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Previous: MERRILL LYNCH WORLD INCOME FUND INC, N-30B-2, 1997-12-01 |
Next: FIRST PACIFIC MUTUAL FUND INC /HI/, NSAR-B, 1997-12-01 |
November 24, 1997
Dear Fellow Shareholder,
We are pleased to report on the progress and the exciting developments of the
First Hawaii family of Funds.
On August 1, 1997, the Leahi Tax-Free Income Trust merged with the First Hawaii
Municipal Bond Fund, creating the largest no-load municipal bond fund in the
State of Hawaii. Welcome to all of the Leahi shareholders and we look forward to
working with each of you.
Despite solid economic growth and a tight labor market in 1997, inflation did
not appear to be a threat, resulting in a strong bond market. The First Hawaii
Municipal Bond Fund and the First Hawaii intermediate Municipal Fund remain
attractive to investors seeking double tax-free income opportunities and
diversification.
For the year ended September 30, 1997:
t First Hawaii Municipal Bond Fund had an annualized distribution
rate of 4.99% (free from Federal and State of Hawaii taxes). This
is a taxable equivalent yield of 8.03% for shareholders in the 31%
Federal tax bracket. *
t First Hawaii Intermediate Municipal Fund had an annualized
distribution rate of 4.24% (free from Federal and State of Hawaii
taxes). This is a taxable equivalent yield of 6.83% for
shareholders in the 31% Federal tax bracket. *
* For shareholders who reinvested their monthly dividends, yields
were higher due to the benefit of tax-free compounding.
On the following pages you will find our Funds' 1997 Annual Report. If you have
any questions or would like us to provide information about the Funds to your
family or friends, please call us at 988-8088.
Thank you for your business as well as all of the referrals we've received. As
we begin our 10th year, we look forward to providing you with the same high
levels of performance and service that you have come to expect.
On behalf of the staff and management of the Funds, I would like to extend to
you and your family best wishes for a safe and happy holiday season.
Warmest Aloha,
Terrence K.H. Lee
\S\ TERRENCE K.H. LEE President
First Pacific Securities, Inc./Member SIPC
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors and Shareholders
First Pacific Mutual Fund, Inc.
Honolulu, Hawaii
We have audited the accompanying statements of assets and liabilities of First
Hawaii Municipal Bond Fund and First Hawaii Intermediate Municipal Fund (each a
series of shares of First Pacific Mutual Fund, Inc.) including the schedules of
investments, as of September 30, 1997, and the related statements of operations
for the year then ended, the statements of changes in net assets and the
financial highlights for the periods indicated thereon. These financial
statements and financial highlights are the responsibility of the Funds'
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
September 30, 1997, by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of First
Hawaii Municipal Bond Fund and First Hawaii Intermediate Municipal Fund as of
September 30, 1997, the results of their operations for the year then ended, the
changes in their net assets and the financial highlights for the periods
indicated thereon, in conformity with generally accepted accounting principles.
TAIT, WELLER & BAKER
Philadelphia, Pennsylvania
November 7, 1997
<PAGE>
FIRST HAWAII MUNICIPAL BOND FUND
SCHEDULE OF INVESTMENTS
September 30, 1997
<TABLE>
<S> <C> <C> <C>
Value
Par Value (Note 1)
HAWAII MUNICIPAL BONDS (87.22%)
Hawaii County
General Obligation Bonds (2.83%)
$1,150,000 7.050%, 6/01/01 $ 1,249,188
100,000 6.800%, 12/01/01 101,495
200,000 7.200%, 6/01/05 218,000
1,030,000 7.200%, 6/01/06 1,122,700
300,000 5.600%, 5/01/11 319,500
--------------
3,010,883
Hawaii State
General Obligation Bonds (2.00%)
100,000 7.200%, 9/01/06 109,500
150,000 7.000%, 6/01/07 161,437
135,000 6.000%, 10/01/08 149,850
330,000 7.125%, 9/01/09 360,938
125,000 7.000%, 6/01/10 134,531
100,000 7.125%, 9/01/10 109,375
200,000 6.000%, 11/01/10 220,000
500,000 6.250%, 1/01/13 554,375
300,000 6.250%, 1/01/14 332,625
--------------
2,132,631
Airport Systems Revenue Bonds (6.99%)
400,000 5.125%, 7/01/00 410,500
150,000 5.800%, 7/01/01 159,000
345,000 6.300%, 7/01/01 370,012
200,000 7.000%, 7/01/07 219,000
175,000 7.000%, 7/01/10 193,375
385,000 6.900%, 7/01/12 452,856
500,000 7.000%, 7/01/18 542,500
1,150,000 7.000%, 7/01/20 1,262,125
2,460,000 7.500%, 7/01/20 2,696,775
1,045,000 6.750%, 7/01/21 1,132,519
--------------
7,438,662
</TABLE>
<PAGE>
FIRST HAWAII MUNICIPAL BOND FUND
SCHEDULE OF INVESTMENTS - (Continued)
September 30, 1997
<TABLE>
<S><C> <C> <C>
Value
Par Value (Note 1)
Department of Budget & Finance
Special Purpose Revenue Bonds
(Hawaiian Electric Company, Inc.) (5.17%)
$ 550,000 6.875%, 4/01/12 $ 563,811
2,720,000 7.625%, 12/01/18 2,924,000
570,000 7.600%, 7/01/20 619,162
275,000 6.550%, 12/01/22 297,688
450,000 6.200%, 5/01/26 477,000
600,000 5.875%, 12/01/26 621,750
--------------
5,503,411
(Kapiolani Hospital) (7.72%)
400,000 6.300%, 7/01/08 428,000
3,120,000 7.600%, 7/01/10 3,545,100
1,650,000 6.400%, 7/01/13 1,749,000
600,000 6.200%, 7/01/16 629,250
985,000 6.000%, 7/01/19 1,014,550
430,000 7.650%, 7/01/19 489,663
340,000 6.250%, 7/01/21 356,575
--------------
8,212,138
(Kaiser Permanente Center) (3.14%)
850,000 6.500%, 3/01/11 899,937
2,325,000 6.250%, 3/01/21 2,444,156
--------------
3,344,093
(Maui Electric Company, Inc.) (.10%)
100,000 6.875%, 4/01/12 102,511
--------------
(Queen's Medical Center Program) (5.44%)
200,000 6.800%, 7/01/00 208,070
300,000 5.200%, 7/01/04 311,625
540,000 6.900%, 7/01/04 563,242
250,000 6.125%, 7/01/11 274,375
945,000 6.000%, 7/01/20 991,069
600,000 6.200%, 7/01/22 660,750
2,735,000 5.750%, 7/01/26 2,776,025
--------------
5,785,156
(St. Francis Medical Center) (2.81%)
2,765,000 6.500%, 7/01/22 2,986,200
--------------
(Wahiawa General Hospital) (3.26%)
