SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Post-Effective Amendment No. 11
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT
OF 1940
Amendment No. 12
FIRST PACIFIC MUTUAL FUND, INC.
(Exact Name of Registrant as Specified in Charter)
2756 Woodlawn Drive, #6-201, Honolulu, Hawaii 96822
(Address of Principal Executive Office) (Zip Code)
Registrant's Telephone Number, Including Area Code (808) 988-8088
Terrence Lee, President; First Pacific Mutual Fund, Inc.;
2756 Woodlawn Drive, #6-201, Honolulu, Hawaii 96822
(Name and address of Agent for Service)
Please send copies of all communications to: Audrey C. Talley, Esquire
Stradley, Ronon, Stevens & Young
2600 Once Commerce Square
Philadelphia, PA 19103-7098
Approximate Date of Proposed Public Offering:
Upon effectiveness of this amendment.
It is proposed that this filing will become effective
(check appropriate box)
_____ immediately upon filing pursuant to paragraph (b)
_____ on _________ pursuant to paragraph (b)
_____ 60 days after filing pursuant to paragraph (a)(1)
_____ on _________ pursuant to paragraph (a)(1)
__x__ 75 days after filing pursuant to paragraph (a)(2)
_____ on_________ pursuant to paragraph (a)(2) of Rule 485
The Registrant has registered an indefinite number of securities under this
Registration Statement pursuant to Rule 24f-2 under the Investment Company Act
of 1940. Registrant has filed a Rule 24f-2 Notice for its most recent fiscal
year on or about November 30, 1995.
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TABLE OF CONTENTS
TO FORM N-1A
The Facing Page
1- Cross-Reference Sheet
2- Part A - Prospectus
3- Part B - Statement of Additional Information
4- Part C - Other Information
5- Signature Page
Exhibits
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CROSS REFERENCE SHEET
N-1A
Item No. Caption or Location in Prospectus
Part A
1 Cover
2 Fund Expenses, Prospectus Summary
3 N/A
4 Prospectus Cover, Investment Objective and Policies, Municipal
Securities, Investment Practices
5 Officers and Directors, Manager, The Distribution Plan, Transfer
Agent, Custodian, Shareholder Services and Reports and General
Information and History
6 General Information and History, Shareholder Services and Reports,
Distributions from the Fund, Tax Status
7 Purchasing Shares of the Fund, Net Asset Value, The Distribution Plan
8 Redemption of Shares
9 N/A
Part B
10 Cover
11 Table of Contents
12 N/A
13 Cover, Investment Policies and Restrictions, Additional Investment
considerations, Description of Municipal Securities Ratings
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14 Officers and Directors
15 N/A
16 Investment Management Agreement
17 Portfolio Transactions
18 N/A
19 The Distributor
20 N/A
21 The Distributor
22 N/A
23 N/A
Part C
Items 24 through 32 have been answered in order in Part C.
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Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any state in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such state.
FIRST PACIFIC MUTUAL FUND, INC. Prospectus dated
2756 Woodlawn Drive, #6-201 May_____, 1996
Honolulu, Hawaii 96822
FIRST PACIFIC MUTUAL FUND, INC.
First Pacific Mutual Fund, Inc. (the "Corporation") is a mutual fund,
organized as a non-diversified open-end management investment company. In this
Prospectus all references to any series of the Corporation will be called the
"Fund" unless expressly noted otherwise. The Corporation offers three series of
shares each of which has different investment objectives and investment
policies. Each Fund's net asset value will fluctuate.
First Idaho Tax-Free Fund (the "Fund"). The objective of this Fund is to
provide a high level of current income exempt from federal and Idaho state
income taxes, consistent with preservation of capital. The Fund attempts to
achieve its objective by investing primarily in a varied portfolio of investment
grade municipal securities which pay interest exempt from federal and Idaho
income taxes. There can be no assurance that the Fund will meet its stated
objective.
First Pacific Management Corporation (the "Manager") manages the Fund's
portfolio of investments.
This Prospectus sets forth the information about the Fund that a
prospective investor should know before investing in the Fund. Please read and
retain this Prospectus for future reference.
---------------------
A Statement of Additional Information, dated May_____, 1996, containing
additional information about the Fund has been filed with the Securities and
Exchange Commission and is hereby incorporated by reference into this
Prospectus. A copy of the Statement of Additional Information may be obtained
without charge by calling (808) 988- 8088.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
1
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TABLE OF CONTENTS
PAGE
FUND EXPENSE TABLE............................................................3
PROSPECTUS SUMMARY............................................................4
INVESTMENT OBJECTIVE AND POLICIES.............................................5
MUNICIPAL SECURITIES..........................................................6
INVESTMENT PRACTICES..........................................................7
PURCHASING SHARES OF THE FUND.................................................8
DISTRIBUTIONS FROM THE FUND..................................................10
REDEMPTION OF SHARES.........................................................11
NET ASSET VALUE..............................................................12
TAX STATUS...................................................................13
OFFICERS AND DIRECTORS.......................................................14
INVESTMENT MANAGER...........................................................14
CUSTODIAN....................................................................15
THE DISTRIBUTION PLAN........................................................16
ALLOCATION OF BROKERAGE TRANSACTIONS.........................................16
SHAREHOLDER SERVICES AND REPORTS.............................................16
GENERAL INFORMATION AND HISTORY..............................................17
2
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FIRST IDAHO TAX-FREE FUND EXPENSES
The following table illustrates all expenses and fees that a shareholder of
the Fund will incur.
Shareholder Transaction Expenses
Maximum Sales Charge Imposed on Purchases...............................2.75%
Sales Charge Imposed on Reinvested Dividends.............................None
Contingent Deferred Sales Charge.........................................None
Redemption Fees..........................................................None
Annual Operating Expenses
(as a percentage of average net assets)
Management Expenses..................................................... .50%
12b-1 Fees.............................................................. .50 1
Other Expenses (Estimated).............................................. .15
Total Operating Expenses............................................... 1.15%
The purpose of this table is to assist the investor in understanding the
various expenses that an investor in the Fund will bear directly or indirectly.
The expenses set forth above are based on estimated amounts for the fiscal year
ending September 30, 1996. Long-term shareholders may pay more than the economic
equivalent of the maximum front-end sales charges permitted by the National
Association of Securities Dealers.
The following example illustrates the expenses that you would pay on $1,000
investment over various time periods assuming (1) a 5% annual rate of return and
(2) redemption at the end of each time period. As noted in the table above, the
Fund charges no redemption fees of any kind.
1 year 3 years
$39 $63
This example should not be considered a representation of past or future
expenses or actual performance. Actual expenses may be greater or less than
those shown.
- ----------------------------
1 The Manager and the Distributor have indicated they will waive a portion of
the Fund's Management Expenses and 12b-1 fees during the period ending
September 30, 1996. Such waivers may cease at any time.
3
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PERFORMANCE
From time to time, the Fund may advertise its total return, yield and tax
equivalent yield. The "total return" of the Fund refers to the average annual
compounded rate of return over 1, 5 and 10 year periods or for the life of the
Fund (which periods will be stated in the advertisement) that would equate an
initial amount invested at the beginning of a stated period to the ending
redeemable value of the investment. The calculation assumes the reinvestment of
all dividends and distributions, includes all recurring fees that are charged to
all shareholder accounts and a deduction of all nonrecurring charges deducted at
the end of each period. Aggregate total return may also be presented for various
periods; such return represents the cumulative change in value of an investment
in the Fund for the specific period (reflecting changes in Fund share prices and
assuming reinvestment of dividends and distributions). Total return may be
quoted with or without giving effect to any voluntary expense limitations in
effect for the Fund during the relevant period. The "yield" of the Fund is
computed by dividing the net investment income per share earned during the
period stated in the advertisement (using the average number of shares entitled
to receive dividends) by the maximum offering price per share on the last day of
the period. The calculation includes among expenses of the Fund, for the purpose
of determining net investment income, all recurring fees that are charged to all
shareholder accounts and any nonrecurring charges for the period stated. The
yield formula provides for semi-annual compounding which assumes that net
investment income is earned and reinvested at a constant rate and annualized at
the end of a six-month period. The "tax equivalent" yield of the Fund is
calculated by determining the pre-tax yield which, after being taxed at a stated
rate, would be equivalent to the stated current yield calculated as described
above. The Fund's Annual Report will contain additional performance information.
It will be available following the completion of the Fund's fiscal year, without
charge upon request to the Fund by writing to the address or calling the phone
number on the cover of this Prospectus.
PROSPECTUS SUMMARY
Offering Price,
and Minimum
Purchase The minimum initial investment is $1,000 with $100 minimum
subsequent investment; less in certain circumstances. Shares
are sold at net asset value plus any applicable sales
charge. See "PURCHASING SHARES OF THE FUND".
Investment
Objective
and Policies The Fund seeks to provide a high level of current income
exempt from federal and Idaho state income taxes, consistent
with preservation of capital. There is no assurance that
this objective will be achieved. The Fund will invest
primarily in a varied portfolio of investment grade Idaho
municipal securities. The Fund will primarily invest in
municipal securities issued by or on behalf of the State of
Idaho and its political subdivisions, agencies and
instrumentalities, certain interstate agencies and certain
territories of the United States. Municipal securities
include municipal bonds, as well as shorter term municipal
notes, municipal leases, zero coupon bonds, pre-refunded
bonds, and tax exempt commercial paper. Individual bonds
could range in maturity from three months to forty years.
The net asset value per share may increase or decrease
depending on changes in interest rates and other factors
affecting the municipal credit markets. The Fund will not
invest more than 10% in lower rated municipal securities.
See "INVESTMENT OBJECTIVES AND POLICIES".
4
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Risks and
Investment
Practices Subject to certain limitations, the Fund may lend its
portfolio securities, and enter into when-issued or delayed
delivery transactions. These investments entail certain
risks. Tax-exempt securities may be adversely affected by
local political and economic conditions and developments
within the State and the United States of America which
adversely affect issuers of such tax-exempt securities.
Adverse conditions in the State of Idaho's significant
industries could have a correspondingly adverse effect on
specific issuers within the State or on anticipated revenue
of the State. In the event of the bankruptcy of a borrower
of Fund portfolio securities, the Fund could experience
delays in recovering either the securities loaned or its
cash. To the extent that the value of the securities loaned
has increased or the value of the collateral held by the
Fund has decreased, the Fund could experience a loss. When
the time comes to receive and pay for a when-issued
security, the security may have a value greater or less than
the Fund's fixed payment obligation. See "MUNICIPAL
SECURITIES" and "INVESTMENT PRACTICES."
Investment Manager First Pacific Management Corporation is the Fund's
Investment Manager. The Investment Manager was organized in
1988. The annual management fee is .50% of average daily net
assets.
Distributions from
Fund Distributions from net investment income are declared daily
and paid monthly. Capital gains, if any, are distributed
annually. See "DISTRIBUTIONS FROM THE FUND."
Redemption Shares may be redeemed at the next determined net asset
value. The Fund may require involuntary redemption of shares
if the value of an account is less than $500. See
"REDEMPTION OF SHARES."
Transfer Agent First Pacific Recordkeeping, Inc. See "SHAREHOLDER SERVICES
AND REPORTS."
The above is qualified in its entirety by
reference to the more detailed information
included elsewhere in this Prospectus.
INVESTMENT OBJECTIVE AND POLICIES
The Fund's investment objective is to provide a high level of current
income exempt from federal and Idaho state income taxes, consistent with
preservation of capital. There can be no assurance that the Fund will achieve
its investment objective, which may be changed only with shareholder approval.
The Fund will generally invest its assets in a varied portfolio of
investment grade municipal securities which are general obligation and revenue
bonds and notes issued by or on behalf of the State of Idaho and its political
subdivisions, agencies and instrumentalities, certain interstate agencies and
certain territories of the United States,
5
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the interest on which, in the opinion of bond counsel or other counsel to the
issuer of such securities, is exempt from federal and Idaho state income taxes.
In normal circumstances up to 100%, but not less than 80%, of the Fund's net
assets will be invested in the foregoing types of municipal securities. The
foregoing is a fundamental policy and cannot be changed without shareholder
approval. In certain instances the interest on municipal securities may be an
item of tax preference includable in alternative minimum taxable income
depending upon the shareholder's tax status. The Fund may invest up to 30% of
its total assets in securities which generate interest which is treated as an
item of tax preference and subject to federal and state alternative minimum tax.
(See "TAX STATUS".) The Fund may invest up to 10% of its assets in bonds rated
BB or Ba grade municipal securities. The lowest quality municipals in which each
Fund will invest are those rated BB by S&P, Ba by Moody's or which are unrated,
but judged by the Investment Manager to be of equivalent quality. (See
"Municipal Securities-Medium and Lower Grade Municipal Securities" below.)
When the Investment Manager determines during periods of adverse market
conditions, including when Idaho tax exempt securities are unavailable, the Fund
may invest up to 20% of the value of its net assets for temporary defensive
purposes in money market instruments the interest on which may be subject to
federal, state or local income tax.
MUNICIPAL SECURITIES
General
Municipal securities are debt obligations issued by or on behalf of the
government of states, territories or possessions of the United States, the
District of Columbia and their political subdivisions, agencies and
instrumentalities, the interest on which is generally exempt from the regular
Federal income tax.
The two principal classifications of municipal securities are "general
obligation" and "revenue" bonds. "General obligation" bonds are secured by the
issuer's pledge of its faith, credit and taxing power for the payment of
principal and interest. "Revenue" bonds are usually payable only from the
revenue derived from a particular facility or class of facilities or, in some
cases, from the proceeds of a special excise tax or other specific revenue
source. Industrial development bonds are usually revenue bonds, the credit
quality of which is normally directly related to the credit standing of the
industrial user involved.
There are, in addition, a variety of hybrid and special types of municipal
securities, including variable rate securities, municipal notes and municipal
leases. Variable rate securities bear rates of interest that are adjusted
periodically according to formulae intended to minimize fluctuations in values
of the instruments. Municipal notes include tax, revenue and bond anticipation
notes of short maturity, generally less than three years, which are issued to
obtain temporary funds for various public purposes. Municipal leases are
obligations issued by state and local governments or authorities to finance the
acquisition of equipment and facilities such as fire, sanitation or police
vehicles or telecommunications equipment, buildings or other capital assets. The
Fund may invest in municipal leases without limit. Some municipal securities may
not be backed by the faith, credit and taxing power of the issuer. Zero coupon
bonds are debt obligations which do not require the periodic payment of interest
and are issued at a significant discount from face value. Pre-refunded bonds are
municipal bonds for which the issuer has previously provided money and/or
securities to pay the principal, any premium and interest on the bonds to their
maturity date or to a specific call date. A more detailed description of the
types of municipal securities in which the Fund may invest is included in the
Statement of Additional Information.
From time to time, proposals have been introduced before Congress that
would have the effect of reducing or eliminating the federal tax exemption on
income derived from municipal securities. If such a proposal were enacted, the
ability of the Fund to pay tax exempt interest dividends might be adversely
affected. The Tax Reform Act of 1986 also limits the types and amounts of
securities eligible to pay tax exempt interest, which may restrict the range of
tax exempt securities available for investment by the Fund.
6
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Investors should be aware that the net asset value of the Fund may change
as general levels of interest rates fluctuate. When interest rates increase, the
value of the Fund's portfolio securities can be expected to decline. Conversely,
when interest rates decline, the value of the Fund's portfolio securities can be
expected to increase.
Investment Grade Municipal Securities
The Fund will invest its assets primarily (up to 100% but not less than
90%), in securities which, at the time of purchase, are either rated within the
four highest grades assigned by Moody's Investors Service, Inc. ("Moody's")
(Aaa, Aa, A and Baa) or Standard & Poor's Corporation ("S&P") (AAA, AA, A and
BBB); or if unrated, are judged by the Investment Manager to be of comparable
quality to such rated securities. Bonds which are rated Baa or BBB are
considered as medium grade obligations, i.e. they are neither highly protected
nor poorly secured. Such bonds lack outstanding investment characteristics and
in fact have speculative characteristics as well. Although the Fund will invest
primarily in investment grade municipal securities, from time to time the Fund
may also invest in medium grade municipal securities and in lower grade
municipal securities. The Investment Manager attributes to medium and lower
quality obligations the same general characteristics as do rating services such
as Standard & Poor's and Moody's.
Lower Grade Municipal Securities
Municipal securities which are in lower grade categories generally offer a
higher current yield than is offered by municipal securities which are in the
higher grade categories, but they also generally involve greater price
volatility and greater credit and market risk. Lower grade municipal securities,
including those rated BB and Ba, are generally regarded as having predominantly
speculative capacity to pay interest and repay principal in accordance with
their terms. A more detailed description of the risks of investing in such
municipal securities is set forth in the Statement of Additional Information.
Certain Considerations Regarding Idaho Securities
The ability of the Fund to meet its objective is affected by the ability of
municipal issuers to meet their payment obligations. There are additional risks
associated with an investment which invests primarily in issues of one state.
Since the Fund invests primarily in obligations of issuers located in Idaho, the
marketability and market value of these obligations may be affected by certain
Idaho constitutional provisions, legislative measures, executive orders,
administrative regulations, and voter initiatives.
The Idaho economy is concentrated in construction, manufacturing,
agriculture, tourism, food products, lumber and mining. Agriculture related
business ranks as the state's number one industry with cash receipts of close to
$3 billion. Over 18,000 Idahoans are employed in food processing operations and
more than 32,000 work on farms and ranches. The service producing sector
accounts for nearly eight out of every ten nonfarm jobs in Idaho. Tourism is
growing rapidly and is Idaho's third largest industry. Idaho's hi-tech industry
has continued to grow at a rapid pace and may become the state's largest
employer.
INVESTMENT PRACTICES
"When-Issued" and "Delayed Delivery" Transactions
The Fund may purchase and sell municipal securities on a "when-issued" and
"delayed delivery" basis. No income accrues to the Fund on municipal securities
in connection with such transactions prior to the date the Fund actually takes
delivery of and makes payment for such securities. These transactions are
subject to market fluctuation; the value of the municipal securities at delivery
may be more or less than their purchase price, and yields
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generally available on municipal securities when delivery occurs may be higher
or lower than yields on the municipal securities obtained pursuant to such
transactions. Because the Fund relies on the buyer or seller, as the case may
be, to consummate the transaction, failure by the other party to complete the
transaction may result in the Fund missing the opportunity of obtaining a price
or yield considered to be advantageous. When the Fund is the buyer in such a
transaction, however, it will maintain, in a segregated account with its
custodian, cash or high-grade municipal portfolio securities having an aggregate
value equal to the amount of such purchase commitments until payment is made.
The Fund will make commitments to purchase municipal securities on such basis
only with the intention of actually acquiring these securities, but the Fund may
sell such securities prior to the settlement date if such sale is considered
advisable. To the extent the Fund engages in "when-issued" and "delayed
delivery" transactions, it will do so for the purpose of acquiring securities
for the Fund's portfolio consistent with the Fund's investment objective and
policies and not for the purpose of investment leverage.
Other Practices
The Fund may invest in municipal bonds with a maturity range as long as 40
years. The Fund will seek to invest in municipal bonds of such maturities that,
in the judgment of the Fund and the Investment Manager, will provide a high
level of current income consistent with liquidity requirements and market
conditions.
The Fund may borrow amounts up to 5% of its net assets (including reverse
repurchase agreements) in order to pay for redemptions when liquidation of
portfolio securities is considered disadvantageous or inconvenient and may
pledge up to 10% of its net assets to secure such borrowing.
It is possible that the Fund will invest more than 25% of its assets in a
particular segment (bonds financing similar projects such as utilities or
hospitals) of the municipal bond market. (An investment of more than 25% of
assets in a particular segment of the municipal bond market differs from an
investment (i.e., concentration) of more than 25% of assets in a single
industry.) In such circumstances, economic, business, political or other changes
affecting one bond might also affect other bonds in the same segment, thereby
potentially increasing market risk with respect to the bonds in such segment.
Such changes could include, but are not limited to, proposed or suggested
legislation involving the financing of projects within such segments, declining
markets or needs for such projects and shortages or price increases of materials
needed for such projects.
The Fund intends to invest its assets in a varied portfolio in order to
reduce the impact on the Fund of any loss on a particular portfolio security.
However, in order to attain economies of scale at relatively low asset size, the
Fund may invest more than 5% of its assets in at least five issuers and may
invest as much as 50% of its assets in as few as two issuers. With respect to
the remaining 50% of its assets, it may invest no more than 5% in the securities
of one issuer. Thus, the Fund's investments may be diversified among fewer
issuers than if it were a diversified fund and, if so, the Fund's net asset
value may increase or decrease more rapidly than a diversified fund if these
securities change in value.
PURCHASING SHARES OF THE FUND
The Funds' shares are continuously offered through First Pacific Securities
(the "Distributor"), 2756 Woodlawn Drive, #6-201, Honolulu, Hawaii 96822. The
Distributor is a wholly-owned subsidiary of the Fund's Investment Manager.
The minimum initial investment to open an account is $1,000, and the
minimum subsequent investment is $100. Shares in the Fund may be purchased from
the Distributor or from members of the National Association of Securities
Dealers who have sales agreements with the Distributor. If an order is placed
with a broker-dealer, the broker-dealer is responsible for promptly transmitting
the order to the Fund. Direct purchase orders may be made by submitting a check
or wiring funds and in the case of a new account, a completed application sent
to the Fund's
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transfer agent, First Pacific Recordkeeping, Inc. ("Transfer Agent") at the
following address: First Pacific Recordkeeping, Inc., 2756 Woodlawn Drive,
#6-201, Honolulu, Hawaii, 96822. For subsequent investments, the stub from the
bottom of the shareholder confirmation should be sent along with the check.
All orders for the purchase of shares are subject to acceptance or
rejection by the Corporation or by the Distributor. Direct purchase orders
received by the Transfer Agent by 4:00 p.m., Eastern Standard Time, are
confirmed at that day's net asset value plus any applicable sales charge, which
will vary with the amount purchased. Direct purchase orders received by the
Transfer Agent after 4:00 p.m. Eastern Standard Time are confirmed at the next
determined net asset value plus any applicable sales charge, next determined on
the following business day. Should an order to purchase shares be canceled
because an investor's check does not clear, the investor will be responsible for
any resulting losses or fees incurred in that transaction.
Shares are offered at net asset value plus any applicable sales charge as
follows:
<TABLE>
<CAPTION>
Concession to
As a % of Net Dealers as a
Amount of As a % of Amount % of Amount
Investment Offering Price Invested Invested
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Less than $50,000 2.75% 2.83% 2.25%
$50,000 but less
than $100,000 2.25% 2.30% 1.75%
$100,000 but less
than $250,000 1.75% 1.78% 1.25%
$250,000 but less
than $500,000 1.25% 1.27% 0.95%
$500,000 but less
than $1,000,000 1.00% 1.01% 0.80%
$1,000,000 and over 0.00% 0.00% 0.25%*
<FN>
* The Distributor may pay a concession to dealers, out of its own assets, a
fee of up to .25% of the offering price of sales of $1,000,000 or more.
However, the Distributor reserves the right to recoup any portion of the
amount paid to the dealer if the investor redeems some or all of the shares
from the Fund within thirteen months of the time of purchase.
</FN>
</TABLE>
The issuance of shares is recorded on the books of the Fund in full and
fractional shares carried to the third decimal place. To avoid additional
operating costs, and for investor convenience, share certificates will not be
issued. The Fund's shares are offered at the net asset value next computed, plus
any applicable sales charge, after the Transfer Agent receives a check and order
to purchase from an investor's securities dealer or broker or directly from the
investor. There is a sales load of up to 2.75% imposed on purchases of Fund
shares at the time of purchase.
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Investors may make systematic investments in fixed amounts automatically on
a monthly basis through the Fund's Automatic Investment Plan. Information is
available by contacting the Fund or your broker-dealer.
Fund shares may be purchased at reduced sales charges through a Letter of
Intention (LOI). Through an LOI, you may pay a lower sales charge if the dollar
amount of shares currently being purchased plus the dollar amount of any
purchases you intend to make during the next thirteen months of shares of the
Fund equals $50,000 or more. Shares acquired up to 90 days before the LOI is
filed will be counted toward completion of the LOI, and will be entitled to a
retroactive downward adjustment of the initial sales charge. You or your dealer
must inform us each time that a purchase is made under a LOI. Automatic
Investment Plans are not allowed for LOI purchases. Your first purchase must be
at least 5% of the LOI amount. If the transfer agent does not receive a
completed LOI within 20 business days after settlement of the first LOI purchase
or if the total purchases indicated on the LOI are not made within the thirteen
month period, your account will be charged with the difference between the
reduced LOI sales charge and the sales charge applicable to the purchase
actually made. Out of your initial purchase, 5% of the dollar amount specified
will be held in escrow during the thirteen month period (registered in your
name) to assure such necessary payment. If you redeem your account during this
period, the applicable Fund will withhold from the escrow amount sufficient
shares to pay any unpaid sales charge.
Fund shares may be purchased without a sales charge by employees, directors
and officers of the Fund, investment executives and other employees of dealers
that have selling agreements with the Distributor, and the spouses and children
under 21 years of age of any of the foregoing persons.
Investors will be entitled to begin receiving dividends on such shares on
the next business day after the Fund receives good funds for such order. It is
the responsibility of an investor, or an investor's broker or dealer, to
promptly forward payment to the Corporation for shares being purchased.
The Distributor from time to time pays certain additional cash incentives
of up to $100 and/or non-cash incentives such as vacations or other prizes to
broker-dealers and financial institutions in consideration of their sales of
Fund shares. In some instances, other incentives may be made available only to
selected broker-dealers and financial institutions, based on objective standards
developed by the Distributor, to the exclusion of other broker-dealers and
financial institutions. The Distributor in its discretion may from time to time,
pursuant to objective criteria established by it, pay fees to qualifying
brokers, dealers or financial intermediaries for certain services or activities
which are primarily intended to result in sales of shares of the Fund.
In-Kind Purchases
Under certain circumstances, an investor may purchase Fund shares by
delivering to the Fund securities eligible for the Fund's portfolio. All in-kind
purchases are subject to prior approval by the Manager. Prior to sending
securities to the Fund with a purchase order, investors must contact the Manager
at (808) 988-8088 for verbal approval of the in-kind purchase. Acceptance of
such securities will be at the discretion of the Manager based on its judgment
as to whether, in each case, acceptance of the securities will allow the Fund to
acquire the securities at no more than the cost of acquiring them through normal
channels. Fund shares purchased in exchange for securities are issued at the
next determined net asset value plus any applicable sales charge, after receipt
of securities and the purchase order. Securities accepted for in-kind purchases
will be valued in the same manner as portfolio securities, described below under
"NET ASSET VALUE", at the value next determined after receipt of the purchase
order. Approval by the Manager of in-kind purchases will not delay valuation of
the securities accepted for in-kind purchases or fund shares issued in exchange
for such securities. The in-kind exchange, for tax purposes, constitutes the
sale of one security and the purchase of another. The sale may involve either a
capital gain or loss to the shareholder for federal income tax purposes.
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DISTRIBUTIONS FROM THE FUND
The Fund will declare distributions on a daily basis and will pay such
distributions on a monthly basis. The Fund will also make distributions to
investors of its net realized capital gains, if any, annually. The monthly
distribution is composed of all or a portion of investment income earned by the
Fund, less the Fund's expenses. Capital gain distributions consist of the Fund's
realized gain on transactions in securities and in futures and options hedging
transactions, net of any realized capital losses, less any carryover capital
losses from previous years.
The Fund will automatically credit monthly distributions and any annual net
long-term capital gain distributions to an investor's account in additional
shares of the Fund valued at net asset value, unless an investor elects
otherwise to the Fund's transfer agent. This election must be made by writing to
the Transfer Agent. If an investor elects to change the method of distribution,
such change will be effective only with regard to distributions for which the
payment date is seven or more business days after the Transfer Agent has
received the request.
REDEMPTION OF SHARES
Written Redemption Request
Investors may redeem shares at any time by mailing a written redemption
request in proper form to the Transfer Agent. This request should be sent to
First Pacific Recordkeeping, Inc., 2756 Woodlawn Drive, #6-201, Honolulu, HI
96822. The request should indicate the amount to be redeemed, identify the
account number and be signed exactly as the shares are registered. If the amount
being redeemed is in excess of $50,000, or if proceeds are to be sent to anyone
other than the registered shareholder or address of record, signature(s) must be
guaranteed by an acceptable financial institution such as a bank, savings and
loan association, trust company, credit union, broker dealer, registered
securities association or clearing agency. From time to time, the Transfer
Agent, in its discretion, may waive any or certain of the foregoing requirements
in particular cases. Investors will receive the net asset value per share next
computed after the Transfer Agent receives the redemption request in proper
form.
Telephone Redemptions
Investors who have previously established the telephone redemption
privilege may sell shares by calling the Transfer Agent at (808) 988-8088 before
4:00 p.m. Eastern Standard Time to request a redemption. Prior to redeeming
shares by telephone the "Redemption Instructions" section of either the Account
Application or Expedited Telephone Redemption and Exchange Request Form (the
"Authorization") must be completed and on file with the Transfer Agent. The
signature(s) on the Authorization must be medallion guaranteed by an acceptable
financial institution such as a bank, savings and loan association, trust
company, credit union, broker dealer, registered securities association or
clearing agency unless the Authorization is completed at the time an account is
originally established. A redemption requested by telephone will be processed at
the net asset value next determined after receipt of the request. The proceeds
would then be made payable to the registered shareowner(s) and mailed to the
address registered on the account or wired to a bank, as requested on the
Authorization. If the amount being redeemed is $50,000 or more, see "Written
Redemption Request". In addition, this service is not available with respect to
shares purchased by check until 15 days after purchase.
By utilizing the telephone redemption service, an investor authorizes the
Transfer Agent or its agent to act upon the instructions of any person by
telephone to redeem shares for any account for which such service has been
authorized to the address of record of such account. The Fund and the Transfer
Agent will employ reasonable procedures to confirm that instructions
communicated by telephone are genuine. These procedures include requiring the
investor to provide certain personal identification at the time an account is
opened and prior to effecting each transaction request by telephone. In
addition, investors may be required to provide additional telecopied written
instructions of such transaction requests. The Fund or the Transfer Agent may be
liable for any losses due to unauthorized or fraudulent telephone instructions
if the Fund or the Transfer Agent does not employ these procedures. Neither the
Fund nor the Transfer Agent will be responsible for any loss, liability, cost or
expense for
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<PAGE>
following instructions received by telephone that it reasonably believes to be
genuine. To change the name of the commercial bank or the account designated to
receive redemption proceeds, a written request must be sent to the Fund at the
Corporation's address. Requests to change the bank or account must be signed by
each shareholder and each signature must be medallion guaranteed. This service
may be amended or terminated at any time by the Transfer Agent or the Fund.
Redemptions Through Certain Broker Dealers
Certain broker-dealers who have sales agreements with the Distributor may
allow their customers to redeem shares of the Fund purchased through that
broker-dealer by notifying the broker-dealer directly. The broker-dealer is then
responsible for promptly placing the redemption request with the Fund on the
customer's behalf. Payment will be made to the shareholder by check or wire sent
to the broker-dealer. Broker-dealers offering this service may impose a fee or
additional requirements for such redemptions.
General
Whether shares are redeemed by the Fund or sold through a securities
dealer, a check for the proceeds (net of any required tax withholding)
ordinarily will be mailed to investors or their dealer as the case may be within
five business days after a redemption request or repurchase order are received
in proper form as set forth above or such shorter period as may be required by
applicable law. Wire transfers from the Fund of redemption proceeds, in the
manner described above, ordinarily will be transmitted to the investor within
two business days. If any shares are redeemed or repurchased shortly after
purchase, the Fund will not mail the proceeds until checks received for the
purchase of shares have cleared, which may take 10 days or more. The proceeds,
of course, may be more or less than the cost of the shares.
The right of redemption by the Fund may be suspended or the date of payment
postponed for more than seven days during any period when the New York Stock
Exchange is closed (other than customary weekend and holiday closings), when an
emergency exists as defined by rules and regulations of the Securities and
Exchange Commission, or during any period when the Securities and Exchange
Commission has by order permitted such suspension or postponement.
The Fund reserves the right to redeem an investor's account where the
account is worth less than $500. The Fund will advise the shareholder of such
intention in writing at least sixty (60) days prior to effecting such
redemption, during which time the shareholder may purchase additional shares in
an amount necessary to bring the account back to $500. The Fund will not redeem
an investor's account which is worth less than $500 solely on account of a
market decline.
NET ASSET VALUE
The net asset value per share for the Fund is determined by calculating the
total value of the Fund's assets, deducting its total liabilities, and dividing
the result by the number of shares outstanding. The net asset value is computed
once daily as of 4:00 p.m. Eastern Standard Time, Monday through Friday, except
on customary business holidays, or except on any day on which no purchase or
redemption orders are received, or there is not a sufficient degree of trading
in the Fund's portfolio securities such that the Fund's net asset value per
share might be materially affected. The Fund reserves the right to calculate the
net asset value and to adjust the public offering price based thereon more
frequently than once a day if deemed desirable.
Fixed income securities are valued by using market quotations, prices
provided by market makers or estimates of market values obtained from yield data
relating to instruments or securities with similar characteristics in accordance
with procedures established in good faith by the Directors of the Fund.
Short-term securities with remaining maturities of less than 60 days are valued
at amortized cost when it is determined by First Pacific's Board
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of Directors that amortized cost is the fair value of such securities. Other
assets are valued at fair value as determined in good faith by the Directors.
TAX STATUS
Federal Taxes
The Fund intends to qualify as a regulated investment company under
Subchapter M of the Internal Revenue Code of 1986 (the "Code"). In each year the
Fund so qualifies and distributes to its shareholders substantially all of its
net investment income and net capital gains, if any, in the manner required by
the Code, it will not be required to pay federal income taxes, except to the
extent that its taxable income is not distributed.
If, at the close of each quarter of the Fund's taxable year, at least 50%
of the value of the Fund's total assets consists of obligations exempt from
federal income tax ("tax-exempt obligations"), the Fund will be qualified to pay
exempt interest dividends to its shareholders to the extent of its tax-exempt
interest income (less expenses applicable thereto). Exempt interest dividends
may be treated by shareholders as interest excludable from their gross income
for federal income tax purposes, but may be taxable distributions for state and
local tax purposes. Exempt interest dividends are included, however, in
determining what portion, if any, of a person's social security benefits will be
includable in gross income subject to federal income tax. Interest with respect
to indebtedness incurred or continued by a shareholder to purchase or carry
shares of the Fund is not deductible to the extent of the exempt interest
dividends received from the Fund.
Exempt-interest dividends attributable to interest income on certain tax
exempt obligations issued after August 7, 1986 to finance private activities are
treated as an item of tax preference for purposes of computing the alternative
minimum tax for individuals, estates and trusts which may cause a shareholder to
be subject to (or result in an increased liability under) the alternative
minimum tax. The Fund may invest up to 30% of its total assets in securities
which generate interest which is treated as an item of tax preference and
subject to federal and state alternative minimum tax.
Distributions of the Fund's taxable income and net short-term capital
gains, if any, are taxable to shareholders at ordinary income rates.
Distributions of the Fund's net long-term capital gains ("capital gains
dividends"), if any, are taxable to shareholders at the rates applicable to
long-term capital gains regardless of the length of time shares of the Fund have
been held by such shareholders. The Fund will inform shareholders of the source
and tax status of such distributions promptly after the close of each calendar
year. Distributions from the Fund will not be eligible for the 70% dividends
received deduction for corporations because none of the Funds' net income will
arise from dividends on common or preferred stock.
