<PAGE>   1
                                 UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                            WASHINGTON, D. C. 20549
                                 UNITED STATES

                                  Form 10-K/A

                 Annual Report Pursuant to Section 13 or 15(d)
                     of the Securities Exchange Act of 1934

For the fiscal year ended July 31, 1996          Commission file Number 0-4179

                       CAPITAL INVESTMENT OF HAWAII, INC.
-------------------------------------------------------------------------------
             (Exact name of registrant as specified in its charter)


          HAWAII                                             99-0065664
-------------------------------                          ------------------ 
(State or other jurisdiction of                           (I.R.S. Employer
incorporation or organization)                           Identification No)

733 Bishop Street, Suite 1700
Honolulu, Hawaii                                                96813
----------------------------------------                     ----------
(Address of principal executive offices)                     (Zip Code)

Registrant's telephone number, including area code (808) 537-3981
                                                   --------------

Securities registered pursuant to Section 12(b) of the Act:

    Title of each class            Name of each exchange on which registered

           None                                    None
----------------------------         -----------------------------------

Securities registered pursuant to Section 12(g) of the Act:


                        Common Stock, no par value
-------------------------------------------------------------------------------
                             (Title of class)


         Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.             Yes X     No
                                                              ---      ---

         The Company's voting stock is not actively traded on any exchange, and
accordingly the aggregate market value is not determinable.

         There were 1,032,683 shares outstanding of common stock, no par 
value, as of October 23, 1996.

DOCUMENTS INCORPORATED BY REFERENCE

         Articles of Association and By-Laws are incorporated by reference into 
Part IV of this report.

<PAGE>   2
                          INDEPENDENT AUDITORS' REPORT

The Board of Directors
Capital Investment of Hawaii, Inc.:

We have audited the consolidated financial statements of Capital Investment of
Hawaii, Inc. and subsidiaries as listed in the accompanying index.  In
connection with our audits of the consolidated financial statements, we also
have audited the financial statement schedules as listed in the accompanying
index.  These consolidated financial statements and financial statement
schedules are the responsibility of the Company's management.  Our
responsibility is to express an opinion on these consolidated financial
statements and financial statement schedules based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards.  Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the consolidated financial statements
are free of material misstatement.  An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements.  An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the overall
consolidated financial statement presentation.  We believe that our audits
provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Capital Investment of Hawaii, Inc. and subsidiaries as of July 31, 1996 and
1995, and the results of their operations and their cash flows for each of the
years in the three-year period ended July 31, 1996, in conformity with
generally accepted accounting principles.  Also in our opinion, the related
financial statement schedules, when considered in relation to the basic
consolidated financial statements taken as a whole, present fairly, in all
material respects, the information set forth therein.

As discussed in notes 1 and 3 to the consolidated financial statements,
effective August 1, 1994, the Company changed its method of accounting for
investments to adopt the provisions of the Financial Accounting Standards
Board's Statement of Financial Accounting Standards No. 115, Accounting for
Certain Investments in Debt and Equity Securities.




                                        /s/ KPMG Peat Marwick LLP
                                        ------------------------------------


Honolulu, Hawaii
October 23, 1996
<PAGE>   3


                       CAPITAL INVESTMENT OF HAWAII, INC.

                                AND SUBSIDIARIES

                          Consolidated Balance Sheets

                             July 31, 1996 and 1995

<TABLE>
<S>                                                                <C>           <C>
                       ASSETS                                       1996         1995
                                                               ------------  -----------
Cash and cash equivalents                                      $   757,399    1,287,636
Marketable equity securities available-for-sale, at
   fair value (notes 1 and 3)                                       42,647      111,046
Receivables:
  Trade accounts and notes, less allowance for
   doubtful receivables of $25,001 and $31,860 in 1996
   and 1995, respectively                                          470,042    1,065,991
  Long-term receivables (including installments due
   within one year of $504,428 and $360,472 in 1996 and
   1995, respectively) (notes 4 and 7)                             965,908    1,656,314
                                                               -----------   ----------
          Total receivables                                      1,435,950    2,722,305
                                                               -----------   ----------
Inventories                                                         65,322       53,113
Developed real estate, less accumulated depreciation
  of $208,766  and $186,345 in 1996 and 1995,
  respectively (notes 5 and 7)                                   1,443,255    1,465,832
Undeveloped land held for sale (note 6)                            134,474      134,474

Other investments:
  Real estate (note 6)                                           1,917,209    3,691,860
  Securities, at cost (notes 3 and 7)                              700,454      808,912
                                                               -----------   ----------
                                                                 2,617,663    4,500,772
                                                               -----------   ----------
Property and equipment, at cost (note 7):
  Leasehold improvements                                           218,265      214,463
  Furniture and equipment                                        1,959,795    1,866,920
                                                               -----------   ----------
                                                                 2,178,060    2,081,383
  Less accumulated depreciation and amortization                (1,953,414)  (1,780,476)
                                                               -----------   ----------

        Net property and equipment                                 224,646      300,907

Deferred charges and other assets (note 7)                          71,226       41,668
                                                               -----------   ----------
                                                               $ 6,792,582   10,617,753
                                                               ===========   ==========
</TABLE>




<PAGE>   4




                       CAPITAL INVESTMENT OF HAWAII, INC.

                                AND SUBSIDIARIES

                          Consolidated Balance Sheets

                             July 31, 1996 and 1995

<TABLE>
<S>                                                                        <C>           <C>
        LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)                     1996         1995
                                                                       ------------  -----------
Indebtedness (note 7):
  Mortgage notes                                                        $ 1,864,493    1,874,247
  Other notes, secured                                                    1,160,111    2,670,016
  Debentures                                                              2,062,245    2,108,245
  Other notes, unsecured                                                    427,567      499,605
                                                                        -----------   ----------
          Total indebtedness                                              5,514,416    7,152,113
                                                                        -----------   ----------
Accounts payable, trade                                                     651,407      429,433

Accrued expenses:  
  Interest                                                                   55,348       57,854
  Taxes other than income                                                    16,954       17,108
  Other                                                                     614,626      532,929
                                                                        -----------   ----------
          Total accrued expenses                                            686,928      607,891
                                                                        -----------   ----------
Other payables:
  Loans under participation agreements (note 6):
   Related parties                                                               --    1,090,200
   Other                                                                         --      472,420
  Other (notes 6 and 9)                                                     230,376      740,839
                                                                        -----------   ----------
          Total other payables                                              230,376    2,303,459
                                                                        -----------   ----------
Commitments and contingent liabilities (notes 6, 9, 10 and 11)

Stockholders' equity (deficit):
  Common stock without par value. Authorized 2,531,765 shares;
   issued 1,723,765 shares at stated value of $1                          1,723,765    1,723,765
  Additional paid-in capital                                                469,321      469,321
  Retained earnings                                                       1,550,519    1,923,877
                                                                        -----------   ----------
                                                                          3,743,605    4,116,963
  Cost of 691,082 common shares in treasury                              (4,057,487)  (4,057,487)
  Unrealized gain on marketable equity securities (note 3)                   23,337       65,381
                                                                        -----------   ----------
        Net stockholders' equity (deficit)                                 (290,545)     124,857
                                                                        -----------   ----------
                                                                        $ 6,792,582   10,617,753
                                                                        ===========   ==========
</TABLE>

See accompanying notes to consolidated financial statements.



<PAGE>   5

 


                       CAPITAL INVESTMENT OF HAWAII, INC.

                                AND SUBSIDIARIES

                     Consolidated Statements of Operations

                             and Retained Earnings

                    Years ended July 31, 1996, 1995 and 1994

<TABLE>
<CAPTION>
                                               1996         1995        1994
                                            -----------  ----------  -----------
<S>                                         <C>          <C>         <C>
Revenues:
  Net product sales                           $5,521,390   4,965,794    5,410,698
  Income from investments                      1,793,636   1,867,281    1,310,432
  Other                                          901,235     737,879      815,119
                                              ----------   ---------   ----------
                                               8,216,261   7,570,954    7,536,249
                                              ----------   ---------   ----------
Costs and expenses:
  Cost of product sales                        3,495,485   3,185,615    3,485,855
  Other direct operating expenses (note 10)    1,942,848   1,998,299    2,141,105
  General and administrative expenses
   (notes 9 and 10)                            2,257,303   2,165,530    2,635,303
  Interest                                       893,983   1,029,436      677,098
                                              ----------   ---------   ----------
                                               8,589,619   8,378,880    8,939,361
                                              ----------   ---------   ----------
          Loss before income taxes              (373,358)   (807,926)  (1,403,112)
Provision for income taxes (note 8)                   --          --       20,341

                                              ----------   ---------   ----------
          Net loss                              (373,358)   (807,926)  (1,423,453)

Retained earnings at beginning of year         1,923,877   2,731,803    4,155,256
                                             ----------    ---------   ----------
Retained earnings at end of year             $1,550,519    1,923,877    2,731,803
                                             ==========    =========   ==========
Net loss per common share (note 13)          $     (.36)        (.78)       (1.38)
                                             ==========    =========   ==========
Weighted average number of common shares
 outstanding during the year                  1,032,683    1,032,683    1,032,683
                                             ==========    =========   ==========
</TABLE>

See accompanying notes to consolidated financial statements.



<PAGE>   6




                       CAPITAL INVESTMENT OF HAWAII, INC.