120,000 7.125%, 7/01/98 121,960
3,035,000 7.500%, 7/01/12 3,346,087
--------------
3,468,047
</TABLE>
<PAGE>
FIRST HAWAII MUNICIPAL BOND FUND
SCHEDULE OF INVESTMENTS - (Continued)
September 30, 1997
<TABLE>
<S><C> <C> <C>
Value
Par Value (Note 1)
Department of Transportation
Special Facilities Revenue Bonds (2.67%)
$2,760,000 5.750%, 3/01/13 $ 2,835,900
--------------
Harbor Capital Improvements Revenue Bonds,
Series 1989 (4.09%)
300,000 5.650%, 7/01/02 315,750
205,000 6.200%, 7/01/03 223,450
310,000 6.300%, 7/01/04 339,838
200,000 6.200%, 7/01/08 214,250
225,000 7.250%, 7/01/10 245,250
250,000 6.250%, 7/01/15 268,125
810,000 7.000%, 7/01/17 875,812
800,000 6.500%, 7/01/19 860,000
1,000,000 5.500%, 7/01/27 1,007,500
--------------
4,349,975
Highway Revenue Bonds, Series 1993 (1.30%)
200,000 5.000%, 7/01/09 201,500
150,000 5.000%, 7/01/11 148,687
1,000,000 5.600%, 7/01/14 1,031,250
--------------
1,381,437
Housing Authority Single Family
Mortgage Purpose Revenue Bonds (10.44%)
145,000 6.300%, 7/01/99 149,169
525,000 8.000%, 7/01/08 541,527
390,000 8.000%, 7/01/10 404,219
405,000 7.000%, 7/01/11 431,325
100,000 5.700%, 7/01/13 102,875
815,000 6.900%, 7/01/16 864,918
305,000 7.375%, 7/01/16 311,100
1,505,000 8.125%, 7/01/17 1,561,227
530,000 9.250%, 7/01/17 535,300
495,000 8.125%, 7/01/19 513,493
380,000 6.750%, 7/01/20 399,475
540,000 7.100%, 7/01/24 573,075
2,235,000 5.900%, 7/01/27 2,290,875
2,250,000 5.900%, 7/01/27 2,309,063
115,000 7.800%, 7/01/29 120,606
--------------
11,108,247
</TABLE>
<PAGE>
FIRST HAWAII MUNICIPAL BOND FUND
SCHEDULE OF INVESTMENTS - (Continued)
September 30, 1997
<TABLE>
<S><C> <C> <C>
Value
Par Value (Note 1)
Housing Authority Multi-Family
Mortgage Purpose Revenue Bonds (4.35%)
$ 180,000 4.500%, 1/01/99 $ 180,450
200,000 4.800%, 1/01/01 201,500
205,000 4.800%, 7/01/01 207,819
210,000 4.900%, 1/01/02 212,100
215,000 4.900%, 7/01/02 218,762
1,000,000 5.700%, 7/01/18 1,017,500
2,500,000 6.100%, 7/01/30 2,587,500
--------------
4,625,631
Public Housing Authority Bonds (.42%)
185,000 5.750%, 8/01/00 189,767
250,000 5.750%, 8/01/04 256,108
--------------
445,875
University Faculty Housing (2.97%)
90,000 4.350%, 10/01/00 90,900
330,000 4.450%, 10/01/01 334,125
345,000 4.550%, 10/01/02 350,175
800,000 5.650%, 10/01/16 829,000
1,500,000 5.700%, 10/01/25 1,554,375
--------------
3,158,575
University of Hawaii - Revenue Bonds (.48%)
500,000 5.700%, 10/01/17 513,750
--------------
Honolulu City & County
Board of Water Supply (1.08%)
100,000 5.000%, 7/01/04 104,125
250,000 5.800%, 7/01/16 260,938
750,000 5.800%, 7/01/21 780,000
--------------
1,145,063
General Obligation Bonds (8.32%)
100,000 7.300%, 7/01/03 114,125
375,000 6.700%, 8/01/05 412,031
200,000 7.350%, 7/01/06 238,500
300,000 6.900%, 12/01/06 328,125
180,000 7.250%, 2/01/07 193,725
200,000 7.100%, 6/01/07 217,250
100,000 7.250%, 2/01/08 107,500
820,000 6.700%, 8/01/08 900,975
380,000 7.100%, 10/01/08 398,187
1,000,000 7.300%, 2/01/09 1,075,000
</TABLE>
<PAGE>
FIRST HAWAII MUNICIPAL BOND FUND
SCHEDULE OF INVESTMENTS - (Continued)
September 30, 1997
<TABLE>
<S> <C> <C> <C>
Value
Par Value (Note 1)
General Obligation Bonds (8.32%) - (Continued)
$ 985,000 6.700%, 8/01/09 $ 1,082,269
880,000 7.100%, 10/01/09 922,117
250,000 7.300%, 2/01/10 268,125
200,000 6.000%, 6/01/10 212,250
525,000 6.700%, 8/01/10 576,844
250,000 7.150%, 6/01/11 271,875
725,000 6.700%, 8/01/11 796,594
460,000 6.100%, 6/01/12 488,175
240,000 5.500%, 9/01/16 244,200
--------------
8,847,867
Halawa Business Park (.91%)
170,000 6.300%, 10/15/00 178,075
370,000 6.500%, 10/15/02 397,750
365,000 6.600%, 10/15/03 396,937
--------------
972,762
Housing Authority Multi-Family
Mortgage Purpose Revenue Bonds (1.55%)
320,000 6.800%, 7/01/28 352,800
1,200,000 6.900%, 6/20/35 1,299,000
--------------
1,651,800
Kauai County
General Obligation Bonds (2.92%)
300,000 5.100%, 2/01/01 307,875
100,000 7.350%, 8/01/05 102,982
410,000 5.850%, 8/01/07 448,950
1,280,000 5.850%, 8/01/07 1,401,600
250,000 5.9005, 2/01/10 265,313
250,000 5.900%, 2/01/11 264,375
295,000 5.900%, 2/01/12 310,856
--------------
3,101,951
Housing Authority Panau Project (1.78%)
1,980,000 7.250% 4/01/12 1,895,850
--------------
</TABLE>
<PAGE>
FIRST HAWAII MUNICIPAL BOND FUND
SCHEDULE OF INVESTMENTS - (Continued)
September 30, 1997
<TABLE>
<S><C> <C> <C>
Value
Par Value (Note 1)
Maui County
General Obligation Bonds (3.44%)
$ 740,000 8.000%, 1/01/01 $ 822,325
125,000 7.300%, 3/01/03 128,683
250,000 6.800%, 12/01/05 272,500
175,000 6.800%, 12/01/08 190,750
250,000 5.700%, 1/01/09 258,125
735,000 5.750%, 1/01/12 755,212
235,000 5.750%, 6/01/13 246,456
500,000 5.300%, 9/01/14 505,000
500,000 5.000%, 9/01/17 479,375
--------------
3,658,426
Water System Revenue (1.04%)
315,000 5.850%, 12/01/00 331,931
300,000 6.500%, 12/01/06 329,625
400,000 6.600%, 12/01/07 441,000
--------------
1,102,556
Total Hawaii Municipal Bonds 92,779,397
PUERTO RICO MUNICIPAL BONDS (9.95%)
Puerto Rico Commonwealth
Electric Power Authority Revenue Bonds (1.26%)
120,000 7.000%, 7/01/07 126,750
100,000 7.125%, 7/01/14 106,875
100,000 7.125%, 7/01/14 106,875
110,000 7.125%, 7/01/14 116,737
55,000 7.125%, 7/01/14 58,369
300,000 6.250%, 7/01/17 318,000
500,000 5.500%, 7/01/25 501,875
--------------
1,335,481
General Obligation Bonds (2.11%)
250,000 6.250%, 7/01/10 265,000
100,000 6.250%, 7/01/10 108,625
250,000 7.250%, 7/01/10 275,313
70,000 7.750%, 7/01/13 73,472
750,000 6.450%, 7/01/17 825,000
100,000 7.300%, 7/01/20 110,375
300,000 6.500%, 7/01/23 330,750
250,000 5.750%, 7/01/24 259,688
--------------
2,248,223
</TABLE>
<PAGE>
FIRST HAWAII MUNICIPAL BOND FUND
SCHEDULE OF INVESTMENTS - (Continued)
September 30, 1997
<TABLE>
<S><C> <C> <C>
Value
Par Value (Note 1)
Highway & Transportation Authority (1.14%)
$ 100,000 8.000%, 7/01/03 $ 105,142
225,000 6.750%, 7/01/05 245,250
200,000 7.750%, 7/01/10 223,000
630,000 6.000%, 7/01/20 644,175
--------------
1,217,567
Housing Finance Corp.
