November 13, 1998
Dear Fellow Shareholder,
As we begin our 11th year of operations, we are pleased to provide you with
our Funds' 1998 Annual Report.
Municipal bond funds caught the attention of many investors seeking a "safe
haven" and added portfolio diversification from a volatile stock market.
A moderately expanding U.S. economy with consistent price and unit labor
costs coupled with economic turmoil in Asia have contributed to declining
interest rates in 1998. Given these conditions and expectations, the primary
investment strategy of the First Hawaii Municipal Bond Fund's investment manager
was to purchase high quality long term Hawaii municipal bonds. The primary
investment strategy of the First Hawaii Intermediate Municipal Fund's investment
manager was to purchase high quality four to eight year Hawaii municipal bonds.
The decline of interest rates, paired with the strategy of purchasing high
quality municipal bonds was the primary factor producing the past year's
performance results.
If you have any questions about this Annual Report 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 the many referrals. 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
President
First Pacific Securities, Inc.,
Distributor/Member SIPC Before investing, read the prospectus carefully for
complete information including all fees and expenses. Call 988-8088 for a free
prospectus. Fund's yields, share prices and investment returns fluctuate so that
you may receive more or less than your original investment upon redemption. Past
performance is no guarantee of future results. Some income may be subject to the
federal alternative minimum tax for certain investors. First Hawaii Municipal
Bond Fund and First Hawaii Intermediate Municipal Fund are series of First
Pacific Mutual Fund, Inc.
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, 1998, 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, 1998, 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, 1998, 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 6, 1998
<TABLE>
<CAPTION>
THE FOLLOWING DATA SUPPORTS THE COMPARATIVE GRAPH PRESENTED IN THE ANNUAL
REPORT.
First Hawaii Municapal Bond Fund
<S> <C> <C>
FIRST HAWAII LEHMAN
MUNICAPAL MUNICAPAL
BOND FUND BOND INDEX
Year End
11/23/88 10,000 10,000
09/30/89 10,815 10,717
09/30/90 11,233 11,426
09/30/91 12,593 12,848
09/30/92 13,873 14,015
09/30/93 15,414 15,707
09/30/94 15,078 15,442
09/30/95 16,348 17,170
09/30/96 17,267 18,314
09/30/97 18,491 19,968
09/30/98 19,651 21,707
The graph above compares the increase in value of a $10,000 investment in the
First Hawaii Municipal Bond Fund with the performance of the Leman Muni Bond
Index. The objective of the graph is to permit you to compare the performance of
the Fund with the current market and to give perspective to market conditions
and investment strategies and techniques persued by the investment manager that
materially affected the performance of the Fund. The Lehman Muni Bond Index
reflects reinvestment of dividends but not the expenses of the Fund. The return
and principal value of an investment in the Fund will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than their original
cost. Past perfomance is not indicative of future results.
First Hawaii Intermediate Municipal Fund
FIRST HAWAII LEHMAN
INTERMEDIATE MUNI
MUNICIPAL FUND BOND INDEX
Year End
07/07/94 10,000 10,000
09/30/94 10,072 10,070
09/30/95 10,864 11,197
09/30/96 11,293 11,943
09/30/97 11,877 13,021
09/30/98 12,481 14,155
The graph above compares the increase in value of a $10,000 investment in the
First Hawaii Intermediate Municipal Fund with the performance of the Leman Muni
Bond Index. The objective of the graph is to permit you to compare the
performance of the Fund with the current market and to give perspective to
market conditions and investment strategies and techniques persued by the
investment manager that materially affected the performance of the Fund. The
Lehman Muni Bond Index reflects reinvestment of dividends but not the expenses
of the Fund. The return and principal value of an investment in the Fund will
fluctuate so that an investor's shares, when redeemed, may be worth more or less
than their original cost. Past perfomance is not indicative of future results.
</TABLE>
FIRST HAWAII MUNICIPAL BOND FUND
SCHEDULE OF INVESTMENTS
September 30, 1998
- ------------------------------------------------------------------------------
Value
Par Value (Note 1)
HAWAII MUNICIPAL BONDS (87.40%)
Hawaii County
General Obligation Bonds (2.64%)
$1,150,000 7.050%,6/01/01 $1,223,313
100,000 6.800%,12/01/01 101,247
200,000 7.200%,6/01/05 213,250
1,030,000 7.200%,6/01/06 1,098,238
300,000 5.600%, 5/01/11 333,750
2,969,798
Hawaii State
General Obligation Bonds (4.15%)
100,000 7.200%,9/01/06 107,375
150,000 7.000%,6/01/07 158,063
135,000 6.000%,10/01/08 153,563
330,000 7.125%,9/01/09 353,925
125,000 7.000%,6/01/10 131,719
