UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-05631
First Pacific Mutual Fund, Inc.
(Exact name of registrant as specified in charter)
2756 Woodlawn Drive, Suite #6-201
Honolulu, HI 96822-1856
(Address of principal executive offices) (Zip code)
Audrey C. Talley
Drinker Biddle & Reath LLP
One Logan Square
18th and Cherry Streets
Philadelphia, PA 19103-6996
(Name and address of agent for service)
Registrant's telephone number, including area code: 808-988-8088
Date of fiscal year end: September 30
Date of reporting period: September 30, 2004
Form N-CSR is to be used by management investment companies to file reports
with the Commission not later than 10 days after the transmission to
stockholders of any report that is required to be transmitted to stockholders
under Rule 30e-1 under the Investment Company Act of 1940 (17 CFR 270.30e-1).
The Commission may use the information provided on Form N-CSR in its
regulatory, disclosure review, inspection, and policymaking roles.
A registrant is required to disclose the information specified by Form N-CSR,
and the Commission will make this information public. A registrant is not
required to respond to the collection of information contained in Form N-CSR
unless the Form displays a currently valid Office of Management and Budget
("OMB") control number. Please direct comments concerning the accuracy of the
information collection burden estimate and any suggestions for reducing the
burden to Secretary, Securities and Exchange Commission, 450 Fifth Street, NW,
Washington, DC 20549-0609. The OMB has reviewed this collection of information
under the clearance requirements of 44 U.S.C. 3507.
Item 1. Reports to Stockholders.
November 15, 2004
Dear fellow shareholder,
As we begin our 17th year of operations, we are pleased to provide you
with our Funds' 2004 Annual Report.
In these uncertain financial times, isn't it comforting to know that you
are invested in the Hawaii Municipal Fund and the Hawaii Intermediate Fund? As
shareholders of the Funds, you are earning tax-free income* and supporting
local 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 and improve
the quality of life here in our islands.
On the following pages are line graphs comparing each Funds performance
to the Lehman Muni Bond Index for the 10 years ended September 30, 2004, or the
inception of the Fund if less than 10 years. Each graph assumes a hypothetical
$10,000 investment in the respective funds. The object of the graph is to
permit a comparison of the Funds with a benchmark and to provide perspective on
market conditions and investment strategies and techniques that materially
affected the performance of each Fund.
Interest rates are the most important of many factors which can affect
bond prices. Over the course of the fiscal year, the treasury yield curve
flattened with short-term interest rates increasing and long-term interest
rates slightly decreasing. This accounts for the Hawaii Municipal Fund's
Investor Class fiscal year price change of just $.01. The Hawaii Municipal
Fund Investor Class had a Net Asset Value ("NAV") of $11.22 on October 1, 2003
and a NAV of $11.21 on September 30, 2004. The Hawaii Municipal Fund
Institutional Class had a NAV of $11.23 on October 1, 2003 and a NAV of $11.22
on September 30, 2004. The rise in short term-rates resulted in the Hawaii
Intermediate Fund's fiscal year price change of $.04. The Hawaii Intermediate
Fund had a NAV of $5.26 of October 1, 2003 and a NAV of $5.22 on September 30,
2004. The primary investment strategy of the Hawaii Municipal Fund was to
purchase high quality long-term Hawaii municipal bonds. The primary investment
strategy of the Hawaii Intermediate Fund was to purchase high quality three to
ten year Hawaii Municipal bonds. The past year's performance for these Funds,
which is presented in this Annual Report, was primarily a result of the
implementation of these strategies. As of September 30, 2004, 71.36% of the
Hawaii Municipal Bond Fund's portfolio was invested in bonds rated AAA by
Standard & Poor's ("S&P"). As of September 30, 2004, 75.55% of the Hawaii
Intermediate Fund's portfolio was invested in bonds rated AAA by S&P.
Throughout most of the year, the Federal Funds Rate was at a historical
low of 1%, below both the annualized rate of inflation as well as the growth of
GDP. In the fall of 2004, in response to concerns about higher inflation and a
mild economic expansion, the Federal Reserve Bank increased the Federal Funds
Rate a total of one half of one percent. The market's reaction suggests that
these actions, among other market events, will keep inflation pressures under
control for the foreseeable future. The decline in the long end of the yield
curve can be interpreted as an indication that bond investors believe inflation
will be less of a factor over the long-term. Still, there continues to be
risks to inflation and the bond market, among which are US fiscal policy,
international conflicts/terrorism and global economic factors.
STANDARD & POOR'S
MUNICIPAL BOND RATINGS
September 30, 2004
[the following information was presented in a pie chart]
Hawaii Municipal Fund Hawaii Intermediate Fund
AAA 71.36% AAA 75.55%
AA 1.91% A 2.30%
AA- 0.47% BBB+ 12.12%
A+ 4.78% NR 10.02%
A 5.32%
BBB+ 5.28%
BBB 3.25%
NR 7.63%
We are proud to report that as a Hawaii resident, 100% of the dividends
earned in 2004 were both state and federal tax-free.* There are no capital
gain distributions for the Hawaii Intermediate Fund in 2004. There will be a
long-term capital gain distribution in 2004 to shareholders of the Hawaii
Municipal Fund.
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. 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,
/s/ Terrence K.H. Lee
Terrence K.H. Lee
President and CEO First Pacific Securities,
Inc./Distributor
A description of the policies and procedures that the Funds use to determine
how to vote proxies relating to portfolio securities is available without
charge, upon request, by calling (808) 988-8088.
Before investing, read the prospectus carefully. Please carefully consider the
Funds' investment objectives, risks, and charges and expenses before investing.
The prospectus contains this and other information about the Funds. Call 988-
8088 for a free prospectus.
*Some income may be subject to the federal alternative minimum tax for certain
investors. Funds' 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. Hawaii
Municipal Fund and Hawaii Intermediate Fund are series of First Pacific Mutual
Fund, Inc.
Hawaii Municipal Fund Investor Class
$10,000 Investment in Fund Compared to Lehman Muni Bond Index
[The following table was depicted as a line chart in the printed material.]
Hawaii Municipal Fund Lehman Muni
Investor Class Bond Index
09/30/94 $10,000 $10,000
09/30/95 $10,844 $11,118
09/30/96 $11,454 $11,790
09/30/97 $12,266 $12,853
09/30/98 $13,024 $13,973
09/30/99 $13,018 $13,876
09/30/00 $13,502 $14,732
09/30/01 $14,597 $16,264
09/30/02 $15,762 $17,717
09/30/03 $16,389 $18,407
09/30/04 $17,050 $19,254
Average Annual Total Return
1 Year 4.33%
5 Year 5.55%
10 Year 5.48%
The graph above compares the increase in value of a $10,000 investment in the
Hawaii Municipal Fund Investor Class with the performance of the Lehman 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 pursued 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 performance is not indicative of future
results. The total returns are before taxes on distributions or redemptions of
Fund shares.
Hawaii Municipal Fund Institutional Class
$10,000 Investment in Fund Compared to Lehman Muni Bond Index
[The following table was depicted as a line chart in the printed material.]
