UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES
Investment Company Act file number 811-4084
Hawaiian Tax-Free Trust
(Exact name of Registrant as specified in charter)
380 Madison Avenue
New York, New York 10017
(Address of principal executive offices) (Zip code)
Joseph P. DiMaggio
380 Madison Avenue
New York, New York 10017
(Name and address of agent for service)
Registrant's telephone number, including area code: (212) 697-6666
Date of fiscal year end: 3/31
Date of reporting period: 3/31/04
FORM N-CSR
ITEM 1. REPORTS TO STOCKHOLDERS.
SERVING HAWAII INVESTORS FOR NEARLY TWO DECADES
HAWAIIAN TAX-FREE TRUST
ANNUAL REPORT
MANAGEMENT DISCUSSION
[Logo of Hawaiian Tax-Free Trust: a palm tree in front of a circle which has
an island and water within it]
ECONOMY AND FINANCIAL MARKETS
The year ended March 31, 2004 included continued economic growth despite
the effects of the war in Iraq, the corporate accounting scandals, the SARS
outbreak, as well as concerns of new terrorist activity following the Spanish
rail terrorist attacks. Accommodative monetary policy persisted throughout the
year. The Federal Reserve (the "Fed") lowered the overnight lending rate to
1.00% in June, 2003, which now represents the lowest level in more than 46
years. Residential investment and mortgage lending remained strong and helped
boost economic growth throughout the year. Bond market performance increased due
to the continued low rate environment. Equity markets also posted a strong
performance for the year.
Although the war and SARS had a negative impact on international travel,
Hawaii's total visitor days (arrivals times length of stay) for 2003 rose to an
all-time high of 61.9 million, up 3.0% from the 2002 level. Domestic arrivals
rose substantially more than international arrivals which were down during the
first half of 2003 in large part because of SARS. Hawaii's favorable
unemployment rate ended the year at 4.1% vs. the U.S. rate at 5.9%. Growth in
Hawaii construction and real estate investment has been a strong force behind
economic improvement as construction is expected to show a 10% increase over the
prior year. Hawaii real personal income levels were up 3.5% for 2003 and we
forecast an increase of 4.0% in 2004. Rising income combined with the low rate
environment and limited housing inventory sent Hawaii median home prices to new
record highs. Home prices are expected to continue to increase in 2004. We
believe all of this bodes well for the market performance of Hawaii bonds.
MUNICIPAL MARKET AND FUND PERFORMANCE
During the 12 months ending March 31, 2004, municipal bond markets
experienced similar market conditions as US Treasury securities. Throughout June
2003, a flight to quality in an uncertain global and economic environment along
with the Fed directed reduction in interest rates pushed the US Treasury and
municipal yield curve to lower levels. In July 2003, the Fed indicated a
somewhat more positive outlook on the economy and reductions in the risks of
"deflation." Consequently, the bond market sold off substantially in
anticipation of the Fed raising rates sooner rather than later. However, since
that time, and through March 2004, rates have been moving in a trading range in
direct response to the release of economic data (jobs, consumer price index,
etc.) as well as increased demand for municipal bonds in comparison with
Treasury bonds. The market continues to react to all information that may hint
at when the Fed may consider raising short-term interest rates from the current
level of 1.00%. State and local governments have been utilizing the low rate
environment to refinance and restructure older, more expensive debt leading to
increases in municipal new issuance volume.
Hawaiian Tax-Free Trust had a total return of 4.69% for its Class A shares,
3.95% for Class C shares, and 4.92% for Class Y shares for the calendar year
ending December 31, 2003. For the fiscal year ending March 31, 2004, the total
return was 4.83% for Class A shares, 3.91% for Class C shares, and 4.97% for
Class Y shares. Total return reflects the market fluctuation of the share price
as well as reinvested dividends. The Lehman Brothers Quality Intermediate
Municipal Bond Index, had a total return of 4.64% for the calendar year 2003 and
4.82% for the fiscal year.
OUTLOOK AND STRATEGY
The U.S. economy finished the year 2003 on a high note with GDP growth in
the second half of the year accelerating at more than 6.0%. We believe the
outlook for continued economic expansion through 2004 is favorable. However,
there still remains a number of uncertainties. Of particular concern is the
sustainability of a strong expansion in the level of job creation experienced in
March and how this will begin to offset the current perception of a "jobless
recovery." In support of economic recovery, the Fed has maintained a highly
accommodative interest rate environment. This has been coupled with a
stimulative fiscal policy of across the board tax cuts. When these actions are
combined with the unwillingness of Congress to cut federal spending, larger
budget deficits have occurred. In the long run, one of the expected results of a
growing economy will be an environment of rising interest rates.
In managing Hawaiian Tax-Free Trust, we keep in mind the Trust's goal of
maintaining a relatively high level of double tax-free income together with
reasonable principal preservation. Accordingly, we seek to continue to manage
the Trust conservatively both in terms of credit quality and interest rate risk
by investing primarily in highly rated municipal bonds with intermediate
maturities.
PERFORMANCE REPORT
The following graph illustrates the value of $10,000 invested in the Class
A shares of Hawaiian Tax-Free Trust for the 10-year period ended March 31, 2004
as compared with the Lehman Brothers Quality Intermediate Municipal Bond Index
(the "Lehman Index") and the Consumer Price Index (a cost of living index). The
performance of each of the other classes is not shown in the graph but is
included in the table below. It should be noted that the Lehman Index does not
include any operating expenses nor sales charges and being nationally oriented,
does not reflect state specific bond market performance.
[Graphic of a line chart with the following information:]
Trust's Class A Shares
Lehman Brothers
Quality Intermediate
Municipal Bond Index With Sales Charge Without Sales Charge Cost of Living Index
3/94 $10,000 $ 9,600 $10,000 $10,000
3/95 $10,646 $10,161 $10,588 $10,285
3/96 $11,482 $10,879 $11,336 $10,577
3/97 $12,002 $11,374 $11,851 $10,870
3/98 $13,016 $12,450 $12,973 $11,019
3/99 $13,772 $13,088 $13,637 $11,209
3/00 $13,909 $12,963 $13,507 $11,630
3/01 $15,252 $14,228 $14,826 $11,970
3/02 $15,829 $14,690 $15,307 $12,147
3/03 $17,332 $15,855 $16,521 $12,514
3/04 $18,168 $16,733 $17,436 $12,731
AVERAGE ANNUAL TOTAL RETURN
FOR PERIODS ENDED MARCH 31, 2004
-------------------------------------------
SINCE
1 YEAR 5 YEARS 10 YEARS INCEPTION
------ ------- -------- ---------
Class A (2/20/85)
With Sales Charge............................. 0.62% 4.17% 5.28% 6.93%
Without Sales Charge.......................... 4.83% 5.04% 5.72% 7.16%
Class C (4/01/96)
With CDSC..................................... 2.91% 4.19% n/a 4.64%
Without CDSC.................................. 3.91% 4.19% n/a 4.64%
Class Y (4/01/96)
No Sales Charge............................... 4.97% 5.22% n/a 5.98%
Lehman Index..................................... 4.82% 5.70% 6.15% 6.51%* (Class A)
n/a 5.90% (Class C&Y)
* From commencement of the index on 1/1/87.
Total return figures shown for the Trust reflect any change in price and assume
all distributions within the period were invested in additional shares. Returns
for Class A shares are calculated with and without the effect of the initial 4%
maximum sales charge. Returns for Class C shares are calculated with and without
the effect of the 1% contingent deferred sales charge (CDSC) imposed on
redemptions made within the first 12 months after purchase. Class Y shares are
sold without any sales charge. The rates of return will vary and the principal
value of an investment will fluctuate with market conditions. Shares, if
redeemed, may be worth more or less than their original cost. Dividend income
may be subject to Federal and state income taxes and/or the Federal alternative
minimum tax. Past performance is not predictive of future investment results.
PRIVACY NOTICE (UNAUDITED)
OUR PRIVACY POLICY. In providing services to you as an individual who owns or is
considering investing in shares of a fund of the Aquila(SM) Group of Funds, we
collect certain nonpublic personal information about you. Our policy is to keep
this information strictly safeguarded and confidential, and to use or disclose
it only as necessary to provide services to you or as otherwise permitted by
law. Our privacy policy applies equally to former shareholders and persons who
inquire about a fund.
INFORMATION WE COLLECT. "Nonpublic personal information" is personally
identifiable financial information about you as an individual or your family.
The kinds of nonpublic personal information we have about you may include the
information you provide us on your share purchase application or in telephone
calls or correspondence with us, and information about your fund transactions
and holdings, how you voted your shares and the account where your shares are
held.
INFORMATION WE DISCLOSE. We disclose nonpublic personal information about you to
companies that provide necessary services to your fund, such as the fund's
transfer agent, distributor, investment adviser or sub-adviser and to our
affiliates, as permitted or required by law, or as authorized by you. We also
may disclose this information to another fund of the Aquila(SM) Group of Funds
or its distributor, or to the broker-dealer that holds your fund shares, under
agreements that permit them to use the information only to provide you
information about your fund, other funds in the AquilaSM Group of Funds or new
services we are offering which may be of interest to you. Any other use is
strictly prohibited. We do not sell information about you or any of our fund
shareholders to anyone.
HOW WE SAFEGUARD YOUR INFORMATION. We restrict access to nonpublic personal
information about you to only those persons who need it to provide services to
you or who are permitted by law to receive it. We maintain physical, electronic
and procedural safeguards to protect the confidentiality of all nonpublic
personal information we have about you.
If you have any questions regarding our Privacy Policy, please contact us at
1-800-437-1020.
[Logo of KPMG LLP: the letters KPMG in front of four black rectangles]
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Trustees and Shareholders of
Hawaiian Tax-Free Trust:
We have audited the accompanying statement of assets and liabilities of
Hawaiian Tax-Free Trust (the "Trust"), including the statement of investments,
as of March 31, 2004, and the related statement of operations for the year then
ended, the statements of changes in net assets for each of the two years in the
period then ended, and the financial highlights for each of the five years in
the period then ended. These financial statements and financial highlights are
the responsibility of the Trust's management. Our responsibility is to express
an opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with the standards of the Public
Company Accounting Oversight Board (United States). Those standards require that
we plan and perform the audit to obtain reasonable assurance about whether the
financial statements and financial highlights are free of material misstatement.
An audit includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements and financial highlights. Our
procedures included confirmation of securities owned as of March 31, 2004, by
correspondence with the custodian. An audit also includes assessing the
accounting principles used, and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
Hawaiian Tax-Free Trust as of March 31, 2004, the results of its operations for
the year then ended, the changes in its net assets for each of the two years in
the period then ended, and the financial highlights for each of the five years
in the period then ended, in conformity with U.S. generally accepted accounting
principles.