100,000 7.125%,9/01/10 107,250
200,000 6.000%,11/01/10 230,250
500,000 6.250%,1/01/13 561,250
1,000,000 4.750%,4/01/18 991,250
300,000 6.250%,1/01/14 336,750
250,000 5.000%,10/01/16 254,375
250,000 5.000%,10/01/17 253,750
1,000,000 4.750%11/01/13 1,018,750
4,658,270
Airport Systems Revenue Bonds (6.83%)
400,000 5.125%, 7/01/00 408,500
150,000 5.800%,7/01/01 157,875
345,000 6.300%,7/01/01 366,131
200,000 7.000%,7/01/07 218,250
175,000 7.000%,7/01/10 191,844
385,000 6.900%,7/01/12 465,850
500,000 7.000%,7/01/18 542,500
1,150,000 7.000%,7/01/20 1,534,750
2,460,000 7.500%,7/01/20 2,653,725
1,045,000 6.750%,7/01/21 1,139,250
7,678,675
- ------------------------------------------------------------------------------
See accompanying notes to financial statements
FIRST HAWAII MUNICIPAL BOND FUND
SCHEDULE OF INVESTMENTS - (Continued)
September 30, 1998
- ------------------------------------------------------------------------------
Value
Par Value (Note 1)
Department of Budget & Finance Special Purpose Revenue Bonds
(Hawaiian Electric Company, Inc.) (5.67%)
$2,725,000 7.625%, 12/01/18 $2,878,281
620,000 7.600%,7/01/20 664,950
365,000 6.550%, 12/01/22 404,694
625,000 6.200%,5/01/26 685,938
600,000 5.875%, 12/01/26 651,000
1,000,000 5.650%,10/01/27 1,088,750
6,373,613
(Kapiolani Hospital) (7.38%)
400,000 6.300%,7/01/08 436,000
3,120,000 7.600%,7/01/10 3,486,600
1,650,000 6.400%,7/01/13 1,796,438
600,000 6.200%,7/01/16 658,500
985,000 6.000%,7/01/19 1,052,719
430,000 7.650%,7/01/19 486,656
340,000 6.250%,7/01/21 374,000
8,290,913
(Kaiser Permanente Center) (4.46%)
850,000 6.500%,3/01/11 906,312
3,875,000 6.250%,3/01/21 4,097,812
5,004,124
(Queen's Medical Center Program) (4.90%)
300,000 5.200%,7/01/04 316,500
250,000 6.125% 7/01/11 274,375
1,020,000 6.000%,7/01/20 1,109,250
600,000 6.200%,7/01/22 660,000
2,735,000 5.750%,7/01/26 2,892,262
250,000 5.000%,7/01/28 252,500
5,504,887
(St. Francis Medical Center) (2.70%)
2,765,000 6.500%,7/01/22 3,038,044
(Wahiawa General Hospital) (2.96%)
3,035,000 7.500%,7/01/12 3,323,325
(Wilcox Hospital) (1.50%)
700,000 5.250%,7/01/13 711,375
845,000 5.350%,7/01/18 857,675
115,000 5.500%,7/01/28 117,731
1,686,781
- ------------------------------------------------------------------------------
See accompanying notes to financial statements
FIRST HAWAII MUNICIPAL BOND FUND
SCHEDULE OF INVESTMENTS - (Continued)
September 30, 1998
- ------------------------------------------------------------------------------
Value
Par Value (Note 1)
Department of Transportation
Special Facilities Revenue Bonds (2.60%)
$2,760,000 5.750%,3/01/13 $2,918,700
Harbor Capital Improvements Revenue Bonds,
Series 1989 (4.03%)
400,000 5.650%,7/01/02 422,500
205,000 6.200%,7/01/03 222,938
310,000 6.300%,7/01/04 340,225
200,000 6.200%,7/01/08 215,750
225,000 7.250%,7/01/10 241,594
250,000 6.250%,7/01/15 276,250
810,000 7.000%,7/01/17 866,700
800,000 6.500%,7/01/19 879,000
1,000,000 5.500%,7/01/27 1,058,750
4,523,707
Highway Revenue Bonds, Series 1993 (2.27%)
200,000 5.000%,7/01/09 205,750
150,000 5.000%,7/01/11 153,000
1,000,000 5.600%,7/01/14 1,077,500
1,000,000 5.000%,7/01/16 1,113,750
2,550,000
Housing Authority Single Family
Mortgage Purpose Revenue Bonds (7.11%)
145,000 6.300%,7/01/99 147,298
405,000 7.000%,7/01/11 434,363
100,000 5.700%,7/01/13 104,375
555,000 6.900%,7/01/16 596,625
1,000,000 5.450%,7/01/17 1,035,000
310,000 6.750%,7/01/20 327,825
540,000 7.100%,7/01/24 579,150
2,235,000 5.900%,7/01/27 2,324,400
2,250,000 5.900%,7/01/27 2,365,312
105,000 7.800%,7/01/29 72,393
7,986,741
- ------------------------------------------------------------------------------
See accompanying notes to financial statements
- ------------------------------------------------------------------------------
FIRST HAWAII MUNICIPAL BOND FUND
SCHEDULE OF INVESTMENTS - (Continued)
September 30, 1998
- ------------------------------------------------------------------------------
Value
Par Value (Note 1)
Housing Authority Multi-Family
Mortgage Purpose Revenue Bonds (4.21%)
$ 180,000 4.500%,1/01/99 $ 180,275
200,000 4.800%,1/01/01 203,000
205,000 4.800%,7/01/01 209,612
210,000 4.900%,1/01/02 214,463
215,000 4.900%,7/01/02 221,450
1,000,000 5.700%,7/01/18 1,036,250
2,500,000 6.100%,7/01/30 2,659,375
4,724,425
Public Housing Authority Bonds (.40%)
185,000 5.750%,8/01/00 190,075
250,000 5.750%,8/01/04 256,526
446,601
University Faculty Housing (2.87%)
90,000 4.350%,10/01/00 91,125
330,000 4.450%,10/01/01 336,188
345,000 4.550%,10/01/02 353,625
800,000 5.650%,10/01/16 850,000
1,500,000 5.700%,10/01/25 1,591,875
3,222,813
University of Hawaii - Revenue Bonds (.56%)
100,000 5.450%,10/01/06 106,500
500,000 5.700%,10/01/17 528,125
634,625
Honolulu City & County
Board of Water Supply (1.39%)
200,000 5.000%,7/01/04 209,500
500,000 5.800%,7/01/16 539,375
750,000 5.800%,7/01/21 810,938
1,559,813
General Obligation Bonds (7.81%)
100,000 7.300%,7/01/03 114,625