Hawaii Municipal Fund Lehman Muni Institutional
Class Bond Index
10/22/02 $10,000 $10,000
09/30/03 $10,737 $10,734
09/30/04 $11,204 $11,228
Average Annual Total Return
1 Year 4.58%
Since Inception 6.04%
The graph above compares the increase in value of a $10,000 investment in the
Hawaii Municipal Fund Institutional Class with the performance of the Lehman
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 pursued 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 performance is not indicative of future
results. The total returns are before taxes on distributions or redemptions of
Fund shares.
Hawaii Intermediate Fund
$10,000 Investment in Fund Compared to Lehman Muni Bond Index
[The following table was depicted as a line chart in the printed material.]
Hawaii Intermediate Fund Lehman Muni Bond Index
09/30/94 $10,000 $10,000
09/30/95 $10,788 $11,118
09/30/96 $11,213 $11,790
09/30/97 $11,793 $12,853
09/30/98 $12,391 $13,973
09/30/99 $12,575 $13,876
09/30/00 $13,066 $14,732
09/30/01 $14,060 $16,264
09/30/02 $14,799 $17,717
09/30/03 $15,201 $18,407
09/30/04 $15,537 $19,254
Average Annual Total Return
1 Year 2.21%
5 Year 4.32%
10 Year 4.50%
The graph above compares the increase in value of a $10,000 investment in the
Hawaii Intermediate Fund with the performance of the Lehman 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 pursued 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 performance is not indicative of future results. The
total returns are before taxes on distributions or redemptions of Fund shares.
Your Fund's Expenses
As a Fund shareholder, you can incur two types of costs:
[Bullet] Transaction costs, including sales charges (loads) on Fund purchases
and redemption fees; and
[Bullet] Ongoing Fund costs, including management fees, distribution and service
(12b-1) fees, and other Fund expenses. All mutual funds have ongoing costs,
sometimes referred to as operating expenses.
The following table shows ongoing costs of investing in the Fund and can help
you understand these costs and compare them with those of other mutual funds.
The table assumes a $1,000 investment held for the six months indicated.
Actual Fund Expenses
The first line (Actual) for each share class listed in the table below provides
actual account values and expenses. The "Ending Account Value" is derived from
the Fund's actual return, which includes the effect of Fund expenses.
You can estimate the expenses you paid during the period, by following these
steps. Of course, your account value and expenses will differ from those in
this illustration:
1. Divide your account value by $1,000.
If an account had an $8,600 value, the $8,600 / $1,000 = 8.6.
2. Multiply the result by the number under the heading "Expenses Paid During
Period."
If expenses Paid During Period were $7.50, then 8.6 x $7.50 = $64.50.
In this illustration, the estimated expenses paid this period are $64.50.
Hypothetical example for Comparison with Other Funds
Information in the second line (Hypothetical) for each class in the table can
help you compare ongoing costs of investing in the Fund with those of other
mutual funds. This information may not be used to estimate the actual ending
account balance or expenses you paid during the period. The hypothetical
"Ending Account Value" is based on the actual expense ratio for each class and
an assumed 5% annual rate of return before expenses, which does not represent
the Fund's actual return. The figure under the heading "Expenses Paid During
Period" shows the hypothetical expenses your account would have incurred under
this scenario. You can compare this figure with the 5% hypothetical examples
that appear in shareholder reports of other funds.
Please note that expenses shown in the table are meant to highlight ongoing
costs and do not reflect any transaction costs, such as sales charges or
redemption fees. Therefore, the second line for each class is useful in
comparing ongoing costs only, and will not help you compare total costs of
owning different funds. Please refer to the Fund prospectus for additional
information on operating expenses.
Beginning
Account
Value
03/31/04
Ending
Account Value
09/30/04
Expenses Paid
During
Period* 3/31/04-
9/30/04
Hawaii Municipal Fund
Investor Class
Actual
$1,000.00
$1,011.10
$5.03
Hypothetical
$1,000.00
$1,020.00
$5.05
Hawaii Municipal Fund
Institutional Class
Actual
$1,000.00
$1,012.70
$3.77
Hypothetical
$1,000.00
$1,021.25
$3.79
Hawaii Intermediate Fund
Actual
$1,000.00
$1,008.50
$4.12
Hypothetical
$1,000.00
$1,020.90
$4.14
*Expenses are equal to the annualized expense ratio for each class (1.00%, .75%
and .82%, respectively), multiplied by the average account value over the
period, multiplied by 183/366 to reflect the one-half year period.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board of Directors and Shareholders
First Pacific Mutual Fund, Inc.
Honolulu, Hawaii
We have audited the accompanying statements of assets and liabilities of Hawaii
Municipal Fund and Hawaii Intermediate Fund (each a series of shares of First
Pacific Mutual Fund, Inc.) including the schedules of investments, as of
September 30, 2004, and the related statements of operations for the year then
ended, the statements of changes in net assets for each of the two years in the
period then ended 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 the standards of the Public Company
Accounting Oversight Board (US). 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, 2004, 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
Hawaii Municipal Fund and Hawaii Intermediate Fund as of September 30, 2004,
the results of their operations for the year then ended, the changes in their
net assets for each of the two years in the period then ended and the financial
highlights for each of the periods indicated thereon, in conformity with
accounting principles generally accepted in the United States of America.
TAIT, WELLER & BAKER
Philadelphia, Pennsylvania
November 4, 2004
HAWAII MUNICIPAL FUND
SCHEDULE OF INVESTMENTS
September 30, 2004
Value
Par Value (Note 1 (A))
HAWAII MUNICIPAL BONDS -98.31%
Hawaii County
General Obligation Bonds - 6.69%
$ 300,000 5.600%, 05/01/11 $ 341,982
2,385,000 5.000%, 07/15/15 2,653,909
1,000,000 5.625%, 05/15/18 1,115,440
1,000,000 5.625%, 05/15/19 1,112,710
1,025,000 5.125%, 07/15/20 1,094,054
1,250,000 5.125%, 07/15/21 1,326,587
1,000,000 5.000%, 07/15/22 1,054,410
1,000,000 5.000%, 07/15/23 1,047,690
9,746,782
Hawaii State
General Obligation Bonds - 3.06%
135,000 6.000%, 10/01/08 153,162
120,000 5.250%, 04/01/11 132,145
300,000 6.250%, 01/01/14 303,471
2,000,000 5.250%, 07/01/18 2,198,380
1,580,000 5.125%, 02/01/22 1,676,317
4,463,475
Airport Systems Revenue Bonds - 4.83%
2,000,000 8.000%, 07/01/11 2,518,160
385,000 6.900%, 07/01/12 453,472
3,000,000 6.500%, 07/01/14 3,485,250
500,000 6.500%, 07/01/15 579,460
7,036,342
Certificates of Participation #1 - Capital District - 2.47%
1,000,000 5.000%, 05/01/16 1,080,320
555,000 5.000%, 05/01/18 595,204
1,750,000 5.500%, 05/01/20 1,921,097
3,596,621
Department of Budget & Finance Special Purpose Revenue Bonds
Hawaiian Electric Company, Inc. - 20.51%
4,000,000 5.750%, 12/01/18 4,422,520
125,000 6.150%, 01/01/20 140,806
500,000 5.700%, 07/01/20 546,345
5,760,000 6.600%, 01/01/25 5,878,714
625,000 6.200%, 05/01/26 663,231
600,000 5.875%, 12/01/26 633,354
10,055,000 5.650%, 10/01/27 10,852,060
6,025,000 6.200%, 11/01/29 6,756,736
29,893,766
See accompanying notes to financial statements.
