May 1, 1998
Dear Fellow Shareholder,
The April 15th tax deadline has just passed and as a Hawaii taxpayer you
probably felt the impact of paying high taxes. By investing in tax-free funds
like the First Hawaii Municipal Bond Fund and the First Hawaii Intermediate
Municipal Fund, you may have realized how important these funds can be in
reducing your tax burden.
Tax-free investing provides more than an opportunity to generate State of Hawaii
and federal tax-free income. Tax-free investing offers Hawaii investors a unique
means of directing working capital toward worthy projects designed to enrich our
community. The money raised through municipal bonds is commonly used to build
schools, hospitals, roads, airports, harbors and water and electrical systems
that serve to create jobs, boost the local economy and improve the quality of
life here in our islands.
On the following pages you will find our 1998 semi-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 always, we look forward to providing you with
the same high levels of service and performance you have come to expect.
Warmest Aloha,
Terrence K.H. Lee
President First Pacific Securities, Inc./Member SIPC
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
March 31, 1998 (Unaudited)
Value
Par Value (Note 1)
HAWAII MUNICIPAL BONDS (87.39%)
Hawaii County
General Obligation Bonds (2.72%)
$1,150,000 7.050%, 6/01/01 $1,233,375
100,000 6.800%,12/01/01 101,215
200,000 7.200%, 6/01/05 215,250
1,030,000 7.200%, 6/01/06 1,108,538
300,000 5.600%, 5/01/11 323,625
---------
2,982,003
Hawaii State
General Obligation Bonds (2.40%)
100,000 7.200%, 9/01/06 108,250
150,000 7.000%, 6/01/07 159,375
135,000 6.000%,10/01/08 150,694
330,000 7.125%, 9/01/09 356,812
125,000 7.000%, 6/01/10 132,812
100,000 7.125%, 9/01/10 108,125
200,000 6.000%,11/01/10 224,250
500,000 6.250%, 1/01/13 556,250
300,000 6.250%, 1/01/14 333,750
250,000 5.000%,10/01/16 247,813
250,000 5.000%,10/01/17 246,562
---------
2,624,693
Airport Systems Revenue Bonds (6.76%)
400,000 5.125%, 7/01/00 410,000
150,000 5.800%, 7/01/01 158,437
345,000 6.300%, 7/01/01 367,425
200,000 7.000%, 7/01/07 218,500
175,000 7.000%, 7/01/10 192,719
385,000 6.900%, 7/01/12 454,300
500,000 7.000%, 7/01/18 542,500
1,150,000 7.000%, 7/01/20 1,260,687
2,460,000 7.500%, 7/01/20 2,666,025
1,045,000 6.750%, 7/01/21 1,132,519
---------
7,403,112
See accompanying notes to financial statements
<PAGE>
FIRST HAWAII MUNICIPAL BOND FUND
SCHEDULE OF INVESTMENTS - (Continued)
March 31, 1998 (Unaudited)
Value
Par Value (Note 1)
Department of Budget & Finance Special Purpose Revenue Bonds
(Hawaiian Electric Company, Inc.) (5.97%)
$ 550,000 6.875%, 4/01/12 $ 559,262
2,720,000 7.625%,12/01/18 2,900,200
570,000 7.600%, 7/01/20 615,600
275,000 6.550%,12/01/22 300,438
450,000 6.200%, 5/01/26 483,750
600,000 5.875%,12/01/26 631,500
1,000,000 5.650%,10/01/27 1,045,000
---------
6,535,750
(Kapiolani Hospital) (7.55%)
400,000 6.300%, 7/01/08 432,000
3,120,000 7.600%, 7/01/10 3,510,000
1,650,000 6.400%, 7/01/13 1,784,061
600,000 6.200%, 7/01/16 648,000
985,000 6.000%, 7/01/19 1,042,869
430,000 7.650%, 7/01/19 484,287
340,000 6.250%, 7/01/21 368,475
---------
8,269,692
(Kaiser Permanente Center) (3.06%)
850,000 6.500%, 3/01/11 901,000
2,325,000 6.250%, 3/01/21 2,449,969
---------
3,350,969
(Maui Electric Company, Inc.) (.09%)
100,000 6.875%, 4/01/12 101,683
---------
(Queen's Medical Center Program) (5.34%)
200,000 6.800%, 7/01/00 205,484
300,000 5.200%, 7/01/04 315,000
540,000 6.900%, 7/01/04 555,077
250,000 6.125%, 7/01/11 273,750
945,000 6.000%, 7/01/20 1,009,969
600,000 6.200%, 7/01/22 658,500
2,735,000 5.750%, 7/01/26 2,830,725
---------
5,848,505
(St. Francis Medical Center) (2.74%)
2,765,000 6.500%, 7/01/22 3,006,937
---------
(Wahiawa General Hospital) (3.21%)
120,000 7.125%, 7/01/98 120,704