                                AND SUBSIDIARIES

                     Consolidated Statements of Cash Flows

                    Years ended July 31, 1996, 1995 and 1994

<TABLE>
<CAPTION>
                                                       1996         1995         1994
                                                  ------------  -----------  -----------
<S>                                                    <C>           <C>          <C>
Cash flows from operating activities:
  Cash received from customers                     $ 6,398,025    5,751,175    6,284,269
  Cash paid to suppliers/employees                  (7,713,659)  (6,967,784)  (7,425,711)
  Capital expenditures - real estate                    (2,201)     (29,251)     (10,310)
  Collections on long-term receivables
   arising from real estate sales                           --        3,681       16,744
Purchase of investments in real estate
 (note 6)                                           (3,618,324)  (6,372,767)  (9,366,513)
Collections from investments in real estate 
 (note 6)                                            5,392,975    8,012,363    7,472,238
Income tax refunds received                                 --           --      378,327
Dividends received                                      13,483       10,536        4,934
Interest received                                    1,909,127    1,220,452    1,097,533
Interest paid                                         (896,489)  (1,042,663)    (669,090)
                                                   -----------   ----------   ----------
      Net cash provided by (used in) 
       operating activities                          1,482,937      585,742   (2,217,579)
                                                   -----------   ----------   ----------
Cash flows from investing activities:
  Purchases of marketable securities                       --            --      (16,926)
  Purchases of other investments                           --       (63,618)    (137,080)
  Proceeds from sale of marketable securities          80,803       401,704       44,711
  Proceeds from sale of other investments             521,085       100,647       12,367
  Loans made                                         (500,000)           --   (2,168,053)
  Collections on long-term receivables              1,190,406         3,690    3,200,306
  Capital expenditures                               (105,151)      (75,978)     (77,723)
                                                  -----------    ----------   ----------
       Net cash provided by investing            
        activities                                $ 1,187,143    $  366,445   $  857,602
                                                  -----------    ----------   ----------
</TABLE>

                                  (Continued)



<PAGE>   7




                       CAPITAL INVESTMENT OF HAWAII, INC.

                                AND SUBSIDIARIES

                Consolidated Statements of Cash Flows, Continued

<TABLE>
<CAPTION>
                                                         1996         1995         1994
                                                     -----------  -----------  -----------
<S>                                                        <C>          <C>          <C>
Cash flows from financing activities:
  Proceeds from indebtedness                          $  564,563      432,837    4,169,674
  Payments on indebtedness                            (2,202,260)  (1,326,256)  (4,095,229)
  Payments on covenants not-to-compete                        --      (30,000)    (120,881)
  Proceeds received under loan participation
   agreements (note 6)                                        --      700,000    1,450,000
  Payments made under loan participation
   agreements (note 6)                                (1,562,620)    (587,380)          --
                                                      ----------   ----------   ----------
          Net cash provided by (used in) 
           financing activities                       (3,200,317)    (810,799)   1,403,564
                                                      ----------   ----------   ----------
          Net increase (decrease) in cash               (530,237)     141,388       43,587

Cash and cash equivalents at beginning of 
 year                                                  1,287,636    1,146,248    1,102,661
                                                      ----------   ----------   ----------

Cash and cash equivalents at end of year              $  757,399    1,287,636    1,146,248
                                                      ==========   ==========   ==========
Reconciliation of net loss to cash provided by 
  (used in) operating activities:
    Net loss                                          $ (373,358)    (807,926)  (1,423,453)
                                                      ----------   ----------   ----------
    Adjustments to reconcile net loss to cash
     provided by  (used in) operating activities:
     Capital expenditures - real estate                   (2,201)     (29,251)     (10,310)
     Depreciation and amortization                       211,836      323,700      642,851
     Gain on sale of marketable securities               (54,448)    (236,323)     (15,050)
     Loss (gain) on sale of other 
      investments                                       (412,627)     (52,724)       5,897
     Loss (gain) on sale/disposal of
      property and equipment                                (469)          --        1,720
     Change in assets and liabilities:
      Decrease (increase) in inventories                 (12,209)       3,523        3,260
      Decrease (increase) in trade 
       accounts and notes receivable, net                595,949     (303,226)     (17,396)
      Decrease in long-term receivables 
       arising from real estate sales                         --        3,681       16,744
      Decrease (increase) in investment in
       real estate                                     1,774,651    1,639,596   (1,894,275)
      Decrease (increase) in deferred
       charges and other assets                          (34,735)      71,896       (7,359)
</TABLE>

                                  (Continued)



<PAGE>   8




                       CAPITAL INVESTMENT OF HAWAII, INC.

                                AND SUBSIDIARIES

                Consolidated Statements of Cash Flows, Continued

<TABLE>
<CAPTION>
                                                1996        1995        1994
                                            ----------  ----------   ----------
<S>                                         <C>          <C>         <C>
Change in assets and liabilities,
 continued:
   Decrease in cash surrender value  
    of life insurance                       $       --          --        3,826
   Increase (decrease) in accounts 
     payable, trade                            221,974      57,814     (156,449)
   Changes in income taxes 
    receivable and payable                          --          --      398,668
   Increase (decrease) in accrued
     expenses and other payables              (431,426)    (85,018)     233,747
                                            ----------   ---------   ----------

      Total adjustments                      1,856,295   1,393,668     (794,126)
                                            ----------   ---------   ----------
      Net cash provided by (used 
       in) operating activities             $1,482,937     585,742   (2,217,579)
                                            ==========   =========   ==========

</TABLE>

Supplemental schedule of noncash operating, investing and financing activities:
  (1)  In fiscal year 1992, the Company entered into an agreement to acquire
       land and a warehouse for $1,350,000.  The Company assumed the existing
       mortgage loan with an original balance of $700,000 and applied $650,000
       of the existing deposit towards the purchase of the property in fiscal
       year 1995.

  (2)  Under SFAS No. 115, unrealized holding gains and losses of marketable
       securities that are classified as available-for-sale are reported as a
       separate component of stockholder's equity until realized.  Unrealized
       holding gains amounted to $23,337 and $65,381 in 1996 and 1995,
       respectively.

  (3)  In fiscal year 1995, $161,736 of other investment securities
       transferred to marketable equity securities.


See accompanying notes to consolidated financial statements.



<PAGE>   9




                       CAPITAL INVESTMENT OF HAWAII, INC.

                                AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

                             July 31, 1996 and 1995

(1) SUMMARY OF ACCOUNTING POLICIES

    BASIS OF PRESENTATION

    The accompanying consolidated financial information has been prepared in
    conformity with generally accepted accounting principles (GAAP).  In
    preparing the financial statements, management is required to make
    estimates and assumptions that affect the reported amounts of assets and
    liabilities and disclosure of the contingent assets and liabilities at the
    date of the balance sheet and the reported amounts of revenues and expenses
    for the period.  Actual results could differ significantly from those
    estimates.

    PRINCIPLES OF CONSOLIDATION

    The financial statements include the accounts of Capital Investment of
    Hawaii, Inc. and all of its subsidiaries (collectively referred to as the
    "Company").  All material intercompany balances and transactions have been
    eliminated from the consolidated financial statements.

    REAL ESTATE ACCOUNTING

         CARRYING AMOUNTS

    Developed real estate and undeveloped land held for sale are carried at the
    lower of cost or market value.

         INCOME RECOGNITION

    Profit is recognized in full from sales of real estate only when a
    significant down payment has been received, risks of ownership have passed
    to the buyer, collectibility of the sales price is reasonably assured and
    other criteria set forth in Statement of Financial Accounting Standards
    (SFAS) No. 66 are met.

    DEPRECIATION AND AMORTIZATION

    Depreciation and amortization are computed generally by use of the
    straight-line method.  Depreciation and amortization rates are based upon
    the estimated useful lives of the assets or, if applicable, the remaining
    terms of leases, whichever is shorter.  In general, the ranges of annual
    rates of depreciation and amortization applicable to major classifications
    of property and equipment are as follows:

<TABLE>
               <S>                                     <C>
              CLASS OF ASSETS                          RATE OF DEPRECIATION
                                                       --------------------

       Leasehold improvements                               5% to 20%
       Furniture and equipment                           10% to 33-1/3%
</TABLE>


                                       1

<PAGE>   10


                       CAPITAL INVESTMENT OF HAWAII, INC.
                                AND SUBSIDIARIES
             Notes to Consolidated Financial Statements, Continued


    Maintenance and repairs are charged to income as incurred; expenditures for
    major renewals and betterments that materially extend the economic lives of
    property and equipment are capitalized.  Gains or losses arising from
    dispositions of depreciable assets are credited or charged to income.

    Debt expense is being amortized by the straight-line method over the term
    of the debt.

    CASH EQUIVALENTS

    For purposes of the consolidated statements of cash flows, the Company
    considers all highly liquid debt instruments purchased with original
    maturities of three months or less to be cash equivalents.  At July 31,
    1996 and 1995, the Company held no instruments that would be considered
    cash equivalents.

    INVENTORIES

    Inventories are stated at the lower of cost or market.  Cost is determined
    using the first-in, first-out method.