375,000 6.700%,8/01/05 407,811
200,000 7.350%,7/01/06 242,750
300,000 6.900%,12/01/06 322,875
180,000 7.250%,2/01/07 190,575
200,000 7.100%,6/01/07 212,750
100,000 7.250%,2/01/08 105,750
820,000 6.700%,8/01/08 891,750
380,000 7.100%,10/01/08 385,700
1,000,000 7.300%,2/01/09 1,058,750
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See accompanying notes to financial statements
FIRST HAWAII MUNICIPAL BOND FUND
SCHEDULE OF INVESTMENTS - (Continued)
September 30, 1998
- ------------------------------------------------------------------------------
Value
Par Value (Note 1)
General Obligation Bonds (7.81%) - (Continued)
$ 985,000 6.700%,8/01/09 $1,071,187
880,000 7.100%,10/01/09 893,200
250,000 7.300%,2/01/10 264,687
200,000 6.000%,6/01/10 222,250
525,000 6.700%,8/01/10 570,937
250,000 7.150%,6/01/11 265,937
725,000 6.700%,8/01/11 788,438
460,000 6.100%,6/01/12 513,475
240,000 5.500%,9/01/16 255,300
8,778,747
Halawa Business Park (.87%)
170,000 6.300%,10/15/00 177,438
370,000 6.500%,10/15/02 400,525
365,000 6.600%,10/15/03 401,500
979,463
Housing Authority Multi-Family
Mortgage Purpose Revenue Bonds (1.48%)
320,000 6.800%,7/01/28 357,600
1,200,000 6.900%,6/20/35 1,306,500
1,664,100
Kauai County
General Obligation Bonds (2.74%)
300,000 5.100%,2/01/01 309,000
410,000 5.850%,8/01/07 461,762
1,280,000 5.850%,8/01/07 1,441,600
250,000 5.900%,2/01/10 272,812
250,000 5.900%,2/01/11 271,562
295,000 5.900%,2/01/12 320,075
3,076,811
Housing Authority Paanau Project (1.67%)
1,900,000 7.250% 4/01/12 1,871,500
- ------------------------------------------------------------------------------
See accompanying notes to financial statements
FIRST HAWAII MUNICIPAL BOND FUND
SCHEDULE OF INVESTMENTS - (Continued)
September 30, 1998
- ------------------------------------------------------------------------------
Value
Par Value (Note 1)
Maui County
General Obligation Bonds (3.19%)
$ 740,000 8.000%,1/01/01 $ 807,525
250,000 6.800%,12/01/05 268,438
175,000 6.800%,12/01/08 187,906
250,000 5.700%,1/01/09 262,812
735,000 5.750%,1/01/12 773,588
235,000 5.750%,6/01/13 254,975
500,000 5.300%,9/01/14 524,375
500,000 5.000%,9/01/17 507,500
3,587,119
Water System Revenue (1.01%)
355,000 5.850%,12/01/00 370,975
300,000 6.500%,12/01/06 327,000
400,000 6.600%,12/01/07 437,000
1,134,975
Total Hawaii Municipal Bonds 98,188,570
PUERTO RICO MUNICIPAL BONDS (8.77%)
Puerto Rico Commonwealth
Electric Power Authority Revenue Bonds (1.21%)
120,000 7.000%,7/01/07 125,099
100,000 7.125%,7/01/14 104,377
100,000 7.125%,7/01/14 104,377
110,000 7.125%,7/01/14 114,774
55,000 7.125%,7/01/14 57,387
300,000 6.250%,7/01/17 331,125
500,000 5.500%,7/01/25 520,000
1,357,139
General Obligation Bonds (1.99%)
250,000 6.250%,7/01/10 270,313
100,000 6.250%,7/01/10 108,875
250,000 7.250%,7/01/10 270,000
750,000 6.450%,7/01/17 862,500
100,000 7.300%,7/01/20 108,125
300,000 6.500%,7/01/23 345,750
250,000 5.750%,7/01/24 268,438
2,234,001
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See accompanying notes to financial statements
FIRST HAWAII MUNICIPAL BOND FUND
SCHEDULE OF INVESTMENTS - (Continued)
September 30, 1998
- ------------------------------------------------------------------------------
Value
Par Value (Note 1)
Highway & Transportation Authority (.99%)
$ 225,000 6.750%,7/01/05 $ 241,313
200,000 7.750%,7/01/10 218,000
630,000 6.000%,7/01/20 655,988
1,115,301
Housing Finance Corp.
Multi-Family Mortgage Revenue Bonds (.52%)
175,000 7.500%,10/01/15 183,094
380,000 7.500%,4/01/22 397,575
580,669
Single-Family Mortgage Revenue Bonds (.42%)
90,000 7.650%,10/15/22 95,063
355,000 6.250%,4/01/29 382,069
477,132
Industrial, Medical & Environmental Pollution Control
(Abbott Laboratories) (.24%)
270,000 6.500%,7/01/09 272,084
(Baxter Travenol Laboratories) (.28%)
300,000 8.000%,9/01/12 309,897
(Hospital Auxilio Mutual Obligation) (1.29%)
440,000 6.250%,7/01/24 490,050
900,000 5.500%,7/01/26 959,625
1,449,675
(Pila Hospital Project) (.45%)
455,000 6.250%,8/01/32 499,931
(Upjohn Co. Project) (.76%)
825,000 7.500%,12/01/23 854,947
Public Building Authority
Health Facilities & Services (.62%)
665,000 5.750%,7/01/15 699,081
Total Puerto Rico Municipal Bonds 9,849,857
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See accompanying notes to financial statements
FIRST HAWAII MUNICIPAL BOND FUND
SCHEDULE OF INVESTMENTS - (Continued)
September 30, 1998
- ------------------------------------------------------------------------------
Value
Par Value (Note 1)
VIRGIN ISLANDS MUNICIPAL BONDS (.41%)
Virgin Islands
Port Authority Airport Revenue Bonds (.30%)
$ 325,000 8.100%,10/01/05 $ 337,080
Public Finance Authority, Series A (.11%)
100,000 7.300%,10/01/18 129,000
Total Virgin Islands Municipal Bonds 466,080
Total Investments (Cost $101,650,585) (a)96.58%
108,504,507
Other Assets Less Liabilities 3.42% 3,841,215
Net Assets 100.00% $112,345,722
(a) Aggregate cost for federal income tax purposes is $101,650,585.