KPMG LLP
New York, New York
May 18, 2004
HAWAIIAN TAX-FREE TRUST
STATEMENT OF INVESTMENTS
MARCH 31, 2004
RATING
FACE MOODY'S/
AMOUNT MUNICIPAL BONDS (98.8%) S&P VALUE
- --------------- -------------------------------------------------------- --------- -------------
HAWAII (96.3%)
--------------------------------------------------------
Board of Regents, University of Hawaii, University
System Revenue Bonds, Series A, FGIC Insured,
$ 1,805,000 5.500%, 07/15/14.................................. Aaa/AAA $ 2,079,198
1,090,000 5.500%, 07/15/16.................................. Aaa/AAA 1,248,802
2,000,000 5.500%, 07/15/19.................................. Aaa/AAA 2,242,440
2,000,000 5.500%, 07/15/21.................................. Aaa/AAA 2,219,920
2,000,000 5.500%, 07/15/22.................................. Aaa/AAA 2,205,060
3,000,000 5.500%, 07/15/29.................................. Aaa/AAA 3,252,660
Board of Regents, University of Hawaii, University
System Revenue Bonds, Series B, FSA Insured,
1,110,000 5.250%, 10/01/12.................................. Aaa/AAA 1,253,368
1,000,000 5.250%, 10/01/13.................................. Aaa/AAA 1,124,920
1,140,000 5.250%, 10/01/14.................................. Aaa/AAA 1,268,045
1,395,000 5.250%, 10/01/15.................................. Aaa/AAA 1,551,686
Board of Regents, University of Hawaii, University
System Revenue Bonds, Series I, Prerefunded
10/01/04 @ 102, FGIC Insured,
950,000 5.300%, 10/01/08.................................. Aaa/AAA 985,863
2,825,000 5.500%, 10/01/18.................................. Aaa/AAA 2,944,498
City and County of Honolulu, Hawaii Board of Water
Supply & System Revenue Bonds, Series A,
FGIC Insured,
1,000,000 3.000%, 07/01/11.................................. Aaa/AAA 995,460
600,000 4.000%, 07/01/13.................................. Aaa/AAA 628,314
1,365,000 4.000%, 07/01/14.................................. Aaa/AAA 1,413,717
2,700,000 4.750%, 07/01/16.................................. Aaa/AAA 2,918,133
2,805,000 4.750%, 07/01/17.................................. Aaa/AAA 2,997,199
2,970,000 4.750%, 07/01/18.................................. Aaa/AAA 3,145,230
3,095,000 4.750%, 07/01/19.................................. Aaa/AAA 3,253,712
3,265,000 4.750%, 07/01/20.................................. Aaa/AAA 3,413,002
1,230,000 5.000%, 07/01/21.................................. Aaa/AAA 1,313,234
City and County of Honolulu, Hawaii Board of Water
Supply & System Revenue Bonds, FSA Insured,
3,000,000 5.125%, 07/01/21.................................. Aaa/AAA 3,175,320
5,450,000 5.250%, 07/01/23.................................. Aaa/AAA 5,786,211
City and County of Honolulu, Hawaii General
Obligation Bonds, Public Refunding and
Improvements Bonds, Series A, Weekly Reset VRDN(1),
LOC: Landesbank Hessen-Thuringen Girozentrale,
$ 6,150,000 1.000%, 01/01/13.................................. VMIG1/A-1+ $ 6,150,000
1,710,000 1.000%, 01/01/18.................................. VMIG1/A-1+ 1,710,000
City and County of Honolulu, Hawaii General
Obligation Bonds, Series A, Escrowed to Maturity,
FGIC Insured,
3,995,000 5.750%, 04/01/11.................................. Aaa/NR 4,705,071
City and County of Honolulu, Hawaii General
Obligation Bonds, Series A, Escrowed to Maturity,
FGIC Insured,
4,110,000 6.000%, 01/01/11.................................. Aaa/AAA 4,879,104
920,000 6.000%, 01/01/12.................................. Aaa/AAA 1,098,784
775,000 5.750%, 04/01/13.................................. Aaa/AAA 921,653
City and County of Honolulu, Hawaii General
Obligation Bonds, Series A, Escrowed to Maturity,
MBIA Insured,
1,355,000 6.000%, 11/01/09.................................. Aaa/AAA 1,607,979
410,000 6.000%, 11/01/10.................................. Aaa/AAA 490,426
City and County of Honolulu, Hawaii General
Obligation Bonds, Series A, FGIC Insured,
9,970,000 7.350%, 07/01/07.................................. Aaa/AAA 11,696,105
3,600,000 7.350%, 07/01/08.................................. Aaa/AAA 4,347,900
1,715,000 6.000%, 01/01/11.................................. Aaa/AAA 2,024,420
5,000 5.750%, 04/01/11.................................. Aaa/AAA 5,868
1,580,000 6.000%, 01/01/12.................................. Aaa/AAA 1,876,297
3,025,000 5.750%, 04/01/13.................................. Aaa/AAA 3,571,618
City and County of Honolulu, Hawaii General
Obligation Bonds, Series A, FSA Insured,
2,500,000 5.000%, 09/01/09.................................. Aaa/AAA 2,815,475
3,500,000 5.375%, 09/01/18.................................. Aaa/AAA 3,878,980
2,000,000 5.125%, 09/01/20.................................. Aaa/AAA 2,129,720
City and County of Honolulu, Hawaii General
Obligation Bonds, Series A, MBIA Insured,
$ 860,000 6.000%, 11/01/09.................................. Aaa/AAA $ 1,016,133
1,090,000 6.000%, 11/01/10.................................. Aaa/AAA 1,298,027
3,000,000 5.250%, 03/01/15.................................. Aaa/AAA 3,391,260
2,280,000 5.000%, 11/01/15.................................. Aaa/AAA 2,423,207
4,600,000 5.250%, 03/01/16.................................. Aaa/AAA 5,170,032
4,780,000 5.250%, 03/01/17.................................. Aaa/AAA 5,326,067
2,000,000 5.250%, 03/01/18.................................. Aaa/AAA 2,210,920
City and County of Honolulu, Hawaii General
Obligation Bonds, Series A, Prerefunded
09/01/06 @ 102, FGIC Insured,
440,000 5.625%, 09/01/14.................................. Aaa/AAA 490,983
City and County of Honolulu, Hawaii General
Obligation Bonds, Series B, FGIC Insured,
600,000 5.125%, 07/01/11.................................. Aaa/AAA 673,632
7,310,000 5.500%, 10/01/11.................................. Aaa/AAA 8,490,346
930,000 5.000%, 11/01/13.................................. Aaa/AAA 1,014,137
1,060,000 5.000%, 11/01/14.................................. Aaa/AAA 1,150,969
2,595,000 5.125%, 07/01/15.................................. Aaa/AAA 2,819,338
530,000 5.000%, 11/01/16.................................. Aaa/AAA 573,031
1,400,000 5.000%, 11/01/17.................................. Aaa/AAA 1,510,194
4,490,000 5.000%, 07/01/19.................................. Aaa/AAA 4,773,768
1,395,000 5.000%, 07/01/20.................................. Aaa/AAA 1,478,393
City and County of Honolulu, Hawaii General
Obligation Bonds, Series C, FGIC Insured,
7,750,000 5.125%, 07/01/14.................................. Aaa/AAA 8,517,793
2,510,000 5.000%, 07/01/18.................................. Aaa/AAA 2,679,726
City and County of Honolulu, Hawaii General
Obligation Bonds, Water Utility Refunding and
Improvement, Escrowed to Maturity, FGIC Insured,
1,125,000 6.000%, 12/01/12.................................. Aaa/AAA 1,360,508
1,050,000 6.000%, 12/01/15.................................. Aaa/AAA 1,290,356
City and County of Honolulu, Hawaii Improvement
District No. 261 (Halawa Business Park), Special
Assessment Bonds,
$ 365,000 6.700%, 10/15/04.................................. NR/NR(2) $ 374,271
355,000 6.800%, 10/15/05.................................. NR/NR(2) 371,021
290,000 6.900%, 10/15/06.................................. NR/NR(2) 302,685
City and County of Honolulu, Hawaii Multifamily
Revenue Bonds (Moanalua Hillside Apartments),
Weekly Reset VRDN(1), AMT, FNMA Insured,
3,500,000 1.070%, 09/15/32.................................. NR/A-1+ 3,500,000
City and County of Honolulu, Hawaii Wastewater
Systems Revenue Bonds, FGIC Insured,
1,395,000 5.000%, 07/01/12.................................. Aaa/NR 1,552,691
City and County of Honolulu, Hawaii Wastewater
Systems Revenue Bonds, Junior Series, FGIC Insured,
2,000,000 5.250%, 07/01/13.................................. Aaa/AAA 2,233,680
1,000,000 5.250%, 07/01/15.................................. Aaa/AAA 1,102,500
2,400,000 5.250%, 07/01/16.................................. Aaa/AAA 2,636,256
2,000,000 5.250%, 07/01/18.................................. Aaa/AAA 2,178,760
5,055,000 5.000%, 07/01/23.................................. Aaa/AAA 5,232,532
City and County of Honolulu, Hawaii Wastewater
Systems Revenue Bonds, Senior Series,
AMBAC Insured,
1,810,000 5.500%, 07/01/11.................................. Aaa/NR 2,093,464
1,065,000 5.500%, 07/01/16.................................. Aaa/NR 1,201,554
3,000,000 5.500%, 07/01/17.................................. Aaa/NR 3,378,540
2,310,000 5.500%, 07/01/18.................................. Aaa/NR 2,590,503
2,000,000 5.250%, 07/01/19.................................. Aaa/NR 2,164,800
County of Hawaii, Hawaii General Obligation
Bonds, Series A, FGIC Insured,
1,700,000 5.450%, 05/01/07.................................. Aaa/AAA 1,883,549
3,170,000 5.500%, 05/01/08.................................. Aaa/AAA 3,576,616
2,500,000 5.550%, 05/01/09.................................. Aaa/AAA 2,862,350
1,900,000 5.000%, 02/01/11.................................. Aaa/AAA 2,035,698
4,905,000 5.600%, 05/01/11.................................. Aaa/AAA 5,688,378
1,970,000 5.100%, 02/01/12.................................. Aaa/AAA 2,111,623
1,000,000 5.600%, 05/01/12.................................. Aaa/AAA 1,162,570
County of Hawaii, Hawaii General Obligation
Bonds, Series A, FGIC Insured (continued)
$ 1,000,000 5.600%, 05/01/13.................................. Aaa/AAA $ 1,170,480
2,205,000 5.200%, 02/01/14.................................. Aaa/AAA 2,346,848
2,440,000 5.200%, 02/01/16.................................. Aaa/AAA 2,595,599
1,465,000 5.500%, 07/15/16.................................. Aaa/AAA 1,665,837
County of Hawaii, Hawaii General Obligation
Bonds, Series A, FSA Insured,
1,000,000 5.375%, 05/15/13.................................. Aaa/AAA 1,117,800
1,000,000 5.400%, 05/15/15.................................. Aaa/AAA 1,109,940
1,000,000 5.000%, 07/15/16.................................. Aaa/AAA 1,096,310
1,000,000 5.000%, 07/15/17.................................. Aaa/AAA 1,086,510