3,035,000 7.500%, 7/01/12 3,391,612
---------
3,512,316
(Wilcox Hospital) (.76%)
845,000 5.350%, 7/01/18 833,381
---------
See accompanying notes to financial statements
FIRST HAWAII MUNICIPAL BOND FUND
SCHEDULE OF INVESTMENTS - (Continued)
March 31, 1998 (Unaudited)
Value
Par Value (Note 1)
Department of Transportation
Special Facilities Revenue Bonds (2.62%)
$2,760,000 5.750%, 3/01/13 $2,873,850
----------
Harbor Capital Improvements Revenue Bonds,
Series 1989 (4.08%)
400,000 5.650%, 7/01/02 418,500
205,000 6.200%, 7/01/03 223,194
310,000 6.300%, 7/01/04 337,900
200,000 6.200%, 7/01/08 214,500
225,000 7.250%, 7/01/10 243,562
250,000 6.250%, 7/01/15 271,562
810,000 7.000%, 7/01/17 868,725
800,000 6.500%, 7/01/19 865,000
1,000,000 5.500%, 7/01/27 1,021,250
---------
4,464,193
Highway Revenue Bonds, Series 1993 (1.28%)
200,000 5.000%, 7/01/09 201,750
150,000 5.000%, 7/01/11 150,937
1,000,000 5.600%, 7/01/14 1,053,750
---------
1,406,437
Housing Authority Single Family
Mortgage Purpose Revenue Bonds (9.97%)
145,000 6.300%, 7/01/99 148,263
470,000 8.000%, 7/01/08 481,163
350,000 8.000%, 7/01/10 358,904
405,000 7.000%, 7/01/11 435,375
100,000 5.700%, 7/01/13 103,750
815,000 6.900%, 7/01/16 878,163
1,000,000 5.450%, 7/01/17 1,012,500
1,335,000 8.125%, 7/01/17 1,369,363
440,000 8.125%, 7/01/19 451,326
335,000 6.750%, 7/01/20 356,775
540,000 7.100%, 7/01/24 580,500
2,235,000 5.900%, 7/01/27 2,310,431
2,250,000 5.900%, 7/01/27 2,331,563
105,000 7.800%, 7/01/29 109,331
---------
10,927,407
See accompanying notes to financial statements
<PAGE>
FIRST HAWAII MUNICIPAL BOND FUND
SCHEDULE OF INVESTMENTS - (Continued)
March 31, 1998 (Unaudited)
Value
Par Value (Note 1)
Housing Authority Multi-Family
Mortgage Purpose Revenue Bonds (4.26%)
$ 180,000 4.500%, 1/01/99 $ 180,524
200,000 4.800%, 1/01/01 202,250
205,000 4.800%, 7/01/01 208,588
210,000 4.900%, 1/01/02 212,888
215,000 4.900%, 7/01/02 219,837
1,000,000 5.700%, 7/01/18 1,027,500
2,500,000 6.100%, 7/01/30 2,615,625
---------
4,667,212
Public Housing Authority Bonds (.41%)
185,000 5.750%, 8/01/00 189,886
250,000 5.750%, 8/01/04 256,268
---------
446,154
University Faculty Housing (2.91%)
90,000 4.350%,10/01/00 91,012
330,000 4.450%,10/01/01 334,125
345,000 4.550%,10/01/02 350,175
800,000 5.650%,10/01/16 844,000
1,500,000 5.700%,10/01/25 1,565,625
---------
3,184,937
University of Hawaii - Revenue Bonds (.57%)
100,000 5.450%,10/01/06 105,875
500,000 5.700%,10/01/17 521,250
---------
627,125
Honolulu City & County
Board of Water Supply (1.40%)
200,000 5.000%, 7/01/04 207,000
500,000 5.800%, 7/01/16 530,625
750,000 5.800%, 7/01/21 792,187
---------
1,529,812
General Obligation Bonds (8.04%)
100,000 7.300%, 7/01/03 114,375
375,000 6.700%, 8/01/05 408,750
200,000 7.350%, 7/01/06 240,250
300,000 6.900%,12/01/06 324,375
180,000 7.250%, 2/01/07 192,150
200,000 7.100%, 6/01/07 214,500
100,000 7.250%, 2/01/08 106,625
820,000 6.700%, 8/01/08 893,800
380,000 7.100%,10/01/08 392,152
1,000,000 7.300%, 2/01/09 1,066,250
See accompanying notes to financial statements
<PAGE>
FIRST HAWAII MUNICIPAL BOND FUND
SCHEDULE OF INVESTMENTS - (Continued)
March 31, 1998 (Unaudited)
Value
Par Value (Note 1)
General Obligation Bonds (8.04%) - (Continued)
$ 985,000 6.700%, 8/01/09 $1,073,650
880,000 7.100%,10/01/09 908,142
250,000 7.300%, 2/01/10 266,562
200,000 6.000%, 6/01/10 220,250
525,000 6.700%, 8/01/10 572,250
250,000 7.150%, 6/01/11 268,438
725,000 6.700%, 8/01/11 790,250
460,000 6.100%, 6/01/12 509,450
240,000 5.500%, 9/01/16 249,600
---------
8,811,819
Halawa Business Park (.89%)
170,000 6.300%,10/15/00 178,075
370,000 6.500%,10/15/02 399,137
365,000 6.600%,10/15/03 399,219
---------
976,431
Housing Authority Multi-Family
Mortgage Purpose Revenue Bonds (1.50%)
320,000 6.800%, 7/01/28 354,800
1,200,000 6.900%, 6/20/35 1,291,500
---------
1,646,300