At September 30, 1998, unrealized appreciation (depreciation) of
securities for federal income tax purposes is as follows:
Gross unrealized appreciation $6,853,922
Gross unrealized depreciation -
Net unrealized appreciation $6,853,922
- ------------------------------------------------------------------------------
See accompanying notes to financial statements
FIRST HAWAII INTERMEDIATE MUNICIPAL FUND
SCHEDULE OF INVESTMENTS
September 30, 1998
- ------------------------------------------------------------------------------
Value
Par Value (Note 1)
HAWAII MUNICIPAL BONDS (92.53%)
Hawaii County
General Obligation Bonds (4.51%)
$ 65,000 6.350%,5/15/01 $ 65,142
100,000 6.800%,12/01/01 101,247
100,000 6.500%,5/15/06 100,237
266,626
Hawaii State
General Obligation Bonds (1.77%)
100,000 5.500%,7/01/01 104,375
Airport Systems Revenue Bonds (16.83%)
105,000 6.400%,7/01/02 113,006
600,000 5.125%,7/01/00 612,750
250,000 5.700%,7/01/07 269,375
995,131
Department of Budget and Finance
Special Purpose Revenue Bonds
(Kapiolani Hospital) (5.32%)
200,000 5.500%,7/01/05 213,500
90,000 7.650%,7/01/19 100,688
314,188
(Queen's Medical Center Program) (3.57%)
200,000 5.200%,7/01/04 211,000
(St. Francis Medical Center) (3.62%)
200,000 6.000%,7/01/02 214,000
(Wilcox Hospital) (4.32%)
250,000 4.800% 7/01/04 255,313
Harbor Capital Improvements Revenue Bonds,
Series 1989 (3.60%)
100,000 5.650%,7/01/02 105,625
100,000 5.850%,7/01/02 106,875
212,500
Highway & Transportation Authority (4.92%)
275,000 5.000%,7/01/06 290,812
- ------------------------------------------------------------------------------
See accompanying notes to financial statements
FIRST HAWAII INTERMEDIATE MUNICIPAL FUND
SCHEDULE OF INVESTMENTS - (Continued)
September 30, 1998
- ------------------------------------------------------------------------------
Value
Par Value (Note 1)
Housing Authority
Single Family Mortgage Purpose Revenue Bonds (8.66%)
$200,000 6.300%,7/01/99 $203,170
300,000 4.800%,7/01/07 309,000
512,170
Public Housing Authority Bonds (3.48%)
200,000 5.750%,8/01/00 205,486
University Faculty Housing (3.94%)
230,000 4.350%,10/01/00 232,875
University of Hawaii (3.24%)
University Revenue Bonds
180,000 5.450%,10/01/06 191,700
Honolulu City & County
Board of Water Supply (3.54%)
200,000 5.000%,7/01/04 209,500
General Obligation Bonds (1.77%)
100,000 5.000%,10/01/02 104,375
Halawa Business Park (3.53%)
200,000 6.300%,10/15/00 208,750
Kauai County
General Obligation Bonds (3.48%)
100,000 4.400%,8/01/03 102,375
100,000 4.550%,8/01/05 103,375
205,750
Maui County
General Obligation Bonds (8.73%)
190,000 8.000%,1/01/01 207,337
300,000 4.650%,3/01/07 309,000
516,337
Water System Revenue (3.70%)
100,000 6.600%,12/01/07 109,250
100,000 6.700%,12/01/11 109,625
218,875
Total Hawaii Municipal Bonds 5,469,763
- ------------------------------------------------------------------------------
See accompanying notes to financial statements
- ------------------------------------------------------------------------------
FIRST HAWAII INTERMEDIATE MUNICIPAL FUND
SCHEDULE OF INVESTMENTS - (Continued)
September 30, 1998
- ------------------------------------------------------------------------------
Value
Par Value (Note 1)
PUERTO RICO MUNICIPAL BONDS (4.18%)
Puerto Rico Commonwealth
Electric Power Authority Revenue Bonds (1.59%)
$ 90,000 7.125%,7/01/14 $ 93,939
General Obligation Bonds (1.59%)
90,000 7.750%,7/01/17 94,347
Housing Finance Corp.
Single Family Mortgage Revenue Bonds (1.00%)
55,000 6.150%,8/01/03 58,919
Total Puerto Rico Municipal Bonds 247,205
Total Investments (Cost $5,527,125) (a)96.71% 5,716,968
Other Assets less Liabilities 3.29% 194,479
Net Assets 100.00%
$5,911,447
(a) Aggregate cost for federal income tax purposes is $5,527,125.
At September 30, 1998, unrealized appreciation (depreciation)of
securities for federal income tax purposes is as follows:
Gross unrealized appreciation $190,205
Gross unrealized depreciation (362)
Net unrealized appreciation $189,843
- ------------------------------------------------------------------------------
See accompanying notes to financial statements
FIRST HAWAII MUNICIPAL BOND FUND
FIRST HAWAII INTERMEDIATE MUNICIPAL FUND
STATEMENT OF ASSETS AND LIABILITIES
September 30, 1998
- ------------------------------------------------------------------------------
Municipal Intermediate
Bond Municipal
Fund Fund
ASSETS
Investments at market value
(Identified cost $101,650,585 and $5,527,125,
respectively) (Note 1 (A)) $108,504,507 $5,716,968
Cash 2,308,340 109,777
Interest receivable 1,714,015 83,975
Subscriptions receivable 30,259 546
Other assets - 4,026
Total assets 112,557,121 5,915,292
LIABILITIES
Distributions payable 120,476 39
Redemptions payable 27,268 -
Advisory fee payable 45,666 1,117
Shareholder servicing fee payable 9,131 -
Accrued expenses 8,858 2,689
Total liabilities 211,399 3,845
NET ASSETS
(Applicable to 10,007,268 and 1,141,128 shares
outstanding,$.01 par value, 20,000,000 shares
authorized)
$112,345,722 $5,911,447
NET ASSET VALUE OFFERING AND REPURCHASE
PRICE PER SHARE
($112,345,722/10,007,268 shares) $11.23
======
($5,911,447/1,141,128 shares) $5.18
=====
NET ASSETS
At September 30, 1998, net assets consisted of:
Paid-in capital $105,722,973 $5,715,578
Accumulated net realized gain/(loss)
on investments (231,173) 6,026
Net unrealized appreciation 6,853,922 189,843
$112,345,722 $5,911,447
- ------------------------------------------------------------------------------
See accompanying notes to financial statements
FIRST HAWAII MUNICIPAL BOND FUND
FIRST HAWAII INTERMEDIATE MUNICIPAL FUND
STATEMENT OF OPERATIONS
For the year ended September 30, 1998
- ------------------------------------------------------------------------------
Municipal Intermediate
Bond Municipal
Fund Fund
---------- ---------
Interest income $6,326,555 $291,830
Expenses
Management fee (Note 2) 545,987 29,058
Distribution costs (Note 2) 130,005 1,904