    SECURITY INVESTMENTS

    The Company adopted the provisions of Statement of Financial Accounting
    Standards No. 115, "Accounting for Certain Investments in Debt and Equity
    Securities" (SFAS No. 115) at July 31, 1995.  Under SFAS No. 115, the
    Company classifies its investments in debt securities and marketable equity
    securities in one of three categories:  trading, available-for-sale, or
    held-to-maturity.  Trading securities are bought and held principally for
    the purpose of selling them in the near term.  Held-to-maturity securities
    are those debt securities in which the Company has the ability and intent
    to hold until maturity.  All other securities not included in trading or
    held-to-maturity are classified as available-for-sale.

    Trading and available-for-sale securities are recorded at fair value.
    Held-to-maturity securities are recorded at amortized cost, adjusted for
    the amortization or accretion of premiums or discounts.  Unrealized holding
    gains and losses on trading securities are included in earnings.
    Unrealized holding gains and losses, net of the related tax effect, on
    available-for-sale securities are excluded from earnings and are reported
    as a separate component of stockholders' equity (deficit) until realized.

    Other investment securities for which no ready market exists are valued at
    cost.

    For all security investments, declines in value below cost that are
    determined to be other than temporary are reflected in operations and the
    written-down value of the securities is established as the new cost basis
    for those securities.

    The cost of securities sold is determined on a first-in, first-out basis.

    INVESTMENTS IN REAL ESTATE - ACQUISITION, DEVELOPMENT AND CONSTRUCTION
    LOANS

    The Company has originated acquisition, development, and construction (ADC)
    loans with the following characteristics:  (1) the borrower has title to
    but little or no equity in the underlying

                                       2

<PAGE>   11


                       CAPITAL INVESTMENT OF HAWAII, INC.
                                AND SUBSIDIARIES
             Notes to Consolidated Financial Statements, Continued


    security and  (2) the Company participates in the profit on the ultimate
    sale of the project.  For financial reporting purposes, the loans have been
    presented as real estate investments.

    The Company recognizes the interest and fees the Company is entitled to
    under ADC loans ratably as profits are earned on the sale of individual
    units in the underlying real estate projects.

    INTANGIBLES

    The costs of the covenants not-to-compete were being amortized on a
    straight-line basis over the term of the related covenants which range from
    three to four years (see note 2).

    ACCOUNTING CHANGES - 1997 IMPLEMENTATION

    In March 1995, the Financial Accounting Standards Board (FASB) issued
    Statement of Accounting Standards No. 121, "Accounting for the Impairment
    of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of" (SFAS No.
    121).  SFAS No. 121, effective for fiscal years beginning after December
    15, 1995, establishes accounting standards for the impairment of long-lived
    assets, certain identifiable intangibles, and goodwill related to those
    assets to be held and used for long-lived assets and certain identifiable
    intangibles to be disposed of.  The application of SFAS No. 121, effective
    from August 1, 1996, is not expected to have a material impact to the
    consolidated financial statements of the Company.

(2)  ACQUISITIONS OF BAKERY OPERATIONS

    On August 10, 1990, the Company entered into an agreement to purchase
    substantially all of the assets and assume certain liabilities of Bakery
    Europa, Inc., a Hawaii corporation engaged in the business of producing and
    wholesaling bakery goods in the state of Hawaii.  Further, the Company
    entered into a second agreement on May 23, 1991, to purchase certain assets
    of Old Vienna Bake Shop, Inc., a Hawaii corporation also engaged in the
    business of producing and wholesaling of bakery goods.

    In addition to the purchase consideration paid for the aforementioned
    acquisitions, the Company entered into not-to-compete agreements.  As of
    July 31, 1995, the Company paid all amounts due under the not-to-compete
    agreements.

(3)  SECURITY INVESTMENTS

    For fiscal year 1996, the Company's investments in marketable equity
    securities have been classified as available-for-sale and are recorded at
    fair value.  Net unrealized holding gains have been reported as a separate
    component of stockholders' equity.

    At July 31, 1996 and 1995, the aggregate cost and aggregate fair value of
    marketable equity securities were as follows:

<TABLE>
<CAPTION>
                                 1996          1995
                                -------       -------
<S>                             <C>           <C>
Aggregate cost                  $19,310        45,665
                                =======       =======
Aggregate fair value            $42,647       111,046
                                =======       =======
</TABLE>


                                       3

<PAGE>   12


                       CAPITAL INVESTMENT OF HAWAII, INC.
                                AND SUBSIDIARIES
             Notes to Consolidated Financial Statements, Continued


    Gross unrealized gains (losses) on the portfolio of marketable equity
    securities at July 31, 1996, 1995 and 1994 and net realized gains (losses)
    for the years then ended pertaining to all security investments were as
    follows:

<TABLE>
<CAPTION>
                                                          NET REALIZED GAINS
                                      UNREALIZED               (LOSSES)
                              --------------------------      ----------
                               GAINS   LOSSES  NET GAINS
                              -------  ------  ---------
<S>                           <C>      <C>     <C>        <C>
1996:
Marketable equity securities  $26,828   3,491     23,337             54,448
                              =======  ======  =========
Other security investments                                          412,627
                                                                -----------
                                                                   $467,075
                                                                ===========
1995:
Marketable equity securities  $68,872   3,491     65,381            236,323
                              =======  ======  =========
Other security investments                                           52,724
                                                                -----------
                                                                   $289,047
                                                                ===========
1994:
Marketable equity securities  $29,240  11,051     18,189             15,050
                              =======  ======  =========
Other security investments                                           (5,897)
                                                                -----------
                                                                   $  9,153
                                                                ===========
</TABLE>

(4)  LONG-TERM RECEIVABLES

    The maturities of long-term receivables for fiscal years ending on July 31
    are shown in the following summary:

<TABLE>
                     <S>                                   <C>
                     1997                                $504,428
                     1998                                   4,859
                     1999                                 456,621
                                                         --------
                                                         $965,908
                                                         ========
</TABLE>


                                       4

<PAGE>   13


                       CAPITAL INVESTMENT OF HAWAII, INC.
                                AND SUBSIDIARIES
             Notes to Consolidated Financial Statements, Continued


    Included in long-term receivables at July 31, 1996 is $500,000 due from an
    individual with an interest rate of 20% per annum and maturing on June 1,
    1997.  The receivable is secured by marketable equity securities with a
    fair value of $875,000 at July 31, 1996.

    At July 31, 1996, substantially all other long-term receivables were
    secured by real estate.  The long-term receivables have a weighted average
    interest rate of 15%.

(5)  DEVELOPED REAL ESTATE

    The components of developed real estate at July 31, 1996 and 1995 were as
    follows:

<TABLE>
<CAPTION>
                                                                 1996       1995
                                                             ----------  ---------
<S>                                                              <C>         <C>
Held for sale, at cost:
  Condominium apartment units, a portion of which 
   includes undivided interest in land                     $    301,998    302,154
  Commercial property                                         1,350,000  1,350,000
  Other                                                              23         23
                                                             ----------  ---------
                                                              1,652,021  1,652,177
  Less accumulated depreciation                                 208,766    186,345
                                                             ----------  ---------
                                                             $1,443,255  1,465,832
                                                             ==========  =========
</TABLE>

(6)  REAL ESTATE INVESTMENTS

    UNDEVELOPED LAND

    Undeveloped land held for sale as of July 31, 1996 was comprised of
    approximately 39 acres in Makaha Valley on the island of Oahu, state of
    Hawaii.

    OTHER REAL ESTATE INVESTMENTS

    The Company has extended various ADC loan commitments to corporate real
    estate ventures to finance residential real estate projects in Las Vegas,
    Nevada.  These financing arrangements are being accounted for as
    in-substance investments in real estate, whereby the interest and fees the
    Company is entitled to will be recognized ratably as profits are earned on
    the sale of units in the underlying real estate projects.  Each loan
    commitment has restrictive loan covenants which limit the maximum amount of
    loan proceeds available for site acquisition and development and building
    construction.

    At July 31, 1996 and 1995, all ADC loans were made to corporate real estate
    ventures which are owned by individuals who have personally guaranteed
    payment of the ADC loans.

    The following paragraphs summarize the ADC loan arrangements and present
    summary financial information for the corporate real estate ventures.


                                       5

<PAGE>   14


                       CAPITAL INVESTMENT OF HAWAII, INC.
                                AND SUBSIDIARIES
             Notes to Consolidated Financial Statements, Continued


    COPPER BLUFFS, LLC

    On June 18, 1996, the Company extended a $600,000 ADC loan commitment to
    Copper Bluffs, LLC to finance a residential real estate project in Clark
    County, Nevada.  At July 31, 1996, the Company's aggregate investment in
    the real estate project amounted to $607,000, including $7,000 of
    capitalized interest.  The ADC loan is secured by a marketable equity
    securities with a fair value of $462,500 at July 31, 1996 and parcel of
    land in Clark County, Nevada.