HAWAII MUNICIPAL FUND
SCHEDULE OF INVESTMENTS - (Continued)
September 30, 2004
Value
Par Value (Note 1 (A))
Kapiolani Health Care System - 7.91%
$ 400,000 6.300%, 07/01/08 $ 410,544
1,500,000 6.000%, 07/01/11 1,563,840
1,525,000 6.400%, 07/01/13 1,640,275
1,785,000 6.400%, 07/01/13 1,822,788
700,000 6.200%, 07/01/16 727,678
3,575,000 6.000%, 07/01/19 3,605,709
1,715,000 6.250%, 07/01/21 1,765,335
11,536,169
The Queen's Health Systems - 4.79%
1,020,000 6.000%, 07/01/20 1,112,942
100,000 5.250%, 07/01/23 104,521
5,310,000 5.750%, 07/01/26 5,771,227
6,988,690
St. Francis Medical Center - 1.91%
2,765,000 6.500%, 07/01/22 2,780,208
Wilcox Hospital - 2.56%
500,000 4.900%, 07/01/05 508,455
800,000 5.250%, 07/01/13 832,864
2,245,000 5.350%, 07/01/18 2,271,311
115,000 5.500%, 07/01/28 114,086
3,726,716
Harbor Capital Improvements Revenue Bonds - 2.09%
1,580,000 5.250%, 01/01/16 1,725,913
200,000 5.750%, 07/01/17 214,954
500,000 5.500%, 07/01/19 548,070
520,000 5.750%, 07/01/29 553,826
3,042,763
Highway Revenue Bonds - 2.31%
1,000,000 5.600%, 07/01/14 1,077,810
1,100,000 5.000%, 07/01/16 1,189,309
1,000,000 5.375%, 07/01/19 1,096,540
3,363,659
See accompanying notes to financial statements.
HAWAII MUNICIPAL FUND
SCHEDULE OF INVESTMENTS - (Continued)
September 30, 2004
Value
Par Value (Note 1 (A))
Housing Authority Single Family
Mortgage Special Purpose Revenue Bonds - 7.12%
$ 50,000 5.550%, 07/01/07 $ 51,164
255,000 7.000%, 07/01/11 257,739
170,000 5.700%, 07/01/13 173,953
465,000 6.900%, 07/01/16 470,789
630,000 5.050%, 07/01/16 643,255
385,000 7.100%, 07/01/24 385,458
2,235,000 5.900%, 07/01/27 2,272,369
2,305,000 5.900%, 07/01/27 2,341,696
910,000 5.750%, 07/01/30 936,426
2,785,000 5.375%, 07/01/33 2,846,632
10,379,481
Department of Hawaiian Homelands - 2.80%
900,000 4.050%, 07/01/06 927,765
1,355,000 4.100%, 07/01/07 1,413,834
1,465,000 4.250%, 07/01/09 1,538,660
200,000 4.450%, 07/01/11 209,580
4,089,839
Housing Authority Multi-Family
Mortgage Revenue Bonds - 2.36%
1,000,000 5.700%, 07/01/18 1,007,100
2,365,000 6.100%, 07/01/30 2,429,896
3,436,996
University Faculty Housing - 1.65%
800,000 5.650%, 10/01/16 836,536
1,500,000 5.700%, 10/01/25 1,569,240
2,405,776
University of Hawaii - Revenue Bonds - 3.41%
750,000 5.500%, 07/15/16 851,865
4,000,000 5.125%, 07/15/32 4,117,280
4,969,145
See accompanying notes to financial statements.
HAWAII MUNICIPAL FUND
SCHEDULE OF INVESTMENTS - (Continued)
September 30, 2004
Value
Par Value (Note 1 (A))
Honolulu City & County
Board of Water Supply - 2.17%
$ 700,000 4.750%, 07/01/15 $ 758,415
500,000 5.800%, 07/01/16 539,460
750,000 5.800%, 07/01/21 809,190
1,000,000 5.000%, 07/01/23 1,051,900
3,158,965
Waste & Water System - 0.74%
1,000,000 5.250%, 07/01/18 1,083,780
General Obligation Bonds - 0.59%
200,000 7.350%, 07/01/06 218,404
105,000 5.500%, 09/01/16 114,274
500,000 5.250%, 03/01/28 524,200
856,878
Housing Authority Multi-Family Mortgage Revenue Bonds
Hale Pauahi - 0.28%
405,000 6.800%, 07/01/28 414,939
Maunakea Apartments - 0.56%
743,000 5.750%, 11/20/09 814,209
Waipahu Project - 2.97%
4,200,000 6.900%, 06/20/35 4,332,846
Sunset Villas - 3.55%
2,955,000 5.600%, 07/20/21 3,068,029
2,000,000 5.700%, 07/20/31 2,103,500
5,171,529
See accompanying notes to financial statements.
HAWAII MUNICIPAL FUND
SCHEDULE OF INVESTMENTS - (Continued)
September 30, 2004
Value
Par Value (Note 1 (A))
Kauai County
General Obligation Bonds - 4.48%
$ 410,000 5.850%, 08/01/07 $ 452,972
1,280,000 5.850%, 08/01/07 1,414,157
595,000 6.250%, 08/01/19 700,702
695,000 6.250%, 08/01/22 818,467
3,065,000 5.000%, 08/01/25 3,148,552
6,534,850
Housing Authority Paanau Project - 0.89%
1,300,000 7.250%, 04/01/12 1,300,663
Maui County
General Obligation Bonds - 0.92%
235,000 5.750%, 06/01/13 252,590
500,000 5.300%, 09/01/14 550,165
500,000 5.000%, 09/01/17 545,955
1,348,710
Kuakini Hawaii Health System - 3.21%
1,570,000 6.300%, 07/01/22 1,607,413
3,000,000 6.375%, 07/01/32 3,070,350
4,677,763
Hawaii Health Systems - 1.48%
760,000 3.800%, 02/15/13 759,430
1,370,000 4.700%, 02/15/19 1,403,058
2,162,488
Total Hawaii Municipal Bonds (Cost $136,841,511) 143,314,048
See accompanying notes to financial statements.
HAWAII MUNICIPAL FUND
SCHEDULE OF INVESTMENTS - (Continued)
September 30, 2004
Value
Par Value (Note 1 (A))
PUERTO RICO MUNICIPAL BONDS - 0.38%
Puerto Rico Commonwealth
Housing Finance Corp.