Kauai County
General Obligation Bonds (2.86%)
300,000 5.100%, 2/01/01 308,625
100,000 7.350%, 8/01/05 101,216
410,000 5.850%, 8/01/07 453,563
1,280,000 5.850%, 8/01/07 1,416,000
250,000 5.9005, 2/01/10 269,687
250,000 5.900%, 2/01/11 269,063
295,000 5.900%, 2/01/12 316,387
---------
3,134,541
Housing Authority Paanau Project (1.76%)
1,980,000 7.250%, 4/01/12 1,930,500
---------
See accompanying notes to financial statements
<PAGE>
FIRST HAWAII MUNICIPAL BOND FUND
SCHEDULE OF INVESTMENTS - (Continued)
March 31, 1998 (Unaudited)
Value
Par Value (Note 1)
Maui County
General Obligation Bonds (3.24%)
$ 740,000 8.000%, 1/01/01 $ 814,925
250,000 6.800%,12/01/05 269,687
175,000 6.800%,12/01/08 188,781
250,000 5.700%, 1/01/09 259,063
735,000 5.750%, 1/01/12 760,725
235,000 5.750%, 6/01/13 250,275
500,000 5.300%, 9/01/14 514,375
500,000 5.000%, 9/01/17 493,125
---------
3,550,956
Water System Revenue (1.00%)
315,000 5.850%,12/01/00 329,569
300,000 6.500%,12/01/06 327,375
400,000 6.600%,12/01/07 438,000
---------
1,094,944
Total Hawaii Municipal Bonds 95,741,659
PUERTO RICO MUNICIPAL BONDS (9.71%)
Puerto Rico Commonwealth
Electric Power Authority Revenue Bonds (1.23%)
120,000 7.000%, 7/01/07 125,850
100,000 7.125%, 7/01/14 105,625
100,000 7.125%, 7/01/14 105,625
110,000 7.125%, 7/01/14 115,775
55,000 7.125%, 7/01/14 57,888
300,000 6.250%, 7/01/17 322,125
500,000 5.500%, 7/01/25 510,000
---------
1,342,888
General Obligation Bonds (2.09%)
250,000 6.250%, 7/01/10 266,563
100,000 6.250%, 7/01/10 108,375
250,000 7.250%, 7/01/10 272,188
70,000 7.750%, 7/01/13 72,106
750,000 6.450%, 7/01/17 853,125
100,000 7.300%, 7/01/20 109,000
300,000 6.500%, 7/01/23 342,000
250,000 5.750%, 7/01/24 262,500
---------
2,285,857
See accompanying notes to financial statements
<PAGE>
FIRST HAWAII MUNICIPAL BOND FUND
SCHEDULE OF INVESTMENTS - (Continued)
March 31, 1998 (Unaudited)
Value
Par Value (Note 1)
Highway & Transportation Authority (1.12%)
$ 100,000 8.000%, 7/01/03 $ 103,069
225,000 6.750%, 7/01/05 242,719
200,000 7.750%, 7/01/10 220,000
630,000 6.000%, 7/01/20 657,563
---------
1,223,351
Housing Finance Corp.
Multi-Family Mortgage Revenue Bonds (.60%)
175,000 7.500%,10/01/15 183,531
450,000 7.500%, 4/01/22 473,063
---------
656,594
Single-Family Mortgage Revenue Bonds (.45%)
115,000 7.650%,10/15/22 122,044
355,000 6.250%, 4/01/29 376,744
---------
498,788
Industrial, Medical & Environmental Pollution Control
(Abbott Laboratories) (.25%)
270,000 6.500%, 7/01/09 271,912
---------
(Baxter Travenol Laboratories) (.29%)
300,000 8.000%, 9/01/12 313,929
---------
(Hospital Auxilio Mutual Obligation) (1.29%)
440,000 6.250%, 7/01/24 482,900
900,000 5.500%, 7/01/26 931,500
---------
1,414,400
(Pila Hospital Project) (.45%)
455,000 6.250%, 8/01/32 493,675
---------
(Upjohn Co. Project) (.79%)
825,000 7.500%,12/01/23 870,111
---------
Public Building Authority
Health Facilities & Services (.70%)
665,000 5.750%, 7/01/15 689,938
75,000 7.250%, 7/01/17 76,795
---------
766,733
University of Puerto Rico (.45%)
500,000 6.500%, 6/01/13 502,380
---------
Total Puerto Rico Municipal Bonds 10,640,618
----------
See accompanying notes to financial statements
<PAGE>
FIRST HAWAII MUNICIPAL BOND FUND
SCHEDULE OF INVESTMENTS - (Continued)
March 31, 1998 (Unaudited)
Value
Par Value (Note 1)
VIRGIN ISLANDS MUNICIPAL BONDS (.42%)
Virgin Islands
Port Authority Airport Revenue Bonds (.31%)
$ 325,000 8.100%,10/01/05 $ 336,590
---------
Public Finance Authority, Series A (.11%)
100,000 7.300%,10/01/18 126,250
---------
Total Virgin Islands Municipal Bonds 462,840
---------
Total Investments (Cost $100,729,929) (a)97.52% 106,845,117
Other Assets Less Liabilities 2.48% 2,716,024
-------- ---------
Net Assets 100.00% $109,561,141
====== ============
(a) Aggregate cost for federal income tax purposes is $100,722,339.
