HOSOI GARDEN MORTUARY, INC.
30 North Kukui Street
(Corner of Nuuanu Avenue and Kukui Street)
Honolulu, Hawaii 96817
December 18, 1998
PROXY STATEMENT
GENERAL INFORMATION
The accompanying proxy is solicited on behalf of
the Board of Directors of Hosoi Garden Mortuary, Inc.
(the "Company") to be used at the Annual Meeting of
Shareholders of the Company to be held at 11:00 A. M.
on Sunday, January 24, 1999, at 30 North Kukui Street
(corner of Nuuanu Avenue and Kukui Street), Honolulu,
Hawaii 96817, and any adjournments thereof.
Attached to this proxy statement is your proxy.
The Board of Directors will vote all proxies it
receives which are properly signed and received in
time. If you send the Board of Directors your proxy,
it will be voted according to how you fill out the
proxy. However, if you send your proxy to the Board,
but do not tell the Board how to vote by filling out
the proxy, the Board will vote your proxy according
to its recommendations explained in this proxy
statement.
The Board is seeking to have the proxy, proxy
statement, annual report and other materials sent
to the shareholders between December 18 and 20, 1998.
REVOCABILITY OF PROXY
You may revoke your proxy any time before the
proxy is voted. You can revoke your proxy only if
you inform the secretary of the Company in writing,
as provided in the Company's by-laws. You can also
change your proxy by sending another proxy of later
date to the Board.
Your attendance at the Annual Meeting in
person will not revoke the proxy you give to the
Board. But if you attend the Annual Meeting in
person, you still may revoke any proxy you have given
and you may vote your shares in person.
SHAREHOLDERS WHO MAY VOTE
Only shareholders of record at the close of
business on November 16, 1998, may vote at the
Annual Meeting. On November 16, 1998, there were
1,737,180
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<PAGE>
shares outstanding, with each share entitled to one
vote. A quorum consists of the holders of a majority
of the outstanding shares, present either in person
or by proxy. There are 452,082 shares in the treasury
which are not included in calculating such number and
shall not be voted.
CUMULATIVE VOTING
Cumulative voting is governed by Hawaii Revised
Statutes Section 415-33. If a request for cumulative
voting is delivered in writing to an officer of the
Company not less than forty-eight (48) hours prior to
the time set for the Annual Meeting of Shareholders,
cumulative voting will be used for the election of
directors. If cumulative voting is used, each
shareholder shall be entitled to as many votes as
shall equal the number of his shares multiplied by the
number of directors to be elected. He may cast all of
such votes for a single director or may distribute them
among any two or more of the number to be elected as
he may see fit. If no request for cumulative voting is
received, each shareholder will be entitled to one vote
per share for each position on the Board of Directors.
PERSONS MAKING THE SOLICITATION AND COST
The accompanying proxy is solicited by mail on
behalf of the Board of Directors of the Company.
The Company will pay the cost of solicitation of
proxies. Following the mailing of proxy soliciting
material, officers, employees and directors of the
Company may, without additional expense, solicit
proxies by appropriate means, including by mail,
telephone, fax or personal interview.
SECURITIES MARKET AND DIVIDENDS
The common shares of the Company are neither
traded nor listed on an exchange and has no
established public trading market. One stockbroker
in Honolulu quotes the common shares, but the Company
is not aware of the prices at which sales have been
made. The records of the Company indicate that very
few shares are transferred. During the fiscal year
ended May 31, 1998, the Company redeemed 30,442
shares at $4.00 per share and 2,005 shares at $4.25
per share, some of which were acquired as payment
for funeral expenses incurred by the shareholders.
Effective November 1, 1998, the Board of
Directors authorized the redemption of shares (for
either cash or services) at $4.25 per share. Any
stock not purchased by the Company shall then be
offered to the remaining shareholders at the price
negotiated by the parties. If neither the Company
nor the remaining shareholders opt to purchase the
selling shareholder's stock, then the stock may be
offered to any person at any price designated by the
selling shareholder.
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<PAGE>
There were 1,653 record holders of common shares
as of November 16, 1998.
A cash dividend has been declared and paid once
a year since 1969. The dividend declared in October,
1998 was $.10 per share and in October, 1997 was $.10
per share.
UPON REQUEST THE COMPANY WILL SEND TO YOU AT NO
CHARGE A COPY OF FORM 10-KSB, THE ANNUAL REPORT
INCLUDING THE FINANCIAL STATEMENTS AND THE FINANCIAL
STATEMENTS SCHEDULES FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION FOR THE MOST RECENT FISCAL YEAR.
TO REQUEST A COPY, YOU MUST WRITE TO:
MS. ELAINE NAKAMURA, SECRETARY
HOSOI GARDEN MORTUARY, INC.
30 NORTH KUKUI STREET
HONOLULU, HAWAII 96817
SOLICITED PROXIES WILL BE VOTED ON THE FOLLOWING
MATTERS
The Board of Directors intends to vote solicited
proxies on the following matters:
I. To elect three (3) directors to serve until the
2002 annual meeting of shareholders and until
their successors are elected;
II. To elect an auditor; and
III. To vote upon other business properly before the
meeting or any adjournment thereof.
I. TO ELECT THREE (3) DIRECTORS TO SERVE UNTIL
THE 2002 ANNUAL MEETING OF SHAREHOLDERS AND
UNTIL THEIR SUCCESSORS ARE ELECTED.
The Company has a total of nine (9) directors
constituting the entire Board of Directors, divided
into three (3) classes of three (3) directors each.
The Company's Articles of Association provide for each
class of directors to be elected for three-year terms
on a staggered basis. At the 1999 annual meeting of
the shareholders, three directors will be elected to
serve until the 2002 annual meeting of the shareholders
and until their respective successors are elected.
The Board of Directors' three nominees for
directors are Sadako Hosoi, Anne T. Tamori and Berton
T. Kato. All three of these nominees are currently
directors of the Company. Each nominee has consented
to serve as a director, if elected.
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Proxies in the accompanying form will (unless
a contrary direction is indicated therein) be voted
to elect the foregoing nominees (who have been
nominated by the present Board of Directors) as
directors to serve, subject to the Articles of
Association and By-Laws of the Company. If any of
the nominees listed is not available for election at
the Annual Meeting (a contingency which the management
of the Company does not now foresee), it is the
intention of the Board of Directors to recommend the
election of such other persons as may be necessary to
fill such vacancies. Proxies in the accompanying form
will be voted for the election of such other persons
unless authority to vote such proxies in the election
of directors has been withheld.
II. TO ELECT AN AUDITOR.
The Board of Directors recommends the election
of Endo & Company, a firm of certified public
accountants, as auditor for the year commencing June
1, 1999. Endo & Company was elected as auditor for
the year commencing June 1, 1998 at the Annual Meeting
held on January 18, 1998. A representative of Endo &
Company will be present at the Annual Meeting, will
make a statement if the shareholders desire and will
respond to any appropriate questions raised at the
meeting.
With respect to the election of the Auditor, each
shareholder is entitled to one vote for each share.
III. TO VOTE UPON OTHER BUSINESS PROPERLY BEFORE
THE MEETING.
Management does not intend to bring any matters
before the meeting other than the election of
directors, election of auditor, and presentation of
President's Report with the financial statements for
the fiscal year ended May 31, 1998. Management does
not have any information that other matters will be
brought before the meeting, or any adjournment or
adjournments thereof. If other matters are introduced,
it is the intention of the persons named in the
enclosed form of proxy to vote said proxy in accordance
with their judgment.
INFORMATION ON STOCK OWNERSHIP OF PRINCIPAL
SHAREHOLDERS, DIRECTORS AND EXECUTIVE OFFICERS
A. PRINCIPAL SHAREHOLDERS
The Herman S. Hosoi Trust, whose trustees are
Sadako Hosoi and Julie S. Shimonishi, and the Hosoi
Family Limited Partnership, whose general partner is
the Hosoi Family Voting Trust, by its trustee Julie S.
Shimonishi, are the only persons who own of record or
are known to the Company to own beneficially more than
five percent of the common shares of the Company as of
May 31, 1998. Certain information about the holders
is set forth in the table below.
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<PAGE>
<TABLE>
<CAPTION>
Title of Name and Address of Nature of Beneficial No. of Percent of
Class Beneficial Owner Ownership Shares Class
<S> <C> <C> <C> <C>
Common Julie S. Shimonishi Shared as co-trustee 158,250 9.07%
30 N. Kukui Street of the Herman S.
Honolulu, HI 96817 Hosoi Trust
General Partner of 160,250 9.18%
the Hosoi Family
Limited Partnership,
as Trustee of the
Hosoi Family
Voting Trust
Custodian for Chad 8,000 0.46%
Shimonishi and Lane
Shimonishi under
HUGMA
Direct 52,534 3.01%
Total 379,034 21.72%
Common Sadako Hosoi Shared as co-trustee 158,250 9.07%
30 N. Kukui Street of the Herman S.
Honolulu, HI 96817 Hosoi Trust
Settlor of the Hosoi 160,250 9.18%
Family Voting Trust
and limited partner
of the Hosoi Family
Limited Partnership
Total 318,500 18.25%
Common Herman S. Hosoi Trust Direct 158,250 9.07%
Sadako Hosoi and
Julie S. Shimonishi,
Trustees
30 N. Kukui Street
Honolulu, HI 96817
Common Hosoi Family Limited Direct 160,250 9.18%
Partnership *
30 N. Kukui Street
Honolulu, HI 96817
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<PAGE>
<FN>
* The Sadako Hosoi Trust, by its trustees Sadako Hosoi and Julie S.