1,470,000 5.625%, 05/15/18.................................. Aaa/AAA 1,669,406
1,000,000 5.000%, 07/15/18.................................. Aaa/AAA 1,081,650
County of Kauai, Hawaii General Obligation
Bonds, Escrowed to Maturity,
615,000 9.000%, 08/01/04.................................. A1/NR 630,670
665,000 9.000%, 08/01/05.................................. A1/NR 733,103
County of Kauai, Hawaii General Obligation
Bonds, Series A, Prerefunded 08/01/10 @ 100,
FGIC Insured,
1,000,000 6.125%, 08/01/13.................................. Aaa/AAA 1,196,510
1,010,000 6.250%, 08/01/14.................................. Aaa/AAA 1,215,757
1,000,000 6.250%, 08/01/15.................................. Aaa/AAA 1,203,720
1,000,000 6.250%, 08/01/16.................................. Aaa/AAA 1,203,720
1,275,000 6.250%, 08/01/17.................................. Aaa/AAA 1,534,743
County of Kauai, Hawaii General Obligation
Refunding Bonds, Series A, MBIA Insured,
1,010,000 5.700%, 02/01/07.................................. Aaa/AAA 1,035,078
1,125,000 5.625%, 08/01/13.................................. Aaa/AAA 1,309,748
1,620,000 5.625%, 08/01/14.................................. Aaa/AAA 1,874,551
1,035,000 5.625%, 08/01/17.................................. Aaa/AAA 1,186,721
1,000,000 5.625%, 08/01/18.................................. Aaa/AAA 1,144,490
2,360,000 5.500%, 08/01/20.................................. Aaa/AAA 2,655,944
County of Kauai, Hawaii General Obligation
Refunding Bonds, Series B & C, AMBAC Insured,
$ 435,000 5.900%, 08/01/08.................................. Aaa/AAA $ 501,194
1,355,000 5.900%, 08/01/08.................................. Aaa/AAA 1,561,190
1,300,000 5.950%, 08/01/10.................................. Aaa/AAA 1,535,703
County of Maui, Hawaii General Obligation
Bonds, Series A, FGIC Insured,
1,130,000 5.250%, 09/01/13.................................. Aaa/AAA 1,254,526
1,200,000 5.125%, 03/01/14.................................. Aaa/AAA 1,311,876
1,265,000 5.250%, 09/01/15.................................. Aaa/AAA 1,402,202
1,050,000 5.125%, 03/01/16.................................. Aaa/AAA 1,146,663
1,335,000 5.250%, 09/01/16.................................. Aaa/AAA 1,477,471
2,590,000 5.250%, 03/01/18.................................. Aaa/AAA 2,842,344
County of Maui, Hawaii General Obligation
Bonds, Series A, MBIA Insured,
1,105,000 5.250%, 03/01/15.................................. Aaa/AAA 1,235,081
1,205,000 5.250%, 03/01/16.................................. Aaa/AAA 1,339,827
1,000,000 5.250%, 03/01/18.................................. Aaa/AAA 1,095,320
1,750,000 5.250%, 03/01/19.................................. Aaa/AAA 1,905,610
County of Maui, Hawaii General Obligation
Bonds, Series A, MBIA Insured,
1,000,000 5.500%, 03/01/18.................................. NR/AAA 1,126,280
County of Maui, Hawaii General Obligation
Bonds, Series B, FGIC Insured,
1,065,000 5.250%, 03/01/11.................................. Aaa/AAA 1,212,002
County of Maui, Hawaii General Obligation
Bonds, Series B, MBIA Insured,
300,000 5.375%, 09/01/13.................................. Aaa/AAA 345,360
County of Maui, Hawaii General Obligation Bonds,
Series C, FGIC Insured,
1,020,000 5.250%, 03/01/16.................................. Aaa/AAA 1,121,398
1,000,000 5.250%, 03/01/17.................................. Aaa/AAA 1,094,940
1,250,000 5.250%, 03/01/20.................................. Aaa/AAA 1,343,425
County of Maui, Hawaii General Obligation
Refunding Bonds, FGIC Insured,
2,045,000 5.125%, 12/15/11.................................. Aaa/AAA 2,075,000
County of Maui, Hawaii General Obligation
Refunding Bonds, Series A, FGIC Insured,
$ 1,000,000 5.000%, 03/01/10.................................. Aaa/AAA $ 1,095,250
County of Maui, Hawaii General Obligation
Refunding Bonds, Series B, MBIA Insured,
1,445,000 5.375%, 09/01/12.................................. Aaa/AAA 1,664,626
Department of Budget and Finance of the State of
Hawaii Special Purpose Revenue Bonds (Hawaiian
Electric Company, Inc.), Series A, AMBAC Insured,
2,965,000 5.500%, 12/01/14.................................. Aaa/AAA 3,386,178
Department of Budget and Finance of the State of
Hawaii Special Purpose Revenue Bonds (Hawaiian
Electric Company, Inc.), Series A, MBIA Insured,
3,125,000 4.950%, 04/01/12.................................. Aaa/AAA 3,486,813
Department of Budget and Finance of the State of
Hawaii Special Purpose Revenue Bonds (Hawaiian
Electric Company, Inc.), Series A-AMT,
AMBAC Insured,
1,000,000 5.100%, 09/01/32.................................. Aaa/AAA 1,019,810
Department of Budget and Finance of the State of
Hawaii Special Purpose Revenue Bonds (Hawaiian
Electric Company, Inc.), Series D-AMT,
AMBAC Insured,
2,500,000 6.150%, 01/01/20.................................. Aaa/AAA 2,864,650
Department of Budget and Finance of the State of
Hawaii Special Purpose Revenue Bonds (Hawaiian
Electric Company, Inc., and Subsidiaries Projects),
Series A-AMT, MBIA Insured,
13,000,000 6.600%, 01/01/25.................................. Aaa/AAA 13,582,789
5,700,000 5.650%, 10/01/27.................................. Aaa/AAA 6,209,922
Department of Budget and Finance of the State of
Hawaii Special Purpose Revenue Bonds (Hawaiian
Electric Company, Inc., and Subsidiaries Projects),
Series B-AMT, XL Capital Insured,
1,000,000 5.000%, 12/01/22.................................. Aaa/AAA 1,031,400
Department of Budget and Finance of the State of
Hawaii Special Purpose Revenue Bonds (Kapiolani
Health Care System), MBIA Insured,
$ 1,000,000 6.300%, 07/01/08.................................. Aaa/AAA $ 1,022,570
1,000,000 6.000%, 07/01/11.................................. Aaa/AAA 1,103,680
6,000,000 6.400%, 07/01/13.................................. Aaa/AAA 6,136,860
1,000,000 6.200%, 07/01/16.................................. Aaa/AAA 1,106,860
1,000,000 6.250%, 07/01/21.................................. Aaa/AAA 1,107,940
Department of Budget and Finance of the State of
Hawaii Special Purpose Revenue Bonds (St. Francis
Medical Centers), FSA Insured,
17,000,000 6.500%, 07/01/22.................................. Aaa/AAA 17,222,189
Department of Budget and Finance of the State of
Hawaii Special Purpose Revenue Bonds (The
Evangelical Lutheran Good Samaritan Society),
AMBAC Insured,
715,000 4.700%, 11/01/06.................................. Aaa/AAA 768,382
Department of Budget and Finance of the State of
Hawaii Special Purpose Revenue Bonds (The
Queen's Health System), Series A, Prerefunded
07/01/06 @ 102,
5,000,000 6.050%, 07/01/16.................................. A1/A+ 5,601,550
8,625,000 6.000%, 07/01/20.................................. A1/A+ 9,653,185
3,500,000 5.750%, 07/01/26.................................. A1/A+ 3,898,055
Department of Budget and Finance of the State of
Hawaii Special Purpose Revenue Bonds (The
Queen's Health System), Series A, Weekly Reset
VRDN(1), SPA: Bank of Nova Scotia,
8,025,000 1.080%, 07/01/26.................................. VMIG1/A-1 8,025,000
Department of Budget and Finance of the State of
Hawaii Special Purpose Revenue Bonds (The
Queen's Health System), Series B, MBIA Insured,
8,000,000 5.250%, 07/01/23.................................. Aaa/AAA 8,537,280
Department of Hawaiian Home Lands (State of
Hawaii) Revenue Bonds,
1,310,000 4.150%, 07/01/08.................................. A3/NR 1,393,120
1,525,000 4.350%, 07/01/10.................................. A3/NR 1,629,447
1,245,000 4.450%, 07/01/11.................................. A3/NR 1,319,476
Hawaii Community Development Authority
Improvement District Revenue Bonds (Kakaako
Community Development District 3),
$ 160,000 7.300%, 07/01/04.................................. NR/NR(2) $ 162,395
1,360,000 7.400%, 07/01/10.................................. NR/NR(2) 1,386,194
Hawaii Community Development Authority
Improvement District Special Assessment Bonds
(Kakaako Community Development District 1),
255,000 5.300%, 07/01/04.................................. NR/NR(2) 257,604
200,000 5.400%, 07/01/05.................................. NR/NR(2) 203,820
Hawaii Community Development Authority
Improvement District Special Assessment Bonds
(Kakaako Community Development District 2),
395,000 5.300%, 07/01/04.................................. NR/NR(2) 399,033
420,000 5.400%, 07/01/05.................................. NR/NR(2) 428,022
435,000 5.500%, 07/01/06.................................. NR/NR(2) 442,556
465,000 5.600%, 07/01/07.................................. NR/NR(2) 473,254
365,000 5.700%, 07/01/08.................................. NR/NR(2) 371,233
Housing Finance and Development Corporation
(State of Hawaii) Affordable Rental Housing
Program Revenue Bonds, Series A, Weekly Reset
VRDN(1), LOC: BNP Paribas,
12,635,000 1.150%, 07/01/27.................................. VMIG1/NR 12,635,000
Housing Finance and Development Corporation
(State of Hawaii) Rental Housing Revenue Bonds,
Series 89A, Weekly Reset VRDN(1), LOC:
BNP Paribas,
2,600,000 0.980%, 07/01/24.................................. VMIG1/NR 2,600,000
Housing Finance and Development Corporation
(State of Hawaii) Rental Housing System Revenue
Bonds, Series A,
2,000,000 5.600%, 07/01/12.................................. A2/NR 2,025,340
3,000,000 5.700%, 07/01/18.................................. A2/NR 3,034,410
Housing Finance and Development Corporation
(State of Hawaii) Single Family Mortgage Revenue
Bonds, Series A-AMT, FNMA Insured,
$ 3,020,000 5.300%, 07/01/22.................................. Aaa/AAA $ 3,099,607
2,610,000 6.000%, 07/01/26.................................. Aaa/AAA 2,657,763
1,885,000 5.400%, 07/01/30.................................. Aaa/AAA 1,922,813
14,480,000 5.750%, 07/01/30.................................. Aaa/AAA 14,879,937
Housing Finance and Development Corporation
(State of Hawaii) Single Family Mortgage Revenue
Bonds, Series B, FNMA Insured,
