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: 3/31/05
FORM N-CSR
ITEM 1. REPORTS TO STOCKHOLDERS
ANNUAL
REPORT
MARCH 31, 2005
[Logo of Hawaii Tax-Free Trust: a palm tree in front of a circle which has an
island and water within it]
HAWAIIAN
TAX-FREE
TRUST
A TAX-FREE INCOME INVESTMENT
[Logo of the Aquila ONE OF THE
Group of Funds: AQUILA(SM) GROUP OF FUNDS
an eagle's head]
[Logo of Hawaii Tax-Free Trust: a palm tree in front of a circle which has an
island and water within it]
SERVING HAWAII INVESTORS FOR TWO DECADES
HAWAIIAN TAX-FREE TRUST
"SERVING YOU AND HAWAII"
May, 2005
Dear Fellow Shareholder:
More than likely, when you were deciding to invest in Hawaiian Tax-Free
Trust, you were seeking capital preservation and tax-free income* - the two
features reflected in the Trust's objective.
What you may not have realized, though, was that in the process of seeking
to provide you with these benefits, the Trust also provides help to a variety of
others within your community and throughout the islands of Hawaii.
Municipal bonds, such as those in which Hawaiian Tax-Free Trust invests,
are the primary way infrastructure is financed. Infrastructure is a relatively
obscure word that by itself doesn't mean much to most people. But, when you
translate the word "infrastructure" into such commonly used words as roads,
bridges, water facilities, pollution control, airports, schools, hospitals, and
fire and police stations, then you are speaking in terms that people more easily
understand.
As the economy of Hawaii grows, new and additional municipal projects are
needed for the benefit of the citizens of Hawaii and the various communities
throughout the state. These projects may include a whole array of useful public
purpose works which are financed through municipal bond investments, such as
yours in the Trust. In essence, your money has helped pay for that new road,
airport, school, etc. that you and your neighbors now enjoy. So, as an investor
in Hawaiian Tax-Free Trust, you can take pride in knowing that you are playing a
vital role and a very real part in enhancing the quality of life for the
citizens of Hawaii.
Just as the needs of Hawaii are many and varied, so, too, are the
securities representing Hawaiian Tax-Free Trust's portfolio. You might be
interested to know that the Trust's March 31, 2005 portfolio included 267
separate municipal issues, representing participation in many of Hawaii's major
municipal projects throughout the state. The Trust currently invests in the
broad categories of education, hospitals, housing, harbors, and airports, among
some other more general categories, such as general obligations. And, your Trust
seeks to invest in as many communities as possible throughout the islands. As
you take the time to leaf through the accompanying Annual Report, you're bound
to find the names of some easily recognizable projects.
The following are just a few of the many projects in which Hawaiian
Tax-Free Trust currently invests.**
NOT A PART OF THE ANNUAL REPORT
[PHOTO] [PHOTO]
MAUI ARTS AND CULTURAL CENTER, MAUI KONA COMMUNITY AQUA CENTER,
ISLAND OF HAWAII
[PHOTO] [PHOTO]
HONOLULU INTERNATIONAL SAINT FRANCIS MEDICAL CENTER, OAHU
AND INTERISLAND AIRPORTS, OAHU
So, the next time that you receive your statement from Hawaiian Tax-Free
Trust, remember that the benefits that are reaped* from your investment are more
than just what is evident on that piece of paper. Your family, friends,
neighbors and future generations of Hawaiians may also benefit from the projects
that your money, through your investment in Hawaiian Tax-Free Trust, helps fund.
Sincerely,
/s/ Diana P. Herrmann /s/ Lacy B. Herrmann
Diana P. Herrmann Lacy B. Herrmann
President Founder and Chairman Emeritus
* Past performance does not guarantee future stability. Investment return
and principal value will fluctuate so that an investor's shares, when
redeemed, may be worth more or less than their original cost. For certain
investors, some portion of your dividends may be subject to Federal and
state taxes, including the Alternative Minimum Tax (AMT).
** Since the portfolio is subject to change, the Trust may not necessarily
currently own these specific securities.
NOT A PART OF THE ANNUAL REPORT
[Logo of Hawaii Tax-Free Trust: a palm tree in front of a circle which has an
island and water within it]
SERVING HAWAII INVESTORS FOR NEARLY TWO DECADES
HAWAIIAN TAX-FREE TRUST
ANNUAL REPORT
MANAGEMENT DISCUSSION
ECONOMY AND FINANCIAL MARKETS
The year ended March 31, 2005, continued in our view to deliver strength
in the US economy despite the effects of the ongoing war in Iraq, the potential
for renewed global terrorist activity, and the persistent rise in commodity
prices highlighted by crude oil spiking through $50 per barrel. For most of the
fiscal year, the Federal Reserve remained on a path of raising short-term
interest rates as a "removal of policy accommodation" that they believed to be
is consistent with their primary commitment to a goal of price stability. While
overall Inflation remained relatively stable, there were some exceptions
including energy prices and home prices. A continuing residential housing boom
nationwide, supported by low mortgage rates, has been marked by high and rising
home prices. Meanwhile, the enormous US trade deficit is shifting dollars
overseas that are currently being recycled back to support our Federal Budget
deficit. In the end, the US has become increasingly reliant on foreigners for
funding the Federal Budget. Bond market performance, hampered by the rise in
short and intermediate interest rates from extremely low levels, produced a
small gain for the fiscal year. Equity markets were volatile but also ended the
fiscal year with a gain, almost all of that gain attributed to the fourth
quarter of 2004.