Shimonishi, transferred 160,250 shares of the Company to the Hosoi
Family Limited Partnership, whose general partner is the Hosoi Family
Voting Trust, by its trustee Julie S. Shimonishi, and whose limited
partner is Sadako Hosoi. Julie S. Shimonishi, as trustee, exercises
voting and investment powers over those shares pursuant to the Hosoi
Family Voting Trust Agreement dated December 30, 1994, between Sadako
Hosoi, as settlor, and Julie S. Shimonishi, as trustee.
</FN>
</TABLE>
B. DIRECTORS AND EXECUTIVE OFFICERS
Certain information with respect to the holdings of
common shares of the directors and executive officers
of the Company as of November 16, 1998, is set forth
in the table below.
<TABLE>
<CAPTION>
Title of Name of Amount and Nature of Percent of
Class Beneficial Owner(1) Beneficial Ownership Class
<S> <C> <C> <C>
Common Julie S. Shimonishi 379,034 (2) 21.72%
Common Sadako Hosoi 318,500 (3) 18.25%
Common Clifford Hosoi 52,532 (4) 3.01%
Common Anne T. Tamori 56,534 (5) 3.24%
Common Richard B. Dole 1,000 (6) 0.06%
All directors 489,100 28.02%
and officers
as a group
(14 persons) (7)
<FN>
(1) The address of each person is 30 N. Kukui Street, Honolulu,
Hawaii 96817, except for Richard B. Dole whose address is
1255 Nuuanu Avenue, Suite C-104, Honolulu, Hawaii 96817.
(2) Includes:
52,534 shares (3.01%) as to which Ms. Shimonishi exercises
sole voting and investment powers;
8,000 shares (0.46%) as to which Ms. Shimonishi exercises
sole voting and investment powers as
Custodian for Chad Shimonishi and Lane
Shimonishi under HUGMA;
158,250 shares (9.07%) as to which Ms. Shimonishi and Sadako
Hosoi share voting and investment
powers as trustees of the Herman S.
Hosoi Trust; and
160,250 shares (9.18%) as to which Ms. Shimonishi, as trustee
of the Hosoi Family Voting Trust, has
voting and investment powers over the
shares owned by the Hosoi Family Limited
Partnership.
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<PAGE>
(3) Voting and investment powers over 158,250 shares of the Company
are shared by Sadako Hosoi and Julie S. Shimonishi, as Trustees
of the Herman S. Hosoi Trust, which owns 158,250 shares of the
Company.
Voting and investment power over 160,250 shares of the Company
are exercised by Julie S. Shimonishi, as trustee under the Hosoi
Family Voting Trust. See the preceding table for more
information about the Hosoi Family Limited Partnership and the
Hosoi Family Voting Trust.
(4) Voting and investment powers exercised solely.
(5) Includes:
52,534 shares (3.01%) as to which Ms. Tamori exercises sole
voting and investment powers; and
4,000 shares (0.23%) as to which Ms. Tamori exercises sole
voting and investment powers for Ryan
Tamori under HUGMA.
(6) Voting and investment powers exercised solely.
(7) Rene Mansho, Ricky C. Manayan, Berton T. Kato and Robert Kuwahara,
who are currently serving as directors, and Elaine Nakamura, David
Fujishige and Keith Numazu, who are currently serving as officers,
do not own any shares of the Company.
</FN>
</TABLE>
INFORMATION ON DIRECTORS AND EXECUTIVE OFFICERS OF
THE COMPANY
The Board of Directors is comprised of nine
members who serve staggered three-year terms.
One-third of the directors will be elected each year
for a three-year term. Directors hold office for the
duration of their terms and thereafter until their
successors are elected. The executive officers serve
at the pleasure of the Board of Directors.
The Board of Directors of the Company has no audit
or compensation committees or committees performing
similar functions.
A. The following table sets forth the directors'
and executive officers' names, ages, position and year
of appointment or election, relationship, and business
experience.
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<PAGE>
<PAGE>
<TABLE>
<CAPTION>
Name Age Office Business Experience and Family Relationship
NOMINEES FOR ELECTION AS DIRECTORS - TERMS TO EXPIRE IN 2002
<S> <C> <C> <C>
Sadako Hosoi 81 Director Widow of Herman Hosoi, founder of the
(since 1957) Company; in the past, served as Treasurer
and Chairperson of the Board of the
Company; Director of Garden
Life Plan, Ltd.; mother of Julie
Shimonishi, Director, Clifford Hosoi,
Director and President,
and Anne Tamori, Director and Vice
President
Roy T. 56 Director Co-owner, Hungry Lion Coffee Shop,
Shimonishi* (since 1979) Honolulu; Director of Hawaii Restaurant
Association, Catholic Services for the
Elderly, and Hungry Lion Charities; Area
Coordinator for Excel Telecommunications;
Brother-in-law of Julie Shimonishi,
Director. Roy T. Shimonishi resigned as a
director in May 1997.
Berton T. 50 Director Attorney (admitted to the Bar of the State
Kato (since 1996) of Hawaii in 1973)
Anne T. Tamori 51 Vice President Employed by the Company as an associate
(since 1994) secretary (since 1978); daughter of Sadako
Hosoi; sister of Clifford Hosoi, Director
and President, and Julie S. Shimonishi,
Director
<CAPTION>
DIRECTORS WHOSE TERMS EXPIRE IN 2001
<S> <C> <C> <C>
Rene Mansho 49 Director City Council member, City and County of
(since 1993); Honolulu, Hawaii (since 1988); School
Chairperson of teacher, Vice-Principal and Administrator,
the Board Department of Education, State of Hawaii
(since 1994) (1971-1988); other organizations include
Hawaii State Association of Counties,
Mililani Hongwanji, Mililani YMCA,
Honolulu Japanese Chamber of Commerce,
Goodwill Industries, Great Aloha Run,
Salvation Army, Wahiawa Lions, Muscular
Dystrophy Association of Hawaii
Clifford Hosoi 49 Director Licensed embalmer since 1979; Funeral
(since 1989); Director since 1985; Vice President of the
President and Company from 1989 - 1994; Director Garden
Chief Executive Life Plan, Ltd.; son of Sadako Hosoi,
Officer Director, brother of Julie S. Shimonishi,
(since 1994) Director, and Anne Tamori, Director and
Vice President
Ricky C. 39 Director Manager - Prepaid Card Programs,
GTE Hawaiian Tel; President of Rick
Manayan Associates; President of East-West
Real Estate Co., Inc.; President of
Transpacific Empire, Inc.
<PAGE>
<CAPTION>
Name Age Office Business Experience and Family Relationship
DIRECTORS WHOSE TERMS EXPIRE IN 2000
<S> <C> <C> <C>
Julie S. 52 Director School teacher, Department of Education,
Shimonishi State of Hawaii since 1970; daughter of
Sadako Hosoi, Director; sister-in-law of
Roy Shimonishi, Director; sister of
Clifford Hosoi, Director and President
and Anne Tamori, Director and Vice
President
Robert K. 50 Director Certified Public Accountant since 1975;
Kuwahara (since 1995) actively involved in human services
organizations such as the YMCA
Richard B. 53 Director Member-Manager of Dole Capital, LLC, a
registered securities broker-dealer;
Vice-President and Principal of Kuroman
Realty, Inc.; American Society of
Appraisers, Chartered Financial Analyst and
Certified Financial Planner designations;
Co-Trustee of the James D. Dole Trust;
member of American Society of Appraisers,
Association for Investment Management
Research, Hawaii Employee Ownership and
Participation Advisory Committee, State of
Hawaii, and Hawaii Estate Planning Council
<PAGE>
<CAPTION>
OTHER EXECUTIVE OFFICERS
<S> <C> <C> <C>
David 50 Vice President Employed by the Company since 1989;
Fujishige (since 1994) Funeral Director since 1991; Food
Production Supervisor, Rehabilitation
Hospital of the Pacific (1980-1991)
Keith Numazu 36 Treasurer Employed by the Company as assistant
(since 1994) bookkeeper and programmer since 1992;
Systems Operator/Analyst, Consolidated
Amusement, Inc. (1991-1992); Senior Systems
Analyst/Programmer, Holmes and Narver,
Inc., and Raytheon Services Nevada (1987 -
1991)
Elaine 60 Secretary Employed by the Company since 1963
Nakamura (since 1972)
<FN>
* Roy T. Shimonishi resigned as a director in 1997. The Board of Directors
nominated and elected Anne T. Tamori to serve the remaining term of Roy T.
Shimonishi as director, which will expire in 1999.