Multi-Family Mortgage Revenue Bonds (.62%)
175,000 7.500%, 10/01/15 184,625
450,000 7.500%, 4/01/22 475,875
--------------
660,500
Single-Family Mortgage Revenue Bonds (.48%)
130,000 7.650%, 10/15/22 137,637
360,000 6.250%, 4/01/29 378,000
--------------
515,637
Industrial, Medical & Environmental Pollution Control
(Abbott Laboratories) (.26%)
270,000 6.500%, 7/01/09 271,736
--------------
(Baxter Travenol Laboratories) (.30%)
300,000 8.000%, 9/01/12 319,125
--------------
(Hospital Auxilio Mutual Obligation) (1.30%)
440,000 6.250%, 7/01/24 475,200
900,000 5.500%, 7/01/26 909,000
--------------
1,384,200
(Pila Hospital Project) (.46%)
455,000 6.250%, 8/01/32 487,988
--------------
(Upjohn Co. Project) (.83%)
825,000 7.500%, 12/01/23 882,750
--------------
Public Building Authority
Health Facilities & Services (.71%)
665,000 5.750%, 7/01/15 677,469
75,000 7.250%, 7/01/17 78,082
--------------
755,551
University of Puerto Rico (.48%)
500,000 6.500%, 6/01/13 509,355
--------------
Total Puerto Rico Municipal Bonds 10,588,113
--------------
</TABLE>
<PAGE>
FIRST HAWAII MUNICIPAL BOND FUND
SCHEDULE OF INVESTMENTS - (Continued)
September 30, 1997
<TABLE>
<S><C> <C> <C> <C>
Value
Par Value (Note 1)
VIRGIN ISLANDS MUNICIPAL BONDS (.44%)
Virgin Islands
Port Authority Airport Revenue Bonds (.32%)
$ 325,000 8.100%, 10/01/05 $ 340,486
--------------
Public Finance Authority, Series A (.12%)
100,000 7.300%, 10/01/18 126,500
--------------
Total Virgin Islands Municipal Bonds 466,986
--------------
Total Investments (Cost $98,291,377) (a) 97.61% 103,834,496
Other Assets Less Liabilities 2.39% 2,545,744
-------- --------------
Net Assets 100.00% $ 106,380,240
====== ==============
(a)Aggregate cost for federal income tax purposes is $98,283,787.
At September 30, 1997, unrealized appreciation (depreciation)
of securities for federal income tax purposes is as follows:
Gross unrealized appreciation $ 5,552,069
Gross unrealized depreciation (1,360)
-------------
Net unrealized appreciation $ 5,550,709
=============
</TABLE>
See accompanying notes to financial statements
<PAGE>
FIRST HAWAII INTERMEDIATE MUNICIPAL FUND
SCHEDULE OF INVESTMENTS
September 30, 1997
<TABLE>
<S> <C> <C> <C>
Value
Par Value (Note 1)
--------- --------
HAWAII MUNICIPAL BONDS (93.74%)
----------------------
Hawaii County
General Obligation Bonds (4.17%)
$ 65,000 6.350%, 5/15/01 $ 65,141
100,000 6.800%, 12/01/01 101,495
100,000 6.500%, 5/15/06 100,228
------------
266,864
Hawaii State
General Obligation Bonds (1.63%)
100,000 5.500%, 7/01/01 104,250
------------
Airport Systems Revenue Bonds (15.53%)
105,000 6.400%, 7/01/02 114,056
600,000 5.125%, 7/01/00 615,750
250,000 5.700%, 7/01/07 264,688
------------
994,494
Department of Budget of Finance
Special Purpose Revenue Bonds
(Kapiolani Hospital) (10.01%)
100,000 6.650%, 7/01/98 101,953
200,000 5.500%, 7/01/05 208,750
290,000 7.650%, 7/01/19 330,237
------------
640,940
(Queen's Medical Center Program) (6.50%)
200,000 6.800%, 7/01/00 208,070
200,000 5.200%, 7/01/04 207,750
------------
415,820
(St. Francis Medical Center) (3.33%)
200,000 6.000%, 7/01/02 213,250
------------
(Wahiawa General Hospital) (2.38%)
150,000 7.125%, 7/01/98 152,450
------------
Harbor Capital Improvements Revenue Bonds,
Series 1989 (4.96%)
200,000 5.650%, 7/01/02 210,500
100,000 5.850%, 7/01/02 106,750
------------
317,250
</TABLE>
<PAGE>
FIRST HAWAII INTERMEDIATE MUNICIPAL FUND
SCHEDULE OF INVESTMENTS - (Continued)
September 30, 1997
<TABLE>
<S><C> <C> <C>
Value
Par Value (Note 1)
Housing Authority
Single Family Mortgage Purpose
Revenue Bonds (10.01%)
$200,000 6.300%, 7/01/99 $ 205,750
130,000 6.800%, 7/01/99 132,600
300,000 4.800%, 7/01/07 302,250
------------
640,600
Public Housing Authority Bonds (3.20%)
200,000 5.750%, 8/01/00 205,154
------------
University Faculty Housing (3.63%)
230,000 4.350%, 10/01/00 232,300
------------
University of Hawaii (4.59%)
University Revenue Bonds
280,000 5.450%, 10/01/06 294,000
------------
Honolulu City & County
Board of Water Supply (4.88%)
300,000 5.000%, 7/01/04 312,375
------------
General Obligation Bonds (4.20%)
165,000 4.800%, 6/01/98 166,112
100,000 5.000%, 10/01/02 102,750
------------
268,862
Halawa Business Park (3.27%)
200,000 6.300%, 10/15/00 209,500
------------
Kauai County
General Obligation Bonds (4.70%)
100,000 4.300%, 8/01/02 100,250
100,000 4.400%, 8/01/03 100,375
100,000 4.550%, 8/01/05 100,500
------------
301,125
Maui County
General Obligation Bonds (3.30%)
190,000 8.000%, 1/01/01 211,137
------------
Water System Revenue (3.45%)
100,000 6.600%, 12/01/07 110,250
100,000 6.700%, 12/01/11 110,625
------------
220,875
Total Hawaii Municipal Bonds 6,001,246
</TABLE>
FIRST HAWAII INTERMEDIATE MUNICIPAL FUND
SCHEDULE OF INVESTMENTS - (Continued)
September 30, 1997
<TABLE>
<S><C> <C> <C> <C>
Value
Par Value (Note 1)
PUERTO RICO MUNICIPAL BONDS (3.94%)
Puerto Rico Commonwealth
Electric Power Authority Revenue Bonds (1.50%)
$ 90,000 7.125%, 7/01/14 $ 96,187
------------
General Obligation Bonds (1.52%)
90,000 7.750%, 7/01/17 97,088
------------
Housing Finance Corp.