For the State of Hawaii, record employment levels, record home sales and
home prices, record visitor counts and uniformly high utilization of hotel
capacity, plus the nation's lowest state unemployment rates all highlight strong
regional performance. Hawaii has now experienced eight years of steady ongoing
expansion that stands out against the backdrop of less than impressive national
and global economic experiences. On a compound annual basis from fourth quarter
1996 through fourth quarter 2004, real Hawaii personal income grew at a 2.9
percent annual rate. Challenged by a global technology recession in 2001,
culminating in the 9/11 shock later that year, and followed by negative tourism
spillovers from Asia's 2003 SARS event, Hawaii's steady growth has been all the
more remarkable for its resilience. Unemployment rates just under 3 percent
statewide, and clustered around 3 percent for all four counties, underscore the
broadly-shared pattern of economic strength throughout the State. Indeed,
neighbor island economies have generally outpaced growth on the island of Oahu,
where Honolulu is located.
We expect Hawaii tourism in 2005 will step up to share economic leadership
with construction and real estate investment, which have been the strongest
drivers in the expansion to date. Tourism is breaking out into record volumes,
with domestic tourist arrivals growing enough to overwhelm continuing weakness
in the international segment, which is recovering but well off its peak from the
mid-1990s. Hawaii's housing market is sharing in the nation's robust residential
investment boom. While Hawaii is picking up on continued growth in the North
American and Asian economies, it is also benefiting from a demographic shift in
investment preferences of the Baby Boom generation. This cohort has been a
strong component of residential investment demand, one that we see as
MANAGEMENT DISCUSSION (CONTINUED)
increasingly less cyclical and more secular in nature. In the end, however, real
estate is still cyclical, so our forecast of at least a few more years of growth
for Hawaii is relying on other factors--such as increased military spending in a
post-9/11 environment--for sustained economic growth even if real estate peaks.
We believe all of this bodes well for the market performance of Hawaii bonds.
MUNICIPAL MARKET AND FUND PERFORMANCE
During the 12 months ended March 31, 2005, the municipal bond markets
responded to the Federal Reserve operations to hike the Fed Funds rate. The
Federal Reserve initiated this directional change in rates at the end of the
second quarter, 2004, but the market had already anticipated the move and began
raising interest rates at the beginning of that quarter. Over the year since,
the Federal Reserve raised rates seven times, increasing the short-term Fed
Funds rate from 1.00% to 2.75% by March, 2005. While short-term rates steadily
increased over the fiscal year, longer-term rates had a more volatile response.
After an initial spike during the second quarter, 2004, long rates actually
declined throughout the rest of the year, only to increase again during 2005 to
finish on March 31st almost unchanged. The result of these changes meant that
the yield curve "flattened" considerably over the past fiscal year as short-term
rates rose while long-term rates ended about unchanged. Driven by the fact that
long rates stayed relatively low, the volume of new municipal bond issuance
during 2004 fell by only 6% from the previous year's all time record volume of
municipal financing.
Hawaiian Tax-Free Trust had a total return, without sales charges, of
3.18% for its Class A shares, 2.28% for Class C shares, and 3.26% for Class Y
shares for the calendar year ending December 31, 2004. For the fiscal year
ending March 31, 2005, the total return, without sales charges, was 1.33% for
Class A shares, 0.53% for Class C shares, and 1.54% 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 3.02% for the calendar year 2004 and 0.81% for the Trust's
fiscal year.
OUTLOOK AND STRATEGY
The recent market volatility in equity, commodity, and bond markets,
displays an uneasiness of participants with the direction of all markets. The US
economy is likewise delivering mixed signals for performance over the coming
year, particularly in view of the rise in prices for oil and other commodities.
Meanwhile, low probability but potentially turbulent risks continue to include
both geopolitical events, and the rising specter of realignment or changes in
China's exchange rate regime that would renew downward pressures on the value of
the US dollar in currency markets. With federal budget and current account
deficits likely to persist, and continued US economic growth likely to alleviate
more recent uncertainties about the outlook, along with the Federal Reserve's
monetary policy statements that still suggest further "measured" tightening we
expect to see 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 continually seek 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, 2005
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.
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE CHART IN THE PRINTED MATERIAL.]
Lehman Brothers
Quality Intermediate
Municipal Bond Index With Sales Charge Without Sales Charge Cost of Living Index
3/95 $ 10,000 $ 9,600 $ 10,000 $ 10,000
3/96 10,785 10,294 10,719 10,265
3/97 11,273 10,762 11,207 10,577
3/98 12,226 11,781 12,268 10,729
3/99 12,936 12,384 12,896 10,901
3/00 13,065 12,266 12,773 11,252
4/01 13,970 13,291 13,840 11,677
3/02 14,869 13,900 14,475 11,783
3/03 16,280 15,002 15,622 12,134
3/04 17,066 15,941 16,600 12,339
3/05 17,203 16,044 16,707 12,710
AVERAGE ANNUAL TOTAL RETURN
FOR PERIODS ENDED MARCH 31, 2005
------------------------------------------
SINCE
1 YEAR 5 YEARS 10 YEARS INCEPTION
------ ------- -------- ---------
Class A (2/20/85)
With Sales Charge...... (2.70)% 4.59% 4.84% 6.65%
Without Sales Charge... 1.33% 5.46% 5.27% 6.87%
Class C (4/01/96)
With CDSC.............. (0.48)% 4.62% n/a 4.18%
Without CDSC........... 0.53% 4.62% n/a 4.18%
Class Y (4/01/96)
No Sales Charge........ 1.54% 5.66% n/a 5.48%
Lehman Index.............. 0.81% 5.66% 5.57% 6.19%* (Class A)
5.32% (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.
- --------------------------------------------------------------------------------
[Logo KPMG LLP: four solid rectangles with the letters KPMG in front]
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 schedule of investments, as
of March 31, 2005, 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, 2005, 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, 2005, 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.