    Condensed financial information of Copper Bluffs, LLC is as follows:

                                 BALANCE SHEET

                                 JULY 31, 1996

                                  (UNAUDITED)

<TABLE>
<S>                                                        <C>
                           ASSETS
Cash                                                      $  116,711
Notes receivable                                              56,000
Construction work in progress                              1,609,497
Other current assets                                          25,000
Finished lot equity                                          429,000
                                                        ------------
                                                          $2,236,208
                                                        ============

            LIABILITIES AND STOCKHOLDERS' EQUITY

Construction notes payable                                $1,241,930
Due to Capital Investment of Hawaii, Inc.                    600,000
                                                        ------------
        Total liabilities                                  1,841,930
Land equity                                                  429,000
Retained earnings                                            (34,722)
                                                        ------------
        Total stockholders' equity                           394,278
                                                        ------------
                                                          $2,236,208
                                                        ============
</TABLE>


                                       6

<PAGE>   15


                       CAPITAL INVESTMENT OF HAWAII, INC.
                                AND SUBSIDIARIES
             Notes to Consolidated Financial Statements, Continued


                                INCOME STATEMENT

                           PERIOD ENDED JULY 31, 1996

                                  (UNAUDITED)

<TABLE>
<S>                                                      <C>
General and administrative expenses                   $ 34,722
                                                      --------
Net loss                                              $(34,722)
                                                      ========
</TABLE>

    SUNSET BAY, LLC

    On July 29, 1996, the Company extended a $608,400 ADC loan commitment to
    Copper Bluffs, LLC to finance a residential real estate project in Clark
    County, Nevada.  At July 31, 1996, the Company's aggregate investment in
    the real estate project amounted to $608,400.  There was no capitalized
    interest as of July 31, 1996.  The ADC loan is secured by marketable equity
    securities with a fair value of $587,500 at July 31, 1996 and a parcel of
    land in Clark County, Nevada.

    Condensed financial information of Sunset Bay, LLC is as follows:

                                 BALANCE SHEET

                                 JULY 31, 1996

                                  (UNAUDITED)

<TABLE>
<S>                                                       <C>
                           ASSET 
Cash (held in escrow)                                $608,400
                                                 ============

                                  LIABILITITY

Due to Capital Investment of Hawaii, Inc.            $608,400
                                                 ============
</TABLE>

    PAGEANTRY COMMUNITIES, INC.

    On June 25, 1996, the Company extended a $900,000 ADC loan commitment to
    Pageantry Communities, Inc. to finance a residential real estate project
    known as Tradewinds Subdivision in Clark County, Nevada.  At July 31, 1996,
    the Company's aggregate investment in the real estate amounted to $701,809
    including $8,200 of capitalized interest, with an outstanding unfunded
    commitment totaling $206,391.  The ADC loan is secured by a parcel of land
    in Clark County, Nevada.  Restrictive loan covenants limit the maximum
    amount of loan proceeds available during various phases of the project.

    In September 1996, the Company extended the remaining commitment of
    $203,391.


                                       7

<PAGE>   16


                       CAPITAL INVESTMENT OF HAWAII, INC.
                                AND SUBSIDIARIES
             Notes to Consolidated Financial Statements, Continued


    In September 1996 and October 1996, the Company entered into loan
    participation agreements which provide that the Company sell, without
    recourse, to participants an undivided participating interest in the loan
    to Pageantry Communities, Inc.  Participants' share of the loan commitment
    is $750,000 of which $350,000 is from an officer of a subsidiary of the
    Company.  The loan participation agreements further provide that the
    Company, from time to time, may repurchase from the participants, their
    participating interests, in whole or in part, for an amount equal to the
    principal amount of the participating interests.  Loans under these
    participation agreements will earn interest at the rate of 15% and
    participants share pro rata with the Company as to all payments,
    collections and recoveries.

    Condensed financial information of Tradewinds Subdivision is as follows:

                                 BALANCE SHEET

                                 JULY 31, 1996

                                  (UNAUDITED)

<TABLE>
<S>                                              <C>
                           ASSETS
Cash                                                     $    7,003
Construction work in progress                             1,423,614
                                                      -------------
                                                         $1,430,617
                                                      =============

            LIABILITIES AND STOCKHOLDERS' EQUITY

Interest payable                                          $   11,945
Notes payable                                                716,235
Due to Capital Investment of Hawaii, Inc.                    693,609
                                                       -------------

       Total liabilities                                   1,421,789
Pageantry Communities, Inc. funded costs                       8,828
                                                       -------------
                                                          $1,430,617
                                                       =============
</TABLE>

                                INCOME STATEMENT

                           PERIOD ENDED JULY 31, 1996


                                  (UNAUDITED)

<TABLE>
<S>                                                       <C>
General and administrative expenses                          $ 7,871
                                                       -------------
      Net loss                                               $(7,871)
                                                       =============

</TABLE>


                                       8

<PAGE>   17


                       CAPITAL INVESTMENT OF HAWAII, INC.
                                AND SUBSIDIARIES
             Notes to Consolidated Financial Statements, Continued


    TBW, INC.

    On April 29, 1993, the Company extended a $5,205,025 ADC loan commitment to
    TBW, Inc. to finance a residential real estate project in Clark County,
    Nevada.  During the year ended July 31, 1995, the real estate project was
    completed with all loan advances being fully repaid.

    MVL, INC.

    On November 12, 1993, the Company extended a $6,101,056 ADC loan commitment
    to MVL, Inc. to finance a residential real estate project in Clark County,
    Nevada.  At July 31, 1995, the Company's aggregate investment in the real
    estate project amounted to $1,516,732, including $65,000 of capitalized
    interest, with an outstanding unfunded commitment totaling $557,200.
    Restrictive loan covenants limited the maximum amount of the loan proceeds
    that was available during various phases of the project.  During the year
    ended July 31, 1996, all loan advances were fully repaid.

    Condensed financial information of MVL, Inc. is as follows:

                                 BALANCE SHEET

                                 JULY 31, 1995

<TABLE>
<S>                                                                 <C>
                                  ASSETS
Cash                                                                $    196,245
Prepaid fees and deposits                                                214,487
Land                                                                   2,298,994
Construction work in progress                                          1,226,994
                                                                    ------------
                                                                    $  3,936,720
                                                                    ============

                   LIABILITIES AND STOCKHOLDER'S EQUITY
Trade accounts payable                                                  $593,254
Customer deposits                                                        168,362
Related party note payable                                               588,205
Note and interest payable                                                763,851
Due to Capital Investment of Hawaii, Inc.                              1,451,732
                                                                    ------------
       Total liabilities                                               3,565,404
                                                                    ------------
Capital stock                                                              5,000
Retained earnings                                                        366,316
                                                                    ------------
       Total stockholder's equity                                        371,316
                                                                    ------------
                                                                      $3,936,720
                                                                    ============
</TABLE>


                                       9

<PAGE>   18


                       CAPITAL INVESTMENT OF HAWAII, INC.
                                AND SUBSIDIARIES
             Notes to Consolidated Financial Statements, Continued


                                INCOME STATEMENT

                            YEAR ENDED JULY 31, 1995

<TABLE>
<S>                                               <C>
Sales revenue                                   $ 11,161,649
Cost of sales                                    (10,815,642)
                                                ------------
        Gross profit                                 346,007
Other expenses                                       (11,252)
                                                ------------
       Net income                               $    334,755
                                                ============
</TABLE>

    QCL, INC.

    On March 9, 1994, the Company extended a $2,900,000 ADC loan commitment to
    QCL, Inc. to finance a residential real estate project in Clark County,
    Nevada.  At July 31, 1995, the Company's aggregate investment in the real
    estate project amounted to $662,300, including $47,000 in capitalized
    interest.  Restrictive loan covenants limited the maximum amount of the
    loan proceeds that was available to $1,900,000.  During the year ended July
    31, 1996, all loan advances were fully repaid.

    Condensed financial information of QCL, Inc. is as follows:

                                 BALANCE SHEET

                                 JULY 31, 1995

<TABLE>
<S>                                              <C>
                 ASSETS
Cash                                           $   27,604
Prepaid fees and deposits                          90,827
Related party note receivable                     203,417
Land                                              946,843
Construction work in progress                     923,023
                                               ----------
                                               $2,191,714
                                               ==========
</TABLE>


                                       10

<PAGE>   19


                       CAPITAL INVESTMENT OF HAWAII, INC.
                                AND SUBSIDIARIES
             Notes to Consolidated Financial Statements, Continued




<TABLE>
<S>                                                      <C>

            LIABILITIES AND STOCKHOLDER'S EQUITY

Trade accounts payable                                   $  385,184
Customer deposits                                            58,626
Note and interest payable                                   797,257
Due to Capital Investment of Hawaii, Inc.                   615,300
                                                         ----------
       Total liabilities                                  1,856,367
                                                         ----------

Capital stock                                                 5,000
Retained earnings                                           330,347
                                                         ----------

      Total stockholder's equity                            335,347
                                                         ----------
                                                         $2,191,714
                                                         ==========

</TABLE>

                                INCOME STATEMENT

                            YEAR ENDED JULY 31, 1995

<TABLE>
<S>                                                    <C>
Sales                                                  $ 10,535,939
Cost of sales                                           (10,205,426)
                                                       ------------
        Gross profit                                        330,513
Other expenses                                                6,191
                                                       ------------
       Net income                                      $    336,704
                                                       ============
</TABLE>

     LSR, INC.

     On July 8, 1994, the Company extended a $15,288,287 ADC loan commitment to
     LSR, Inc. to finance a residential real estate project in Clark County,
     Nevada.  On March 2, 1995, the loan was modified, which reduced the loan
     commitment to $8,187,879.  At July 31, 1995, the Company's aggregate
     investment in the real estate project amounted to $1,512,828, including
     $5,500 in capitalized interest, with an outstanding unfunded commitment
     totaling $4,810,800.  At July 31, 1995, restrictive loan covenants limited
     the maximum amount of loan proceeds available to $1,800,000.  During the
     year ended July 31, 1996, all loan advances were fully repaid.