At March 31, 1998, unrealized appreciation (depreciation) of
securities for federal income tax purposes is as follows:
Gross unrealized appreciation $6,124,037
Gross unrealized depreciation (1,259)
Net unrealized appreciation $6,122,778
See accompanying notes to financial statements
<PAGE>
FIRST HAWAII INTERMEDIATE MUNICIPAL FUND
SCHEDULE OF INVESTMENTS
March 31, 1998 (Unaudited)
Value
Par Value (Note 1)
- --------- --------
HAWAII MUNICIPAL BONDS (97.10%)
----------------------
Hawaii County
General Obligation Bonds (4.68%)
$65,000 6.350%, 5/15/01 $ 65,103
100,000 6.800%,12/01/01 101,215
100,000 6.500%, 5/15/06 100,178
--------
266,496
Hawaii State
General Obligation Bonds (1.83%)
100,000 5.500%, 7/01/01 104,375
--------
Airport Systems Revenue Bonds (17.43%)
105,000 6.400%, 7/01/02 113,531
600,000 5.125%, 7/01/00 615,000
250,000 5.700%, 7/01/07 264,687
--------
993,218
Department of Budget and Finance
Special Purpose Revenue Bonds
(Kapiolani Hospital) (11.21%)
100,000 6.650%, 7/01/98 100,696
200,000 5.500%, 7/01/05 211,250
290,000 7.650%, 7/01/19 326,613
--------
638,559
(Queen's Medical Center Program) (7.29%)
200,000 6.800%, 7/01/00 205,484
200,000 5.200%, 7/01/04 210,000
--------
415,484
(St. Francis Medical Center) (3.76%)
200,000 6.000%, 7/01/02 214,000
--------
(Wahiawa General Hospital) (2.65%)
150,000 7.125%, 7/01/98 150,880
--------
(Wilcox Hospital) (4.39%)
250,000 4.800% 7/01/04 250,000
--------
Harbor Capital Improvements Revenue Bonds,
Series 1989 (3.70%)
100,000 5.650%, 7/01/02 104,625
100,000 5.850%, 7/01/02 106,375
--------
211,000
See accompanying notes to financial statements
<PAGE>
FIRST HAWAII INTERMEDIATE MUNICIPAL FUND
SCHEDULE OF INVESTMENTS - (Continued)
March 31, 1998 (Unaudited)
Value
Par Value (Note 1)
Housing Authority
Single Family Mortgage Purpose Revenue Bonds (8.93%)
$200,000 6.300%, 7/01/99 $204,500
300,000 4.800%, 7/01/07 304,500
--------
509,000
Public Housing Authority Bonds (3.60%)
200,000 5.750%, 8/01/00 205,282
--------
University Faculty Housing (4.08%)
230,000 4.350%,10/01/00 232,588
--------
University of Hawaii (3.34%)
University Revenue Bonds
180,000 5.450%,10/01/06 190,575
--------
Honolulu City & County
Board of Water Supply (3.63%)
200,000 5.000%, 7/01/04 207,000
--------
General Obligation Bonds (1.81%)
100,000 5.000%,10/01/02 103,375
--------
Halawa Business Park (3.68%)
200,000 6.300%,10/15/00 209,500
--------
Kauai County
General Obligation Bonds (3.55%)
100,000 4.400%, 8/01/03 101,000
100,000 4.550%, 8/01/05 101,375
--------
202,375
Maui County
General Obligation Bonds (3.69%)
190,000 8.000%, 1/01/01 209,237
--------
Water System Revenue (3.85%)
100,000 6.600%,12/01/07 109,500
100,000 6.700%,12/01/11 109,750
--------
219,250
Total Hawaii Municipal Bonds 5,532,194
See accompanying notes to financial statements
<PAGE>
FIRST HAWAII INTERMEDIATE MUNICIPAL FUND
SCHEDULE OF INVESTMENTS - (Continued)
March 31, 1998 (Unaudited)
Value
Par Value (Note 1)
PUERTO RICO MUNICIPAL BONDS (4.38%)
Puerto Rico Commonwealth
Electric Power Authority Revenue Bonds (1.67%)
$90,000 7.125%, 7/01/14 $ 95,062
--------
General Obligation Bonds (1.68%)
90,000 7.750%, 7/01/17 95,738
--------
Housing Finance Corp.
Single Family Mortgage Revenue Bonds (1.03%)
55,000 6.150%, 8/01/03 58,850
--------
Total Puerto Rico Municipal Bonds 249,650
Total Investments (Cost $5,626,508) (a)101.48% 5,781,844
Liabilities in Excess of Other Assets (1.48%) (84,240)
-------- --------
Net Assets 100.00% $5,697,604
====== ==========
(a) Aggregate cost for federal income tax purposes is $5,626,508.
At March 31, 1998, unrealized appreciation (depreciation) of
securities for federal income tax purposes is as follows:
Gross unrealized appreciation $156,440
Gross unrealized depreciation (1,104)
Net unrealized appreciation $155,336
See accompanying notes to financial statements
<PAGE>
FIRST HAWAII MUNICIPAL BOND FUND
FIRST HAWAII INTERMEDIATE MUNICIPAL FUND
STATEMENT OF ASSETS AND LIABILITIES
March 31, 1998 (Unaudited)
Municipal Intermediate
Bond Municipal
Fund Fund
ASSETS
Investments at market value
(Identified cost $100,729,929
and $5,626,508, respectively)
(Note 1 (A)) $106,846,117 $5,781,844
Cash 2,036,395 76,690
Interest receivable 1,745,153 88,345
Subscriptions receivable 2,608 417
Other assets - 4,253
-------- --------
Total assets 110,630,273 5,951,549
----------- ---------
LIABILITIES
Payable for investment securities purchased 835,519 250,233
Distributions payable 148,793 3,712
Redemptions payable 8,000 -
Accrued expenses 76,820 -
--------- -----
Total liabilities 1,069,132 253,945
--------- --------
NET ASSETS
(Applicable to 9,821,325 and 1,106,913 shares
outstanding, $.01 par value, 20,000,000
shares authorized) $109,561,141 $5,697,604
NET ASSET VALUE OFFERING AND REPURCHASE
PRICE PER SHARE
($109,561,141/9,821,325 shares) $11.16
======
($5,697,604/1,106,913 shares) $5.15
=====
NET ASSETS
At March 31, 1998, net assets consisted of:
Paid-in capital $103,662,847 $5,540,404
Accumulated net realized gain (loss)
on investments (217,894) 1,864
Net unrealized appreciation 6,116,188 155,336
--------- --------
$109,561,141 $5,697,604
See accompanying notes to financial statements
<PAGE>
FIRST HAWAII MUNICIPAL BOND FUND
FIRST HAWAII INTERMEDIATE MUNICIPAL FUND
STATEMENT OF OPERATIONS
For the six months ended March 31, 1998 (Unaudited)
Municipal Intermediate
Bond Municipal
Fund Fund
INVESTMENT INCOME