2,500,000 5.700%, 07/01/13.................................. Aaa/AAA 2,558,500
9,350,000 5.450%, 07/01/17.................................. Aaa/AAA 9,684,729
16,750,000 5.850%, 07/01/17.................................. Aaa/AAA 17,126,037
6,800,000 5.300%, 07/01/28.................................. Aaa/AAA 6,947,832
4,025,000 7.000%, 07/01/31.................................. Aaa/AAA 4,073,542
Housing Finance and Development Corporation
(State of Hawaii) University of Hawaii Faculty
Housing Project, Revenue Bonds, AMBAC Insured,
2,125,000 5.650%, 10/01/16.................................. Aaa/AAA 2,273,835
4,000,000 5.700%, 10/01/25.................................. Aaa/AAA 4,266,480
State of Hawaii Airport System Revenue Bonds, AMT,
FGIC Insured,
4,000,000 5.750%, 07/01/17.................................. Aaa/AAA 4,459,880
6,000,000 5.625%, 07/01/18.................................. Aaa/AAA 6,599,220
6,000,000 5.250%, 07/01/21.................................. Aaa/AAA 6,278,760
State of Hawaii Airport System Revenue Bonds, AMT,
Second Series, Escrowed to Maturity, MBIA Insured,
6,455,000 6.900%, 07/01/12.................................. Aaa/AAA 7,813,326
State of Hawaii Airport System Revenue Bonds,
Series B-AMT, FGIC Insured,
3,000,000 8.000%, 07/01/10.................................. Aaa/AAA 3,790,890
State of Hawaii General Obligation Bonds,
Series BW, FSA Insured,
1,000,000 6.400%, 03/01/09.................................. Aaa/AAA 1,182,010
State of Hawaii General Obligation Bonds,
Series BZ, FGIC Insured,
$ 3,700,000 6.000%, 10/01/11.................................. Aaa/AAA $ 4,420,390
3,500,000 6.000%, 10/01/12.................................. Aaa/AAA 4,197,515
State of Hawaii General Obligation Bonds, Series
CA, FGIC Insured,
2,000,000 5.750%, 01/01/11.................................. Aaa/AAA 2,330,560
State of Hawaii General Obligation Bonds, Series CC,
590,000 5.125%, 02/01/07.................................. Aa3/AA- 644,245
State of Hawaii General Obligation Bonds, Series CH,
1,000,000 4.750%, 11/01/11.................................. Aa3/AA- 1,116,300
State of Hawaii General Obligation Bonds, Series
CH, FGIC Insured,
5,000,000 6.000%, 11/01/07.................................. Aaa/AAA 5,719,600
3,390,000 6.000%, 11/01/08.................................. Aaa/AAA 3,948,977
State of Hawaii General Obligation Bonds, Series
CL, FGIC Insured,
2,305,000 6.000%, 03/01/11.................................. Aaa/AAA 2,730,180
State of Hawaii General Obligation Bonds, Series
CM, FGIC Insured,
3,000,000 6.500%, 12/01/15.................................. Aaa/AAA 3,795,810
State of Hawaii General Obligation Bonds, Series
CN, FGIC Insured,
4,000,000 5.250%, 03/01/10.................................. Aaa/AAA 4,421,360
4,000,000 5.250%, 03/01/13.................................. Aaa/AAA 4,421,360
3,000,000 5.500%, 03/01/14.................................. Aaa/AAA 3,337,020
7,950,000 5.250%, 03/01/15.................................. Aaa/AAA 8,775,528
1,000,000 5.250%, 03/01/17.................................. Aaa/AAA 1,100,850
State of Hawaii General Obligation Bonds, Series
CP, FGIC Insured,
5,000,000 5.000%, 10/01/13.................................. Aaa/AAA 5,443,450
2,195,000 5.000%, 10/01/14.................................. Aaa/AAA 2,379,709
5,000,000 5.000%, 10/01/15.................................. Aaa/AAA 5,403,350
7,195,000 5.000%, 10/01/17.................................. Aaa/AAA 7,750,526
State of Hawaii General Obligation Bonds, Series
CR, MBIA Insured,
$ 1,000,000 5.250%, 04/01/13.................................. Aaa/AAA $ 1,108,810
5,000,000 5.000%, 04/01/16.................................. Aaa/AAA 5,405,900
16,000,000 5.000%, 04/01/17.................................. Aaa/AAA 17,255,039
State of Hawaii General Obligation Bonds, Series
CS, MBIA Insured,
5,000,000 5.000%, 04/01/07.................................. Aaa/AAA 5,460,500
5,500,000 5.000%, 04/01/09.................................. Aaa/AAA 6,143,885
State of Hawaii General Obligation Bonds, Series
CU, MBIA Insured,
1,250,000 5.750%, 10/01/08.................................. Aaa/AAA 1,439,263
1,000,000 5.750%, 10/01/09.................................. Aaa/AAA 1,166,280
State of Hawaii General Obligation Bonds, Series
CU, Prerefunded 10/01/10 @ 100, MBIA Insured,
3,000,000 5.600%, 10/01/19.................................. Aaa/AAA 3,510,780
State of Hawaii General Obligation Bonds, Series
CV, FGIC Insured,
13,000,000 5.000%, 08/01/20.................................. Aaa/AAA 13,775,059
1,015,000 5.000%, 08/01/21.................................. Aaa/AAA 1,066,978
5,000,000 5.250%, 08/01/21.................................. Aaa/AAA 5,366,800
State of Hawaii General Obligation Bonds, Series
CX, FSA Insured,
2,000,000 5.250%, 02/01/12.................................. Aaa/AAA 2,275,720
8,725,000 5.500%, 02/01/13.................................. Aaa/AAA 10,070,918
500,000 5.000%, 02/01/19.................................. Aaa/AAA 532,235
2,500,000 5.500%, 02/01/21.................................. Aaa/AAA 2,761,975
State of Hawaii General Obligation Bonds, Series
CY, FSA Insured,
2,500,000 5.750%, 02/01/14.................................. Aaa/AAA 2,945,775
2,000,000 5.750%, 02/01/15.................................. Aaa/AAA 2,366,720
State of Hawaii General Obligation Bonds, Series
CZ, FSA Insured,
1,500,000 5.250%, 07/01/12.................................. Aaa/AAA 1,710,585
9,390,000 5.250%, 07/01/16.................................. Aaa/AAA 10,478,488
3,000,000 5.250%, 07/01/17.................................. Aaa/AAA 3,331,950
3,000,000 5.250%, 07/01/18.................................. Aaa/AAA 3,296,160
State of Hawaii Harbor Capital Improvement
Revenue Bonds, AMT, FGIC Insured,
$ 1,000,000 6.250%, 07/01/09.................................. Aaa/AAA $ 1,031,030
1,000,000 6.250%, 07/01/10.................................. Aaa/AAA 1,030,900
3,725,000 6.250%, 07/01/15.................................. Aaa/AAA 3,840,103
10,180,000 6.375%, 07/01/24.................................. Aaa/AAA 10,497,615
State of Hawaii Harbor Capital Improvement
Revenue Bonds, AMT, MBIA Insured,
3,850,000 5.750%, 07/01/17.................................. Aaa/AAA 4,274,617
State of Hawaii Harbor Capital Improvement
Revenue Bonds, FGIC Insured,
1,260,000 6.050%, 07/01/04.................................. Aaa/AAA 1,275,120
1,225,000 6.150%, 07/01/05.................................. Aaa/AAA 1,252,207
State of Hawaii Harbor Capital Improvement
Revenue Bonds, Series B-AMT, AMBAC Insured,
3,000,000 5.500%, 07/01/19.................................. Aaa/AAA 3,284,340
State of Hawaii Harbor System Revenue Bonds,
Series A-AMT, FSA Insured,
2,000,000 5.750%, 07/01/17.................................. Aaa/AAA 2,226,960
1,500,000 5.900%, 07/01/21.................................. Aaa/AAA 1,660,590
State of Hawaii Highway Revenue Bonds,
FGIC Insured,
3,705,000 5.600%, 07/01/13.................................. Aaa/AAA 4,065,497
2,000,000 5.250%, 07/01/16.................................. Aaa/AAA 2,186,320
State of Hawaii Highway Revenue Bonds, FSA Insured,
2,000,000 4.500%, 07/01/10.................................. Aaa/AAA 2,193,320
2,000,000 4.500%, 07/01/11.................................. Aaa/AAA 2,184,300
5,105,000 5.000%, 07/01/12.................................. Aaa/AAA 5,730,260
500,000 5.250%, 07/01/13.................................. Aaa/AAA 560,590
1,530,000 5.375%, 07/01/14.................................. Aaa/AAA 1,719,246
2,720,000 5.500%, 07/01/19.................................. Aaa/AAA 3,051,514
2,000,000 5.375%, 07/01/20.................................. Aaa/AAA 2,177,800
1,110,000 5.500%, 07/01/20.................................. Aaa/AAA 1,244,621
-------------
727,805,354
-------------
PUERTO RICO (2.5%)
-------------------------------------------------------
Puerto Rico Commonwealth Aqueduct and Sewer
Authority Revenue Bonds, MBIA Insured,
$ 2,500,000 5.000%, 07/01/15.................................. Aaa/AAA 2,688,300
Puerto Rico Commonwealth Public Finance Corp.
Revenue Bonds, Series A, MBIA Insured,
5,000,000 5.500%, 08/01/17.................................. Aaa/AAA 5,720,600
Puerto Rico Commonwealth Public Improvement
General Obligation Bonds, MBIA Insured,
1,800,000 5.250%, 07/01/13.................................. Aaa/AAA 2,048,544
Puerto Rico Commonwealth Public Improvement
General Obligation Bonds, Series A, FGIC Insured,
4,000,000 5.500%, 07/01/13.................................. Aaa/AAA 4,692,160
2,000,000 5.500%, 07/01/16.................................. Aaa/AAA 2,349,480
Puerto Rico Commonwealth Public Improvement
General Obligation Bonds, Series CR, FSA Insured,
1,060,000 5.250%, 07/01/17.................................. Aaa/AAA 1,216,297
-------------
18,715,381
-------------
Total Investments (Cost $694,947,036)(3)................ 98.8% 746,520,735
Other assets less liabilities........................... 1.2 8,839,901
------ -------------
Net Assets.............................................. 100.0% $ 755,360,636
====== =============
(1) Variable rate demand notes (VRDNs) are payable upon
demand within the same day for securities with daily
liquidity or seven days for securities with weekly
liquidity.
(2) Any securities not rated (NR) have been determined by
the Investment Adviser to have sufficient quality to be
ranked in the top four credit ratings if a credit rating
were to be assigned by a rating service.
(3) See footnote 4 to the financial statements.
PORTFOLIO ABBREVIATIONS:
AMBAC American Municipal Bond Assurance Corporation
AMT Alternative Minimum Tax
FGIC Financial Guaranty Insurance Company
FNMA Federal National Mortgage Association
FSA Financial Securities Assurance
LOC Letter of Credit
MBIA Municipal Bond Investors Assurance
SPA Standby Bond Purchase Agreement
VRDN Variable Rate Demand Note
See accompanying notes to financial statements.