                                       11

<PAGE>   20


                       CAPITAL INVESTMENT OF HAWAII, INC.
                                AND SUBSIDIARIES
             Notes to Consolidated Financial Statements, Continued


     Condensed financial information of LSR, Inc. is as follows:

                                 BALANCE SHEET

                                 JULY 31, 1995

<TABLE>
<S>                                                  <C>
                            ASSETS
Cash                                                 $  104,630
Prepaid fees and deposits                               305,546
Land                                                  2,602,340
Construction work in progress                         1,349,314
                                                     ----------
                                                     $4,361,830
                                                     ==========

             LIABILITIES  AND STOCKHOLDER'S EQUITY
Trade accounts payable                               $  475,487
Customers' deposits                                      16,580
Related party note payable                              447,302
Note and interest payable                             1,893,099
Due to Capital Investment of Hawaii, Inc.*            1,507,328
                                                     ----------
       Total liabilities                              4,339,796
Retained earnings                                        22,034
                                                     ----------


       Total stockholder's equity                        22,034
                                                     ----------
                                                     $4,361,830
                                                     ==========

</TABLE>

                                INCOME STATEMENT

                            YEAR ENDED JULY 31, 1995

<TABLE>
<S>                                                 <C>
Sales                                               $ 1,621,475
Cost of sales                                        (1,582,384)
                                                    -----------
        Gross profit                                     39,091
Other expense                                           (17,049)
                                                    -----------
       Net income                                   $    22,042
                                                    ===========



</TABLE>


                                       12

<PAGE>   21


                       CAPITAL INVESTMENT OF HAWAII, INC.
                                AND SUBSIDIARIES
             Notes to Consolidated Financial Statements, Continued




  *  The Company had entered into loan participation agreements which provided
     that the Company sell, without recourse, to participants an undivided
     participating interest in the loan to LSR, Inc.  Participants' share of
     the loan commitment amounted to $1,562,620 at July 31, 1995.  Certain
     participants are related parties which, in the aggregate, had a 72%
     interest at July 31, 1995 in the loan commitment.

     The loan participation agreements further provided that the Company, from
     time to time, may repurchase from the participants, their participating
     interests, in whole or in part, for an amount equal to the principal
     amount of the participating interests.  Generally accepted accounting
     principles require that these participation agreements be accounted for as
     financing arrangements rather than as sales due to the Company's option to
     repurchase the participating interests.  Accordingly, the participants'
     loans amounting to $1,562,620 have been presented as "Other investments in
     real estate" and as "Loans under participation agreements" in the
     accompanying consolidated balance sheets as of July 31, 1995.  Loans under
     these participation agreements earned interest at the rate of 15% and
     participants share pro-rata with the Company as to all payments,
     collections and recoveries.  Payments on the loans were received from the
     proceeds from the sales of the residential units.  As of July 31, 1996,
     all amounts under these participation agreements have been fully repaid.

     The following summarizes the Company's other investments in real estate
     and related deferred income which is presented as "other payables" in the
     accompanying consolidated balance sheets.

<TABLE>
<S>                                    <C>         <C>          <C>        <C>
                                                   CAPITALIZED             DEFERRED
             PROJECT                     ADVANCES    INTEREST      TOTAL     INCOME
----------------------------------     ----------  -----------  ---------  --------
As of July 31, 1996:
 Copper Bluffs, LLC                    $  600,000        7,000    607,000    14,000
 Sunset Bay, LLC                          608,400           --    608,400     1,014
 Pageantry 
  Communities, Inc.                       693,609        8,200    701,809    13,872
                                       ----------  -----------  ---------  --------
                                       $1,902,009       15,200  1,917,209    28,886
                                       ==========  ===========  =========  ========
As of July 31, 1995:
   MVL, Inc.                           $1,451,732       65,000  1,516,732   237,000
   QCL, Inc.                              615,300       47,000    662,300   153,000
   LSR, Inc.                            1,507,328        5,500  1,512,828   105,000
                                       ----------  -----------  ---------  --------
                                       $3,574,360      117,500  3,691,860   495,000
                                       ==========  ===========  =========  ========
</TABLE>


                                       13

<PAGE>   22


                       CAPITAL INVESTMENT OF HAWAII, INC.
                                AND SUBSIDIARIES
             Notes to Consolidated Financial Statements, Continued


(7)  INDEBTEDNESS

    Indebtedness at July 31, 1996 and 1995 is summarized as follows:

<TABLE>
<CAPTION>
                                                                   1996         1995
                                                                ----------    ---------
<S>                                                             <C>           <C>
Mortgage notes:
 9-1/2%, payable to individuals in monthly installments of    
  interest only, due on demand                                  $  200,000      200,000
 9-1/2%, payable to a corporation in monthly installments
  of interest only, due February 28, 1997                        1,000,000    1,000,000
 9-1/2%, payable to a financial institution in monthly
  installments of $6,125 including interest, due July 1,
  2001                                                             664,493      674,247
                                                                ----------    ---------
                                                                 1,864,493    1,874,247
                                                                ----------    ---------
Other notes, secured:
  Interest at index rate (8.75% at July 31, 1996) plus 1.5%,
    payable to a financial institution in monthly
    installments of $762 including interest, due 
    February 2, 1997                                                   714        9,289
  Interest at prime (8.25% at July 31, 1996) plus 2.0%,
    payable to a financial institution in monthly
    installments of principal of $11,138, plus interest,
    due February 1, 1997, but payable on demand as
    subsidiary is in violation of certain financial
    covenants in loan agreement                                    345,223      473,850
  10%, payable to a financial institution in monthly
    installments of $14,539 including interest, due June 1,
    1997                                                           394,454    1,448,585
  Interest at prime (8.25% at July 31, 1996) plus 2.5%,
    payable to a financial institution in monthly
    installments of interest only, due February 1, 1997            100,000      100,000
  Interest at prime (8.25% at July 31, 1996) plus 1.5%,
    payable to a financial institution in monthly
    installments of $1,706 including interest, due through
    July 23, 1997                                                   10,980       29,371
  10%, payable to a financial institution in monthly
    installments of $2,272 including interest, due
    August 1, 1998                                                 250,000           --
  Interest at prime (8.25% at July 31, 1996) plus 1.25%
    until September 3, 1997, then interest at prime plus
    1.5%, payable to a financial institution in monthly
    installments of $278 including interest, due August 3,
    2000                                                            11,093           --
</TABLE>


                                       14

<PAGE>   23


                       CAPITAL INVESTMENT OF HAWAII, INC.
                                AND SUBSIDIARIES
             Notes to Consolidated Financial Statements, Continued




<TABLE>
<CAPTION>
                                                                1996          1995
                                                            ----------      ---------
<S>                                                              <C>          <C>
Interest at prime (8.25% at July 31, 1996) plus 1.25%
  until December 1, 1997; interest at prime plus 1.5%
  thereafter payable to a financial institution in
  monthly principal of $322 plus interest, due
  October 31, 2000                                               16,424            --
Interest at prime (8.25% at July 31, 1996) plus 1.5%
  payable to a financial institution in monthly
  principal of $1,111 plus interest, due December 22,
  1998                                                           31,223            --
11% payable to a financial institution in monthly
  installments of $2,477 including interest, paid in full
  on March 29, 1996                                                  --       258,921
11% payable to a financial institution in monthly
  installments of $3,208 including interest, paid in full
  on August 1, 1995                                                 --        350,000
                                                            ----------      ---------
                                                             1,160,111      2,670,016
                                                            ----------      ---------

Debentures - at stated rates (7% to 9.5%), payable to
  individuals in quarterly installments of interest only,
  all of which have matured and are payable on
  demand; amount authorized by indenture, $19,000,000        2,062,245      2,108,245
                                                            ----------      ---------


Other notes, unsecured:
  Interest at stated rates (6% to 9.5%), term notes
    payable to individuals in quarterly installments of
    interest only, due two years from date of issuance         297,567        269,605
  Interest at stated rates (8.0% to 9.5%), payable to
    individuals in quarterly installments of interest 
    only, payable on demand except $75,000 due 
    February 14, 1997 (of which $5,000 and $105,000 at
    July 31, 1996 and 1995, respectively, due to related
    parties)                                                  130,000         230,000
                                                            ----------      ---------
                                                              427,567         499,605
                                                           ----------       ---------
                                                           $5,514,416       7,152,113
                                                           ==========       =========
</TABLE>

The Company has a $100,000 working capital line of credit with a bank.  As
of July 31, 1996, the outstanding drawings amounted to $100,000.  The line of 
credit expires on February 1, 1997.


                                       15

<PAGE>   24


                       CAPITAL INVESTMENT OF HAWAII, INC.
                                AND SUBSIDIARIES
             Notes to Consolidated Financial Statements, Continued


    Maturities of indebtedness over the next five fiscal years ending on July
    31 are shown in the following summary:

<TABLE>
                   <S>                                              <C>
                   1997                                           $4,331,451
                   1998                                              521,903
                   1999                                               24,412
                   2000                                               21,482
                   2001                                              615,168
                                                                  ----------
                                                                  $5,514,416
                                                                  ==========
</TABLE>

    The carrying amounts of assets pledged as collateral for indebtedness as of
    July 31, 1996 were as follows:

<TABLE>
                    <S>                                             <C>
                    Cash and cash equivalents                     $  32,099
                    Marketable equity securities                     42,647
                    Notes receivable                                453,989
                    Inventories                                      65,322
                    Developed real estate                         1,443,255
                    Investment in other securities                  700,454
                    Property and equipment                          205,744
                                                                 ==========


</TABLE>

    In addition, the rights and interests in insurance policies, income or
    profits, and other contracts and agreements of the Company and Latipac Fine
    Foods, Inc., a wholly owned subsidiary, were pledged as collateral for
    indebtedness as of July 31, 1996.