/s/ KPMG LLP
New York, New York
May 23, 2005
- --------------------------------------------------------------------------------
HAWAIIAN TAX-FREE TRUST
SCHEDULE OF INVESTMENTS
MARCH 31, 2005
RATING
FACE MOODY'S/
AMOUNT MUNICIPAL BONDS (98.2%) S&P VALUE
- ------------ ------------------------------------------------------- -------- -------------
HAWAII (94.3%)
Board of Regents, University of Hawaii, University
System Revenue Bonds, Series A, FGIC Insured
$ 1,805,000 5.500%, 07/15/14.................................. Aaa/AAA $ 2,005,662
1,090,000 5.500%, 07/15/16.................................. Aaa/AAA 1,206,052
2,000,000 5.500%, 07/15/19.................................. Aaa/AAA 2,191,640
2,000,000 5.500%, 07/15/21.................................. Aaa/AAA 2,186,360
2,000,000 5.500%, 07/15/22.................................. Aaa/AAA 2,194,300
3,000,000 5.500%, 07/15/29.................................. Aaa/AAA 3,244,680
Board of Regents, University of Hawaii, University
System Revenue Bonds, Series B, FSA Insured
1,110,000 5.250%, 10/01/12.................................. Aaa/AAA 1,207,103
1,000,000 5.250%, 10/01/13.................................. Aaa/AAA 1,086,280
1,140,000 5.250%, 10/01/14.................................. Aaa/AAA 1,231,542
1,395,000 5.250%, 10/01/15.................................. Aaa/AAA 1,507,856
City and County Board of Honolulu, Hawaii Water
Supply Revenue Bonds, Series A, FGIC Insured
700,000 4.750%, 07/01/15.................................. Aaa/AAA 744,072
City and County of Honolulu, Hawaii Board of Water
Supply & System Revenue Bonds, FSA Insured
620,000 5.500%, 07/01/15.................................. Aaa/AAA 678,020
3,000,000 5.125%, 07/01/21.................................. Aaa/AAA 3,160,920
5,450,000 5.250%, 07/01/23.................................. Aaa/AAA 5,786,374
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 959,000
600,000 4.000%, 07/01/13.................................. Aaa/AAA 608,820
1,365,000 4.000%, 07/01/14.................................. Aaa/AAA 1,381,790
2,700,000 4.750%, 07/01/16.................................. Aaa/AAA 2,852,847
2,805,000 4.750%, 07/01/17.................................. Aaa/AAA 2,946,092
2,970,000 4.750%, 07/01/18.................................. Aaa/AAA 3,103,086
3,095,000 4.750%, 07/01/19.................................. Aaa/AAA 3,219,233
3,265,000 4.750%, 07/01/20.................................. Aaa/AAA 3,383,422
1,230,000 5.000%, 07/01/21.................................. Aaa/AAA 1,294,034
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 $ 4,490,620
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 4,653,465
920,000 6.000%, 01/01/12.................................. Aaa/AAA 1,051,615
775,000 5.750%, 04/01/13.................................. Aaa/AAA 883,438
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 1,512,099
410,000 6.000%, 11/01/10.................................. Aaa/AAA 463,464
City and County of Honolulu, Hawaii General
Obligation Bonds, Series A, FGIC Insured
9,970,000 7.350%, 07/01/07.................................. Aaa/AAA 10,933,501
3,600,000 7.350%, 07/01/08.................................. Aaa/AAA 4,073,724
1,715,000 6.000%, 01/01/11.................................. Aaa/AAA 1,937,967
5,000 5.750%, 04/01/11.................................. Aaa/AAA 5,606
1,580,000 6.000%, 01/01/12.................................. Aaa/AAA 1,802,985
3,025,000 5.750%, 04/01/13.................................. Aaa/AAA 3,430,380
City and County of Honolulu, Hawaii General
Obligation Bonds, Series A, FSA Insured
2,500,000 5.000%, 09/01/09.................................. Aaa/AAA 2,682,400
City and County of Honolulu, Hawaii General
Obligation Bonds, Series A MBIA Insured
860,000 6.000%, 11/01/09.................................. Aaa/AAA 959,708
1,090,000 6.000%, 11/01/10.................................. Aaa/AAA 1,231,547
1,000,000 5.250%, 03/01/12.................................. Aaa/AAA 1,098,770
3,000,000 5.250%, 03/01/15.................................. Aaa/AAA 3,277,410
4,600,000 5.250%, 03/01/16.................................. Aaa/AAA 5,015,564
4,655,000 5.000%, 07/01/16.................................. Aaa/AAA 5,007,616
4,780,000 5.250%, 03/01/17.................................. Aaa/AAA 5,184,723
2,000,000 5.250%, 03/01/18.................................. Aaa/AAA 2,159,500
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 $ 466,730
City and County of Honolulu, Hawaii General
Obligation Bonds, Series A, Prerefunded 09/01/11
@ 100, FSA Insured
3,500,000 5.375%, 09/01/18.................................. Aaa/AAA 3,873,555
2,000,000 5.125%, 09/01/20.................................. Aaa/AAA 2,184,980
City and County of Honolulu, Hawaii General
Obligation Bonds, Series A, Prerefunded 11/01/05
@ 101, MBIA Insured
2,280,000 5.000%, 11/01/15.................................. Aaa/AAA 2,336,590
City and County of Honolulu, Hawaii General
Obligation Bonds, Series B FGIC Insured
600,000 5.125%, 07/01/11.................................. Aaa/AAA 646,170
7,310,000 5.500%, 10/01/11.................................. Aaa/AAA 8,116,220
4,490,000 5.000%, 07/01/19.................................. Aaa/AAA 4,690,164
1,395,000 5.000%, 07/01/20.................................. Aaa/AAA 1,452,432
City and County of Honolulu, Hawaii General
Obligation Bonds, Series B, MBIA Insured
4,000,000 5.000%, 07/01/10.................................. Aaa/AAA 4,310,520
5,000,000 5.000%, 07/01/12.................................. Aaa/AAA 5,419,100