Multi-Family Mortgage Revenue Bonds - 0.22%
$ 100,000 7.500%, 10/01/15 $ 100,334
220,000 7.500%, 04/01/22 220,704
321,038
Single-Family Mortgage Revenue Bonds - 0.16%
230,000 6.250%, 04/01/29 236,084
Total Puerto Rico Municipal Bonds (Cost $549,668) 557,122
VIRGIN ISLANDS MUNICIPAL BONDS - 0.09%
Virgin Islands
Public Finance Authority, Series A - 0.09%
100,000 7.300%, 10/01/18 130,612
Total Virgin Islands Municipal Bonds (Cost $99,625) 130,612
Total Investments (Cost $137,490,804) (a) 98.78% 144,001,782
Other Assets Less Liabilities 1.22% 1,774,370
Net Assets 100.00% $145,776,152
(a) Aggregate cost for federal income tax purposes is $137,449,284.
At September 30, 2004, unrealized appreciation (depreciation) of
securities for federal income tax purposes is as follows:
Gross unrealized appreciation $ 6,593,938
Gross unrealized depreciation (41,440)
Net unrealized appreciation $ 6,552,498
See accompanying notes to financial statements.
HAWAII INTERMEDIATE FUND
SCHEDULE OF INVESTMENTS
September 30, 2004
Value
Par Value (Note 1 (A))
HAWAII MUNICIPAL BONDS - 95.81%
Hawaii County
General Obligation Bonds - 13.94%
$ 100,000 4.700%, 02/01/07 $ 105,316
800,000 5.000%, 07/15/11 886,048
250,000 4.000%, 07/15/13 259,175
1,250,539
Hawaii State
Airport Systems Revenue Bonds - 1.19%
100,000 5.000%, 07/01/07 106,410
Certificates of Participation - Kapolei - 3.09%
250,000 5.250%, 05/01/13 277,585
Certificates of Participation - Capitol District - 1.19%
100,000 4.750%, 05/01/07 106,964
Department of Budget & Finance
Special Purpose Revenue Bonds
Hawaiian Electric - 4.92%
400,000 4.950%, 04/01/12 441,800
Kapiolani Health Care Systems - 14.27%
200,000 5.500%, 07/01/05 204,580
1,000,000 6.400%, 07/01/13 1,075,590
1,280,170
General Obligation Bonds - 4.87%
150,000 5.900%, 10/01/06 161,565
100,000 5.250%, 07/01/12 112,780
150,000 5.000%, 04/01/15 162,480
436,825
Harbor Capital Improvements Revenue Bonds - 4.78%
210,000 5.000%, 07/01/10 229,780
185,000 5.250%, 07/01/11 199,064
428,844
See accompanying notes to financial statements.
HAWAII INTERMEDIATE FUND
SCHEDULE OF INVESTMENTS - (Continued)
September 30, 2004
Value
Par Value (Note 1 (A))
Hawaiian Homeland Department - 4.04%
$ 250,000 4.050%, 07/01/06 $ 257,712
100,000 4.450%, 07/01/11 104,790
362,502
Highway & Transportation Authority - 3.23%
275,000 5.000%, 07/01/06 289,506
Housing Authority
Single Family Special Purpose Mortgage
Revenue Bonds - 8.18%
300,000 4.800%, 07/01/07 315,702
23,000 5.550%, 07/01/07 23,535
285,000 4.650%, 07/01/12 292,812
100,000 5.050%, 07/01/16 102,104
734,153
University of Hawaii
University Faculty Bonds - 4.24%
380,000 4.750%, 10/01/04 380,000
University of Hawaii
University Revenue Bonds - 3.52%
300,000 4.300%, 07/15/13 315,996
Hawaii Health Systems Corp. - 3.34%
300,000 3.80%, 02/15/13 299,775
Honolulu City & County
Board of Water Supply - 2.23%
200,000 1.450%, 07/01/31 200,000
General Obligation Bonds - 4.55%
100,000 5.000%, 07/01/09 110,116
170,000 4.850%, 02/01/10 183,705
100,000 5.375%, 09/01/12 114,376
408,197
Waste System Revenue - 2.53%
200,000 5.500%, 07/01/11 227,416
Multi-Family Mortgage Purpose Revenue Bond - 1.67%
137,000 5.750%, 11/20/09 150,130
See accompanying notes to financial statements.
HAWAII INTERMEDIATE FUND
SCHEDULE OF INVESTMENTS - (Continued)
September 30, 2004
Value
Par Value (Note 1 (A))
Kauai County
General Obligation Bonds - 4.11%
$ 100,000 4.550%, 08/01/05 $ 102,373
250,000 4.125%, 08/01/08 266,218
368,591
Maui County
General Obligation Bonds - 5.92%
300,000 4.650%, 03/01/07 319,233
200,000 4.250%, 03/01/12 212,252
531,485
Total Hawaii Municipal Bonds (Cost $8,399,908) 8,596,888
VIRGIN ISLANDS MUNICIPAL BONDS - 3.12%
Virgin Islands Water & Power Authority
Electric System Revenue - 3.12%
250,000 5.000%, 07/01/14 279,608
Total Virgin Islands Municipal Bonds (Cost $274,091) 279,608
Total Investments (Cost $8,673,999) (a) 98.93% 8,876,496
Other Assets Less Liabilities 1.07% 96,209
Net Assets 100.00% $8,972,705
(a) Aggregate cost for federal income tax purposes is $8,673,999.
At September 30, 2004, unrealized appreciation (depreciation) of
securities for federal income tax purposes is as follows:
Gross unrealized appreciation $ 215,168
Gross unrealized depreciation (12,671)
Net unrealized appreciation $ 202,497
See accompanying notes to financial statements.
HAWAII MUNICIPAL FUND
HAWAII INTERMEDIATE FUND
STATEMENTS OF ASSETS AND LIABILITIES
September 30, 2004
Municipal Intermediate
Fund Fund
ASSETS
Investments at market value
(Identified cost $137,490,804 and $8,673,999
respectively) (Note 1 (A)) $ 144,001,782 $ 8,876,496
Cash - 1,639
Interest receivable 2,214,075 102,332
Subscriptions receivable 2,838 -
Other assets 7,082 1,232
Total assets 146,225,777 8,981,699
LIABILITIES
Cash overdraft 155,496 -
Distributions payable 142,908 4,457
Redemptions payable 10,956 -
Management fees payable 59,603 2,949
Administration fees payable 2,334 148
Distribution plan payable 17,505 -
Shareholder servicing fees payable 11,670 -
Transfer agent fees payable 8,305 499
Accrued expenses 40,848 941
Total liabilities 449,625 8,994
NET ASSETS $145,776,152 $8,972,705
NET ASSETS, INVESTOR CLASS SHARES
Net assets
(Applicable to 12,726,503 and 1,718,793
shares outstanding, respectively
$.01 par value, 20,000,000
shares authorized) $142,679,588 $8,972,705
NET ASSET VALUE, OFFERING AND REPURCHASE
PRICE PER SHARE, INVESTOR CLASS SHARES $11.21 $5.22
INSTITUTIONAL CLASS SHARES
Net assets
(Applicable to 275,981 shares outstanding,
$.01 par value, 20,000,000
shares authorized) $3,096,564
NET ASSET VALUE, OFFERING AND REPURCHASE
PRICE PER SHARE, INSTITUTIONAL CLASS SHARES $11.22
NET ASSETS
At September 30, 2004, net assets consisted of:
Paid-in capital $139,027,986 $8,771,917
Undistributed net investment income 50,583 -
Accumulated net realized gain(loss)
investments 186,605 (1,709)
Net unrealized appreciation 6,510,978 202,497
$145,776,152 $8,972,705
See accompanying notes to financial statements.