Single Family Mortgage Revenue Bonds (.92%)
55,000 6.150%, 8/01/03 58,850
------------
Total Puerto Rico Municipal Bonds 252,125
------------
Total Investments (Cost $6,093,693) (a) 97.68% 6,253,371
Other Assets Less Liabilities 2.32 148,421
------- ------------
Net Assets 100.00% $ 6,401,792
====== ============
(a) Aggregate cost for federal income tax purposes is $6,093,693.
At September 30, 1997, unrealized appreciation (depreciation) of
securities for federal income tax purposes is as follows: Gross
unrealized appreciation $ 160,401 Gross unrealized depreciation
(723) ------------- Net unrealized appreciation $ 159,678
=============
</TABLE>
See accompanying notes to financial statements
<PAGE>
FIRST HAWAII MUNICIPAL BOND FUND
FIRST HAWAII INTERMEDIATE MUNICIPAL FUND
STATEMENT OF ASSETS AND LIABILITIES
September 30, 1997
<TABLE>
<S> <C> <C>
Municipal Intermediate
Bond Municipal
Fund Fund
ASSETS
Investments at market value
(Identified cost $98,291,377 and $6,093,693,
respectively) (Note 1 (A)) $ 103,834,496 $ 6,253,371
Cash 1,007,127 47,681
Interest receivable 1,720,351 99,181
Subscriptions receivable 20,952 417
Other assets - 4,625
-------------- ------------
Total assets 106,582,926 6,405,275
--------------- ------------
LIABILITIES
Accrued expenses 74,524 -
Distributions payable 128,162 3,483
--------------- ------------
Total liabilities 202,686 3,483
--------------- ------------
NET ASSETS
(Applicable to 9,586,282 and 1,242,325 shares outstanding,
$.01 par value, 20,000,000 shares authorized) $ 106,380,240 $ 6,401,792
=============== ============
NET ASSET VALUE OFFERING AND REPURCHASE
PRICE PER SHARE
($106,380,240 ) 9,586,282 shares) $11.10
======
($6,401,792 ) 1,242,325 shares) $5.15
=====
NET ASSETS
At September 30, 1997, net assets consisted of:
Paid-in capital $ 101,046,879 $ 6,237,842
Accumulated net realized gain (loss) on investments (209,758) 4,272
Net unrealized appreciation 5,543,119 159,678
--------------- ------------
$ 106,380,240 $ 6,401,792
=============== ============
</TABLE>
See accompanying notes to financial statements
<PAGE>
FIRST HAWAII MUNICIPAL BOND FUND
FIRST HAWAII INTERMEDIATE MUNICIPAL FUND
STATEMENT OF OPERATIONS
Year ended September 30, 1997
<TABLE>
<S><C> <C> <C>
Municipal Intermediate
Bond Municipal
Fund Fund
INVESTMENT INCOME
Interest income $ 3,766,448 $ 317,331
------------- -----------
Expenses
Management fee (Note 2) 318,926 31,806
Distribution costs (Note 2) 93,094 844
Transfer agent fees (Note 2) 45,135 14,139
Shareholder services (Note 2) 63,785 6,361
Accounting fees (Note 2) 47,525 23,610
Legal and audit fees 23,282 6,637
Printing 8,235 2,404
Custodian fees 11,819 3,000
Insurance 6,857 495
Registration fees 6,055 1,350
Directors fees 400 -
------------- --------
Total expenses 625,113 90,646
Fee reductions (Note 4) (25,559) (7,014)
Expenses reimbursed or waived (Note 2) (1,330) (35,924)
------------- -----------
Net expenses 598,224 47,708
------------- -----------
Net investment income 3,168,224 269,623
------------- -----------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net realized gain from security transactions 19,725 4,272
Increase in unrealized appreciation of investments 3,769,988 56,068
------------- -----------
Net gain on investments 3,789,713 60,340
------------- -----------
Net increase in net assets resulting from operations $ 6,957,937 $ 329,963
============= ===========
</TABLE>
See accompanying notes to financial statements
<PAGE>
FIRST HAWAII MUNICIPAL BOND FUND
STATEMENT OF CHANGES IN NET ASSETS
Years ended September 30, 1997 and 1996
<TABLE>
<S> <C> <C> <C>
1997 1996
---- ----
INCREASE (DECREASE) IN NET ASSETS FROM
Operations
Net investment income $ 3,168,224 $ 2,668,355
Net realized gain on investments 19,725 21,217
Increase in unrealized appreciation of investments 3,769,988 202,015
--------------- --------------
Net increase in net assets resulting from operations 6,957,937 2,891,587
Distributions to shareholders from
Net investment income
($.54 and $.55 per share, respectively) (3,168,224) (2,668,355)
Capital share transactions (a)
Increase in net assets resulting from capital share transactions 48,425,600 2,810,813
--------------- --------------
Total increase in net assets 52,215,313 3,034,045
NET ASSETS
Beginning of period 54,164,927 51,130,882
--------------- --------------
End of period $ 106,380,240 $ 54,164,927
=============== ==============
</TABLE>
(a) Summary of capital share activity follows:
<TABLE>
1997
1996
Shares Value Shares Value
<S> <C> <C> <C> <C>
Shares sold 1,385,844 $ 15,233,619 982,410 $ 10,706,770
Shares issued on acquisition of
Fund (Note 5) 4,250,805 44,450,011 - -
Shares issued on reinvestment
of distributions 204,944 2,251,292 173,650 1,892,040
-------------- --------------- ------------- --------------
5,841,593 61,934,922 1,156,060 12,598,810
Shares redeemed (1,228,255) (13,509,322) (900,255) (9,787,997)
---------- ------------- ----------- -------------
Net increase 4,613,338 $ 48,425,600 255,805 $ 2,810,813
============== =============== ============= ==============
</TABLE>
See accompanying notes to financial statements
<PAGE>
FIRST HAWAII INTERMEDIATE MUNICIPAL FUND
STATEMENT OF CHANGES IN NET ASSETS
Years ended September 30, 1997 and 1996
<TABLE>
<S> <C> <C>
1997 1996
INCREASE (DECREASE) IN NET ASSETS FROM
Operations
Net investment income $ 269,623 $ 253,088
Net realized gain on investments 4,272 17,216
Increase (decrease) in unrealized appreciation of investments 56,068 (35,876)
------------- -------------