None of the directors of the Company is a director of an investment company
registered under the Securities Exchange Act of 1934. Richard B. Dole is
the Member-Manager of Dole Capital, LLC, a securities broker-dealer
registered under the Securities Exchange Act of 1934. All officers serve
at the pleasure of the Board of Directors.
</FN>
</TABLE>
<PAGE>
B. Shareholders, Board, Committees, Number of
Meetings - fiscal year ended May 31, 1998.
The shareholders of the Company last met on
January 18, 1997. 1,136,160 shares representing 64.72%
of shares issued and outstanding were present in person
or by proxy. All members of the Board of Directors
were elected by holders of at least 63.77% of the
shares outstanding.
A nominating committee was formed with Richard B.
Dole, Rene Mansho and Robert K. Kuwahara as members at
the October 15, 1998 Board meeting to designate
nominees for election at the annual meeting.
Shareholders may suggest nominees by contacting Richard
B. Dole, Rene Mansho and Robert K. Kuwahara at the
Company's address. No specific format or information
is required to nominate a person as a director.
Nominations must be received by the close of
nominations during the course of the Annual Meeting on
January 24, 1999, to be acted upon at that Annual
Meeting.
COMPENSATION OF DIRECTOR AND EXECUTIVE OFFICERS
The following sets forth the information, on an
accrual basis, with respect to the compensation of the
chief executive officer of the Company for the three
fiscal years ended May 31, 1998.
<TABLE>
<CAPTION>
Name and Year ended Annual Other
Position May 31 Compensation Compensation
<S> <C> <C> <C>
Clifford Hosoi 1996 $60,502 $10,447 (1)
President/Chief 1997 $54,759 $ 7,955 (2)
Executive Officer 1998 $46,731 $ 7,420 (3)
<FN>
(1) Amount shown includes $3,025 contributed to the Company's Money
Purchase Pension Plan, $6,097 contributed to the Company's Profit
Sharing Plan and $1,325 fees paid as a director.
(2) Amount shown includes $2,738 contributed to the Company's Money
Purchase Pension Plan, $3,817 contributed to the Company's Profit
Sharing Plan and $1,400 fees paid as a director.
(3) Amount shown includes $2,337 contributed to the Company's Money
Purchase Pension Plan, $3,583 contributed to the Company's Profit
Sharing Plan and $1,500 fees paid as a director.
</FN>
</TABLE>
The total annual salary and bonus for any other
executive officer does not exceed $100,000.
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<PAGE>
The standard fees paid to directors are $100 for
each Board of Directors meeting attended and $25 for
each committee meeting attended.
COMPENSATION TO PLANS
(a) PROFIT-SHARING PLAN. The Company has established
a profit-sharing plan for the Company's employees.
Every employee, who has completed one year of service
with the Company, becomes eligible to participate in
the profit-sharing plan. An employee who has completed
1,000 hours of service commencing from the date of
employment or an anniversary date is considered to have
one year of service.
The Company's contribution to the profit-sharing plan
is discretionary and may be up to 15% of the
participant's eligible compensation. The Company's
total contributions shall not exceed the amount
allowable by income tax regulations. The amounts
charged against income for the profit-sharing plan in
1998 and 1997 were $40,000 and $37,000, respectively.
The Company's allocation of contributions among
eligible members is based on their respective
compensation and is allocated proportionately.
The investment decision for the profit-sharing plan
is formulated by a registered investment advisor
through Hawaiian Trust Company, Ltd.
(b) MONEY PURCHASE PENSION PLAN. The Company has
established a money purchase pension plan, which became
effective as of June 1, 1990, for the Company's
employees. Every employee, who has completed one year
of service with the Company, becomes eligible to
participate in the money purchase plan. An employee
who has completed 1,000 hours of service commencing
from the date of employment or an anniversary date is
considered to have one year of service.
The Company is required to contribute 5% of each
participant's eligible compensation to the money
purchase plan. The Company's total contributions
cannot exceed the amount allowable by income tax
regulations. The amounts charged against income for
the money purchase pension plan in 1998 and 1997 were
$26,560 and $27,122, respectively.
The investment decision for the money purchase plan
is formulated by a registered investment advisor
through Smith Barney, Inc.
TRANSACTION WITH DIRECTOR AND OFFICERS
The Company operates its business at 30 North
Kukui Street, Honolulu, Hawaii, 96817, on the northwest
corner of Nuuanu Avenue and Kukui Street in Honolulu
Hawaii. The business site consists of 92,773 square
feet, of which the Company owns a 78/104th interest.
The Herman S. Hosoi Trust owns a 13.65/104th interest
and the Hosoi-Tamori-Shimonishi Trust owns the
remaining 12.35/104th interest. The trustees and
beneficiaries of both trusts include directors,
officers and shareholders of the Company.
The portion owned by the Company is owned in fee
simple. The Company
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<PAGE>
leases the portion owned by the Herman S. Hosoi Trust
and Hosoi-Tamori-Shimonishi Trust ("Trusts") under a
five-year lease that expired on May 31,1994, subject
to an option to renew for an additional five-year
period. The option to renew the lease was exercised
while negotiations for the terms of a new lease
continued. In August 1997, the terms of a new lease
retroactive to June 1, 1994 were approved by the
Directors of the Company. The lease, which expires on
May 31, 1999, provides for an annual lease rent of
$312,498, including general excise taxes. In addition,
the Company is responsible for the payment of real
property taxes on the portion of the land owned by the
Trusts. Total rental expense was $356,469 and $356,432
in 1998 and 1997, respectively. For more information
on the lease between the Company and the Trusts, see
Footnote 12 on page F-18 and F-19 of the Company's
Financial Statements, which are attached hereto and
incorporated by reference.
SECTION 16(a) REPORTS
Section 16(a) of the Securities Exchange Act of
1934 requires the Company's directors and officers,
and persons who own more than 10% of a registered
class of the Company's equity securities, to file, on
forms 3, 4 and 5, reports of ownership and changes in
ownership of such securities with the Securities and
Exchange Commission. No such reports were required to
be filed for 1997 and 1998.
ACTION WITH RESPECT TO REPORTS
Minutes of the last annual meeting of the
shareholders held on January 18, 1998, will be read
and the shareholders will be requested to approve or
disapprove the minutes. Approval or disapproval of
the minutes will not constitute approval or disapproval
of the matters referred to in such reports or minutes.
The President will give a report at the meeting.
All records of the Company, including the minutes of
the meetings of the Board of Directors and the
shareholders held during the preceding year are
available for review by the shareholders at the
office of the Company.
VOTE REQUIRED FOR APPROVAL
A majority vote of shareholders present, in
person or by proxy, shall be required in matters other
than the election of directors.
ANNUAL REPORT TO SHAREHOLDERS
The annual report to shareholders, consisting
of the President's and Chief Executive Officer's
letter and the comparative financial statements for
the years ended May 31, 1998 and May 31, 1997, is
included with this Proxy Statement.
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<PAGE>
RETURN OF PROXY
If you do not plan to attend the Annual Meeting
in person, we urge you to execute the proxy and return
it promptly in the enclosed business reply envelope.
SHAREHOLDER PROPOSALS FOR 2000
Proposals of shareholders intended to be
presented at the annual meeting of the Company in
January or February 2000 must be received by the
Company on or before September 15, 1999.
BY ORDER OF THE BOARD OF DIRECTORS
By /s/
Elaine Nakamura, Secretary
December 18, 1998
WHETHER YOU PLAN TO ATTEND OR NOT, YOU ARE URGED TO
MARK, DATE, SIGN AND RETURN THE ENCLOSED PROXY.
A PROMPT RESPONSE IS HELPFUL, AND YOUR COOPERATION
WILL BE APPRECIATED.
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<PAGE>
ANNUAL REPORT
HOSOI GARDEN MORTUARY, INC.
DESCRIPTION OF BUSINESS
Hosoi Garden Mortuary, Inc. (the "Company") was
incorporated in 1957 under the laws of the State of
Hawaii as the successor to a business founded in 1900.
Professional funeral services are the principal
services rendered by the Company. The Company is
engaged in the funeral and mortuary business, including
the sale of pre-need funeral services contracts.
During the fiscal years ended May 31, 1998 and 1997,
funeral services accounted for 72.1% and 72.7%,
respectively, of revenues. The Company owns 50% of
Garden Life Plan, Ltd. ("Garden Life") which sells
pre-need funeral service contracts for which the
Company acts as the sole servicing mortuary.
The Company operates a mortuary business in
Honolulu, Hawaii. Although established to offer funeral
services to all persons in Hawaii, the Company serves
principally persons of Japanese ancestry who follow a
particular and special order of worship in accordance
with their religious beliefs. In addition to handling
funeral services for residents of Honolulu, the Company
conducts services for residents of other counties in
Hawaii and prepares remains for shipment to or receives
them from other counties in Hawaii, other states in the
United States and foreign countries.
On July 7, 1998, the Company entered into an
agreement with Woolsey Funeral & Cemetery Services, Inc.
to form Woolsey-Hosoi Mortuary Services, LLC, a limited
liability company under the laws of the State of Hawaii.