City and County of Honolulu, Hawaii General
Obligation Bonds, Series B, Prerefunded 07/01/09
@ 101, FGIC Insured
2,595,000 5.125%, 07/01/15.................................. Aaa/AAA 2,815,186
City and County of Honolulu, Hawaii General
Obligation Bonds, Series B, Prerefunded 11/01/07
@ 101, FGIC Insured
930,000 5.000%, 11/01/13.................................. Aaa/AAA 986,925
1,060,000 5.000%, 11/01/14.................................. Aaa/AAA 1,124,883
530,000 5.000%, 11/01/16.................................. Aaa/AAA 562,441
1,400,000 5.000%, 11/01/17.................................. Aaa/AAA 1,485,694
City and County of Honolulu, Hawaii General
Obligation Bonds, Series C, FGIC Insured
$ 4,000,000 5.000%, 07/01/05.................................. Aaa/AAA $ 4,024,880
7,750,000 5.125%, 07/01/14.................................. Aaa/AAA 8,295,910
2,510,000 5.000%, 07/01/18.................................. Aaa/AAA 2,631,434
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 1,296,068
1,050,000 6.000%, 12/01/15.................................. Aaa/AAA 1,233,666
City and County of Honolulu, Hawaii Improvement
District No. 261 (Halawa Business Park), Special
Assessment Bonds
355,000 6.800%, 10/15/05.................................. NR/NR2 362,963
290,000 6.900%, 10/15/06.................................. NR/NR2 296,516
City and County of Honolulu, Hawaii Wastewater
Systems Revenue Bonds, FGIC Insured
1,395,000 5.000%, 07/01/12.................................. Aaa/NR 1,480,039
City and County of Honolulu, Hawaii General
Obligation Bonds, Series B, MBIA Insured
3,000,000 5.000%, 07/01/13.................................. Aaa/AAA 3,254,670
County of Hawaii, Hawaii General Obligation
Bonds, Series A, FGIC Insured
1,700,000 5.450%, 05/01/07.................................. Aaa/AAA 1,785,833
3,170,000 5.500%, 05/01/08.................................. Aaa/AAA 3,400,871
2,500,000 5.550%, 05/01/09.................................. Aaa/AAA 2,721,575
4,905,000 5.600%, 05/01/11.................................. Aaa/AAA 5,455,439
1,000,000 5.600%, 05/01/12.................................. Aaa/AAA 1,119,230
1,000,000 5.600%, 05/01/13.................................. Aaa/AAA 1,124,830
1,465,000 5.500%, 07/15/16.................................. Aaa/AAA 1,597,729
County of Hawaii, Hawaii General Obligation
Bonds, Series A, FSA Insured
1,000,000 5.375%, 05/15/13.................................. Aaa/AAA 1,080,650
1,000,000 5.400%, 05/15/15.................................. Aaa/AAA 1,080,000
County of Hawaii, Hawaii General Obligation
Bonds, Series A, FSA Insured (continued)
$ 1,000,000 5.000%, 07/15/16.................................. Aaa/AAA $ 1,069,090
2,000,000 5.000%, 07/15/17.................................. Aaa/AAA 2,126,600
1,470,000 5.625%, 05/15/18.................................. Aaa/AAA 1,606,063
1,000,000 5.000%, 07/15/18.................................. Aaa/AAA 1,058,250
County of Hawaii, Hawaii General Obligation
Bonds, Series A, Prerefunded 02/01/06 @ 101.5,
FGIC Insured
1,900,000 5.000%, 02/01/11.................................. Aaa/AAA 1,966,272
1,970,000 5.100%, 02/01/12.................................. Aaa/AAA 2,040,309
2,205,000 5.200%, 02/01/14.................................. Aaa/AAA 2,285,483
2,440,000 5.200%, 02/01/16.................................. Aaa/AAA 2,529,060
County of Hawaii, Hawaii General Obligation
Bonds, Series B, MBIA Insured
1,060,000 4.250%, 07/15/09.................................. Aaa/AAA 1,103,693
City and County of Honolulu, Hawaii Wastewater
Systems Revenue Bonds, Junior Series, FGIC Insured
3,000,000 5.250%, 07/01/13.................................. Aaa/AAA 3,233,340
1,000,000 5.250%, 07/01/15.................................. Aaa/AAA 1,076,140
2,400,000 5.250%, 07/01/16.................................. Aaa/AAA 2,582,736
2,000,000 5.250%, 07/01/18.................................. Aaa/AAA 2,147,380
5,055,000 5.000%, 07/01/23.................................. Aaa/AAA 5,226,415
City and County of Honolulu, Hawaii Wastewater
Systems Revenue Bonds, Senior Series,
AMBAC Insured
1,810,000 5.500%, 07/01/11.................................. Aaa/NR 2,007,996
1,065,000 5.500%, 07/01/16.................................. Aaa/NR 1,160,957
3,000,000 5.500%, 07/01/17.................................. Aaa/NR 3,261,630
2,310,000 5.500%, 07/01/18.................................. Aaa/NR 2,503,462
2,000,000 5.250%, 07/01/19.................................. Aaa/NR 2,143,200
County of Kauai, Hawaii General Obligation Bonds,
Escrowed to Maturity
665,000 9.000%, 08/01/05.................................. A1/NR 678,952
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 $ 1,134,710
1,010,000 6.250%, 08/01/14.................................. Aaa/AAA 1,152,168
1,000,000 6.250%, 08/01/15.................................. Aaa/AAA 1,140,760
1,000,000 6.250%, 08/01/16.................................. Aaa/AAA 1,140,760
1,275,000 6.250%, 08/01/17.................................. Aaa/AAA 1,454,469
County of Kauai, Hawaii General Obligation
Refunding Bonds, Series A, MBIA Insured
1,010,000 5.700%, 02/01/07.................................. Aaa/AAA 1,023,625
1,125,000 5.625%, 08/01/13.................................. Aaa/AAA 1,248,705
1,620,000 5.625%, 08/01/14.................................. Aaa/AAA 1,794,280
1,035,000 5.625%, 08/01/17.................................. Aaa/AAA 1,137,776
1,000,000 5.625%, 08/01/18.................................. Aaa/AAA 1,097,530
2,360,000 5.500%, 08/01/20.................................. Aaa/AAA 2,560,010