Net increase in net assets resulting from operations 329,963 234,428
Distributions to shareholders from
Net investment income
($.22 and $.22 per share, respectively) (269,623) (253,088)
Capital gains ($.01 per share) (15,406) -
Capital share transactions (a)
Increase (decrease) in net assets resulting from capital
share transactions (267,381) 1,882,838
------------- -------------
Total increase (decrease) in net assets (222,447) 1,864,178
NET ASSETS
Beginning of period 6,624,239 4,760,061
------------- -------------
End of period $ 6,401,792 $ 6,624,239
============= =============
</TABLE>
(a) Summary of capital share activity follows:
<TABLE>
<S> <C> <C>
1997 1996
Shares Value
Shares Value
Shares sold 281,929 $ 1,445,252 688,964 $ 3,522,684
Shares issued on reinvestment
of distributions 47,134 241,769 43,852 224,869
----------- -------------- ----------- --------------
329,063 1,687,021 732,816 3,747,553
Shares redeemed (380,936) (1,954,402) (364,169) (1,864,715)
----------- -------------- -------- -------------
Net increase (decrease) (51,873) $ (267,381) 368,647 $ 1,882,838
=========== ============== =========== ==============
</TABLE>
See accompanying notes to financial statements
<PAGE>
FIRST HAWAII MUNICIPAL BOND FUND
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout the period)
<TABLE>
Years Ended September 30,
-------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
Net asset value
Beginning of year $10.89 $10.84 $10.62 $11.48 $10.90
------ ------ ------ ------ ------
Income from investment operations
Net investment income .54 .55 .55 .55 .58
Net gain (loss) on securities (both realized and unrealized) .21 .05 .31 (.80) .60
--------- --------- --------- --------- ---------
Total from investment operations .75 .60 .86 (.25) 1.18
--------- --------- --------- --------- --------
Less distributions
Dividends from net investment income (.54) (.55) (.55) (.55) (.58)
Distributions from capital gains - - (.09) (.06) (.02)
----------- ---------- --------- --------- ---------
Total distributions (.54) (.55) (.64) (.61) (.60)
--------- --------- --------- --------- ---------
End of year $11.10 $10.89 $10.84 $10.62 $11.48
====== ====== ====== ====== ======
Total return 7.09% 5.62% 8.42% (2.18)% 11.11%
Ratios/Supplemental Data
Net assets, end of period (in 000's) $106,380 $54,165 $51,131 $52,230 $57,396
Ratio of expenses to average net assets
Before expense reimbursements .98% .98% 1.00% .97% .95%
After expense reimbursements .98% (a) .98% (a) .97% (a) .95% .95%
Ratio of net investment income to average net assets
Before expense reimbursements 4.99% 5.03% 5.19% 4.99% 5.21%
After expense reimbursements 4.99% 5.03% 5.22% 5.01% 5.21%
Portfolio turnover 3.21% 15.16% 17.08% 40.22% 27.77%
</TABLE>
(a) Ratio of expenses to average net assets after the reduction of custodian
fees under a custodian arrangement was .94%, .95% and .95% in 1997, 1996
and 1995, respectively. Prior to 1995, such reductions were reflected in
the expense ratios.
See accompanying notes to financial statements
<PAGE>
FIRST HAWAII INTERMEDIATE MUNICIPAL FUND
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout the period)
<TABLE>
Period
July 5, 1994* To
Years Ended September 30, September 30, 1994
---------------------------------------------- ------------------
<S> <C> <C> <C> <C>
1997 1996 1995
---- ---- ----
Beginning of period $5.12 $5.14 $4.99 $5.00
----- ----- ----- -----
Income from investment operations
Net investment income .22 .22 .23 .05
Net gain (loss) on securities .04 (.02) .15 (.01)
(both realized and unrealized) ------- ------ ------- -------
Total from investment operations .26 .20 .38 .04
------- ------ ------- -------
Less distributions
Dividends from net investment income (.22) (.22) (.23) (.05)
Distributions from capital gains (.01) - - -
------- -------- --------- --------
Total distributions (.23) (.22) (.23) (.05)
------- ------ ------- -------
End of period $5.15 $5.12 $5.14 $4.99
===== ===== ===== =====
Total return 5.17% 3.95% 7.86% .72%
Ratios/Supplemental Data
Net assets, end of period (in 000's) $6,402 $6,624 $4,760 $2,447
Ratio of expenses to average net assets
Before expense reimbursements 1.43% 1.50% 1.90% 4.48% (a)
After expense reimbursements .86% (b) .84% (b) .66% (b) 0% (a)
Ratio of net investment income to average net assets
Before expense reimbursements 3.67% 3.66% 3.39% .12% (a)
After expense reimbursements 4.24% 4.32% 4.63% 4.60% (a)
Portfolio turnover 17.36% 17.76% 10.04% 0%
</TABLE>
* Commencement of operations
(a) Annualized
(b) Ratio of expenses to average net assets after the reduction of custodian
fees under a custodian arrangement was .75% for 1997 and 1996 and .64% for
1995. Prior to 1995, such reductions were reflected in the expense ratios.
See accompanying notes to financial statements
<PAGE>
FIRST HAWAII MUNICIPAL BOND FUND
FIRST HAWAII INTERMEDIATE MUNICIPAL FUND
NOTES TO FINANCIAL STATEMENTS
September 30, 1997
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
First Hawaii Municipal Bond Fund and First Hawaii Intermediate Municipal
Fund ("Funds") are each a series of shares of First Pacific Mutual Fund,
Inc. which is registered under the Investment Company Act of 1940, as a
non-diversified open-end management company.
The investment objective of the Funds is to provide investors with the
maximum level of income exempt from federal and Hawaii income taxes
consistent with the preservation of capital. The Funds seek to achieve
their objective by investing primarily in municipal securities which pay
interest that is exempt from federal and Hawaii income taxes.