It is expected that the LLC will conduct funeral services
to persons other than those of Japanese ancestry.
Funeral services arranged by the LLC will generally be
conducted at churches and other locations other than on
the Company's premises.
Thirty-five (35) persons were employed by the
Company for the fiscal year ended May 31, 1998.
Thirteen (13) persons were employed full-time and
twenty-two (22)persons were employed part-time.
DIRECTORS AND EXECUTIVE OFFICERS
The Company has a total of nine (9) directors
constituting the entire Board of Directors, divided into
three (3) classes of three (3) directors each. The
Company's Articles of Association provide for each class
of directors to be elected for three-year terms on a
staggered basis.
Directors hold office for the duration of their
terms and thereafter until their successors are elected.
The executive officers serve at the pleasure of the Board
of Directors. See the table on pages 14 and 15 for
certain information about the directors and executive
officers of the Company.
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<PAGE>
The names, ages, positions and offices, terms of
office, and business experience of the directors and
executive officers of the Company during the past five
years are set forth below.
DIRECTORS WHOSE TERMS EXPIRE IN 1999
Sadako Hosoi is the widow of Herman S. Hosoi,
founder of the Company. She has been a director of the
Company since 1957 and is the Chairperson of the Board
Emeritus. At the January 21, 1996, annual meeting, she
was elected to a new three-year term which will expire in
1999. In the past, she has served as chairperson of the
Company and treasurer. She serves as a director of
Garden Life Plan, Ltd. She is the mother of Julie S.
Shimonishi, director, Clifford Hosoi, director and
president of the Company, and Anne T. Tamori, director
and vice president of the Company.
Roy T. Shimonishi is co-owner of Hungry Lion Coffee
Shop in Honolulu, Hawaii. He had been a director since
1979. At the January 21, 1996, annual meeting, he was
elected to a new three-year term to expire in 1999. He
serves on the Board of Directors of the Hawaii Restaurant
Association, Catholic Services for the Elderly and Hungry
Lion Charities. He is also an area coordinator for Excel
Telecommunications. Roy T. Shimonishi resigned as a
director in May 1997. The Board of Directors nominated
and elected Anne T. Tamori to serve the remaining term of
Roy T. Shimonishi as director, which will expire in
1999.
Berton T. Kato is an attorney licensed in the State
of Hawaii and has his own law practice. At the January
21, 1996, annual meeting, he was elected to serve a
three-year term which will expire in 1999.
Anne T. Tamori has been employed by the Company
since 1978. She has been a vice president of the
Company since 1994. She has served as an associate
secretary of the Company. She is a daughter of Sadako
Hosoi, director, and a sister of Clifford Hosoi, director
and president of the Company, and Julie S. Shimonishi,
director. Following the resignation of Roy T. Shimonishi
as a director, the Board of Directors elected Anne T.
Tamori to serve Roy T. Shimonishi's remaining term as a
director, which will expire in 1999.
DIRECTORS WHOSE TERMS EXPIRE IN 2000
Julie S. Shimonishi is a school teacher and has been
employed by the Department of Education, State of Hawaii,
since 1970. She has been a director since 1979. She is
a daughter of Sadako Hosoi, director, and a sister of
Clifford Hosoi, director and president of the Company,
and Anne T. Tamori, director and vice-president of the
Company.
Robert Kuwahara is a Certified Public Accountant and
has his own CPA practice. He has been a director of the
Company since 1995. He is actively involved in human
services organizations such as the YMCA.
-2-
<PAGE>
Richard B. Dole is the Member-Manager of Dole
Capital, LLC, a registered securities broker-dealer. He
is also Vice-President and Principal of Kuroman Realty,
Inc. He has been a director of the Company since 1995.
He holds many professional designations, including the
American Society of Appraisers, Chartered Financial
Analyst and Certified Financial Planner designations.
He is the Co-Trustee of the James D. Dole Trust. He is
involved with many professional organizations,
including the American Society of Appraisers, the
Association for Investment Management Research (AIMR),
the Hawaii Employee Ownership and Participation Advisory
Committee, State of Hawaii, and the Hawaii Estate
Planning Council.
DIRECTORS WHOSE TERMS EXPIRE IN 2001
Clifford Hosoi has been a director of the Company
since 1989. He was a vice president from 1989 until his
appointment as president and chief executive officer of
the Company as of January 1, 1994. He has been a
licensed embalmer since 1979. He has been a Funeral
Director for the Company since 1985. He serves as a
director of Garden Life Plan, Ltd. He is the son of
Sadako Hosoi, director, and a brother of Julie S.
Shimonishi, director, and Anne T. Tamori, vice-president,
director and an employee of the Company.
Rene Mansho is an elected member of the City
Council of the City and County of Honolulu and has served
on the City Council since 1988. She has been a director
of the Company since 1993. She presently serves as
chairperson of the Board of Directors and was elected to
that position in 1994. She has been a school
teacher, Vice-Principal and Administrator with the
Department of Education of the State of Hawaii between
1971 through 1988. Other organizations with which she
is involved include the Hawaii State Association of
Counties, the Mililani Hongwanji, Mililani YMCA,
Honolulu Japanese Chamber of Commerce, Goodwill
Industries, Great Aloha Run, Salvation Army, Wahiawa
Lions, Muscular Dystrophy Association of Hawaii.
Ricky C. Manayan is currently a Manager - Prepaid
Card Programs with GTE Hawaiian Tel. He has been a
director of the Company since 1995. His other business
affiliations include Rick Manayan & Associates. He is
President of East-West Real Estate Co., Inc., Ricky
Manayan Associates and Transpacific Empire, Inc.
OTHER EXECUTIVE OFFICERS ARE AS FOLLOWS:
David Fujishige has been employed by the Company
since 1989. He has been a funeral director since 1991.
He has been a vice president of the Company since 1994.
Prior to joining the Company, he was a food production
supervisor at Rehabilitation Hospital of the Pacific.
Keith Numazu has been employed by the Company since
1992. He has been treasurer of the Company since 1994.
He has been an assistant bookkeeper and programmer since
1992. Prior to joining the Company, he was a systems
operator/analyst for Consolidated Amusement, Inc. and a
senior systems analyst/programmer for Holmes and Narver,
Inc. and Raytheon Services Nevada.
-3-
<PAGE>
Elaine Nakamura has been employed by the Company
since 1963. She is the secretary of the Company.
MARKET FOR COMMON STOCK AND RELATED SHAREHOLDER MATTERS
The common shares of the Company are neither traded
nor listed on an exchange and has no established public
trading market. One stockbroker in Honolulu, Hawaii,
quotes the common stock, but the Company does not know
the prices at which the trades are made. During the
fiscal year ended May 31, 1998, the Company redeemed
32,447 shares as follows:
<TABLE>
<CAPTION>
No. of Shares Redemption Price
<S> <C>
30,442 $4.00
2,005 $4.25
</TABLE>
There were 1,660 record holders of common stock as
of May 31, 1998.
A cash dividend has been declared and paid once a
year since 1969. The dividend for the year ended May 31,
1998, which was declared on October 15, 1998, was $.10
per share. Dividends for the year ended May 31, 1998
are payable to shareholders in January 1999. The
dividend for the year ended May 31, 1997, which was
declared on October 16, 1997, was $.10 per share.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
TOTAL REVENUES
The Company's revenues decreased by $205,749 in 1998
over 1997. The decrease of 7.2% is attributable to the
decrease in number of services performed from 1,170 in
1997 to 1,050 in 1998, which is a decrease of 10.3%.
The Company expects revenues to remain at the 1998
level, despite an increase in prices for funeral
services, because it is expected that the selection of
lower priced funeral services will continue because of
the poor economic conditions in Hawaii.
The affiliation with Woolsey Funeral & Cemetery
Services, Inc., described in ITEM 1. DESCRIPTION OF
BUSINESS, is a revenue source from a segment of the
community not currently served by the Company.
Initially, the Woolsey-Hosoi Mortuary Services, LLC is
not expected to have a major impact on the Company's
revenues.
The Company's operating expenses are increasing as
the Company
-4-
<PAGE>
continues to upgrade its professional staff and continues
to explore either the establishment of a pre-need
authority, the purchase of the interest of its 50%
shareholder in Garden Life Plan, Ltd. or extending the
service agreement with Garden Life Plan, Ltd. beyond the
expiration in 2001. Operating results for fiscal 1999
will be adversely affected if revenues do not increase
correspondingly.
The Company's operating results may also be affected
by Hawaii's generally unfavorable economic conditions
which may be the cause of the shift to lower priced
funeral services.
COST OF SALES AND SERVICES
Cost of sales and services increased to 78.8% of
revenues in 1998 compared to 73.2% in 1997. The 5.6%
increase in cost of sales is attributable to an increase
of 2.9% in the cost of labor and increases of less than
1% each in rent, insurance and other expenses.
GROSS PROFIT
Gross profit as a percentage of total revenues
decreased to 21.2% in 1998 from 26.8% in 1997. The
decrease is due to the decrease in number of services
performed relative to the increase in the cost of labor
and to fixed costs such as rent and insurance expense.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses
decreased to $710,923 in 1998 from $723,642 in 1997.