Redemption or resale of shares of the Fund will be a taxable transaction
for federal income tax purposes, and shareholders will recognize gain or loss in
an amount equal to the difference between their basis in their shares of the
Fund and the amount received. Assuming that such shares are held as a capital
asset, the gain or loss will be a capital gain or loss and will generally be
long-term if such shareholders have held their shares for more than one year.
Any loss on shares held for six months or less will be disallowed to the extent
of any exempt interest dividends received with respect to such shares. If such
loss is not entirely disallowed, it will be treated as a long-term capital loss
to the extent of any capital gains dividends received (or deemed to have been
received) with respect to such shares.
Distributions of the Fund's taxable income and net capital gains, if any,
will be taxable as described above, whether received in shares of the Fund or in
cash. Shareholders who receive distributions in the form of additional shares
will have a basis for federal income tax purposes in each such share equal to
the value thereof on the reinvestment date.
In order to avoid a 4% excise tax on "spillover dividends," the Fund will
be required to distribute by December 31 of each year at least 98% of its net
investment income for such year and at least 98% of its capital gain net income
(computed on the basis of the one-year period ending on October 31 of such
year), plus any required distribution
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<PAGE>
amounts that were not distributed in previous tax years. Dividends that are
declared by the Fund in December of any year and that are actually paid before
the following February to shareholders of record on a specified date in December
will be treated for tax purposes as having been distributed to, and received by,
shareholders in December.
The Fund is required, in certain circumstances, to withhold 31% of taxable
dividends and certain other payments, including redemptions, paid to
shareholders who do not furnish to the Fund their correct taxpayer
identification number (in the case of individuals, their social security number)
or who are otherwise subject to backup withholding. In addition, the Fund is
required, in certain circumstances, to withhold up to 30% of dividends paid to
nonresident aliens.
Idaho Tax Status
Shareholders of the Fund who are subject to Idaho income taxes will not be
subject to Idaho income taxes on the Fund's dividends to the extent that such
dividends qualify as either (1) exempt-interest dividends of a regulated
investment company under Section 852(b)(5) of the Internal Revenue Code of 1986,
which are derived from interest on tax-exempt obligations of the State of Idaho
or any of its political subdivisions or on obligations of the possessions or
territories of the United States (such as Puerto Rico, Virgin Islands or Guam)
that are exempt from federal income tax or (2) dividends derived from interest
or dividends on obligations of the United States and its possessions or on
obligations or securities of any authority, commission or instrumentality of the
United States included in federal adjusted gross income but exempt from state
income taxes under the laws of the United States. To the extent that the Fund's
distributions are attributable to sources not described in the preceding
sentences, such as long or short term capital gains, such distributions will not
be exempt from Idaho income tax.
Persons or entities who are not Idaho residents but who transact business
in Idaho may be subject to Idaho income taxation on dividends and distributions
made by the Fund to the extent those dividends and distributions are not tax
exempt as explained in the preceding paragraph.
Persons or entities who are not Idaho residents and who do not transact any
business in Idaho should not be subject to Idaho income taxation on dividends
and distributions made by the Fund but may be subject to other state and local
taxes.
The Fund will notify its shareholders within 45 days after the close of the
year as to the interest derived from Idaho obligations and exempt from Idaho
income tax.
The tax discussion set forth above is for general information only.
Prospective investors should consult their tax advisors regarding the federal,
state, local, foreign and other tax consequences to them of any investment in
the Fund, including the effects of any changes, including proposed changes, in
the tax laws.
OFFICERS AND DIRECTORS
The officers of the Fund manage its day-to-day operations. The Fund's
manager and its officers are subject to the supervision and control of the Board
of Directors under the laws of Maryland. A list of the directors and officers of
the Fund and a brief statement of their present positions and principal
occupations during the past five years is set forth in the "Statement of
Additional Information."
INVESTMENT MANAGER
First Pacific Management Corporation (the "Manager"), 2756 Woodlawn Drive,
#6-201, Honolulu, Hawaii 96822, was founded in 1988, organized the Fund in 1996,
and acts as its manager. The Manager manages the investment of the assets of the
Fund, provides the Fund with investment research and administers the Fund's
daily business affairs. The Manager engages in a continuous review and analysis
of state and local economic conditions and trends and governmental activities
related to the issuance of state and local debt obligations. The Manager
14
<PAGE>
provides portfolio research and services. The Manager is responsible for
evaluating the portfolio and overseeing its performance. First Pacific
Management Corporation provides or pays the cost of certain management,
supervisory and administrative services required in the normal operation of the
Corporation. This includes investment management and supervision; remuneration
of directors, officers and other personnel; rent; and such other items that
arise in daily corporate administration. Daily corporate administration includes
the coordination and monitoring of any third parties furnishing services to the
Fund, providing the necessary office space, equipment and personnel for such
Fund business and assisting in the maintenance of the Fund's federal
registration statement and other documents required to comply with federal and
state law. Not considered normal operating expenses, and therefore payable by
the Fund, are organizational expenses, custodian fees, shareholder services and
transfer agency fees, taxes, interest, governmental charges and fees, including
registration of the Fund and its shares with the Securities and Exchange
Commission and the Securities Departments of the various States, brokerage
costs, dues, and all extraordinary costs and expenses including but not limited
to legal and accounting fees incurred in anticipation of or arising out of
litigation or administrative proceedings to which the Fund, its directors or
officers may be subject or a party thereto. As compensation for the services
provided by First Pacific Management Corporation, the Fund pays the Manager a
fee at the annual rate of .50 of one percent (.50%) of its average daily net
assets.
The Manager may voluntarily assume expenses such that it will waive a
portion of its fees to the extent required to meet any applicable state expense
limitation or to maintain a certain voluntary maximum annual expense ratio for
the Fund. Any such expense limitation would reduce the Fund's expenses and
increase its yield.
Certain officers and directors of the Fund are also officers or directors,
or both, of First Pacific Management Corporation. Terrence K.H. Lee, President
of the Fund and the Manager, owns 58% of the stock of the Manager. The stock of
the Manager owned by Mr. Lee and by other stockholders who are not controlling
persons is subject to certain agreements providing for rights of first refusal
as to such stock.
All investment decisions are made by a committee and no person is primarily
responsible for making recommendations to that committee.
Management Agreement
Subject to the authority of the Board of Directors of the Corporation, the
Manager and the Corporation's officers will supervise and implement the Fund's
investment activities. The Manager implements the investment program of the Fund
and the composition of its portfolio on a day-to-day basis.
The Management Agreement between the Fund and First Pacific Management
Corporation will be submitted to the Fund's initial shareholder(s) for approval.
Each Agreement continues in effect for an initial two-year period and thereafter
for successive annual periods, so long as such continuance is specifically
approved at least annually by the Board of Directors of the Corporation or by a
vote of the majority of the outstanding voting securities of the Fund, and,
provided also that such continuance is approved by a vote of the majority of the
directors who are not parties to the Agreements or interested persons of any
such party at a meeting held in person and called specifically for the purpose
of evaluating and voting on such approval. The Agreement provides that either
party may terminate by giving the other not more than sixty days nor less than
thirty days written notice. The Agreement will terminate automatically if
assigned by either party.
CUSTODIAN
Bank of California of San Francisco, California is the custodian of the
assets of the Fund.
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<PAGE>
THE DISTRIBUTION PLAN
The Fund has adopted a distribution plan (the "Distribution Plan") pursuant
to Rule 12b-1 under the Investment Company Act of 1940 which provides that the
Fund may spend up to .50% per year of its average daily net assets in connection
with the Fund's activities as a distributor of its shares. The Board of
Directors determined that the Distribution Plan is in the best interests of the
shareholders. Pursuant to the Distribution Plan, the Fund has entered into a
Distribution Agreement with First Pacific Securities (the "Distributor"), to
serve as the distributor of the Fund's shares. Under the Distribution Plan, the
Fund will pay the Distributor for expenditures which are primarily intended to
result in the sale of the Fund's shares such as advertising, marketing and
distributing the Fund's shares and servicing Fund investors, including payments
for reimbursement of and/or compensation to brokers and dealers.
During the initial term of the Distribution Agreement the amounts payable
to the Distributor under the Distribution Plan may not fully reimburse the
Distributor for its actual distribution related expenses. The Distributor
expects to recover such excess amounts through its normal fees under the
Distribution Plan in later years. The Fund is not legally obligated to repay
such excess amounts or any interest thereon, or to continue the Distribution
Plan for such purpose. Distribution Plan payments are subject to limits under
the rules of the National Association of Securities Dealers.
The Plan provides that the Distributor must submit quarterly reports to the
Board of Directors of the Corporation setting forth all amounts paid under the
Distribution Plan and the purposes for which such expenditures were made,
together with such other information as from time to time is reasonably
requested by the Directors.
The Distribution Plan provides that it will continue in full force and
effect if ratified at the first meeting of Fund shareholders, and thereafter
from year to year so long as such continuance is specifically approved by a vote
of the Directors, and also by a vote of the disinterested Directors, cast in
person at a meeting called for the purpose of voting on the Distribution Plan.
The Distribution Plan for the Fund will be submitted to the Fund's initial
shareholder(s) for approval. The Distribution Plan may not be amended to
increase materially the amount to be spent for the services described therein
without approval by a vote of a majority of the outstanding voting shares of the
Fund, and all material amendments of the Distribution Plan must be approved by
the Directors and also by the disinterested Directors. The Distribution Plan may
be terminated at any time by a vote of a majority of the disinterested Directors
or by a vote of a majority of the outstanding voting shares of the Fund. While
the Distribution Plan is in effect, selection of the nominees for disinterested
directors is committed to the discretion of the disinterested directors.
ALLOCATION OF BROKERAGE TRANSACTIONS
In effecting purchases and sales of the Fund's portfolio securities, the
Manager and the Fund may place orders with and pay brokerage commissions to
brokers, including brokers which may be affiliated with the Fund, the Manager,
the Distributor or dealers participating in the offering of the Fund's shares.
In addition, in selecting among firms to handle a particular transaction,
subject to best price and execution, the Manager and the Fund may take into
account whether the firm has sold or is selling shares of the Fund.
SHAREHOLDER SERVICES AND REPORTS
First Pacific Recordkeeping, Inc., transfer agent for the Fund,
performs bookkeeping, data processing and administrative services related to the
maintenance of shareholder accounts. The Transfer Agent also provides personal
services to shareholders of the Fund pursuant to the Shareholder Services
Agreement. Services provided pursuant to this Agreement include telephone and
written communications with shareholders pertaining to changing dividend payment
options, account designations and addresses, transfers, purchase and redemption
transactions and general maintenance of shareholder relations. The Shareholder
Service Agreement does not duplicate services
16
<PAGE>
provided under the Transfer Agent Agreement, such as maintenance of shareholder
accounts and records, or effectuating redemptions, transfers or opening
shareholder accounts. Clerical services provided by the Transfer Agent on behalf
of the Fund under the Shareholder Services Agreement include personnel as
needed, equipment and supplies, to respond to and process the shareholder
inquiries. Bookkeeping services provided by the Transfer Agent on behalf of the
Fund pursuant to this Agreement, are generally limited to records of
transactions and expenditures originating with the Transfer Agent in connection
with providing supplemental shareholder services and maintaining shareholder
relations and communications.
When an initial investment is made in the Fund, an account will be opened
for each investor on the Fund's books and investors will receive a confirmation
of the opening of the account. Investors will receive monthly statements giving
details of all activity in their account during the month and will also receive
a statement whenever an investment or withdrawal is made in or from their
account. Information for federal income tax purposes will be provided at the end
of the year.
GENERAL INFORMATION AND HISTORY
First Pacific Mutual Fund, Inc. was incorporated in Maryland on July 8,
1988 and has a present authorized capitalization of 100,000,000 shares of $.01
par value common stock, of which, 20,000,000 shares have been allocated to the
Fund. All shares have like rights and privileges. Each full and fractional
share, when issued and outstanding, has (1) equal voting rights with respect to
matters which affect the Fund, and (2) equal dividend, distribution and
redemption rights to assets of the Fund. Shares when issued are fully paid and
nonassessable. The Corporation may create other series of stock but will not
issue any senior securities. Shareholders do not have preemptive or conversion
rights. These shares have noncumulative voting rights, which means that the
holders of more than 50% of the shares voting for the election of Directors can
elect 100% of the Directors, if they choose to do so, and in such event, the
holders of the remaining less than 50% of the shares voting will not be able to
elect any Directors. The Corporation is not required to hold a meeting of
shareholders each year. The Fund intends to hold annual meetings when it is
required to do so by the Maryland General Corporate Law or the Investment
Company Act of 1940. Shareholders have the right to call a meeting to consider
the removal of one or more of the Directors and will be assisted in Shareholder
communication in such matter.
This prospectus omits certain of the information contained in the
registration statement filed with the Securities and Exchange Commission,
Washington, D.C. These items may be inspected at the offices of the Commission
or obtained from the Commission upon payment of the fee prescribed.
Shareholder inquiries should be directed to: First Pacific Securities, 2756
Woodlawn Drive #6-201, Honolulu, Hawaii 96822.
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<PAGE>
INVESTMENT MANAGER
First Pacific Management Corporation
2756 Woodlawn Drive, #6-201
Honolulu, Hawaii 96822
DISTRIBUTOR
First Pacific Securities, Inc.
2756 Woodlawn Drive, #6-201
Honolulu, Hawaii 96822
CUSTODIAN
Bank of California
400 California Street
San Francisco, California 94104
LEGAL COUNSEL TO FUND
Stradley, Ronon, Stevens & Young, LLP
2600 One Commerce Square
Philadelphia, Pennsylvania 19103-7098
INDEPENDENT AUDITORS
Tait, Weller & Baker
Two Penn Center Plaza, Suite 700
Philadelphia, Pennsylvania 19102
TRANSFER AGENT
First Pacific Recordkeeping, Inc.
2756 Woodlawn Drive, #6-201
Honolulu, Hawaii 96822
LEGAL COUNSEL TO INVESTMENT MANAGER
Hawley Troxell Ennis & Hawley
First Interstate Center
877 West Main, Suite 1000
Boise, Idaho 83701
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<PAGE>
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This Statement of Additional Information shall not constitute an
offer to sell or the solicitation of an offer to buy nor shall there be any sale
of these securities in any state in which such offer, solicitation or sale would
be unlawful prior to registration or qualification under the securities laws of
any such state.
FIRST PACIFIC MUTUAL FUND, INC.
FIRST IDAHO TAX-FREE FUND SERIES
STATEMENT OF ADDITIONAL INFORMATION
First Pacific Mutual Fund, Inc. (the "Corporation") is a series investment
company organized as a Maryland corporation. In this Statement of Additional
Information all references to any series of the Corporation will be called the
"Fund" unless expressly noted otherwise. First Idaho Tax-Free Fund is the third
series of the corporation. The Fund is a non-diversified, open-end management
investment company whose investment goal is to provide investors with as high a
level of income exempt from federal income taxes and Idaho personal income taxes
as is consistent with prudent investment management and the preservation of
shareholders' capital. The Fund's portfolio is managed by First Pacific
Management Corporation (the "Manager").
This Statement of Additional Information is not a prospectus but should be
read in conjunction with the Fund's Prospectus dated May_____, 1996, (the
"Prospectus"). A copy of the Prospectus may be obtained without charge by
calling (808) 988-8088. .
The Prospectus and this Statement of Additional Information omit certain
information contained in the registration statement filed with the Securities
and Exchange Commission ("SEC"), Washington, D.C. This omitted information may
be obtained from the Commission upon payment of the fee prescribed, or inspected
at the Commission's office at no charge.
TABLE OF CONTENTS
Investment Polices and Restrictions...........................................2
Additional Investment Considerations..........................................4
Description of Municipal Securities Ratings..................................11
Officers and Directors.......................................................15
Custodian....................................................................16
Fund Accounting..............................................................17
Independent Auditors.........................................................17
Investment Management Agreement..............................................17
Portfolio Transactions ......................................................17
The Distributor .............................................................18
Transfer Agent ..............................................................20
Performance .................................................................21
This Statement of Additional Information is dated May_____, 1996.
1
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INVESTMENT POLICIES AND RESTRICTIONS
The investment objective of the Fund is to provide investors with as high a
level of income exempt from federal income taxes and Idaho personal income taxes
as is consistent with prudent investment management and the preservation of
shareholders' capital. The Fund will primarily invest its assets in obligations
issued by or on behalf of the State of Idaho and its political subdivisions,
agencies and certain territories of the United States, the interest on which is
exempt from federal and Idaho state income taxes in the opinion of counsel.
Fundamental investment restrictions limiting the investments of the Fund
provide that the Fund may not:
1. Purchase any securities (other than obligations issued or guaranteed by
the United States Government or by its agencies or instrumentalities), if as a
result more than 5% of the Fund's total assets (taken at current value) would
then be invested in securities of a single issuer or if as a result the Fund
would hold more than 10% of the outstanding voting securities of any single
issuer, except that with respect to 50% of the Fund's total assets up to 25% may
be invested in one issuer.
2. Invest more than 25% of its assets in a single industry. (As described
in the Prospectus, the Fund may from time to time invest more than 25% of its
assets in a particular segment of the municipal bond market; however, the Fund
will not invest more than 25% of its assets in industrial development bonds in a
single industry.)
3. Borrow money, except for temporary purposes from banks or in reverse
repurchase transactions as described in the Statement of Additional Information
and then in amounts not in excess of 5% of the total asset value of the Fund, or
mortgage, pledge or hypothecate any assets except in connection with a borrowing
and in amounts not in excess of 10% of the total asset value of the Fund.
Borrowing (including bank borrowing and reverse repurchase transactions) may not
be made for investment leverage, but only to enable the Fund to satisfy
redemption requests where liquidation of portfolio securities is considered
disadvantageous or inconvenient. In this connection, the Fund will not purchase
portfolio securities during any period that such borrowings exceed 5% of the
total asset value of the Fund. Notwithstanding this investment restriction, the
Fund may enter into "when-issued" and "delayed delivery" transactions as
described in the Prospectus.
4. Make loans, except to the extent obligations in which the Fund may
invest are considered to be loans.
5. Buy any securities "on margin." The deposit of initial or maintenance
margin in connection with municipal bond index and interest rate futures
contracts or related options transactions is not considered the purchase of a
security on margin.
6. Sell any securities "short", write, purchase or sell puts, calls or
combinations thereof, or purchase or sell interest rate or other financial
futures or index contracts or related options, except
2
<PAGE>
as described, from time to time, under the heading "Investment Practices" in the
Prospectus.
7. Act as an underwriter of securities, except to the extent the Fund may
be deemed to be an underwriter in connection with the sale of securities held in
its portfolio.
8. Purchase any illiquid assets, including any security which is restricted
as to disposition under federal securities laws or by contract ("restricted
securities" or which is not readily marketable), if as a result of such purchase
more than 15% of the Fund's total assets would be so invested.
9. Make investments for the purpose of exercising control or participation
in management.
10. Invest in securities of other investment companies, except as part of a
merger, consolidation or other acquisition and except that the Fund may
temporarily invest up to 10% of the value of its assets in Idaho tax exempt
money market funds for temporary defensive purposes, including when acceptable
investments are unavailable. Such tax exempt fund investments will be limited in
accordance with Section 12(d) of the 1940 Act.
11. Invest in equity, interests in oil, gas or other mineral exploration or
development programs.
12. Purchase or sell real estate, commodities or commodity contracts,
except to the extent the municipal securities the Fund may invest in are
considered to be interests in real estate, and except to the extent the options
and futures and index contracts the Fund may invest in are considered to be
commodities or commodities contracts.
The Fund may not change any of these investment restrictions without the
approval of the lesser of (i) more than 50% of the Fund's outstanding shares or
(ii) 67% of the Fund's shares present at a meeting at which the holders of more
than 50% of the outstanding shares are present in person or by proxy. As long as
the percentage restrictions described above are satisfied at the time of the
investment or borrowing, the Fund will be considered to have abided by those
restrictions even if, at a later time, a change in values or net assets causes
an increase or decrease in percentage beyond that allowed.
Frequent portfolio turnover is not anticipated. The Fund anticipates that
the annual portfolio turnover rate of the Fund will be less than 100%. The Fund
will not seek capital gain or appreciation but may sell securities held in its
portfolio and, as a result, realize capital gain or loss. Sales of portfolio
securities will be made for the following purposes: in order to eliminate unsafe
investments and investments not consistent with the preservation of the capital
or tax status of the Fund; honor redemption orders, meet anticipated redemption
requirements and negate gains from discount purchases; reinvest the earnings
from portfolio securities in like securities; or defray normal administrative
expenses.
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ADDITIONAL INVESTMENT CONSIDERATIONS
Municipal Securities. Municipal securities include long-term obligations,
which are often called municipal bonds, as well as shorter term municipal notes,
municipal leases, and tax exempt commercial papers. Under normal market
conditions, longer term municipal securities have greater price fluctuation than
shorter term municipal securities. The two principal classifications of
municipal bonds are "general obligation" and "revenue" or "special obligation"
bonds, which include "industrial revenue bonds." General obligation bonds are
secured by the issuer's pledge of its faith, credit, and taxing power for the
payment of principal and interest. Revenue or special obligation bonds are
payable only from the revenues derived from a particular facility or class of
facilities or, in some cases, from the proceeds of a special tax or other
specific revenue source such as from the user of the facility being financed.
Municipal leases are obligations issued by state and local governments or
authorities to finance the acquisition of equipment and facilities. They may
take the form of a lease, an installment purchase contract, a conditional sales
contract, or a participation certificate in any of the above. Some municipal
leases and participation certificates may not be considered readily marketable.
The "issuer" of municipal securities is generally deemed to be the governmental
agency, authority, instrumentality or other political subdivision, or the
nongovernmental user of a facility, the assets and revenues of which will be
used to meet the payment obligations, or the guarantee of such payment
obligations, of the municipal securities. Zero coupon bonds are debt obligations
which do not require the periodic payment of interest and are issued at a
significant discount from face value. The discount approximates the total amount
of interest the bonds will accrue and compound over the period until maturity at
a rate of interest reflecting the market rate of the security at the time of
issuance. Inverse floaters are types of derivative municipal securities whose
interest rates bear an inverse relationship to the interest rate on another
security or the value of an index. These securities usually permit the investor
to convert the floating rate to a fixed rate (normally adjusted downward), and
this optional conversion feature may provide a partial hedge against rising
interest rates if exercised at an opportune time. Pre- refunded bonds are
municipal bonds for which the issuer has previously provided money and/or
securities to pay the principal, any premium, and the interest on the bonds to
their maturity date or to a specific call date. The bonds are payable from
principal and interest on an escrow account invested in U.S. government
obligations, rather than from the usual tax base or revenue stream. As a result,
the bonds are rated AAA by the rating agencies.
The Fund may purchase floating and variable rate demand notes, which are
municipal securities normally having a stated maturity payment in excess of one
year, but which permit the holder to demand payment of principal at any time, or
at specified intervals. The issuer of such notes normally has a corresponding
right, after a given period, to prepay at its discretion, upon notice to the
note holders, the outstanding principal amount of the notes plus accrued
interest. The interest rate on a floating rate demand note is based on a known
lending rate, such as a bank's prime rate, and is adjusted automatically each
time such rate is adjusted. The interest rate on a variable rate demand note is
adjusted automatically at specified intervals. There generally is no secondary
market for these notes, although they are redeemable at face value. Each note
purchased by the Fund will meet the criteria established for the purchase of
municipal securities.
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Medium and Lower Grade Municipal Securities. Municipal securities which are
in the medium and lower grade categories generally offer a higher current yield
than that offered by municipal securities which are in the high grade
categories, but they also generally involve greater price volatility and greater
credit and market risk. Credit risk relates to the issuer's ability to make
timely payment of principal and interest when due. Market risk relates to the
changes in market value that occur as a result of variation in the level of
prevailing interest rates and yield relationships in the municipal securities
market. Generally, prices for longer maturity issues tend to fluctuate more than
for shorter maturity issues. Additionally, the Fund will seek to reduce risk
through portfolio diversification, credit analysis, and attention to current
developments and trends in the economy and financial and credit markets.
Many issuers of medium and lower grade municipal securities choose not to
have a rating assigned to their obligations by one of the rating agencies; hence
the Fund's portfolio may at times contain unrated securities. Unrated securities
may carry a greater risk and a higher yield than rated securities. Although
unrated securities are not necessarily lower quality, the market for them may
not be so broad as for rated securities. The Fund will purchase only those
unrated securities which the Investment Manager believes are comparable to rated
securities that qualify for purchase by the Fund.
Idaho Bonds. Idaho issues several types of municipal securities. These
include:
1. General Obligation bonds (all bonds for the payment of the principal and
interest of which the full faith and credit of the State or a political
subdivision are pledged and, unless otherwise indicated, including reimbursable
general obligation bonds);
2. Bonds issued under special improvements statutes;
3. Revenue bonds or bond anticipation notes (all bonds payable from
revenues, or user taxes, or any combination of both, of a public undertaking,
improvement, system or loan program); and
4. Special purpose revenue bonds (all bonds payable from rental or other
payments made or any issuer by a person pursuant to contract and security)
including anti-pollution revenue bonds. Such bonds shall only be authorized or
issued to finance manufacturing, processing or industrial enterprise facilities,
utilities serving general public, health care facilities provided to the general
public by not-for-profit corporations or low and moderate income governmental
housing programs.
All bonds other than special purpose revenue bonds may be authorized by a
majority vote of the members of each House of the State Legislature. Special
purpose revenue bonds may be authorized by two-thirds vote of the members of
each House of the State Legislature.
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There is a constitutional limitation of $2 million on the issuance of State
of Idaho general obligation bonds. Idaho may exceed this limitation only through
voter referendum and approval by members of each House of the State Legislature.
This limitation on the power of the State to incur indebtedness, applies only to
the issuance of State general obligation bonds.
Because the Portfolio will ordinarily invest 80% or more of its net assets
in Idaho obligations, it is more susceptible to factors affecting Idaho issuers
than is a comparable municipal bond fund not concentrated in the obligations of
issuers located in a single state.
The Idaho economy is concentrated in construction, manufacturing,
agriculture, tourism, food products, lumber and mining.
Agriculture related business ranks as the state's number one industry with
cash receipts of close to $3 billion. Over 18,000 Idahoans are employed in food
processing operations and more than 32,000 work on farms and ranches.
The service producing sector, another one of the fastest growing sectors of
Idaho's economy, accounts for nearly eight out of every ten nonfarm jobs in
Idaho. Categories in this sector include finance, insurance, real estate,
transportation, communications, public utilities, trade, services and
government. With the expected economic growth and influx of population from
outside of the state, these categories are forecast to continue advancement.
Idaho's economy is slowly shifting its reliance on agricultural and consumptive
natural resource-based industries, to those businesses which include jobs in the
categories listed above.
Tourism is growing rapidly and is Idaho's third largest industry. Between
1989 and 1994, annual travel expenditures have increased from $730 million to
over $1.8 billion and employment in travel related businesses has grown by
almost 50% since 1982.
Idaho's hi-tech industry has continued to grow at a rapid pace during the
last two years. The electrical and nonelectrical machinery sector may become the
state's largest manufacturing employer early next year. According to DRI/McGraw
Hill, real spending on office and computing equipment will increase by at least
14.0% annually through 1997.
With only 3% of the nation's forests, Idaho ranks among the seventh largest
producers of softwood lumber in the U.S., producing 5% of the nation's softwood
lumber. 1994's wild fires left large tracts of forest land ripe for salvage
logging which may help mitigate the efforts the U.S. Forest Service has made in
recent years to reduce the number of board feet cut from Idaho forests. The
burned timber must be cut within a very short time to reduce the risk of decay
thereby rendering it useless for commercial lumber purposes. The salvage sales
may help alleviate an otherwise tight lumber supply and employment market. In
spite of this, the Idaho Division of Financial Management (DFM) is forecasting
an employment decline of 4.3% in 1995.
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Idaho ranks in the top ten domestic producers of gold and has remained one
of the nation's largest producers of silver for nearly a century. Idaho also
ranks among the nation's leading producers of lead, zinc, antimony, phosphate
and molybdenum. The phosphate and molybdenum deposits in southeastern Idaho are
the largest in the U.S.
With the growth in world trade and the reduction of tariffs and other trade
barriers, Idaho's economy is becoming increasingly tied to the international
marketplace. Between 1987 and 1994, Idaho's total exports have grown from $750
million to $2.3 billion. The growth in merchandise or non-agricultural products
has increased from $332 million in 1987 to $1.32 billion in 1994. Based on U. S.
Department of Commerce calculations, exports directly account for nearly 44,000
Idaho jobs.
U.S. Census Bureau data shows total Idaho housing starts rose 54.1% during
the first quarter of 1994. Construction employment is correspondingly strong
during the same time period. However, the severe housing shortage, while not
alleviated, is abating somewhat and longer sales times, rising vacancy rates and
moderating rent and sale prices suggest that Idaho's housing supply is finally
catching up with the demand.
The U.S. Department of Commerce Bureau of Economic Analysis reports Idaho
nonfarm personal income grew at a healthy 8.4% in the first quarter of 1994. On
an annual basis, Idaho nonfarm employment is expected to grow 5.5% in 1994,
non-farm personal income is forecast to increase 8.7%, and housing starts are
expected to rise 11.4%.
U.S. Government Securities. Government Securities include (1) U.S. Treasury
obligations, which differ only in their interest rates, maturities and times of
issuance: U.S. Treasury bills (maturity of one year or less), U.S. Treasury
notes (maturities of one to 10 years), and U.S. Treasury bonds (generally
maturities of greater than 10 years), and separated or divided U.S. Treasury
securities (stripped by the U.S. Treasury) whose payments of principal and
interest are all backed by the full faith and credit of the United States; and
(2) obligations issued or guaranteed by U.S. Government agencies or
instrumentalities, some of which are backed by the full faith and credit of the
U.S. Treasury, e.g., direct pass-through certificates of the Government National
Mortgage Association (generally referred to as "GNMA"); some of which are
supported by the right of the issuer to borrow from the U.S. Government, e.g.,
obligations of Federal Home Loan Banks; and some of which are backed only by the
credit of the issuer itself, e.g., obligations of the Student Loan Marketing
Association.
Investments in taxable securities will be substantially in securities
issued or guaranteed by the United States Government (such as bills, notes and
bonds), its agencies, instrumentalities or authorities, highly-rated corporate
debt securities (rated AA, or better, by S&P or Aa3, or better, by
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Moody's); prime commercial paper (rated A-1 + or A-2 by S&P or P-1 or P-2 by
Moody's) and certificates of deposit of the 100 largest domestic banks in terms
of assets which are subject to regulatory supervision by the U.S. Government or
state governments and the 50 largest foreign banks in terms of assets with
branches or agencies in the United States. Investments in certificates of
deposit of foreign banks and foreign branches of U.S. banks may involve certain
risks, including different regulation, use of different accounting procedures,
political or other economic developments, exchange controls, withholding income
taxes at the source, or possible seizure or nationalization of foreign deposits.
When the Fund takes a temporary defensive position, the Fund will not be
pursuing policies designed to achieve its investment objective.
Investment Practices of the Fund.
Hedging. Hedging is a means of offsetting, or neutralizing, the price
movement of an investment by making another investment, the price of which
should tend to move in the opposite direction from that of the original
investment. If the Investment Manager deems it appropriate to hedge partially or
fully the Fund's portfolio against market value changes, the Fund may buy or
sell financial futures contracts and options thereon, such as municipal bond
index future contracts and the related put or call options contracts on such
index futures.
Both parties entering into a financial futures contract are required by the
contract marketplace to post a good faith deposit, known as "initial margin."
Thereafter, the parties must make additional deposits equal to any net losses
due to unfavorable price movements of the contract, and are credited with an
amount equal to any net gains due to favorable price movements. These additional
deposits or credits are calculated and required daily and are known as
"maintenance margin." In situations in which the Fund is required to deposit
additional maintenance margin, if the Fund has insufficient cash, it may have to
sell portfolio securities to meet such maintenance margin requirements at a time
when it may be disadvantageous to do so. When the Fund engages in the purchase
or sale of futures contracts or the sale of options thereon, it will deposit the
initial margin required for such contracts in a segregated account maintained
with the Fund's custodian, in the name of the futures commission merchant with
whom the Fund maintains the related account. Thereafter, if the Fund is required
to make maintenance margin payments with respect to the futures contracts, or
mark-to-market payments with respect to such option sale positions, the Fund
will make such payments directly to such futures commission merchant. The SEC
currently requires mutual funds to demand promptly the return of any excess
maintenance margin or mark-to-market credits in its account with futures
commission merchants. The fund will comply with SEC requirements concerning such
excess margin.
The Fund may also purchase and sell put and call options on financial
futures, including option on municipal bond index futures. An option on a
financial future gives the holder the right to receive, upon exercise of the
option, a position in the underlying futures contract. When the Fund purchases
an option on a financial futures contract, it receives in exchange for the
payment of a cash premium the right, but not the obligation, to enter into the
underlying futures contract at a price (the "strike price") determined at the
time the option was purchased, regardless of the comparative market value of
such futures position at the time the option is exercised. The holder of a call
option has the
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right to receive a long (or buyer's) position in the underlying futures and the
holder of a put option has the right to receive a short (or seller's) position
in the underlying futures.
When the Fund sells an option on a financial futures contract, it receives
a cash premium which can be used in whatever way is deemed most advantageous to
the Fund. In exchange for such premium, the Fund grants to the option purchaser
the right to receive from the Fund, at the strike price, a long position in the
underlying futures contract, in the case of a call option, or a short position
in such futures contract, in the case of a put option, even though the strike
price upon exercise of the option is less (in the case of a call option) or
greater (in the case of a put option) than the value of the futures position
received by such holder. If the value of the underlying futures position is not
such that exercise of the option would be profitable to the option holder, the
option will generally expire without being exercised. The Fund has no obligation
to return premiums paid to it whether or not the option is exercised. It will
generally be the policy of the Fund, in order to avoid the exercise of an option
sold by it, to cancel its obligation under the option by entering into a closing
purchase transaction, if available, unless it is determined to be in the Fund's
interest to deliver the underlying futures position. A closing purchase
transaction consists of the purchase by the Fund of an option having the same
term as the option sold by the Fund, and has the effect of cancelling the Fund's
position as a seller. The premium which the Fund will pay in executing a closing
purchase transaction may be higher than the premium received when the option was
sold, depending in large part upon the relative price of the underlying futures
position at the time of each transaction. The Securities and Exchange Commission
requires that the obligations of mutual funds, such as the Fund, under option
sale positions must be "covered."
The Fund does not intend to engage in transactions in futures contracts or
related options for speculative purposes but only as a hedge against changes in
the values of securities in their portfolios resulting from market conditions,
such as fluctuations in interest rates. In addition, the Fund will not enter
into futures contracts or related options (except in closing transactions) if,
immediately thereafter, the sum of the amount of its initial margin deposits and
premiums paid for its open futures and options positions, less the amount by
which any such options are "in-the-money", would exceed 5% of the Fund's total
assets (taken at current value).
Investments in financial futures and related options entail certain risks.