The Funds are subject to the risk of price fluctuation of the municipal
securities held in its portfolio which is generally a function of the
underlying credit rating of an issuer, the maturity length of the
securities, the securities' yield, and general economic and interest rate
conditions.
Since the Funds invest primarily in obligations of issuers located in
Hawaii, the marketability and market value of these obligations may be
affected by certain Hawaiian constitutional provisions, legislative
measures, executive orders, administrative regulations, voter initiatives,
and other political and economic developments. If any such problems arise,
they could adversely affect the ability of various Hawaiian issuers to
meet their financial obligation.
In preparing financial statements in conformity with generally accepted
accounting principles, management makes estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial statements, as well as the reported amounts of income and
expenses during the reported period. Actual results could differ from
those estimates.
(A) SECURITY VALUATION
Portfolio securities, which are fixed income securities, are valued
by an independent pricing service 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 Board of Directors. Securities with remaining maturities
of 60 days or less are valued on the amortized cost basis as
reflecting fair value. All other securities are valued at their fair
value as determined in good faith by the Board of Directors.
(B) FEDERAL INCOME TAXES
It is the Funds' policy to comply with the requirements of the
Internal Revenue Code applicable to regulated investment companies
and to distribute their taxable income, if any, to their
shareholders. Therefore, no federal income tax provision is required.
(C) SECURITY TRANSACTIONS, INVESTMENT INCOME AND DISTRIBUTIONS TO
SHAREHOLDERS
Security transactions are recorded on the trade date. Interest income
is recorded on the accrual basis. Bond discounts and premiums are
amortized as required by the Internal Revenue Code. Distributions to
shareholders are declared daily and reinvested or paid in cash
monthly. Premiums and discounts are amortized in accordance with
income tax regulations.
<PAGE>
FIRST HAWAII MUNICIPAL BOND FUND
FIRST HAWAII INTERMEDIATE MUNICIPAL FUND
NOTES TO FINANCIAL STATEMENTS
September 30, 1997
(2) INVESTMENT MANAGEMENT FEE AND OTHER TRANSACTIONS WITH AFFILIATES
First Pacific Management Corporation ("FPMC") provides the Funds with
management and administrative services pursuant to a management agreement.
In accordance with the terms of the management agreement, FPMC receives
compensation at the annual rate of .50% of each Fund's average daily net
assets.
The Funds' distributor, First Pacific Securities ("FPS"), a wholly-owned
subsidiary of FPMC, received $93,094 for costs incurred in connection with
the sale of First Hawaii Municipal Bond Fund's shares. FPS also received
$844 for costs incurred with the sale of First Hawaii Intermediate
Municipal Fund's shares (See Note 3).
First Pacific Recordkeeping, ("FPR"), a wholly-owned subsidiary of FPMC,
serves as the transfer agent and accounting agent for the Funds. FPR also
provides the Funds with certain clerical, bookkeeping and shareholder
services pursuant to a service agreement approved by the Funds' directors.
As compensation for these services FPR receives a fee, computed daily and
payable monthly, at an annualized rate of .10% of each Fund's average
daily net assets.
For the year ended September 30, 1997, FPMC and FPR voluntarily waived
certain management, transfer agent, shareholder services, and accounting
fees in the amount of $1,330 and $35,924 for First Hawaii Municipal Bond
Fund and First Hawaii Intermediate Municipal Fund, respectively. In
addition, FPMC also has agreed to be voluntarily subject to an expense
limit of .85% of average daily net assets for the First Hawaii Municipal
Bond Fund for the two year period beginning August 1, 1997.
Certain officers and directors of the Funds are also officers of FPMC, FPS
and FPR.
(3) DISTRIBUTION COSTS
The Funds' Board of Directors, including a majority of the Directors who
are not "interested persons" of the Funds, as defined in the Investment
Company Act of 1940, adopted a distribution plan pursuant to Rule 12b-1 of
the Act. The Plan regulates the manner in which a regulated investment
company may assume costs of distributing and promoting the sales of its
shares.
The Plan provides that the Funds may incur certain costs, which may not
exceed .25% per annum of the Funds' average daily net assets, for payment
to the distributor for items such as advertising expenses, selling
expenses, commissions or travel reasonably intended to result in sales of
shares of the Funds.
<PAGE>
FIRST HAWAII MUNICIPAL BOND FUND
FIRST HAWAII INTERMEDIATE MUNICIPAL FUND
NOTES TO FINANCIAL STATEMENTS - (Continued)
September 30, 1997
(4) PURCHASES AND SALES/CUSTODY OF SECURITIES
Purchases and sales of securities aggregated $6,047,114 and $1,995,438,
respectively for the First Hawaii Municipal Bond Fund. Purchases and sales
of securities for First Hawaii Intermediate Municipal Fund aggregated
$1,083,544 and $1,490,225, respectively. Under an agreement with the
Custodian Bank, custodian fees are reduced by credits for cash balances.
During the year ended September 30, 1997, such reductions amounted to
$25,559 and $7,014 for the First Hawaii Municipal Bond Fund and the First
Hawaii Intermediate Municipal Fund, respectively.
(5) ACQUISITION OF FUND
On July 31, 1997, First Hawaii Municipal Bond Fund acquired all the assets
of Leahi Tax-Free Income Trust, in exchange for 4,420,805 shares (valued
at $47,353,850) of First Hawaii Municipal Bond Fund that were subsequently
distributed to the shareholders of Leahi Tax-Free Income Trust. The
exchange had no effect on the net asset value per share of First Hawaii
Municipal Bond Fund. The net assets of Leahi Tax-Free Income Trust as of
July 31, 1997 were $47,353,850 consisting of paid-in capital of
$44,450,011 and net unrealized appreciation of investments of $2,903,839.
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors and Shareholders
First Pacific Mutual Fund, Inc.
Honolulu, Hawaii
We have audited the accompanying statement of assets and liabilities of First
Idaho Tax-Free Fund (a series of shares of First Pacific Mutual Fund, Inc.),
including the schedule of investments, as of September 30, 1997, and the related
statement of operations for the year then ended and the statement of changes in
net assets and the financial highlights for the periods indicated thereon. These
financial statements and financial highlights are the responsibility of the
Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements and financial highlights are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. Our
procedures included confirmation of securities owned as of September 30, 1997,
by correspondence with the custodian. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of First
Idaho Tax-Free Fund as of September 30, 1997, the results of its operations for
the year then ended and, the changes in its net assets and the financial
highlights for the periods indicated thereon in conformity with generally
accepted accounting principles.