Interest income $3,127,980 $150,190
---------- --------
Expenses
Management fee (Note 2) 270,682 14,598
Distribution costs (Note 2) 54,136 1,904
Transfer agent fees (Note 2) 24,226 5,380
Shareholder services (Note 2) 54,136 1,844
Accounting fees (Note 2) 27,499 4,421
Legal and audit fees 5,519 1,461
Printing 7,584 636
Miscellaneous 22,296 3,873
Custodian fees 9,387 1,500
Insurance 2,707 584
Registration fees 2,707 1,153
--------- -------
Total expenses 480,879 37,354
Fee reductions (Note 4) (20,720) (3,601)
Expenses reimbursed or waived (Note 2) - (13,070)
--------- -------
Net expenses 460,159 20,683
--------- -------
Net investment income 2,667,821 129,507
--------- -------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS
Net realized gain (loss) from security transactions (8,136) 2,981
Increase (decrease) in unrealized
appreciation of investments 573,069 (4,342)
Net gain (loss) on investments 564,933 (1,361)
--------- -------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS $3,232,754 $128,146
========== ========
See accompanying notes to financial statements
<PAGE>
FIRST HAWAII MUNICIPAL BOND FUND
STATEMENT OF CHANGES IN NET ASSETS
For the six For the year
months ended ended
March 31, September 30,
1998 1997
-------------- ------------
(Unaudited)
INCREASE (DECREASE) IN NET ASSETS FROM
Operations
Net investment income $2,667,821 $3,168,224
Net realized gain (loss) on investments (8,136) 19,725
Increase in unrealized appreciation
of investments 573,069 3,769,988
Net increase in net assets resulting
from operations 3,232,754 6,957,937
Distributions to shareholders from:
Net investment income
($.27 and $.54 per share, respectively) (2,667,821) (3,168,224)
Capital share transactions (a)
Increase in net assets resulting
from capital share transactions 2,615,968 48,425,600
--------- ----------
Total increase in net assets 3,180,901 52,215,313
NET ASSETS
Beginning of period 106,380,240 54,164,927
----------- ----------
End of period $109,561,141 $106,380,240
============ ============
(a) Summary of capital share activity follows:
For the six months For the yearended
ended March 31, 1998 September 30, 1997
-------------------- ------------------
(Unaudited)
Shares Value Shares Value
Shares sold 884,470 $9,819,458 1,385,844 $15,233,619
Shares issued on acquisition of
Fund (Note 5) - - 4,250,805 44,450,011
Shares issued on reinvestment
of distributions 165,822 1,849,757 204,944 2,251,292
------- --------- --------- ----------
1,050,292 11,669,215 5,841,593 61,934,922
Shares redeemed (815,249) (9,053,247) (1,228,255) (13,509,322)
------- --------- --------- -----------
Net increase 235,043 $2,615,968 4,613,338 $48,425,600
======= ========== ========= ===========
See accompanying notes to financial statements
<PAGE>
FIRST HAWAII INTERMEDIATE MUNICIPAL FUND
STATEMENT OF CHANGES IN NET ASSETS
For the six For the year
months ended ended
March 31, September 30,
1998 1997
-------------- ------------
(Unaudited)
INCREASE (DECREASE) IN NET ASSETS FROM
Operations
Net investment income $ 129,507 $269,623
Net realized gain on investments 2,981 4,272
Increase (decrease) in unrealized
appreciation of investments (4,342) 56,068
-------- ------------
Net increase in net assets
resulting from operations 128,146 329,963
Distributions to shareholders from
Net investment income
($.11 and $.22 per share, respectively) (129,507) (269,623)
Capital gains
($.01 and $.01 per share, respectively) (5,389) (15,406)
Capital share transactions (a)
Increase in net assets resulting
from capital share transactions (697,438) (267,381)
Total decrease in net assets (704,188) (222,447)
NET ASSETS
Beginning of period 6,401,792 6,624,239
--------- ---------
End of period $5,697,604 $6,401,792
========== ==========
(a) Summary of capital share activity follows:
For the six months For the yearended
ended March 31, 1998 September 30, 1997
-------------------- ------------------
(Unaudited)
Shares Value Shares Value
Shares sold 152,020 $ 784,783 281,929 $1,445,252
Shares issued on reinvestment
of distributions 22,897 117,915 47,134 241,769
------- --------- ------- ---------
174,917 902,698 329,063 1,687,021
Shares redeemed (310,329) (1,600,136) (380,936) (1,954,402)
-------- ---------- -------- ----------
Net decrease (135,412) $(697,438) (51,873) $(267,381)
======== ========= ======= =========
See accompanying notes to financial statements
<PAGE>
FIRST HAWAII MUNICIPAL BOND FUND
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout the period)
<TABLE>
<CAPTION>
Period Ended
March 31, Years Ended September 30,
--------------- --------------------------------------------------------
1998 1997 1996 1995 1994 1993
-------- -------- -------- -------- -------- --------
(Unaudited)
Net asset value
<S> <C> <C> <C> <C> <C> <C>
Beginning of period ........................... $ 11.10 $ 10.89 $ 10.84 $ 10.62 $ 11.48 $ 10.90
-------- -------- -------- -------- -------- --------
Income from investment operations
Net investment income ......................... .27 .54 .55 .55 .55 .58
Net gain (loss) on securities
(both realized and unrealized) ................ .06 .21 .05 .31 (.80) .60
------ ------ ------ ------ ------ ------
Total from investment operations ............. .33 .75 .60 .86 (.25) 1.18
Less distributions
Dividends from net investment income .......... (.27) (.54) (.55) (.55) (.55) (.58)