Among these are the possibility that the cost of hedging could have an adverse
effect on the performance of the Fund if the Investment Manager predictions as
to interest rate trends are incorrect or due to the imperfect correlation
between movement in the price of the futures contracts and the price of the
Fund's actual portfolio of municipal securities. Although the contemplated use
of these contracts should tend to minimize the risk of loss due to a decline in
the value of the securities in the Fund's portfolio, at the same time hedging
transactions tend to limit any potential gains which might result in an increase
in the value of such securities. In addition, futures and options markets may
not be liquid in all circumstances due, among other things, to daily price
movement limits which may be imposed under the rules of the contract
marketplace, which could limit the Fund's ability to enter into positions or
close out existing positions, at a favorable price. If the Fund is unable to
close out a futures position in connection with adverse market movements, the
Fund would be required to make daily payments
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on maintenance margin until such position is closed out. Also, the daily
maintenance margin requirement in futures and option sales transactions creates
greater potential financial exposure than do option purchase transactions, where
the Fund's exposure is limited to the initial cost of the option.
Income earned or deemed to be earned, if any, by the Fund from its hedging
activities will be distributed to its shareholders in taxable distributions.
The Fund's hedging activities are subject to special provisions of the
Internal Revenue Code. These provisions may, among other things, limit the use
of losses of the Fund and affect the holding period of the securities held by
the Fund and the nature of the income realized by the Fund. These provisions may
also require the Fund to mark-to-market some of the positions in its portfolio
(i.e., treat them as if they were closed out), which may cause the Fund to
recognize income without the cash to distribute such income and to incur tax at
the Fund level. The Fund and its shareholders may recognize taxable income as a
result of the Fund's hedging activities. The Fund will monitor its transactions
and may make certain tax elections in order to mitigate the effect of these
rules and prevent disqualification of the Fund as a regulated investment
company.
If the Manager deems it appropriate to seek to hedge the Fund's portfolio
against market value changes, the Fund may buy or sell financial futures
contracts and related options, such as municipal bond index futures contracts
and the related put or call options contracts on such index futures. A tax
exempt bond index fluctuates with changes in the market values of the tax exempt
bonds included in the index. An index future is an agreement pursuant to which
two parties agree to receive or deliver at settlement an amount of cash equal to
a specified dollar amount multiplied by the difference between the value of the
index at the close of the last trading day of the contract and the price at
which the future was originally written. A financial future is an agreement
between two parties to buy and sell a security for a set price on a future date.
An index future has similar characteristics to a financial future except that
settlement is made through delivery of cash rather than the underlying
securities. An example is the Long-Term Municipal Bond futures contract traded
on the Chicago Board of Trade. It is based on the Bond Buyer's Municipal Bond
Index, which represents an adjusted average price of the forty most recent
long-term municipal issues of $50 million or more ($75 million in the instance
of housing issues) rated A or better by either Moody's Investor Service, Inc. or
Standard & Poor's Corporation, maturing in no less than nineteen years, having a
first call in no less than seven nor more than sixteen years, and callable at
par.
"When-issued" and "delayed delivery" transactions. The Fund may engage in
"when-issued" and "delayed delivery" transactions and utilize futures contracts
and options thereon for hedging purposes. The SEC generally requires that when
mutual funds, such as the Fund, effect transactions of the foregoing nature,
such funds must either segregate cash or readily marketable portfolio securities
with its custodian in an amount of its obligations under the foregoing
transactions, or cover such obligations by maintaining positions in portfolio
securities, futures contracts or options that would serve to satisfy or offset
the risk of such obligations. When effecting transactions of the foregoing
nature, the Fund will comply with such segregation or cover requirements.
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Reverse Repurchase Agreements. The Fund may enter into reverse repurchase
agreements with selected commercial banks or broker-dealers, under which the
Fund sells securities and agrees to repurchase them at an agreed upon time and
at an agreed upon price. The difference between the amount the Fund receives for
the securities and the amount it pays on repurchase is deemed to be a payment of
interest by the Fund. The Fund will maintain in a segregated account having an
aggregate value with its custodian, cash, treasury bills, or other U.S.
Government securities having an aggregate value equal to the amount of such
commitment to repurchase, including accrued interest, until payment is made.
Reverse repurchase agreements are treated as a borrowing by the Fund and will be
used by it as a source of funds on a short-term basis, in an amount not
exceeding 5% of the net assets of the Fund (which 5% includes bank borrowings)
at the time of entering into any such agreement. The Fund will enter into
reverse repurchase agreements only with commercial banks whose deposits are
insured by the Federal Deposit Insurance Corporation and whose assets exceed
$500 million or broker-dealers who are registered with the SEC. In determining
whether to enter into a reverse repurchase agreement with a bank or
broker-dealer, the Fund will take into account the credit worthiness of such
party and will monitor such credit worthiness on an ongoing basis.
DESCRIPTION OF MUNICIPAL SECURITIES RATINGS
Standard & Poor's Corporation - A brief description of the applicable
Standard & Poor's Corporation ("S&P") rating symbols and their meanings (as
published by Standard & Poor's Corporation) follows:
An S&P corporate or municipal debt rating is a current assessment of the
credit worthiness of an obligor with respect to a specific obligation. This
assessment may take into consideration obligors such as guarantors, insurers, or
lessees.
The debt rating is not a recommendation to purchase, sell, or hold a
security, inasmuch as it does not comment as to market price or suitability for
a particular investor.
The ratings are based on current information furnished by the issuer or
obtained by S&P from other sources it considers reliable. S&P does not perform
an audit in connection with any rating and may, on occasion, rely on audited
financial information. The ratings may be changed, suspended, or withdrawn as a
result of changes in, or unavailability of, such information, or for other
circumstances.
The ratings are based, in varying degrees, on the following considerations:
1. Likelihood of default-capacity and willingness of the obligor as to
the timely payment of interest and repayment of principal in
accordance with the terms of the obligation;
2. Nature of and provision of the obligation;
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3. Protection afforded by, and relative position of, the obligation in
the event of bankruptcy, reorganization, or other arrangement under
the laws of bankruptcy and other laws affecting creditors' rights.
1. Municipal bonds.
AAA Debt rated "AAA" has the highest rating assigned by S&P. Capacity to
pay interest and repay principal is extremely strong.
AA Debt rated "AA" has a very strong capacity to pay interest and repay
principal and differs from the highest rated issued only in small
degree.
A Debt rated "A" has a strong capacity to pay interest and repay
principal although it is somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than debt
in higher rated categories.
BBB Debt rated "BBB" is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate
protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay
interest and repay principal for debt in this category than in higher
rated categories.
BB
B
CCC
CC
Debt rated "BB", "B", "CCC", or "CC" is regarded, on balance, as
predominantly speculative with respect to capacity to pay interest and
repay principal in accordance with the terms of the obligation. "BB"
indicates the lowest degree of speculation and "CC" the highest degree
of speculation. While such debt will likely have some quality and
protective characteristics, those are outweighed by large quantities
or major risk exposures to adverse conditions.
Plus (+) or Minus(-): The ratings from "AA" to "B" may be
modified by the addition of a plus or minus sign to show relative
standing within the major rating categories.
Provisional Ratings: The letter "p" indicates that the rating is
provisional. A provisional rating assumes the successful
completion of the project being financed by the debt being rated
and indicates that payment of debt service requirements is
largely or entirely dependent upon the successful and timely
completion of the project. This rating, however, while addressing
credit quality subsequent to completion of the project, makes no
comment on the likelihood of, or the risk of default upon failure
of, such completion. The investor should exercise judgment with
respect to such likelihood and risk.
L: The letter "L" indicates that the rating pertains to the
principal amount of those bonds where the underlying deposit
collateral is fully insured by the Federal Savings & Loan
Insurance Corp. or the Federal Deposit Insurance Corp.
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+ Continuance of the rating is contingent upon S&P's receipt of
closing documentation confirming investments and cash flow.
* Continuance of the rating is contingent upon S&P's receipt of
an executed copy of the escrow agreement.
NR Indicates no rating has been requested, that there is insufficient
information on which to base a rating, or that S&P does not rate a
particular type of obligation as a matter of policy.
2. Short-term tax exempt notes
S&P's tax exempt note ratings are generally given to such notes that
mature in three years or less. The three rating categories are as follows:
SP-1 Very strong or strong capacity to pay principal and interest.
These issues determined to possess overwhelming safety
characteristics will be given plus (+) designation.
SP-2 Satisfactory capacity to pay principal and interest.
SP-3 Speculative capacity to pay principal and interest.
3. Tax-exempt Commercial Paper
An S&P commercial paper rating is a current assessment of the likelihood of
timely payment of debt having an original maturity of no more than 365 days.
Ratings are graded into four categories, ranging from "A" for the highest
quality obligations to "D" for the lowest. The two categories the Fund will
invest in are as follows:
A Issues assigned this highest rating are regarded as having the
greatest capacity for timely payment. Issues in this category are
further refined with the designation 1, 2 and 3 to indicate the
relative degree of safety. These issues determined to possess
overwhelming safety characteristics are denoted with a plus (+) sign
designation.
A-1 This designation indicates that the degree of safety regarding timely
payment is very strong.
A-2 Capacity for timely payment on issues with this designation is strong.
However, the relative degree of safety is not as overwhelming as for
issues designated "A-1".
A-3 Issues carrying this designation have a satisfactory capacity for
timely payment. They are, however, somewhat more vulnerable to the
adverse effects of changes in circumstances than obligations carrying
the higher designations.
B Issues rated "B" are regarded as having only an adequate capacity for
timely payment. However, such capacity may be damaged by changing
conditions or short-term adversities.
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Moody's Investors Service, Inc. - A brief description of the
applicable Moody's Investors Service, Inc. ("Moody's") rating symbols and their
meanings (as published by Moody's) follows:
1. Municipal bonds
Aaa Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally
referred as "gilt edge". Interest payments are protected by a large or
by an exceptionally stable margin and principal is secure. While the
various protective elements are likely to change, such changes as can
be visualized are most unlikely to impair the fundamentally strong
position of such issues.
Aa Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are
generally known as high grade bonds. They are rated lower than the
best bonds because margins of protection may not be as large as in Aaa
securities or fluctuation of protective elements may be of greater
amplitude or there may be other elements present which make the long
term risks appear somewhat larger than in Aaa securities.
A Bonds which are rated A possess many favorable investment attributes
and are to be considered as upper medium grade obligations. Factors
giving security to principal and interest are considered adequate but
elements may be present which suggest a susceptibility to impairment
sometime in the future.
Baa Bonds which are rated Baa are considered as medium grade obligations,
i.e. they are neither highly protected nor poorly secured. Interest
payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be
characteristically unreliable over any great length of time. Such
bonds lack outstanding investment characteristics and in fact have
speculative characteristics as well.
Ba Bonds which are rated Ba are judged to have speculative elements;
their future cannot be considered as well assured. Often the
protection of interest and principal payments may be very moderate and
thereby not well safeguarded during both good and bad times over the
future. Uncertainty of position characterizes bonds in this class.
B Bonds which are rated B generally lack characteristics of the
desirable investment. Assurance of interest and principal payments or
of maintenance of other terms of the contract over any long period of
time may be small.
Con.(...) Bonds for which the security depends upon the completion of some act
or the fulfillment of some condition are rated conditionally. These
are bonds secured
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by (a) earnings of projects under construction, (b) earnings of
projects unseasoned in operating experience, (c) rentals which begin
when facilities are completed, or (d) payments to which some other
limiting condition attaches. Parenthetical rating denotes probable
credit stature upon completion of construction or elimination of basis
of condition.
Note: Those bonds in the Aa, A, Baa, Ba and B groups which Moody's
believes possess the strongest investment attributes are designated by the
symbols Aa 1, A 1, Baa 1, Ba 1, and B 1.
2. Short-term tax exempt notes
Short-term Notes. The four ratings of Moody's for short-term notes are
MIG 1, MIG 2, MIG 3 and MIG 4; MIG 1 denotes "best quality, enjoying strong
protection from established cash flows"; MIG 2 denotes "high quality" with
"ample margins of protection"; MIG 3 notes are of "favorable quality....but
lacking the undeniable strength of the preceding grades"; MIG 4 notes are of
"adequate quality, carrying specific risk but having protection...and not
distinctly or predominantly speculative."
3. Tax exempt commercial paper
Moody's commercial paper ratings are opinions of the ability of
issuers to repay punctually promissory obligations not having an original
maturity in excess of nine months. Moody's employs the following three
designations, all judged to be investment grade, to indicate the relative
repayment capacity of rated issuers:
Issuers rated Prime-1 (or related supporting institutions) have a
superior capacity for repayment of short-term promissory obligations.
Issuers rated Prime-2 (or related supporting institutions) have a
superior capacity for repayment of short-term promissory obligations.
Issuers rated Prime-3 (or related supporting institutions) have an
acceptable capacity for repayment of short-term promissory
obligations.
Issuers rated Not Prime do not fall within any of the Prime rating
categories.
OFFICERS AND DIRECTORS
The officers and directors of First Pacific Mutual Fund, Inc., their
principal occupations for the last five years and their affiliation, if any,
with the Manager, or the Fund's Distributor, are shown below. Interested persons
of the Fund as defined in the Investment Company Act of 1940 are indicated by an
asterisk in the table below.
15
<PAGE>
<TABLE>
<CAPTION>
Name and Position & Office Principal Occupation During
Address With the Fund the Past Five Years
- ---------------------------------------------------------------------------------------------------
<S> <C> <C>
*Terrence K.H. Lee Director, President President, First Pacific Management Corp.;
1441 Victoria St #901 President, First Pacific Securities, Inc.
Honolulu, HI 96822
Samuel L. Chesser Director Market Maker and Member Pacific Stock
21 Seacape Drive Exchange: Formerly President, First
Muir Beach, CA 94965 Pacific Securities, Inc.; Vice President,
First Pacific Management Corporation.
Clayton W.H. Chow Director Sr. Account Executive, Federal Express
896 Puuikena Dr.
Honolulu, HI 96821
Lynden Keala Director Market Analyst, Vanier Graphics, Inc.
47-532 Hui Iwa St.
Kaneohe, HI 96744
Stuart S. Marlowe Director President, Record Service, Inc.
274 Poipu Drive
Honolulu, HI 96825
*Jean M. Chun Secretary Corporate Secretary, First Pacific
217 Prospect St. B-14 Management Corporation; Corporate
Honolulu, HI 96813 Secretary, First Pacific Securities, Inc.
*Charlotte A. Meyer Treasurer Corporate Treasurer, First Pacific
PO Box 2834 Management Corporation; Corporate
Kamuela, HI 96743 Treasurer, First Pacific Securities, Inc.
</TABLE>
The compensation of the officers who are interested persons (as defined in
the Investment Company Act of 1940) of the Manager is paid by the Manager. The
Fund pays the compensation of all other officers of the Fund who are not
interested persons for services or reimbursed for expenses incurred in
connection with attending meetings of the Board of Directors. The directors of
the Fund are not compensated for services or reimbursed for expenses incurred in
connection with attending meetings of the Board of Directors. The directors and
officers as a group own less than 1% of the Fund's shares.
CUSTODIAN
Bank of California, of San Francisco, California, is the custodian of the
Fund and has custody of all securities and cash. The custodian, among other
things, attends to the collection of principal and income, and payment for the
collection of proceeds of securities bought and sold by the Fund.
16
<PAGE>
FUND ACCOUNTING
First Pacific Recordkeeping, Inc., a wholly-owned subsidiary of First
Pacific Management, Corporation provides fund accounting for the Fund. The
annual accounting fee schedule for the Fund is as follows:
$21,500 Minimum to $ 20 Million of Average Net Assets
.000325 On Next $ 30 Million of Average Net Assets
.00026 On Next $ 50 Million of Average Net Assets
.000195 On Next $100 Million of Average Net Assets
.0001625 Over $200 Million of Average Net Assets
INDEPENDENT AUDITORS
The independent auditors for the Fund are Tait, Weller & Baker,
Philadelphia, Pennsylvania.
INVESTMENT MANAGEMENT AGREEMENT
The investment management agreement between the Manager and the Fund
provides that the Manager will provide portfolio management services to the Fund
including the selection of securities for the Fund to purchase, hold or sell,
supply investment research to the Fund and select brokers through whom the
Fund's portfolio transactions are executed. The Manager also administers the
business affairs of the Fund, furnishes offices, necessary facilities and
equipment, provides administrative services, and permits its officers and
employees to serve without compensation as directors and officers of the Fund if
duly elected to such positions.
The agreement provides that the Manager shall not be liable for any error
of judgment or of law, or for any loss suffered by the Fund in connection with
the matters to which the agreement relates, except a loss resulting from willful
misfeasance, bad faith or gross negligence on the part of the Manager in the
performance of its obligations and duties, or by reason of its reckless
disregard of its obligations and duties under the agreement.
The Manager's activities are subject to the review and supervision of the
Fund's Board of Directors, to whom the Manager renders periodic reports of the
Fund's investment activities.
PORTFOLIO TRANSACTIONS
The Manager will place orders for portfolio transactions for the Fund with
broker-dealer firms giving consideration to the quality, quantity and nature of
each firm's professional services.
17
<PAGE>
These services include execution, clearance procedures, wire service quotations
and statistical and other research information provided to the Fund and the
Manager, including quotations necessary to determine the value of the Fund's net
assets. Any research benefits derived are available for all clients of the
Manager. Since statistical and other research information is only supplementary
to the research efforts of the Manager and still must be analyzed and reviewed
by its staff, the receipt of research information is not expected to materially
reduce its expenses. In selecting among the firms believed to meet the criteria
for handling a particular transaction, the Fund or the Manager may (subject
always to best price and execution) take into consideration that certain firms
have sold or are selling shares of the Fund, and/or that certain firms provide
market, statistical or other research information to the Fund. Securities may be
acquired through firms that are affiliated with the Fund, its Manager, or its
Distributor and other principal underwriters acting as agent, and not as
principal. Transactions will only be placed with affiliated brokers if the price
to be paid by the Fund is at least as good as the price the Fund would pay to
acquire the security from other unaffiliated parties.
If it is believed to be in the best interests of the Fund the Manager may
place portfolio transactions with unaffiliated brokers or dealers who provide
the types of service (other than sales) described above, even if it means the
Fund will have to pay a higher commission (or, if the dealer's profit is part of
the cost of the security, will have to pay a higher price for the security) than
would be the case if no weight were given to the broker's or dealer's furnishing
of those services. This will be done, however, only if, in the opinion of the
Manager, the amount of additional commission or increased cost is reasonable in
relation to the value of the services.
If purchases or sales of securities of the Fund and of one or more other
clients advised by the Manager are considered at or about the same time,
transactions in such securities will be allocated among the several clients in a
manner deemed equitable to all by the Manager, taking into account the
respective sizes of the funds and the amount of securities to be purchased or
sold. Although it is possible that in some cases this procedure could have a
detrimental effect on the price or volume of the security as far as the Fund is
concerned, it is also possible that the ability to participate in volume
transactions and to negotiate lower brokerage commissions generally will be
beneficial to the Fund.
The Directors have adopted certain policies incorporating the standards of
Rule 17e-1 issued by the SEC under the Investment Company Act of 1940 which
requires that the commission paid to the Distributor and other affiliates of the
Fund must be reasonable and fair compared to the commissions, fees or other
remuneration received or to be received by other brokers in connection with
comparable transactions involving similar securities during a comparable period
of time. The rule and procedures also contain review requirements and require
First Pacific Securities, Inc. to furnish reports to the Directors and to
maintain records in connection with such reviews.
THE DISTRIBUTOR
Shares of the Fund are offered on a continuous basis through First Pacific
Securities, Inc.
18
<PAGE>
(the "Distributor"), a wholly-owned subsidiary of the Manager. Pursuant to a
distribution agreement, First Pacific Securities, Inc. will purchase shares of
the Fund for resale to the public, either directly or through securities dealers
and brokers, and is obligated to purchase only those shares for which it has
received purchase orders. A discussion of how to purchase and redeem the Fund's
shares and how the Fund's shares are priced is contained in the Prospectus.
Determining Offering Price
Shares are offered at net asset value plus any applicable sales charge as
follows:
<TABLE>
<CAPTION>
Concession to
As a % of Net Dealers as a
Amount of As a % of Amount % of Amount
Investment Offering Price Invested Invested
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Less than $50,000 2.75% 2.83% 2.25%
$50,000 but less
than $100,000 2.25% 2.30% 1.75%
$100,000 but less
than $250,000 1.75% 1.78% 1.25%
$250,000 but
than $500,000 1.25% 1.27% 0.95%
$500,000 but less
than $1,000,000 1.00% 1.01% 0.80%
$1,000,000 and over 0.00% 0.00% 0.25%*
<FN>
* The Distributor may pay a concession to dealers, out of its own assets, a
fee of up to .25% of the offering price of sales of $1,000,000 or more.
However, the Distributor reserves the right to recoup any portion of the
amount paid to the dealer if the investor redeems some or all of the shares
from the Fund within thirteen months of the time of purchase.
</FN>
</TABLE>
Under the Distribution Agreement between the Fund and the Distributor, the
Distributor pays the expenses for distribution of Fund shares, including
preparation and distribution of literature relating to the Fund and its
investment performance and advertising and public relations material. The Fund
bears the expenses of registration of its shares with the SEC and of sending
prospectuses to existing shareholders. The Distributor pays the cost of
qualifying and maintaining qualification of the shares for sale under the
securities laws of the various states and permits its officers and employees to
serve without compensation as directors and officers of the Fund if duly elected
to such positions.
19
<PAGE>
Under the Distribution Plan, the Fund will pay the distributor for
expenditures which are primarily intended to result in the sale of the Fund's
shares such as advertising, marketing and distributing the Fund's shares and
servicing Fund investors, including payments for reimbursement of and/or
compensation to brokers, dealers, certain financial institutions, (which may
include banks) and other intermediaries for administrative and accounting
services for Fund investors who are also their clients. Such third party
institutions will receive fees based on the average daily value of the Fund's
shares owned by investors for whom the institution performs administrative and
accounting services. The Glass-Steagall Act and other applicable laws, among
other things, generally prohibit federally chartered or supervised banks from
engaging in the business of underwriting, selling or distributing securities.
Accordingly, the Fund will engage banks only to perform administrative and
investor servicing functions. The Funds' management believes that such laws
should not preclude a bank from performing these services. However, if a bank
were prohibited by law from so acting, its investor clients would be permitted
to remain Fund investors and alternative means for continuing the servicing of
such investors would be sought.
The Distribution Agreement continues in effect from year to year if
specifically approved at least annually by the shareholders or directors of the
Fund and by the Fund's disinterested directors in compliance with the Investment
Company Act of 1940. The agreement may be terminated without penalty upon thirty
days written notice by either party and will automatically terminate if it is
assigned.
TRANSFER AGENT
First Pacific Recordkeeping Inc., Honolulu, Hawaii, a wholly-owned
subsidiary of First Pacific Management, Corporation, serves as transfer agent,
dividend disbursing agent and redemption agent pursuant to a Transfer and
Dividend Disbursing Agency Agreement approved by the Board of Directors of First
Pacific Mutual Fund, Inc. at a meeting held for such purpose on January 29,
1996. The agreement is subject to annual renewal by the Board of Directors,
including the directors who are not interested persons of the Fund or of the
Transfer Agent. Pursuant to the agreement, the Transfer Agent will receive a fee
calculated at an annual rate of $16.50 per shareholder account and will be
reimbursed out-of-pocket expenses incurred on the Fund's behalf.
The Transfer Agent acts as paying agent for all Fund expenses and provides
all the necessary facilities, equipment and personnel to perform the usual or
ordinary services of Transfer and Dividend Paying Agent, including: receiving
and processing orders and payments for purchases of shares, opening stockholder
accounts, preparing annual stockholder meeting lists, mailing proxy material,
receiving and tabulating proxies, mailing stockholder reports and prospectuses,
withholding certain taxes on nonresident alien accounts, disbursing income
dividends and capital distributions, preparing and filing U.S. Treasury
Department Form 1099 (or equivalent) for all stockholders, preparing and mailing
confirmation forms to stockholders for all purposes and redemption of the Fund's
shares and all other confirmable transactions in stockholders' accounts,
recording reinvestment of dividends and distributions of the Fund's shares and
causing redemption of shares for and disbursements of proceeds to withdrawal
plan stockholders.
20
<PAGE>
PERFORMANCE
Current yield, tax equivalent yield and total return quotations used by the
Fund are based on standardized methods of computing performance mandated by SEC
rules. An explanation of those and other methods used by the Portfolios to
compute or express performance follows:
As indicated below, current yield is determined by dividing the net
investment income per share earned during the period by the maximum offering
price per share on the last day of the period and annualizing the result.
Expenses accrued for the period include any fees charged to all shareholders
during the 30-day base period. According to the new SEC formula:
Yield = 2 [(a-b + 1)6-1]
----------------
cd
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.
d= the maximum offering price per share on the last day of the period.
Tax equivalent yield is calculated by dividing that portion of the current
yield (calculated as described above) which is tax exempt by 1 minus a stated
tax rate and adding the quotient to that portion of the yield of the Fund that
is not tax exempt.
As the following formula indicates, the average annual total return is
determined by multiplying a hypothetical initial purchase order of $1,000 by the
average annual compound rate of return (including capital
appreciation/depreciation and dividends and distributions paid and reinvested)
for the stated period less any fees charged to all shareholder accounts and
annualizing the result. The calculation assumes that all dividends and
distributions are reinvested at the public offering price on the reinvestment
dates during the period. The quotation assumes the account was completely
redeemed at the end of each period and the deduction of all applicable charges
and fees.
According to the new SEC formula:
P(1 + T)n = ERV
where
P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical $1,000 payment made at
the beginning of the 1, 5 or 10 year periods at the end of the 1, 5 or
10 year periods (or fractional portion thereof).
21
<PAGE>
Comparisons and Advertisements
To help investors better evaluate how an investment in the Fund might
satisfy their investment objective, advertisements regarding the Fund may
discuss yield, tax equivalent yield or total return for the Fund as reported by
various financial publications and/or compare yield, tax equivalent yield or
total return to yield, tax equivalent yield or total return as reported by other
investments, indices, and averages.
The Shearson Lehman Hutton Municipal Bond Index measures yield, price, and
total return for the municipal bond market. The Bond Buyer 20 Bond Index is an
index of municipal bond yields based on yields of 20 general obligation bonds
maturing in 20 years. The Bond Buyer 40 Bond Index is an index of municipal bond
yields of 40 general obligation bonds maturing in 40 years.
Financial Statements
The Financial Statements of the Fund will be audited at least annually by
Tait Weller & Baker, Independent Auditors.
22
<PAGE>
PART C
OTHER INFORMATION
Item 24. STATEMENTS AND EXHIBITS.
The following are the financial statements and exhibits filed as a part of
this registration statement:
(a) Financial Statements:
Not applicable.
(b) Exhibits:
(1) Registrant's Articles of Incorporation.* (Filed with Form N-1A
registration.) Registrant's Articles Supplementary
(2) Registrant's By-Laws.* (Filed with Form N-1A registration.)
(3) Not applicable, because there is no voting trust agreement.
(4) Specimen copy of each security to be issued by the registrant.*
(Filed with Form N-1A registration.) First Idaho Tax-Free Fund
Specimen Security
(5) (a) Form of Management Agreement between First Pacific Management
Corporation and the Registrant.* (Filed with Form N-1A
registration.) Management Agreement, as amended
(6) Form of principal Underwriting Agreement between First Pacific
Securities and the Registrant.* (Filed with Form N-1A
registration.) Underwriting Agreement, as amended
(7) Not applicable, because there are no pension, bonus or other
agreements for the benefit of directors and officers.
(8) Form of Custodian Agreement between Registrant and Bank of
California.
<PAGE>
(9) There are no other material contracts not made in the ordinary
course of business between the Registrant and others.
(10) Opinion and consent of counsel as to the legality of the
registrant's securities being registered. (To be supplied
annually pursuant to Rule 24f-2 of the Investment Company Act of
1940.)
(11) The consent of Tait, Weller & Baker Independent Public
Accountants. Not Applicable
(12) Not applicable.
(13) Letter from contributors of initial capital to the Registrant
that purchase was made for investment purposes without any
present intention of redeeming or selling.* (Filed with
Pre-effective Amendment #1 to Form N-1A).
(14) Not applicable.
(15) (a) Rule 12b-1 Plan of Distribution.* (Filed with Form N-1A
registration.) 12b-1 Plan, as amended
(b) Shareholder Services Agreement.* (Filed with Form N-1A
registration.) Shareholder Services Agreement, as amended
(c) Selling Dealer Agreement.* (Filed with Form N-1A
registration.) First Idaho Tax-Free Fund Selling Dealer
Agreement
(d) First Pacific Mutual Fund Inc. Transfer Agent Agreement.*
(Filed with Form N-1A registration.) Transfer Agent
Agreement, as amended
(e) Accounting Services Agreement.* (Filed with Form N1-A
registration.) Accounting Services Agreement, as amended
(16) Schedule of Computation of Performance Quotations. Not
applicable.
*Previously filed and incorporated by reference herein.
<PAGE>
Item 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL OF THE REGISTRANT.
NONE
Item 26. NUMBER OF HOLDERS OF SECURITIES.
The number of record holders of each class of securities of the Registrant
as of January 29, 1996, is as follows:
(1) (2)
Title of Class Number of Record Holders
Common stock $.01 par value:
First Hawaii Municipal Bond Fund 1,949
First Hawaii Intermediate Municipal Fund 200
First Idaho Tax-Free Fund 0
Item 27. INDEMNIFICATION.
Under the terms of the Maryland General Corporation Law and the company's
Articles of Incorporation, the company shall indemnify any person who was or is
a director, officer or employee of the company to the maximum extent permitted
by the Maryland General Corporation Law; provided however, that any such
indemnification (unless ordered by a court) shall be made by the company only as
authorized in the specific case upon a determination that indemnification of
such persons is proper in the circumstances. Such determination shall be made:
(i) by the Board of Directors by a majority vote of a quorum which consists
of the directors who are neither "interested persons" of the company as defined
in Section 2(a)(19) of the 1940 Act, nor parties to the proceedings, or,
(ii) if the required quorum is not obtainable or if a quorum of such
directors so directs, by independent legal counsel in a written opinion.
No indemnification will be provided by the company to any director or officer of
the company for any liability to the company or shareholders to which he would
otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence, or reckless disregard of duty.
<PAGE>
As permitted by Article ELEVENTH of the company's Articles of Incorporation
and subject to the restrictions under D2-418(F)(1) of the Maryland General
Corporation Law, reasonable expenses incurred by a director who is a party to a
proceeding may be paid by the company in advance of the final disposition of the
action, after a determination that the facts then known would not preclude
indemnification, upon receipt by the company of a written affirmation by the
director of the director's good faith belief that the standard of conduct
necessary for indemnification by the company has been met and a written
undertaking by or on behalf of the director to repay the amount if it is
ultimately determined that the standard of conduct has not been met.
Insofar as indemnification for liability arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public policy
as expressed in the Act and is, therefore, 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 a director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities 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 issue.
Item 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER.
The principal business of First Pacific Management Corporation is to provide
investment counsel and advice to individuals and institutional investors.
Item 29. PRINCIPAL UNDERWRITERS.
(a) First Pacific Securities, the only principal underwriter of the
Registrant, does not act as principal underwriter, depositor or investment
advisor to any other investment company.
(b) Herewith is the information required by the following table with
respect to each director, officer or partner of the only underwriter named in
answer to Item 21 of Part B:
<PAGE>
<TABLE>
<CAPTION>
Position and Position and
Name and Principal Offices with Offices with
Business Address Underwriter Registrant
- -----------------------------------------------------------------------------------------------------
<S> <C> <C>
Terrence Lee President Director and
2756 Woodlawn Drive, #6-201 President
Honolulu, HI 96822
Jean Chun Secretary Secretary
2756 Woodlawn Drive, #6-201
Honolulu, HI 96822
Charlotte Meyer Treasurer Treasurer
2756 Woodlawn Drive, #6-201
Honolulu, HI 96822
</TABLE>
(c) Not applicable.
Item 30. LOCATION OF ACCOUNTS AND RECORDS.
Each account, book or other document required to be maintained by Section
31(a) of the 1940 Act and the Rules (17 CFR 270.31a-1 to 31a-3) promulgated
thereunder is in the physical possession of:
First Pacific Management Corporation
2756 Woodlawn Drive, #6-201
Honolulu, HI 96822;
First Pacific Recordkeeping, Inc.
2756 Woodlawn Drive, #6-201
Honolulu, HI 96822
Item 31. MANAGEMENT SERVICES.
All management services are covered in the management agreement between the
Registrant and First Pacific Management Corporation, as discussed in Parts A and
B.
<PAGE>
Item 32. UNDERTAKINGS.
Registrant undertakes to file a post-effective amendment, using financial
statements of the First Idaho Tax-Free Fund, which need not be certified, within
four to six months from the effective date of this post-effective amendment to
Registrant's 1933 Act Registration Statement.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto authorized,
in the City of Honolulu and State of Hawaii on the 29th day of January, 1996.
FIRST PACIFIC MUTUAL FUND, INC.
(Registrant)
By: (sig. on original)
Terrence K.H. Lee, President
Pursuant to the requirement of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the date indicated.
_____(sig. on orig.)____________ President, Principal January 29, 1996
Terrence K.H. Lee Executive and Financial
Officer, and Director
_____(sig. on orig.)____________ Director January 29, 1996
Samuel L. Chesser
_____(sig. on orig.)____________ Director January 29, 1996
Clayton W.H. Chow
_____(sig. on orig.)____________ Director January 29, 1996
Lynden Keala
_____(sig. on orig.)____________ Director January 29, 1996
Stuart Marlowe
EXHIBIT 1
ARTICLES OF INCORPORATION
OF
FIRST PACIFIC MUTUAL FUND, INC.
FIRST: The undersigned, Audrey C. Talley, whose post office address is 1100
One Franklin Plaza, Philadelphia, Pennsylvania 19102, and being at least
eighteen years of age, does hereby cause to be filed these Articles of
Incorporation for the purpose of forming a corporation under the General
Corporation Law of the State of Maryland.
SECOND: The name of the corporation is First Pacific Mutual Fund, Inc.
THIRD: The purpose for which the corporation is formed is to operate as an
investment company and to exercise all of the powers and to do any and all of
the things as fully and to the same extent as any other corporation incorporated
under the laws of the State of Maryland, now or hereinafter in force, including,
without limitation, the following:
1. To purchase, hold, invest and reinvest in, sell, exchange,
transfer, mortgage, and otherwise acquire and dispose of securities of every
kind, character and description.
2. To exercise all rights, powers and privileges with reference to or
incident to ownership, use and enjoyment of any of such securities, including,
but without limitation, the right, power and privilege to own, vote, hold,
purchase, sell, negotiate, assign, exchange, transfer, mortgage, pledge or
otherwise deal with, dispose of, use, exercise or enjoy any rights, title,
interest, powers or privileges under or with reference to any of such
securities; and to do any and all acts and things for the preservation,
protection, improvement and enhancement in value of any of such securities.
3. To purchase or otherwise acquire, own, hold, sell, exchange,
assign, transfer, mortgage, pledge or otherwise dispose of, property of all
kinds.
4. To buy, sell, mortgage, encumber, hold, own, exchange, rent or
otherwise acquire and dispose of, and to develop, improve, manage, subdivide,
and generally to deal and trade in real property, improved and unimproved, and
wheresoever situate; and to build, erect, construct, alter and maintain
buildings, structures, and other improvements on real property.
5. To borrow or raise moneys for any of the purposes of the
corporation, and to mortgage or pledge the whole or any part of the property and
franchises of the corporation, real, personal, and mixed, tangible or
intangible, and wheresoever situate.
6. To enter into, make and perform contracts and undertakings of every
kind for any lawful purpose, without limit as to amount.
