appearance of such a conflict), and to establish reporting requirements and enforcement procedures. I. STATEMENT OF GENERAL PRINCIPLES. In recognition of the trust and confidence placed in First Hawaiian Bank by the Trust and its shareholders, and to give effect to First Hawaiian Bank's belief that its operations should be directed to the benefit of the Trust's shareholders First Hawaiian Bank hereby adopts the following general principles to guide the actions of its employees, officers and directors: (1) The interests of the Trust's shareholders are paramount, and all of First Hawaiian Bank's personnel must conduct themselves and their operations to give maximum effect to this tenet by assiduously placing the interests of the shareholders before their own. (2) All personal transactions in securities by First Hawaiian Bank's personnel must be accomplished so as to avoid even the appearance of a conflict of interest on the part of such personnel with the interests of the Trust and its shareholders. (3) All of First Hawaiian Bank's personnel must avoid actions or activities that allow (or appear to allow) a person to profit or benefit from his or her position with respect to the Trust, or that otherwise bring into question the person's independence or judgment. II. DEFINITIONS. (1) "Access Person" shall mean (i) each director or officer of First Hawaiian Bank, (ii) each employee of First Hawaiian Bank (or of any company in a control relationship to First Hawaiian Bank), and (iii) any natural person in a control relationship to First Hawaiian Bank, but only where such person, with respect to the Trust, makes any recommendation, participates in the determination of which 2 recommendation shall be made, or whose principal function or duties relate to the determination of which recommendation shall be made by First Hawaiian Bank with respect to the purchase or sale of a Security by the Trust, or where such person, in connection with his or her duties, obtains any information concerning Securities recommendations being made by First Hawaiian Bank to the Trust. (2) "Beneficial ownership" of a Security is to be determined in the same manner as it is for purposes of Section 16 of the Securities Exchange Act of 1934. This means that a person should generally consider himself or herself the beneficial owner of any Securities in which he or she has a direct or indirect pecuniary interest. In addition, a person should consider himself or herself the beneficial owner of Securities held by his or her spouse, minor children, a relative who shares his or her home, or other persons by reason of any contract, arrangement, understanding or relationship that provides him or her with sole or shared voting or investment power. (3) "Control" shall have the same meaning as that set forth in Section 2(a)(9) of the 1940 Act. Section 2(a)(9) provides that "control" means the power to exercise a controlling influence over the management or policies of a company, unless such power is solely the result of an official position with such company. Ownership of 25% or more of a company's outstanding voting Securities is presumed to give the holder thereof control over the company. Such presumption may be countered by the facts and circumstances of a given situation. (4) "Investment Personnel" means all Access Persons who occupy the position of portfolio manager (or who serve on an investment committee that carries out the portfolio management function) with respect to the Trust or any separately-managed series thereof (a "Fund"), all Access Persons who provide or supply information and/or advice to any portfolio manager (or committee), or who execute or help execute any portfolio manager's (or committee's) decisions, and all Access Persons who, in connection with their regular functions, obtain contemporaneous information regarding the purchase or sale of a Security by or for the Trust. (5) "Purchase or sale of a Security" includes, among other things, the writing of an option to purchase or sell a Security. (6) "Security" shall have the same meaning as that set forth in Section 2(a)(36) of the 1940 Act, except that it shall not include securities issued by the Government of the United States or an agency thereof, bankers' acceptances, bank certificates of deposit, commercial paper and registered, open-end mutual funds. (7) A "Security held or to be acquired" by the Trust (or any Fund) means any Security which, within the most recent fifteen days, (i) is or has been held by the Trust (or any Fund), or (ii) is being or has been considered by First Hawaiian Bank for purchase by the Trust (or any Fund). 