Because of a decrease in revenues these expenses
increased to 26.7% of revenues in 1998 from 25.2% in
1997. As a percent of revenues, there were no expense
category which increased more than 1% in 1998 over 1997.
It is expected that selling, general and
administrative expenses in 1999 will remain at the 1998
level.
EARNINGS OF GARDEN LIFE PLAN, LTD.
Revenues from the trust funds of the Company's
subsidiary, Garden Life Plan, Ltd. (GLP), whose earnings
are accounted for on the equity method of accounting are
included in the amount reflected as EQUITY IN EARNINGS OF
GARDEN LIFE PLAN, LTD. of $759,190 and $1,093,897 for
1998 and 1997 respectively. In 1997, GLP's earnings
included a one time credit for a change in its accounting
for investments in securities at market value.
Previously, the Trust recorded its investments at cost.
Earnings of the Trust fund of GLP are not directly
affected by decisions of the management of the Company.
Investment decisions are generally made by the money
manager of GLP's Trust funds. Fluctuations in GLP's
Trust fund income, which amounted to $2,666,047 and
$1,641,352 for the years ended May 31, 1998 and 1997
respectively are
-5-
<PAGE>
the result of fluctuations in interest rates, capital
gains and the mix of investment of the Trust.
Equity in the earnings of GLP accounted for 89.1%
and 87.8% of the Company's net income in 1998 and 1997,
respectively.
INCOME TAXES
The Company's effective income tax rate was 36.5%
of pre-tax income in 1997 and 29.5% in 1998. Note (9)
to the Company's financial statements presents a
reconciliation of the Company's effective and statutory
income tax rates.
LIQUIDITY AND CAPITAL RESOURCES
Total working capital increased by $895,447 from
$1,528,254 in 1997 to $2,389,586 in 1998. The increase
is attributable to an increase in current assets,
particularly in dividend receivable of $750,000 and a
decrease in current liabilities. Working capital ratio
was 6.9:1 at May 31, 1998 and 2.9:1 at May 31, 1997.
SECURITIES AVAILABLE FOR SALE decreased from
$906,020 in 1997 to $773,464 in 1998 as a result of the
liquidation of securities to pay the retroactive rent
and funds for working capital.
SECURITIES HELD TO MATURITY decreased from
$1,101,423 in 1997 to $842,656 in 1998 principally as a
result of the liquidation of Treasury bills for the
reasons stated above.
At the end of 1997, the Company did not have any
long-term debt. The Company expects that cash flows from
operations, its cash reserves and investments will be
adequate to meet the Company's cash requirements in the
foreseeable future.
Dividends declared for the fiscal years ended 1998
and 1997, respectively, were $.10 and $.045 per share
which amounted to $175,569 and $81,572.
Cash out flows for the acquisition of the Company's
shares were $130,289 in 1998 and $169,629 in 1997. The
Company expects that future acquisitions will be in the
range of $100,000 to $150,000 per year.
YEAR 2000 ISSUE
The Company is working to resolve the potential
impact of the year 2000 on the ability of the Company's
computerized information system to accurately process
information that may be date-sensitive. The Company
utilizes an OFF-THE-SHELF accounting program, which it
expects to be year 2000 compliant before the end of 1999.
The Company has not completed its overall assessment,
but believes that the cost of addressing this issue will
not have a material adverse impact on the Company
financial position.
-6-
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders
HOSOI GARDEN MORTUARY, INC.
We have audited the accompanying balance sheets of
HOSOI GARDEN MORTUARY, INC.
as of May 31, 1998 and 1997, and the related statements
of income, retained earnings and cash flows for the
years then ended. These financial statements are the
responsibility of the Company's management. Our
responsibility is to express an opinion on these
financial statements based on our audits. We did not
audit the financial statements of Garden Life Plan,
Ltd., (a 50% owned subsidiary accounted for by the
equity method of accounting) for its years ended May 31,
1998 and 1997, which accounts 23.3% of total assets and
89.1% and 87.8% of net income in 1998 and 1997,
respectively. Those financial statements were audited
by other auditors whose reports have been furnished to
us, and our opinion, insofar as it relates to the
amounts included in the Company's equity in the
underlying net assets and its equity in the earnings of
the subsidiary is based solely on the report of the
other auditors.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require
that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are
free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements.
An audit also includes assessing the accounting
principles used and significant estimates made by
management, as well as evaluating the overall financial
statement presentation. We believe that our audits and
the reports of other auditors provide a reasonable basis
for our opinion.
F-1
<PAGE>
In our opinion, based upon our audits and the report of
other auditors, the financial statements referred to
above present fairly, in all material respects, the
financial position of HOSOI GARDEN MORTUARY, INC. as of
May 31, 1998 and 1997, and the results of its operations
and its cash flows for the years then ended in
conformity with generally accepted accounting principles.
ENDO & COMPANY
Honolulu, Hawaii
August 5, 1998
F - 2
<PAGE>
<TABLE>
HOSOI GARDEN MORTUARY, INC.
BALANCE SHEETS
_ _ _ _ _ _ _ _ _ _ _ _
May 31, 1998 and 1997
<CAPTION>
<S> 1998 1997
A S S E T S <C> <C>
CURRENT ASSETS
Cash and cash equivalents (Notes 1 and 3) $ 498,871 $ 776,095
Securities available for sale, at market
(Notes 1 and 4) 773,464 906,020
Accounts receivable, less allowance of
$78,740 and $69,724 274,788 303,102
Income tax receivable 255,749 -
Dividend receivable (Note 2) 750,000 -
Inventories (Note 1) 149,268 136,946
Prepaid expenses and others 64,787 64,453
Deferred income taxes (Note 5) 43,588 140,242
TOTAL CURRENT ASSETS 2,810,515 2,326,858
INVESTMENTS
Garden Life Plan, Ltd. (Notes 1 and 2) 1,603,868 1,548,009
Cemetery plots 1,350 1,350
Securities held to maturity, at cost
(Notes 1 and 4) 842,656 1,101,423
2,447,874 2,650,782
PROPERTY AND EQUIPMENT, at cost, less
accumulated depreciation (Notes 1 and 6) 1,524,560 1,551,948
OTHER ASSETS 103,921 125,184
TOTAL ASSETS $ 6,886,870 $ 6,654,772
L I A B I L I T I E S
CURRENT LIABILITIES
Accounts payable (Note 7) $ 85,445 $ 352,689
Accrued liabilities (Note 8) 135,484 369,199
Income taxes payable (Note 9) - 76,716
TOTAL CURRENT LIABILITIES 420,929 798,604
DEFERRED INCOME TAXES (Note 5) 168,583 123,751
S T O C K H O L D E R S ' E Q U I T Y
CAPITAL CONTRIBUTED (Note 10)
Common stock, par value $.20 per share;
authorized 3,625,000 shares, issued 2,187,140
shares 437,428 437,428
Less 218,542 and 186,095 reacquired shares (43,928) (37,439)
TOTAL CAPITAL CONTRIBUTED 393,500 399,989
UNREALIZED GAINS ON SECURITIES AVAILABLE-FOR-SALE,
net of applicable deferred income taxes
(Notes 1 and 4) 65,994 46,998
RETAINED EARNINGS 5,919,146 5,366,712
TREASURY STOCK, 223,785 shares, at cost
(Note 10) (81,282) (81,282)
TOTAL STOCKHOLDERS' EQUITY 6,297,358 5,732,417
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 6,886,870 $ 6,654,772
<FN>
The accompanying Notes to Financial Statements are an
integral part of these statements.
</FN>
</TABLE>
F - 3
<PAGE>
<TABLE>
HOSOI GARDEN MORTUARY, INC.
STATEMENTS OF INCOME
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _
Years Ended May 31, 1998 and 1997
<CAPTION>
1998 1997
<S> <C> <C>
Revenues
Sale of urns and other items $ 742,913 $ 782,467
Funeral services 1,921,575 2,087,770
Total revenues 2,664,488 2,870,237
Cost of sales and services 2,100,550 2,100,481
Gross profit 563,938 769,756
Selling, general and administrative expenses
Salaries and wages 241,684 248,156
Profit sharing and pension fund contributions
(Note 11) 66,560 64,122
Professional services 241,057 233,437
Taxes and licenses 26,513 27,930
Advertising 37,071 38,635
Others 98,038 111,362
Total selling, general and administrative
expenses 710,923 723,642
Operating income (loss) (146,985) 46,114
Other income and (expenses)
Interest, dividends, and others (Note 13) 278,881 192,500
Interest and others (502) (1,001)
Total other income and (expenses) 278,379 191,499
Income before income taxes and equity in
earnings of Garden Life Plan, Ltd. 131,394 237,613
Income taxes (Note 9) 38,781 86,745
Income before equity in earnings of Garden
Life Plan, Ltd. 92,613 150,868
Equity in earnings of Garden Life Plan, Ltd.,
net of deferred taxes of $46,669 and $95,050
(Notes 2 and 5) 759,190 1,093,897
Net income $ 851,803 $1,244,765
Average number of shares common stock outstanding 1,753,998 1,797,907
Earnings per common share (Note 1) $ .49 $ .69
Dividends per common share $ .10 $ .045
<FN>
The accompanying Notes to Financial Statements are an
integral part of these statements.