Distributions from capital gains .............. -- -- -- (.09) (.06) (.02)
------ ------ ------ ------ ------ ------
Total distributions ........................ (.27) (.54) (.55) (.64) (.61) (.60)
------ ------ ------ ------ ------
End of period ................................ $ 11.16 $ 11.10 $ 10.89 $ 10.84 $ 10.62 $ 11.48
======== ======== ======== ======== ======== ========
Total return ..................................... 3.06% 7.09% 5.62% 8.42% (2.18)% 11.11%
</TABLE>
<TABLE>
Ratios/Supplemental Data
<S> <C> <C> <C> <C> <C> <C>
Net assets, end of period (in 000's) $109,561 $106,380 $54,165 $51,131 $52,230 $57,396
Ratio of expenses to average net assets
Before expense reimbursements .89%(a) .98% .98% 1.00% .97% .95%
After expense reimbursements .89%(a)(b) .98%(b) .98%(b) .97%(b) .95% .95%
Ratio of net investment income to average net assets
Before expense reimbursements 4.89%(a) 4.99% 5.03% 5.19% 4.99% 5.21%
After expense reimbursements 4.89%(a) 4.99% 5.03% 5.22% 5.01% 5.21%
Portfolio turnover 1.29% 3.21% 15.16% 17.08% 40.22% 27.77%
</TABLE>
(a) Annualized
(b)Ratios of expenses to average net assets after the reduction of custodian
fees under a custodian arrangement were .85%, .94%, .95% and .95% for the six
months ended March 31, 1998, and for the years ended September 30, 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>
<CAPTION>
Period
Period Ended July 5,
1994* To
March 31, Years Ended September 30, September 30,
--------------- ----------------------------------------------
1998 1997 1996 1995 1994
-------- -------- -------- -------- --------
(Unaudited)
Net asset value
<S> <C> <C> <C> <C> <C>
Beginning of period ............................. $ 5.15 $ 5.12 $ 5.14 $ 4.99 $ 5.00
-------- -------- -------- -------- --------
Income from investment operations
Net investment income ........................... .11 .22 .22 .23 .05
Net gain (loss) on securities
(both realized and unrealized) .................. .01 .04 (.02) .15 (.01)
-------- -------- -------- -------- --------
Total from investment operations ............... .12 .26 .20 .38 .04
-------- -------- -------- -------- --------
Less distributions
Dividends from net investment income ............ (.11) (.22) (.22) (.23) (.05)
Distributions from capital gains ................ (.01) (.01) -- -- --
-------- -------- -------- -------- --------
Total distributions ............................ (.12) (.23) (.22) (.23) (.05)
-------- -------- -------- -------- --------
End of period ................................... $ 5.15 $ 5.15 $ 5.12 $ 5.14 $ 4.99
======== ======== ======== ======== ========
Total return 2.13% 5.17% 3.95% 7.86% .72%
Ratios/Supplemental Data
Net assets, end of period (in 000's) $5,697 $6,402 $6,624 $4,760 $2,447
Ratio of expenses to average net assets
Before expense reimbursements 1.32%(a) 1.43% 1.50% 1.90% 4.48%(a)
After expense reimbursements .84%(a)(b) .86%(b) .84%(b) .66%(b) 0%(a)
Ratio of net investment income to average net assets
Before expense reimbursements 3.95%(a) 3.67% 3.66% 3.39% .12%(a)
After expense reimbursements 4.43%(a) 4.24% 4.32% 4.63% 4.60%(a)
Portfolio turnover 4.30% 17.36% 17.76% 10.04% 0%
</TABLE>
* Commencement of operations
(a) Annualized
(b)Ratios of expenses to average net assets after the reduction of custodian
fees under a custodian arrangement were .71%, .75%, .75% and .64% for the six
months ended March 31, 1998 and for the years ended September 30, 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 MUNICIPAL BOND FUND
FIRST HAWAII INTERMEDIATE MUNICIPAL FUND
NOTES TO FINANCIAL STATEMENTS
March 31, 1998 (Unaudited)
(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
March 31, 1998 (Unaudited)
(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, Inc. ("FPS"), a
wholly-owned subsidiary of FPMC, received $54,136 for costs incurred in
connection with the sale of First Hawaii Municipal Bond Fund's shares. FPS
also received $1,904 for costs incurred with the sale of First Hawaii
Intermediate Municipal Fund's shares (See Note 3).
First Pacific Recordkeeping, Inc. ("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, book-keeping 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 First Hawaii Municipal
Bond Fund's and First Hawaii Intermediate Municipal Fund's (through January
21, 1998) average daily net assets. Effective January 21, 1998, First Hawaii
Intermediate Municipal Fund's fee for these services was discontinued.
For the six months ended March 31, 1998, FPMC and FPR voluntarily waived
certain management, transfer agent, shareholder services, and accounting
fees in the amount of $14,145 for First Hawaii Intermediate Municipal Fund.
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)
March 31, 1998 (Unaudited)
(4) PURCHASES AND SALES/CUSTODY OF SECURITIES
Purchases and sales of securities aggregated $4,272,981 and $1,365,775,
respectively for the First Hawaii Municipal Bond Fund. Purchases and sales
of securities for First Hawaii Intermediate Municipal Fund aggregated
$250,000 and $708,668, respectively. Under an agreement with the Custodian
Bank, custodian fees are reduced by credits for cash balances. During the
six months ended March 31, 1998, such reductions amounted to $9,387 and
$1,500 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.
INVESTMENT MANAGER
First Pacific Management Corporation
2756 Woodlawn Drive, #6-201
Honolulu, Hawaii 96822-1856
DISTRIBUTOR
First Pacific Securities, Inc.