TAIT, WELLER & BAKER
Philadelphia, Pennsylvania
November 7, 1997
<PAGE>
FIRST IDAHO TAX-FREE FUND
SCHEDULE OF INVESTMENTS
September 30, 1997
<TABLE>
<S> <C> <C>
Par Value
Value (Note 1)
IDAHO MUNICIPAL BONDS (83.64%)
Ada & Canyon Counties
Joint School District (1.58%)
$10,000 5.500%, 7/30/12 $ 10,425
Boise City
Independent School District (1.57%)
10,000 5.300%, 7/30/09 10,375
Public Housing Authority (3.86%)
25,000 5.250%, 8/01/11 25,500
Boise State University
Revenue Bond (1.56%)
10,000 5.050%, 4/01/08 10,338
Boise-Kuna-Irrigation District
Lucky Peak Hydroelectric (4.00%)
25,000 6.000%, 7/01/08 26,469
Bonneville County
General Obligation Bonds (1.54%)
10,000 5.200%, 8/01/12 10,175
Cassia & Twin Falls County
General Obligation Bonds (3.84%)
25,000 5.375%, 8/01/13 25,406
Central Shoshone County
Water District Revenue Bond (1.55%)
10,000 6.150%, 12/01/17 10,275
Elmore County
School District #193 (3.58%)
25,000 4.500%, 7/31/13 23,656
Gooding City
School District #232 Wendell (1.58%)
10,000 5.800%, 8/01/06 10,462
Idaho Falls
Idaho Electric Revenue Bonds (8.73%)
40,000 10.375%, 4/01/13 57,700
Idaho Health Facilities Revenue Bonds
(Bannock Regional Medical Center) (4.64%)
15,000 5.000%, 5/01/00 15,131
10,000 7.600%, 5/01/05 10,373
5,000 6.000%, 5/01/14 5,137
----------
30,641
See accompanying notes to financial statements
<PAGE>
FIRST IDAHO TAX-FREE FUND
SCHEDULE OF INVESTMENTS - (Continued)
September 30, 1997
Par Value
Value (Note 1)
(Holy Cross Health Systems) (4.11%)
$25,000 6.100%, 12/01/06 $ 27,188
(Intermountain Health Care Inc.) (4.34%)
25,000 6.500%, 4/01/10 28,719
(Magic Valley Regional Medical Center) (1.57%)
10,000 5.500%, 12/01/10 10,400
(Mercy Medical Center) (4.15%)
25,000 7.400%, 10/01/05 27,437
Idaho Housing Agency
Single Family Mortgage - Series B (14.34%)
30,000 6.600%, 7/01/12 31,687
10,000 5.700%, 7/01/13 10,250
50,000 6.500%, 1/01/27 52,875
----------
94,812
Idaho State
Board of Education (0.77%)
5,000 7.100%, 10/01/17 5,100
Water Reserve Board (1.63%)
10,000 7.250%, 12/01/21 10,763
Student Loan Marketing Association - Series C (1.51%)
10,000 4.750%, 4/01/99 10,012
Kootenai County
School District #271 (3.87%)
25,000 5.850%, 7/30/07 25,591
Nampa Urban Renewal Agency (1.55%)
10,000 5.700%, 8/01/05 10,237
Payette & Washington Counties
School District #371 (3.16%)
20,000 6.300%, 10/01/03 20,900
Twin Falls County
Solid Waste Disposal (3.05%)
20,000 4.500%, 9/01/99 20,150
University of Idaho
University Commons Project (1.56%)
10,000 5.650%, 4/01/22 10,275
----------
Total Idaho Municipal Bonds 553,006
----------
See accompanying notes to financial statements
<PAGE>
FIRST IDAHO TAX-FREE FUND
SCHEDULE OF INVESTMENTS - (Continued)
September 30, 1997
Par Value
Value (Note 1)
PUERTO RICO MUNICIPAL BONDS (14.09%)
Puerto Rico Commonwealth
General Obligation Bonds (1.56%)
$10,000 5.750%, 7/01/17 $ 10,313
Housing Finance Corp.
Multi-Family Mortgage Revenue Bonds (1.60%)
10,000 7.500%, 4/01/22 10,575
Single Family Mortgage Revenue Bonds (2.43%)
15,000 6.150%, 8/01/03 16,050
Industrial, Medical & Environmental Pollution Control
Abbott Laboratories (4.56%)
30,000 6.500%, 7/01/09 30,193
Public Building Authority
Health Facilities & Services (3.94%)
25,000 7.250%, 7/01/17 26,028
----------
Total Puerto Rico Municipal Bonds 93,159
----------
Total Investments (cost $633,568) (a) 97.73 % 646,165
Other Assets Less Liabilities 2.27 14,994
------ ---------
Net Assets 100.00 % $ 661,159
====== =========
(a) Aggregate cost for federal income tax purposes is $633,568.
At September 30, 1997, unrealized appreciation (depreciation) of
securities for federal income tax purposes is as follows:
Gross unrealized appreciation $ 13,449
Gross unrealized depreciation (852)
--------
Net unrealized appreciation $ 12,597
========
</TABLE>
See accompanying notes to financial statements
<PAGE>
FIRST IDAHO TAX-FREE FUND
STATEMENT OF ASSETS AND LIABILITIES
September 30, 1997
<TABLE>
<S> <C>
ASSETS
Investments at market value
(Identified cost $633,568) (Note 1(A)) $ 646,165
Cash 3,334
Interest receivable 12,404
Prepaid expense 385
----------
Total assets 662,288
LIABILITIES
Accrued expenses 1
Distributions payable 1,128
Total liabilities 1,129
NET ASSETS
(Applicable to 63,637 shares outstanding,
$.01 par value, 20,000,000 shares authorized) $ 661,159
==========
NET ASSET VALUE, OFFERING AND REPURCHASE PRICE PER SHARE
Net asset value and repurchase price per share
($661,159 ) 63,637 shares) $ 10.39
========
Offering price per share
(100 ) 97.25 of $10.39) * $ 10.68
========
NET ASSETS
At September 30, 1997, net assets consisted of:
Paid-in capital $ 648,562
Net unrealized appreciation of investments 12,597
----------
$ 661,159
</TABLE>
* On investments of $50,000 or more the offering price is reduced.