Transfer agent fees (Note 2) 58,996 14,400
Shareholder services (Note 2) 109,198 1,844
Accounting fees (Note 2) 44,486 21,500
Legal and audit fees 13,414 4,352
Printing 10,337 636
Miscellaneous 23,439 7,527
Custodian fees 18,577 3,000
Insurance 6,827 1,163
Registration fees 6,632 1,164
Director's fees 1,700 -
Total expenses 969,598 86,548
Fee reductions (Note 4) (41,420) (7,434)
Expenses reimbursed or waived (Note 2) - (36,841)
Net expenses 928,178 42,273
Net investment income 5,398,377 249,557
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS
Net realized gain (loss) from security transactions (21,415) 7,143
Change in unrealized appreciation of investments 1,310,803 30,165
Net gain on investments 1,289,388 37,308
Net increase in net assets resulting
from operations $6,687,765 $286,865
- ------------------------------------------------------------------------------
See accompanying notes to financial statements
FIRST HAWAII MUNICIPAL BOND FUND
STATEMENT OF CHANGES IN NET ASSETS
Years ended September 30, 1998 and 1997
- ------------------------------------------------------------------------------
1998 1997
INCREASE (DECREASE) IN NET ASSETS FROM
Operations
Net investment income $5,398,377 $3,168,224
Net realized gain (loss) on investments (21,415) 19,725
Increase in unrealized appreciation
of investments 1,310,803 3,769,988
--------- ---------
Net increase in net assets resulting from operations 6,687,765 6,957,937
Distributions to shareholders from:
Net investment income
($0.55 and $0.54 per share, respectively) (5,398,377) (3,168,224)
Capital share transactions (a)
Increase in net assets resulting from
capital share transactions 4,676,094 48,425,600
--------- ----------
Total increase in net assets 5,965,482 52,215,313
NET ASSETS
Beginning of period 106,380,240 54,164,927
----------- ----------
End of period $112,345,722 $106,380,240
=========== ===========
(a) Summary of capital share activity follows:
<TABLE>
1998 1997
---- ----
Shares Value Shares Value
------ ----- ------ -----
<S> <C> <C> <C> <C>
Shares sold ................. 1,871,699 $ 20,798,408 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 .......... 335,571 3,742,788 204,944 2,251,292
2,207,270 24,541,196 5,841,593 61,934,922
Shares redeemed ............. (1,786,284) (19,865,102) (1,228,255)
Net increase .............. 420,986 $ 4,676,094 4,613,338 $48,425,600
</TABLE>
- ------------------------------------------------------------------------------
See accompanying notes to financial statements
FIRST HAWAII INTERMEDIATE MUNICIPAL FUND
STATEMENT OF CHANGES IN NET ASSETS
Years ended September 30, 1998 and 1997
- ------------------------------------------------------------------------------
1998 1997
INCREASE (DECREASE) IN NET ASSETS FROM
Operations
Net investment income $249,557 $ 269,623
Net realized gain on investments 7,143 4,272
Increase in unrealized appreciation of investments 30,165 56,068
Net increase in net assets resulting from operations 286,865 329,963
Distributions to shareholders from
Net investment income
($.22 and $.22 per share, respectively) (249,557) (269,623)
Capital gains
($.01 and $.01 per share, respectively) (5,389) (15,406)
Capital share transactions (a)
Decrease in net assets resulting from capital
share transactions (522,264) (267,381)
Total decrease in net assets (490,345) (222,447)
NET ASSETS
Beginning of period 6,401,792 6,624,239
End of period $5,911,447 $6,401,792
(a) Summary of capital share activity follows:
<TABLE>
1998 1997
---- ----
Shares ......... Value Shares Value
---------- ----------- ---------- -----------
<S> <C> <C> <C> <C>
Shares sold .... 282,264 $ 1,451,895 281,929 $ 1,445,252
Shares issued on
reinvestment of
distributions .. 43,202 222,275 47,134 241,769
---------- ----------- ---------- -----------
325,466 1,674,170 329,063 1,687,021
Shares redeemed (426,663) (2,196,434) (380,936) (1,954,402)
---------- ----------- ---------- -----------
Net decrease ... (101,197 $ (522,264) (51,873) $ (267,381)
========== =========== ========== ===========
</TABLE>
- -----------------------------------------------------------------------------
See accompanying notes to financial statements
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>
1998 1997 1996 1995 1994
----------- ----------- ---------- ---------- ----------
Net asset value
Beginning of period ............................. $11.10 $10.89 $10.84 $10.62 $11.48
Income from investment operations
Net investment income ........................... .55 .54 .55 .55 .55
Net gain (loss) on securities
(both realized and unrealized) ................... .13 .21 .05 .31 (.80)
Total from investment operations ............... .68 .75 .60 .86 (.25)
Less distributions
Dividends from net investment income ............ (.55) (.54) (.55) (.55) (.55)
Distributions from capital gains ................ -- -- -- (.09) (.06)
Total distributions .......................... (.55) (.54) (.55) (.64) (.61)
End of period ................................... $11.23 $11.10 $10.89 $10.84 $10.62
Total return ....................................... 6.28% 7.09% 5.62% 8.42% (2.18)%
Ratios/Supplemental Data
Net assets, end of period (in 000's) ............ $112,346 $106,380 $54,165 $51,131 $52,230
Ratio of expenses to average net assets
Before expense reimbursements .................. .89% .98% .98% 1.00% .97%
After expense reimbursements ................... .89%(a) .98%(a) .98%(a) .97%(a) .95%
Ratio of net investment income to average net assets
Before expense reimbursements .................. 4.90% 4.99% 5.03% 5.19% 4.99%
After expense reimbursements ................... 4.90% 4.99% 5.03% 5.22% 5.01%
Portfolio turnover ................................. .35% 3.21% 15.16% 17.08% 40.22%
</TABLE>
(a)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
years ended September 30, 1998, 1997, 1996 and 1995, respectively. Prior to
1995, such reductions were reflected in the expense ratios.