HAWAIIAN TAX-FREE TRUST
STATEMENT OF ASSETS AND LIABILITIES
MARCH 31, 2004
ASSETS
Investments at value (cost $694,947,036) ....................................................... $746,520,735
Cash ........................................................................................... 464,396
Interest receivable ............................................................................ 9,813,698
Receivable for Trust shares sold ............................................................... 447,841
Other assets ................................................................................... 6,473
------------
Total assets ................................................................................... 757,253,143
------------
LIABILITIES
Payable for Trust shares redeemed .............................................................. 650,572
Dividends payable .............................................................................. 620,994
Distribution fees payable ...................................................................... 291,138
Adviser and Administrator fees payable ......................................................... 257,759
Accrued expenses ............................................................................... 72,044
------------
Total liabilities .............................................................................. 1,892,507
------------
NET ASSETS ........................................................................................ $755,360,636
============
Net Assets consist of:
Capital Stock - Authorized an unlimited number of shares, par value $.01 per share ............. $ 638,643
Additional paid-in capital ..................................................................... 700,623,700
Net unrealized appreciation on investments (note 4) ............................................ 51,573,699
Accumulated net realized gain on investments ................................................... 440,517
Undistributed net investment income ............................................................ 2,084,077
------------
$755,360,636
============
CLASS A
Net Assets ..................................................................................... $693,722,528
============
Capital shares outstanding ..................................................................... 58,653,879
============
Net asset value and redemption price per share ................................................. $ 11.83
============
Offering price per share (100/96 of $11.83 adjusted to nearest cent) ........................... $ 12.32
============
CLASS C
Net Assets ..................................................................................... $ 38,163,982
============
Capital shares outstanding ..................................................................... 3,228,581
============
Net asset value and offering price per share ................................................... $ 11.82
============
Redemption price per share (*a charge of 1% is imposed on the redemption
proceeds of the shares, or on the original price, whichever is lower, if redeemed
during the first 12 months after purchase) .................................................. $ 11.82*
============
CLASS Y
Net Assets ..................................................................................... $ 23,474,126
============
Capital shares outstanding ..................................................................... 1,981,840
============
Net asset value, offering and redemption price per share ....................................... $ 11.84
============
See accompanying notes to financial statements.
HAWAIIAN TAX-FREE TRUST
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED MARCH 31, 2004
INVESTMENT INCOME:
Interest income ................................................................ $34,332,912
Expenses:
Investment Adviser fees (note 3) ............................................... $ 1,040,829
Administrator fees (note 3) .................................................... 1,932,980
Distribution and service fees (note 3) ......................................... 1,731,981
Transfer and shareholder servicing agent fees .................................. 340,483
Trustees' fees and expenses (note 8) ........................................... 156,386
Shareholders' reports and proxy statements ..................................... 140,627
Legal fees ..................................................................... 115,621
Insurance ...................................................................... 65,418
Custodian fees ................................................................. 49,770
Auditing and tax fees .......................................................... 29,225
Registration fees and dues ..................................................... 25,317
Miscellaneous .................................................................. 46,002
-----------
5,674,639
Expenses paid indirectly (note 6) .............................................. (46,675)
-----------
Net expenses ................................................................... 5,627,964
-----------
Net investment income ............................................................... 28,704,948
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain (loss) from securities transactions .......................... 986,153
Change in unrealized appreciation on investments ............................... 4,749,938
-----------
Net realized and unrealized gain (loss) on investments ......................... 5,736,091
-----------
Net change in net assets resulting from operations ............................. $34,441,039
===========
See accompanying notes to financial statements.
HAWAIIAN TAX-FREE TRUST
STATEMENTS OF CHANGES IN NET ASSETS
YEAR ENDED YEAR ENDED
MARCH 31, 2004 MARCH 31, 2003
-------------- --------------
OPERATIONS:
Net investment income ......................................... $ 28,704,948 $ 29,061,836
Net realized gain (loss) from securities transactions ......... 986,153 1,086,092
Change in unrealized appreciation on investments .............. 4,749,938 27,318,482
-------------- --------------
Change in net assets resulting from operations ................ 34,441,039 57,466,410
-------------- --------------
DISTRIBUTIONS TO SHAREHOLDERS (NOTE 10):
Class A Shares:
Net investment income ......................................... (26,573,300) (27,129,722)
Class C Shares:
Net investment income ......................................... (1,134,456) (973,006)
Class Y Shares:
Net investment income ......................................... (997,192) (959,109)
-------------- --------------
Change in net assets from distributions .................... (28,704,948) (29,061,837)
-------------- --------------
CAPITAL SHARE TRANSACTIONS (NOTE 7):
Proceeds from shares sold ..................................... 66,381,406 78,179,467
Reinvested dividends and distributions ........................ 15,988,808 16,030,825
Cost of shares redeemed ....................................... (66,720,092) (56,989,659)
-------------- --------------
Change in net assets from capital share transactions .......... 15,650,122 37,220,633
-------------- --------------
Change in net assets ....................................... 21,386,213 65,625,206
NET ASSETS:
Beginning of period ........................................... 733,974,423 668,349,217
-------------- --------------
End of period* ................................................ $ 755,360,636 $ 733,974,423
============== ==============
* Includes undistributed net investment income of: ............ $ 2,084,077 $ 2,084,077
============== ==============
See accompanying notes to financial statements.
HAWAIIAN TAX-FREE TRUST
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION
Hawaiian Tax-Free Trust (the "Trust"), a non-diversified, open-end
investment company, was organized on May 7, 1984, as a Massachusetts business
trust and commenced operations on February 20, 1985. The Trust is authorized to
issue an unlimited number of shares and, from its inception to April 1, 1996,
offered only one class of shares. On that date, the Trust began offering two
additional classes of shares, Class C and Class Y shares. All shares outstanding
prior to that date were designated as Class A shares and are sold with a
front-payment sales charge and bear an annual distribution fee. Class C shares
are sold with a level-payment sales charge with no payment at time of purchase
but level service and distribution fees from date of purchase through a period
of six years thereafter. A contingent deferred sales charge of 1% is assessed to
any Class C shareholder who redeems shares of this Class within one year from
the date of purchase. Class C Shares, together with a pro-rata portion of all
Class C Shares acquired through reinvestment of dividends and other
distributions paid in additional Class C Shares, automatically convert to Class
A Shares after 6 years. The Class Y shares are only offered to institutions
acting for an investor in a fiduciary, advisory, agency, custodial or similar
capacity and are not offered directly to retail investors. Class Y shares are
sold at net asset value without any sales charge, redemption fees, contingent
deferred sales charge or distribution or service fees. On July 21, 1998, the
Trust established Class I shares, which are offered and sold only through
financial intermediaries and are not offered directly to retail investors. As of
the report date, there were no Class I Shares outstanding. All classes of shares
represent interests in the same portfolio of investments and are identical as to
rights and privileges but differ with respect to the effect of sales charges,
the distribution and/or service fees borne by each class, expenses specific to
each class, voting rights on matters affecting a single class and the exchange
privileges of each class.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies followed by
the Trust in the preparation of its financial statements. The policies are in
conformity with U.S. generally accepted accounting principles.
a) PORTFOLIO VALUATION: Municipal securities which have remaining maturities
of more than 60 days are valued each business day based upon information
provided by a nationally prominent independent pricing service and
periodically verified through other pricing services; in the case of
securities for which market quotations are readily available, securities
are valued at the mean of bid and asked quotations and, in the case of
other securities, at fair value determined under procedures established by
and under the general supervision of the Board of Trustees. Securities
which mature in 60 days or less are valued at amortized cost if their term
to maturity at purchase is 60 days or less, or by amortizing their
unrealized appreciation or depreciation on the 61st day prior to maturity,
if their term to maturity at purchase exceeds 60 days.
b) SECURITIES TRANSACTIONS AND RELATED INVESTMENT INCOME: Securities
transactions are recorded on the trade date. Realized gains and losses from
securities transactions are reported on the identified cost basis. Interest
income is recorded daily on the accrual basis and is adjusted for
amortization of premium and accretion of original issue discount and market
discount on a daily basis.
C) FEDERAL INCOME TAXES: It is the policy of the Trust to qualify as a
regulated investment company by complying with the provisions of the
Internal Revenue Code applicable to certain investment companies. The Trust
intends to make distributions of income and securities profits sufficient
to relieve it from all, or substantially all, Federal income and excise
taxes.
d) ALLOCATION OF EXPENSES: Expenses, other than class-specific expenses, are
allocated daily to each class of shares based on the relative net assets of
each class. Class-specific expenses, which include distribution and service
fees and any other items that are specifically attributed to a particular
class, are charged directly to such class.
e) USE OF ESTIMATES: The preparation of financial statements in conformity
with U.S. generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of assets
and liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of increases and
decreases in net assets from operations during the reporting period. Actual
results could differ from those estimates.
3. FEES AND RELATED PARTY TRANSACTIONS
a) MANAGEMENT ARRANGEMENTS:
The Asset Management Group of Bank of Hawaii (the "Adviser"), serves as
Investment Adviser to the Trust. In this role, under an Investment Advisory
Agreement, the Adviser supervises the Trust's investments and provides various
services to the Trust, for which it is entitled to receive a fee which is
payable monthly and computed as of the close of business each day at the annual
rate of 0.14% of the net assets of the Trust.
Effective January 1, 2004, Aquila Management Corporation, founder of the
Trust, assigned its Administration Agreement to its wholly-owned subsidiary,
Aquila Investment Management LLC (the "Administrator"), which will continue the
administration of the Trust. The transfer was made for reasons of corporate and
tax planning and will have no effect on the management of the Trust or the fees
being paid. Under this Agreement, the Administrator provides all administrative
services, other than those relating to the management of the Trust's
investments. These include providing the office of the Trust and all related
services as well as overseeing the activities of all the various support
organizations to the Trust such as the shareholder servicing agent, custodian,
legal counsel, auditors and distributor. For its services, the Administrator is
entitled to receive a fee which is payable monthly and computed as of the close
of business each day at the annual rate of 0.26% of the net assets of the Trust.
Specific details as to the nature and extent of the services provided by
the Adviser and the Administrator are more fully defined in the Trust's
Prospectus and Statement of Additional Information.
The Adviser and the Administrator each agrees that the above fees shall be
reduced, but not below zero, by an amount equal to its pro-rata portion
(determined on the basis of the respective fees computed as described above) of
the amount, if any, by which the total expenses of the Trust in any fiscal year,
exclusive of taxes, interest and brokerage fees, shall exceed the lesser of (i)
2.5% of the first $30 million of average annual net assets of the Trust plus 2%
of the next $70 million of such assets and 1.5% of its average annual net assets
in excess of $100 million, or (ii) 25% of the Trust's total annual investment
income. The payment of the above fees at the end of any month will be reduced or
postponed so that at no time will there be any accrued but unpaid liability
under this expense limitation. No such reduction in fees was required during the
year ended March 31, 2004.
b) DISTRIBUTION AND SERVICE FEES:
The Trust has adopted a Distribution Plan (the "Plan") pursuant to Rule
12b-1 (the "Rule") under the Investment Company Act of 1940. Under one part of
the Plan, with respect to Class A Shares, the Trust is authorized to make
service fee payments to broker-dealers or others ("Qualified Recipients")
selected by Aquila Distributors, Inc. (the "Distributor"), including, but not
limited to, any principal underwriter of the Trust, with which the Distributor
has entered into written agreements contemplated by the Rule and which have
rendered assistance in the distribution and/or retention of the Trust's shares
or servicing of shareholder accounts. The Trust makes payment of this service
fee at the annual rate of 0.20% of the Trust's average net assets represented by
Class A Shares. For the year ended March 31, 2004, service fees on Class A
Shares amounted to $1,364,791, of which the Distributor retained $82,560.