</FN>
</TABLE>
F - 4
<PAGE>
<TABLE>
HOSOI GARDEN MORTUARY, INC.
STATEMENTS OF RETAINED EARNINGS
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _
Years Ended May 31, 1998 and 1997
<CAPTION>
1998 1997
<S> <C> <C>
Balance beginning of year, as previously reported $5,366,712 $4,487,897
Retroactive rent, net of deferred taxes of
$68,035 (Note 16) - (93,089)
Prior year's income tax assessment (Note 16) - (30,094)
Balance beginning of year, as restated 5,366,712 4,364,714
Net income for the year 851,803 1,244,765
Cash dividends paid, $.10 and $.045 per share (175,569) (81,572)
Common stock reacquired in excess of par value
(Note 10) (123,800) (161,195)
Balance end of year $ 5,919,146 $ 5,366,712
<FN>
The accompanying Notes to Financial Statements are an
integral part of this statement.
</FN>
</TABLE>
F - 5
<PAGE>
<TABLE>
HOSOI GARDEN MORTUARY, INC.
STATEMENTS OF CASH FLOWS
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _
Years Ended May 31, 1998 and 1997
<CAPTION>
1998 1997
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 851,803 $1,244,765
Adjustments to reconcile net income to
net cash and cash equivalents provided
by (used in) operating activities:
Depreciation 67,340 63,343
Loss on write-off of assets - 479
Realized gain on sale of investment
securities, net (104,819) (53,621)
Increase in allowance for doubtful
accounts 9,016 5,801
Undistributed earnings of affiliate (55,859) (1,188,947)
Cash value of life insurance policies (3,210) 5,587
Deferred income taxes 135,212 60,646
(Increase) decrease in certain assets
Accounts receivable 19,298 16,846
Income tax receivable (255,749) -
Dividend receivable (750,000) -
Inventories (12,322) (24,731)
Prepaid expenses and other (334) (2,934)
(Decrease) increase in certain liabilities
Accounts payable (67,244) 108,070
Accrued liabilities (233,715) 56,964
Income taxes payable (76,716) 41,013
Note payable - (685)
Decrease in deferred income taxes - (75,468)
NET CASH PROVIDED BY (USED IN) OPERATING
ACTIVITIES (477,299) 257,128
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (39,952) (28,816)
Redemption of life insurance policy 27,284 -
Redemption of certificate of deposit - 200,000
Dividend from Garden Life Plan, Ltd. 944,298
Proceeds from sale of investment securities 4,363,649 683,126
Increase in investment securities (3,842,237) (1,736,607)
Increase in cash value of life insurance
policies (2,811) (2,811)
NET CASH PROVIDED BY INVESTING ACTIVITIES 505,933 59,190
CASH FLOWS FROM FINANCING ACTIVITIES:
Purchase of reacquired stocks (130,289) (169,629)
Cash dividends paid (175,569) (81,572)
NET CASH USED IN FINANCING ACTIVITIES (305,858) (251,201)
NET INCREASE (DECREASE) (277,224) 65,117
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 776,095 710,978
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 498,871 $ 776,095
<FN>
The accompanying Notes to Financial Statements are an
integral part of these statements.
</FN>
</TABLE>
F - 6
<PAGE>
HOSOI GARDEN MORTUARY, INC.
NOTES TO FINANCIAL STATEMENTS
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _
Years Ended May 31, 1998 and 1997
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Line of business - The Company is engaged in one line of
business that consists principally of providing mortuary
services in the State of Hawaii on the island of Oahu.
The significant accounting policies followed by the
Company are summarized below.
Fair value of financial instruments - The carrying
amount of cash and cash equivalents approximates fair
value due to the short-term maturities of these
instruments. The fair value of current and non-current
marketable securities and long-term debt were estimated
based on quotes obtained from brokers for those or
similar instruments. The fair value for long-term
investments were estimated based on quoted market price
at year end.
Cash and cash equivalents - For purpose of the statement
of cash flows, cash equivalents includes certificates of
deposit, money market accounts and highly liquid debt
instruments with maturities of three months or less at
the date of acquisition.
Investment securities - Management determines the
appropriate classification of securities at the time of
purchase. Those investments are classified in three
categories and accounted for as follows:
. Debt securities that the company intends to hold
to maturity are classified as SECURITIES HELD TO
MATURITY and reported at cost.
. Debt and equity securities that are purchased and
held for the purpose of selling in the near term
are classified as TRADING SECURITIES and reported
at fair value, with unrealized gains and losses
included in income.
. Debt and equity securities not classified as
SECURITIES HELD TO MATURITY or TRADING SECURITIES
are classified as securities available for sale
and reported at fair value, with unrealized gains
and losses reported as a separate component of
stockholders' equity. Securities available for
sale will be used as part of the Company's asset
management strategy and may be sold in response
to changes in interest rates or the need for
capital.
F - 7
<PAGE>
HOSOI GARDEN MORTUARY, INC.
NOTES TO FINANCIAL STATEMENTS
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _
Years Ended May 31, 1998 and 1997
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
Investment in Garden Life Plan, Ltd. - The Company
accounts for its investment in Garden Life Plan, Ltd.
(a 50% owned Company) by the equity method of
accounting. The equity in earnings of Garden Life Plan,
Ltd., reflected on the statements of income, includes
the pro rata share of the earnings of Garden Life Plan,
Ltd., net of income taxes applicable to such earnings,
for its years ended May 31, 1998 and 1997.
Inventories - Inventories of caskets and urns are
stated at the lower of cost or market. Cost is
determined substantially by the first-in, first-out
method and market is based on replacement cost or
realizable value.
Property and equipment - Land, buildings and equipment
are carried at cost. Depreciation is computed using the
declining-balance and straight-line methods. Maintenance
and repairs are charged to income as incurred. Major
renewals and betterments are capitalized. Upon sale or
other disposition of assets, the cost and related
accumulated depreciation are removed from the accounts,
the proceeds applied thereto, and any resulting gain or
loss is reflected in income.
Compensated absences - Full-time employees of the
Company are entitled to paid vacations and sick days.
Unused vacation and sick leave are reflected in
accrued liabilities.
Earnings per common share - Earnings per common share
has been computed by dividing net income by the
weighted average number of common shares outstanding.
Revenue and cost recognition - Revenues from at-need
funeral services and pre-need funeral plan services are
recognized upon completion of the final funeral
ceremony. Revenues from at-need funeral services
include professional service revenues which are included
in FUNERAL SERVICES and sales of caskets, urns and other
items which are included in SALE OF URNS AND OTHER ITEMS.
Revenues from pre-need services, which accounted for
approximately 27.7% and 25.5% of funeral service
revenues in 1998 and 1997, respectively, are accounted
for in FUNERAL SERVICES since these plans are sold
inclusive of the merchandise selected.
F - 8
<PAGE>
HOSOI GARDEN MORTUARY, INC.
NOTES TO FINANCIAL STATEMENTS
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _
Years Ended May 31, 1998 and 1997
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
Cost of sales and services includes all direct cost,
including merchandise, labor and other related cost
and indirect cost such as insurance, depreciation,
supplies and indirect labor costs, related to the
performance and completion of at-need and pre-need
funeral services.
Advertising - The Company follows the policy of
charging the costs of advertising to operations as
incurred.
Income taxes - Income tax expense is based on reported
earnings before income taxes. Deferred income taxes
reflect the impact of temporary differences between
assets and liabilities recognized for financial
reporting purposes and such amounts recognized for
tax purposes. In accordance with Statement of Financial
Accounting Standards (SFAS) 109, ACCOUNTING FOR INCOME
TAXES, these deferred taxes are measured by applying
currently enacted tax laws.
Use of estimates - The preparation of financial
statements in conformity with generally accepted
accounting principles requires management to make
estimates and assumptions that affect the reported
amounts of assets and liabilities, the disclosure of
contingent assets and liabilities at the date of the
financial statements and the reported amounts of
revenues and expenses during the reporting periods.
Actual results could differ from those estimates.
(2) Garden Life Plan, Ltd.
Investment in Garden Life Plan, Ltd. (GLP) represents
the Company's 50% share in the underlying equity in the
net assets, accounted for under the equity method of
accounting for investments in common stock, of Garden
Life Plan, Ltd., a Hawaii corporation engaged in the
sales of pre-need funeral plans which are serviced
solely by the Company.
F - 9
<PAGE>
HOSOI GARDEN MORTUARY, INC.
NOTES TO FINANCIAL STATEMENTS
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _
Years Ended May 31, 1998 and 1997
(2) GARDEN LIFE PLAN, LTD. (CONTINUED)
All payments received from the sale of pre-need
funeral plans up to an amount equal to 30% of the
total price plus any sales tax or other charges are
retained by GLP as its compensation. The balance is
deposited with Hawaiian Trust Company, Limited (Trust)
to be held in trust. GLP is entitled to all earnings
from funds held in trust which earnings amounted to
$2,666,047 and $1,641,352 for the years ended May 31,
1998 and 1997, respectively. The assets of the Trust
are not included in the financial statements of the
Company nor GLP.