County of Kauai, Hawaii General Obligation
Refunding Bonds, Series B & C, AMBAC Insured
435,000 5.900%, 08/01/08.................................. Aaa/AAA 473,867
1,355,000 5.900%, 08/01/08.................................. Aaa/AAA 1,476,069
1,300,000 5.950%, 08/01/10.................................. Aaa/AAA 1,462,097
County of Maui, Hawaii General Obligation Bonds,
MBIA Insured
1,100,000 5.000%, 09/01/08.................................. Aaa/AAA 1,170,686
County of Maui, Hawaii General Obligation Bonds,
MBIA Insured
4,000,000 5.000%, 03/01/17.................................. Aaa/AAA 4,310,760
2,500,000 5.000%, 03/01/18.................................. Aaa/AAA 2,679,475
1,105,000 5.000%, 03/01/19.................................. Aaa/AAA 1,178,759
County of Maui, Hawaii General Obligation Bonds,
Series A, FGIC Insured
1,200,000 5.125%, 03/01/14.................................. Aaa/AAA 1,283,496
1,050,000 5.125%, 03/01/16.................................. Aaa/AAA 1,123,059
2,590,000 5.250%, 03/01/18.................................. Aaa/AAA 2,779,174
County of Maui, Hawaii General Obligation Bonds,
Series A, MBIA Insured
$ 1,105,000 5.250%, 03/01/15.................................. Aaa/AAA $ 1,202,881
1,205,000 5.250%, 03/01/16.................................. Aaa/AAA 1,309,449
1,000,000 5.250%, 03/01/18.................................. Aaa/AAA 1,074,110
1,750,000 5.250%, 03/01/19.................................. Aaa/AAA 1,873,165
County of Maui, Hawaii General Obligation Bonds,
Series A, MBIA Insured
1,000,000 5.500%, 03/01/18.................................. NR/AAA 1,082,540
County of Maui, Hawaii General Obligation Bonds,
Series A, Prerefunded 09/01/07 @ 101, FGIC Insured
1,130,000 5.250%, 09/01/13.................................. Aaa/AAA 1,203,687
1,265,000 5.250%, 09/01/15.................................. Aaa/AAA 1,347,491
1,335,000 5.250%, 09/01/16.................................. Aaa/AAA 1,422,055
County of Maui, Hawaii General Obligation Bonds,
Series A, Prerefunded 03/01/08 @101, FGIC Insured
250,000 5.000%, 03/01/10.................................. Aaa/AAA 266,532
County of Maui, Hawaii General Obligation Bonds,
Unrefunded Series A, FGIC Insured
750,000 5.000%, 03/01/10.................................. Aaa/AAA 791,415
County of Maui, Hawaii General Obligation Bonds,
Series B, FGIC Insured
1,065,000 5.250%, 03/01/11.................................. Aaa/AAA 1,167,794
County of Maui, Hawaii General Obligation Bonds,
Series B, MBIA Insured
825,000 5.375%, 09/01/13.................................. Aaa/AAA 917,161
County of Maui, Hawaii General Obligation
Refunding Bonds, Series B, MBIA Insured
1,445,000 5.375%, 09/01/12.................................. Aaa/AAA 1,608,401
County of Maui, Hawaii General Obligation Bonds,
Series C, FGIC Insured
1,020,000 5.250%, 03/01/16.................................. Aaa/AAA 1,103,711
County of Maui, Hawaii General Obligation Bonds,
Series C, FGIC Insured (continued)
$ 1,000,000 5.250%, 03/01/17.................................. Aaa/AAA $ 1,079,860
1,250,000 5.250%, 03/01/20.................................. Aaa/AAA 1,342,487
Department of Budget and Finance of the State of
Hawaii Special Purpose Revenue Bonds (Hawaiian
Electric Company, Inc.), Series A, AMBAC Insured
4,965,000 5.500%, 12/01/14.................................. Aaa/AAA 5,410,063
Department of Budget and Finance of the State of
Hawaii Special Purpose Revenue Bonds (Hawaiian
Electric Company, Inc.), Series A, MBIA Insured
4,125,000 4.950%, 04/01/12.................................. Aaa/AAA 4,447,864
Department of Budget and Finance of the State of
Hawaii Special Purpose Revenue Bonds
(Hawaiian Electric Company, Inc.) Refunding
Series A-AMT, FGIC Insured
3,000,000 4.800%, 01/01/25.................................. Aaa/AAA 2,973,330
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
5,700,000 5.650%, 10/01/27.................................. Aaa/AAA 6,157,425
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 1,029,180
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 2,753,950
Department of Budget and Finance of the State of
Hawaii Special Purpose Revenue Bonds
(Kapiolani Health Care System), MBIA Insured
825,000 6.300%, 07/01/08.................................. Aaa/AAA 834,174
Department of Budget and Finance of the State of
Hawaii Special Purpose Revenue Bonds
(Kapiolani Health Care System), MBIA Insured
(continued)
$ 1,000,000 6.000%, 07/01/11.................................. Aaa/AAA $ 1,055,310
1,000,000 6.200%, 07/01/16.................................. Aaa/AAA 1,057,720
1,000,000 6.250%, 07/01/21.................................. Aaa/AAA 1,058,330
Department of Budget and Finance of the State of
Hawaii (North Hawaii Community Hospital) Special
Purpose Revenue Bonds, VRDO1 Enhancement
LOC - First Hawaiian Bank expiring 5/26/09
1,675,000 2.350%, 05/01/19.................................. VMIG1/NR 1,675,000
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 17,072,080
Department of Budget and Finance of the State of
Hawaii Special Purpose Revenue Bonds (The
Evangelical Lutheran Good Samaritan Society),
AMBAC Insured
490,000 4.700%, 11/01/06.................................. Aaa/AAA 503,451
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+ 5,299,200
8,625,000 6.000%, 07/01/20.................................. A1/A+ 9,135,945
3,500,000 5.750%, 07/01/26.................................. A1/A+ 3,696,735
Department of Budget and Finance of the State of
Hawaii Special Purpose Revenue Bonds (The