Under another part of the Plan, the Trust is authorized to make payments
with respect to Class C Shares to Qualified Recipients which have rendered
assistance in the distribution and/or retention of the Trust's Class C shares or
servicing of shareholder accounts. These payments are made at the annual rate of
0.75% of the Trust's net assets represented by Class C Shares and for the year
ended March 31, 2004, amounted to $275,392. In addition, under a Shareholder
Services Plan, the Trust is authorized to make service fee payments with respect
to Class C Shares to Qualified Recipients for providing personal services and/or
maintenance of shareholder accounts. These payments are made at the annual rate
of 0.25% of the Trust's net assets represented by Class C Shares and for the
year ended March 31, 2004, amounted to $91,798. The total of these payments made
with respect to Class C Shares amounted to $367,190 of which the Distributor
retained $68,892.
Specific details about the Plans are more fully defined in the Trust's
Prospectus and Statement of Additional Information.
Under a Distribution Agreement, the Distributor serves as the exclusive
distributor of the Trust's shares. Through agreements between the Distributor
and various broker-dealer firms ("dealers"), the Trust's shares are sold
primarily through the facilities of these dealers having offices within Hawaii,
with the bulk of sales commissions inuring to such dealers. For the year ended
March 31, 2004, total commissions on sales of Class A Shares amounted to
$1,330,367, of which the Distributor received $141,659.
c) OTHER RELATED PARTY TRANSACTIONS:
For the year ended March 31, 2004, the Trust incurred $110,955 of legal
fees allocable to Hollyer Brady Smith & Hines LLP, counsel to the Trust, for
legal services in conjunction with the Trust's ongoing operations. The Secretary
of the Trust is a Partner of Hollyer Brady Smith & Hines LLP.
4. PURCHASES AND SALES OF SECURITIES
During the year ended March 31, 2004, purchases of securities and proceeds
from the sales of securities aggregated $91,964,411 and $53,880,839,
respectively.
At March 31, 2004, aggregate gross unrealized appreciation for all
securities in which there is an excess of market value over tax cost amounted to
$51,904,031 and gross unrealized depreciation for all securities in which there
is an excess of tax cost over market value amounted to $253,985 for a net
unrealized appreciation of $51,650,046. The tax cost of the Trust's securities
at March 31, 2004 equaled $694,870,689.
5. PORTFOLIO ORIENTATION
Since the Trust invests principally and may invest entirely in double
tax-free municipal obligations of issuers within Hawaii, it is subject to
possible risks associated with economic, political, or legal developments or
industrial or regional matters specifically affecting Hawaii and whatever
effects these may have upon Hawaii issuers' ability to meet their obligations.
6. EXPENSES
The Trust has negotiated an expense offset arrangement with its custodian
wherein it receives credit toward the reduction of custodian fees and other
Trust expenses whenever there are uninvested cash balances. The Statement of
Operations reflects the total expenses before any offset, the amount of offset
and the net expenses. It is the general intention of the Trust to invest, to the
extent practicable, some or all of cash balances in income-producing assets
rather than leave cash on deposit.
7. CAPITAL SHARE TRANSACTIONS
Transactions in Capital Shares of the Trust were as follows:
YEAR ENDED YEAR ENDED
MARCH 31, 2004 MARCH 31, 2003
------------------------------- -------------------------------
SHARES AMOUNT SHARES AMOUNT
------------ ------------ ------------ ------------
CLASS A SHARES:
Proceeds from shares sold ................ 4,338,910 $ 51,110,178 4,970,648 $ 57,675,498
Reinvested distributions ................. 1,277,260 15,049,500 1,309,874 15,200,088
Cost of shares redeemed .................. (4,480,901) (52,720,550) (4,252,320) (49,305,178)
------------ ------------ ------------ ------------
Net change ............................... 1,135,269 13,439,128 2,028,202 23,570,408
------------ ------------ ------------ ------------
CLASS C SHARES:
Proceeds from shares sold ................ 935,498 11,030,203 1,086,453 12,622,577
Reinvested distributions ................. 53,038 624,410 44,331 514,367
Cost of shares redeemed .................. (639,318) (7,518,842) (395,979) (4,603,669)
------------ ------------ ------------ ------------
Net change ............................ 349,218 4,135,771 734,805 8,533,275
------------ ------------ ------------ ------------
CLASS Y SHARES:
Proceeds from shares sold ................ 359,896 4,241,025 677,585 7,881,392
Reinvested distributions ................. 26,724 314,898 27,148 316,370
Cost of shares redeemed .................. (553,321) (6,480,700) (263,739) (3,080,812)
------------ ------------ ------------ ------------
Net change ............................ (166,701) (1,924,777) 440,994 5,116,950
------------ ------------ ------------ ------------
Total transactions in Trust
shares ................................... 1,317,786 $ 15,650,122 3,204,001 $ 37,220,633
============ ============ ============ ============
8. TRUSTEES' FEES AND EXPENSES
During the fiscal year ended March 31, 2004 there were 9 Trustees, one of
which is affiliated with the Administrator and is not paid any trustee fees.
Each Trustee was paid during the year fees at the annual average rate of $15,900
for carrying out their responsibilities and attendance at regularly scheduled
quarterly Board Meetings and meetings of the independent trustees held prior to
each quarterly Board Meeting. If additional or special meetings are scheduled
for the Trust, separate meeting fees are paid for each such meeting to those
Trustees in attendance. The Trust also covers Trustees' expenses such as travel,
accomodations, and meals incurred in connection with attendance at regularly
scheduled or special Board Meetings and at the Annual Meeting and outreach
meetings of Shareholders. For the fiscal year ended March 31, 2004, such
meeting-related expenses averaged approximately $3,200 per Trustee.
9. SECURITIES TRADED ON A WHEN-ISSUED BASIS
The Trust may purchase or sell securities on a when-issued basis.
When-issued transactions arise when securities are purchased or sold by the
Trust with payment and delivery taking place in the future in order to secure
what is considered to be an advantageous price and yield to the Trust at the
time of entering into the transaction. Beginning on the date the Trust enters
into a when-issued transaction, cash or other liquid securities are segregated
in an amount equal to or greater than the value of the when-issued transaction.
These transactions are subject to market fluctuations and their current value is
determined in the same manner as for other securities.
10. DISTRIBUTIONS
The Trust declares dividends daily from net investment income and makes
payments monthly in additional shares at the net asset value per share, in cash,
or in a combination of both, at the shareholder's option. Net realized capital
gains, if any, are distributed annually and are taxable.
The Trust intends to maintain, to the maximum extent possible, the
tax-exempt status of interest payments received from portfolio municipal
securities in order to allow dividends paid to shareholders from net investment
income to be exempt from regular Federal and State of Hawaii income taxes.
However, due to differences between financial statement reporting and Federal
income tax reporting requirements, distributions made by the Trust may not be
the same as the Trust's net investment income, and/or net realized securities
gains. Further, a small portion of the dividends may, under some circumstances,
be subject to taxes at ordinary income and/or capital gain rates. For certain
shareholders, some dividend income may, under some circumstances, be subject to
the alternative minimum tax.
The tax character of distributions paid by the Trust during its fiscal
years ended March 31, 2004 and 2003 is as follows:
Distributions paid from
Year Ended March 31,
2004 2003
------------- -------------
Net tax-exempt income $ 28,703,852 $ 29,054,293
Ordinary income 1,096 7,544
------------- -------------
$ 28,704,948 $ 29,061,837
============= =============
As of March 31, 2004, the components of distributable earnings on a tax
basis were as follows:
Undistributed long term capital gain $ 440,517
Unrealized appreciation 51,650,046
Undistributed tax-exempt income 2,007,730
-------------
$ 54,098,293
=============
FEDERAL TAX STATUS OF DISTRIBUTIONS (UNAUDITED)
This information is presented in order to comply with a requirement of the
Internal Revenue Code AND NO ACTION ON THE PART OF SHAREHOLDERS IS REQUIRED.
For the fiscal year ended March 31, 2004, $28,703,852 of dividends paid by
Hawaiian Tax-Free Trust, constituting 99.99% of total dividends paid during
fiscal 2004, were exempt-interest dividends, exempt from regular Federal income
tax and Hawaii state income tax.
Prior to January 31, 2004, shareholders were mailed IRS Form 1099-DIV
which contained information on the status of distributions paid for the 2003
CALENDAR YEAR.
HAWAIIAN TAX-FREE TRUST
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
CLASS A
----------------------------------------------------------
YEAR ENDED MARCH 31,
----------------------------------------------------------
2004 2003 2002 2001 2000
------ ------ ------ ------ ------
Net asset value, beginning of period ....................... $11.73 $11.26 $11.37 $10.94 $11.65
------ ------ ------ ------ ------
Income (loss) from investment operations:
Net investment income + ................................. 0.46 0.48 0.51 0.54 0.56
Net gain (loss) on securities (both realized
and unrealized) ...................................... 0.10 0.47 (0.10) 0.43 (0.65)
------ ------ ------ ------ ------
Total from investment operations ........................ 0.56 0.95 0.41 0.97 (0.09)
------ ------ ------ ------ ------
Less distributions (note 10):
Dividends from net investment income .................... (0.46) (0.48) (0.52) (0.54) (0.55)
Distributions from capital gains ........................ - - - - (0.07)
------ ------ ------ ------ ------
Total distributions ..................................... (0.46) (0.48) (0.52) (0.54) (0.62)
------ ------ ------ ------ ------
Net asset value, end of period ............................. $11.83 $11.73 $11.26 $11.37 $10.94
====== ====== ====== ====== ======
Total return (not reflecting sales charge) ................. 4.83% 8.57% 3.62% 9.14% (0.64)%
Ratios/supplemental data
Net assets, end of period (in millions) ................. $694 $675 $625 $593 $575
Ratio of expenses to average net assets ................. 0.73% 0.71% 0.72% 0.74% 0.73%
Ratio of net investment income to average
net assets ........................................... 3.89% 4.15% 4.51% 4.88% 4.99%
Portfolio turnover rate ................................. 8% 5% 13% 11% 4%
The expense ratios after giving effect to the expense offset for uninvested cash balances were:
Ratio of expenses to average net assets ................. 0.72% 0.70% 0.70% 0.72% 0.71%
- ----------
+ Per share amounts have been calculated using the monthly average shares
method.
See accompanying notes to financial statements.