HAWAII MUNICIPAL FUND
HAWAII INTERMEDIATE FUND
STATEMENTS OF OPERATIONS
For the year ended September 30, 2004
Municipal Intermediate
Fund Fund
INVESTMENT INCOME
Interest income $ 7,205,404 $ 307,842
Expenses
Management fees (Note 2) 726,550 42,370
Distribution costs (Notes 2 and 3) 213,447 -
Transfer agent fees (Note 2) 105,152 6,282
Shareholder services fees (Note 2) 142,295 -
Administration fees (Note 2) 28,457 1,690
Accounting fees 104,429 5,598
Legal and audit fees 53,074 7,345
Printing 19,007 864
Miscellaneous 5,453 -
Custodian fees 26,428 1,681
Insurance 9,904 1,260
Registration fees 13,111 916
Directors fees 2,000 1,400
Total expenses 1,449,307 69,406
Expense reimbursement (Note 2) - (8,560)
Fee reductions (Note 5) (29,000) (1,681)
Net expenses 1,420,307 59,165
Net investment income 5,785,097 248,677
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS
Net realized gain from security transactions 186,759 3,838
Change in unrealized appreciation of investments (143,481) (49,032)
Net gain (loss) on investments 43,278 (45,194)
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS $ 5,828,375 $ 203,483
See accompanying notes to financial statements.
HAWAII MUNICIPAL FUND
STATEMENT OF CHANGES IN NET ASSETS
For The Year Ended For The Year Ended
September 30, 2004 September 30, 2003
INCREASE (DECREASE) IN NET ASSETS FROM
Operations
Net investment income $ 5,785,097 $ 5,826,481
Net realized gain on investments 186,759 643,796
Increase (decrease) in unrealized appreciation (depreciation) of
investments (143,481) (1,033,771)
Net increase in net assets resulting from operations
5,828,375 5,436,506
Distributions to shareholders from:
Net investment income
Investor Class ($.47 and $.47 per share, respectively)
(5,641,162) (5,701,321)
Institutional Class ($.51 and $.47 per share, respectively*)
(128,842) (94,949)
Capital gains
Investor Class ($.01 and $0 per share, respectively)
(115,358) (6,771)
Institutional Class ($.01 and $0 per share, respectively)
(2,381) (134)
Total distributions (5,887,743) (5,803,175)
Capital share transactions (a)
Increase in net assets resulting from capital share transactions
1,183,048 10,038,432
Total increase in net assets 1,123,680 9,671,763
NET ASSETS
Beginning of year 144,652,472 134,980,709
End of year (including undistributed net investment income of $50,583 and
$35,339, respectively) $ 145,776,152 $ 144,652,472
(a) Summary of capital share activity follows:
Investor Class
Institutional Class
Investor Class
Institutional Class
For The Year Ended September 30, 2004
For The Year Ended September 30, 2004
For The Year Ended September 30, 2003
For The Period Ended September 30, 2003*
Shares
Value
Shares
Value
Shares
Value
Shares
Value
Shares sold
1,242,013
$13,868,349
47,890
$532,931
1,624,327
$18,115,962
394,018
$4,350,601
Shares issued on
reinvestment of
distributions
361,783
4,040,714
1,541
17,218
356,615
3,973,325
138
1,546
1,603,796
17,909,063
49,431
550,149
1,980,942
22,089,287
394,156
4,352,147
Shares redeemed
(1,523,997)
(17,008,045)
(24,183)
(268,119)
(1,332,147)
(14,817,427)
(143,423)
(1,585,575)
79,799
$901,018
25,248
$282,030
648,795
$7,271,860
250,733
$2,766,572
* Commencement of operations was October 22, 2002
See accompanying notes to financial statements.
HAWAII INTERMEDIATE FUND
STATEMENT OF CHANGES IN NET ASSETS
For The Year Ended For The Year Ended
September 30, 2004 September 30, 2003
INCREASE (DECREASE) IN NET ASSETS FROM
Operations
Net investment income $ 248,677 $ 189,792
Net realized gain (loss) on investments 3,838 2,647
Increase (decrease) in unrealized appreciation (depreciation) of
investments (49,032) (21,610)
Net increase in net assets resulting from operations
203,483 170,829
Distributions to shareholders from:
Net investment income
($.15 and $.15 per share, respectively) (248,677) (189,792)
Capital share transactions (a)
Increase in net assets resulting from capital share transactions
1,369,248 1,322,403
Total increase in net assets 1,324,054 1,303,440
NET ASSETS
Beginning of year 7,648,651 6,345,211
End of year $ 8,972,705 $ 7,648,651
(a) Summary of capital share activity follows:
For The Year Ended For The Year Ended
September 30, 2004 September 30, 2003
Shares Value Shares Value
Shares sold 654,310 $ 3,403,971 646,984 $3,396,257
Shares issued on reinvestment of distributions
38,581 200,875 29,924 156,913
692,891 3,604,846 676,908 3,553,170
Shares redeemed (429,327) (2,235,598) (425,910) (2,230,767)
Net increase 263,564 $ 1,369,248 250,998 $ 1,322,403
See accompanying notes to financial statements.
HAWAII MUNICIPAL FUND
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout each year)
INVESTOR CLASS
Years Ended September 30,
2004 2003 2002(b) 2001 2000
Net asset value
Beginning of year $11.22 $11.25 $10.89 $10.55 $10.68
Income from investment operations
Net investment income .47 .47 .48 .50 .52
Net gain (loss) on securities
(both realized and unrealized) - (.03) .36 .34 (.13)
Total from investment operations .47 .44 .84 .84 .39
Less distributions
Dividends from net investment
income (.47) (.47) (.48) (.50) (.52)
Distributions from capital gains (.01) - *** - - -
Total distributions (.48) (.47) (.48) (.50) (.52)
End of year $11.21 $11.22 $11.25 $10.89 $10.55
Total return 4.33% 3.98% 7.92% 8.11% 3.79%
Ratios/Supplemental Data
Net assets, end of year(in 000's)$142,680 $141,838 $134,980 $121,471 $111,864
Ratio of expenses to average
net assets (a) 1.00% 1.01% 1.02% 1.03% .98%
Ratio of net investment income
to average net assets 3.98% 4.22% 4.42% 4.64% 4.83%
Portfolio turnover 10.53% 16.40% 13.06% 22.06% 20.96%
*** Less than $.01 per share
(a) Ratios of expenses to average net assets after the reduction of custodian
fees and other expenses under a custodian arrangement were .98%, .99%, .96%,
..94%, and .91%, for the years ended September 30, 2004, 2003, 2002, 2001,
and 2000, respectively.
(b) As required, effective October 1, 2001, the Fund has adopted the
provisions of the AICPA Audit and Accounting Guide for Investment Companies and
began amortizing market discount on debt securities. Had the Fund not
amortized market discount as an adjustment to interest income, the net
investment income to average net assets would have been 4.38%. Per share and
ratios prior to October 1, 2001 have not been restated to reflect this change in
presentation.