See accompanying notes to financial statements
<PAGE>
FIRST IDAHO TAX-FREE FUND
STATEMENT OF OPERATIONS
Year ended September 30, 1997
<TABLE>
<S> <C>
INVESTMENT INCOME
Interest income $ 17,684
----------
Expenses
Management fee (Note 2) 1,778
Accounting fees (Note 2) 23,961
Transfer agent fees (Note 2) 14,400
Custodian fees 3,000
Legal and audit 2,000
Insurance expense 180
----------
Total expenses 45,319
Fee reductions (Note 4) (5,461)
Expenses waived (Note 2) (39,678)
----------
Net expenses 180
Net investment income 17,504
UNREALIZED GAIN ON INVESTMENTS
Increase in unrealized appreciation of investments 12,456
----------
Net increase in net assets resulting from operations $ 29,960
==========
</TABLE>
See accompanying notes to financial statements
<PAGE>
FIRST IDAHO TAX-FREE FUND
STATEMENT OF CHANGES IN NET ASSETS
Year ended September 30, 1997 and Period July 1, 1996 (Commencement of
Operations) to September 30, 1996
<TABLE>
<S> <C> <C>
1997 1996
---- ----
INCREASE (DECREASE) IN NET ASSETS FROM
Operations
Net investment income $ 17,504 $ 122
Increase in unrealized appreciation
of investments 12,456 141
---------- ----------
Net increase in net assets
resulting from operations 29,960 263
Distributions to shareholders from
Net investment income
($.49 and $.05 per share, respectively) (17,504) (122)
Capital share transactions (a)
Increase in net assets resulting from
capital share transactions 537,823 110,739
---------- ----------
Total increase in net assets 550,279 110,880
NET ASSETS
Beginning of period 110,880 -
---------- -------
End of period $ 661,159 $ 110,880
========== ==========
</TABLE>
(a) Summary of capital share activity follows:
<TABLE>
<S> <C> <C> <C>
1997 1996
------------------------------ -----------------
Shares Value Shares Value
Shares sold 59,375 $ 605,567 10,914 $ 110,635
Shares issued on
reinvestment of distributions 1,197 12,290 10 104
-------- --------- -------- ----------
60,572 617,857 10,924 110,739
Shares redeemed (7,859) (80,034) - -
-------- --------- -------- -------
Net increase 52,713 $ 537,823 10,924 $ 110,739
======== ========= ======== ==========
</TABLE>
See accompanying notes to financial statements
<PAGE>
FIRST IDAHO TAX-FREE FUND
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout the period)
<TABLE>
<S> <C> <C>
Year Ended Period July 1, 1996*
September 30,1997 To September 30,1996
-------------------- ------------
Net asset value
Beginning of period $10.15 $10.00
------ ------
Income from investment operations
Net investment income .49 .05
Net unrealized gain on securities .24 .15
-------- --------
Total from investment operations .73 .20
-------- --------
Less distributions
Dividends from net investment income (.49) (.05)
-------- --------
End of period$10.39 $10.15
====== ======
Total return 7.38% 2.05%
Ratios/Supplemental Data
Net assets, end of year (in 000's) $661 $111
Ratio of expenses to average net assets 1.59% (b) .02% (a)
Ratio of net investment income to average net assets 4.92% 3.03% (a)
Portfolio turnover 0% 0%
</TABLE>
* Commencement of operations
(a) Annualized
(b) Ratio of expenses to average net assets after the reduction of custodian
fees under a custodian arrangement was .05% in 1997. There were no custodian fee
reductions in 1996.
See accompanying notes to financial statements
<PAGE>
FIRST IDAHO TAX-FREE FUND
NOTES TO FINANCIAL STATEMENTS
September 30, 1997
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
First Idaho Tax-Free Fund is a series of shares of First Pacific Mutual
Fund, Inc. which is registered under the Investment Company Act of 1940,
as a non-diversified open-end management company.
The investment objective of the Fund is to provide investors with the
maximum level of income exempt from federal and Idaho income taxes
consistent with the preservation of capital. The Fund seeks to achieve its
objective by investing primarily in municipal securities which pay
interest that is exempt from federal and Idaho income taxes.
The Fund is subject to the risk of price fluctuation of the municipal
securities held in its portfolio which is generally a function of the
underlying credit rating of an issuer, the maturity length of the
securities, the securities' yield, and general economic and interest rate
conditions.
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 Idahoan constitutional provisions, legislative
measures, executive orders, administrative regulations, voter initiatives,
and other political and economic developments. If any such problems arise,
they could adversely affect the ability of various Idahoan issuers to meet
their financial obligation. The Fund also has a concentration of
securities from issuers located in Puerto Rico. Those issuers could be
affected by similar developments within Puerto Rico.
In preparing financial statements in conformity with generally accepted
accounting principles, management makes estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial statements, as well as the reported amounts of income and
expenses during the reported period. Actual results could differ from
those estimates.
(A) SECURITY VALUATION
Portfolio securities, which are fixed income securities, are valued
by an independent pricing service 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 Board of Directors. Securities with remaining maturities
of 60 days or less are valued on the amortized cost basis as
reflecting fair value. All other securities are valued at their fair
value as determined in good faith by the Board of Directors.
(B) FEDERAL INCOME TAXES
It is the Fund's policy to comply with the requirements of the
Internal Revenue Code applicable to regulated investment companies
and to distribute its taxable income, if any, to its shareholders.
Therefore, no federal income tax provision is required.
<PAGE>
FIRST IDAHO TAX-FREE FUND
NOTES TO FINANCIAL STATEMENTS - (Continued)
September 30, 1997
(C) SECURITY TRANSACTIONS, INVESTMENT INCOME AND DISTRIBUTIONS TO
SHAREHOLDERS
Security transactions are recorded on the trade date. Interest income
is recorded on the accrual basis. Bond discounts and premiums are
amortized as required by the Internal Revenue Code. Distributions to
shareholders are declared daily and reinvested or paid in cash
monthly.
Premiums and discounts are amortized in accordance with income tax
regulations.
(2) INVESTMENT MANAGEMENT FEE AND OTHER TRANSACTIONS WITH AFFILIATES
First Pacific Management Corporation ("FPMC") provides the Fund with
management and administrative services pursuant to a management agreement.
In accordance with the terms of the management agreement, FPMC receives
compensation at the annual rate of .50% of the Fund's average daily net
assets.
The Funds' distributor, First Pacific Securities ("FPS"), a wholly-owned
subsidiary of FPMC, may be reimbursed for costs incurred in connection
with the sale of the Fund's shares (See Note 3). No reimbursements were
received during the year ended September 30, 1997.
First Pacific Recordkeeping, ("FPR"), a wholly-owned subsidiary of FPMC,
serves as the transfer agent and accounting agent for the Fund. FPR also
provides the Fund with certain clerical, bookkeeping and shareholder
services pursuant to a service agreement approved by the Fund's directors.
For the year ended September 30, 1997, FPMC and FPR voluntarily waived
certain management, transfer agent, and accounting fees in the amount of
$39,678 for the Fund.
Certain officers and directors of the Funds are also officers of FPMC, FPS
and FPR.
(3) DISTRIBUTION COSTS
The Fund's Board of Directors, including a majority of the Directors who
are not "interested persons" of the Fund, as defined in the Investment
Company Act of 1940, adopted a distribution plan pursuant to Rule 12b-1 of
the Act. The Plan regulates the manner in which a regulated investment
company may assume costs of distributing and promoting the sales of its
shares.
The Plan provides that the Fund may incur certain costs, which may not
exceed .50% per annum of the Fund's average daily net assets, for payment
to the distributor for items such as advertising expenses, selling
expenses, commissions or travel reasonably intended to result in sales of
shares of the Fund.
(4) PURCHASES AND SALES OF SECURITIES
Purchases of securities aggregated $568,530. There were no sales of
securities during the period. Under an agreement with the Custodian Bank,
custodian fees are reduced by credits for cash balances. During the year
ended September 30, 1997, such reductions amounted to $5,461.
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