See accompanying notes to financial statements
FIRST HAWAII INTERMEDIATE MUNICIPAL FUND
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout the period)
<TABLE>
Period
Years Ended September 30, July 5, 1994* To
September 30,
<S> <C> <C> <C> <C> <C>
1998 1997 1996 1995 1994
----------- ----------- ---------- ---------- ----------
Net asset value
Beginning of period .............................. $5.15 $5.12 $5.14 $4.99 $5.00
Income from investment operations
Net investment income ............................ .22 .22 .22 .23 .05
Net gain (loss) on securities
(both realized and unrealized) .................... .04 .04 (.02) .15 (.01)
Total from investment operations ................ .26 .26 .20 .38 .04
Less distributions
Dividends from net investment income ............. (.22) (.22) (.22) (.23) (.05)
Distributions from capital gains ................. (.01) (.01) -- -- --
Total distributions ............................. (.23) (.23) (.22) (.23) (.05)
End of period .................................... $5.18 $5.15 $5.12 $5.14 $4.99
Total return ....................................... 5.08% 5.17% 3.95% 7.86% .72%
Ratios/Supplemental Data
Net assets, end of period (in 000's) ............. $5,911 $6,402 $6,624 $4,760 $2,447
Ratio of expenses to average net assets
Before expense reimbursements ................... 1.49% 1.43% 1.50% 1.90% 4.48% (a)
After expense reimbursements .................... .85% (b) .86% (b) .84% (b) .66% (b) 0% (a)
Ratio of net investment income to average net assets
Before expense reimbursements ................... 3.53% 3.67% 3.66% 3.39% .12% (a)
After expense reimbursements .................... 4.17% 4.24% 4.32% 4.63% 4.60% (a)
Portfolio turnover ................................. 14.57% 17.36% 17.76% 10.04% 0%
* Commencement of operations
</TABLE>
(a) Annualized
(b) Ratios of expenses to average net assets after the reduction of
custodian fees under a custodian arrangement were .73%, .75%, .75% and
.64% for the years ended September 30, 1998, 1997, 1996 and 1995,
respectively. Prior to 1995, such reductions were reflected in the
expense ratios.
See accompanying notes to financial statements
FIRST HAWAII MUNICIPAL BOND FUND
FIRST HAWAII INTERMEDIATE MUNICIPAL FUND
NOTES TO FINANCIAL STATEMENTS
September 30, 1998
- ------------------------------------------------------------------------------
(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. At September 30, 1998, the First Hawaii Municipal Fund
had an unused capital loss carryforward of approximately $239,800 of
which $210,800 expires in 2004 and $29,000 expires in 2005.
- ------------------------------------------------------------------------------
FIRST HAWAII MUNICIPAL BOND FUND
FIRST HAWAII INTERMEDIATE MUNICIPAL FUND
NOTES TO FINANCIAL STATEMENTS
September 30, 1998
- ------------------------------------------------------------------------------
(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 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 $130,005 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 year ended September 30, 1998, FPMC and FPR voluntarily waived
certain management, transfer agent, shareholder services, and accounting
fees in the amount of $36,841 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.
- ------------------------------------------------------------------------------
IRST HAWAII MUNICIPAL BOND FUND
FIRST HAWAII MUNICIPAL BOND FUND
FIRST HAWAII INTERMEDIATE MUNICIPAL FUND
NOTES TO FINANCIAL STATEMENTS - (Continued)
September 30, 1998
- ------------------------------------------------------------------------------
(4) PURCHASES AND SALES/CUSTODY OF SECURITIES
Purchases and sales of securities aggregated $11,359,032 and $7,855,015,
respectively for the First Hawaii Municipal Bond Fund. Purchases and
sales of securities for the First Hawaii Intermediate Municipal Fund
aggregated $834,730 and $1,385,394, respectively. Under an agreement
with the Custodian Bank, custodian fees are reduced by credits for cash
balances. During the year ended September 30, 1998, such reductions
amounted to $41,420 and $7,434 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
November 13, 1998
Dear Shareholder,
We are pleased to provide you with the First Idaho Tax-Free Fund's 1998
Annual Report.
Municipal bond funds caught the attention of many investors seeking a "safe
haven" and added portfolio diversification from a volatile stock market.
A moderately expanding U.S. economy with consistent price and unit labor
costs coupled with economic turmoil in Asia have contributed to declining
interest rates in 1998. Given these conditions and expectations, the primary
investment strategy of the Fund's investment manager was to purchase good
quality long term Idaho municipal bonds. The decline of interest rates, paired
with the strategy of purchasing good quality municipal bonds was the primary
factor producing the past year's performance results.
If you have any questions about this Annual Report or would like us to
provide information about the Fund to your family or friends, please call (808)
988-8088 or our local Boise office at (208) 331-7879.
Thank you for your business as well as the many referrals. 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 Fund, I would like to extend
to you and your family best wishes for a safe and happy holiday season.
Sincerely,
Terrence K.H. Lee
President
First Pacific Securities, Inc.,
Distributor/Member SIPC
Before investing, read the prospectus carefully for complete information
including all fees and expenses. Call (808) 988-8088 for a free prospectus.
Fund's yields, share prices and investment returns fluctuate so that you may
receive more or less than your original investment upon redemption. Past
performance is no guarantee of future results. Some income may be subject to the
federal alternative minimum tax for certain investors. First Idaho Tax-Free Fund
is a series of First Pacific Mutual Fund, Inc. 2756 Woodlawn Drive, #6-201,
Honolulu, HI 96822
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, 1998, 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, 1998,
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, 1998, 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 6, 1998
THE FOLLOWING DATA SUPPORTS THE COMPARATIVE GRAPH PRESENTED IN THE ANNUAL
REPORT.
FIRST IDAHO LEHMAN MUNICIPAL
YEAR ENDED TAX-FREE FUND BOND FUND INDEX
- ---------- ------------- ---------------
9/30/96 10,000 10,000
9/30/96 9,927 10,100
9/30/97 10,660 10,800
9/30/98 11,437 11,741
The graph above compares the increase in value of a $10,000 investment in the
First Idaho Tax-Free Fund with the performance of the Leman Muni Bond Index. The
objective of the graph is to permit you to compare the performance of the Fund
with the current market and to give perspective to market conditions and
investment strategies and techniques persued by the investment manager that
materially affected the performance of the Fund. The Lehman Muni Bond Index
reflects reinvestment of dividends but not the expenses of the Fund. The return
and principal value of an investment in the Fund will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than their original
cost. Past perfomance is not indicative of future results.