Queen's Health System), Series A, Weekly Reset
VRDO1, SPA: Bank of Nova Scotia
1,800,000 2.280%, 07/01/26.................................. VMIG1/A-1+ 1,800,000
Department of Budget and Finance of the State of
Hawaii Special Purpose Revenue Bonds (The
Queen's Health System) Series A, Weekly Reset
VRDO1, SPA: Bank of Nova Scotia
$ 900,000 2.190%, 07/01/29.................................. VMIG1/A-1+ $ 900,000
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 8,314,800
Department of Hawaiian Home Lands (State of
Hawaii) Revenue Bonds
1,310,000 4.150%, 07/01/08.................................. A3/NR 1,332,990
1,525,000 4.350%, 07/01/10.................................. A3/NR 1,569,545
1,245,000 4.450%, 07/01/11.................................. A3/NR 1,278,291
Hawaii Community Development Authority
Improvement District Revenue Bonds (Kakaako
Community Development District 3)
1,010,000 7.400%, 07/01/10.................................. NR/NR2 1,024,867
Hawaii Community Development Authority
Improvement District Special Assessment Bonds
(Kakaako Community Development District 1)
155,000 5.400%, 07/01/05.................................. NR/NR2 156,393
Hawaii Community Development Authority
Improvement District Special Assessment Bonds
(Kakaako Community Development District 2)
420,000 5.400%, 07/01/05.................................. NR/NR2 423,776
435,000 5.500%, 07/01/06.................................. NR/NR2 441,042
465,000 5.600%, 07/01/07.................................. NR/NR2 471,477
365,000 5.700%, 07/01/08.................................. NR/NR2 370,099
Housing Finance and Development Corporation
(State of Hawaii) Single Family Mortgage
Revenue Bonds, Series A-AMT, FNMA Insured
2,870,000 5.300%, 07/01/22.................................. Aaa/AAA 2,937,273
8,830,000 5.750%, 07/01/30.................................. Aaa/AAA 8,927,218
1,420,000 5.400%, 07/01/30.................................. Aaa/AAA 1,434,697
Housing Finance and Development Corporation
(State of Hawaii) Single Family Mortgage Revenue
Bonds, Series B, FNMA Insured
$ 2,315,000 5.700%, 07/01/13.................................. Aaa/AAA $ 2,346,762
15,535,000 5.850%, 07/01/17.................................. Aaa/AAA 15,750,781
9,350,000 5.450%, 07/01/17.................................. Aaa/AAA 9,632,931
6,800,000 5.300%, 07/01/28.................................. Aaa/AAA 6,876,840
4,025,000 7.000%, 07/01/31.................................. Aaa/AAA 4,030,675
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 2,178,423
4,000,000 5.700%, 10/01/25.................................. Aaa/AAA 4,101,520
State of Hawaii Airport System Revenue Bonds, ~
AMT, FGIC Insured
5,080,000 6.500%, 07/01/13.................................. Aaa/AAA 5,762,193
State of Hawaii Airport System Revenue Bonds,
AMT, FGIC Insured
4,000,000 5.750%, 07/01/17.................................. Aaa/AAA 4,366,680
6,000,000 5.625%, 07/01/18.................................. Aaa/AAA 6,488,520
6,000,000 5.250%, 07/01/21.................................. Aaa/AAA 6,235,380
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 7,385,036
State of Hawaii Airport System Revenue Bonds,
Series B-AMT, FGIC Insured
3,000,000 8.000%, 07/01/10.................................. Aaa/AAA 3,569,640
State of Hawaii General Obligation Bonds, Series
BW, FSA Insured
1,000,000 6.400%, 03/01/09.................................. Aaa/AAA 1,118,130
State of Hawaii General Obligation Bonds, Series
BZ, FGIC Insured
3,700,000 6.000%, 10/01/11.................................. Aaa/AAA 4,214,374
3,500,000 6.000%, 10/01/12.................................. Aaa/AAA 4,017,405
State of Hawaii General Obligation Bonds, Series
CA, FGIC Insured
$ 2,000,000 5.750%, 01/01/11.................................. Aaa/AAA $ 2,234,220
State of Hawaii General Obligation Bonds, Series CC
590,000 5.125%, 02/01/07.................................. Aa3/AA- 613,110
State of Hawaii General Obligation Bonds, Series CH
1,000,000 4.750%, 11/01/11.................................. Aa3/AA- 1,067,950
State of Hawaii General Obligation Bonds, Series CH,
FGIC Insured
5,000,000 6.000%, 11/01/07.................................. Aaa/AAA 5,380,100
3,390,000 6.000%, 11/01/08.................................. Aaa/AAA 3,719,915
State of Hawaii General Obligation Bonds, Series CI
1,500,000 4.700%, 11/01/07.................................. Aa3/AA- 1,563,780
State of Hawaii General Obligation Bonds, Series CL,
FGIC Insured
2,305,000 6.000%, 03/01/11.................................. Aaa/AAA 2,612,579
State of Hawaii General Obligation Bonds, Series CM,
FGIC Insured
3,000,000 6.500%, 12/01/15.................................. Aaa/AAA 3,665,760
State of Hawaii General Obligation Bonds, Series CN,
FGIC Insured
4,000,000 5.250%, 03/01/10.................................. Aaa/AAA 4,230,200
4,000,000 5.250%, 03/01/13.................................. Aaa/AAA 4,230,200
3,000,000 5.500%, 03/01/14.................................. Aaa/AAA 3,186,420
7,950,000 5.250%, 03/01/15.................................. Aaa/AAA 8,407,522
1,000,000 5.250%, 03/01/17.................................. Aaa/AAA 1,057,550
State of Hawaii General Obligation Bonds, Series CP,
FGIC Insured
5,000,000 5.000%, 10/01/13.................................. Aaa/AAA 5,266,000
2,195,000 5.000%, 10/01/14.................................. Aaa/AAA 2,311,247
5,000,000 5.000%, 10/01/15.................................. Aaa/AAA 5,266,000
7,195,000 5.000%, 10/01/17.................................. Aaa/AAA 7,568,924
