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