FIRST IDAHO TAX-FREE FUND
SCHEDULE OF INVESTMENTS
September 30, 1998
- ------------------------------------------------------------------------------
Par Value
Value (Note 1)
IDAHO MUNICIPAL BONDS (87.13%)
Ada & Canyon Counties
Joint School District (1.13%)
$10,000 5.500%, 7/30/12 $10,788
Boise City
Convention Center (2.72%)
25,000 6.250%, 12/01/09 25,844
Independent School District (1.11%)
10,000 5.300%, 7/30/09 10,587
Public Housing Authority (2.68%)
25,000 5.250%, 8/01/11 25,555
Boise State University
Revenue Bond (2.83%)
10,000 5.050%, 4/01/08 10,713
15,000 6.200%, 4/01/10 16,200
26,913
Boise-Kuna-Irrigation District
Lucky Peak Hydroelectric (2.78%)
25,000 6.000%, 7/01/08 26,438
Bonneville County
General Obligation Bonds (1.10%)
10,000 5.200%, 8/01/12 10,488
Cassia & Twin Falls County
General Obligation Bonds (2.78%)
25,000 5.375%, 8/01/13 26,469
Central Shoshone County
Water District Revenue Bond (1.13%)
10,000 6.150%, 12/01/17 10,712
Elmore County
School District #193 (2.63%)
25,000 4.500%, 7/31/13 25,000
Gooding County
School District #232 Wendell (1.10%)
10,000 5.800%, 8/01/06 10,512
Idaho Falls
Idaho Electric Revenue Bonds (8.50%)
20,000 6.750%, 4/01/09 22,950
40,000 10.375%, 4/01/13 58,000
80,950
- ------------------------------------------------------------------------------
See accompanying notes to financial statements
FIRST IDAHO TAX-FREE FUND
SCHEDULE OF INVESTMENTS - (Continued)
September 30, 1998
- ------------------------------------------------------------------------------
Par Value
Value (Note 1)
Idaho Health Facilities Revenue Bonds
(Bannock Regional Medical Center) (3.21%)
15,000 5.000%, 5/01/00 $15,244
10,000 7.600%, 5/01/05 10,224
5,000 6.000%, 5/01/14 5,108
30,576
(Holy Cross Health Systems) (7.11%)
25,000 6.100%, 12/01/06 27,656
40,000 5.000%, 12/01/28 40,050
67,706
(Intermountain Health Care Inc.) (3.13%)
25,000 6.500%, 4/01/10 29,781
(Magic Valley Regional Medical Center) (1.12%)
10,000 5.500%, 12/01/10 10,700
(Mercy Medical Center) (2.84%)
25,000 7.400%, 10/01/05 27,063
(Elks Rehabilitation Hospital) (4.21%)
40,000 5.300%, 7/15/18 40,050
Idaho Housing Agency
Single Family Mortgage - Series B (11.76%)
10,000 5.625%, 7/01/05 10,337
30,000 6.600%, 7/01/12 32,250
10,000 5.700%, 7/01/13 10,500
50,000 6.500%, 1/01/27 53,625
5,000 7.850%, 1/01/21 5,219
111,931
Idaho State
Board of Education (0.54%)
5,000 7.100%, 10/01/17 5,150
Water Reserve Board (5.18%)
45,000 7.250%, 12/01/21 49,331
Student Loan Marketing Association - Series C (1.05%)
10,000 4.750%, 4/01/99 10,018
Jerome
Sewer Revenue (1.63%)
15,000 6.800%, 11/01/06 15,556
Nampa Urban Renewal Agency (1.16%)
10,000 5.700%, 8/01/05 11,038
Payette & Washington Counties
School District #371 (2.16%)
20,000 6.300%, 10/01/03 20,609
- ------------------------------------------------------------------------------
See accompanying notes to financial statements
FIRST IDAHO TAX-FREE FUND
SCHEDULE OF INVESTMENTS - (Continued)
September 30, 1998
- ------------------------------------------------------------------------------
Par Value
Value (Note 1)
Twin Falls County
Solid Waste Disposal (2.12%)
20,000 4.500%, 9/01/99 $20,167
University of Idaho
University Commons Project (9.42%)
50,000 5.300%, 4/01/17 52,625
25,000 5.350%, 4/01/22 26,250
10,000 5.650%, 4/01/22 10,787
89,662
Total Idaho Municipal Bonds 829,594
PUERTO RICO MUNICIPAL BONDS (7.09%)
Puerto Rico Commonwealth
General Obligation Bonds (1.13%)
10,000 5.750%, 7/01/17 10,787
Housing Finance Corp.
Multi-Family Mortgage Revenue Bonds (1.10%)
10,000 7.500%, 4/01/22 10,462
Single Family Mortgage Revenue Bonds (1.69%)
15,000 6.150%, 8/01/03 16,069
Industrial, Medical & Environmental Pollution Control
Abbott Laboratories (3.17%)
30,000 6.500%, 7/01/09 30,232
Total Puerto Rico Municipal Bonds 67,550
Total Investments (cost $865,368) (a) 94.22% 897,144
Other Assets Less Liabilities 5.78 55,023
Net Assets 100.00% $952,167
(a) Aggregate cost for federal income tax purposes is $865,368.