State of Hawaii General Obligation Bonds, Series CR,
MBIA Insured
1,000,000 5.250%, 04/01/13.................................. Aaa/AAA 1,066,490
State of Hawaii General Obligation Bonds, Series CR,
MBIA Insured (continued)
$ 5,000,000 5.000%, 04/01/16.................................. Aaa/AAA $ 5,277,000
16,000,000 5.000%, 04/01/17.................................. Aaa/AAA 16,825,920
State of Hawaii General Obligation Bonds, Series
CS, MBIA Insured
5,000,000 5.000%, 04/01/07.................................. Aaa/AAA 5,200,500
5,500,000 5.000%, 04/01/09.................................. Aaa/AAA 5,865,860
State of Hawaii General Obligation Bonds, Series CU,
MBIA Insured
1,250,000 5.750%, 10/01/08.................................. Aaa/AAA 1,358,738
1,000,000 5.750%, 10/01/09.................................. Aaa/AAA 1,103,200
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 3,337,440
State of Hawaii General Obligation Bonds, Series CV,
FGIC Insured
11,000,000 5.000%, 08/01/20.................................. Aaa/AAA 11,502,150
5,000,000 5.250%, 08/01/21.................................. Aaa/AAA 5,340,100
1,015,000 5.000%, 08/01/21.................................. Aaa/AAA 1,056,189
State of Hawaii General Obligation Bonds, Series CX,
FSA Insured
2,000,000 5.250%, 02/01/12.................................. Aaa/AAA 2,195,400
8,725,000 5.500%, 02/01/13.................................. Aaa/AAA 9,697,139
500,000 5.000%, 02/01/19.................................. Aaa/AAA 522,880
2,500,000 5.500%, 02/01/21.................................. Aaa/AAA 2,720,250
State of Hawaii General Obligation Bonds, Series CY,
FSA Insured
2,500,000 5.750%, 02/01/14.................................. Aaa/AAA 2,854,325
2,000,000 5.750%, 02/01/15.................................. Aaa/AAA 2,294,120
State of Hawaii General Obligation Bonds, Series CZ,
FSA Insured
1,500,000 5.250%, 07/01/12.................................. Aaa/AAA 1,649,385
9,390,000 5.250%, 07/01/16.................................. Aaa/AAA 10,176,037
State of Hawaii General Obligation Bonds, Series CZ,
FSA Insured (continued)
$ 3,000,000 5.250%, 07/01/17.................................. Aaa/AAA $ 3,235,440
3,000,000 5.250%, 07/01/18.................................. Aaa/AAA 3,221,790
State of Hawaii General Obligation Bonds, Series
DD, MBIA Insured
2,000,000 4.250%, 05/01/10.................................. Aaa/AAA 2,081,380
4,000,000 5.000%, 05/01/18.................................. Aaa/AAA 4,251,640
State of Hawaii Harbor Capital Improvement
Revenue Bonds, AMT, MBIA Insured
3,850,000 5.750%, 07/01/17.................................. Aaa/AAA 4,087,930
State of Hawaii Harbor Capital Improvement
Revenue Bonds, Series B-AMT, AMBAC Insured
3,000,000 5.500%, 07/01/19.................................. Aaa/AAA 3,217,830
State of Hawaii Harbor System Revenue Bonds,
Series A, FSA Insured
1,350,000 4.500%, 01/01/07.................................. Aaa/AAA 1,386,774
1,285,000 4.500%, 01/01/08.................................. Aaa/AAA 1,335,269
State of Hawaii Harbor System Revenue Bonds,
Series A-AMT, FSA Insured
2,000,000 5.750%, 07/01/17.................................. Aaa/AAA 2,171,180
1,500,000 5.900%, 07/01/21.................................. Aaa/AAA 1,633,710
State of Hawaii Harbor System Revenue Bonds,
Series B-AMT, FSA Insured
870,000 5.000%, 01/01/07.................................. Aaa/AAA 900,276
1,220,000 5.000%, 01/01/08.................................. Aaa/AAA 1,277,084
3,275,000 4.500%, 01/01/09.................................. Aaa/AAA 3,405,018
2,000,000 5.000%, 01/01/11.................................. Aaa/AAA 2,135,340
State of Hawaii Highway Revenue Bonds
1,000,000 3.000%, 07/01/06.................................. Aa3/AA 1,003,000
1,140,000 3.000%, 07/01/07.................................. Aa3/AA 1,141,927
1,000,000 6.000%, 07/01/09.................................. Aa3/AA 1,109,690
State of Hawaii Highway Revenue Bonds, FSA Insured
$ 1,000,000 3.000%, 07/01/08.................................. Aaa/AAA $ 998,440
750,000 3.000%, 07/01/09.................................. Aaa/AAA 743,782
1,500,000 3.000%, 07/01/10.................................. Aaa/AAA 1,462,500
1,500,000 3.000%, 07/01/11.................................. Aaa/AAA 1,441,470
State of Hawaii Highway Revenue Bonds, FSA Insured
825,000 4.800%, 07/01/08.................................. Aaa/AAA 869,170
1,000,000 5.375%, 07/01/19.................................. Aaa/AAA 1,104,220
State of Hawaii Highway Revenue Bonds, Callable
07/01/10 @ 100, FSA Insured
2,000,000 4.500%, 07/01/10.................................. Aaa/AAA 2,107,620
2,000,000 4.500%, 07/01/11.................................. Aaa/AAA 2,107,680
5,105,000 5.000%, 07/01/12.................................. Aaa/AAA 5,532,901
500,000 5.250%, 07/01/13.................................. Aaa/AAA 548,635
1,530,000 5.375%, 07/01/14.................................. Aaa/AAA 1,689,457
250,000 5.125%, 07/01/14.................................. Aaa/AAA 271,273
2,720,000 5.500%, 07/01/19.................................. Aaa/AAA 3,000,078
1,110,000 5.500%, 07/01/20.................................. Aaa/AAA 1,224,297
2,000,000 5.375%, 07/01/20.................................. Aaa/AAA 2,208,440
State of Hawaii Highway Revenue Bonds,
FGIC Insured
3,705,000 5.600%, 07/01/13.................................. Aaa/AAA 3,911,257
2,000,000 5.250%, 07/01/16.................................. Aaa/AAA 2,102,860
State of Hawaii Housing & Community
Development Revenue Bonds, FSA Insured