7. To issue, purchase, sell and transfer, reacquire, hold, trade and
deal in, to the
1
<PAGE>
extent permitted under the General Corporation Law of the State of Maryland,
capital stock, bonds, debentures and other securities of the corporation, from
time to time, to such extent as the Board of Directors shall, consistent with
the provisions of these Articles of Incorporation, determine; and to repurchase,
re-acquire and redeem, to the extent permitted under the General Corporation Law
of the State of Maryland, from time to time, the shares of its own capital
stock, bonds, debentures and other securities.
The foregoing clauses shall each be construed as purposes, objects and
powers, and it is hereby expressly provided that the foregoing enumeration of
specific purposes, objects and powers shall not be held to limit or restrict in
any manner the powers of the corporation, and that they are in furtherance of,
and in addition to, and not in limitation of, the general powers conferred upon
the corporation by the laws of the State of Maryland or otherwise; nor shall the
enumeration of one thing be deemed to exclude another, although it be of like
nature, not expressed.
FOURTH: The post office address of the principal office of the corporation
in the State
c/o The Corporation Trust, Incorporated
32 South Street
Baltimore, Maryland 21202
The name and post office address of the initial resident agent of the
corporation in the State of Maryland is:
The Corporation Trust, Incorporated
32 South Street
Baltimore, Maryland 21202
FIFTH: The total number of shares of stock which the corporation shall have
authority to issue is One Hundred Million (100,000,000) shares of stock, with a
par value of One Cent ($.01) per share, to be known and designated as Common
Stock, such shares of Common Stock having an aggregate par value of One Million
Dollars ($1,000,000). The Board of Directors may increase the authorized shares
of stock and aggregate capital pursuant to Section 2-105 of the Maryland General
Corporation Law.
Subject to the provisions of these Articles of Incorporation, the
Board of Directors shall have the power to issue shares of Common Stock of the
corporation from time to time, at prices not less than the net asset value or
par value thereof, whichever is greater, for such consideration as may be fixed
from time to time pursuant to the direction of the Board of Directors.
Pursuant to Section 2-105 of the Maryland General Corporation Law, the
Board of Directors of the corporation shall have the power to designate one or
more series of shares of Common Stock or classes of such series and to classify
or reclassify any unissued shares with
2
<PAGE>
respect to such series or class and such series (subject to any applicable rule,
regulation or order of the Securities and Exchange Commission or other
applicable law or regulation) shall have such preferences, conversion or other
rights, voting powers, restrictions, limitations as to dividends,
qualifications, terms and conditions of redemption and other characteristics as
the Board may determine in the absence of contrary determination set forth
herein. Subject to the aforesaid power of the Board of Directors, one series of
shares is hereby initially designated as the "First Hawaii Municipal Bond Fund"
series and Twenty Million (20,000,000) shares of Common Stock are hereby
initially classified and allocated to such Series. At any time when there are no
shares outstanding or subscribed for a particular series or class previously
established and designated herein or by the Board of Directors, the series or
class may be liquidated by similar means. Each share of a series shall have
equal rights with each other share of that series with respect to the assets of
the corporation pertaining to that series. The dividends payable to the holders
of any series (subject to any applicable rule, regulation or order of the
Securities and Exchange Commission or any other applicable law or regulation)
shall be determined by the Board and need not be individually declared, but may
be declared and paid in accordance with a formula adopted by the Board. Except
as otherwise provided herein, all references in these Articles of Incorporation
to Common Stock or series of stock shall apply without discrimination to the
shares of each series of stock.
The holder of each share of stock of the corporation shall be entitled
to one vote for each full share, and a fractional vote for each fractional share
of stock, irrespective of the series then standing in his or her name in the
books of the corporation. On any matter submitted to a vote of shareholders, all
shares of the corporation then issued and outstanding and entitled to vote,
irrespective of the series, shall be voted in the aggregate and not by series
except (1) when otherwise expressly provided by the Maryland General Corporation
Law, or (2) when required by the Investment Company Act of 1940, as amended,
shares shall be voted by individual series or class; and (3) when the matter
does not affect any interest of a particular series, then only shareholders of
affected series shall be entitled to vote thereon. Holders of shares of stock of
the corporation shall not be entitled to cumulative voting in the election of
directors or on any other matter.
Each series of stock of the corporation shall have the following
powers, preferences and participating, voting or other special rights and the
qualifications, restrictions, and limitations thereof shall be as follows:
1. All consideration received by the corporation for the issue or sale
of stock of each series, together with all income, earnings, profits, and
proceeds thereof, including any proceeds derived from the sale, exchange or
liquidation thereof, and any funds or payments derived from any reinvestment of
such proceeds in whatever form the same may be, shall irrevocably belong to the
series of shares of stock with respect to which such assets, payments or funds
were received by the corporation for all purposes, subject only to the rights of
creditors, and shall be so handled upon the books of account of the corporation.
Such assets, income, earnings, profits and proceeds thereof, including any
proceeds derived from the sale, exchange or liquidation thereof and any assets
derived from any reinvestment of such proceeds, in whatever form the same may
be, are herein referred to as "assets belonging to" such series.
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2. The Board of Directors may from time to time declare and pay
dividends or distributions, in stock or in cash, on any or all series of stock;
provided, such dividends or distributions on shares of any series of stock shall
be paid only out of earnings, surplus, or other lawfully available assets
belonging to such series.
3. The Board of Directors shall have the power in its discretion to
distribute to the shareholders of the corporation or to the shareholders of any
series thereof in any fiscal year as dividends, including dividends designated
in whole or in part as capital gain distributions, amounts sufficient, in the
opinion of the Board of Directors, to enable the corporation or any series
thereof to qualify as a "regulated investment company" under the Internal
Revenue Code of 1986, as amended, or any successor or comparable statute
thereto, and regulations promulgated thereunder (collectively, the "IRC"), and
to avoid liability of the corporation or any series thereof for Federal income
tax in respect of that year and to make other appropriate adjustments in
connection therewith.
4. The Board of Directors shall have the power, in its discretion, to
make such elections as to the tax status of the corporation or any series or
class of the corporation as may be permitted or required by the IRC as presently
in effect or as amended, without the vote of shareholders of the corporation or
any series or class thereof.
5. In the event of the liquidation or dissolution of the corporation,
shareholders of each series shall be entitled to receive, as a series, out of
the assets of the corporation available for distribution to shareholders, but
other than general assets not belonging to any particular series of stock, the
assets belonging to such series, and the assets so distributable to the
shareholders of any series shall be distributed among such shareholders in
proportion to the number of shares of such series held by them and recorded on
the books of the corporation. In the event that there are any general assets not
belonging to any particular series of stock and available for distribution, such
distribution shall be made to the holders of stock of all series in proportion
to the net asset value of the respective series determined as hereinafter
provided.
6. The assets belonging to any series of stock shall be charged with
the liabilities in respect to such series, and shall also be charged with its
share of the general liabilities of the corporation, in proportion to the net
asset value of the respective series determined as hereinafter provided. The
determination of the Board of Directors shall be conclusive as to the amount of
liabilities, including accrued expenses and reserves, as to the allocation of
the same as to a given series, and as to whether the same or general assets of
the corporation are allocable to one or more series.
The net asset value per share of a series of the corporation's common
stock shall be determined in accordance with the Investment Company Act of 1940,
as amended, and with generally accepted accounting principles, by adding the
market or appraised value of all securities, cash and other assets of the
corporation pertaining to that series, subtracting the liabilities determined by
the Board of Directors to be applicable to that series, allocating any general
assets and
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general liabilities to that series, and dividing the net result by the number of
shares of that series outstanding. Securities and other investments and assets
will be valued at the current market value, and in the absence of a readily
available market value, will be valued at fair value as determined in good faith
by the Board of Directors.
7. The Board of Directors may provide for a holder of any series of
stock of the corporation, who surrenders his certificate in good form for
transfer to the corporation or, if the shares in question are not represented by
certificates, who delivers to the corporation a written request in good order
signed by the shareholder, to convert the shares in question on such basis as
the Board may provide, into shares of stock of any other series of the
corporation.
8. The holders of the shares of Common Stock or other securities of
the corporation shall have no preemptive rights to subscribe to new or
additional shares of its Common Stock or other securities.
SIXTH: The number of directors of the Corporation shall be such number as
may from time to time be fixed by the By-Laws of the corporation or pursuant to
authorization contained in such By-Laws; provided, notwithstanding anything
herein to the contrary, the board of directors shall initially consist of five
directors until such time as the number of directors is fixed as stated above.
The name of the directors who shall act as such until successors are duly chosen
and qualify are: Clayton W.H. Chow, Deborah M. Sur, Stuart S. Marlowe, Terrence
K.H. Lee and Samuel L. Chesser.
SEVENTH: The following provisions are inserted for the management of the
business and for the conduct of the affairs of the corporation:
1. The Board of Directors shall have power to fix an initial offering
price for the shares of any series which shall yield to the corporation not less
than the par value thereof, at which price the shares of the Common Stock of the
corporation shall be offered for sale, and to determine from time to time
thereafter the offering price which shall yield to the corporation not less than
the par value thereof from sales of the shares of its Common Stock; provided,
however, that no shares of the Common Stock of the corporation shall be issued
or sold for a consideration which shall yield to the corporation less than the
net asset value of shares of such series determined as hereinafter provided, as
of the business day on which such shares are sold, or at such other times set by
the Board of Directors, except in the case of shares of such Common Stock issued
in payment of a dividend properly declared and payable.
The net asset value of the property and assets of any series of the
corporation shall be determined at such times as the Board of Directors may
direct, by deducting from the total appraised value of all of the property and
assets of the corporation, determined in the manner hereinafter provided, all
debts, obligations and liabilities of the corporation (including, but without
limitation of the generality of any of the foregoing, any or all debts,
obligations, liabilities or claims of any and every kind and nature, whether
fixed, accrued, or unmatured, and any reserves
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or charges, determined in accordance with generally accepted accounting
principles, for any or all thereof, whether for taxes, including estimated taxes
or unrealized book profits, expenses, contingencies or otherwise).
In determining the total appraised value of all the property and
assets of the corporation or belonging to any series thereof:
(a) Securities owned shall be valued at market value or, in
the absence of readily available market quotations, at fair value as
determined in good faith by or as directed by the Board of Directors
in accordance with applicable statutes and regulations.
(b) Dividends declared but not yet received, or rights, in
respect of securities which are quoted ex-dividend or ex-rights, shall
be included in the value of such securities as determined by or
pursuant to the direction of the Board of Directors on the day the
particular securities are first quoted ex-dividend or ex-rights, and
on each succeeding day until the said dividends or rights are received
and become part of the assets of the corporation.
(c) The value of any other assets of the corporation (and
any of the assets mentioned in paragraphs (a) or (b), in the
discretion of the Board of Directors in the event of a national
financial emergency, as hereinafter defined) shall be determined in
such manner as may be approved from time to time by or pursuant to the
direction of the Board of Directors.
The net asset value of each share of the Common Stock of the
corporation shall be determined by dividing the total market value of
the property and assets of the relevant series of the corporation by
the total number of shares of its Common Stock then issued and
outstanding for such series, including any shares sold by the
corporation up to and including the date as of which such net asset
value is to be determined whether or not certificates therefor have
actually been issued. In case the net asset value of each share so
determined shall include a fraction of one cent, such net asset value
of each share shall be adjusted to the nearest full cent.
For the purposes of these Articles of Incorporation, a "national
financial emergency" is defined as the whole or any part of any period (i)
during which the New York Stock Exchange is closed other than customary weekend
and holiday closings, (ii) during which trading on the New York Stock Exchange
is restricted, (iii) during which an emergency exists as a result of which
disposal by the corporation of securities owned by such series is not reasonably
practicable or it is not reasonably practicable for the corporation fairly to
determine the value of the net assets of such series, or (iv) during any other
period when the Securities and Exchange Commission (or any succeeding
governmental authority) may for the protection of security holders of the
corporation by order permit suspension of the right of redemption or
postponement of the date of payment on redemption; provided that applicable
rules and regulations of the Securities and Exchange Commission (or any
succeeding governmental authority) shall govern as to whether the conditions
prescribed in (ii), (iii), or (iv) exist. The Board of Directors may, in its
discretion, declare the suspension described in (iv) above at an end, and such
other suspension relating to a natural
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financial emergency shall terminate as the case may be on the first business day
on which said Stock Exchange shall have reopened or the period specified in (ii)
or (iii) shall have expired (as to which in the absence of an official ruling by
said Commission or succeeding authority, the determination of the Board of
Directors shall be conclusive).
2. To the extent permitted by law, and except in the case of a
national financial emergency, the corporation shall redeem shares of its Common
Stock from its stockholders upon request of the holder thereof received by the
corporation or its designated agent during business hours of any business day,
provided that such request must be accompanied by surrender of outstanding
certificate or certificates for such shares in form for transfer, together with
such proof of the authenticity of signatures as may reasonably be required on
such shares (or, on such request in the event no certificate is outstanding) by,
or pursuant to the direction of the Board of Directors of the corporation, and
accompanied by proper stock transfer stamps. Shares redeemed upon any such
request shall be purchased by the corporation at the net asset value of such
shares determined in the manner provided in Paragraph (1) of this Article
Seventh, as of the close of business on the business day during which such
request was received in good order by the corporation.
Payments for shares of its Common Stock so redeemed by the corporation
shall be made from the assets of the applicable series in cash, except payment
for such shares may, at the option of the Board of Directors, or such officer or
officers as they may duly authorize for the purpose in their complete
discretion, be made from the assets of that series in kind or partially in cash
and partially in kind. In case of any payment in kind the Board of Directors, or
their delegate, shall have absolute discretion as to what security or securities
of such series shall be distributed in kind and the amount of the same; and the
securities shall be valued for purposes of distribution at the value at which
they were appraised in computing the current net asset value of the series of
the Fund's shares, provided that any stockholder who cannot legally acquire
securities so distributed in kind by reason of the prohibitions of the
Investment Company Act of 1940 shall receive cash.
Payment for shares of its Common Stock so redeemed by the corporation
shall be made by the corporation as provided above within seven days after the
date which such shares are deposited; provided, however, that if payment shall
be made by delivery of assets of the corporation, as provided above, any
securities to be delivered as part of such payment shall be delivered as
promptly as any necessary transfers of such securities on the books of the
several corporations whose securities are to be delivered may be made, but not
necessarily within such seven day period.
The right of any holder of shares of the Common Stock of the
corporation to receive dividends thereon and all other rights of such
stockholder with respect to the shares so redeemed by the corporation shall
cease and determine from and after the time as of which the purchase price of
such shares shall be fixed, as provided above, except the right of such
stockholder to receive payment for such shares as provided for herein.
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3. The Board of Directors, may from time to time, without the vote or
consent of stockholders, establish uniform standards with respect to the minimum
net asset value of a stockholder account or a minimum investment which may be
made by a stockholder. The Board of Directors may authorize the closing of those
stockholder accounts not meeting the specified minimum standards of net asset
value by redeeming all of the shares in such accounts, provided there is mailed
to each affected stockholder account, at least thirty (30) days prior to the
planned redemption date, a notice setting forth the minimum account size
requirement and the date on which the account will be closed if the minimum size
requirement is not met prior to said closing date.
EIGHTH: Subject to the Investment Company Act of 1940, as amended and the
Maryland General Corporation Law, meetings of the stockholders may be called at
any time by the Chairman, or by the Secretary, at the direction of a majority of
the members of the Board of Directors. The Board of Directors, in its
discretion, may determine not to hold an annual meeting of the stockholders in
any year in which none of the following is required to be acted on by
stockholders under the Investment Company Act of 1940: (i) selection of
directors; (ii) approval of an Investment Advisory Agreement; (iii) ratification
of the selection of independent public accountants; and (iv) approval of a
Distribution Agreement.
NINTH: Subject to the Investment Company Act of 1940, as amended, each of
the following actions, to the extent required to be approved by the shareholders
under Maryland General Corporation Law, shall be approved by a majority of all
votes entitled to be cast on the matter:
(i) Amendment or amendment and restatement of the Articles;
(ii) Reduction of stated capital;
(iii) Consolidation, merger, share exchange or transfer of assets;
(iv) Distribution in partial liquidation; or
(v) Voluntary dissolution.
TENTH: The corporation may use the name "First Pacific" or any other name
derived from or similar thereto only for so long as the initial Investment
Management Agreement or any extension, renewal or amendment thereof, or
subsequent Investment Management Agreement with the Investment Manager, First
Pacific Advisory Group, Inc., or other affiliate of the Investment Manager,
remains in effect. Unless otherwise permitted by the Investment Manager, when
such Investment Management Agreement is no longer in effect, the Corporation
will (to the extent that it lawfully can) cease to use such a name or any other
name indicating that it is advised by or otherwise connected with the Investment
Manager or an affiliate of the Investment Manager.
ELEVENTH: (a) To the fullest extent that limitations on the liability of
directors and officers are permitted by the Maryland General Corporation Law, no
director or officer of the
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Corporation shall have any liability to the Corporation or its stockholders for
money damages. This limitation on liability applies to events occurring at the
time a person serves as a director or officer of the Corporation whether or not
such person is a director or officer at the time of any proceeding in which
liability is asserted.
(b) The Corporation shall indemnify and advance expenses to its
currently acting and its former directors to the fullest extent that
indemnification of directors is permitted by the Maryland General Corporation
Law. The Corporation shall indemnify and advance expenses to its officers to the
same extent as its directors and to such further extent as is consistent with
law. The Board of Directors may by By-Law, resolution or agreement make further
provisions for indemnification of directors, officers, employees and agents to
the fullest extent permitted by the Maryland General Corporation Law.
(c) No provision of this Article shall be effective to protect or
purport to protect any director or officer of the Corporation against any
liability to the Corporation or its security holders to which he would otherwise
be subject by reason of willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of his office.
(d) References to the Maryland General Corporation Law in this Article
are to the law as from time to time amended. No further amendment to the
Articles of Incorporation of the Corporation shall affect any right of any
person under this Article based on any event, omission or proceeding prior to
such amendment.
(e) Each Provision of this Article ELEVENTH shall be severable from
the remainder, and the invalidity of any such provision shall not affect the
validity of the remainder of this Article ELEVENTH.
TWELFTH: The corporation expressly reserves the right to amend, alter,
change or repeal any provision contained in these Articles of Incorporation, and
all rights, contract and otherwise, conferred herein upon the stockholders are
granted subject to such reservation.
IN WITNESS WHEREOF, the undersigned incorporator of First Pacific Mutual
Fund, Inc. who executed the foregoing Articles of Incorporation, hereby
acknowledges the same to be her act and further acknowledges that, to the best
of her knowledge the matters and facts set forth therein are true in all
material respects under the penalties of perjury.
Dated the 7th day of July, 1988.
____(sig. on orig.)__________________
Audrey C. Talley
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FIRST PACIFIC MUTUAL FUND, INC.
Articles Supplementary to
Articles of Incorporation
FIRST PACIFIC MUTUAL FUND, INC., a Maryland corporation having its
principal office in Baltimore City, Maryland (the "Corporation"), hereby
certifies to the State Department of Assessments and Taxation of Maryland that:
FIRST: In accordance with the requirements of Section 2-208 of the Maryland
General Corporation Law, the Board of Directors of the Corporation, at a meeting
called for such purpose on January 29, 1996, adopted these Articles
Supplementary classifying or reclassifying unissued shares of the Common Stock
of the Corporation.
SECOND: Once new series of shares of the Corporation's Common Stock, par
value $.01 (one cent) per share is hereby designated as follows:
First Idaho Tax-Free Fund and Twenty Million (20,000,000) shares of
the unallocated and unissued Common Stock of the Corporation are
classified and allocated to such series.
THIRD: The shares of the series classified and allocated in Article SECOND
hereof shall have all the rights and privileges as set forth in the
Corporation's Articles of Incorporation, including such priority in the assets
and liabilities of such series as may be provided in such Articles.
FOURTH: The shares of the series classified and allocated in Article SECOND
hereof have been classified or reclassified by the Board of Directors pursuant
to the authority contained in the Corporation's Articles of Incorporation.
IN WITNESS WHEREOF, FIRST PACIFIC MUTUAL FUND, INC. has caused these
Articles Supplementary to be signed in its name and on its behalf this 16th day
of February, 1996.
FIRST PACIFIC MUTUAL FUND, INC.
By:____(sig on orig.)___________________________
Terrence K.H. Lee, President
ATTEST:____(sig. on orig.)_________________
Jean Chun, Secretary
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THE UNDERSIGNED, President of FIRST PACIFIC MUTUAL FUND, INC., who executed
on behalf of said Corporation the foregoing Articles Supplementary to the
Articles of Incorporation, of which this certificate is made a part, hereby
acknowledges, in the name and on behalf of said Corporation, the foregoing
Articles Supplementary to the Articles of Incorporation to be the corporate act
of said Corporation and further certifies that, to the best of his knowledge,
information and belief, the matters in fact set forth herein with respect to the
approval thereof are true in all material respects under the penalties of
perjury.
By:____(sig. on orig.)_______________________
Terrence K.H. Lee, President
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EXHIBIT 2
FIRST PACIFIC MUTUAL FUND, INC.
BY-LAWS
ARTICLE I
OFFICES
Section 1. The principal office of the Corporation shall be in the City of
Baltimore, State of Maryland. The Corporation shall also have offices at such
other places as the Board of Directors may from time to time determine or the
business of the Corporation may require.
ARTICLE II
STOCKHOLDERS AND STOCK CERTIFICATES
Section 1. Every stockholder of record shall be entitled to a stock
certificate representing the shares owned by him. Stock certificates shall be in
such form as may be required by law and as the Board of Directors shall
prescribe. Every stock certificate shall be signed by the Chairman or the
President or a Vice President and by the Treasurer or an Assistant Treasurer, or
the Secretary or an Assistant Secretary, and sealed with the corporate seal,
which may be a facsimile, either engraved or printed. Stock certificates may
bear the facsimile signatures of the officers authorized to sign such
certificates.
Section 2. Shares of the capital stock of the Corporation shall be
transferable only on the books of the Corporation by the person in whose name
such shares are registered, or by his duly authorized attorney or
representative. In all cases of transfer by an attorney-in-fact, the original
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power of attorney, or an official copy thereof duly certified, shall be
deposited and remain with the Corporation or its duly authorized transfer agent.
In case of transfers by executors, administrators, guardians or other legal
representatives, duly authenticated evidence of their authority shall be
produced, and may be required to be deposited and remain with the Corporation or
its duly authorized transfer agent. No transfer shall be made unless and until
the certificate issued to the transferor shall be delivered to the Corporation
or its duly authorized transfer agent, properly endorsed.
Section 3. Any person desiring a certificate for shares of the capital
stock of the Corporation to be issued in lieu of one lost or destroyed shall
make an affidavit or affirmation setting forth the loss or destruction of such
stock certificate, and shall advertise such loss or destruction in such manner
as the Board of Directors may require, and shall, if the Board of Directors
shall so require, give the Corporation a bond or indemnity, in such form and
with such security as may be satisfactory to the Board, indemnifying the
Corporation against any loss that may result upon the issuance of a new stock
certificate. Upon receipt of such affidavit and proof of publication of the
advertisement of such loss or destruction, and the bond, if any, required by the
Board of Directors, a new stock certificate may be issued of the same tenor and
for the number of shares as the one alleged to have been lost or destroyed.
Section 4. The Corporation shall be entitled to treat the holder of record
of any share or shares of its capital stock as the owner thereof and,
accordingly, shall not be bound to recognize any equitable or other claim to or
interest in such share or shares on the part of any other person, whether
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or not the Corporation shall have express or other notice thereof.
ARTICLE III
MEETINGS OF STOCKHOLDERS
Section 1. An annual meeting of the stockholders of the Corporation for the
election of directors and for the transaction of general business need not be
held in any year in which none of the following are required to be acted on by
stockholders under the Investment Company Act of 1940; (i) election of
directors; (ii) approval of an Investment Advisory Agreement; (iii) ratification
of the selection of independent public accountants; and (iv) approval of a
Distribution Agreement. Any annual meeting called for these or other purposes
shall be held at the principal office of the Corporation, or at such other place
within or without the State of Maryland as the Board of Directors may from time
to time prescribe.
Section 2. Special meetings of the stockholders may be called at any time
by the Chairman, President or a majority of the members of the Board of
Directors and shall be called by the Secretary upon the written request of the
holders of at least twenty-five percent of the shares of the capital stock of
the Corporation issued and outstanding and entitled to vote at such meeting;
provided, if the matter proposed to be acted on is substantially the same as a
matter voted on at any special meeting held during the preceding twelve months,
such written request shall be made by holders of at least a majority of the
capital stock of the Corporation issued and outstanding and entitled to vote at
such meetings. Upon receipt of a written request from such holders entitled to
call a special meeting, which shall state the purpose of the meeting and the
matter proposed to be acted
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on at it, the Secretary shall inform the holders who made such request of the
reasonably estimated cost of preparing and mailing a notice of a meeting and
upon payment of such costs to the Corporation the Secretary shall issue notice
of such meeting. Special meetings of the stockholders shall be held at the
principal office of the Corporation, or at such other place within or without
the State of Maryland as the Board of Directors may from time to time direct, or
at such place within or without the State of Maryland as shall be specified in
the notice of such meeting.
Section 3. Notice of the time and place of the annual or any special
meeting of the stockholders shall be given to each stockholder entitled to
notice of such meeting not less than ten days nor more than ninety days prior to
the date of such meeting. In the case of special meetings of the stockholders,
the notice shall specify the object or objects of such meeting, and no business
shall be transacted at such meeting other than that mentioned in the call.
Section 4. The Board of Directors may close the stock transfer books of the
Corporation for a period not exceeding twenty days preceding the date of any
meeting of stockholders, or the date for payment of any dividend, or the date
for the allotment of rights, or the date when any change or conversion or
exchange of capital stock shall go into effect, or for a period of not exceeding
twenty days in connection with the obtaining of the consent of stockholders for
any purpose; provided, however, that in lieu of closing the stock transfer books
as aforesaid, the Board of Directors may fix in advance a date, not exceeding
ninety days preceding the date of any meeting of stockholders, or the date for
payment of any dividend, or the date for the allotment of rights, or the date
when any change or conversion or exchange of capital stock shall go into effect,
or a date in connection with
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obtaining such consent, as a record date for the determination of the
stockholders entitled to notice of, and to vote at any such meeting and any
adjournment thereof, or entitled to receive payment of any such dividend, or to
any such allotment of rights, or to exercise the rights in respect of any such
change, conversion or exchange of capital stock or to give such consent, and in
such case such stockholders and only such stockholders as shall be stockholders
of record on the date so fixed shall be entitled to such notice of, and to vote
at, such meeting and any adjournment thereof, or to receive payment of such
dividend or to receive such allotment of rights or to exercise such rights, or
to give such consent, as the case may be, notwithstanding any transfer of any
stock on the books of the Corporation after any such record date fixed as
aforesaid.
Section 5. At all meetings of the stockholders a quorum shall consist of
the holders of a majority of the outstanding shares of the capital stock of the
Corporation entitled to vote at such meeting. In the absence of a quorum no
business shall be transacted except that the stockholders present in person or
by proxy and entitled to vote at such meeting shall have power to adjourn the
meeting from time to time to a date not more than one hundred twenty days after
the original record date without further notice other than announcement at the
meeting. At any such adjourned meeting at which a quorum shall be present any
business may be transacted which might have been transacted at the meeting on
the date specified in the original notice. If a quorum is present at any
meeting, the holders of a majority of the shares of capital stock of the
Corporation issued and outstanding and entitled to vote at the meeting who shall
be present in person or by proxy at such meeting shall have power to approve any
matter properly before the meeting, except a plurality of all votes cast at a
meeting at which a quorum is present shall be sufficient for the election of a
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director. The holders of such majority shall also have power to adjourn the
meeting to any specific time or times, and no notice of any such adjourned
meeting need be given to stockholders absent or otherwise.
Section 6. At any meeting of the stockholders of the Corporation every
stockholder having the right to vote shall be entitled, in person or by proxy
appointed by an instrument in writing subscribed by such stockholder and bearing
a date not more than eleven months prior to said meeting unless such instrument
provides for a longer period, to one vote for each share of stock having voting
power registered in his name on the books of the Corporation.
ARTICLE IV
DIRECTORS
Section 1. The Board of Directors shall consist of not less than three nor
more than twelve members. The Board of Directors may by a vote of the entire
board increase or decrease the number of directors without a vote of the
stockholders; provided, that any such decrease shall not affect the tenure of
office of any director. Directors need not hold any shares of the capital stock
of the Corporation.
Section 2. Subject to the provisions of Article III, Section 1 of these
By-Laws, the directors shall be elected by the stockholders of the Corporation
at an annual meeting, if held, or at a special meeting called for such purposes,
and shall hold office until their successors shall be duly elected and shall
qualify.
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Section 3. The Board of Directors shall have the control and management of
the business of the Corporation, and in addition to the powers and authority by
these By-Laws expressly conferred upon them, may exercise, subject to the
provisions of the laws of the State of Maryland and of the Articles of
Incorporation of the Corporation, all such powers of the Corporation and do all
such acts and things as are not required by law or by the Articles of
Incorporation to be exercised or done by the stockholders.
Section 4. The Board of Directors shall have power to fill vacancies
occurring on the Board, whether by death, resignation or otherwise. A vacancy on
the Board of Directors resulting from any cause except an increase in the number
of directors may be filled by a vote of the majority of the remaining members of
the Board, though less than a quorum. A vacancy on the Board of Directors
resulting from an increase in the number of directors may be filled by a
majority of the entire Board of Directors. A director elected by the Board of
Directors to fill a vacancy shall serve until the next annual meeting of
stockholders and until his successor is elected and qualifies. If less than a
majority of the directors in office shall have been elected by the stockholders,
a meeting of the stockholders shall be called as required under the Investment
Company Act of 1940, as amended.
Section 5. The Board of Directors shall have power to appoint, and at its
discretion to remove or suspend, any officers, managers, superintendents,
subordinates, assistants, clerks, agents and employees, permanently or
temporarily, as the Board may think fit, and to determine their duties and to
fix, and from time to time to change, their salaries or emoluments, and to
require security in such instances and in such amounts as it may deem proper.
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Section 6. In case of the absence of an officer of the Corporation, or for
any other reason which may seem sufficient to the Board of Directors, the Board
may delegate his powers and duties for the time being to any other officer of
the Corporation or to any director.
Section 7. The Board of Directors may, by resolution or resolutions passed
by a majority of the whole Board, designate one or more committees, each
committee to consist of two or more of the directors of the Corporation which,
to the extent provided in such resolution or resolutions and by applicable law,
shall have and may exercise the powers of the Board of Directors in the
management of the business and affairs of the Corporation. Such committee or
committees shall have such name or names as may be determined from time to time
by resolution adopted by the Board of Directors. Any such committee shall keep
regular minutes of its proceedings, and shall report the same to the Board when
required.
Section 8. The Board of Directors may hold their meetings and keep the
books of the Corporation, except the original or a duplicate stock ledger and
the original or a certified copy of these By-Laws, outside of the State of
Maryland, at such place or places as they may from time to time determine.
Section 9. The Board of Directors shall have power to fix, and from time to
time to change the compensation, if any, of the directors of the Corporation.
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ARTICLE V
DIRECTORS MEETINGS
Section 1. Regular meetings of the Board of Directors shall be held without
notice at such times and places as may be from time to time prescribed by the
Board.
Section 2. Special meetings of the Board of Directors may be called at any
time by the Chairman, and shall be called by the Chairman upon the written
request of a majority of the members of the Board of Directors. Unless notice is
waived by all the members of the Board of Directors, notice of any special
meeting shall be given to each director at least twenty-four hours prior to the
date of such meeting, and such notice shall provide the time and place of such
special meeting.
Section 3. One-third of the entire Board of Directors shall constitute a
quorum for the transaction of business at any meeting; except that if the number
of directors on the Board is less than six, two members shall constitute a
quorum for the transaction of business at any meeting. The act of a majority of
the directors present at any meeting where there is a quorum shall be the act of
the Board of Directors except as may be otherwise required by Maryland law or
the Investment Company Act of 1940.
Section 4. The order of business at meetings of the Board of Directors
shall be prescribed from time to time by the Board.
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ARTICLE VI
OFFICERS AND AGENTS
Section 1. The Board shall elect one or more persons to serve as Chairman,
President and Chief Executive Officer, one or more Vice Presidents, a Secretary
and a Treasurer and may elect or appoint one or more Assistant Secretaries, one
or more Assistant Treasurers and such other officers and agents as the Board may
deem necessary and as the business of the Corporation may require.
Section 2. The Chairman of the Board and the President shall be elected
from the membership of the Board of Directors, but other officers need not be
members of the Board of Directors. Any two or more offices may be held by the
same person except the offices of President and Vice President. All officers of
the Corporation shall serve for one year and until their successors shall have
been duly elected and shall have qualified; provided, however, that any officer
may be removed at any time, either with or without cause, by action by the Board
of Directors.
ARTICLE VII
DUTIES OF OFFICERS
CHAIRMAN OF THE BOARD
Section 1. The Chairman of the Board shall preside at all meetings of the
stockholders and the Board of Directors and shall be a member ex officio of all
standing committees. He shall have those duties and responsibilities as shall be
assigned to him by the Board of Directors. In the absence, resignation,
disability or death of the President, the Chairman shall exercise all the powers
and perform all the duties of the President until his return, or until such
disability shall be removed
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or until a new President shall have been elected.
PRESIDENT
Section 2. The President shall be the Chief Executive Officer of the
Corporation, and in the recess of the Board of Directors shall have the general
control and management of its business and affairs, subject, however to the
regulations of the Board of Directors.
The President shall, in the absence of the Chairman, preside at all
meetings of the stockholders and the Board of Directors. In the event of the
absence, resignation, disability or death of the Chairman, the President shall
exercise all powers and perform all duties of the Chairman until his return, or
until such disability shall have been removed or until a new Chairman shall have
been elected.
VICE PRESIDENT
Section 3. The Vice President shall have those duties and responsibilities
as shall be assigned to him by the Chairman or the President. In the event of
the absence, resignation, disability or death of the Chairman and President, the
Vice President shall exercise all the powers and perform all the duties of the
President until his return, or until such disability shall be removed or until a
new President shall have been elected. If the Board appoints more than one Vice
President, the duties of such Vice Presidents shall be designated by the Board.
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THE SECRETARY AND ASSISTANT SECRETARIES
Section 4. The Secretary shall attend all meetings of the stockholders and
shall record all the proceedings thereof in a book to be kept for that purpose,
and he shall be the custodian of the corporate seal of the Corporation. In the
absence of the Secretary, an Assistant Secretary or any other person appointed
or elected by the Board of Directors, as is elsewhere in these By-Laws provided,
may exercise the rights and perform the duties of the Secretary.
Section 5. The Assistant Secretary, or, if there be more than one Assistant
Secretary, then the Assistant Secretaries in the order of their seniority,
shall, in the absence or disability of the Secretary, perform the duties and
exercise the powers of the secretary. Any Assistant Secretary elected by the
Board shall also perform such other duties and exercise such other powers as the
Board of Directors shall from time to time prescribe.
THE TREASURER AND ASSISTANT TREASURERS
Section 6. The Treasurer shall keep full and correct accounts of the
receipts and expenditures of the Corporation in books belonging to the
Corporation, and shall deposit all monies and valuable effects in the name and
to the credit of the Corporation and in such depositories as may be designated
by the Board of Directors, and shall, if the Board shall so direct, give bond
with sufficient security and in such amount as may be required by the Board of
Directors for the faithful performance of his duties.