HAWAIIAN TAX-FREE TRUST
FINANCIAL HIGHLIGHTS (CONTINUED)
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
CLASS C
-----------------------------------------------
YEAR ENDED MARCH 31,
-----------------------------------------------
2004 2003 2002 2001 2000
------ ------ ------ ------ ------
Net asset value, beginning of period .......... $11.73 $11.26 $11.36 $10.93 $11.65
------ ------ ------ ------ ------
Income (loss) from investment operations:
Net investment income + .................... 0.36 0.38 0.41 0.45 0.47
Net gain (loss) on securities (both
realized and unrealized) ................ 0.09 0.48 (0.08) 0.43 (0.66)
------ ------ ------ ------ ------
Total from investment operations ........... 0.45 0.86 0.33 0.88 (0.19)
------ ------ ------ ------ ------
Less distributions (note 10):
Dividends from net investment income ....... (0.36) (0.39) (0.43) (0.45) (0.46)
Distributions from capital gains ........... - - - - (0.07)
------ ------ ------ ------ ------
Total distributions ........................ (0.36) (0.39) (0.43) (0.45) (0.53)
------ ------ ------ ------ ------
Net asset value, end of period ................ $11.82 $11.73 $11.26 $11.36 $10.93
====== ====== ====== ====== ======
Total return (not reflecting sales charge) .... 3.91% 7.70% 2.91% 8.28% (1.53)%
Ratios/supplemental data
Net assets, end of period (in millions) .... $38.2 $33.8 $24.1 $15.0 $11.7
Ratio of expenses to average net assets .... 1.54% 1.51% 1.51% 1.54% 1.53%
Ratio of net investment income to
average net assets ....................... 3.08% 3.33% 3.68% 4.06% 4.18%
Portfolio turnover rate .................... 8% 5% 13% 11% 4%
The expense ratios after giving effect to the expense offset for uninvested cash balances were:
Ratio of expenses to average net assets .... 1.52% 1.50% 1.50% 1.51% 1.51%
CLASS Y
-----------------------------------------------
YEAR ENDED MARCH 31,
-----------------------------------------------
2004 2003 2002 2001 2000
------ ------ ------ ------ ------
Net asset value, beginning of period .......... $11.75 $11.28 $11.39 $10.95 $11.67
------ ------ ------ ------ ------
Income (loss) from investment operations:
Net investment income + .................... 0.48 0.50 0.52 0.55 0.58
Net gain (loss) on securities (both
realized and unrealized) ................. 0.09 0.47 (0.09) 0.45 (0.66)
------ ------ ------ ------ ------
Total from investment operations ........... 0.57 0.97 0.43 1.00 (0.08)
------ ------ ------ ------ ------
Less distributions (note 10):
Dividends from net investment income ....... (0.48) (0.50) (0.54) (0.56) (0.57)
Distributions from capital gains ........... - - - - (0.07)
------ ------ ------ ------ ------
Total distributions ........................ (0.48) (0.50) (0.54) (0.56) (0.64)
------ ------ ------ ------ ------
Net asset value, end of period ................ $11.84 $11.75 $11.28 $11.39 $10.95
====== ====== ====== ====== ======
Total return (not reflecting sales charge) .... 4.97% 8.77% 3.80% 9.44% (0.56)%
Ratios/supplemental data
Net assets, end of period (in millions) .... $23.5 $25.2 $19.3 $7.9 $2.9
Ratio of expenses to average net assets .... 0.53% 0.51% 0.52% 0.54% 0.53%
Ratio of net investment income to
average net assets ....................... 4.09% 4.33% 4.69% 5.00% 5.15%
Portfolio turnover rate .................... 8% 5% 13% 11% 4%
The expense ratios after giving effect to the expense offset for uninvested cash balances were:
Ratio of expenses to average net assets .... 0.52% 0.50% 0.50% 0.51% 0.51%
- ----------
+ Per share amounts have been calculated using the monthly average shares
method.
See accompanying notes to financial statements.
ADDITIONAL INFORMATION (UNAUDITED)
TRUSTEES AND OFFICERS(1)
NUMBER OF
POSITIONS PORTFOLIOS OTHER DIRECTORSHIPS
HELD WITH IN FUND HELD BY TRUSTEE
NAME, TRUST AND PRINCIPAL COMPLEX (THE POSITION HELD IS
ADDRESS(2) LENGTH OF OCCUPATION(S) OVERSEEN A DIRECTORSHIP UNLESS
AND DATE OF BIRTH SERVICE(3) DURING PAST 5 YEARS BY TRUSTEE INDICATED OTHERWISE.)
- ----------------- ---------- ------------------- ---------- ---------------------
INTERESTED TRUSTEES(4)
Lacy B. Herrmann Founder, Founder, Chief Executive Officer and Chairman of 11 Director or trustee,
New York, NY Trustee since the Board, Aquila Management Corporation, the Pimco Advisors VIT,
(05/12/29) 1984, and sponsoring organization and parent of the Oppenheimer Quest
Chairman of Manager or Administrator and/or Adviser or Value Funds Group,
the Board of Sub-Adviser to each fund of the Aquila(sm) Group Oppenheimer Small Cap
Trustees, of Funds,(5) Chairman and Chief Executive Value Fund,
1984-2003 Officer of the Manager or Administrator and/or Oppenheimer Midcap
Adviser or Sub-Adviser to each since 2004, and Fund, and Oppenheimer
Founder, Chairman of the Board of Trustees, Rochester Group of
Trustee and (currently or until 1998) President Funds.
of each since its establishment, beginning in
1984, except Chairman of the Board of Trustees
of Hawaiian Tax-Free Trust, Pacific Capital Cash
Assets Trust, Pacific Capital Tax-Free Cash
Assets Trust and Pacific Capital U.S. Government
Securities Cash Assets Trust through 2003;
Director of the Distributor since 1981 and
formerly Vice President or Secretary, 1981-1998;
Trustee Emeritus, Brown University and active in
university, school and charitable organizations.
NON-INTERESTED TRUSTEES
Theodore T. Mason Chairman since Executive Director, East Wind Power Partners LTD 5 Trustee, Pimco
New York, NY 2004 and since 1994 and Louisiana Power Partners, Advisors VIT.
(11/24/35) Trustee since 1999-2003; Treasurer, Alumni Association of SUNY
1984 Maritime College since 2004 (President,
2002-2003; First Vice President, 2000-2001,
Second Vice President, 1998-2000) and director
of the same organization since 1997; Director,
STCM Management Company, Inc., since 1973; twice
national officer of Naval Reserve Association,
commanding officer of four naval reserve units
and Captain, USNR (Ret); director, The Navy
League of the United States New York Council
since 2002; trustee, The Maritime Industry
Museum at Fort Schuyler and the Maritime College
at Fort Schuyler Foundation, Inc. since 2000.
Thomas W. Courtney Trustee since President, Courtney Associates, Inc., a venture 5 Chairman of the Board
Sewickley, PA 1984 capital firm, since 1988. of Oppenheimer Quest
(08/17/33) Value Funds Group,
Oppenheimer Small Cap
Value Fund,
Oppenheimer Midcap
Fund, and Oppenheimer
Rochester Group of
Funds; Trustee of
Pimco Advisors VIT.
Richard W. Gushman, II Trustee since President and Chief Executive Officer, OKOA, 4 Trustee, Pacific
Honolulu, HI 1992 Inc., a diversified Hawaii-based real estate Capital Funds, which
(02/28/46) organization with activities in the western U.S. includes 11 bond and
and the Pacific Basin, since 1972; Managing stock funds;
Partner of Summit Financial Resources, a Salt director, Outrigger
Lake City, Utah-based financial services Hotels since 2000;
company; trustee, the Estate of James Campbell director, Servco
since 2000 and Chairman of the Board of Trustees Pacific, Inc. and
since 2002; trustee, University of Hawaii Oceanic Time-Warner
Foundation and Hawaii Pacific University since since 1998; director,
1997; director, United Way of America since American Savings Bank
1998; board member of the Boys & Girls Club of since 2002.
Honolulu, Aloha United Way, and other charitable
and civic organizations.
Stanley W. Hong Trustee since President, Waste Management of Hawaii, Inc. 4 Trustee, Pacific
Honolulu, HI 1992 since 2002; Corporate Vice President, Hawaii Capital Funds, which
(04/05/36) Area, Waste Management, Inc. since 2002; includes 11 bond and
Trustee, The King William Charles Lunalilo Trust stock funds;
Estate since 2001; President and Chief Executive director, First
Officer, The Chamber of Commerce of Hawaii, Insurance Co. of
1996-2001; director, Hawaii Public Television Hawaii, Ltd., Lanilou
Foundation since 1998; Regent, Chaminade Properties, Ltd.
University of Honolulu; Chair - trustees, Heald
College; trustee, the Nature Conservancy of
Hawaii; and director of other corporate and
community organizations.
Russell K. Okata Trustee since Executive Director, Hawaii Government Employees 4 Trustee, Pacific
Honolulu, HI 1992 Association AFSCME Local 152, AFL-CIO since Capital Funds, which
(03/22/44) 1981; International Vice President, American includes 11 bond and
Federation of State, County and Municipal stock funds;
Employees, AFL-CIO since 1981; director of Chairman, Royal State
various civic and charitable organizations. Group.
Douglas Philpotts Trustee since Retired; formerly director, Chairman of the 4 Trustee, Pacific
Honolulu, HI 1992 Board and President of Hawaiian Trust Company, Capital Funds, which
(11/21/31) Limited; present or former director of various includes 11 bond and
Hawaii-based civic and charitable organizations. stock funds.
Oswald K. Stender Trustee since Director, Hawaiian Electric Industries, Inc., a 4 Trustee, Pacific
Honolulu, HI 1992 public utility holding company, since 1993; Capital Funds, which
(10/08/31) trustee, the Bernice Pauahi Bishop Estate includes 11 bond and
1990-1999; trustee, Office of Hawaiian Affairs stock funds;
and a member or trustee of several community director, Grace
organizations. Pacific Corporation,
an asphalt paving
company.
OFFICERS
Diana P. Herrmann President since Vice Chair of Aquila Management Corporation, N/A N/A
New York, NY 1998 and Vice Founder of the Aquila(sm) Group of Funds and
(02/25/58) Chair since parent of the Administrator, since 2004,
2004 President and Chief Operating Officer since
1997, a Director since 1984, Secretary since
1986 and previously its Executive Vice
President, Senior Vice President or Vice
President, 1986-1997; Vice Chair since 2004 and
President, Chief Operating Officer and Manager
of the Administrator since 2003; Vice Chair,
President, Executive Vice President or Senior
Vice President of funds in the Aquila(sm) Group of
Funds since 1986; Director of the Distributor
since 1997; trustee, Reserve Money-Market Funds,
1999-2000 and Reserve Private Equity Series,
1998-2000; Governor, Investment Company
Institute since 2004, active in charitable and
volunteer organizations.
Charles E. Childs, III Executive Vice Executive Vice President of all Funds since N/A N/A
New York, NY President since 2003; Senior Vice President, corporate
(04/01/57) 2003 development, formerly Vice President, Assistant
Vice President and Associate of the
Administrator's parent since 1987; Senior Vice
President, Vice President or Assistant Vice
President of the Money-Market Funds since 1988.
Sherri Foster Senior Vice Senior Vice President, Hawaiian Tax-Free Trust N/A N/A
Lahaina, HI President since since 1993; Vice President or Assistant Vice
(07/27/50) 1993 President of three Aquila Money-Market Funds;
Registered Representative of the Distributor
since 1985.
Stephen J. Caridi Vice President Vice President of the Distributor since 1995; N/A N/A
New York, NY since 1998 Vice President, Hawaiian Tax-Free Trust since
(05/06/61) 1998; Senior Vice President, Narragansett
Insured Tax-Free Income Fund since 1998, Vice
President 1996-1997; Senior Vice President,
Tax-Free Fund of Colorado since 2004; Assistant
Vice President, Tax-Free Fund For Utah since
1993.
Joseph P. DiMaggio Chief Financial Chief Financial Officer of the Aquila(sm) Group of N/A N/A
New York, NY Officer since Funds since 2003 and Treasurer since 2000;
(11/06/56) 2003 and Controller, Van Eck Global Funds, 1993-2000.
Treasurer since
2000
Edward M. W. Hines Secretary since Partner, Hollyer Brady Smith & Hines LLP, legal N/A N/A
New York, NY 1984 counsel to the Trust, since 1989; Secretary of
(12/16/39) the Aquila(sm) Group of Funds.