(8)  INCOME TAXES

    The components of the provision for income taxes are as follows:

<TABLE>
<CAPTION>


                                                                    CURRENT
                                                                 ----------
                    <S>                                              <C>
                    1994:
                    Federal                                         $20,575
                    State                                              (186)
                    Foreign                                             (48)
                                                                 ----------
                                                                    $20,341
                                                                 ==========

</TABLE>


                                       16

<PAGE>   25


                       CAPITAL INVESTMENT OF HAWAII, INC.
                                AND SUBSIDIARIES
             Notes to Consolidated Financial Statements, Continued


    The provision (benefit) for income taxes applicable to loss before income
    taxes for fiscal years 1996, 1995 and 1994 differ from the "expected
    benefit for income taxes" for those years (computed by applying the U.S.
    federal income tax rate of 34% to loss before income taxes) as follows:

<TABLE>
<CAPTION>
                                                   1996       1995       1994
                                                ----------  ---------  ---------
<S>                                             <C>         <C>        <C>
Computed "expected" tax benefit                 $(126,942)  (274,695)  (477,058)
Net operating losses for which no
 deferred income tax benefit has been
 recognized                                       111,222    255,602    448,157
Dividends received deduction                       (3,209)    (2,508)    (1,174)
Over accrual of prior years' income tax
 benefit                                               --         --     20,341
Officers' life insurance                           16,441     17,794     24,495
Other, net                                          2,488      3,807      5,580
                                                ---------   --------   --------
                                                $      --         --     20,341
                                                =========   ========   ========
</TABLE>

    In February 1992, the FASB issued Statement of Accounting Standards No. 109
    (SFAS No. 109), "Accounting for Income Taxes."  SFAS No. 109 requires a
    change from the deferred method of accounting for income taxes of APB
    Opinion 11 to the asset and liability method of accounting for income
    taxes.  Under the asset and liability method of SFAS No. 109, deferred tax
    assets and liabilities are recognized for the estimated future tax
    consequences attributable to differences between the financial statement
    carrying amounts of existing assets and liabilities and their respective
    tax bases.  Deferred tax assets and liabilities are measured using enacted
    tax rates in effect for the year in which those temporary differences are
    expected to be recovered or settled.  Under SFAS No. 109, the effect on
    deferred tax assets and liabilities of a change in tax rates is recognized
    in the period that includes the enactment date.

    Effective August 1, 1993, the Company  adopted SFAS No. 109.  There was no
    cumulative effect of a change in accounting method as of August 1, 1993 and
    prior fiscal years were not restated.


                                       17

<PAGE>   26


                       CAPITAL INVESTMENT OF HAWAII, INC.
                                AND SUBSIDIARIES
             Notes to Consolidated Financial Statements, Continued


    The tax effects of temporary differences that give rise to significant
    portions of the deferred tax assets and deferred tax liabilities at July
    31, 1996 and 1995 are presented below.

<TABLE>
<CAPTION>
                                                                   1996         1995
                                                                ----------   ----------
<S>                                                             <C>            <C>
Deferred tax assets:
  Deferred compensation agreement                               $   64,300       79,700
  Other investment securities, permanent decline in
   market value                                                     83,100       83,100
  Deferred income on other real estate investment                   11,000      188,100
  Net tax operating loss carryforwards                           1,038,100      749,800
  Other                                                             95,600      102,600
                                                                ----------   ----------
        Total gross deferred tax assets                          1,292,100    1,203,300
  Less valuation allowance                                      (1,285,100)  (1,157,400)
                                                                ----------   ----------
        Net deferred tax assets                                 $    7,000       45,900
                                                                ==========   ==========
Deferred tax liabilities:
  Capitalized interest on other real estate investments         $    5,800       44,700
  Other                                                              1,200        1,200
                                                                ----------   ----------
        Total gross deferred tax liabilities                    $    7,000       45,900
                                                                ==========   ==========
</TABLE>

    The net change in the total valuation allowance for the years ended July
    31, 1996 and 1995 were increases of $127,700 and $242,700, respectively.

    In assessing the realizability of deferred tax assets, management considers
    whether it is more likely than not that some portion or all of the deferred
    tax assets will not be realized.  The ultimate realization of deferred tax
    assets is dependent upon the generation of future taxable income during the
    periods in which those temporary differences become deductible.  Management
    considers the scheduled reversal of deferred tax liabilities, projected
    future taxable income, and tax planning strategies in making this
    assessment.

    As of July 31, 1996, the Company had tax net operating loss carryforwards
    of approximately $2,600,000 and $3,700,000 for federal and state income tax
    purposes, respectively, which can be used to offset future taxable income
    through 2011.

(9)  DEFERRED COMPENSATION

    The Company has a deferred compensation agreement under which the Company
    is obligated to pay $5,000 each month for 120 consecutive months to the
    spouse of the late Mr. Chinn Ho, the former chairman of the Executive
    Committee.  The Company commenced monthly payments in accordance with the
    deferred compensation agreement to Mrs. Chinn Ho in November 1989.  The
    accrued obligation as of July 31, 1996 and 1995 amounted to $169,158 and
    $209,777, respectively, and is included in the consolidated balance sheet
    as other payables.


                                       18

<PAGE>   27


                       CAPITAL INVESTMENT OF HAWAII, INC.
                                AND SUBSIDIARIES
             Notes to Consolidated Financial Statements, Continued


(10) LEASE COMMITMENTS

    The Company leases various facilities for its office premises, rental
    agency and its bakery operations.  These operating leases provide that the
    Company pay all taxes, maintenance and insurance applicable to the leased
    properties.

    Consolidated future minimum payments required under noncancelable operating
    leases as of July 31, 1996 are summarized as follows:

<TABLE>
                <S>                                        <C>
               Year ending July 31:
                     1997                                $  329,562
                     1998                                   330,960
                     1999                                   286,897
                     2000                                   281,815
                     2001                                   280,120
                     Thereafter                           2,529,367
                                                         ----------
                                                         $4,038,721
                                                         ==========
</TABLE>

    Net rent expense for all operating leases was $501,100, $449,900 and
    $423,000 for the years ended July 31, 1996, 1995 and 1994, respectively.

(11) COMMITMENT AND CONTINGENT LIABILITIES

    Under the provision of various agreements relating to its participation in
    mortgage notes receivable sold with recourse, the Company is committed to
    repurchase notes that become delinquent, as specified in the agreements, if
    requested to do so by the holder of the notes.  At July 31, 1996 the
    outstanding balances of notes receivable sold that were subject to the
    aforementioned recourse provisions aggregated $186,000.  The Company may be
    subject to similar recourse provisions with respect to additional
    outstanding balances of notes aggregating approximately $76,000 at July 31,
    1996, although management does not believe this was the intent of the
    parties to the agreements related to the sale of its participation in notes
    receivable.  The mortgage notes referred to above relate to condominium
    unit sales in 1972 and 1973.  Management believes that if the Company is
    required to repurchase delinquent notes, no losses will be incurred as the
    proceeds from the sale of real estate securing the notes would be adequate
    to satisfy the related debt obligations.

(12) FOURTH QUARTER RESULTS (UNAUDITED)

    Fourth quarter results for the year ended July 31, 1996 are as follows:

<TABLE>
              <S>                                            <C>
              Revenues                                      $1,850,766
                                                            ==========
              Net loss ($.16 per common share)              $ (168,615)
                                                            ==========
</TABLE>


                                       19

<PAGE>   28


                       CAPITAL INVESTMENT OF HAWAII, INC.
                                AND SUBSIDIARIES
             Notes to Consolidated Financial Statements, Continued


(13) LOSS PER COMMON SHARE

    Loss per common share was computed by dividing the applicable loss by the
    weighted average number of shares of common stock outstanding.