See accompanying notes to financial statements.
HAWAII MUNICIPAL FUND
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout each period)
INSTITUTIONAL CLASS
For The For The
Year Ended Period Ended
September 30, 2004 September 30, 2003 **
Net asset value
Beginning of period $11.23 $10.91
Income from investment operations
Net investment income .51 .47
Net gain (loss) on securities
(both realized and unrealized) - .32
Total from investment operations .51 .79
Less distributions
Dividends from net investment income (.51) (.47)
Distributions from capital gains (.01) - ***
Total distributions (.52) (.47)
End of period $11.22 $11.23
Total return 4.58% 7.36%
Ratios/Supplemental Data
Net assets, end of period (in 000's) $3,096 $2,814
Ratio of expenses to average net assets (a) .75% .76%*
Ratio of net investment income to average
net assets 4.23% 4.47%*
Portfolio turnover 10.53% 16.40%
* Annualized
** Commencement of Operations was October 22, 2002
*** Less than $.01 per share
(a) Ratios of expenses to average net assets after the reduction of custodian
fees and other expenses under a custodian arrangement for the Institutional
Class were .73% and .74% for the periods ended September 30, 2004 and 2003,
respectively.
See accompanying notes to financial statements.
HAWAII INTERMEDIATE FUND
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout each year)
Years Ended September 30,
2004 2003 2002 2001 2000
Net asset value
Beginning of year $5.26 $5.27 $5.17 $5.01 $5.03
Income from investment operations
Net investment income .15 .15 .16 .21 .21
Net gain (loss) on securities
(both realized and unrealized) (.04) (.01) .10 .16 (.02)
Total from investment operations .11 .14 .26 .37 .19
Less distributions
Dividends from net investment income(.15) (.15) (.16) (.21) (.21)
Distributions from capital gains - - - - -
Total distributions (.15) (.15) (.16) (.21) (.21)
End of year $5.22 $5.26 $5.27 $5.17 $5.01
Total return 2.21% 2.77% 5.15% 7.61% 3.97%
Ratios/Supplemental Data
Net assets, end of year (in 000's)$8,973 $7,647 $6,345 $4,944 $4,519
Ratio of expenses to average net assets
Before expense reimbursements .82% .96% .84% .88% .85%
After expense reimbursements .72%(a) .73%(a) .74%(a) .88%(a) .85%(a)
Ratio of net investment income to
average net assets
Before expense reimbursements 2.84% 2.61% 3.15% 4.12% 4.07%
After expense reimbursements 2.94% 2.86% 3.15% 4.12% 4.07%
Portfolio turnover 13.96% 20.02% 18.29% 19.28% 4.22%
(a) Ratios of expenses to average net assets after the reduction of custodian
fees and other expenses under a custodian arrangement were .70%, .71%, .69%,
..79%, and .77%, for the years ended September 30, 2004, 2003, 2002, 2001,
and 2000, respectively.
See accompanying notes to financial statements.
HAWAII MUNICIPAL FUND
HAWAII INTERMEDIATE FUND
NOTES TO FINANCIAL STATEMENTS
September 30, 2004
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Hawaii Municipal Fund and Hawaii Intermediate 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. Hawaii Municipal Fund is authorized to offer two
Classes of Shares: Investor Shares and Institutional Shares. The Classes
offer different distribution charges and shareholder servicing fees which
may affect performance.
The investment objective of the Funds is to provide a high level of current
income exempt from federal and Hawaii state income taxes, consistent with
preservation of capital and prudent investment management. 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 their portfolios 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 accounting principles
generally accepted in the United States of America, 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, 2004, the Hawaii Intermediate Fund had an unused capital loss
carryforward of $1,709 which expires in 2010.
HAWAII MUNICIPAL FUND
HAWAII INTERMEDIATE FUND
NOTES TO FINANCIAL STATEMENTS - (Continued)
September 30, 2004
(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 using the interest method. Distributions to shareholders are
declared daily and reinvested or paid in cash monthly.
The tax character of distributions paid during the years ended September
30, 2004 and 2003 were as follows:
Exempt- Long-Term
Interest Ordinary Capital Total
Dividends Income Gains Distributions
Hawaii Municipal Fund
2004 $5,770,004 $ - $117,739 $5,887,743
2003 $5,796,270 $ - $ 6,905 $5,803,175
Hawaii Intermediate Fund
2004 $ 248,677 $ - $ - $ 248,677
2003 $ 188,686 $1,106 $ - $ 189,792
The tax character of distributable earnings at September 30, 2004 were
as follows:
Undistributed Post Unrealized Total
Ordinary Exempt- Undistributed Capital Loss October Gain/ Distributable
Interest Income Capital Gains Carryforwards Loss* (Loss)** Earnings
Hawaii
Municipal Fund $9,063 $186,605 $ - $ - $6,552,498 $6,748,166
Intermediate Fund $ - $ - $(1,709)$ - $ 202,497 $ 200,788
* Under the current tax law capital losses realized after October 31 and
prior to the Fund's fiscal year end may be deferred as occurring on
the first day of the following fiscal year.
** The difference between book basis and tax basis unrealized
appreciation is attributable to market discount on debt securities.
Accounting principles generally accepted in the United States of America
require that certain components of net assets be reclassified between
financial and tax reporting. These reclassifications have no effect on
net assets or net asset value per share. For the year ended September
30, 2004, the Hawaii Municipal Fund decreased realized gain (loss) by
$151 and increased undistributed net investment income $151.
HAWAII MUNICIPAL FUND
HAWAII INTERMEDIATE FUND
NOTES TO FINANCIAL STATEMENTS - (Continued)
September 30, 2004
(2) INVESTMENT MANAGEMENT FEE AND OTHER TRANSACTIONS WITH AFFILIATES
Lee Financial Group Inc. ("LFG") provides the Funds with management and
administrative services pursuant to a management agreement and
administrative services agreement. In accordance with the terms of the
management agreement and the administrative services agreement, LFG receives
compensation at the annual rate of .50% and up to .05% of each Fund's
average daily net assets, respectively. For the year ended September 30,
2004, LFG voluntarily waived certain management fees in the amount of $8,560
for the Hawaii Intermediate Fund.
The Funds' distributor, First Pacific Securities, Inc. ("FPS"), a wholly-owned
subsidiary of LFG, received $213,447 and $0 for costs incurred in
connection with the sale of Hawaii Municipal Fund's shares and Hawaii
Intermediate Fund's shares, respectively (See Note 3).
First Pacific Recordkeeping, Inc. ("FPR"), a wholly-owned subsidiary of LFG,
serves as the transfer agent for the Funds. In accordance with the terms
of the transfer agent agreement, FPR receives compensation at the annual
rate of .06% of each Fund's average daily net assets. FPR also provides
the Hawaii Municipal Fund with certain clerical, bookkeeping and shareholder
services pursuant to a service agreement approved by the Fund's directors.
As compensation for these services FPR receives a fee, computed daily and
payable monthly, at an annualized rate of .10% of average daily net assets.
Certain officers and directors of the Funds are also officers of LFG, 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.