2 3 (8) A Security is "being purchased or sold" by the Trust from the time when a purchase or sale program has been communicated to the person who places the buy and sell orders for the Trust until the time when such program has been fully completed or terminated. III. PROHIBITED PURCHASES AND SALES OF SECURITIES. (1) No Access Person shall, in connection with the purchase or sale, directly or indirectly, by such person of a Security held or to be acquired by any Fund: (A) employ any device, scheme or artifice to defraud such Fund; (B) make to such Fund any untrue statement of a material fact or omit to state to such Fund a material fact necessary in order to make the statements made, in light of the circumstances under which they are made, not misleading; (C) engage in any act, practice or course of business which would operate as a fraud or deceit upon such Fund; or (D) engage in any manipulative practice with respect to such Fund. (2) Subject to Section IV(2) or IV(3) of this Code, no Access Person shall purchase or sell, directly or indirectly, any Security in which he or she had or by reason of such transaction acquires any Beneficial Ownership, within 24 hours (7 days, in the case of Investment Personnel) before or after the time that the same (or a related) Security is being purchased or sold by any Fund. (3) No Investment Personnel may acquire Securities as part of any initial public offering by the issuer. (4) No Investment Personnel may sell a Security within 60 days of acquiring beneficial ownership of that Security. IV. PRE-CLEARANCE OF TRANSACTIONS. (1) Except as provided in Section IV(2), each Access Person must pre-clear each proposed transaction in Securities with First Hawaiian Bank's designated Review Officer prior to proceeding with the transaction. No transaction in Securities may be effected without the prior written approval of the Review Officer. In determining whether to grant such clearance, the Review Officer shall refer to Section IV(3), below. (2) The requirements of Section IV(1) shall not apply to the following transactions: (A) Purchases or sales over which the Access Person has no direct or indirect influence or control. 3 4 (B) Purchases or sales which are non-volitional on the part of either the Access Person or any Fund, including purchases or sales upon exercise of puts or calls written by the Access Person and sales from a margin account pursuant to a bona fide margin call. (C) Purchases which are part of an automatic dividend reinvestment plan. (D) Purchases effected upon the exercise of rights issued by an issuer pro rata to all holders of a class of its Securities, to the extent such rights were acquired from such issuer. (3) The following transactions shall be entitled to clearance from the Review Officer: (A) Transactions which appear upon reasonable inquiry and investigation to present no reasonable likelihood of harm to the Trust and which are otherwise in accordance with Rule 17j-1. Such transactions would normally include purchases or sales of up to 1,000 shares of a Security which is being considered for purchase or sale by a Fund (but not then being purchased or sold) if the issuer has a market capitalization of over $1 billion. (B) Purchases or sales of Securities which are not eligible for purchase or sale by any Fund of the Trust, as determined by reference to the Act and blue sky laws and regulations thereunder, the investment objectives and policies and investment restrictions of the Trust and its series, undertakings made to regulatory authorities. (C) Transactions which the Senior Management Committee or successor committee of senior executive officers of First Hawaiian Bank as a group and after consideration of all the facts and circumstances determine to be in accordance with Section III and to present no reasonable likelihood of harm to the Trust. V. ADDITIONAL RESTRICTIONS AND REQUIREMENTS. (1) No Access Person shall accept or receive any gift of more than de minimis value from any person or entity that does business with or on behalf of First Hawaiian Bank or the Trust. (2) No Investment Personnel may accept a position as a director, trustee or general partner of a publicly-traded company or partnership unless such position has been presented to and approved by First Hawaiian Bank and by the Trust's Board of Trustees as consistent with the interests of the Trust and its shareholders. (3) Each Access Person must direct each brokerage firm or bank at which such person maintains a Securities account to promptly send duplicate copies of such person's statement to the Review Officer. Compliance with this provision can be effected by the Access Person providing duplicate copies of all such statements 4 5 directly to the Review Officer within two business days of receipt by the Access Persons. (4) Each Access Person must provide to the Review Officer a complete listing of all Securities owned by such person as of June 30, 1994, and thereafter must submit a revised list of such holdings to the Review Officer as of January 1 of each subsequent year. The initial listing must be submitted no later than January 1, 1995 (or within 10 days of the day upon which such person first became an Access Person of the Trust), and each update thereafter must be provided no later than 10 days after the start of the subsequent year. VI. REPORTING OBLIGATION. (1) First Hawaiian Bank shall create and thereafter maintain a list of all Access Persons. (2) Each Access Person shall report all transactions in Securities in which the person