He shall disburse funds of the Corporation as may be ordered by the Board
of Directors, taking proper vouchers for such disbursements, and shall render to
the President and Board of
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Directors at the regular meetings of the Board, or whenever they may require it,
an account of all his transactions as the chief fiscal officer of the
Corporation and of the financial condition of the Corporation, and shall present
each year before the annual meeting of the stockholders a full financial report
of the preceding fiscal year.
Section 7. The Assistant Treasurer, or, if there be more than one Assistant
Treasurer, then the Assistant Treasurers in the order of their seniority, shall,
in the absence or disability of the Treasurer, perform the duties and exercise
the powers of the Treasurer. Any Assistant Treasurer elected by the board shall
also perform such duties and exercise such powers as the Board of Directors
shall from time to time prescribe.
ARTICLE VIII
CHECKS, DRAFTS, NOTES, ETC.
Section 1. All checks shall bear the signature of such person or persons as
the Board of Directors may from time to time direct.
Section 2. All notes and other similar obligations and acceptances of
drafts by the Corporation shall be signed by such person or persons as the Board
of Directors may from time to time direct.
Section 3. Any officer of the Corporation or any other employee, as the
Board of Directors may from time to time direct, shall have full power to
endorse for deposit all checks and
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all negotiable paper drawn payable to his or their order or to the order of the
Corporation.
ARTICLE IX
CORPORATE SEAL
Section 1. The corporate seal of the Corporation shall have inscribed
thereon the name of the Corporation, the year of its organization, and the
words, "Corporate Seal, Maryland." Such seal may be used by causing it or a
facsimile thereof to be impressed or affixed or otherwise reproduced.
ARTICLE X
DIVIDENDS
Section 1. Dividends upon the shares of the capital stock of the
Corporation may, subject to the provisions of the Articles of Incorporation of
the Corporation, if any, be declared by the Board of Directors at any regular or
special meeting, pursuant to law. Dividends may be paid in cash, in property, or
in shares of the capital stock of the Corporation.
Section 2. Before payment of any dividend there may be set aside out of any
funds of the Corporation available for dividends such sum or sums as the Board
of Directors may, from time to time, in their absolute discretion, think proper
as a reserve fund to meet contingencies, or for equalizing dividends, or for
repairing or maintaining any property of the Corporation, or for such other
purpose as the Board of Directors shall deem to be for the best interests of the
Corporation, and the Board of Directors may abolish any such reserve in the
manner in which it was created.
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ARTICLE XI
FISCAL YEAR
Section 1. The fiscal year of the Corporation shall be determined by
resolution of the Board of Directors.
ARTICLE XII
NOTICES
Section 1. Whenever under the provisions of these By-Laws notice is
required to be given to any director or stockholder, such notice is deemed given
when it is personally delivered, left at the residence or usual place of
business of the director or stockholder, or mailed to such director or
stockholder at such address as shall appear on the books of the Corporation and
such notice, if mailed, shall be deemed to be given at the time it shall be so
deposited in the United States mail postage prepaid. In the case of directors,
such notice may also be given orally by telephone or by telegraph or cable.
Section 2. Any notice required to be given under these By-Laws may be
waived in writing, signed by the person or persons entitled to such notice,
whether before or after the time stated therein.
ARTICLE XIII
AMENDMENTS
Section 1. These By-Laws may be amended, altered or repealed by the
affirmative vote
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of the holders of a majority of the shares of capital stock of the Corporation
issued and outstanding and entitled to vote thereon, or by a majority of the
Board of Directors, as the case may be.
16
Number Shares
xxxx xxxx
FIRST PACIFIC MUTUAL FUND, INC.
FIRST IDAHO TAX-FREE FUND SERIES
Incorporated Maryland, 1988
This certifies that_________________________xxxx_________________________is the
registered holder of_________________________xxxx_________________________Shares
transferable only on the books of the Corporation by the holder hereof in person
or by Attorney upon surrender of this Certificate properly endorsed.
IN WITNESS WHEREOF, the said Corporation has caused this Certificate to be
signed by its duly authorized officers and its Corporate Seal to be hereunto
affixed this___________xxxx________ day of __________xxxx___________A.D.
_____________
- ----------------------------------- -----------------------------------
President Secretary
<PAGE>
The Corporation will furnish a full statement of the preferences, limitations
and rights of the stock of each class which the Corporation is authorized to
issue to any stockholder on request and without charge.
For value received, ___________hereby sell, assign, and transfer
unto______________________________________________________________________Shares
represented by the within Certificate, and do hereby irrevocably constitute and
appoint_________________________________________________________________Attorney
to transfer the said Shares on the books of the within named Corporation with
full power of substitution in the premises.
Dated_________________________________________________
______________________________________________________
In presence of:
______________________________________________________
NOTICE. The Signature of this Assignment must correspond with the name as
written upon the face of the Certificate, in every particular, without
alteration or enlargement, or any change whatever.
EXHIBIT 5
FIRST PACIFIC MUTUAL FUND, INC.
FIRST HAWAII MUNICIPAL BOND FUND
FIRST HAWAII INTERMEDIATE MUNICIPAL FUND
FIRST IDAHO TAX-FREE FUND
INVESTMENT MANAGEMENT AGREEMENT
INVESTMENT MANAGEMENT AGREEMENT made this 16th day of March, 1994, amended
January 29, 1996, by and between First Pacific Mutual Fund, Inc., a Maryland
corporation, (the "Corporation") for the First Hawaii Municipal Bond Fund
series, the First Hawaii Intermediate Municipal Fund series, the First Idaho
Tax-Free Fund series and First Pacific Management Corporation, a Hawaii
corporation (the "Manager"). All references to any series of the Corporation
will be called the "Fund" unless expressly noted otherwise.
BACKGROUND
Each Fund, a series of the Corporation, is organized and operated as an
open-end, non-diversified management investment company, registered under the
Investment Company Act of 1940 as amended (the "1940 Act"). The Corporation
desires to retain the Manager to render investment management and advisory
services to each Fund, and the Manager is willing to render such services on the
terms and conditions hereinafter set forth.
NOW, THEREFORE, the parties hereto, intending to be legally bound, hereby
agree as follows:
1. The Corporation hereby appoints the Manager to act as investment manager
and advisor to each Fund, subject to the supervision and direction of the Board
of Directors of each Fund, for the period and on the terms set forth in this
Agreement. The Manager accepts such appointment and agrees to render the
services herein described, for the compensation herein provided.
2. The Manager shall furnish each Fund investment management and
administrative services. Investment management shall include analysis, research
and portfolio recommendations consistent with each Funds' objectives and
policies. Administrative services shall include the services and compensation of
such members of the Manager's organization as shall be duly elected officers
and/or directors of each Fund and such other personnel as shall be necessary to
carry out its normal operations.
3. The Manager shall manage the investment operations of each Fund and the
composition of each Funds' portfolio, including the purchase, retention and
disposition thereof, in
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accordance with each Funds' investment objectives, policies and restrictions as
stated in and limited by the statements contained in the various documents filed
with the U.S. Securities and Exchange Commission (the "Commission") as such
documents may from time to time be amended and subject to the following
understandings:
(a) The Manager shall provide supervision of each Fund's investments
and determine from time to time what investments or securities, including
futures contracts, will be purchased, retained, sold or loaned by each Fund, and
what portion of the assets will be invested, hedged, or held uninvested as cash.
(b) The Manager shall use its best judgement in the performance of its
duties under this Agreement.
(c) The Manager, in the performance of its duties and obligations
under this Agreement, shall act in conformity with the Corporation's Articles of
Incorporation and By-Laws, and the Prospectus of each Fund and the instructions
and directions of the Board of Directors of the Corporation, and will conform to
and comply with the requirements of the 1940 Act and all other applicable
federal and state laws and regulations.
(d) The Manager shall determine the securities to be purchased or sold
by each Fund and will place orders pursuant to its determination with or through
such persons, brokers or dealers in conformity with the policy with respect to
brokerage as set forth in the Corporation's Registration Statement and
Prospectus of each Fund or as the Board of Directors may direct from time to
time. In providing each Fund with investment supervision, it is recognized that
the Manager will give primary consideration to securing the most favorable price
and efficient execution. Consistent with this policy, the Manager may consider
the financial responsibility, research and investment information and other
services provided by brokers or dealers who may effect or be a party to any such
transaction or other transactions to which other clients of the Manager may be a
party. It is understood that neither the Funds nor the Manager has adopted a
formula for allocation of each Funds' investment transaction business. It is
also understood that it is desirable, for each Fund, that the Managers have
access to supplemental investment and market research and security and economic
analysis provided by brokers who may execute brokerage transactions at a higher
cost to each Fund than may result when allocating brokerage to other brokers by
seeking the most favorable price and efficient execution. Therefore, the Manager
is authorized to place orders for the purchase and sale of securities for each
Fund with such brokers, subject to review by the Corporation's Board of
Directors, from time to time with respect to the extent and continuation of this
practice. It is understood that the services provided by such brokers may be
useful to the Manger in connection with its services to other clients.
On occasions when the Manager deems the purchase or sale of a security to
be in the best interest of each Fund as well as other clients, the Manager, to
the extent permitted by applicable laws and regulations, may, but shall be under
no obligation to, aggregate the securities to be so sold or
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<PAGE>
purchased in order to obtain the most favorable price or lower brokerage
commissions and efficient execution. In such event, allocation of the securities
so purchased or sold, as well as the expenses incurred in the transaction, will
be made by the Manager in the manner it considers to be the most equitable and
consistent with its fiduciary obligations to each Fund and to such other
clients.
(e) The Manager shall maintain all books and records with respect to
each Funds' securities transactions required by subparagraphs (b)(5), (6) and
(11) and paragraph (f) of Rule 31a-1 under the 1940 Act and shall render to the
Corporation's Board of Directors such periodic and special reports as the Board
may reasonably request.
(f) The Manager shall provide each Funds' custodian and each Fund on
each business day with information relating to all transactions concerning each
Funds' assets.
(g) The investment management services provided by the Manager
hereunder are not to be deemed exclusive, and the Manager shall be free to
render similar services to others. While information and recommendations
supplied to each Fund shall, in the Manger's judgement, be appropriate under the
circumstances and in light of investment objectives and policies of each Fund,
they may be different from the information and recommendations supplied to other
investment companies and customers. Each Fund shall be entitled to equitable
treatment under the circumstances in receiving information, recommendation and
any other services, but each Fund shall not be entitled to receive preferential
treatment as compared with the treatment given to any other investment company
or customer.
(h) The Manager shall perform such other services as are reasonably
incidental to the foregoing duties.
4. Each Fund has delivered to the Manager copies of each of the following
documents and will deliver to it all future amendments and supplements, if any:
(a) Articles of Incorporation of the Corporation, filed with the
Secretary of the State of Maryland (such Articles of Incorporation, as in effect
on the date hereof and as amended from time to time, are herein called the
"Articles of Incorporation");
(b) By-Laws of each Fund (such By-Laws, as in effect on the date
hereof and as amended from time to time, are herein called the "By-Laws");
(c) Certified resolutions of the Board of Directors of the Corporation
authorizing the appointment of the Manager and approving the form of this
Agreement;
(d) Registration Statement under the 1940 Act and the Securities Act
of 1933, as amended, on Form N-1A (the Registration Statement), as filed with
the Commission relating to each Fund and shares of each Funds' common stock and
all amendments thereto;
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(e) Notification of Registration of the Corporation under the 1940 Act
on Form N-8A as filed with the Commission and all amendments thereto;
(f) Prospectus of each Fund (such Prospectus, as currently in effect
and as amended or supplemented from time to time, being herein called the
"Prospectus"); and
(g) Any other documents filed with the Commission. The Manager shall
have no responsibility or liability for the accuracy or completeness of the
Corporation's Registration Statement under the 1940 Act or the Securities Act of
1933 except for information supplied by the Manager for inclusion therein. On
behalf of each Fund, the Corporation agrees to indemnify the Manager to the full
extent permitted by the Corporations's governing instruments.
5. The Manager shall authorize and permit any of its directors, officers
and employees who may be elected as directors or officers of the Corporation to
serve in the capacities in which they are elected. Services to be furnished by
the Manager under this Agreement may be furnished through the medium of any of
such directors, officers or employees.
6. The Manager agrees that no officer or director of the Manager, or of any
affiliate of the Manager, will deal for or on behalf of each Fund with himself
as principal or agent, or with any corporation, partnership or other person in
which he may have a financial interest, except that this shall not prohibit:
(a) Officers and directors of the Manager or of any affiliate of the
Manager, from having a financial interest in each Fund, in the Manager or any
affiliate of the Manager.
(b) Officers and directors of the Manager, or of any affiliate of the
Manager, from providing services to each Fund of a type usually and customarily
provided to an investment company, pursuant to a written agreement approved by
the Board of Directors of each Fund, including a majority of the disinterested
directors of each Fund (as defined in the 1940 Act).
(c) The purchase of securities for each Fund, or the sale of
securities owned by each Fund, through a security broker or dealer, one or more
of whose partners, officers or directors is an officer or a director of the
Manager, provided such transactions are handled in the capacity of broker only
and provided commissions charged do not exceed customary brokerage charges for
such services.
7. If any occasion should arise in which the Manager or any of its officers
or directors advises persons concerning the shares of each Fund, the Manager or
such officer or director will act solely on its, her or his own behalf and not
in any way on behalf of each Fund.
8. The Manager agrees that, except as herein otherwise expressly provided,
neither it nor any of its officers or directors shall at any time during the
period of this Agreement make, accept or receive, directly or indirectly, any
fees, profits or emoluments of any character in connection with
4
<PAGE>
the purchase or sale of securities (except securities issued by each Fund) or
other assets by or for each Fund.
9. The Manager shall keep each Funds books and records required to be
maintained by it pursuant to paragraph 3 hereof. The Manager agrees that all
records which it maintains for each Fund are the property of each Fund and it
will surrender promptly to each Fund any of such records upon each Funds'
request. The Manager further agrees to preserve for the periods prescribed by
Rule 31a-2 of the Commission under the 1940 Act any such records as are required
to be maintained by the Manager pursuant to paragraph 2 hereof.
10. During the term of this Agreement, the Manager will pay (i) the
salaries and expenses of all its personnel, and (ii) all expenses incurred by it
in he ordinary course of performing its duties hereunder. All costs and expenses
not expressly assumed by the Manager under this Agreement shall be paid by each
Fund, including, but not limited to: (i) interest and taxes, including but not
limited to all issue or transfer taxes chargeable to each Fund in connection
with its securities transactions; (ii) brokerage commissions; (iii) insurance
premiums; (iv) compensation and expenses of the Board of Directors of each Fund;
(v) legal and audit expenses; (vi) fees and expenses of each Fund's distributor,
transfer agent and accounting services agents; (vii) expenses incident to the
issuance of shares, including issuance on the payment of, or reinvestment of,
dividends; (viii) fees and expenses incident to the registration under Federal
or state securities laws of each Fund or its shares; (ix) expenses of preparing,
printing and mailing reports and notices and proxy material to shareholders of
each Fund; (x) all other expenses incidental to holding meetings of the
Corporation's directors and each Funds' shareholders and all allocable
communications expenses with respect to investor services and to preparing,
printing and mailing prospectuses and reports to shareholders in the amount
necessary for distribution to the shareholders; (xi) dues or assessments of or
contributions to any trade association of which each Fund is a member; (xii)
such non-recurring expenses as may arise, including litigation affecting each
Fund and the legal obligations which the Corporation may have to indemnify its
officers and directors with respect thereto; (xiii) all expenses which the
Corporation agrees to bear in any distribution agreement or in any plan adopted
by the Corporation on behalf of each Fund pursuant to Rule 12b-1 under the Act;
and (xiv) all corporate fees payable by each Fund to federal, state or other
governmental agencies.
11. For the services provided and the expenses assumed pursuant to this
Agreement, each Fund will pay to the Manager as full compensation therefor a fee
at an annualized rate of .50% of each Funds' average daily net assets. This fee
will be compounded daily as of the close of business and will be paid to the
Manager monthly within ten (10) business days after the last day of each month
and such management fee shall be adjusted, if necessary, at the time of the
payment due in the last month in the fiscal year of each Fund. The Management
fee shall be prorated for any fraction of a month at the commencement or
termination of this Agreement.
12. In the event the expenses of each Fund for any fiscal year (including
the fees payable to the Manager but excluding interest, taxes, brokerage
commissions, distribution fees, amortization of organization expenses and
litigation and indemnification expenses and other extraordinary
5
<PAGE>
expenses not incurred in the ordinary course of each funds' business) exceed the
limit set by applicable regulation of state securities commissions, if any, the
compensation due to the Manager hereunder will be reduced by the amount of such
excess of postponed so that at no time will there be any accrued but unpaid
liability under this expense limitation. Any such reductions or payments are
subject to readjustment during the year, and the Manager's obligation hereunder
will be limited to the amount of its fee paid or accrued with respect to such
fiscal year.
13. The Manager shall give each Fund the benefit of its best judgement and
effort in rendering service hereunder, but the Manager shall not be liable for
any loss sustained by reason of the purchase, sale or retention of any
securities or hedging instrument, whether or not such purchase, sale or
retention shall have been based upon its own investigation or upon investigation
and research made by any other individual firm or corporation. The Manager shall
not be liable for any error of judgement or mistake of law for any loss suffered
by each Fund in connection with the matters to which this Agreement relates,
except a loss resulting from a breach of fiduciary duty with respect to the
receipt of compensation for services (in which case any award of damages shall
be limited to the period and the amount set forth in Section 36(b)(3) of the
1940 Act) of a loss resulting from willful misfeasance, bad faith or gross
negligence on its part in the performance of its duties or from reckless
disregard by it of its obligations and duties under this Agreement. Any person
employed by the Manager, who may be or become an employee of and paid by any
other entity affiliated with each Fund, such as the administrator, distributor,
or custodian to each Fund, shall be deemed, when acting within the scope of his
employment by such other affiliated entity, to be acting in such employment
solely for such other affiliated entity and not as the Manger's employee or
agent.
14. This Agreement shall continue in effect for a period of more than two
(2) years from the date hereof only so long as such continuance is specifically
approved at least annually in conformity with the requirements of the 1940 Act;
provided, however, that this Agreement may be terminated by each Fund at any
time, without the payment of any penalty, by the Board of Directors of each Fund
or by vote of a majority of the outstanding voting securities (as defined in the
1940 Act) of each Fund, or by the Manager at any time, without the payment of
any penalty, on not more than sixty (60) days nor less than thirty (30) days
written notice to the other party. This Agreement shall terminate automatically
in the event of its assignment (as defined in the 1940 Act).
15. Nothing in this Agreement shall limit or restrict the right of any of
the Manager's directors, officers, or employees who may also be a director,
officer or employee of each Fund to engage in any other business or to devote
his time and attention in part to the management or other aspects of any
business, whether of a similar or dissimilar nature, nor limit nor restrict the
Manager's right to engage in any other business or to render services of any
kind to any other corporation, firm, individual or association. Nothing in this
Agreement shall prevent the Manager or any affiliated person (as defined in the
1940 Act) of the Manager from acting as investment advisor and/or principal
underwriter for any other person, firm or corporation and shall not in any way
limit or restrict the Manager or any such affiliated person from buying,
selling, or trading any securities or hedging instruments for its or their own
accounts or for the account of others for whom it or they may be acting,
provided, however, that the Manager expressly represents that it will undertake
no
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activities which, in its judgement, will adversely affect the performance of its
obligations to each Fund under the Agreement.
16. Neither this Agreement nor any transaction made pursuant hereto shall
be invalidated or in any way affected by the fact that directors, officers,
agents and/or shareholders of each Fund are or may be interested in the Manager,
or any successor or assignee thereof, as directors, officers, shareholders or
otherwise; that directors, officers, shareholders or agents of the Manager are
or may be interested in each Fund as directors, officers, shareholders or
otherwise; or that the Manager or any successor or assignee, is or may be
interested in each Fund as shareholders or otherwise; provided, however, that
neither the Manager nor any officer or director of the Manager or of the
Corporation shall sell to or buy from each Fund any property or security other
than a security issued by the Fund, except in accordance with an applicable
order or exemptive rule of the Commission.
17. Except as otherwise provided herein or authorized by the Board of
Directors of the Corporation from time to time, the Manager shall for all
purposes herein deemed to be an independent contractor, and, except as expressly
provided or authorized in this Agreement, shall have no authority to act for or
represent each Fund in any way or otherwise be deemed an agent of each Fund.
Each Fund and the Manager are not partners or joint venturers with each other
and nothing herein shall be construed so as to make them such partners or joint
venturers or impose any liability as such on either of them.
18. During the term of this Agreement, the Corporation agrees to furnish
the Manager at its principal office with all prospectuses, proxy statements,
report to stockholders, sales literature, or other material prepared for
distribution to stockholders of each Fund or the public, which refer to the
Manager in any way, prior to use thereof and not to use such material if the
Manager reasonably objects in writing within five (5) business days (or such
other time as may be mutually agreed) after receipt thereof. In the event of
termination of this Agreement, the Corporation will continue to furnish to the
Manager copies of any of the above mentioned materials which refer in any way to
the Manager. The Corporation shall furnish or otherwise make available to the
Manager such other information relating to the business affairs of the
Corporation or of each Fund as the Manager at any time, or from time to time,
reasonably requests in order to discharge its obligations hereunder. The
Corporation agrees that, in the event that the Manager ceases to be each Funds'
investment manager for any reason, each Fund will (unless the Manager otherwise
agrees in writing) promptly take all necessary steps to propose to the
shareholders at the next regular meeting that each Fund change to a name not
including the words "First Pacific". The Corporation agrees that the words
"First Pacific" in its name is derived from the name of the Manager and is the
property of the Manager for copyright and all other purposes and that therefore
such word may be freely used by the Manager as to other investment activities or
other investment products.
19. This Agreement may be amended by mutual consent, but the consent of
each Fund must be obtained in conformity with the requirement of the 1940 Act.
20. This Agreement shall be subject to all applicable provisions of law,
including,
7
<PAGE>
without limitation, the applicable provisions of the 1940 Act.
21. This Agreement shall be governed by an construed in accordance with the
laws of the State of Hawaii.
22. Compensation to be paid to the Manager hereunder shall be separate and
distinct from organizational expenses, if any, to be reimbursed to the Manager.
8
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their officers designated below as of the day and year first above
written.
FIRST PACIFIC MUTUAL FUND, INC.
By:____(sig. on orig.)________________________________
Terrence K.H. Lee, President
[Corporate Seal]
Attest:__(sig. on orig.)______________________________
Jean Chun, Secretary
FIRST PACIFIC MANAGEMENT CORPORATION
By:___(sig. on orig.)______________________________
Terrence K.H. Lee, President
[Corporate Seal]
Attest:_(sig. on orig.)_____________________________
Jean Chun, Secretary
9
EXHIBIT 6
FIRST PACIFIC MUTUAL FUND, INC.
DISTRIBUTION AGREEMENT
THIS AGREEMENT made this 16th day of March, 1994, amended January 29, 1996,
by and between FIRST PACIFIC MUTUAL FUND, INC., a Maryland corporation with an
office located at 2756 Woodlawn Drive, Suite #6-201, Honolulu, Hawaii, (the
"Corporation"), for the First Hawaii Municipal Bond Fund series and First Hawaii
Intermediate Municipal Fund series, the First Idaho Tax-Free Fund series (all
references to any series of the Corporation will be called the "Fund" unless
expressly noted otherwise) and FIRST PACIFIC SECURITIES, INC., a Hawaii
corporation, with its principal office located at 2756 Woodlawn Drive, Suite
#6-201, Honolulu, Hawaii (the "Distributor").
WITNESSETH:
In consideration of the mutual covenants and agreements of the parties
hereto, the parties intending to be bound, mutually covenant and agree with each
other as follows:
1. The Corporation, on behalf of each Fund, hereby appoints the Distributor
as agent of each Fund to effect the sale and public distribution of shares of
the capital stock of each Fund. This appointment is made by the Corporation of
each Fund and accepted by the Distributor upon the understanding that the
distribution of shares of each Fund to the public be effected by the Distributor
or through various securities dealers, either individuals or organizations, but
that it shall be done in such a manner that each Fund shall be under no
responsibility or liability to any person whatsoever on account of the acts and
statements of any such individual or organization. The Distributor shall have
the sole right to select the security dealers to whom shares will be offered by
it and, subject to express provisions of this Agreement, applicable securities
laws, the Corporation's Articles of Incorporation and the By-Laws and the then
current Prospectus of each Fund, to determine the terms and prices in any
contract for the sale of shares to any dealer made by it as such agent for each
Fund.
2. The Distributor shall be the exclusive agent for each Fund for the sale
of its shares and each Fund agrees that it will not sell any shares to any
person except to fill orders for the shares received through the Distributor;
provided, however, that the foregoing exclusive right shall not apply: (a) to
shares issued or sold in connection with the merger or consolidation of any
other investment company with each Fund or the acquisition by purchase or
otherwise of all or substantially all of the assets of any investment company or
substantially all of the outstanding shares of any such company by each Fund;
(b) to shares which may be offered by each Fund to its stockholders for
reinvestment of cash distributed from capital gains of net investment income of
each Fund; or (c) to shares which may be issued to shareholders of other funds
who exercise any exchange privilege set forth in the Funds' Prospectus.
3. The Distributor shall have the right to sell the shares of each Fund's
capital stock to dealers, as needed (making reasonable allowance for the
clerical errors and errors of transmission),
1
<PAGE>
but not more than the shares needed to fill unconditional orders for shares
placed with the Distributor by dealers. In every case, the Distributor shall
charge the public offering price and each Fund shall receive the net asset value
for shares sold, determined as provided in Paragraph 4 hereof. The Distributor
shall notify each Fund at the close of each business day (normally 5:00 pm
Eastern Standard Time), of the number of shares sold during each day.
Notwithstanding the foregoing, each Fund may sell its shares to certain
affiliated persons at net asset value, as described in the Prospectus.
4. (a) The public offering price for the First Hawaii Municipal Bond Fund
series and the First Hawaii Intermediate Municipal Fund series consists of the
net asset value per share. The public offering price of the First Idaho Tax-Free
Fund series consists of the net asset value plus any applicable sales charge as
follows:
<TABLE>
<CAPTION>
Concession to
As a % of Net Dealers as a
Amount of As a % of Amount % of Amount
Investment Offering Price Invested Invested
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Less than $50,000 2.75% 2.83% 2.25%
$50,000 but less
than $100,000 2.25% 2.30% 1.75%
$100,000 but less
than $250,000 1.75% 1.78% 1.25%
$250,000 but less
than $500,000 1.25% 1.27% 0.95%
$500,000 but less
than $1,000,000 1.00% 1.01% 0.80%
$1,000,000 and over 0.00% 0.00% 0.25%
</TABLE>
(b) The net asset value of shares of each Fund shall be determined by
each Fund or each Fund's custodian, or such officer or officers or other persons
the Board of Directors of the Corporation may designate. The determination shall
be made once a day on which the New York Stock Exchange is open for business and
in accordance with the method set out in the By-Laws of the Corporation and the
current Prospectus of the Funds.
5. The Distributor agrees that it will not sell any shares of any Fund to
any officer, director, or partner of either the Distributor or of the
Corporation or any firm or corporation which
2
<PAGE>
may be employed by each Fund or by the Distributor except for investment
purposes only and where the purchaser agrees not to resell the securities to
anyone except the Fund. The Distributor further agrees that it will promptly
advise the Secretary of the Corporation of all sales of shares of each Fund to,
or purchase of shares of each Fund from any such person.
6. The Distributor agrees that it will not for its own account purchase any
shares of each Fund except for investment purposes and that it will not for its
own account sell any such shares excepting only those shares which it may own at
the time of executing this Agreement and any shares resulting from the
reinvestment of dividends paid on those shares, and the Distributor will not
sell other shares except by redemption of such shares by each Fund.
7. (a) On behalf of each Fund, the Corporation appoints and designates the
Distributor as agents of each Fund and the Distributor accepts such appointments
as such agent, to repurchase shares of each Fund in accordance with the
provisions of the Articles of Incorporation and By-Laws of the Corporation.
(b) In connection with such redemptions or repurchases, the
Corporation authorizes and designates the Distributor to take any action, to
make any adjustments in net asset value, and to make any arrangements for the
payment of the redemption or repurchase price authorized or permitted to be
taken or made in accordance with the Investment Company Act of 1940 and as set
forth in the By-Laws and then current Prospectus of the Funds.
(c) The authority of the Distributor under this Paragraph 7 may, with
the consent of the Corporation, be delegated in whole or in part to another
person or firm.
(d) The authority granted in this Paragraph 7 may be suspended by the
Corporation at any time or from time to time pursuant to the provisions of its
Articles of Incorporation until further notice to the Distributor. The President
or any Vice President of the Corporation shall have the power granted by said
provision. After any such suspension the authority granted to the Distributor by
this Paragraph 7 shall be reinstated only by a written instrument executed on
behalf of each Fund by the Corporation's President or any Vice President.
8. The Corporation agrees that it will cooperate with the Distributor to
prepare, execute and file applications for registration and qualification of
each Fund's shares for sale under the laws of the United States and the
provisions and regulations of the U.S. Securities and Exchange Commission and
under the Securities Acts of such States and in such amounts as the Corporation
may determine, and shall pay registration fees in connection therewith. The
Distributor shall bear all expenses incident to the sale of shares of each Fund,
including without limitation, the cost of any sales material or literature, the
cost of copies of the prospectus used as sales material (except those being sent
to existing shareholders) and the cost of any reports or proxy material prepared
for each Fund's stockholders to the extent that such material is used in
connection with the sale of shares of each Fund except to the extent that each
Fund is obligated to bear such costs under a distribution plan adopted by each
Fund.
3
<PAGE>
9. For its services under this Agreement, the Distributor shall be entitled
to receive the maximum amount of the payment called for under each Fund's
Distribution Plan (the "Plan") adopted pursuant to the Investment Company Act of
1940 Rule 12b-1 (the "Rule"). The Distributor may make payments to others from
such amounts in accordance with the Plan or any agreement in effect under such
Plan. The Distributor agrees to comply with the Rule and the Plan in connection
with receipt and disbursement of funds under the Plan.
10. Notwithstanding anything contained herein to the contrary, shares of
each Fund may be offered for sale at a price, if such reduction or elimination
is authorized by an order of the Securities and Exchange Commission, or the
Investment Company Act of 1940 or if the rules and regulations promulgated
thereunder provide for such variation. Furthermore, such shares may be offered
and sold directly by each Fund rather than by the Distributor as otherwise
provided in this Agreement.
11. This Agreement shall become effective January 29, 1996 and shall
continue in effect for a period of more than one year from its effective date
only as long as such continuance is approved, at least annually, by the Board of
Directors of the Corporation, including a majority of those Directors who are
not "interested persons" of any party to this Agreement, voting in person at a
meeting called for the purpose of voting on such approval. If payments hereunder
are made pursuant to provisions of a plan adopted by each Fund pursuant to the
Investment Company Act of 1940 rule 12b-1, then renewals hereof shall also be
made in accordance with the requirements of such rule. This Agreement may be
terminated by either party hereto upon thirty (30) days written notice to the
other party. This Agreement shall automatically terminate in the event of its
assignment by the Distributor (as the term "assignment" is defined by the
Investment Company Act of 1940, as amended) unless the United States Securities
and Exchange Commission has issued and order exempting each Fund and the
Distributor from the provisions of the Investment Company Act of 1940, as
amended, which would otherwise have effected the termination of this Agreement.
12. No Amendment to this Agreement shall be executed or become effective
unless its terms have been approved: (a) by a majority of the directors of the
Corporation or by the vote of a majority of the outstanding voting securities of
each Fund, and (b) by a majority of those directors who are not interested
persons of the Funds or of any party to this Agreement.
13. The Corporation, on behalf of each Fund, and the Distributor hereby
each agree that all literature and publicity issued by either of them referring
directly or indirectly to each Fund or the Distributor shall be submitted to and
receive the approval of the Corporation and the Distributor before the same may
be used by either party.
14. (a) The Distributor agrees to use its best efforts in effecting the
sale and public distribution of the shares of each Fund through dealers and to
perform its duties in redeeming and repurchasing the shares of each Fund, but
nothing contained in this Agreement shall make the Distributor or any of its
officers and directors or shareholders liable for any loss sustained by each
Fund or any of the Corporation's officers, directors or shareholders, or by any
other person on
4
<PAGE>
account of any act done or omitted to be done by the Distributor under this
Agreement provided that nothing herein contained shall protect the Distributor
against nay liability to each Fund or to any of its shareholders to which the
Distributor would otherwise be subject by reason of willful misfeasance, bad
faith, or gross negligence in the performance of its duties as Distributor or by
reason of its reckless disregard of its obligations or duties as Distributor
under this Agreement. Nothing in this Agreement shall protect the Distributor
from any liabilities which it may have under the Securities Act of 1933 or the
Investment Company Act of 1940.
(b) The Distributor may, from time to time, enter into agreements with
security dealers and other qualified entities such amounts as it deems
appropriate, provided that such payments are permitted by the then current
distribution plan adopted by each Fund in accordance with Rule 12b-1 of the
Investment Company Act of 1940, as amended.
15. As used in this Agreement, the terms "interested person", "assignment",
and "majority of the outstanding voting securities" shall have the respective
meanings specified in the Investment Company Act of 1940 as now in effect.
5
<PAGE>
IN WITNESS WHEREOF, FIRST PACIFIC MUTUAL FUND, INC. for the First Hawaii
Municipal Bond Fund series, the First Hawaii Intermediate Municipal Fund series,
the First Idaho Tax-Free Fund series, and FIRST PACIFIC SECURITIES, INC. have
caused this Agreement to be signed by their duly authorized officers and their
corporate seals to be hereto duly affixed all on the day and year above written.
FIRST PACIFIC MUTUAL FUND, INC.
By:____(sig. on orig.)_______________________
Terrence K.H. Lee, President
[Corporate Seal]
Attest:__(sig. on orig.)_____________________
Jean Chun, Secretary
FIRST PACIFIC SECURITIES, INC.
By:____(sig. on orig.)_______________________
Terrence K.H. Lee, President
[Corporate Seal]
Attest:__(sig. on orig.)_____________________
Jean Chun, Secretary
6
EXHIBIT 8
CUSTODY AGREEMENT
This AGREEMENT is entered into as of June 24, 1994, between First Pacific
Mutual Fund, Inc. on behalf of First Hawaii Intermediate Municipal Fund (the
"Fund"), having its principal office and place of business at 1270 Queen Emma
Street #607, Honolulu, Hawaii 96813 and The Bank of California, National
Association (the "Bank"), a National Banking Association organized under the
laws of the United States with its principal place of business at 400 California
Street, San Francisco, CA 94104.
In consideration of the mutual promises set forth below, the Fund and the Bank
agree as follows:
1. Definitions.
Whenever used in this Agreement or in any Schedules to this Agreement, the words
and phrases set forth below shall have the following meanings, unless the
context otherwise requires:
1.2 "Authorized Person" shall be deemed to include the President, and
any Vice President, the Secretary, the Assistant Secretary, the Treasurer and
any Assistant Treasurer of the Fund, or any other person, including persons
employed by the Investment Manager, whether or not any such person is an officer
of the Fund, duly authorized by the Board of Directors of the Fund to give Oral
Instructions and Written Instructions on behalf of the Fund and listed in the
certification annexed hereto as Appendix A or such other certification as may be
received by the Bank from time to time.
1.2 "Book-Entry System" shall mean the Federal Reserve/Treasury
book-entry system for United States and federal agency securities, its successor
or successors and its nominee or nominees.