(4) PURCHASES AND SALES OF SECURITIES
Purchases and sales of securities aggregated $21,846,264 and $14,914,422,
respectively, for the Hawaii Municipal Fund. Purchases and sales of
securities for the Hawaii Intermediate Fund aggregated $3,260,257 and
$1,075,000, respectively.
HAWAII MUNICIPAL FUND
HAWAII INTERMEDIATE FUND
NOTES TO FINANCIAL STATEMENTS - (Continued)
September 30, 2004
(5) CUSTODY CREDITS
Under an agreement with the Custodian Bank, custodian fees are paid by
credits for cash balances. Any remaining credits are used to offset expenses
of other vendors and service providers. During the year ended September
30, 2004, such reductions amounted to $29,000 and $1,681 for the Hawaii
Municipal Fund and the Hawaii Intermediate Fund, respectively. Credits
used to offset expenses were as follows:
Municipal Intermediate
Fund Fund
Custody $29,000 $1,681
FIRST PACIFIC MUTUAL FUND, INC.________________________________________________
BOARD OF DIRECTORS AND OFFICERS (Unaudited)
Overall responsibility for management of First Pacific Mutual Fund, Inc., (the
"Fund") rests with the Board of Directors. Each Director serves during the
lifetime of the Fund and until its termination, or until the Director's death,
resignation, retirement or removal. The Directors, in turn, elect the officers
of the Fund to actively supervise its day-to-day operations. The officers have
been elected for an annual term. The following table provides information
regarding each Director and officer of the Fund.
Name,
Age
and Address
Position & Office With the Fund
Term of Office and
Length of Time Served
Principal Occupation During the Past Five Years
Number of Portfolios in Fund Complex Overseen by Director
DISINTERESTED DIRECTORS
Clayton W.H. Chow
(52)
896 Puuikena Dr.
Honolulu, HI
96821
Director
Unlimited
Term
16 years
Account Executive, Roadway
Express
Sr. Account Executive, Federal
Express
2
Lynden M. Keala
(50)
47-532 Hui Iwa St.
Kaneohe, HI
96744
Director
Unlimited
Term
15 years
Account Executive, Xpedx
(Distribution Division of
International Paper)
Account Executive, Reynolds &
Reynolds
(formerly Vanier Business Forms)
2
Stuart S. Marlowe
(64)
274 Poipu Drive
Honolulu, HI
96825
Director
Unlimited
Term
16 years
Owner, Surfside Sales and
Marketing(Sales and marketing of music
for the State of Hawaii)
Vice President/General Manager,
Navarre Corp.
(Distributor of music and
software products.)
2
Karen T. Nakamura
(60)
1727 Dillingham
Boulevard
Honolulu, HI
96819
Director
Unlimited
Term
7 years
Executive Vice President,
Building Industry Association of
Hawaii
Vice President, Wallpaper
Hawaii, Ltd.
2
Kim F. Scoggins
(57)
220 S. King
Street, #1800
Honolulu, HI
96813
Director
Unlimited
Term
7 years
Commercial Real Estate, Colliers
Monroe Friedlander, Inc.
Real Estate, 1250 Oceanside
Partners
2
INTERESTED DIRECTORS
*Terrence K.H.
Lee (47)
593 Moaniala
Street
Honolulu, HI
96821
Director
President and
CEO
Unlimited
Term
16 years
Director, President and CEO, Lee
Financial Group Inc., First
Pacific Securities, Inc., and
First Pacific Recordkeeping,
Inc.
2
OFFICERS
Nora B. Simpson
(44)
503 Blackbird Drive
Hockessin, DE 19707
Treasurer, Chief Compliance
Officer,
Assistant
Secretary
Vice President and Compliance
Officer, Lee Financial
Group Inc., First Pacific Securities,
Inc., and
First Pacific Recordkeeping, Inc.
Charlotte A. Meyer
(51)
64-5251 Puu Nani
Drive
PO Box 2834
Kamuela, HI 96743
Assistant
Treasurer
Director, Treasurer and Vice
President, Lee Financial Group Inc.,
First Pacific Securities, Inc., and
First Pacific Recordkeeping, Inc.
Jean E. Lee
(48)
2756 Woodlawn Drive,
#6-201
Honolulu, HI 96822
Secretary
Director, Secretary and Vice
President, Lee Financial Group Inc.,
First Pacific Securities, Inc., and
First Pacific Recordkeeping, Inc.
There are no other Directorships held by any of the Directors. Terrence K.H.
Lee and Jean E. Lee are husband and wife. Terrence K.H. Lee is an interested
person of First Pacific Mutual Fund, Inc. by virtue of his relationship as
President of the investment adviser and principal underwriter and has had a
material and professional relationship with the Fund for the last three
completed fiscal years.
Additional information about members of the Board of Directors and executive
officers is available in the Statement of Additional Information ("SAI"). To
obtain a free copy of the SAI, please call (808) 988-8088.
Hawaii Municipal Fund Investor Class
Hawaii Municipal Fund Institutional Class
Hawaii Intermediate Fund
Shareholder Information
Proxy Voting Policies and Procedures
The Fund has established Proxy Voting Policies and Procedures ("Policies") that
the Fund uses to determine how to vote proxies relating to portfolio
securities. Shareholders may request copies of the Policies free of charge by
calling (808) 988-8088 or by sending a written request to Lee Financial Group
Inc., 2756 Woodlawn Drive, Suite #6-201, Honolulu, HI 96822. Copies of the
Fund's proxy voting records are posted on the Securities and Exchange
Commission's website at www.sec.gov and reflect the 12-month period beginning
July 1, 2003 and ending June 30, 2004.
Quarterly Statement of Investments
The Fund files a complete statement of investments with the Securities and
Exchange Commission for the first and third quarters for each fiscal year on
Form N-Q. Shareholders may view the filed Form N-Q by visiting the
Commission's website at www.sec.gov. The filed form may also be viewed and
copied at the Commission's Public Reference Room in Washington, DC.
Information regarding the operations of the Public Reference Room may be
obtained by calling 1-800-SEC-0330.
INVESTMENT MANAGER
Lee Financial Group Inc.
2756 Woodlawn Drive, Suite #6-201
Honolulu, Hawaii 96822-1856
DISTRIBUTOR
First Pacific Securities, Inc.
2756 Woodlawn Drive, Suite #6-201
Honolulu, Hawaii 96822-1856
CUSTODIAN
Union Bank of California, N.A.
475 Sansome Street, 15th Floor
San Francisco, California 94111
LEGAL COUNSEL
Drinker Biddle & Reath LLP
One Logan Square
18th and Cherry Streets
Philadelphia, Pennsylvania 19103-6996
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Tait, Weller & Baker
1818 Market Street, Suite #2400
Philadelphia, Pennsylvania 19103-2108
TRANSFER AGENT
First Pacific Recordkeeping, Inc.
2756 Woodlawn Drive, Suite #6-201
Honolulu, Hawaii 96822-1856
Item 2. Code of Ethics.
(a) The registrant has adopted a code of ethics that applies to its principal
executive and senior financial executives.
(c) The code of ethics was amended as there were personnel changes approved by
the registrant's board of directors. The amendment is included as an exhibit
pursuant to Item 11(a)(1).