Robert W. Anderson Assistant Compliance Officer of the Administrator or its N/A N/A
New York, NY Secretary since predecessor and current parent since 1998 and
(08/23/40) 2000 Assistant Secretary of the Aquila(sm) Group of
Funds since 2000; trustee, Alpha Strategies Fund
since July, 2002; Consultant, The Wadsworth
Group, 1995-1998.
John M. Herndon Assistant Assistant Secretary of the Aquila(sm) Group of N/A N/A
New York, NY Secretary since Funds since 1995 and Vice President of the three
(12/17/39) 1995 Aquila Money-Market Funds since 1990; Vice
President of the Administrator or its predecessor
and current parent since 1990.
Lori A. Vindigni Assistant Assistant Treasurer of the Aquila(sm) Group of N/A N/A
New York, NY Treasurer since Funds since 2000; Assistant Vice President of the
(11/02/66) 2000 Administrator or its predecessor and current
parent since 1998; Fund Accountant for the
Aquila(sm) Group of Funds, 1995-1998.
- ----------
(1) The Trust's Statement of Additional Information includes additional
information about the Trustees and is available, without charge, upon request by
calling 800-437-1020 (toll free).
(2) The mailing address of each Trustee and officer is c/o Hawaiian Tax-Free
Trust, 380 Madison Avenue, Suite 2300, New York, NY 10017.
(3) Each Trustee holds office until the next annual meeting of shareholders or
until his successor is elected and qualifies. The term of office of each officer
is one year.
(4) Mr. Herrmann is an interested person of the Trust as that term is defined in
the 1940 Act as a shareholder and director of the Distributor.
(5) In this material Pacific Capital Cash Assets Trust, Pacific Capital U.S.
Government Securities Cash Assets Trust and Pacific Capital Tax-Free Cash Assets
Trust, each of which is a money-market fund, are called the "Aquila Money-Market
Funds"; Hawaiian Tax-Free Trust, Tax-Free Trust of Arizona, Tax-Free Trust of
Oregon, Tax-Free Fund of Colorado, Churchill Tax-Free Fund of Kentucky,
Narragansett Insured Tax-Free Income Fund and Tax-Free Fund For Utah, each of
which is a tax-free municipal bond fund, are called the "Aquila Bond Funds";
Aquila Rocky Mountain Equity Fund is an equity fund; considered together, these
11 funds are called the "Aquila(sm) Group of Funds."
INFORMATION AVAILABLE (UNAUDITED)
Much of the information that the funds in the Aquila(sm) Group of Funds
produce is automatically sent to you and all other shareholders. Specifically,
you are routinely sent the entire list of portfolio securities of your fund
twice a year in the semi-annual and annual reports you receive. You should know,
however, that we prepare, and have available, portfolio listings at the end of
each quarter.
Whenever you may be interested in seeing a listing of your trust's
portfolio other than in your shareholder reports, please check our website
(www.aquilafunds.com) or call us at 1-800-437-1020.
FOUNDER
AQUILA MANAGEMENT CORPORATION
ADMINISTRATOR
AQUILA INVESTMENT MANAGEMENT LLC
380 Madison Avenue, Suite 2300
New York, New York 10017
INVESTMENT ADVISER
ASSET MANAGEMENT GROUP of
BANK of HAWAII
P.O. Box 3170
Honolulu, Hawaii 96802
BOARD OF TRUSTEES
Theodore T. Mason, Chairman
Lacy B. Herrmann, Founder
Thomas W. Courtney
Richard W. Gushman, II
Stanley W. Hong
Russell K. Okata
Douglas Philpotts
Oswald K. Stender
OFFICERS
Diana P. Herrmann, Vice Chair and President
Sherri Foster, Senior Vice President
Stephen J. Caridi, Vice President
Joseph P. DiMaggio, Chief Financial Officer
and Treasurer
Edward M.W. Hines, Secretary
DISTRIBUTOR
AQUILA DISTRIBUTORS, INC.
380 Madison Avenue, Suite 2300
New York, New York 10017
CUSTODIAN
BANK ONE TRUST COMPANY, N.A.
1111 Polaris Parkway
Columbus, Ohio 43240
TRANSFER AND SHAREHOLDER SERVICING AGENT
PFPC Inc.
760 Moore Road
King of Prussia, Pennsylvania 19406
INDEPENDENT AUDITORS
KPMG LLP
757 Third Avenue
New York, New York 10017
Further information is contained in the Prospectus, which must precede or
accompany this report.
ANNUAL
REPORT
MARCH 31, 2004
HAWAIIAN
TAX-FREE
TRUST
A TAX-FREE INCOME INVESTMENT
[Logo of Hawaiian Tax-Free Trust: a palm tree in front of a circle which has
an island and water within it]
[Logo of the Aquila Group of Funds: an eagle's head]
ONE OF THE
AQUILA(SM) GROUP OF FUNDS
ITEM 2. CODE OF ETHICS.
(a) As of March 31, 2004 (the end of the reporting period) the
Trust has adopted a code of ethics that applies to the Trust's
principal executive officer(s)and principal financial officer(s)
and persons performing similar functions ("Covered Officers") as
defined in the Aquila Group of Funds Code of Ethics for Principal
Executive and Senior Financial Officers under Section 406 of the
Sarbanes-Oxley Act of 2002.;
(f)(1) Pursuant to Item 10(a)(1), a copy of the Trust's Code of
Ethics that applies to the Trust's principal executive officer(s)
and principal financial officer(s) and persons performing similar
functions is included as an exhibit to its annual report on this
Form N-CSR;
(f)(2) The text of the Trust's Code of Ethics that applies to the
Trust's principal executive officer(s) and principal financial
officer(s) and persons performing similar functions has been
posted on its Internet website which can be found at the Trust's
Internet address at aquilafunds.com.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
(a)(1)(ii) The Board of Trustees of the Fund has determined that
it does not have at least one audit committee financial expert
serving on its audit committee. The Fund does not have such a
person serving on the audit committee because none of the persons
currently serving as Trustees happens to have the technical
accounting and auditing expertise included in the definition of
"audit committee financial expert" recently adopted by the Securities
and Exchange Commission in connection with this Form N-CSR, and the
Board has not heretofore deemed it necessary to seek such a person
for election to the Board.
The primary mission of the Board, which is that of oversight over
the operations and affairs of the Fund, confronts the Trustees with
a wide and expanding range of issues and responsibilities. The
Trustees believe that, accordingly, it is essential that the Board's
membership consist of persons with as extensive experience as possible
in fulfilling the duties and responsibilities of mutual fund directors
and audit committee members and, ideally, with extensive experience
and background relating to the economic and financial sectors and
securities in which the Fund invests, including exposure to the
financial and accounting matters commonly encountered with respect
to those sectors and securities. The Board believes that its current
membership satisfies those criteria. It recognizes that it would
also be helpful to have a member with the relatively focused accounting
and auditing expertise reflected in the applicable definition of
"audit committee financial expert," just as additional members with
similarly focused technical expertise in other areas relevant to
the Fund's operations and affairs would also contribute added value.
However, the Board believes that the Fund is better served, and its
assets better employed, by a policy of hiring experts in various
areas, including the specialized area of technical accounting and
auditing matters, if and as the Board identifies the need, rather
than by seeking to expand its numbers by adding technical experts
in the areas constituting its domain of responsibility. The Fund's
Audit Committee Charter explicitly authorizes the Committee to
retain such experts as it deems necessary in fulfilling its duties
under the Charter.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES
a) Audit Fees - The aggregate fees billed for professional services rendered
By the principal accountant for the audit of the Registrant's annual
financial statements were $21,200 in 2004 and $20,600 in 2003
b) Audit Related Fees - There were no amounts billed for audit-related
fees over the
past two years.
c) Tax Fees - The Registrant was billed by the principal accountant $8,270
and $7,392 in 2004 and 2003, respectively, for return preparation.
d) All Other Fees - There were no additional fees plaid for audit and non-
audit services other than those disclosed in a) thorough c) above.
e)(1) Currently, the audit committee of the Registrant pre-approves audit
services and fees on an engagement-by-engagement basis
e)(2) None of the services described in b) through d) above were approved
by the audit committee pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of
Regulation
S-X, all were pre-approved on an engagement-by-engagement basis.
f) No applicable.
g) There were no non-audit services fees billed by the Registrant's accountant
to the Registrant's investment adviser or distributor over the past two years.
h) Not applicable.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable.
ITEM 6. [RESERVED]
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR
CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 8. [RESERVED]
ITEM 9. CONTROLS AND PROCEDURES.
(a) Based on their evaluation of the registrant's disclosure controls and
procedures (as defined in Rule 30a-2(c) under the Investment Company Act of
1940) as of a date within 90 days of the fling of this report, the registrant's
chief financial and executive officers have concluded that the disclosure
controls and procedures of the registrant are appropriately designed to ensure
that information required to be disclosed in the registrant's reports that are
filed under the Securities Exchange Act of 1934 are accumulated and communicated
to registrant's management, including its principal executive officer(s) and
principal financial officer(s), to allow timely decisions regarding required
disclosure and is recorded, processed, summarized and reported, within the time
periods specified in the rules and forms adopted by the Securities and Exchange
Commission.
(b) There have been no significant changes in registrant's internal controls or
in other factors that could significantly affect registrant's internal controls
subsequent to the date of the most recent evaluation, including no significant
deficiencies or material weaknesses that required corrective action.
ITEM 10. EXHIBITS.
(a)(1) Aquila Group of Funds Code of Ethics for Principal Executive and
Senior Financial Officers under Section 406 of the Sarbanes-Oxley Act of 2002.
(a)(2) Certifications of principal executive officer and principal financial
officer as required by Rule 30a-2(a) under the Investment Company Act of
1940.
(b) Certifications of principal executive officer and principal financial
officer as required by Rule 30a-2(b) under the Investment Company Act of 1940.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and
the Investment Company Act of 1940, the registrant has duly caused this report
to be signed on its behalf by the undersigned thereunto duly authorized.
HAWAIIAN TAX-FREE TRUST
By: /s/ Lacy B. Herrmann
- ---------------------------------
Trustee and Founder
June 7, 2004
By: /s/ Diana P. Herrmann
- ---------------------------------
Vice Chair and President
June 7, 2004
By: /s/ Joseph P. DiMaggio
- -----------------------------------
Chief Financial Officer and Treasurer
June 7, 2004
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on
the dates indicated.
By: /s/ Lacy B. Herrmann
- ---------------------------------
Lacy B. Herrmann
Trustee and Founder
June 7, 2004
By: /s/ Diana P. Herrmann
- ---------------------------------
Diana P. Herrmann
Vice Chair and President
June 7, 2004
By: /s/ Joseph P. DiMaggio
- -----------------------------------
Joseph P. DiMaggio
Chief Financial Officer and Treasurer
June 7, 2004
HAWAIIAN TAX-FREE TRUST
EXHIBIT INDEX
(a)(1) Aquila Group of Funds Code of Ethics for Principal Executive
and Senior Financial Officers under Section 406 of the Sarbanes-Oxley
Act of 2002.
(a) (2) Certifications of principal executive officer
and principal financial officer as required by Rule 30a-2(a)
under the Investment Company Act of 1940.
(b) Certification of chief executive officer and chief financial
officer as required by Rule 30a-2(b) of the Investment Company Act
of 1940.