1.3 "Depository" shall mean The Depository Trust Company ("DTC"), a
clearing agency registered with the Securities and Exchange Commission under
Section 17(a) of the Securities Exchange Act of 1934, as amended, its successor
or successors and its nominee or nominees, in which the Bank is hereby
specifically authorized to make deposits. The term "Depository" shall further
mean and include any other person to be named in Written Instructions authorized
to act as a depository under the 1940 Act, its successor or successors and its
nominee or nominees.
1.4 "Money Market Security" shall be deemed to include, without
limitation, debt obligations issued or guaranteed as to interest and principal
by the Government of the United States or agencies or instrumentalities thereof,
and repurchase and reverse repurchase agreements with respect to any of the
foregoing types of securities, commercial paper, bank certificates of deposit,
bankers' acceptances and short-term corporate obligations, where the purchase or
sale of such securities normally requires settlement in federal funds on the
same day as such purchase or sale.
1.5 "Prospectus" shall mean the Series' current prospectus and
statement of additional
1
<PAGE>
information relating to the registration of the Series' Shares under the
Securities Act of 1933, as amended.
1.6 "Security" or "Securities" shall be deemed to include bonds,
debentures, notes, stocks, shares, evidences of indebtedness, and other
securities and investments from time to time owned by each Series.
1.7 "Shares" refers to the shares of beneficial interest of a Series
of the Fund.
1.8 "Series" refers to portfolios of the Fund shown on Schedule A,
attached hereto and made a part hereof by this reference, and any such other
Series as may from time to time be created and designated.
1.9 "Transfer Agent" shall mean the person which performs the transfer
agent, dividend disbursing agent and shareholder servicing agent functions for
the Fund.
1.10 "Written Instructions" shall mean a written or electronic
communication actually received by the Bank from an Authorized Person or from a
person reasonably believed by the Bank to be an Authorized Person by telex or
any other such system whereby the receiver of such communication is able to
verify through codes or otherwise with a reasonable degree of certainty the
authenticity of the sender of such communication.
1.11 The "1940 Act" refers to the Investment Company Act of 1940, and
the rules and regulations thereunder, all as amended from time to time.
2. Appointment of Custodian
2.1 The Fund hereby constitutes and appoints the Bank as custodian of
all the Securities and moneys owned by or in the possession of the Fund during
the period of this Agreement.
2.2 The Bank hereby accepts appointment as custodian for the Fund and
agrees to perform the duties thereof as hereinafter set forth.
3. Compensation
3.1 The Fund will compensate the Bank for its services rendered under
this Agreement in accordance with the fees set forth in the Fee Schedule
attached as Schedule B and made a part of this Agreement by this reference.
3.2 The parties to this Agreement will agree upon the compensation for
acting as Custodian for any Series hereafter established and designated, and at
the time that the Bank commences serving as such for said Series, such agreement
shall be reflected in a Fee Schedule for the Fund, which shall be attached to
Schedule B of this Agreement.
2
<PAGE>
3.3 Any compensation agreed to hereunder may be adjusted from time to
time by not less than 90 days advance written notice of such fee increase from
Bank to Fund.
3.4 The Bank will bill the Fund as soon as practicable after the end
of the month, and said billings will be detailed in accordance with the Fee
Schedule. The Fund will promptly pay to the Bank the amount of such billing. In
the event such bill is not promptly paid, the Bank may charge against any money
specifically allocated to the Fund such compensation and any expenses incurred
by the Bank in the performance of its duties pursuant to such agreement. The
Bank shall also be entitled to charge against any money held by it and
specifically allocated to the Fund the amount of any loss, damage, liability or
expense incurred with respect to such Fund, including counsel fees, for which it
shall be entitled to reimbursement under the provision of this Agreement.
The expenses which the Bank may charge against such account include,
but are not limited to, the expenses of Sub-Custodians and foreign branches of
the Bank incurred in settling transactions outside of San Francisco or New York
City involving the purchase and sale of Securities of the Fund.
4. Custody of Cash and Securities.
4.1 Receipt and Holding of Assets. The Fund will deliver or cause to
be delivered to the Bank all Securities and moneys owned by it, including cash
received from the issuances of its Shares, at any time during the period of this
Agreement and shall specify the Series to which the Securities and moneys are to
be specifically allocated. The Bank shall physically segregate and keep apart on
its books, the assets of each Series, including separate identification of
Securities held in the Book-Entry System. The Bank will not be responsible for
such Securities and moneys until actually received by it. The Fund shall
instruct the Bank from time to time in its sole discretion, by means of Written
Instructions as to the manner in which and in what amounts Securities and moneys
of a Series are to be deposited on behalf of such Series in the Book-Entry
System or the Depository and specifically allocated on the books of the Bank to
such Series. Securities and moneys of the Fund deposited in the Book-Entry
System or the Depository will be represented in accounts which include only
assets held by the Bank for customers, including but not limited to accounts in
which the Bank acts in a fiduciary or representative capacity.
4.2 Accounts and Disbursements. The Bank shall establish and maintain
a separate account for each Series and shall credit to the separate account of
each Series all moneys received by it for the account of such Series and shall
disburse the same only:
4.2.1 In Payment for Securities purchased for such Series,
as provided in Section 5 hereof;
4.2.2 In payment of dividends or distributions with respect
to the Shares of such Series;
3
<PAGE>
4.2.3 In payment of original issue or other taxes with
respect to the Shares of such Series;
4.2.4 In payment for Shares which have been redeemed by such
Series;
4.2.5 Pursuant to Written Instructions, setting forth the
name of such Series, the name and address of the person to whom the
payment is to be made, the amount to be paid and the purpose for which
payment is to be made; or
4.2.6 In payment of fees and in reimbursement of the
expenses and liabilities of the Bank attributable to such Series.
4.3 Confirmations and Statements. Promptly after the close of business
each day, the Bank shall make available to the Fund information with respect to
all transfers to and from the account of a Series during that day. The Bank need
not send written confirmation or a summary of all such transfers to or from the
account of each Series. Provided, however that upon the written request of
Funds, Bank shall provide within 5 business days of such written request a copy
of any confirmations which include transactions of the Fund. Where securities
purchased by a Series are in a fungible bulk of Securities registered in the
name of the Bank (or its nominee) or shown on the Bank's account on the books of
the Depository or the Book-Entry System, the Bank shall by book entry or
otherwise identify the quantity of those securities belonging to such Series. At
least monthly, the Bank shall furnish the Fund with a detailed statement of the
Securities and moneys held for each Series under this Agreement.
4.4 Registration of Securities and Physical Separation.
All Securities held for a Series which are issued or issuable only in
bearer form, except such Securities as are held in the Book-Entry System, shall
be held by the Bank in that form; all other Securities held for a Series may be
registered, in the name of any duly appointed registered nominee of the Bank as
the Bank may from time to time determine, or in the name of the Book-Entry
System or the Depository of their successor or successors, or their nominee or
nominees. When a reference is made in this Agreement to an action to be taken by
Bank it is understood by the parties that the action may be taken directly or in
the case of book-entry securities, through the appropriate depository. The Fund
agrees to furnish to the Bank appropriate instruments to enable the Bank to hold
or deliver in proper form for transfer, or to register in the name of its
registered nominee or in the name of the Book-Entry System or the Depository,
and Securities which it may hold for the account of a Series. The Bank (or its
sub-custodians) shall hold all such Securities specifically allocated to a
Series which are not held in the Book-Entry System or the Depository in a
separate account for such series in the name of such Series physically
segregated at all times from those of any other person or persons.
4.5 Collection: of Income and Other Matters Affecting Securities.
Unless otherwise instructed to the contrary by Written Instructions, the Bank
shall with respect to all Securities held
4
<PAGE>
for a Series in accordance with this Agreement:
4.5.1 Collect all income due or payable and credit such
income promptly on the contractual settlement date, whether or not
actually received, to the account of the appropriate Series, except
for income from foreign issues. Income which has not been collected
after reasonable effort, within a time agreed upon between the
parties, shall be repaid to the Bank pending final collection at such
date as may be mutually agreed upon by the Fund and the Bank.
4.5.2 Present for payment and collect the amount payable
upon all Securities which may mature or be called, redeemed or
retired, or otherwise become payable. Bank shall make a good faith
effort to inform Fund of any call, redemption or retirement date with
respect to securities which are owned by a Series and held by the Bank
or its nominee. Notwithstanding the foregoing, the Bank shall have no
responsibility to the Fund or a Series for monitoring or ascertaining
of any call, redemption or retirement date with respect to securities
which are held by a Series and held by Bank or its nominee. Nor shall
the Bank have any responsibility or liability to the Fund or to a
Series for any loss by a Series for any missed payment or other
default resulting therefrom unless the Bank received timely general
notification, which shall not be less than 5 business days from the
Fund or the Series specifying the time, place and manner for the
presentment of any put bond owned by a Series and held by the Bank or
its nominee. The Bank shall not be responsible and assumes no
liability to the Fund or a Series for the accuracy or completeness of
any notification the Bank shall provide to the Fund or a series with
respect to put securities;
4.5.3 Execute any necessary declarations or certificates of
ownership under the Federal income tax laws or the laws or regulations
of any other taxing authority now or hereafter in effect; and
4.5.4 Hold for the account of each Series all rights and
other Securities issued with respect to any Securities held by the
Bank hereunder for such Series.
4.6 Delivery of Securities and Evidence of Authority. Upon receipt of
Written Instructions, the Bank shall:
4.6.1 Execute and deliver or cause to be executed and
delivered to such persons as may be designated in such Written
Instructions, proxies, consents, authorization, and any other
instruments whereby the authority of the Fund as owner of any
Securities may be exercised;
4.6.2 Deliver or cause to be delivered any Securities held
for a Series in exchange for other Securities or cash issued or paid
in connection with the liquidation, reorganization, refinancing,
merger, consolidation or recapitalization of any Fund, or the exercise
of any conversion privilege;
4.6.3 Deliver or cause to be delivered any Securities held
for a Series to any protective committee, reorganization committee or
other person in connection with the
5
<PAGE>
reorganization, refinancing, merger, consolidation or recapitalization
or sale of assets of any Fund, and receive and hold under the terms of
this Agreement in the separate (bookkeeping) account for each Series
such certificates of deposit, interim receipts or other instruments or
documents as may be issued to it to evidence such delivery;
4.6.4 Make or cause to be made such transfers or exchanges
of the assets and take such steps as shall be stated in said Written
Instructions to be for the purpose of effectuating any duly authorized
plan of liquidation, reorganization, merger, consolidation or
recapitalization of the Fund;
4.6.5 Deliver Securities owned by any Series upon sale of
such Securities for the account of such Series pursuant to Section 5;
4.6.6 Deliver Securities owned by any Series upon the
receipt of payment in connection with any repurchase agreement related
to such Securities entered into by such Series;
4.6.7 Deliver Securities owned by any Series to the issuer
thereof or its agent when such Securities are called, redeemed,
retired or otherwise becomes payable; provided, however, that in any
such case the cash or other consideration is to be delivered to the
Bank.
4.6.8 Deliver Securities owned by any Series in connection
with any loans of Securities made by such Series but only against
receipt of adequate collateral as agreed upon from time to time by the
Bank and the Fund which may be in any form permitted under the 1940
Act or any interpretations thereof issued by the Securities and
Exchange Commission or its staff;
4.6.9 Deliver Securities owned by any Series for delivery as
security in connection with any borrowings by such Series requiring a
pledge of Series assets, but only against receipt of amount borrowed;
4.6.10 Deliver Securities owned by any Series upon receipt
of instructions from such Series for delivery to the Transfer Agent or
to the holders of Shares of such Series in connection with
distributions in kind, as may be described from time to time in the
Series' Prospectus, in satisfaction of requests by holders of Shares
for repurchase or redemption; and
4.6.11 Deliver Securities owned by any Series for any other
proper business purpose, but only upon receipt of, in addition to
Written Instructions, a certified copy of a resolution of the Board of
Directors signed by an Authorized Person and certified by the
Secretary or Assistant Secretary of the Fund, specifying the
Securities to be delivered, setting forth the purpose for which such
delivery is to be made, declaring such purpose to be a proper business
purpose, and naming the person or persons to whom delivery of such
Securities shall be made.
4.7 Endorsement and Collection of Checks. Etc. The Bank is hereby
authorized to endorse and collect all checks, drafts or other orders for the
payment of money received by the
6
<PAGE>
Bank for the account of a Series.
5. Purchase and Sale of Investments of the Series.
5.1 Promptly after each purchase of Securities for a Series, the Fund
shall deliver to the Bank Written Instructions specifying with respect to each
purchase: (1) the name of the Series to which such Securities are to be
specifically allocated; (2) the name of the issuer and the title of the
Securities; (3) the number of shares or the principal amount purchased and
accrued interest, if any; (4) the date of purchase and settlement; (5) the
purchase price per unit; (6) the total amount payable upon such purchase; (7)
the name of the person from whom or the broker through whom the purchase was
made, if any; (8) whether or not such purchase is to be settled through the
Book- Entry System or the Depository; and (9) whether the Securities purchased
are to be deposited in the Book-Entry System or the Depository. The Bank shall
receive all Securities purchased by or for a Series and upon receipt of such
Securities shall pay out of the moneys held for the account of such Series the
total amount payable upon such purchase, provided that the same conforms to the
total amount payable as set forth in such Written Instructions.
5.2 Promptly after each sale of Securities of a Series, the Fund shall
deliver to the Bank Written Instructions specifying with respect to such sale:
(1) the name of the Series to which the Securities sold were specifically
allocated; (2) the name of the issuer and the title of the Securities; (3) the
number of shares or principal amount sold, and accrued interest, if any; (4) the
date of sale; (5) the sale price per unit; (6) the total amount payable to the
Series upon such sale; (7) the name of the broker through whom or the person to
whom the sale was made; and (8) whether or not such sale is to be settled
through the Book-Entry System or the Depository. The Bank shall deliver or cause
to be delivered the Securities to the broker or other person designated by the
Fund upon receipt of the total amount payable to such Series upon such sale,
provided that the same conforms to the total amount payable to such Series as
set forth in such Written Instructions. Subject to the foregoing, the Bank may
accept payment in such form as shall be satisfactory to it, and may deliver
Securities and arrange for payment in accordance with the customs prevailing
among dealers in Securities.
6. Payment of Dividends or Distributions.
6.1 The Fund shall furnish to the Bank the resolution of the Board of
Directors of the Fund certified by the Secretary or Assistant Secretary (i)
authorizing the declaration of dividends or distributions with respect to a
Series on a specified periodic basis and authorizing the Bank to rely on Written
Instructions specifying the date of the declaration of such dividend or
distribution, the date of payment thereof, the record date as of which
shareholders entitled to payment shall be determined, the amount payable per
share to the shareholders of record as of the record date and the total amount
payable per share to the shareholders of record as of the record date and the
total amount payable to the Transfer Agent on the payment date, or (ii) setting
forth the date of declaration of any dividend or distribution by a Series, the
date of payment thereof, the record date as of which shareholders entitled to
payment shall be determined, the amount payable per share to
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the shareholders of record as of the record date and the total amount payable to
the Transfer Agent on the payment date.
6.2 Upon the payment date specified in such resolution or Written
Instructions the Bank shall pay out the moneys specifically allocated to and
held for the account of the appropriate Series the total amount payable to the
Transfer Agent of the Fund.
7. Sale and Redemption of Shares of a Series.
7.1 Whenever the Fund shall sell or redeem any Shares of a Series, the
Fund shall deliver or cause to be delivered to the Bank Written Instructions
duly specifying:
7.1.1 The name of the Series whose Shares were sold or
redeemed;
7.1.2 The number of Shares sold or redeemed, trade date, and
price; and
7.1.3 The amount of money to be received or paid by the Bank
for the sale or redemption of such Shares.
7.2 Upon receipt of such money from the Transfer Agent, the Bank shall
credit such money to the separate account of the Series.
7.3 Upon issuance of any Shares of a Series in accordance with the
foregoing provisions of this Section 7, the Bank shall pay, out of the moneys
specifically allocated and held for the account of such Series, all original
issue or other taxes required to be paid in connection with such issuance upon
the receipt of Written Instructions specifying the amount to be paid.
7.4 Upon receipt from the Transfer Agent of advice setting forth the
number of Shares of a Series received by the Transfer Agent for redemption and
that such Shares are valid and in good form for redemption, the Bank shall make
payment to the Transfer Agent out of the moneys specifically allocated to and
held for the account of the Series.
8. Indebtedness.
8.1 The Fund will cause to be delivered to the Bank by any bank
(excluding the Bank) from which the Fund borrows money for temporary
administrative or emergency purposes using Securities as collateral for such
borrowings, a notice or undertaking in the form currently employed by any such
bank setting forth the amount which such bank will loan to the Fund against
delivery of a stated amount of collateral. The Fund shall promptly deliver to
the Bank Written Instructions stating with respect to each such borrowing: (1)
the name of the Series for which the borrowing is to be made; (2) the name of
the bank; (3) the amount and terms of the borrowing, which may be set forth by
incorporating by reference an attached promissory note, duly endorsed by the
Fund, or other loan agreement; (4) the time and date, if known, on which the
loan is to be entered into (the
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"borrowing date"); (5) the date on which the loan becomes due and payable; (6)
the total amount payable to the Fund for the separate account of the Series on
the borrowing date; (7) the market value of Securities to be delivered as
collateral for such loan, including the name of the issuer, the title and the
number of shares or the principal amount of any particular Securities; (8)
whether the Bank is to deliver such collateral through the Book-Entry System or
the Depository; and (9) a statement that such loan is in conformance with the
1940 Act and the Series' Prospectus.
8.2 Upon receipt of the Written Instructions referred to above, the
Bank shall deliver on the borrowing date the specified collateral and the
executed promissory note, if any, against delivery by the lending bank of the
total amount of the loan payable, provided that the same conforms to the total
amount payable as set forth in the Written Instructions. The Bank may, at the
option of the lending bank keep such collateral in its possession, but such
collateral shall be subject to all rights therein given the lending bank by
virtue of any promissory note or loan agreement. The Bank shall deliver as
additional collateral in the manner directed by the Fund from time to time such
Securities specifically allocated to such Series as may be specified in Written
Instructions to collateralize further any transaction described in this Section
8. The Fund shall cause all Securities released from collateral status to be
returned directly to the Bank, and the Bank shall receive from time to time such
return of collateral as may be tendered to it. In the event that the Fund fails
to specify in Written Instructions all of the information required by this
Section 8, the Bank shall not be under any obligation to deliver any Securities.
Collateral returned to the Bank shall be held hereunder as it was prior to being
used as collateral.
9. Persons Having Access to Assets of the Series.
9.1 No director, officer, employee or agent of the Fund, and no
officer, director, employee or agent of the Advisor, shall have physical access
to the assets of the Fund held by the Bank or be authorized or permitted to
withdraw any investments of the Fund, nor shall the Bank deliver any assets of
the Fund to any such person. No officer, director, employee or agent of the Bank
who holds any similar position with the Fund, the Advisor shall have access to
the assets of the Fund.
9.2 The individual employees of the Bank initially duly authorized by
the Board of Directors of the Bank to have access to the assets of the Fund are
listed on Schedule C which is attached and made a part of this Agreement by this
reference. The Bank shall advise the Fund of any change in the individuals
authorized to have access to the assets of the Fund by written notice to the
Fund.
9.3 Nothing in this Section 9 shall prohibit any officer, employee or
agent of the Fund, or any officer, director, employee or agent of the Advisor,
from giving Written Instructions to the Bank so long as it does not result in
delivery of or access to assets of the Fund prohibited by this Section 9.
10. Concerning the Bank.
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10.1 Standard of Conduct. The Bank shall not be responsible for the
title, validity or genuineness of any property or evidence of title thereto
received by it or delivered by it pursuant to this Agreement and reasonably
believed by it to be valid or genuine and shall be held harmless in acting upon
proper instructions, resolutions, any notice, request, consent, certificate or
other instrument reasonably believed by it to be genuine and to be signed by the
proper party or parties and shall be entitled to receive as conclusive proof of
any fact or matter required to be ascertained by it hereunder, a certificate
signed by the President, a Vice President, the Treasurer, the Secretary or an
Assistant Secretary of the Fund. The Bank may receive and accept a resolution as
conclusive evidence (a) of the authority of any person to act in accordance with
such vote or (b) of any determination or of any action by the Board of Directors
as described in such vote, and such vote may be considered as in full force and
effect until receipt by the Bank of written notice from the Secretary or an
Assistant Secretary to the contrary.
The Bank shall be entitled to rely on and may act upon advice of
counsel (who may be counsel for the Fund) on all matters, and shall be without
liability for any action reasonably taken or omitted pursuant to such advice.
Provided, however, that if such reliance involves a potential material loss to
the Fund, the Bank shall advise the Fund of any such actions to be taken in
accordance with such advice of counsel to the Bank.
The Bank shall be held to the exercise of reasonable care in carrying
out the provisions of this Agreement but shall be liable only for its own
negligent or bad faith acts or wilful misconduct or wilful failures to act by
the Bank and its agents or Employees. Bank shall have no responsibility for
reviewing or questioning the acts or records of any prior custodian. The Fund
shall indemnify the Bank and hold it harmless from and against all losses,
liabilities, demands, claims, actions, expenses, attorneys' fees, and taxes with
respect to each Series which the Bank may suffer or incur on account of being
custodian hereunder except to the extent that such losses, liabilities, demands,
claims, actions, expenses, attorneys fees or taxes arise from the Bank's own
gross negligence or bad faith. Notwithstanding the foregoing the Bank shall be
liable to the Fund for any loss or damage resulting from the use of the
Book-Entry System or the Depository arising by reason of any negligence,
misfeasance or misconduct on the part of the Bank or any of its employees or
agents.
If a Series requires the Bank to take any action with respect to
Securities, which action involves the payment of money or which action may, in
the opinion of the Bank, result in the Bank or its nominee assigned to such
Series being liable for the payment of money or incurring liability of some
other form, such Series, as a prerequisite to requiring the Bank to take such
action, shall, prior to the Bank taking such action, provide indemnity in
writing to the Bank in an amount and form satisfactory to it.
10.2 Limit of Duties. Without limiting the generality of the
foregoing, the Bank shall be under no duty or obligation to inquire into, and
shall not be liable for:
10.2.1 The validity of the issue of any Securities purchased
by any Series, the legality of the purchase thereof, the
permissibility of the purchase thereof under the Fund's governing
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documents, or the propriety of the amount paid therefor;
10.2.2 The legality of the sale of any Securities by any
Series, the permissibility of such sale under the fund's governing
documents, or the propriety of the amount for which the same are sold;
10.2.3 The legality of the issue or the sale of any Shares,
or the sufficiency of the amount to be received therefor;
10.2.4 The legality of the redemption of any Shares, or the
propriety of the amount to be paid therefor;
10.2.5 The legality of the declaration or payment of any
dividend or other distribution of any Series;
10.2.6 The legality of any borrowing for temporary or
emergency administrative purposes.
10.3 No Liability Until Receipt. the Bank shall not be liable for, or
considered to be the custodian of, any money, whether or not represented by any
check, draft, or other instrument for the payment of money, received by it on
behalf of any Series until the Bank actually receives and collects such money
directly or by the final crediting of the account representing the Fund's
interest in the Book-Entry System or the Depository.
10.4 Collection Where Payment Refused. The Bank shall not be under any
duty or obligation to take action to effect collection of any amount, if the
Securities upon which such amount is payable are in default, or if payment is
refused after due demand or presentation, unless and until (a) it shall be
directed to take such action by Written Instructions and (b) it shall be assured
to its satisfaction of reimbursement of its costs and expenses in connection
with any such action.
10.5 Appointment of Agents and Sub-Custodians. The Bank may appoint
one or more banking institutions, including but not limited to banking
institutions located in foreign countries, to act as Depository or Depositories
or as Sub-Custodian or as Sub-Custodians of Securities and moneys at any time
owned by any Series, upon terms and conditions specified in Written
Instructions. The Bank shall use reasonable care in selecting a Depository
and/or Sub- Custodian located in a country other than the United States
("Foreign Sub-Custodian"), and shall oversee the maintenance of any Securities
or moneys of the Fund by any Foreign Sub-Custodian.
10.6 No Duty to Ascertain: Authority. The Bank shall not be under any
duty or obligation to ascertain whether any Securities at any time delivered to
or held by it for the Fund and specifically allocated to a Series are such as
may properly be held by the Series and specifically allocated to such Series
under the provisions of the Declaration of Fund and the Series' Prospectus.
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10.7 Reliance on Certificates and Instructions. The Bank shall be
entitled to rely upon any Written Instructions or Oral Instructions actually
received by the Bank pursuant to the applicable Sections of this Agreement and
reasonably believed by the Bank to be genuine and to be given by an Authorized
Person. The Fund agrees to forward to the Bank Written Instructions from an
Authorized Person confirming such Oral Instructions in such manner so that such
Written Instructions are received by the Bank, whether by hand delivery, telex,
or otherwise, by the close of business on the same day that such Oral
Instructions are given to the Bank. The Fund agrees that the fact that such
confirming instructions are not received by the Bank shall in no way affect the
validity for the transactions or enforceability of the transactions hereby
authorized by the Fund. The Fund agrees that the Bank shall incur no liability
to the Fund in acting upon Oral Instructions given to the Bank hereunder
concerning such transactions provided such instructions reasonably appear to
have been received from a duly Authorized Person.
10.8 Inspection of Books and Records. The books and records of the
Bank regarding the Fund shall be open to inspection and audit at reasonable
times by officers and auditors employed by the Fund and by employees of the
Securities and Exchange Commission. The Bank shall provide the Fund, upon
request, with any report obtained by the Bank on the system of internal
accounting control of the Book-Entry System or the Depository and with such
reports on its own systems of internal accounting control as the Fund may
reasonably request from time to time. Provided, however, that in the event that
the Fund shall require a report of internal accounting control produced by the
auditors of the Series rather than of the Bank, then such report shall be
prepared at the expense of the Series, and the Series agrees to pay for the time
expended by Bank on such audit and report at the hourly rate set forth on the
Fee agreement.
11. Term and Termination.
11.1 This Agreement shall become effective on the date first set forth
above (the "Effective Date") and shall continue in effect thereafter as the
parties may mutually agree.
11.2 Either of the parties hereto may terminate this Agreement with
respect to any Series by giving to the other party a notice in writing
specifying the date of such termination, which shall be not less than 90 days
after the date of receipt of such notice. In the event such notice is given by
the Fund, it shall designate a successor custodian or custodians, which shall be
a person qualified to so act under the 1940 Act. In the event such notice is
given by the Bank, the Fund shall, on or before the termination date, deliver to
the Bank, Written Instructions designating a successor Custodian or Custodians.
In the absence of such designation by the Fund, the Bank may designate a
successor Custodian, which shall be a person qualified to so Act under the 1940
Act. If the Fund fails to designate a successor Custodian for any Series, the
Fund shall upon the date specified in the notice of termination of this
Agreement and upon the delivery by the Bank of all Securities (other than
Securities held in the Book-Entry Systems which cannot be delivered to the Fund)
and moneys then owned by such Series, be deemed to be its own Custodian and the
bank shall thereby be relieved of all duties and responsibilities pursuant to
this Agreement, other than the duty with respect to Securities held in the
Book-Entry system which cannot be delivered to the Fund.
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11.3 Upon the date set forth in such notice under paragraph (b) of
this Section, this Agreement shall terminate to the extent specified in such
notice, and the Bank shall upon receipt of a notice of acceptance by the
successor Custodian on that date deliver directly to the successor Custodian all
Securities and moneys then held by the Bank and specifically allocated to the
Series or Series specified, after deducting all fees, expenses and other amounts
for the payment or reimbursement of which it shall then be entitled with respect
to such Series or Series.
12. Additional Services by Bank.
12.1 If allowed by the prospectus, Investment Manager may direct that
the assets of any Series be invested in deposits in Bank or its affiliates
bearing a reasonable rate of interest.
12.2 Other Bank Services. Any authorized person may direct Bank to
utilize other services or facilities provided by BanCal Tri-State Corp.
13. Miscellaneous.
13.1 Annexed hereto as Schedule C is a certification signed by two of
the present Directors of the Fund setting forth the names and the signatures of
the present Authorized Persons. The Fund agrees to furnish to the Bank a new
certification in similar form in the event that any such present Authorized
Person ceases to be such an Authorized Person or in the event that other or
additional Authorized Persons are elected or appointed. Until such new
certification shall be received, the Bank shall be fully protected in acting
under the provisions of this Agreement upon Oral Instructions or signatures of
the present Authorized Persons as set forth in the last delivered certification.
13.2 Annexed hereto as Appendix B is a certification signed by two of
the present Directors of the Fund setting forth the names and the signatures of
the present Directors of the Fund. The Fund agrees to furnish to the Bank a new
certification in similar form in the event any such present Director ceases to
be a Director of the Fund or in the event that other or additional Directors are
elected or appointed. Until such new certification shall be received, the Bank
shall be fully protected in acting under the provisions of this Agreement upon
the signature of the officers as set forth in the last delivered certification.
13.3 Any notice or other instrument in writing, authorized or required
by this Agreement to be given to the Bank, shall be sufficiently given if
addressed to the Bank and mailed or delivered to it at its offices at:
The Bank of California, N.A.
Mutual Fund Services Dept., Trust Group
457 Sansome Street, 11th Floor
San Francisco, California 94111
or such other place as the Bank may from time to time designate in writing.
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13.4 Any notice or other instrument in writing, authorized or required
by this Agreement to be given to the Fund, shall be sufficiently given if
addressed to the Fund and mailed or delivered to it at its offices at:
First Pacific Mutual Fund, Inc.
1270 Queen Emma Street Suite 607
Honolulu, Hawaii 96813
or at such other place as the Fund may from time to time designate in writing.
13.5 This Agreement may not be amended or modified in any manner
except by a written agreement executed by both parties with the same formality
as this Agreement, and as may be permitted or required by the 1940 Act.
13.6 This Agreement shall extend to and shall be binding upon the
parties hereto, and their respective successors and assigns; provided, however,
that this Agreement shall not be assignable by the Fund without the written
consent of the Bank, or by the Bank without the written consent of the Fund
authorized or approved by a resolution of the Board of Directors of the Fund,
and any attempted assignment without such written consent shall be null and
void.
13.7 This Agreement shall be construed in accordance with the laws of
the State of California.
13.8 It is expressly agreed to that the obligations of the Fund
hereunder shall not be binding upon any of the Directors, shareholders,
nominees, officers, agents or employees of the Fund, personally, but bind only
the property of the Fund. The execution and delivery of this Agreement have been
authorized by the Directors of the Fund and signed by an authorized officer of
the Fund, acting as such, and neither such authorization by such Directors nor
such execution and delivery by such officer shall be deemed to have been made by
any of them individually or to impose any liability on any of them personally,
but shall bind only the property of the Fund.
13.9 The captions of the Agreement are included for convenience of
reference only and in no way define or delimit any of the provisions hereof or
otherwise affect their construction or effect.
13.10 This Agreement may be executed in any number of counterparts ,
each of which shall be deemed to be an original, but such counterparts shall,
together, constitute only one instrument.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunder duly authorized as of the day
and year first above written.
First Pacific Mutual Fund, Inc.
By:____________________________________
Terrence K.H. Lee, President
Date: June 24, 1994
The Bank of California, N.A.
By:____________________________________
Mary Fowler, Vice President
Date: June 22, 1994
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Schedule A - Series
First Hawaii Intermediate Municipal Fund
First Pacific Mutual Fund, Inc.
By:____________________________________
Terrence K.H. Lee, President
Date: June 24, 1994
The Bank of California, N.A.
By:____________________________________
Mary Fowler, Vice President
Date: June 22, 1994
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Schedule B
Mutual Fund Services
Schedule of Fees
Custody
$3,000 minimum per year per portfolio - or 2 basis points for the first fifty
million and 1.5 basis points in excess of fifty million per portfolio. The Bank
will offset 100% of the incurred fee with credits received for uninvested cash
balances. The Bank will retain as fee all credits received from cash balances
whether they are smaller or larger than the fee quoted above.
There will be no additional charges.
First Pacific Mutual Fund, Inc.
By:____________________________________
Terrence K.H. Lee, President
Date: June 24, 1994
The Bank of California, N.A.
By:____________________________________
Mary Fowler, Vice President
Date: June 22, 1994
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Schedule C
Authorized Persons
Part I - Access Persons of Bank
Mary Fowler
Mark Peterson
Audrey Bough
Cari Umekubo
Charles Cassilas
Jeffrey Gimm
Part II - Authorized Persons of the Fund
Terrence K.H. Lee
Jean M. Chun
Charlotte A. Meyer
Louis F. D'Avanzo
Part III - Directors
First Pacific Mutual Fund, Inc.
By:____________________________________
Terrence K.H. Lee, President
Date: June 24, 1994
The Bank of California, N.A.
By:____________________________________
Mary Fowler, Vice President
Date: June 22, 1994
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<PAGE>
Amendment to Schedule A of the
Custody Contract dated June 24, 1994 Between
the First Pacific Mutual Fund, Inc.
and
Bank of California, N.A.
First Hawaii Intermediate Municipal Fund
First Hawaii Municipal Bond Fund
First Pacific Mutual Fund, Inc.
By:____________________________________
Terrence K.H. Lee, President
Date: September 2, 1994
The Bank of California, N.A.
By:____________________________________
Mary Fowler, Vice President
Date: August 29, 1994
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Amendment to Schedule C of the
Custody Contract dated June 24, 1994 Between
the First Pacific Mutual Fund, Inc.
and
The Bank of California, N.A.
Part I- Access Persons of Bank
Mary Fowler
Mark Peterson
Audrey Bough
Cari Umekubo
Charles Casillas
Part II- Authorized Persons of the Fund
Terrence K.H. Lee
Jean M. Chun
Charlotte A. Meyer
Louis D'Avanzo
First Pacific Mutual Fund, Inc.
By:____________________________________
Terrence K.H. Lee, President
Date: September 2, 1994
The Bank of California, N.A.
By:____________________________________
Mary Fowler, Vice President
Date: August 29, 1994
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WIRE TRANSFER AGREEMENT
This Agreement is entered into between the Bank of California, N.A. ("Bank"),
and the undersigned ("Client"), effective upon execution of the Agreement by
Client and acceptance by Bank. Acceptance will be deemed to have occurred on the
date Client is authorized to initiate Payment Orders as defined below. Pursuant
to the terms and conditions stated herein, Appendix A which is attached hereto,
and the information contained in the applicable Wire Transfer Specification
Sheet or such other written document provided by Client ("Spec Sheet"), Bank
agrees as follows. During normal Bank business hours Bank will allow Client
through its representatives designated in the Spec Sheet ("Authorized Client
Representative") to initiate wire transfer requests from Client's account(s) at
Bank ("Account(s)") and to initiate outgoing reverse wire transfer requests to
Client's Account(s), and, if authorized by Client, Bank agrees to honor incoming
reverse wire transfer requests for funds from banks requesting Bank to debit
Client's Account(s). The preceding transfer requests are collectively referred
to as "Payment Orders" in this Agreement.
SPEC SHEET. Clients will initiate Payment Orders in accordance with the Spec
Sheet, regardless of any multiple signature requirements on the Account(s)
listed on the Spec Sheet. Changes to the Spec Sheet may be made by written
notice thereof by Client, and these changes will be effective after actual
receipt by Bank and after Bank has had a reasonable opportunity to act on the
notice.