(14) SEGMENT INFORMATION

    The Company has classified its business activities into significant
    segments for the years ended July 31, 1996, 1995 and 1994.  The Company's
    operations have been classified into real estate, security and other
    investing, wholesale bakery and other activities.  Real estate activities
    include the acquisition and development of undeveloped real estate, the
    sale and leasing of developed real estate and investment in undeveloped
    real estate.  Also included in real estate activities are interest income
    on notes receivable arising from property sales and from loans made to
    development projects.  Security and other investing include gain or loss
    from security investments, investment income related to the ownership of
    such investments and income from a partnership.  Other activities include
    the Company's rental agency businesses and other miscellaneous activities.
    The following is a summary of segment financial information for the years
    ended July 31, 1996, 1995 and 1994:

<TABLE>
<CAPTION>
                                                   1996       1995       1994
                                                ----------  ---------  ---------
<S>                                             <C>         <C>        <C>
Revenues:
  Real estate activities:
   Property rentals                             $  178,325     87,741     59,631
   Income from ADC loan 
    arrangements                                 1,143,229  1,360,568    861,594
   Interest income                                 124,155    181,077    399,300
   Other                                                --         --     17,847
                                                ----------  ---------  ---------
          Total real estate
           activities                            1,445,709  1,629,386  1,338,372
                                                ----------  ---------  ---------

Security and other investing
 activities:
  Gains from securities                            467,075    289,047      9,153
  Dividends and interest                            59,177     36,589     40,385
                                                ----------  ---------  ---------
      Total security and other 
       investing activities                        526,252    325,636     49,538
                                                ----------  ---------  ---------
Wholesale bakery activities                      5,521,390  4,965,794  5,410,698
Other activities                                   722,910    650,138    737,641
                                                ----------  ---------  ---------
                                                $8,216,261  7,570,954  7,536,249
                                                ==========  =========  =========
</TABLE>


                                       20

<PAGE>   29


                       CAPITAL INVESTMENT OF HAWAII, INC.
                                AND SUBSIDIARIES
             Notes to Consolidated Financial Statements, Continued




<TABLE>
<CAPTION>
                                              1996         1995         1994
                                           ----------   ----------   -----------
<S>                                        <C>          <C>          <C>
Operating income (loss):
   Real estate activities                  $1,016,950    1,191,284      792,363
   Security and other investing 
    activities                                479,910      278,666        1,587
   Wholesale bakery activities               (330,923)    (526,037)    (870,605)
   Other activities                            43,294      (14,817)     107,759
                                           ----------   ----------   ----------
         Income from operations             1,209,231      929,096       31,104
   Interest expense                          (893,983)  (1,029,436)    (677,098)
   Corporate expenses                        (688,606)    (707,586)    (757,118)
   Provision for income taxes                      --           --      (20,341)
                                           ----------   ----------   ----------
          Net loss                         $ (373,358)    (807,926)  (1,423,453)
                                           ==========   ==========   ==========
Depreciation and amortization:
  Real estate activities                   $   30,768       18,210       20,732
  Security and other investing 
   activities                                     780        1,412        1,893
  Wholesale bakery activities                 156,899      270,055      578,130
  Other activities                             16,244       21,075       24,746
                                           ----------   ----------   ----------
         Total segments                       204,691      310,752      625,501
  Corporate                                     7,145       12,948       17,350
                                           ----------   ----------   ----------
                                           $  211,836      323,700      642,851
                                           ==========   ==========   ==========
Capital expenditures:
  Real estate activities                   $    2,201    1,379,251       10,310
  Wholesale bakery activities                  96,179       65,896       69,920
  Other activities                                790          341        5,597
  Corporate                                     8,182        9,741        2,206
                                           ----------   ----------   ----------
                                           $  107,352    1,455,229       88,033
                                           ==========   ==========   ==========
</TABLE>


                                       21

<PAGE>   30


                       CAPITAL INVESTMENT OF HAWAII, INC.
                                AND SUBSIDIARIES
             Notes to Consolidated Financial Statements, Continued




<TABLE>
<CAPTION>
                                                 1996        1995        1994
                                              ----------  ----------  ----------
<S>                                           <C>         <C>         <C>
Identifiable assets:
   Real estate activities                     $4,479,964   6,975,918   7,921,148
   Security and other investing 
    activities                                   745,019     922,165   1,007,298
   Wholesale bakery activities                   638,400     674,742     945,097
   Other activities                              128,501     728,060     405,385
                                              ----------  ----------  ----------
          Total segments                       5,991,884   9,300,885  10,278,928
Corporate                                        800,698   1,316,868   1,219,373
                                              ----------  ----------  ----------
                                              $6,792,582  10,617,753  11,498,301
                                              ==========  ==========  ==========
</TABLE>

    Sales between business segments are immaterial and are netted against the
    sales of the respective segment.

(15) BUSINESS AND CREDIT CONCENTRATIONS

    Substantially all of the Company's business activity is with customers
    located in the state of Hawaii and Las Vegas, Nevada.  The majority of
    customers of the Company's operating businesses are related to the
    hospitality industry.

    The Company's business activities in Las Vegas related solely to financing
    residential real estate development projects.  At July 31, 1996 and 1995,
    the Company had outstanding ADC loans of $1,902,009 and $3,574,360 due from
    corporate real estate ventures which are owned by a single developer.
    Under participation agreements the Company had sold $1,562,620 of these
    loans without recourse as of July 31, 1995 (see note 6).

(16) FAIR VALUE OF FINANCIAL INSTRUMENTS

    The following methods and assumptions were used to estimate the fair value
    of each applicable class of financial instruments for which it is
    practicable to estimate that value:

    The carrying amount of cash and cash equivalents, trade accounts
    receivable, accounts payable, accrued expenses and debentures approximate 
    fair value because of the short maturity of these instruments.

    MARKETABLE EQUITY SECURITIES AND OTHER INVESTMENT SECURITIES

    Fair value is based on quoted market prices or dealer quotes.

    LONG-TERM RECEIVABLES AND OTHER REAL ESTATE INVESTMENTS

    Fair value is determined as the present value of expected future cash flows
    discounted at the interest rate currently offered by the Company, which
    approximates rates currently offered by local lending institutions for
    loans of similar terms to companies with comparable credit risk.


                                       22

<PAGE>   31


                       CAPITAL INVESTMENT OF HAWAII, INC.
                                AND SUBSIDIARIES
             Notes to Consolidated Financial Statements, Continued


    INDEBTEDNESS

    Fair value of mortgage notes, other notes, secured and other notes,
    unsecured is estimated by discounting the future cash flows of each
    instrument based on the quoted market prices for the same or similar issues
    or on the current rates offered for debt of the same or similar remaining
    maturities.  The carrying amount of debentures approximates fair value
    because of the short maturity of this investment.

    DEFERRED COMPENSATION PAYABLE

    Fair value is determined as the present value of expected future cash flows
    discounted at the current rates offered for commercial debt.

    LIMITATIONS

    Fair value estimates are made at a specific point in time, based on
    relevant market information and information about the financial instrument.
    These estimates do not reflect any premium or discount that could result
    from offering for sale at one time the Company's entire holdings of a
    particular financial instrument.  Because no market exists for a
    significant portion of the Company's financial instruments, fair value
    estimates cannot be determined with precision.  Changes in assumptions
    could significantly affect the estimates.

    Fair value estimates are provided for certain existing on-and off-balance
    sheet financial instruments without attempting to estimate the value of
    anticipated future business and the value of assets and liabilities that
    are not considered financial instruments.  In addition, the tax
    ramifications related to the realization of the unrealized gains and losses
    can have a significant effect on fair value estimates and have not been
    considered.

<TABLE>
<CAPTION>
                                                     JULY 31, 1996
                                             --------------------------------
                                                                     FAIR
        FINANCIAL ASSETS                     CARRYING AMOUNT         VALUE
        ----------------                     ---------------       ----------
<S>                                             <C>                <C>
Cash and cash equivalents                       $ 757,399            757,399
Marketable equity securities                       42,647             42,647
Trade accounts receivable                         470,042            470,042
Long-term receivables                             965,908            886,218
Other investments:
  Real estate                                   1,917,209          1,785,774
  Securities                                      700,454          1,511,892
</TABLE>


                                       23

<PAGE>   32


                       CAPITAL INVESTMENT OF HAWAII, INC.
                                AND SUBSIDIARIES
             Notes to Consolidated Financial Statements, Continued




<TABLE>
<CAPTION>
                                                       JULY 31, 1996
                                                ----------------------------
                                                                     FAIR
    FINANCIAL LIABILITIES                       CARRYING AMOUNT      VALUE
    ---------------------                       ---------------    ---------
<S>                                               <C>              <C>
Accounts payable                                  $  651,407         651,407
Accrued expenses:
  Interest                                            55,348          55,348
  Taxes other than income                             16,954          16,954
  Other                                              614,626         614,626
Mortgage notes                                     1,864,493       1,662,857
Other notes, secured                               1,160,111       1,112,537
Debentures                                         2,062,245       2,062,245
Other notes, unsecured                               427,567         424,752
Deferred compensation payable                        169,158         169,158
</TABLE>


                                       24

<PAGE>   33

                                  Schedule II

                       CAPITAL INVESTMENT OF HAWAII, INC.
                                AND SUBSIDIARIES

                 Valuation and Qualifying Accounts and Reserves
                    Years ended July 31, 1996, 1995 and 1994

<TABLE>
<CAPTION>


                                                                      ADDITIONS
                                                            ------------------------------
                                             BALANCE OF      CHARGED TO
                                            BEGINNING OF     COSTS AND      CHARGED TO                        BALANCE AT
            DESCRIPTION                       PERIOD          EXPENSES    OTHER ACCOUNTS   DEDUCTIONS        END OF PERIOD
------------------------------------        -----------     ----------    -------------  ------------        -------------
<S>                                         <C>             <C>            <C>           <C>                    <C> 
Year ended  July 31, 1996:
  Allowance for doubtful receivables        $   31,860          24,500             --        31,358(1)              25,001
                                            ==========      ==========     ==========    ==========             ========== 
Year ended July 31, 1995:
  Allowance for doubtful receivables        $   58,544          (3,482)            --        23,202(1)              31,860
                                            ==========      ==========     ==========    ==========             ========== 
Year ended July 31, 1994:
  Allowance for doubtful receivables        $   56,641         126,788             --       124,885(1)              58,544
                                            ==========      ==========     ==========    ==========             ========== 