2756 Woodlawn Drive, #6-201
Honolulu, Hawaii 96822-1856
CUSTODIAN
Union Bank of California, N.A.
475 Sansome Street, 15th Floor
San Francisco, California 94111
LEGAL COUNSEL TO FUND
Drinker, Biddle & Reath, LLP
1345 Chestnut Street
Philadelphia, Pennsylvania 19107-3496
INDEPENDENT AUDITORS
Tait, Weller & Baker
8 Penn Center Plaza, Suite 800
Philadelphia, Pennsylvania 19103-2108
TRANSFER AGENT
First Pacific Recordkeeping, Inc.
2756 Woodlawn Drive, #6-201
Honolulu, Hawaii 96822-1856
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
March 31, 1998 (Unaudited)
Par Value
Value (Note 1)
IDAHO MUNICIPAL BONDS (83.33%)
Ada & Canyon Counties
Joint School District (1.26%)
$10,000 5.500%, 7/30/12 $10,550
Boise City
Convention Center (3.08%)
25,000 6.250%, 12/01/09 25,719
Independent School District (1.25%)
10,000 5.300%, 7/30/09 10,450
Public Housing Authority (3.06%)
25,000 5.250%, 8/01/11 25,528
Boise State University
Revenue Bond (3.19%)
10,000 5.050%, 4/01/08 10,475
15,000 6.200%, 4/01/10 16,125
------
26,600
Boise-Kuna-Irrigation District
Lucky Peak Hydroelectric (3.16%)
25,000 6.000%, 7/01/08 26,406
Bonneville County
General Obligation Bonds (1.23%)
10,000 5.200%, 8/01/12 10,275
Cassia & Twin Falls County
General Obligation Bonds (3.09%)
25,000 5.375%, 8/01/13 25,781
Central Shoshone County
Water District Revenue Bond (1.25%)
10,000 6.150%, 12/01/17 10,450
Elmore County
School District #193 (2.89%)
25,000 4.500%, 7/31/13 24,125
Gooding County
School District #232 Wendell (1.25%)
10,000 5.800%, 8/01/06 10,450
Idaho Falls
Idaho Electric Revenue Bonds (6.90%)
40,000 10.375%, 4/01/13 57,600
Idaho Health Facilities Revenue Bonds
(Bannock Regional Medical Center) (3.66%)
15,000 5.000%, 5/01/00 15,188
10,000 7.600%, 5/01/05 10,225
5,000 6.000%, 5/01/14 5,106
------
30,519
See accompanying notes to financial statements
<PAGE>
FIRST IDAHO TAX-FREE FUND
SCHEDULE OF INVESTMENTS - (Continued)
March 31, 1998 (Unaudited)
Par Value
Value (Note 1)
(Holy Cross Health Systems) (3.28%)
$25,000 6.100%, 12/01/06 $27,313
(Intermountain Health Care Inc.) (3.48%)
25,000 6.500%, 4/01/10 29,062
(Magic Valley Regional Medical Center) (1.26%)
10,000 5.500%, 12/01/10 10,525
(Mercy Medical Center) (3.27%)
25,000 7.400%, 10/01/05 27,281
Idaho Housing Agency
Single Family Mortgage - Series B (12.09%)
30,000 6.600%, 7/01/12 31,950
10,000 5.700%, 7/01/13 10,350
50,000 6.500%, 1/01/27 53,313
5,000 7.850%, 1/01/21 5,244
------
100,857
Idaho State
Board of Education (0.62%)
5,000 7.100%, 10/01/17 5,137
Water Reserve Board (1.32%)
10,000 7.250%, 12/01/21 10,975
Student Loan Marketing Association - Series C (1.20%)
10,000 4.750%, 4/01/99 10,030
Kootenai County
School District #271 (3.05%)
25,000 5.850%, 7/30/07 25,433
Jerome
Sewer Revenue (1.88%)
15,000 6.800%, 11/01/06 15,675
Nampa Urban Renewal Agency (1.30%)
10,000 5.700%, 8/01/05 10,875
Payette & Washington Counties
School District #371 (2.48%)
20,000 6.300%, 10/01/03 20,725
Twin Falls County
Solid Waste Disposal (2.41%)
20,000 4.500%, 9/01/99 20,150
University of Idaho
University Commons Project (10.42%)
50,000 5.300%, 4/01/17 50,938
25,000 5.350%, 4/01/22 25,469
10,000 5.650%, 4/01/22 10,525
------
86,932
Total Idaho Municipal Bonds 695,423
See accompanying notes to financial statements
<PAGE>
FIRST IDAHO TAX-FREE FUND
SCHEDULE OF INVESTMENTS - (Continued)
March 31, 1998 (Unaudited)
Par Value
Value (Note 1)
PUERTO RICO MUNICIPAL BONDS (11.14%)
Puerto Rico Commonwealth
General Obligation Bonds (1.27%)
$10,000 5.750%, 7/01/17 $10,575
Housing Finance Corp.
Multi-Family Mortgage Revenue Bonds (1.26%)
10,000 7.500%, 4/01/22 10,512
Single Family Mortgage Revenue Bonds (1.92%)
15,000 6.150%, 8/01/03 16,050
Industrial, Medical & Environmental Pollution Control
Abbott Laboratories (3.62%)
30,000 6.500%, 7/01/09 30,212
Public Building Authority
Health Facilities & Services (3.07%)
25,000 7.250%, 7/01/17 25,598
------
Total Puerto Rico Municipal Bonds 92,947
------
Total Investments (cost $769,461) (a) 94.47% 788,370
Other Assets Less Liabilities 5.53 46,106
-------- ------
Net Assets 100.00% $834,476
====== ========
(a) Aggregate cost for federal income tax purposes is $769,461.
