Hawaii muni bond
funds in merger

First Hawaii Municipal Bond
has acquired Leahi Tax-Free
Income Trust

By Rick Daysog
Star-Bulletin

The First Hawaii Municipal Bond Fund has acquired the Leahi Tax-Free Income Trust, in a deal that nearly doubles the local municipal bond fund's assets to $105 million.

Shareholders of both mutual funds approved the deal on July 30 and the funds were merged Aug. 1, said Terry Lee, president of First Pacific Management Inc., manager of the First Hawaii fund.

The financial terms were not disclosed.

The merger will make First Hawaii the state's second-largest local muni bond fund, behind Pacific Century Financial Corp.'s Hawaiian Tax-Free Trust, which lists assets of $660 million.

"This makes us more competitive," said Lee. "And it's good for the shareholders because the two funds were very similar."

The First Hawaii Municipal Bond Fund is not affiliated with First Hawaiian Inc., which manages the Bishop Street Municipal Bond Fund.

Founded in 1988, the First Hawaii fund is a no-load mutual fund that invests in high-grade bonds issued by the state and counties. The bonds' interest income is exempt from state and federal taxes.

With a no-load fund, investors don't pay brokerage commissions because they buy shares from the company and not from brokers.

The Leahi fund, established in 1987, had about $47 million in assets in similar tax-free investments.

By acquiring Leahi, First Hawaii can invest in more types of bonds due to its size.

The merger allows First Hawaii to cap the fund's expenses at 0.85 percent of its net asset values over the next two years, he said.

Since 1988, First Hawaii's costs have averaged 0.88 percent of its net asset value.

The combined funds have 5,060 shareholders.

Besides the First Hawaii Municipal Bond Fund, First Pacific Management also manages the First Hawaii Intermediate Fund, with $7 million in assets, and the First Idaho Tax-Free Fund.