Effective June 1, 1996, the Trust began recording its
investments at market value. Previously, the Trust
recorded its investments at cost. The cumulative effect
of this change as of June 1, 1996 was an increase in
GLP's trust fund income receivable of $1,574,286 (net
of deferred taxes of $964,885) and is reflected in GLP's
net income of $2,377,893 as shown below.
Audited financial statements of this subsidiary as of
May 31, 1998 and 1997 showed the following summarized
financial position and results of operations.
<TABLE>
<CAPTION>
1998 1997
<S> <C> <C>
Total assets $6,981,992 $5,019,929
Total liabilities 2,274,260 1,923,917
Total stockholders' equity $4,707,732 $3,096,012
Total revenues $ 617,214 $1,184,909
Operating income (loss) $ (84,329) $ 172,255
Other income $2,666,047 $1,641,352
Cumulative effect of change
in accounting principle $ - $1,574,286
Net income $1,611,718 $2,377,893
</TABLE>
F - 10
<PAGE>
HOSOI GARDEN MORTUARY, INC.
NOTES TO FINANCIAL STATEMENTS
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _
Years Ended May 31, 1998 and 1997
(2) GARDEN LIFE PLAN, LTD. (CONTINUED)
INVESTMENT IN GARDEN LIFE PLAN, LTD. as of May 31, 1998
and 1997 is accounted for as follows:
<TABLE>
<CAPTION>
1998 1997
<S> <C> <C>
Stockholders' equity of Garden Life Plan, Ltd. $4,707,732 $3,096,012
Less: dividend declared (1,500,000) -
3,207,732 3,096,012
Equity ownership 50% 50%
1,603,866 1,548,006
Rounding 2 3
Total investment in Garden Life Plan, Ltd. $1,603,868 $1,548,009
<FN>
Cash dividend declared and subsequently paid after
May 31, 1998 by Garden Life Plan, Ltd. is recorded as
dividend receivable in the amount of $750,000 as of
May 31, 1998.
</FN>
</TABLE>
(3) CASH AND CASH EQUIVALENTS
Cash and cash equivalents consist of the following:
<TABLE>
<CAPTION>
1998 1997
<S> <C> <C>
Cash on hand $ 500 $ 500
Checking accounts 76,480 122,306
Savings accounts 316,313 354,486
Certificate of deposit - 200,000
Short-term investments 105,578 98,803
Total cash and cash equivalents $ 498,871 $ 776,095
</TABLE>
F - 11
<PAGE>
HOSOI GARDEN MORTUARY, INC.
NOTES TO FINANCIAL STATEMENTS
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _
Years Ended May 31, 1998 and 1997
(4) INVESTMENT SECURITIES
As of May 31, 1998 and 1997, the Company held
investments in the following types of securities:
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gain Loss Value
<S> <C> <C> <C> <C>
MAY 31, 1998
Available for sale
Equity securities $ 74,346 $ 41,132 $ 1,760 $ 113,718
Mutual funds 592,721 67,128 103 659,746
667,067 108,260 1,863 773,464
Held to maturity
U.S. Treasury
bills 842,656 850 5,148 838,358
Totals $1,509,723 $109,110 $ 7,011 $1,611,822
MAY 31, 1997
Available for sale
Equity securities $ 84,713 $ 36,233 $ 2,698 $ 118,248
Mutual funds 740,181 50,630 3,039 787,772
824,894 86,863 5,737 906,020
Held to maturity
U.S. Treasury
bills 1,101,423 5,103 4,226 1,102,300
Totals $1,926,317 $ 91,966 $ 9,963 $2,008,320
</TABLE>
The maturities of all debt securities held at May 31,
1998 were as follows:
<TABLE>
<CAPTION>
Available for Sale Held to Maturity
Amortized Market Amortized Market
Cost Value Cost Value
<S> <C> <C> <C> <C>
Within 1 year $ - $ - $ 753,932 $ 749,812
After 1 year
through 5 years - - 40,623 40,648
After 5 years - - 48,101 47,898
$ - $ - $ 842,656 $ 838,358
</TABLE>
F - 12
<PAGE>
HOSOI GARDEN MORTUARY, INC.
NOTES TO FINANCIAL STATEMENTS
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _
Years Ended May 31, 1998 and 1997
(4) INVESTMENT SECURITIES (CONTINUED)
During the year ended May 31, 1998, the Company sold
SECURITIES AVAILABLE FOR SALE for $4,363,649. The net
gross realized gain of $104,819 is reflected in
earnings. The cost of the securities sold was based on
cost of all the shares of each such security held at the
time of sale.
During the year ended May 31, 1997, the Company sold
SECURITIES AVAILABLE FOR SALE for $683,126. The net
gross realized gain of $53,621 is reflected in earnings.
The cost of the securities sold was based on cost of all
the shares of each such security held at the time of
sale.
The unrealized holding gains on investment securities
AVAILABLE-FOR-SALE during the years ended May 31, 1998
and 1997, and reported as a separate component of
Stockholders' Equity, are as follows:
<TABLE>
<CAPTION>
1998 1997
<S> <C> <C>
Unrealized holding gains, net of losses $ 106,396 $ 81,126
Deferred income tax on the net unrealized
holding gains (40,402) (34,128)
$ 65,994 $ 46,998
</TABLE>
(5) DEFERRED INCOME TAXES
Deferred taxes are recognized for differences between
the basis of assets and liabilities for financial
statement and income tax purposes. The deferred assets
and liabilities represent the future tax consequences of
those differences, which will be either taxable or
deductible when the assets and liabilities are recovered
or settled. The deferred tax liability results from the
recognition of unrealized gains or losses on securities
for financial statements and the recognition of gains or
losses when securities are sold for income tax purposes,
the inclusion of deferred earnings on an annuity for
financial statements and the recognition of the earnings
when received for tax purposes
F - 13
<PAGE>
HOSOI GARDEN MORTUARY, INC.
NOTES TO FINANCIAL STATEMENTS
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _
Years Ended May 31, 1998 and 1997
(5) DEFERRED INCOME TAXES (CONTINUED)
and the equity method of accounting for the investment
in subsidiary as explained under GARDEN LIFE PLAN, LTD.
above. Under the equity method the Company's share of
earnings of the subsidiary is reported for tax purposes
only when distributions of earnings are received as
dividends.
The deferred tax asset results from the use of the
reserve method in accounting for uncollectible accounts
receivable in the financial statements and the use of
the direct write off method for income tax purpose, the
accrual of the retroactive rent for financial statements
purposes and the recognition of the rent expense when
paid for income tax purposes and the accrual of vacation
and sick leave when earned for the financial statements
and the recognition for income tax purposes when paid.
(6) PROPERTY AND EQUIPMENT
Property and equipment consist of:
<TABLE>
<CAPTION>
1998 1997
<S> <C> <C>
Land $ 517,040 $ 517,040
Buildings 1,262,530 1,262,530
Land improvements 94,710 94,710
Equipment and vehicles 373,877 333,926
Total cost 2,248,157 2,208,206
Accumulated depreciation 723,597 656,258
Net property and equipment $1,524,560 $1,551,948
</TABLE>
Aggregate depreciation charged to operations are as follows:
<TABLE>
<CAPTION>
1998 1997
<S> <C> <C>
Cost of sales and services $ 64,001 $ 57,709
Selling, general and administrative expenses 3,339 5,634
$ 67,340 $ 63,343
</TABLE>
F - 14
<PAGE>
HOSOI GARDEN MORTUARY, INC.
NOTES TO FINANCIAL STATEMENTS
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _
Years Ended May 31, 1998 and 1997
(7) FUNERAL SERVICE DEPOSITS
Included in accounts payable is $33,066 of deposits made
by eleven individuals that the Company has been
collecting from since 1969 for future services or
purchase of merchandise. The payable of $33,066,
including interest of $25,041 accrued to May 31, 1998,
approximates fair value.
In an agreement with the Professional and Vocational
Licensing Division of the State of Hawaii, Department
of Commerce and Consumer Affairs (DCCA), the Company
consented to a plan to either convert these funeral
service deposits to a Garden Life Plan, Ltd.'s (GLP)
pre-need funeral plan identical to the services and/or
merchandise that the depositor originally contracted for
or refund the deposit plus accrued interest. The
agreement with the DCCA provides that the Company will
provide the funds for any difference between the cost of
a comparable GLP pre-need plan and the amount deposited
with the Company.
As of May 31, 1998, twenty-seven plans have been
converted to GLP pre-need plans. The difference between
the cost of plans converted and the amount of the
available deposit is reflected as a charge to
operations. Eleven plans remain to be converted. No
provision has been made for the cost of conversion of
the remaining eleven plans because of the uncertainty of
whether the holders of the deposits will elect to
convert to a GLP pre-need plan or elect to receive a
refund.
F - 15
<PAGE>
HOSOI GARDEN MORTUARY, INC.