(d) Not applicable.
(e) Not applicable.
(f)(1) Pursuant to Item 11(a), the Registrant is attaching as an exhibit a copy
of its code of ethics that applies to its principal executive and senior
financial executives.
(f)(2) Copies of the Code of Ethics may be obtained free of charge by calling
(808) 988-8088 or by sending a written request to Lee Financial Group Inc.,
2756 Woodlawn Drive, Suite #6-201, Honolulu, HI 96822.
Item 3. Audit Committee Financial Expert
(a)(1) The registrant's board of directors has determined that the registrant
does not have an audit committee financial expert serving on its audit
committee.
(a)(2) Not applicable.
(a)(3) The board of directors concluded that based on the required attributes,
no independent member of the Board qualified as a financial expert.
Item 4. Principal Accountant Fee and Services.
(a) Audit Fees.
The aggregate fees billed for each of the last two fiscal years for
professional services rendered by the principal accountant for the audit of the
registrant's annual financial statements or services that are normally provided
by the accountant in connection with statutory and regulatory filings or
engagements were $29,800.00 for the fiscal year ended September 30, 2004 and
$28,000.00 for the fiscal year ended September 30, 2003.
(b) Audit-Related Fees.
The aggregate fees billed in each of the last two fiscal years for assurance
and related services by the principal accountant that are reasonably related to
the performance of the audit of the registrant's financial statements and are
not reported under paragraph (a) of this Item were none for the fiscal year
ended September 30, 2004 and $1,600.00 (services related to EDGAR filings) for
the fiscal year ended September 30, 2003.
(c) Tax Fees.
The aggregate fees billed in each of the last two fiscal years for professional
services rendered by the principal accountant for tax compliance, tax advice,
and tax planning were $5,000.00 for the fiscal year ended September 30, 2004 and
$5,000.00 for the fiscal year ended September 30, 2003.
(d) All Other Fees.
The aggregate fees billed in each of the last two fiscal years for products and
services provided by the principal accountant, other than the services reported
in paragraphs (a) through (c) of this Item were $6,500.00 for the fiscal year
ended September 30, 2004 and $6,500.00 for the fiscal year ended September 30,
2003. These fees are for services related to the internal control audit of the
transfer agency.
(e)(1) Audit Committee's Pre-Approval Policies and Procedures
1. (a) The Committee shall review and approve proposals for the
independent accountants to render permissible non-audit services. The
Committee may adopt pre-approval policies and procedures, including both
general pre-approvals and terms for specific case-by-case approvals, and may
delegate the authority to grant such pre-approvals to one or more members of
the Committee.
(b) The pre-approval requirement may be waived with respect to
the provision of non-audit services for the Funds if: (i) the aggregate amount
of all such non-audit services provided to the Funds constitutes no more than
5% of the total amount of revenues paid by the Funds to its independent
accountants during the fiscal year in which the non-audit services are
provided; (ii) such services were not recognized at the time of the engagement
to be non-audit services; and (iii) such services are promptly brought to the
attention of the Committee and approved prior to the completion of the audit.
2. Review and approve in advance with the independent accountants each
non-audit engagement involving the Funds' independent accountants and the
Funds' investment adviser and any entity controlling, controlled by or under
common control with the adviser ("control affiliates") where: (i) the
investment adviser or its control affiliate provides ongoing services to the
Funds; and (ii) the engagement relates directly to the operations and financial
reporting of the Funds.
(a) The pre-approval requirement may be waived if: (i) the
aggregate amount of all services provided constitutes not more than 5% of the
total amount of revenues paid to the Funds' independent accountants by the
Funds' investment adviser and its control affiliates that provide ongoing
services to the Funds during the fiscal year in which the services are provided
that would have to be pre-approved by the Funds' Committee; (ii) such services
were not recognized by the Funds' adviser or its control affiliates (that
provide ongoing services to the Fund) at the time of the engagement to be non-
audit services; and (iii) such services are promptly brought to the attention
of the Committee and approved prior to the completion of the audit.
(e)(2) All of the services provided to the registrant described in paragraphs
(b) - (d) of Item 4 were pre-approved by the audit committee.
(f) Not applicable.
(g) The aggregate non-audit fees paid to the principal accountant for services
rendered by the principal accountant to the Registrant and the Registrant's
investment adviser and any entity controlling, controlled by or under common
control with the investment adviser that provides ongoing services to the
registrant were none for the fiscal year ended September 30, 2004 and none for
the fiscal year ended September 30, 2003.
(h) Not applicable.
Item 5. Audit Committee of Listed Registrants.
Not applicable.
Item 6. Schedule of Investments.
Schedule is included as part of the report to shareholders filed under Item 1
of this Form.
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End
Management Investment Companies.
Not applicable.
Item 8. Purchases of Equity Securities by Closed-End Management Investment
Company and Affiliated Purchasers.
Not applicable.
Item 9. Submission of Matters to a Vote of Security Holders.
No material changes were made to the procedures by which shareholders recommend
nominees to the board.
Item 10. Controls and Procedures.
(a) The registrant's principal executive and principal financial officers,
or person performing similar functions, has concluded that the
registrant's disclosure controls and procedures (as defined in Rule 30a-
3(c) under the Investment Company Act of 1940, as amended (the "1940
Act") (17CFR 270.30a-3(c))) are effective, as of a date within 90 days
of the filing date of the report that includes the disclosure required
by this paragraph, based on their evaluation of these controls and
procedures required by Rule 30a-3(b) under the 1940 Act (17 CFR 270.30a-
3(b)) and Rules 13a-15(b) or 15d-15(b) under the Securities Exchange Act
of 1934, as amended (17CFR 240.13a-15(b) or 240.15d-15(b)).
(b) There were no changes in the registrant's internal control over
financial reporting (as defined in Rule 30a-3(d) under the 1940 Act (17
CFR 270.30a-3(d)) that occurred during the registrant's last fiscal
half-year (the registrant's second fiscal half-year in the case of an
annual report) that has materially affected, or is reasonably likely to
materially affect, the registrant's internal control over financial
reporting.
Item 11. Exhibits.
(a)(1) Code of Ethics is attached hereto.
(a)(2) Certifications pursuant to Rule 30a-2(a) under the 1940
Act (17 CFR270.30a-2(a)) and Section 302 of the Sarbanes
Oxley Act of 2002 are attached hereto.
(a)(3) Not applicable.
(b) Certifications pursuant to Rule 30a-2(a) under the 1940 Act
and Section 906 of the Sarbanes-Oxley Act of 2002 are
attached hereto.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant) __________First Pacific Mutual Fund, Inc.__________
By (Signature and Title)* ___/s/ Terrence K.H. Lee______________
Terrence K.H. Lee, President and CEO
(principal executive officer)
Date __________December 7, 2004__________
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By (Signature and Title)* ___/s/ Terrence K.H. Lee___________________
Terrence K.H. Lee, President and CEO
(principal executive)
By (Signature and Title)* ___/s/ Nora B. Simpson____________________
Nora B. Simpson, Treasurer
(principal financial officer)
Date __________December 7, 2004__________
*Print the name and title of each signing officer under his or her signature.