At March 31, 1998, unrealized appreciation (depreciation) of
securities for federal income tax purposes is as follows:
Gross unrealized appreciation $19,490
Gross unrealized depreciation (581)
Net unrealized appreciation $18,909
See accompanying notes to financial statements
<PAGE>
FIRST IDAHO TAX-FREE FUND
STATEMENT OF ASSETS AND LIABILITIES
March 31, 1998 (Unaudited)
ASSETS
Investments at market value
(Identified cost $769,461) (Note 1(A)) $788,370
Cash 48,578
Interest receivable 14,504
Subscriptions receivable 208
Other assets 129
---
Total assets 851,789
LIABILITIES
Accrued expenses 15,995
Distributions payable 1,318
Total liabilities 17,313
NET ASSETS
(Applicable to 79,766 shares outstanding,
$.01 par value, 20,000,000 shares authorized) $834,476
========
NET ASSET VALUE, OFFERING AND REPURCHASE PRICE PER SHARE
Net asset value and repurchase price per share
($834,476 ) 79,766 shares) $10.46
Offering price per share
(100 ) 97.25 of $10.46)* $10.76
======
NET ASSETS
At March 31, 1998, net assets consisted of:
Paid-in capital $815,567
Net unrealized appreciation of investments 18,909
$834,476
* 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
For the six months ended March 31, 1998 (Unaudited)
INVESTMENT INCOME
Interest income $19,234
Expenses
Management fee (Note 2) 1,911
Transfer agent fees (Note 2) 7,700
Accounting fees (Note 2) 11,980
Legal and audit 1,000
Miscellaneous 2,483
Custodian fees 1,500
Insurance 382
Registration fees 34
-------
Total expenses 26,990
Fee reductions (Note 4) (3,983)
Expenses waived (Note 2) (22,591)
-------
Net expenses 416
-------
Net investment income 18,818
UNREALIZED GAIN ON INVESTMENTS
Increase in unrealized appreciation of investments 6,312
-------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $25,130
=======
See accompanying notes to financial statements
<PAGE>
FIRST IDAHO TAX-FREE FUND
STATEMENT OF CHANGES IN NET ASSETS
For the six For the year
months ended ended
March 31, September 30,
1998 1997
-------------- ------------
(Unaudited)
INCREASE (DECREASE) IN NET ASSETS FROM
Operations
Net investment income $18,818 $17,504
Increase in unrealized appreciation
of investments 6,312 12,456
Net increase in net assets resulting
from operations 25,130 29,960
Distributions to shareholders from
Net investment income
($.26 and $.49 per share, respectively) (18,818) (17,504)
Capital share transactions (a)
Increase in net assets resulting from
capital share transactions 167,005 537,823
Total increase in net assets 173,317 550,279
NET ASSETS
Beginning of period 661,159 110,880
------- -------
End of period $834,476 $661,159
======== ========
(a) Summary of capital share activity follows:
<TABLE>
<CAPTION>
For the
six months ended For the year ended
March 31, 1998 September 30, 1997
--------------------- ------------------
(Unaudited)
Shares Value Shares Value
<S> <C> <C> <C> <C>
Shares sold ................. 20,297 $ 210,715 59,375 $ 605,567
Shares issued on reinvestment
of distributions ............ 1,204 12,597 1,197 12,290
21,501 223,312 60,572 617,857
Shares redeemed ............. (5,372) (56,307) (7,859) (80,034)
--------- --------- --------- ---------
Net increase ................ 16,129 $ 167,005 52,713 $ 537,823
========= ========= ========= =========
</TABLE>
See accompanying notes to financial statements
<PAGE>
FIRST IDAHO TAX-FREE FUND
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout the period)
<TABLE>
<CAPTION>
Period
Six months July 1, 1996*
ended Year ended To
March 31, September 30, September 30,
1998 1997 1996
------------ ------------ ------------
(Unaudited)
Net asset value
<S> <C> <C> <C>
Beginning of period ................ $ 10.39 $ 10.15 $ 10.00
------ ------ ------
Income from investment operations
Net investment income .............. .26 .49 .05
Net unrealized gain on securities .. .07 .24 .15
------ ------ ------
Total from investment operations . .33 .73 .20
------ ------ ------
Less distributions
Dividends from net investment income (.26) (.49) (.05)
------ ------ ------
End of period ...................... $ 10.46 $ 10.39 $ 10.15
====== ====== ======
Total return .......................... 3.19% 7.38% 2.05%
Ratios/Supplemental Data
Net assets, end of period (in 000's) $834 $661 $111
Ratio of expenses to average net assets 1.15%(a)(b) 1.59%(b) .02%(a)
Ratio of net investment income to
average net assets 4.92%(a)(b) 4.92% 3.03%(a)
Portfolio turnover 0% 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 .11% and .05% for the six months
ended March 31, 1998 and for the year ended September 30, 1997,
respectively. There were no custodian fee reductions in 1996.
See accompanying notes to financial statements
<PAGE>
FIRST IDAHO TAX-FREE FUND
NOTES TO FINANCIAL STATEMENTS
March 31, 1998 (Unaudited)
(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.
(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 IDAHO TAX-FREE FUND
NOTES TO FINANCIAL STATEMENTS - (Continued)
March 31, 1998 (Unaudited)
(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, Inc. ("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 six months ended March 31, 1998.
First Pacific Recordkeeping, Inc. ("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 six months ended March 31, 1998, FPMC and FPR voluntarily waived
certain management, transfer agent, and accounting fees in the amount of
$22,591 for the Fund.
Certain officers and directors of the Fund 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 $138,917. 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 six
months ended March 31, 1998, such reductions amounted to $3,983.