NOTES TO FINANCIAL STATEMENTS
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _
Years Ended May 31, 1998 and 1997
(8) ACCRUED LIABILITIES
Accrued liabilities consist of the following:
<TABLE>
<CAPTION>
1998 1997
<S> <C> <C>
Salaries and wages $ - $ 16,492
Bonus accrued 7,000 10,000
Payroll and general excise taxes 25,876 12,222
Accrued rent payable (Note 16) - 241,686
Profit sharing and money-purchase
plan contributions (Note 12) 66,560 64,122
Vacation and sick leave 36,048 24,677
Total accrued liabilities $135,484 $ 369,199
</TABLE>
(9) INCOME TAXES
The provisions for income taxes consist of the following:
<TABLE>
<CAPTION>
1998 1997
<S> <C> <C>
Current:
Federal $ (60,760) $104,734
State (14,907) 16,415
(75,667) 121,149
Deferred:
Federal 99,715 (30,193)
State 14,733 (4,211)
114,448 (34,404)
Total $ 38,781 $ 86,745
</TABLE>
F - 16
<PAGE>
HOSOI GARDEN MORTUARY, INC.
NOTES TO FINANCIAL STATEMENTS
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _
Years Ended May 31, 1998 and 1997
(9) INCOME TAXES (CONTINUED)
A reconciliation of income taxes at the United States
statutory rate, as a percentage of pretax income, to
the effective tax rate is as follows:
<TABLE>
<CAPTION>
1998 1997
<S> <C> <C>
Federal income tax statutory rate 34.0% 34.0%
State income tax, net of tax benefit (7.7) 9.4
Others, net 3.2 ( 6.9)
Effective tax rate 29.5% 36.5%
</TABLE>
(10) REACQUIRED SHARES
CAPITAL CONTRIBUTED has been reduced for shares
reacquired after June 30, 1987. Purchases of 32,447
and 42,170 reacquired shares in 1998 and 1997,
respectively, exceeded the balance of additional
paid-in capital and a charge of $123,800 and $161,195
for 1998 and 1997, respectively, were made to
RETAINED EARNINGS for the excess of reacquired shares
in excess of their par value.
The 223,785 shares reflected as Treasury Stock as of
May 31, 1998 reflects the shares acquired before July
1, 1987.
F - 17
<PAGE>
HOSOI GARDEN MORTUARY, INC.
NOTES TO FINANCIAL STATEMENTS
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _
Years Ended May 31, 1998 and 1997
(11) RETIREMENT PLANS
The Company provides benefits to substantially all
full-time employees with a defined contribution profit
sharing plan and a money-purchase pension plan. Both
plans are non-contributory plans.
The money-purchase pension plan was adopted on June 1,
1990 and provides benefits to employees after one year
of service and upon completion of 1,000 hours of
service each year. The required contribution under
this plan is five-percent of compensation of all
employees who qualify.
Contribution to the defined contribution profit
sharing plan is discretionary up to a maximum of
fifteen-percent of compensation of eligible employees
after one year of service and upon completion of 1,000
hours of service each year.
Amounts charged against income for the retirement
benefit plans are as follows:
<TABLE>
<CAPTION>
1998 1997
<S> <C> <C>
Profit sharing $ 40,000 $ 37,000
Money-purchase 26,560 27,122
$ 66,560 $ 64,122
</TABLE>
(12) LEASE
The Company leases a portion of the land on which the
mortuary is situated from the Herman S. Hosoi Trust and
the Hosoi-Tamori-Shimonishi Trust (Trusts) which
respectively owns a 13% and 12% interest in the land.
As a group, members of the Hosoi family own
approximately 27.97% of the outstanding shares of the
Company. The lease which was for a term of five years
expired on May 31, 1994. In August 1997 the terms for
the five year option renewal period , retroactive to
June 1, 1994, were agreed upon between the Company and
the Trusts. The retroactive agreement provides for an
annual lease rent of $312,498, including general excise.
In addition, the
F - 18
<PAGE>
HOSOI GARDEN MORTUARY, INC.
NOTES TO FINANCIAL STATEMENTS
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _
Years Ended May 31, 1998 and 1997
(12) LEASE (CONTINUED)
Company is responsible for the payment of real property
taxes on the share of the property owned by the Trust.
Total rental expense was $356,469 and $356,432 in 1998
and 1997, respectively.
Future minimum lease payment under the lease at May 31,
1998 for the year ending May 31, 1999 is $312,498.
On April 24, 1992, the Company entered into an operating
lease for a hearse. The term of the lease is 60 months
which expired on August 21, 1997. The noncancellable
operating lease required monthly payments of $1,151. The
lease agreement also required that the Company pays all
costs of operating the vehicle. Lease rent expense was
$2,302 and $13,812 for 1998 and 1997.
(13) OTHER INCOME
Other income consists of the following:
<TABLE>
<CAPTION>
1998 1997
<S> <C> <C>
Interest $ 104,092 $ 74,431
Capital gains and dividends 17,589 10,964
Net gains from sale of securities 104,819 53,622
Parking 32,004 39,597
Others 20,377 13,886
Total other income $ 278,881 $ 192,500
</TABLE>
F - 19
<PAGE>
HOSOI GARDEN MORTUARY, INC.
NOTES TO FINANCIAL STATEMENTS
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _
Years Ended May 31, 1998 and 1997
(14) CASH FLOW SUPPLEMENTARY DISCLOSURE
Cash payments for interest and income taxes were
as follows:
<TABLE>
<CAPTION>
1998 1997
<S> <C> <C>
Interest $ - $ 2,559
Income taxes $ 205,629 $ 154,967
</TABLE>
The Company had a non cash transaction during the year
ended May 31, 1997 consisting of the surrender of a
life insurance policy on the life of the former
President for $64,317 which was used to purchase an
insurance policy for the Company's current President.
(15) CONCENTRATIONS OF CREDIT RISK OF FINANCIAL INSTRUMENTS
The Company's cash and cash equivalents are deposited
with five local financial institutions. For the year
ended May 31, 1998, the Company had deposits in two
financial institutions in excess of the deposit
insurance of $100,000. At May 31, 1998 and 1997, the
Company's uninsured cash balances were $284,051 and
$419,221, respectively.
The Company performs funeral services for deaths
occurring principally on the island of Oahu located in
the State of Hawaii. In the normal course of business
the Company extends unsecured credit to its customers.
(16) PRIOR YEAR ADJUSTMENTS
In October 1996, an Internal Revenue Service's
examination for the year ended May 31, 1995 was
settled. The settlement resulted in income tax
assessments of $26,333 and $3,761 by the Internal
Revenue Service and the Hawaii State Tax Collector,
respectively, which is reflected as an adjustment
to retained earnings.
F - 20
<PAGE>
HOSOI GARDEN MORTUARY, INC.
NOTES TO FINANCIAL STATEMENTS
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _
Years Ended May 31, 1998 and 1997
(16) PRIOR YEAR ADJUSTMENTS (CONTINUED)
The Company exercised its option to renew the lease on
the portion of the land owned by the Herman S. Hosoi
Trust and Hosoi-Tamori-Shimonishi Trust as discussed in
Note (12). As a result, retroactive rents for the
fiscal years ended May 31, 1995 and 1996 was reflected
as a liability as of May 31, 1997.
<TABLE>
<CAPTION>
1997
<S> <C>
Rent accrual for May 31, 1995 $ 80,562
Rent accrual for May 31, 1996 80,562
161,124
Less deferred taxes (68,035)
$ 93,089
</TABLE>
(17) SUBSEQUENT EVENT
On July 7, 1998, the Company in partnership with Woolsey
Funeral & Cemetery Services, Inc. formed a limited
liability company named Woolsey-Hosoi Mortuary Services,
LLC (Woolsey-Hosoi) to provide funeral services to
market sectors not previously serviced by the Company.
The Company's initial capital contribution to
Woolsey-Hosoi was $15,000.
F - 21
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> This schedule contains summary financial
information extracted from the balance sheets and the
statements of income filed as part of the annual report
on Form 10-KSB and is qualified in its entirety by
reference to such annual report on Form 10-KSB.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAY-31-1998
<PERIOD-END> MAY-31-1998
<CASH> 498,871
<SECURITIES> 773,464
<RECEIVABLES> 353,528
<ALLOWANCES> 78,740
<INVENTORY> 149,268
<CURRENT-ASSETS> 2,810,515
<PP&E> 1,524,560
<DEPRECIATION> 67,340
<TOTAL-ASSETS> 6,886,870
<CURRENT-LIABILITIES> 420,929
<BONDS> 0
0
0
<COMMON> 437,428
<OTHER-SE> 5,859,930
<TOTAL-LIABILITY-AND-EQUITY> 6,886,870
<SALES> 2,664,488
<TOTAL-REVENUES> 2,664,488
<CGS> 2,100,550
<TOTAL-COSTS> 2,100,550
<OTHER-EXPENSES> 710,923
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 502
<INCOME-PRETAX> 131,394
<INCOME-TAX> 38,781
<INCOME-CONTINUING> 92,613
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 851,803
<EPS-PRIMARY> .49
<EPS-DILUTED> .49
</TABLE>