SECURITY PROCEDURES. Client and Bank shall comply with the security procedure
requirements described in Appendix A, in any applicable user guide, and in any
applicable confidential code confirmation. These security procedures are not
designed to detect Client error. A Payment Order shall not be considered
received by Bank until Bank has performed all verification procedures set forth
in this Agreement.
PROCESSING, TRANSMITTAL AND SETTLEMENT BY BANK. Bank shall use its best efforts
to transmit Payment Orders on the day of receipt if receipt is prior to Bank's
cut-off time, which is set forth in Appendix A. Bank may change its cut-off time
without prior notice to Client.
Client agrees that reverse wire agreements shall be in effect with any bank
sending Bank an incoming reverse wire request.
Client understands and agrees that Bank may not effect requests for Payment
Orders in the order of receipt. Payment Orders made by telephone may be recorded
and Client hereby consents to such recording without being notified at the time
of each such recording. The decision to record any telephone conversation shall
be solely by Bank, and Bank shall have no liability for failing to do so.
Client agrees to maintain sufficient collected balances to effect Payment
Orders. Client authorizes Bank to charge its Account(s) for any Payment Order
Bank reasonably believes is authorized by Client. Bank will be under no
obligation to honor a Payment Order from a Client Account which (1) exceeds
Client's collected funds on deposit with Bank, (2) is not authenticated pursuant
to, or
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is not otherwise in accordance with, this Agreement, (3) Bank has reason to
believe may not be authorized by Client, (4) is incomplete or ambiguous, (5)
involves funds subject to a hold, dispute, or legal process preventing their
withdrawal, or is otherwise deemed unsatisfactory to Bank in its sole
discretion.
In the event there are insufficient available funds in the Account to cover
Client's obligations under this Agreement, Client agrees that Bank may debit any
account maintained by Client with Bank or that Bank may set off against any
amount it owes to Client, in order to obtain payment of Client's obligations
under this Agreement. If Bank creates an overdraft to complete a Payment Order,
Client agrees to immediately repay Bank the amount of such overdraft, whether or
not demand is made, as well as any other applicable charges previously disclosed
to Client.
TERMINAL-INITIATED PAYMENT ORDERS. For terminal-initiated payment orders using
Bank's Terminal Funds Transfer (TFT) product, Client will furnish, at Client's
expense, its own computer hardware and software necessary to access Bank's wire
transfer system ("System"). For all terminal-initiated payment orders, Client
agrees to follow the instructions contained in the applicable terminal-initiated
wire transfer user's guide ("Guide") in making any terminal-initiated Payment
Order. Bank will have no obligation to verify the validity of a Payment Order
which has been received on the System.
OWNERSHIP AND CONFIDENTIALITY. Client acknowledges that all computer programs,
data bases, any trade secrets, processes, proprietary data and information or
documentation related thereto made available by Bank ("Products") are the
exclusive and confidential property of Bank or the third parties from whom Bank
has secured the right to use such computer programs and data bases. Client will
treat as confidential and will not disclose or otherwise make available any of
the Products in any form, to any person other than employees of Client. Client
will instruct its employees who have access to the Products to keep the same
confidential by using the same care and discretion that Client uses with respect
to its own confidential property and trade secrets. Upon termination of this
Agreement, Client will return to Bank any and all copies of the Products which
are in its possession.
CLIENT REVIEW. Client will examine any confirmation or Account statement Bank
provides to Client reflecting a Payment Order and will report any discrepancies
to Bank within thirty (30) days after receipt of the advice or Account
statement, whichever is earlier. Client agrees Bank will not be liable for any
losses resulting from Client's failure to report any discrepancies within this
time.
NOTICE OF INCOMING WIRE TRANSFER. Client agrees that, unless specifically agreed
to in writing by Bank, Bank is not obligated to provide notice to Client of
receipt of an incoming wire transfer of funds other than on the Account
statement.
CANCELLATION OR AMENDMENT BY CLIENT. Client shall have no right to cancel or
amend a Payment Order after its receipt by Bank. However, Bank shall use
reasonable efforts to act on a request by Client for cancellation of a Payment
Order prior to transmitting it or, in the case of an on-us payment order, prior
to crediting a beneficiary's account, but shall have no liability if such
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cancellation is not effected. A request to amend a Payment Order shall be
considered a request to cancel the Payment Order.
FUNDS TRANSFER RISK. Client assumes certain risks and responsibilities with
respect to the actions of Authorized Client Representatives and third parties
authorized by Client to act on its behalf. Client recognizes and agrees that no
individual should be allowed to initiate Payment Orders in the absence of proper
supervision and adequate safeguards. Client assumes full responsibility for any
and all loss, liability and damage associated with transfers, omissions and/or
instructions given to Bank by Authorized Client Representatives, individuals
purporting to be Authorized Client Representatives, or said third parties acting
or purporting to act on Client's behalf.
PROVISIONAL PAYMENT; INDEMNITY. Client represents to Bank and agrees that the
payment system used to effect transfer of a Payment Order may contain rules,
including without limitation a provision making payment by a receiving bank to
another receiving bank or beneficiary provisional until receipt by the receiving
bank of final settlement for such payment order. Client agrees that, if such
settlement is not received, the receiving bank shall be entitled to a refund
from another receiving bank or beneficiary of the amount credited and Client
shall not be deemed to have paid the receiving bank or beneficiary the amount of
the payment order. Client shall indemnify Bank against any loss, liability or
expense (including reasonable attorneys' fees and expenses) resulting from or
arising out of any breach of the foregoing.
LIABILITY, LIMITATIONS ON LIABILITY; INDEMNITY.
(a) Bank shall be responsible only for performing the services expressly
provided for in this Agreement, and shall be liable only for its negligence in
performing those services. Bank shall not be responsible for Client's acts or
omissions (including without limitation the amount, accuracy, timeliness of
transmittal or authorization of any Payment Order received from Client) or those
of any other person, including without limitation any Federal Reserve Bank or
transmission or communications facility, any receiving bank or any beneficiary,
and no such person shall be deemed Bank's agent. Client agrees to indemnify Bank
against any loss, liability or expense (including reasonable attorneys' fees and
expenses) resulting from or arising out of any claim of any person that Bank is
responsible for any act or omission of Client or any other person described in
this Section. The foregoing shall apply to the services provided for in this
Agreement, except as otherwise required by applicable law.
(b) IN NO EVENT SHALL BANK BE LIABLE FOR ANY CONSEQUENTIAL, SPECIAL, PUNITIVE OR
INDIRECT LOSS OR DAMAGE WHICH CLIENT MAY INCUR OR SUFFER IN CONNECTION WITH THIS
AGREEMENT, including without limitation loss or damage from subsequent wrongful
dishonor resulting from Bank's acts or omissions pursuant to this Agreement.
(c) Without limiting the generality of the foregoing provisions, Bank shall be
excused from failing to act or delay in acting if such failure or delay is
caused by legal constraint, interruption or transmission or communication
facilities, equipment failure, war, emergency conditions or other
23
<PAGE>
circumstances beyond Bank's control. In addition, Bank shall be excused from
failing to transmit or delay in transmitting a Payment Order if such transmittal
would result in Bank's having exceeded any limitation upon its intra-day net
funds position established pursuant to present or future Federal Reserve
guidelines or in Bank's otherwise violating any provision of any present or
future risk control program of the Federal Reserve or any present of future
statute, regulation or government policy to which Bank is subject.
COMPLIANCE WITH SECURITY PROCEDURES.
(a) Except as otherwise required by applicable law, if a Payment Order (or a
request for cancellation or amendment of a Payment Order) received by Bank
purports to have been transmitted or authorized by Client, it will be deemed
effective as Client's Payment Order (or request) and Client shall be obligated
to pay Bank the amount of such Payment Order as provided herein even though the
Payment Order (or request) was not authorized by Client, provided Bank acted in
compliance with the security procedure referred to in Appendix A with respect to
such Payment Order.
(b) If a Payment Order (or request for cancellation or amendment of an Payment
Order) received by Bank was transmitted or authorized by Client, Client shall be
obligated to pay the amount of the Payment Order as provided herein whether or
not Bank complied with the security procedure referred to in Appendix A with
respect to that Payment Order.
INCONSISTENCY OF NAME AND BANK NUMBER; DESIGNATION OF FUNDS TRANSFER SYSTEM
AND/OR INTERMEDIARY BANK. Client acknowledges and agrees that, if a Payment
Order describes the intermediary or beneficiary's bank inconsistently by name
and bank number, execution of the Payment Order by Bank, an intermediary bank or
a funds transfer system may be made on the basis of the bank number or bank name
even if they are inconsistent, and that Client's obligation to pay the amount of
the Payment Order to Bank is not excused in such circumstances. In the event
Client fails to specify a funds transfer payment system, communication system or
intermediary bank when initiating a particular payment order, Client hereby
instructs Bank to use the following: FedWire System, Clearing House for
Interbank Payment System, Society for World-Wide Interbank Financial
Telecommunications, any intermediary bank identified by the foregoing systems as
a correspondent bank of the beneficiary bank, or any payment system or
intermediary bank which Bank deems reasonable under the circumstances. Client
agrees to be bound by the rules of any applicable funds transfer payment system.
INCONSISTENCY OF NAME AND ACCOUNT NUMBER. Client acknowledges and agrees that,
if an Payment Order describes the beneficiary inconsistently by name and account
number, payment of the Payment Order transmitted by Bank to the beneficiary's
bank might be made by that institution (or by Bank in the case of an on-us
Payment Order) on the basis of the account number even if it identifies a person
different from the named beneficiary, and that Client's obligation to pay the
amount of the Payment Order to Bank is not excused in such circumstances.
PAYMENT FOR SERVICES. Client shall pay Bank the charges for the services
provided for
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<PAGE>
herein as set forth in pricing schedule previously provided to Client. Such
charges are in addition to the fees or charges provided for in the agreement
between Bank and Client with respect to the Account (the "Account Agreement").
AMENDMENTS. From time to time Bank may amend any of the terms and conditions
contained in this Agreement, including without limitation, any cut-off time, any
business day, and any part of Appendices A and B attached hereto. Such
amendments shall become effective upon mailing or otherwise giving notice to
Client or at such later date as may be stated in Bank's notice to Client.
NOTICES, INSTRUCTIONS, ETC. Bank shall be entitled to rely on any written notice
or other written communication believed by it in good faith to be genuine and to
have been signed by an Authorized Client Representative, and any such
communication shall be deemed to have been signed by such person. Except as
otherwise expressly provided herein, Bank shall not be required to act upon any
notice or instruction received from Client or any other person, or to provide
any notice or advice to Client or any other person with respect to any matter.
DATA RETENTION. Client shall retain data on file adequate to reconstruct Payment
Orders for one year following the date of their transmittal by Bank, and shall
provide such data to Bank upon its request.
TERMINATION. Client may terminate this Agreement at any time. Such termination
shall be effective on the second business day following the day of Bank's actual
receipt of written notice of such termination or such later date as is specified
in that notice. Bank reserves the right to terminate this Agreement immediately
upon providing written notice of such termination to Client. Any termination of
this Agreement shall not affect any of Client's obligations arising prior to
such termination.
ENTIRE AGREEMENT. This Agreement (including the Appendices attached hereto),
together with the Account Agreement, is the complete and exclusive statement of
the agreement between Bank and Client with respect to the subject matter hereof
and supersedes any prior agreement(s) between Bank and Client with respect to
such subject matter. In the event of any inconsistency between the terms of this
Agreement and the Account Agreement, the terms of this Agreement shall govern.
GENERAL.
(a) Client may not assign this Agreement or any of the rights or duties
hereunder to any person without Bank's prior written consent.
(b) This Agreement shall be binding upon and inure to the benefit of the parties
hereto and their respective legal representatives, successors and assigns. This
Agreement is not for the benefit of any other person, and no other person shall
have any right against Bank or Client hereunder.
25
<PAGE>
(c) Headings are used for reference purposes only and shall not be deemed a part
of this Agreement.
(d) This Agreement shall be construed in accordance with and governed by the
laws of the State of California.
(e) A Bank business day is Monday through Friday, excluding Bank holidays.
(f) In the absence of manifest error, Bank records shall be deemed conclusive
evidence of a Payment Order and related communications.
(g) Client agrees that no action, suit or other proceeding to recover for any
loss claimed under this Agreement shall be brought against Bank unless such
action, suit or proceeding shall have been commenced within one year from
receipt by Client of notification identifying the applicable Payment Order.
(h) Notwithstanding any provision of the California Commercial Code to the
contrary, the parties agree that attorney's fees will not be awarded in any
action regarding this Agreement.
CLIENT: First Pacific Recordkeeping, Inc.
By:_____________________________________
Terrence K.H. Lee, President
Date: June 24, 1994
26
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Appendix A
SECURITY PROCEDURES - TELEPHONE-INITIATED WIRE REQUESTS TO BANK'S DOMESTIC WIRE
TRANSFER ROOM. Payment Orders may be initiated by telephone by an Authorized
Client Representative who is designated in the Spec Sheet as authorized to
initiate Payment Orders. When initiating a Payment Order, an Authorized Client
Representative shall present his/her personal identification number (PIN), which
shall previously have been provided to Client by Bank.
In addition to requiring a PIN when a Payment Order is initiated, Bank's
standard procedure to verify Client's authorization for non-repetitive,
telephone-initiated Payment Orders made to Bank's domestic wire transfer room
consists of a call-back whereby Bank telephones a second Authorized Client
Representative. The second Authorized Client Representative must also present
his or her PIN. This call-back procedure may be based on a non-disclosed floor
limit (a dollar amount under which a call-back will not be made). This call-back
procedure will not be used for repetitive Payment Orders unless Client has
specifically requested Bank in writing to do so. Bank will have no duty other
than as stated herein to verify that a Payment Order is made by an Authorized
Client Representative.
SECURITY PROCEDURES - TERMINAL-INITIATED WIRE TRANSFERS. An authorized Client
Representative will have access to Bank's System by following the procedures
specified in the applicable Guide. On or before the effective date of this
Agreement Bank will provide Client with the Guide and passwords and/or user
identification number and/or PINs, as applicable (collectively referred to as
Codes), to be used to access the System and make Payment Orders. Client agrees
that it will not issue any single Authorized Client Representative a combination
of Codes that may enable said Representative to make Payment Orders that would
otherwise require two Authorized Client Representatives.
CLIENT RESPONSIBILITY FOR PINS AND CODES, ETC. Client is responsible for
maintaining the confidentiality of all PINs, Codes, and other devices used to
protect the authenticity of a Payment Order. If Client has reason to believe
that any PINs, Codes or devices have or may have become known by, or have or may
become comprised by, unauthorized persons (whether or not employed by Client),
Client agrees to immediately notify Bank by telephone and agrees to confirm oral
notification in writing to Bank within 24 hours. Bank will issue new PINs and
Codes to Client in accordance with Bank's security requirements. Bank reserves
the right to change PINs and Codes at any time by giving reasonable prior notice
to Client.
CUT-OFF TIME. Bank agrees to use its best efforts to act on all Payment Orders
on the day received if receipt is prior to the 2:30 p.m. Pacific Time cut-off
time set by Bank, which time may be changed from time to time without prior
notice.
COMPENSATION. Subject to the foregoing limitations, Bank's liability for loss of
interest resulting from its error or delay shall be calculated by using a rate
equal to the average Federal Funds
27
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rate at the Federal Reserve Bank of New York for the period involved.
NOTICES. Except as otherwise expressly provided herein, all notices will be in
writing and will be mailed by first class mail, postage prepaid, or personally
or electronically delivered to the Client at the address specified on the Spec
Sheet and to Bank as follows: The Bank of California, Wire Transfer Department,
P.O. Box 45000, San Francisco, CA 94145; these addresses may be amended in
writing from time to time. Such notices will be effective upon receipt and,
except as otherwise set forth in the Wire Transfer Agreement, will be deemed to
be received within five days of mailing.
28
EXHIBIT 15(a)
FIRST PACIFIC MUTUAL FUND, INC.
DISTRIBUTION PLAN
WHEREAS, First Pacific Mutual Fund, Inc. (the "Corporation") engages in
business as an open-end management investment company and is registered as such
under the Investment Company Act of 1940, as amended (the "Act").
WHEREAS, First Hawaii Municipal Bond Fund series, First Hawaii Intermediate
Municipal Fund series and First Idaho Tax-Free Fund series are series of the
Corporation operated as open- ended non-diversified management investment
companies and all references to any series of the Corporation will be called the
"Fund" unless expressly noted otherwise.
WHEREAS, each Fund intends to act as a distributor of its shares of capital
stock as defined in Rule 12b-1 under the Act, and the Board of Directors of the
Corporation has determined that there is a reasonable likelihood that adoption
of this Distribution Plan will benefit the Fund and its shareholders.
NOW THEREFORE, the Corporation hereby adopts this Distribution Plan for the
Fund (the "Plan") in accordance with Rule 12b-1 under the Act and containing the
following terms and conditions:
1. The Fund may finance activities which are primarily intended to result
in the sale of its shares in accordance with this Plan. The expenses of such
activities ("Distribution Expenses") shall not exceed .25 of one percent (.25%)
per annum of the First Hawaii Municipal Bond Fund and First Hawaii Intermediate
Municipal Fund average daily net assets. The expenses of such activities
("Distribution Expenses") for the First Idaho Tax-Free Fund shall not exceed .50
of one percent (.50%) per annum of the fund's average daily net assets.
2. The Distribution Expenses provided for in paragraph 1 of this Plan may
be spent by each Fund on any activities primarily intended to result in the sale
of each Fund's shares, including, but not limited to, compensation paid to and
expenses incurred by officers, directors, employees or sales representatives of
the Fund, or broker-dealers or other third parties, in consideration of their
promotional and distribution services, which services may include assistance in
the servicing of shareholder accounts produced by third parties, and may include
promotional, travel, entertainment and telephone expenses, the printing of
prospectuses, and reports for other than existing shareholders, preparation and
distribution of sales literature, and advertising of any type.
3. This Plan shall not take affect until it has been approved by (a) a vote
of at least a majority of the outstanding voting securities of the Fund and (b)
a vote of the Board of Directors of the Corporation, including the affirmative
vote of at least a majority of those Directors who are not "interested persons"
( as defined in the Act) of the Fund and have no direct or indirect financial
interest in the operation of the Plan or in agreements related to the Plan (the
"Rule 12b-1 Directors"),
1
<PAGE>
cast in person at a meeting call for voting on the Plan.
4. Any agreements related to this Plan shall be in writing, the form
thereof must be approved by the Board of Directors (including the disinterested
Directors), and may be terminated at any time in the manner provided for
termination of this Plan in paragraph 7 below.
5. This Plan and agreements hereunder shall continue in effect for so long
as such continuance is specifically approved at least annually in the manner
provided for approval of this Plan in paragraph 3(b).
6. The persons authorized to direct the disposition of Distribution
Expenses paid or payable by the Fund pursuant to this Plan or any related
agreement shall be the President of the Corporation or his designee. The
President shall provide to the Corporation's Directors, and the Directors shall
review at least quarterly, a written report of the Distribution Expenses so
expended and the purposes for which such expenditures were made.
7. This Plan may be terminated at any time by vote of a majority of the
Rule 12b-1 Directors, or by vote of a majority of the outstanding voting
securities of each Fund.
8. This Plan may not be amended to increase materially the limit upon
Distribution Expenses provided in paragraph 1 or to change materially the nature
of such Distribution Expenses provided in paragraph 2 hereof unless such
amendment is approved in the manner provided for in paragraph 3 hereof.
9. While this Plan is in effect, the selection and nomination of Directors
who are not interested persons (as defined in the Act) of the Fund shall be
committed to the discretion of the Directors who are not interested persons.
10. The Fund shall preserve copies of this Plan and any related agreements
and all reports made pursuant to paragraph 6 hereof, for a period of not less
than six (6) years from the date of this Plan, or the agreements or of such
reports, as the case may be, the first two (2) years in an easily accessible
place.
11. It is the opinion of the Corporation's Directors and Officers that the
following are not expenses primarily intended to result in the sale of shares
issued by the Fund: as to the First Hawaii Municipal Bond Fund and First Hawaii
Intermediate Municipal Fund, fees and expenses of registering each Fund as a
broker-dealer or of registering an agent of each Fund under federal or state
laws regulating the sale of securities, provided that no sales commission or
"load" is charged on sales of shares of each Fund; and fees and expenses of
preparing and setting in type the Fund's registration statement under the
Securities Act of 1933. Should such expenses be deemed by a court or agency
having jurisdiction to be expenses primarily intended to result in the sale of
shares issued by each Fund, they shall be considered to be expenses contemplated
by and included in this Distribution Plan, but not subject to the limitation
prescribed in paragraph 1 hereof.
2
<PAGE>
IN WITNESS WHEREOF, the Corporation has executed this Distribution Plan on
behalf of the Fund on the day and year set forth below.
FIRST PACIFIC MUTUAL FUND, INC.
By:____(sig. on orig.)__________________
Terrence K.H. Lee, President
[Corporate Seal]
Attest:__(sig. on orig.)________________
Jean Chun, Secretary
Date:___________________________________
3
EXHIBIT 15(b)
SHAREHOLDER SERVICES AGREEMENT
AGREEMENT dated March 16, 1994, amended, January 29, 1996, between First
Pacific Recordkeeping, Inc. ("FPR"), a Hawaii Corporation and First Pacific
Mutual Fund, Inc. (the "Corporation"), a Maryland Corporation. First Hawaii
Municipal Bond Fund series, First Hawaii Intermediate Municipal Fund series and
First Idaho Tax-Free Fund series are series of the Corporation operated as
open-end, non-diversified management investment companies. All references to any
series of the Corporation will be called the "Fund" unless expressly noted
otherwise.
WITNESSETH:
WHEREAS, each Fund is a non-diversified, open-end management investment
company registered under the Investment Company Act of 1940, as amended (the
"1940 Act"); and
WHEREAS, FPR serves as Transfer Agent to each Fund under a separate
Transfer Agent Agreement and each Fund desires to avail itself of certain
administrative services provided by FPR with regard to personal services of
shareholder accounts which are not covered by the Transfer Agent Agreement; and
WHEREAS, FPR is willing to furnish such services on the terms and
conditions hereinafter set forth.
NOW, THEREFORE, the parties hereto, intending to be legally bound, hereby
agree as follows:
Section 1. Each Fund hereby appoints FPR to administer certain of the
affairs of each Fund for the period and on the terms set forth in this
Agreement. FPR hereby accepts such appointment and agrees during such period to
render the services herein described and to assume the obligations set forth
herein, for the compensation herein provided.
Section 2. FPR shall provide personal servicing of shareholder accounts,
which may include telephone and written conversations, assistance in
redemptions, exchanges, transfers and opening accounts as may be required from
time to time. FPR shall, in addition, provide such additional administrative
management services as it and each Fund may from time to time agree.
Section 3. First Pacific Management Corporation shall oversee all
relationships between the Fund and its Custodian, Transfer Agent and any
accounting services agents, including the supervision of the performance of the
Fund's agreements with such parties.
Section 4. The accounts and records maintained by FPR shall be the property
of
1
<PAGE>
each Fund and shall be made available to each Fund within a reasonable period of
time, upon demand. FPR shall assist each Fund's independent auditors, or upon
approval of each Fund, or upon demand, any regulatory body, in any requested
review of each Fund's accounts and records but shall be reimbursed for all
expenses and employee time invested in any such review outside of routine and
normal periodic reviews. FPR shall supply the necessary data for each Fund's
completion of any necessary tax returns, questionnaires, periodic reports to
shareholders and such other reports and information requests as each Fund and
FPR shall agree upon from time to time.
Section 5. FPR may rely upon the advice of each Fund and counsel to each
Fund and upon statements of each Fund's accountants and other persons believed
by it in good faith to be expert in matters upon which they are consulted, and
FPR shall not be liable for any actions taken in good faith upon such
statements.
Section 6. FPR shall not be liable for any action taken in good faith
reliance upon any authorized Oral Instructions, any Written Instructions and
certified copy of any resolution of the Board of Directors of each Fund or any
other document reasonably believed by FPR to be genuine and to have been
executed or signed by the proper person or persons.
Section 7. Each Fund shall indemnify and hold FPR harmless from any and all
expenses, damages, claims, suits, liabilities, actions, demands and losses
whatsoever arising out of or in connection with any error, omission, inaccuracy
or other deficiency of any information provided to FPR by each Fund, or the
failure of each Fund to provide any information needed by FPR knowledgeably to
perform its functions hereunder. Also, each Fund shall indemnify and hold
harmless FPR from all claims and liabilities (including reasonable expenses for
legal counsel) incurred by or assessed against FPR in connection with the
performance of this Agreement, except such as may arise from FPR's own negligent
action, omission or willful misconduct; provided, however, that before
confessing any claim against it, FPR shall give the Fund reasonable opportunity
to defend against such claim in the name of the Fund or FPR or both.
Section 8. As full compensation for the services performed by FPR, First
Hawaii Municipal Bond Fund and First Hawaii Intermediate Municipal Fund shall
pay FPR a fee at the annualized rate of .10 of one percent (.10%) of the average
daily net assets of the Fund. This fee will be computed daily and be paid
monthly within ten (10) business days after the last six (6) days of each month.
This fee shall be prorated for any fraction of a month at the commencement or
termination of this Agreement. First Idaho Tax-Free Fund will not pay FPR any
fees.
Section 9. Except as required by laws and regulations governing investment
companies, nothing contained in this Agreement is intended to or shall require
FPR, in any capacity hereunder, to perform any functions or duties on any
holiday or other day of special observance on which FPR is closed. Functions or
duties normally scheduled to be performed on such days shall be performed on,
and as of, the next business day on which both each Fund and FPR are open.
Section 10. Either each Fund or FPR may give written notice to the other of
the
2
<PAGE>
termination of this Agreement, such termination to take effect at the time
specified in the notice, which time shall be not less than sixty (60) days from
the giving of such notice. Such termination shall be without penalty.
Section 11. This Agreement may be executed in two or more counterparts,
each of which, when so executed, shall be deemed to be an original, but such
counterparts shall together constitute but one and the same instrument.
Section 12. This Agreement shall extend to and shall be binding upon the
parties hereto and their respective successors and assigns; provided, however,
that this Agreement shall not be assignable by FPR without the approval of each
Fund by a resolution of its Board of Directors.
Section 13. This Agreement shall be governed by the laws of the State of
Hawaii.
3
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
signed by their duly authorized officers as of the day and year first above
written.
FIRST PACIFIC RECORDKEEPING, INC.
By:____(sig. on orig.)__________________
Terrence K.H. Lee, President
Attest:__(sig. on orig.)________________
Jean Chun, Secretary
FIRST PACIFIC MUTUAL FUND, INC.
By:_____________________________________
Terrence K.H. Lee, President
Attest:_________________________________
Jean Chun, Secretary
4
EXHIBIT 15(c)
FIRST PACIFIC SECURITIES, INC.
2756 Woodlawn Drive, Suite #6-201
Honolulu, Hawaii 96822
(808) 988-8088
SELLING DEALER AGREEMENT
First Pacific Securities, Inc., principal underwriter of the capital stock
of the First Idaho Tax- Free Fund series of First Pacific Mutual Fund, Inc.
(hereinafter referred to as the "Fund"), cordially invites you to become a
member of the Selling Group which distributes the Fund's shares. We base our
offer of membership to you on our understanding that you are a member of the
National Association of Securities Dealers, Inc. and also on the understanding
that you agree to act in accordance with the following terms:
1. You and we agree to abide by Rule 26 of the Rules of Fair Practice of
the National Association of Securities Dealers, Inc., and all other rules and
regulations that are now or may become applicable to transactions hereunder.
2. Orders for shares received from you and accepted by us will be executed
at the public offering price applicable to each order as established by the
prospectus of the Fund. The procedure relating to the handling of orders shall
be subject to instructions which we shall forward from time to time to all
members of the Selling Group. All orders are subject to acceptance by us and we
reserve the right in our sole discretion to reject any order.
3. (a) At the time of sale, checks shall be made out to the Fund and the
principal underwriter of the Fund will rebate to you a concession equal to the
amount set forth in the then current prospectus of the Fund.
(b) We agree to pay you a quarterly amount in arrears equal to .40% of
the net asset value of Fund accounts attributable to your sales efforts until
the earlier of the date on which the net assets subject to this Agreement are
redeemed out of the Fund by the shareholder or the date of termination or
material amendment of the Fund's Rule 12b-1 Distribution Plan.
4. As a member of the Selling Group, you agree to purchase shares only from
us as agent for the Fund or from your customers. Purchases from us shall be made
only for the purpose of covering purchase orders already received from your
customers (who may be any persons other than a securities dealer or broker) or
for your own bona fide investment. Purchases from your customers shall be at a
price not less than the net asset value next calculated after receipt by us of a
proper order.
5. You agree that you will not withhold placing customers' orders so as to
profit yourself as a result of such withholding.
1
<PAGE>
6. You agree to sell shares only (a) to your customers at the public
offering price then applicable in accordance with the terms of the prospectus of
the Fund, or (b) to us as agent for the Fund or the Fund itself.
7. Settlements shall be made promptly, but in no case later than three
business days after our acceptance of the order. If payment is not so received
or made, the right is reserved forthwith to cancel the sale or, at our option,
to resell the shares purchased at the then prevailing net asset value, in which
latter case you will agree to be responsible for any loss resulting to us from
your failure to make payment as aforesaid.
8. If any shares sold to you under the terms of this agreement are
repurchased by the Fund or by us as agent for the Fund, you agree to pay
forthwith to us the full amount of the concession allowed to you on the original
sale. We shall notify you of such repurchase within ten days of the date of said
liquidation.
9. All sales will be subject to receipt of shares by us from the Fund. The
Fund and/or we reserve the right in our discretion without notice to you to
suspend sales or withdraw the offering of shares entirely, to change the
offering price as provided in the prospectus or to modify or cancel this
agreement, which shall be construed in accordance with the laws of the State of
Idaho.
10. No person is authorized to make any representations concerning the Fund
or their shares except those contained in the prospectus of the Fund and any
such information as may be released by the Fund as information supplemental to
the prospectus. In purchasing shares from us you shall rely solely on the
representations contained in the prospectus and supplemental information above
mentioned.
11. Additional copies of the prospectus and of any printed information
issued as supplemental literature to said documents will be supplied by us to
members of the Selling Group in reasonable quantities upon request.
12. In no transaction shall you have authority whatsoever to act as agent
of the Fund or of us or of any other member of the Selling Group, and nothing in
this agreement shall constitute you or the Fund, the agent of the other. In all
transactions in these shares between you and us, you are acting as principal, or
as agent for an undisclosed principal, and we as agent for the Fund.
13. All communications to us shall be sent to: First Pacific Securities,
Inc. at the address set forth on page one of this Agreement. Any notice to you
shall be duly given if mailed or telegraphed to you at your address as
registered from time to time with The National Association of Securities
Dealers, Inc.
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<PAGE>
FIRST IDAHO TAX-FREE FUND FIRST PACIFIC SECURITIES, INC.
By:_____________________________________
Date:___________________________________
The undersigned accepts your invitation to become a member of the Selling Group
and agrees to abide by the foregoing terms and conditions. The undersigned
acknowledges receipt of First Pacific Securities, Inc. prospectuses for use in
connection with this offering.
Dealer Name_______________________________________________________________
Address___________________________________________________________________
__________________________________________________________________________
Employer Identification Number____________________________________________
By:_______________________________________________________________________
(Authorized Signature)
Print Name and Title______________________________________________________
Phone Number______________________________________________________________
Date______________________________________________________________________
3
EXHIBIT 15(d)
TRANSFER AGENT and DIVIDEND DISBURSING AGENT AGREEMENT
This Agreement, dated as of the 16th day of March 1994, amended January 29,
1996, made by and between First Pacific Mutual Fund, Inc. (the "Fund"), a
corporation operating as an open-end management investment company, duly
organized and existing under the laws of the State of Maryland and First Pacific
Recordkeeping, Inc. (the "Company"), a corporation duly organized and existing
under the laws of the State of Hawaii.
WITNESSETH THAT:
WHEREAS, the Fund consists of a series of Funds, at present namely: First
Hawaii Municipal Bond Fund, First Hawaii Intermediate Municipal Fund and First
Idaho Tax-Free Fund.
WHEREAS, the Fund desires to appoint the company as its Transfer,
Redemption and Dividend Disbursing Agent as set forth in this Agreement and to
perform certain other functions in connection with these duties; and
WHEREAS, the Company is willing to perform such functions upon the terms
and conditions set forth below; and
WHEREAS, the Fund will cause to be provided certain information to the
Company as set forth below.
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein, the parties hereto, intending to be legally bound, do hereby
agree as follows:
Section 1. The terms as defined in this Section wherever used in this
Agreement, or in any amendment or supplement hereto, shall have the meanings
herein specified unless the context otherwise requires.
The Fund: The term Fund shall mean any series issued by the authority of
the Board of Directors.
Share Certificates: The term Share Certificates shall mean the share
certificates for the Shares of the Fund.
Shareholders: The term Shareholders shall mean the registered owners from
time to time of the Shares of the Fund in accordance with the share registry
records of the Fund.
Shares: The term Shares shall mean the issued and outstanding shares of the
Fund.
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Oral Instruction: The term Oral Instruction shall mean an authorization,
instruction approval, item or set of data, or information of any kind
transmitted to the Company in person or by telegram, telecopy or other
mechanical or documentary means lacking original signature, by a person or
persons believed in good faith by the Company to be a person or persons
authorized by a resolution of the Board of Directors of the Fund to give Oral
Instructions on behalf of the Fund.
Written Instruction: The term Written Instruction shall mean an
authorization, instruction, approval, item or set of data or information of any
kind transmitted to the Company in original writing containing original
signatures or a copy of such document transmitted by telecopy including
transmission of such signature believed in good faith by the Company to be the
signature of a person authorized by a resolution of the Board of Directors of
the Fund to give Written Instructions on behalf of the Fund.
Section 2. The Fund shall furnish to the Company as Transfer Agent a
sufficient supply of blank Share Certificates and from time to time will renew
such supply upon the request of the Company. Such blank Share Certificates shall
be signed, manually or by facsimile, signatures of officers of the Fund
authorized by law or the by-laws of the Fund to sign Share Certificates and, if
required, shall bear the corporate seal or a facsimile thereof.
Section 3. The Company as Transfer Agent, shall make original issues of
Shares in accordance with Sections 13 and 14 below and with the Fund's
Prospectus upon the written request of the Fund and upon being furnished with
(i) a certified copy of a resolution or resolutions of the Board of Directors of
the Fund authorizing such issue; (ii) an opinion of counsel as to the validity
of such additional Shares; and (iii) necessary funds for the payment of any
original issue tax applicable to such additional Shares.
Section 4. Transfers of Shares shall be registered and new Share
Certificates issued by the Company upon surrender of outstanding Share
Certificates (i) in form deemed by the Company to be properly endorsed for
transfer, (ii) with all necessary endorsers' signatures guaranteed by a member
firm of a national securities exchange or a commercial bank, accompanied by
(iii) such assurances as the Company shall deem necessary or appropriate to
evidence the genuineness and effectiveness of each necessary endorsement, and
(iv) satisfactory evidence of compliance with all applicable laws relating to
the payment or collection of taxes.
Section 5. When mail is used for delivery of Share Certificates, the
Company shall forward Share Certificates in "non-negotiable" form by registered
mail, all mail deliveries to be covered while in transit to the addressee by
insurance arranged for by the Company.
Section 6. In registering transfers, the Company as Transfer Agent may rely
upon the Uniform Commercial Code or any statues which in the opinion of counsel
protect the Company and the Fund in not requiring complete documentation, in
registering transfer without inquiry into adverse claims, in delaying
registration for purposes of such inquiry, or in refusing registration where in
its judgement an adverse claim requires such refusal.