At September 30, 1998, unrealized appreciation (depreciation) of
securities for federal income tax purposes is as follows:
Gross unrealized appreciation $32,079
Gross unrealized depreciation (303)
----
Net unrealized appreciation $31,776
=======
- ------------------------------------------------------------------------------
See accompanying notes to financial statements
FIRST IDAHO TAX-FREE FUND
STATEMENT OF ASSETS AND LIABILITIES
September 30, 1998
- ------------------------------------------------------------------------------
ASSETS
Investments at market value
(Identified cost $865,368) (Note 1(A)) $897,144
Cash 38,946
Interest receivable 17,700
Total assets 953,790
LIABILITIES
Distributions payable 1,311
Accrued expenses 312
Total liabilities 1,623
NET ASSETS
(Applicable to 89,779 shares outstanding,
$.01 par value, 20,000,000 shares authorized) $952,167
========
NET ASSET VALUE, OFFERING AND REPURCHASE PRICE PER SHARE
Net asset value and repurchase price per share
($952,167/89,779 shares) $10.61
Offering price per share ======
(100/97.25 of $10.61) $10.91
======
NET ASSETS
At September 30, 1998, net assets consisted of:
Paid-in capital $920,668
Accumulated net realized loss on investments (277)
Net unrealized appreciation of investments 31,776
$952,167
- ------------------------------------------------------------------------------
See accompanying notes to financial statements
FIRST IDAHO TAX-FREE FUND
STATEMENT OF OPERATIONS
For the period ended September 30, 1998
- ------------------------------------------------------------------------------
INVESTMENT INCOME
Interest income $41,417
Expenses
Management fee (Note 2) 4,108
Transfer agent fees (Note 2) 14,400
Accounting fees (Note 2) 21,500
Legal and audit 2,000
Miscellaneous 5,643
Custodian fees 3,000
Insurance 820
Registration fees 35
Total expenses 51,506
Fee reductions (Note 4) (8,643)
Expenses reimbursed or waived (Note 2) (42,008)
Net expenses 855
Net investment income 40,562
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized loss from security transactions (277)
Increase in unrealized appreciation of investments 19,179
Net gain on investments 18,902
Net increase in net assets resulting from operations $59,464
- ------------------------------------------------------------------------------
See accompanying notes to financial statements
FIRST IDAHO TAX-FREE FUND
STATEMENT OF CHANGES IN NET ASSETS
Years ended September 30, 1997 and 1998
- ------------------------------------------------------------------------------
1998 1997
INCREASE (DECREASE) IN NET ASSETS FROM
Operations
Net investment income $40,562 $17,504
Net realized loss from security transactions (277) -
Increase in unrealized appreciation of investments 19,179 12,456
------ ------
Net increase in net assets resulting from operations 59,464 29,960
Distributions to shareholders from
Net investment income
($.52 and $.49 per share, respectively) (40,562) (17,504)
Capital share transactions (a)
Increase in net assets resulting from capital
share transactions 272,106 537,823
------- -------
Total increase in net assets 291,008 550,279
NET ASSETS
Beginning of period 661,159 110,880
------- -------
End of period $952,167 $661,159
======== ========
(a) Summary of capital share activity follows:
1998 1997
------------------------
Shares Value Shares Value
------------------------------------
Shares sold 30,410 $317,797 59,375 $605,567
Shares issued on acquisition
of distributions 2,560 26,831 1,197 12,290
----- ------ ----- ------
32,970 344,628 60,572 617,857
Shares redeemed (6,827) (72,522) (7,859) (80,034)
------ ------- ------ -------
Net increase 26,143 $272,106 52,713 $537,823
====== ======== ====== ========
- ------------------------------------------------------------------------------
See accompanying notes to financial statements
FIRST IDAHO TAX-FREE FUND
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout the period)
- ------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
Period
July 1, 1996*
To Year ended
Year ended September 30, September 30,
1998 1997 1996
-------------------------------------
Net asset value
Beginning of period ................................ $10.39 $10.15 $10.00
Income from investment operations
Net investment income .............................. .52 .49 .05
Net unrealized gain on securities .................. .22 .24 .15
Total from investment operations ................. .74 .73 .20
Less distributions
Dividends from net investment income ............... (.52) (.49) (.05)
End of period ...................................... $10.61 $10.39 $10.15
Total return .......................................... 7.29% 7.38% 2.05%
Ratios/Supplemental Data
Net assets, end of period (in 000's) .............. $952 $661 $111
Ratio of expenses to average net assets
Before expense reimbursements .................... 6.27% 12.74% 222.98%(a)
After expense reimbursements ..................... 1.16%(b) 1.59%(b) .02%(a)
Ratio of net investment income to average net assets
Before expense reimbursements .................... (1.23)% (6.23%) (219.93)%(a)
After expense reimbursements ..................... 4.93% 4.92% 3.03%(a)
Portfolio turnover .................................... 6.44% 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 years ended
September 30, 1998 and 1997, respectively. There were no custodian fee
reductions in 1996.
- ------------------------------------------------------------------------------
See accompanying notes to financial statements
FIRST IDAHO TAX-FREE FUND
NOTES TO FINANCIAL STATEMENTS
September 30, 1998
- ------------------------------------------------------------------------------
(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. At
September 30, 1998, the Fund had a capital loss carryforward of
approximately $300 which expires in 2006.
(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.
- ------------------------------------------------------------------------------
FIRST IDAHO TAX-FREE FUND
NOTES TO FINANCIAL STATEMENTS - (Continued)
September 30, 1998
- ------------------------------------------------------------------------------
(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 year ended September 30, 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 year ended September 30, 1998, FPMC and FPR voluntarily waived
certain management, transfer agent, and accounting fees in the amount of
$42,008 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 and sales of securities aggregated $288,002 and $50,625,
respectively. Under an agreement with the Custodian Bank, custodian
fees are reduced by credits for cash balances. During the year ended
September 30, 1998, such reductions amounted to $8,643.
- ------------------------------------------------------------------------------
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
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<EXPENSES-NET> 928,178
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<INVESTMENTS-AT-COST> 5,527,125
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<NET-INVESTMENT-INCOME> 249,557
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<NET-CHANGE-FROM-OPS> 286,865
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (249,557)
<DISTRIBUTIONS-OF-GAINS> (5,389)
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<NUMBER-OF-SHARES-SOLD> 282,264
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<NET-CHANGE-IN-ASSETS> (490,345)
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<GROSS-EXPENSE> 86,548
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<PERIOD-START> OCT-01-1997
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<INVESTMENTS-AT-COST> 865,368
<INVESTMENTS-AT-VALUE> 897,144
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</TABLE>
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We consent to the references to our firm in the Post-Effective Amendment to the
Registration Statement on Form N-1A of First Pacific Mutual Fund, Inc. and to
the use of our report dated November 6, 1998 on the financial statements and
financial highlights of First Hawaii Municipal Bond Fund, First Hawaii
Intermediate Municipal Fund, and First Idaho Tax-Free Fund, each a series of
shares of First Pacific Mutual Fund, Inc. Such financial statements and
financial highlights appear in the 1998 Annual Report to Shareholders which are
incorporated by reference in the Registration Statement and Prospectus.
TAIT, WELLER & BAKER
Philadelphia, Pennsylvania
November 13, 1998