has, or by reason of such transaction acquires, any direct or indirect beneficial ownership. Reports shall be filed with the Review Officer each quarter. The Review Officer shall submit confidential quarterly reports with respect to his or her own personal Securities transactions to an officer designated to receive his or her reports ("Alternate Review Officer"), who shall act in all respects in the manner prescribed herein for the Review Officer. (3) Every report shall be made not later than 10 days after the end of the calendar quarter in which the transaction to which the report relates was effected, and shall contain the following information: (A) The date of the transaction, the title and the number of shares or the principal amount of each Security involved; (B) The nature of the transaction (i.e., purchase, sale or any other type of acquisition or disposition); (C) The price at which the transaction was effected; (D) The name of the broker, dealer or bank with or through whom the transaction was effected; and (E) The date the report was signed. (4) Any such report may contain a statement that the report shall not be construed as an admission by the person making such report that he or she has any direct or indirect beneficial ownership in the Security to which the report relates. (5) Every Access Person shall report the name of any publicly-owned company (or any company anticipating a public offering of its equity securities) and the total 5 6 number of its shares beneficially owned by him or her if such total ownership is more than 1/2 of 1% of the company's outstanding shares. (6) In the event no reportable transactions occurred during the quarter, the report should be so noted and returned signed and dated. VII. REVIEW AND ENFORCEMENT. (1) The Review Officer shall compare all reported personal Securities transactions with completed portfolio transactions of the Trust and a list of Securities being considered for purchase or sale by First Hawaiian Bank to determine whether a violation of this Code may have occurred. Before making any determination that a violation has been committed by any person, the Review Officer shall give such person an opportunity to supply additional explanatory material. (2) If the Review Officer determines that a violation of this Code may have occurred, he or she shall submit his or her written determination, together with the confidential monthly report and any additional explanatory material provided by the individual, to the President of First Hawaiian Bank, who shall make an independent determination as to whether a violation has occurred. (3) If the President finds that a violation has occurred, the President shall impose upon the individual such sanctions as he or she deems appropriate and shall report the violation and the sanction imposed to the Board of Trustees of the Trust. (4) No person shall participate in a determination of whether he or she has committed a violation of the Code or of the imposition of any sanction against himself or herself. If a Securities transaction of the President is under consideration, any Vice Chairman shall act in all respects in the manner prescribed herein for the President. VIII. RECORDS. First Hawaiian Bank shall maintain records in the manner and to the extent set forth below, which records shall be available for examination by representatives of the Securities and Exchange Commission. (1) A copy of this Code and any other code which is, or at any time within the past five years has been, in effect shall be preserved in an easily accessible place; (2) A record of any violation of this Code and of any action taken as a result of such violation shall be preserved in an easily accessible place for a period of not less than five years following the end of the fiscal year in which the violation occurs; (3) A copy of each report made by an officer or trustee pursuant to this Code shall be preserved for a period of not less than five years from the end of the fiscal year in which it is made, the first two years in an easily accessible place; and 6 7 (4) A list of all persons who are, or within the past five years have been, required to make reports pursuant to this code shall be maintained in an easily accessible place. IX. MISCELLANEOUS. (1) All reports of Securities transactions and any other information filed with the Trust pursuant to this Code shall be treated as confidential. (2) First Hawaiian Bank may from time to time adopt such interpretations of this Code as it deems appropriate. (3) The President of First Hawaiian Bank shall report to First Hawaiian Bank and to the Board of Trustees of the Trust at least annually as to the operation of this Code and shall address in any such report the need (if any) for further changes or modifications to this Code. (4) The Senior Trust Committee of First Hawaiian Bank is hereby delegated and authorized to review and revise this Code of Ethics from time to time as it deems necessary or appropriate for compliance with all applicable laws, rules and regulations. 7 -----END PRIVACY-ENHANCED MESSAGE-----