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Section 7. The Company as Transfer Agent may issue new Share Certificates
in place of Share Certificates represented to have been lost, destroyed or
stolen, upon receiving indemnity satisfactory to the Company and may issue new
Share Certificates in exchange for and upon surrender of mutilated Share
Certificates.
Section 8. In case any officer of the Fund who shall have signed manually
or whose facsimile signature shall have been affixed to blank Share Certificates
shall die, resign or be removed prior to the issuance of such Share
Certificates, the Company as Transfer Agent may issue or register such Share
Certificates as the Share Certificates of the Fund notwithstanding such death,
resignation or removal; and the Fund shall file promptly with the Company such
approval, adoption or certification as may be required by law.
Section 9. The Company will maintain stock registry records in the usual
form in which it will note the issuance, transfer and redemption of Shares and
the issuance and transfer of Share Certificates, and is also authorized to
maintain an account entitled Unissued Certificate Account in which it will
record the Shares and fractions issued and outstanding from time to time for
which issuance of Share Certificates is deferred. The Fund is responsible to
provide the Company reports of Fund Share purchases, redemptions and total
Shares outstanding on the next business day after each net asset valuation. The
Company is authorized to keep records, which will be part of the stock transfer
records, in which it will note the names and registered address of Shareholders
and the number of Shares and fraction from time to time owned by them for which
no Share Certificates are outstanding. Each shareholder will be assigned a
single account number even though Shares for which Certificates have been issued
will be accounted for separately.
Section 10. The Company will issue Share Certificates for Shares of the
Fund, only upon receipt of a written request from a Shareholder. In all other
cases, the Fund authorizes the Company to dispense with the issuance and
countersignature of Share Certificates whenever Shares are purchased. In such
case the Company as Transfer Agent, shall merely, note on its stock registry
records the issuance of the Shares and fractions (if any), shall credit the
Unissued Certificate Account with the Shares and fractions issued and shall
credit the proper number of Shares and fractions to the respective Shareholders.
Likewise, whenever the Company has occasion to surrender for redemption Shares
and fractions owned by Shareholders, it shall be unnecessary to issue Share
Certificates for redemption purposes. The Fund authorizes the Company in such
cases to process the transactions by appropriate entries in its share transfer
records, and debiting of the Unissued Certificate Account and the record of
issued Shares outstanding.
Section 11. The Company in its capacity as Transfer Agent will, in addition
to the duties and functions above-mentioned, perform the usual duties and
functions of a Stock Transfer Agent for a corporation. It will countersign for
issuance or reissuance Share Certificates representing original issue or
reissued treasury Shares as directed by the Written Instructions of the Fund and
will transfer Share Certificates registered in the name of Shareholders from one
Shareholder to another in the usual manner. The Company may rely conclusively
and act without further investigation upon any list, instruction, certification,
authorization, Share Certificate or other instrument or paper
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believed by it in good faith to be genuine and unaltered, and to have been
signed, countersigned or executed by a duly authorized person or persons, or
upon the instructions of any officer of the Fund, or upon the advice of counsel
for the Fund or for the Company. The Company may record any transfer of Share
Certificates which is believed by it in good faith to have been duly authorized
or may refuse to record any transfer of Share Certificates if in good faith the
Company in its capacity as Transfer Agent deems such refusal necessary in order
to avoid any liability either to the Fund or to the Company. The Fund agrees to
indemnify and hold harmless the Company from and against any and all losses,
costs, claims, and liability which it may suffer or incur by reason of so
relying or acting or refusing to act.
Section 12. In case of any request or demand for the inspection of the
share records of the Fund, the Company as Transfer Agent, shall endeavor to
notify the Fund and to secure instructions as to permitting or refusing such
inspections. However, the Company may exhibit such records to any person in any
case where it is advised by its counsel that it may be held liable for failure
to do so.
ISSUANCE OF SHARES
Section 13. Prior to the daily determination of net asset value in
accordance with the Fund's Prospectus, the Company shall process all purchase
orders received since the last determination of the Fund's net asset value.
The Company shall calculate daily the amount available for investment in
Shares at the net asset value determined by the Company as pricing agent (see
Accounting Services Agreement) as of the close of trading on the New York Stock
Exchange, the number of Shares and fractional Shares to be purchased and the net
asset value to be deposited with the Custodian. The Company as agent for the
Shareholders, shall place a purchase order daily with the Fund for the proper
number of Shares and fractional Shares to be purchased and confirm such number
to the Fund in writing.
Section 14. The Company having made the calculations provided for in
Section 13, shall thereupon pay over the net asset value of Shares purchased to
the Custodian. The proper number of Shares and fractional Shares shall then be
issued daily and credited by the Company to the Unissued Certificate Account.
The shares and fractional Shares purchased for each Shareholder will be credited
by the Company to his separate Account. The Company shall mail to each
Shareholder a confirmation of each purchase with copies to the Fund if
requested. Such confirmations will show the prior Share balance, the new Share
balance, the Shares for which Stock Certificates are outstanding (if any) the
amount invested and the price paid for the newly purchased Shares.
REDEMPTIONS
Section 15. The Company shall, prior to the daily determination of net
asset value in accordance with the Fund's Prospectus, process all requests from
Shareholders to redeem Shares and determine the number of Shares required to be
redeemed to make monthly payments, automatic
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payments or the like. Thereupon, the Company shall advise the Fund of the total
number of Shares available for redemption and the number of Shares and
fractional Shares requested to be redeemed. The Company as Pricing Agent shall
then determine the applicable net asset value, whereupon the Company shall
furnish the Fund with an appropriate confirmation of the redemption and process
the redemption by filing with the Custodian an appropriate statement and making
the proper distribution and application of the redemption proceeds in accordance
with the Fund's Prospectus. The stock registry books recording outstanding
Shares, the Unissued Certificate Account and the individual account of the
Shareholder or Planholder shall be properly debited.
Section 16. The proceeds of redemption shall be remitted by the Company in
accordance with the Fund's Prospectus by check mailed to the Shareholder at his
registered address. If Share Certificates have been issued for Shares being
redeemed, then such Share Certificates and a stock power with a signature
guarantee of a commercial bank or a member of a national securities exchange
shall accompany the redemption request.
If share Certificates have not been issued to the redeeming Shareholder,
the Shareholder may redeem shares by mailing a written redemption request in
proper form to the Transfer Agent or by establishing telephone redemption
privileges. The written request should indicate the amount to be redeemed,
identify the account number and be signed exactly as the Shares are registered.
If the amount being redeemed is in excess of $50,000, or if proceeds are to be
sent to anyone other than the Shareholder or address of record, signature(s)
must be guaranteed by an acceptable financial institution. From time to time,
the Transfer Agent, in its discretion may waive any or certain of the foregoing
requirements in particular cases. Investors who have previously established the
telephone redemption privilege may redeem Shares by calling the Transfer Agent
at (808) 988-8088 before 4:00 pm Eastern Time to request a redemption. Prior to
redeeming Shares by telephone the "Redemption Instructions" section of either
the Account Application or Expedited Telephone Redemption and Exchange Request
Form (the "Authorization") must be completed and on file with the Transfer
Agent. The signature(s) on the Authorization must be guaranteed by an acceptable
institution unless the Authorization is completed at the time an account is
originally established. If the telephone redemption request is $50,000 or more,
a written redemption request must be completed as noted above.
For the purposes of redemption of Shares which have been purchased within
fifteen (15) days of a redemption request, the Fund shall provide the Company,
from time to time, with Written Instructions concerning the time within which
such requests may be honored.
Section 17. In lieu of the Company receiving a properly executed signature
guarantee from a commercial bank or trust company, or a member firm of a
national securities exchange, or the National Association of Securities Dealers,
the Fund agrees to indemnify and hold harmless the Company from and against any
and all losses, costs, claims and liability by acting upon a shareholder(s)
signature for redemption.
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DIVIDENDS
Section 18. Upon the declaration of each dividend and each capital gain
distribution by the Board of Directors of the Fund, the Fund shall notify the
Company of the date of such declaration, the amount payable per share, the
record date for determining the Shareholders entitled to payment, the payment
and the reinvestment date price.
Section 19. On or before each payment date, the Fund will transfer, or
cause the Custodian to transfer, to the Company in its capacity as Dividend
Disbursing Agent, the total amount of the dividend or distribution currently
payable. The Company will, on the designated payment date, automatically
reinvest all dividends in additional shares, except in cases where Shareholders
have elected to receive distributions in cash, in which case the Company will
mail distribution checks to the Shareholders for the proper amounts payable to
them.
GENERAL PROVISIONS
Section 20. The Company shall maintain records (which may be part of the
stock transfer records) in connection with the issuance and redemption of
Shares, and the disbursement of dividends and dividend reinvestment, in which
will be noted the transactions effected for each Shareholder and the number of
Shares and fractional Shares owned by each for which no Share Certificates are
outstanding. The Company agrees to make available upon request and to preserve
for the periods prescribed in Rule 31a-2 any records relating to services
provided under this Agreement which are required to be maintained by Rule 31a-1.
Section 21. In addition to the services as Transfer Agent and Dividend
Disbursing Agent as above set forth, the Company will perform other services for
the Fund as agreed from time to time including but not limited to, preparation
of and mailing Federal Tax Information Forms, mailing semi-annual reports of the
Fund, preparation of one annual list of Shareholders, and mailing notices of
Shareholders' meetings, proxies and proxy statements.
Section 22. Nothing contained in this Agreement is intended to or shall
require the Company in any capacity hereunder, to perform any functions or
duties on any holiday, day of special observance or any other day on which the
Custodian or the New York Stock Exchange are closed. Functions or duties
normally scheduled to be performed on such days shall be performed on, and as
of, the next business day on which both the New York Stock Exchange and
Custodian are open.
Section 23. The Fund agrees to pay the Company compensation for its
services and to reimburse it for expenses, as set forth in Schedule A attached
hereto or as shall be set forth in amendments to such Schedule the Fund
authorizes the Company to debit the Fund's custody account for invoices which
are rendered for the services performed for the applicable function. The
invoices for the service will be sent to the Fund after the debiting with the
indication that payment has been made.
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Section 24. (a) The Company, its directors, officers, employees,
Shareholders and agents shall not be liable for any error of judgement or
mistake of law or for any loss suffered by the Fund in connection with the
performance of this Agreement, except a loss resulting from willful misfeasance,
bad faith or gross negligence on the part of the Company in the performance of
its obligations and duties under this Agreement.
(b) Any person, even though also a director, officer, employee,
Shareholder or agent of the Company, who may be or become an officer, trustee,
employee or agent of the Fund, shall be deemed, when rendering services to the
Fund or acting on any business of the Fund (other than services or business in
connection with the Company's duties hereunder), to be rendering such services
to or acting solely for the Fund and not as a director, officer, employee,
Shareholder or agent of, or one under the control or direction of the Company,
even though paid by it.
(c) Notwithstanding any other provision of this Agreement, the Fund
shall indemnify and hold harmless the Company, its directors, officers,
employees, Shareholders and agents from and against any and all claims, demands,
expenses and liabilities (whether with or without basis in fact or law) of any
and every nature which the Company may sustain or incur or which may be asserted
against the Company by any person by reason of, or as a result of: (i) any
action taken or omitted to be taken by the Company in good faith hereunder; (ii)
in reliance upon any certificate, instrument, order or stock certificate or
other document reasonably believed by it to be genuine and to be signed,
countersigned or executed by any duly authorized person upon the Oral
Instructions or Written Instructions of an authorized person of the Fund or upon
the opinion of legal counsel for the Fund or its own counsel; or (iii) any
action taken or omitted to be taken by the Company in connection with its
appointment in good faith in reliance upon any law, act, regulation or
interpretation of the same even though the same may thereafter have been
altered, changed, amended or repealed. However, indemnification under this
subparagraph shall not apply to actions or omissions of the Company or its
directors, officers, employees, shareholders or agents in cases of its or their
own negligence, willful misconduct, bad faith or reckless disregard of its or
their own duties hereunder.
(d) The Company shall give written notice to the Fund within twenty
(20) business days of receipt by the Company of a written assertion or claim of
any threatened or pending legal proceeding which may be subject to this
indemnification. However, the failure to notify the Fund of such written
assertion or claim shall not operate in any manner whatsoever to relieve the
Fund of any liability arising from this Section or otherwise.
(e) For any legal proceeding giving rise to this indemnification, the
Fund shall be entitled to defend or prosecute any claim in the name of the
Company at its own expense and through counsel of its own choosing if it gives
written notice to the Company within twenty (20) business days of receiving
notice of such claim. Notwithstanding the foregoing, the Company may participate
in the litigation at its own expense through counsel of its own choosing. If the
Fund does choose to defend or prosecute such claim, then the parties shall
cooperate in the defense of prosecution thereof and shall furnish such records
and other information as are reasonably necessary.
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(f) The Fund shall not settle any claim without the Company's express
written consent which shall not be unreasonably withheld. The Company shall not
settle any claim without the Fund's express written consent which shall not be
unreasonably withheld.
Section 25. The Company is authorized upon receipt of Written Instructions
from the Fund, to make payment upon redemption of Shares without a signature
guarantee. The Fund hereby agrees to indemnify and hold the Company, its
successors and assigns, harmless of and from any and all expenses, damages,
claims, suits, liabilities, actions, demands, or losses whatsoever arising out
of or in connection with a payment by the Company upon redemption of Shares
without a signature guarantee and upon the request of the Company the Fund shall
assume the entire defense of any action, suit or claim subject to the foregoing
indemnity. The Company shall notify the Fund of any such action, suit or claim
within thirty (30) days after receipt by the Company of notice thereof.
Section 26. The Fund shall file with the Company a certified copy of each
resolution of its Board of Directors authorizing the execution of Written
Instructions or the transmittal of Oral Instructions, as provided in Section 1
of this Agreement.
Section 27. This Agreement may be amended from time to time by a
supplemental agreement executed by the Fund and the Company.
Section 28. The Fund or the Company may give written notice to the other of
the termination of this Agreement, such termination to take effect at the time
specified in the notice, not less than one hundred and twenty (120) days after
the giving of the notice. Upon the effective termination date, subject to
payment to the Company by the Fund of all amounts due to the Company as of said
date, the Company shall make available to the Fund or its designated
recordkeeping successor, all of the records of the Fund maintained under this
Agreement then in the Company's possession.
Section 29. Any notice or other communication required by or permitted to
be given in connection with this Agreement shall be in writing, and shall be
delivered in person or sent by first class mail, postage prepaid to the
respective parties as follows:
If to the Fund:
First Pacific Mutual Fund, Inc.
2756 Woodlawn Drive, Suite #6-201
Honolulu, HI 96822
Attention: Terrence K.H. Lee
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If to the Company:
First Pacific Recordkeeping, Inc.
2756 Woodlawn Drive, Suite #6-201
Honolulu, HI 96822
Attention: Charlotte Meyer
Section 30. The Fund represents and warrants to the Company that the
execution and delivery of this Transfer Agency Agreement by the undersigned
officers of the Fund has been duly and validly authorized by resolution of the
Board of Directors of the Fund.
Section 31. This Agreement may be executed in two or more counterparts,
each of which when so executed shall be deemed to be an original but such
counterparts shall together constitute but one and the same instrument.
Section 32. This Agreement shall extend to and shall be binding upon the
parties hereto and their respective successors and assigns; provided, however,
that this Agreement shall not be assignable by the Fund without the written
consent of the Company or by the Company without the written consent of the Fund
authorized or approved by a resolution of its Board of Directors.
Section 33. This Agreement shall be governed by the laws of the State of
Hawaii.
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SCHEDULE A
FIRST HAWAII MUNICIPAL BOND FUND
FIRST HAWAII INTERMEDIATE MUNICIPAL FUND
FIRST IDAHO TAX-FREE FUND
Transfer Agent and Dividend Disbursing Agent
$16.50 per Shareholder account, annually (1/12th payable monthly).
Minimum monthly fee of $1,200.00
Services
1.) Opening new accounts and entering demographic data into
shareholder base.
2.) 100% quality control of new accounts opened.
3.) Processing all investments.
4.) Processing Tax ID certifications and handling backup withholding.
5.) Issuing and cancelling certificates.
6.) Replacing lost certificates.
7.) Processing partial and complete redemptions and systematic
withdrawal plans.
8.) Regular and legal transfers of accounts.
9.) Processing daily dividends.
10.) Preparation of monthly statements to shareholders.
11.) Blue Sky reports. This indicates shares sold to investors in
various states. There is also a "warning system" that informs the
Fund when it is within a certain percentage of the shares
registered in the state, or within a certain time period when the
registration statement is up for renewal.
12.) Maintaining shareholder records of certificate and whole and
fractional unissued shares.
13.) Changing shareholders' addresses, dividend status, etc.
14.) Daily or periodic reports on number of shares, accounts, etc.
15.) Addressing and tabulating annual proxy cards.
16.) Supplying an annual stockholder list.
17.) Preparation of federal tax information forms to include 1099's,
1099B, 1042's etc. to shareholders and the IRS.
Optional Services
There are also optional services available. Fees and descriptions for any
of these services will be provided upon request.
In addition, all out-of-pocket expenses shall be separately charged; i.e.:
expenses such as postage, stationary, retention of records, mailing,
insurance, conversion, etc. and expenses in the development of Agreements
between the Company and First Pacific Recordkeeping, Inc.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
signed by their duly authorized officers and their corporate seals hereunto duly
affixed and attested, as of the day and year above written.
FIRST PACIFIC MUTUAL FUND, INC.
By:____(sig. on orig.)__________________
Terrence K.H. Lee, President
[Corporate Seal]
Attest:___(sig. on orig.)_______________
Jean Chun, Secretary
FIRST PACIFIC RECORDKEEPING, INC.
By:____(sig. on orig.)_________________
Terrence K.H. Lee, President
[Corporate Seal]
Attest:___(sig. on orig.)_______________
Jean Chun, Secretary
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EXHIBIT 15(e)
ACCOUNTING SERVICES AGREEMENT
THIS AGREEMENT, dated as of the 1st day of June, 1994, amended January 29,
1996, made by and between First Pacific Mutual Fund, Inc., (the Fund) a
corporation operating as an open-end management company, duly organized and
existing under the laws of the State of Maryland, and First Pacific
Recordkeeping, Inc. (the "Company") a corporation duly organized and existing
under the laws of the State of Deleware.
WITNESSETH THAT:
WHEREAS, the Fund consists of a series of Funds, at present namely: First
Hawaii Municipal Bond Fund, First Hawaii Intermediate Municipal Fund and First
Idaho Tax-Free Fund.
WHEREAS, the Fund desires to appoint the Company as its Accounting Services
Agent to maintain and keep current the books, accounts, records, journals or
other records of original entry relating to the business of the Fund as set
forth in Section 2 of this Agreement (the "Accounts and Records") and to perform
certain other functions in connection with such accounts and records; and
WHEREAS, the Company is willing to perform such functions upon the terms
and conditions set forth below; and
WHEREAS, the Fund will cause to be provided certain information to the
Company as set forth below; and
WHEREAS, the Company shall perform the duties of transfer agent and
dividend disbursing agent pursuant to a separate agreement ("Shareholder
Services Agreement").
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, the parties hereto, intending to be legally bound, do hereby
agree as follows:
Section 1. The Fund shall promptly turn over to the Company such of the
Accounts and Records previously maintained by or for it as are necessary for the
Company to perform its functions under this Agreement. The Fund authorizes the
Company to rely on such Accounts and Records turned over to it and hereby
indemnifies and holds the Company, its successors and assigns, harmless of and
from any and all expenses, damages, claims, suits liabilities, actions, demands
and losses whatsoever arising out of or in connection with any error, omission,
inaccuracy or other deficiency of such Accounts and Records or in the failure of
the Fund to provide any portion of such or to provide any information needed by
the Company to knowledgeably perform its functions.
Section 2. To the extent it receives the necessary information from the
Fund or its agents by Written or Oral Instructions, the Company shall maintain
and keep current the following
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Accounts and Records relating to the business of the Fund, in such form as may
be mutually agreed to between the Fund and the Company:
(a) Cash Receipts Journal
(b) Cash Disbursements Journal
(c) Dividends Paid Record
(d) Subscription and Redemption Journals
(e) Daily Expense Accruals
(f) Daily Interest Accruals
Unless necessary information to perform the above functions is furnished by
Written or Oral Instructions to the Company daily, prior to 4:00 pm Eastern
Standard Time (the close of trading on the New York Stock Exchange), and the
calculation of the Fund's net asset value as provided below, the Company shall
incur no liability, and the Fund shall indemnify and hold harmless the Company
from and against any liability arising from any failure to provide complete
information or from any discrepancy between the information received by the
Company and used in such calculations and any subsequent information received
from the Fund or any of its designated Agents.
Section 3. The Company shall perform the ministerial calculations necessary
to calculate the Fund's net asset value daily, in accordance with the Fund's
current prospectus and utilizing the information described in this Section.
Portfolio items for which market quotations are available by the Company's use
of automated financial information ("Service") shall be based on the closing
prices of such Service except where the Fund has given or caused to be given
specific Written or Oral Instructions to utilize a different value. All of the
portfolio securities shall be given such values as the Fund provides by Written
or Oral Instructions including all foreign securities, restricted securities and
other securities requiring valuation not readily ascertainable solely by such
Service. The Company shall have no responsibility or liability for the accuracy
of prices quoted by such Services; for the accuracy of the information supplied
by the Fund; or for any loss, liability, damage, or cost arising out of any
inaccuracy of such data. The Company shall have no responsibility or duty to
include information or valuations to be provided by the Fund in any computation
unless and until it is timely supplied to the Company in usable form. Unless the
necessary information to calculate the net asset value daily is furnished by
Written or Oral Instructions from the Fund, the Company shall incur no
liability, and the Fund shall indemnify and hold harmless the Company from and
against any liability arising from any failure to provide complete information
or from any discrepancy between the information received by the Company and used
in such calculation and any subsequent information received from the Fund or any
of its designated agents.
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Section 4. For all purposes under this Agreement, the Company is authorized
to act upon receipt of the first of any Written or Oral Instruction it receives
from the Fund or its agents on behalf of the Fund. In cases where the first
instruction is an Oral Instruction that is not in the form of a document or
written record, a confirmatory Written Instruction or Oral Instruction in the
form of a document or written record, a confirmatory Written Instruction or Oral
Instruction in the form of a document or written record shall be delivered, and
in cases where the Company receives an Instruction, whether Written or Oral, to
enter a portfolio transaction on the records, the Fund shall cause the
Broker-Dealer to send a written confirmation to the Company. The Company shall
be entitled to rely on the first Instruction received, and for any act or
omission undertaken in compliance therewith shall be free of liability and fully
indemnified and held harmless by the Fund, provided however, that in the event a
Written or Oral Instruction received by the Company is countermanded by a timely
later Written or Oral Instruction received by the Company prior to acting upon
such countermanded Instruction, the Company shall act upon such later Written or
Oral Instruction. The sole obligation of the Company with respect to any
follow-up or confirmatory Written Instruction, Oral Instruction in documentary
or written form, or Broker-Dealer written confirmation shall be to make
reasonable efforts to detect any discrepancy between the original Instruction
and such confirmation and to report such discrepancy to the Fund. The Fund shall
be responsible, at the Fund's expense, for taking any action, including any
reprocessing, necessary to correct any discrepancy or error, and to the extent
such action requires the Company to act, the Fund shall give the Company
specific Written Instruction as to the action required.
Section 5. At the end of each month, the Fund shall cause the Custodian to
forward to the Company a monthly statement of cash and portfolio transactions,
which will be reconciled with the Company's Accounts and Records maintained for
the Fund. The Company will report any discrepancies to the Custodian, and report
any unreconciled items to the Fund.
Section 6. The Company shall promptly supply daily and periodic reports of
the Fund as requested by the Fund and agreed upon by the Company.
Section 7. The Fund shall and shall require each of its agents (including
without limitation its Transfer Agent and its Custodian) to provide the Company
as of the close of each Business Day, or on such other schedule as the Fund
determines is necessary, with Written or Oral Instructions (to be delivered to
the Company by 10:00 am the next following business day) containing all data and
information necessary for the Company to maintain the Fund's Accounts and
Records and the Company may conclusively assume that the information it receives
by Written or Oral Instructions is complete and accurate. The Fund is
responsible to provide or cause to be provided to the Company reports of share
purchases, redemptions, and total shares outstanding on the next business day
after each net asset valuation.
Section 8. The Accounts and Records, in the agreed upon format, maintained
by the Company shall be the property of the Fund, and shall be made available to
the Fund promptly upon request and shall be maintained for the periods
prescribed in Rule 31(a)-2 of the Investment Company Act of 1940, as amended.
The Company shall assist the Fund's independent auditors, or
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upon approval of the Fund, or upon demand, any regulatory body, in any requested
review of the Fund's Accounts and Records but shall be reimbursed for all
expenses and employee time invested in any such review of the Fund's Accounts
and Records outside of routine and normal periodic reviews. Upon receipt from
the Fund of the necessary information, the Company shall supply the necessary
data for the Fund or accountant's completion of any necessary tax returns,
questionnaires, periodic reports to shareholders and such other reports and
information requests as the Fund and the Company shall agree upon from time to
time.
Section 9. The Company and the Fund may from time to time adopt such
procedures as they agree upon in writing, and the Company may conclusively
assume that any procedure approved by the Fund or directed by the Fund, does not
conflict with or violate any requirements of its Prospectus, Articles of
Incorporation, By-Laws, or any rule or regulation of any regulatory body or
governmental agency. The Fund shall be responsible for notifying the Company of
any changes in regulations or rules which might necessitate changes in the
Company's procedures, and for working out with the Company such changes.
Section 10. (a) The Company, its directors, officers, employees,
shareholders and agents shall not be liable for any error of judgement or
mistake of law or for any loss suffered by the Fund in connection with the
performance of this Agreement, except a loss resulting from willful misfeasance,
bad faith or gross negligence on the part of the Company in the performance of
its obligations and duties under this Agreement.
(b) Any person, even though also a director, officer, employee,
shareholder or agent of the Company, who may be or become an officer, trustee,
employee or agent of the Fund, shall be deemed, when rendering services to the
Fund or acting on any business of the Fund (other than services or business in
connection with the Company's duties hereunder), to be rendering such services
to or acting solely for the Fund and not as a director, officer, employee,
shareholder or agent of, or one under the control or direction of the Company
even though paid by it.
(c) Notwithstanding any other provision of this Agreement, the Fund
shall indemnify and hold harmless the Company, its directors, officers,
employees, shareholders and agents from and against any and all claims, demands,
expenses and liabilities (whether with or without basis in fact or law) of any
and every nature which the Company may sustain or incur or which may be asserted
against the Company by any person by reason of, or as a result of: (i) any
action taken or omitted to be taken by the Company in good faith hereunder; (ii)
in reliance upon any certificate, instrument, order or stock certificate or
other document reasonably believed by it to be genuine and to be signed,
countersigned or executed by any duly authorized person, upon the Oral
Instructions or Written Instructions of an authorized person of the Fund or upon
the opinion of legal counsel for the Fund or its own counsel; or (iii) any
action taken or omitted to be taken by the Company in connection with its
appointment in good faith in reliance upon any law, act, regulation or
interpretation of the same even though the same may thereafter have been
altered, changed, amended or repealed. However, indemnification under this
subparagraph shall not apply to actions or omissions of the Company or its
directors, officers, employees , shareholders or agents in cases
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of its or their own negligence, willful misconduct, bad faith, or reckless
disregard of its or their own duties hereunder.
(d) The Company shall give written notice to the Fund within twenty
(20) business days of receipt by the Company of a written assertion or claim of
any threatened or pending legal proceeding which may be subject to this
indemnification. However, the failure to notify the Fund of such written
assertion or claim shall not operate in any manner whatsoever to relieve the
Fund of any liability arising from this Section or otherwise.
(e) For any legal proceeding giving rise to this indemnification, the
Fund shall be entitled to defend or prosecute any claim in the name of the
Company at its own expense and through counsel of its own choosing if it gives
written notice to the Company within twenty (20) business days of receiving
notice of such claim. Notwithstanding the foregoing, the Company may participate
in the litigation at its own expense through counsel of its own choosing. If the
Fund does choose to defend or prosecute such claim, then the parties shall
cooperate in the defense or prosecution thereof and shall furnish such records
and other information as are reasonably necessary.
(f) The Fund shall not settle any claim without the Company's express
written consent which shall not be unreasonably withheld. The Company shall not
settle any claim without the Fund's express written consent which shall not be
unreasonably withheld.
Section 11. All financial data provided to, processed by, and reported by
the Company under this Agreement shall be stated in United States dollars or
currency. The Company shall have no obligation to convert to, equate, or deal in
foreign currencies or values, and expressly assumes no liability for any
currency conversion or equation computations relating to the affairs of the
Fund.
Section 12. The Fund agrees to pay the Company, within 15 days from the
execution date of this Agreement, an amount equal to reasonable costs and
expenses (including counsel fees), incurred by the Company in connection with
the transfer of the services subject to this Agreement to the Company from the
Fund.
Section 13. The Fund agrees to pay the Company compensation for its
services and to reimburse it for expenses, as set forth in Schedule A attached
hereto, or as shall be set forth in amendments to such Schedule approved by the
Fund and Company. The Fund authorizes the Company to debit the Fund's custody
account for invoices which are rendered for the services performed for the
accounting agent function. The invoices for the service will be sent to the Fund
after the debiting with the indication the payment has been made.
Section 14. Nothing contained in this Agreement is intended to or shall
require the Company, in any capacity hereunder, to perform any functions or
duties on any holiday, day of special observance or any other day on which the
Custodian or the New York Stock Exchange is closed. Functions or duties normally
scheduled to be performed on such days shall be performed on, and as of, the
next succeeding business day on which both the New York Stock Exchange and
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the Custodian are open. Notwithstanding the foregoing, the Company shall compute
the net asset value of the Fund on each day required pursuant to Rule 22c-1
promulgated under the Investment Act of 1940.
Section 15. This Agreement may be executed in two or more counterparts,
each of which, when so executed shall be deemed to be an original, but such
counterparts shall together constitute but one and the same instrument.
Section 16. The terms defined in Section 1 of the Shareholder Services
Agreement shall have the same meanings wherever used in this Agreement.
The Fund shall file with the Company a certified copy of each resolution of
its Board of Directors authorizing execution of Written Instructions or the
transmittal of Oral Instructions as provided in Section 1 of the Shareholder
Services Agreement.
Section 17. The Fund or the Company may give written notice to the other of
the termination of this Agreement, such termination to take effect at the time
specified in the notice not less than 120 days after the giving of the notice.
Upon the effective termination date, subject to payment to the Company by the
Fund of all amounts due to the Company as of said date, the Company shall make
available to the Fund or its designated recordkeeping successor, all of the
records of the Fund maintained under this Agreement then in the Company's
possession.
Section 18. Any notice or other communication required by or permitted to
be given in connection with this Agreement shall be in writing, and shall be
delivered in person or sent by first class mail, postage prepaid to the
respective parties as follows:
If to the Fund:
First Pacific Mutual Fund, Inc.
2756 Woodlawn Drive, Suite #6-201
Honolulu, HI 96822
Attention: Terrence K.H. Lee
If to the Company:
First Pacific Recordkeeping, Inc.
2756 Woodlawn Drive, Suite #6-201
Honolulu, HI 96822
Attention: Terrence K.H. Lee
Section 19. This Agreement may be amended from time to time by supplemental
agreements executed by the Fund and the Company.
Section 20. This Agreement shall be governed by the laws of the State of
Hawaii.
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SCHEDULE A
ACCOUNTING AND PORTFOLIO VALUATION SERVICES AND FEES
First Hawaii Municipal Bond Fund
First Hawaii Intermediate Municipal Fund
First Idaho Tax-Free Fund
Accounting Services:
1.) Compute net asset value (and offering price) per share, daily.
2.) Maintain security ledger.
3.) Maintain general ledger.
4.) Prepare and submit to client:
Daily: Trial Balance.
Portfolio Pricing Report or interest evaluation
(money market funds).
Cash Availability.
Monthly: Statement of Assets and Liabilities.
Statement of Operations.
Statement of Changes in Net Assets.
Summary of Purchases.
Summary of Sales.
Schedule of Brokerage Commissions.
Schedule of Principal Trade Transactions.
Semi- In addition to monthly reports, Statement of
Annually: Investments and a draft of footnotes.
Annually: Schedules supporting securities and shareholder
transactions, income and expense accrual during the
year.
Portfolio Pricing Services:
1.) Update the daily market value of securities held by Fund.
The following pricing is included in the fee quoted:
Listed Securities:
Traded: Closing price.
Untraded: Mean, bid or ask.
NASDAQ National Market Issues:
Traded: Closing price.
Untraded: Mean, bid or ask.
Other Over-the-Counter Securities:
Traded: Mean, bid or ask.
Untraded: Mean bid or ask.
2.) Monitor securities held for stock splits, stock dividends,
mergers, spin-offs. (Domestic securities only).
3.) Determine gain or loss on security trades.
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SCHEDULE A (continued)
NSAR Reporting Services:
Prepare answers to the following items (if applicable):
2, 12B, 20, 21, 22, 23, 28, 30A, 31, 32, 35, 36, 37, 38, 40, 41, 42,
43, 53, 55, 62, 63, 64B, 71, 72, 73, 74, 75, 76.
Yield Calculation:
Provide up to 12 reports per year to reflect the yield calculation changes
to Rule 482 required by the SEC effective July 1, 1988.
$1,000.00 per year per portfolio.
Bond Quotation Fee (If Applicable):
Corporate Bonds: $ .50 Per Quote Per Bond
Municipal Bonds: $ .75 Per Quote Per Bond
Cost of copying and sending material to auditors for off-site audits will be an
additional expense.
Annual Fee Schedule: (1/12th payable monthly)
$21,500 Minimum to $20 Million of Average Net Assets
.000325 On Next $30 Million of Average Net Assets
.00026 On Next $50 Million of Average Net Assets
.000195 On Next $100 Million of Average Net Assets
.0001625 Over $200 Million of Average Net Assets
A.) Securities Transaction Charge: (Payable Monthly)
Book Entry DTC or
Federal Book Entry $12.00
Physical (Mutual Fund Trades) $22.50
GNMA $23.00
Options $17.50
(Should an option expire, our
transaction fee will be only $12.00.)
Mortgage Backed Securities -
Principal Pay Down Per Pool $10.00
Security Lending $17.00
Now Account $12.00
B.) When Issued, Securities Lending, Index Futures: Should each of
these investment vehicles require seperate segregated custody
accounts, there will be a fee of $250.00 per account per month.
C.) Out-of Pocket Expenses: The Fund will reimburse the custodian
monthly for all out-of- pocket expenses, i.e. postage,
stationary, insurance, retention of records, conversion, etc. and
expenses in the development of agreements between the Company and
the Custodian.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be signed by
their duly authorized officers and their Corporate seals hereunto duly affixed
and attested, as of the day and year first above written.
FIRST PACIFIC MUTUAL FUND, INC.
By:____(sig. on orig.)__________________
Terrence K.H. Lee, President
[Corporate Seal]
Attest:__(sig. on orig.)________________
Jean Chun, Secretary
FIRST PACIFIC RECORDKEEPING, INC.
By:____(sig. on orig.)__________________
Terrence K.H. Lee, President
[Corporate Seal]
Attest:__(sig. on orig.)________________
Jean Chun, Secretary
9