</TABLE>

(1) Accounts receivable written off.
<PAGE>   34





                                  Schedule III
                       CAPITAL INVESTMENT OF HAWAII, INC.
                                AND SUBSIDIARIES
                    Real Estate and Accumulated Depreciation
                                 July 31, 1996

<TABLE>
<CAPTION>
                                                                        Cost
                                                                    capitalized
                                                                   subsequent to       Gross amount at which
                                          Initial Cost to Company   acquisition      carried at close of period
                                          ------------------------ -------------   ------------------------------
                                                        Buildings                             Buildings
                                                          and                                   and                  Accumulated
   Description           Encumbrances       Land      Improvements  Improvements    Land    Improvements   Total     depreciation
   -----------           ------------    ----------   ------------  ------------   -------  ------------  -------    ------------
<S>                     <C>              <C>          <C>           <C>            <C>      <C>           <C>        <C>
Developed real estate -
 held for sale
  Condominium
   apartments:                                                                                                  
    Makaha, Hawaii     Note payable on 
                        apartments to
                        financial
                        institution      $  (2,323)      30,138        13,381       (2,323)     43,519      41,196        9,165

    Honolulu, Hawaii   Mortgages payable
                        on four apart-
                        ments to various
                        individuals and
                        company; note
                        payable on one
                        apartment to 
                        financial
                        institution         24,578      166,705        69,519       24,578     236,224     260,802      184,037

  Commercial/          Mortgages payable
   industrial:          to financial
    Honolulu, Hawaii    institution and
                        company; notes
                        payable to 
                        financial
                        institution        743,000      607,000            --      743,000     607,000   1,350,000       15,564

Other miscellaneous
 developed real
 estate located in
 Hawaii                None                     23           --            --           23          --          23           --
                                          --------      -------       -------      -------     -------   ---------      -------

     Total developed
      real estate                          765,278      803,843        82,900      765,278     886,743   1,652,021(A)   208,766(B)

Undeveloped land
 held for sale -
 Makaha, Hawaii        None                 73,290           --        61,184       73,290      61,184     134,474(C)        --(D)
                                          --------      -------       -------      -------     -------   ---------      -------
     Grand total                          $838,568      803,843       144,084      838,568     947,927   1,786,495      208,766
                                          ========      =======       =======      =======     =======   =========      =======




                                                                   Life on which depreciation in
                             Date of                                   latest income statement
   Description            construction          Date acquired                is computed
   -----------            ------------          -------------       -----------------------------
<S>                      <C>                    <C>                <C>
Developed real estate -
 held for sale
  Condominium
   apartments:           Completed              Various 1973       36 to 40 years for apartments,               
    Makaha, Hawaii        February 1971          to 1985            5 years for furnishings

    Honolulu, Hawaii     Completed 1964         Various 1964       40 years for apartments,
                          and 1968               to 1985            5 years for furnishings

  Commercial/
   industrial:
    Honolulu, Hawaii          1986              July 1995          39 years

Other miscellaneous
 developed real
 estate located in
 Hawaii                  April 1956             July 1953

Undeveloped land
 held for sale -
 Makaha, Hawaii                                 May 1973           Primarily over 20 years

</TABLE>
<PAGE>   35





                              Schedule III, Cont.
                       CAPITAL INVESTMENT OF HAWAII, INC.
                                AND SUBSIDIARIES
              Real Estate and Accumulated Depreciation, Continued


(1) Changes during the two years ended July 31, 1996:

<TABLE>
<CAPTION>
                                                                           1996              1995
                                                                      -------------      -------------  
    <S>                                                               <C>                 <C>
    Cost of real estate:
      Balance at beginning of year                                    $    1,786,651          408,317

      Additions during year - improvements to real estate                      2,200        1,379,251
      Deductions during year - cost of retirements                            (2,356)            (917)
                                                                       -------------    -------------  
      Balance at end of year                                          $    1,786,495        1,786,651
                                                                       =============    =============  
    Accumulated depreciation  of real estate:
      Balance at beginning of year                                    $      186,345          176,259

      Additions  during  the year  -  charged  to  costs  and
       expenses                                                               24,777           11,003
      Deductions during the year - retirements and sales                      (2,356)            (917)
                                                                       -------------    -------------  
      Balance at end of year                                          $      208,766          186,345
                                                                       =============    =============  

</TABLE>


(2)      Aggregate original cost for federal income tax purposes amounted to
         $1,862,484 for 1996.

(3)      Presentation on consolidated balance sheet as of July 31, 1996:

<TABLE>
<CAPTION>
                                                                                             UNDEVELOPED
                                                                          DEVELOPED           LAND HELD
                                                                         REAL ESTATE           FOR SALE
                                                                       -------------       -------------  
         <S>                                                             <C>               <C>
      Cost                                                                $1,652,021 (A)         134,474(C)
       Less accumulated depreciation                                         208,766 (B)             -- (D)
                                                                       -------------       -------------  
                                                                      $    1,443,255             134,474
                                                                       =============       =============
  

</TABLE>
<PAGE>   36





                                  Schedule IV
                       CAPITAL INVESTMENT OF HAWAII, INC.
                                AND SUBSIDIARIES
                         Mortgage Loans on Real Estate
                                 July 31, 1996

<TABLE>
<CAPTION>

                                                               FINAL                PERIODIC
              DESCRIPTION                  INTEREST RATE    MATURITY DATE        PAYMENT TERMS               PRIOR LIENS
              -----------                  -------------    -------------        -------------               -----------
<S>                                           <C>          <C>                  <C>                         <C>
First mortgage - payable to a corporation
   on condominium apartments located in                                         Monthly installments
   Honolulu, Hawaii                           9-1/2%       February 28, 1997     of interest only           $        --    

First  mortgages - payable to individuals
   on condominium apartment located                                             Monthly installments
   in Honolulu, Hawaii                        9-1/2%       On Demand             of interest only                    --       

First mortgages - payable to a financial                                        Monthly installments
   insititution on land and warehouse                                            of $6,125, including
        located in Honolulu, Hawaii           9-1/2%       July 1, 2001          interest                            --
                                                                                                            -----------
                                                                                                            $        --
                                                                                                            ===========

</TABLE>   

<TABLE>
<CAPTION>
                                                                                 PRINCIPAL AMOUNT OF 
                                                  FACE          CARRYING           LOANS SUBJECT TO
                                                AMOUNT OF       AMOUNT OF        DELINQUENT PRINCIPAL
               DESCRIPTION                      MORTGAGES      MORTGAGE (1)        OR INTEREST
               -----------                     ----------      -----------       -------------------
<S>                                            <C>             <C>                 <C>
First mortgage - payable to a corporation
   on condominium apartments located in           
   Honolulu, Hawaii                            1,000,000       1,000,000                  --

First  mortgages - payable to individuals       
   on condominium apartment located        
   in Honolulu, Hawaii                           200,000         200,000                  --      

First mortgages - payable to a financial      
   insititution on land and warehouse                                         
        located in Honolulu, Hawaii              700,000         664,493                  --
                                              ----------     -----------          ----------    
                                               1,900,000       1,864,493                  --
                                              ==========     ===========          ==========

</TABLE>









   (1)Changes during the two years ended July 31, 1996 and 1995:

<TABLE>
<CAPTION>
                                               1996                 1995
                                           ------------          ----------   
<S>                                        <C>                   <C>
   Balance at beginning of year            $  1,874,247           1,200,000

   Additions during the year                         --             700,000

   Deductions during the year                    (9,754)            (25,753)
                                           ------------          ----------
   Balance at end of year                  $  1,864,493           1,874,247
                                           ============          ==========

</TABLE>

<PAGE>   37
                                   SIGNATURE

Pursuant to the requirements of Section 13 or 15(d) of the Securities Act of
1934, the Registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.

                                      CAPITAL INVESTMENT OF HAWAII, INC.


Date: January 29, 1997                By:   /s/  STUART T.K. HO
                                         --------------------------------------
                                         Stuart T.K. Ho, Chairman of the Board,
                                         President and Director


Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.


                                      /s/  DEAN T.W. HO
Date: January 29, 1997                -----------------------------------------
                                      Dean T.W. Ho, Vice Chairman, Secretary
                                      and Director


                                      /s/  DONALD M. WONG
Date: January 29, 1997                -----------------------------------------
                                      Donald M. Wong, Senior Vice President,
                                      Chief Financial Officer, Treasurer and
                                      Director


                                      /s/  HARRIET H. MATSUO
Date: January 29, 1997                -----------------------------------------
                                      Harriet H. Matsuo, Assistant Secretary
                                      and Assistant Treasurer


                                      /s/  GRETA U. NAKAO
Date: January 29, 1997                -----------------------------------------
                                      Greta U. Nakao, Assistant Secretary
                                      and Assistant Treasurer


                                      /s/  PEDRO P. ADA
Date: January 29, 1997                -----------------------------------------
                                      Pedro P. Ada, Director


                                      /s/  C. B. SUNG
Date: January 29, 1997                -----------------------------------------
                                      C. B. Sung, Director


                                      /s/  STANLEY W. HONG
Date: January 29, 1997                -----------------------------------------
                                      Stanley W. Hong, Director



                                      /s/  WALTER LUM
Date: January 29, 1997                -----------------------------------------
                                      Walter Lum, Assistant Treasurer