660,000 1.900%, 01/01/06.................................. Aaa/NR 654,509
910,000 2.900%, 01/01/09.................................. Aaa/NR 897,014
895,000 3.400%, 01/01/11.................................. Aaa/NR 886,220
670,000 3.450%, 07/01/11.................................. Aaa/NR 662,925
925,000 3.600%, 01/01/12.................................. Aaa/NR 916,767
960,000 3.600%, 07/01/12.................................. Aaa/NR 950,909
1,055,000 3.700%, 07/01/13.................................. Aaa/NR 1,046,813
------------
697,147,812
------------
PUERTO RICO (3.9%)
Puerto Rico Commonwealth Aqueduct and Sewer
Authority Revenue Bonds, MBIA Insured
2,500,000 5.000%, 07/01/15.................................. Aaa/AAA 2,607,950
RATING
FACE MOODY'S/
AMOUNT PUERTO RICO (CONTINUED) S&P VALUE
- ------------ ------------------------------------------------------- -------- -------------
Puerto Rico Commonwealth Highway &
Transportation Authority Revenue Bonds, Series J,
Callable 07/01/14 @ 100, MBIA Insured
$ 5,745,000 5.000%, 07/01/17.................................. Aaa/AAA $ 6,207,817
Puerto Rico Commonwealth Public Improvement
General Obligation Bonds, Series A, FSA Insured
4,000,000 5.000%, 07/01/16.................................. Aaa/AAA 4,338,360
Puerto Rico Commonwealth Public Finance Corp.
Revenue Bonds, Series A, Prerefunded
08/01/11 @ 100, MBIA Insured
5,000,000 5.500%, 08/01/17.................................. Aaa/AAA 5,577,500
Puerto Rico Commonwealth Public Improvement
General Obligation Bonds, MBIA Insured
1,800,000 5.250%, 07/01/13.................................. Aaa/AAA 1,954,872
Puerto Rico Commonwealth Public Improvement
General Obligation Bonds, Series A, FGIC Insured
4,000,000 5.500%, 07/01/13.................................. Aaa/AAA 4,525,280
2,000,000 5.500%, 07/01/16.................................. Aaa/AAA 2,294,700
Puerto Rico Commonwealth Public Improvement
General Obligation Bonds, Series CR, FSA Insured
1,060,000 5.250%, 07/01/17.................................. Aaa/AAA 1,192,648
------------
28,699,127
------------
COMMERCIAL PAPER (0.7%)
HAWAII (0.7%)
City and County of Honolulu, Hawaii
5,000,000 2.000%, 06/02/05.................................. P1/A1+ 5,000,000
------------
Total Investments (Cost $699,936,669) 3................ 98.9% 730,846,939
Other assets less liabilities.......................... 1.1 8,413,899
----- ------------
Net Assets............................................. 100.0% $739,260,838
===== ============
PORTFOLIO DISTRIBUTION BY QUALITY RATING (UNAUDITED)
Highest rating(4)...................................... 94.2%
Second highest rating(5)............................... 0.9
Third highest rating(6)................................ 4.2
Not rated(2)........................................... 0.7
-----
100.0%
=====
Footnotes:
(1) Variable rate demand obligations (VRDOs) 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.
(4) Aaa of Moody's or AAA of S&P.
(5) Aa of Moody's or AA of S&P.
(6) A of Moody's or S&P.
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
VRDO - Variable Rate Demand Obligation
See accompanying notes to financial statements.
HAWAIIAN TAX-FREE TRUST
STATEMENT OF ASSETS AND LIABILITIES
MARCH 31, 2005
ASSETS
Investments at value (cost $699,936,669) ................................................ $730,846,939
Cash .................................................................................... 103,920
Interest receivable ..................................................................... 9,870,046
Receivable for Trust shares sold ........................................................ 504,481
Other assets ............................................................................ 23,350
------------
Total assets ............................................................................ 741,348,736
------------
LIABILITIES
Payable for Trust shares redeemed ....................................................... 868,866
Dividends payable ....................................................................... 574,682
Distribution and service fees payable ................................................... 283,347
Adviser and Administrator fees payable .................................................. 252,006
Accrued expenses ........................................................................ 108,997
------------
Total liabilities ....................................................................... 2,087,898
------------
NET ASSETS ................................................................................. $739,260,838
------------
Net Assets consist of:
Capital Stock - Authorized an unlimited number of shares, par value $.01 per share ...... $ 642,423
Additional paid-in capital .............................................................. 705,158,842
Net unrealized appreciation on investments (note 4) ..................................... 30,910,270
Accumulated net realized gain on investments ............................................ 458,984
Undistributed net investment income ..................................................... 2,090,319
------------
$739,260,838
============
CLASS A
Net Assets .............................................................................. $680,970,153
============
Capital shares outstanding .............................................................. 59,177,670
============
Net asset value and redemption price per share .......................................... $ 11.51
============
Offering price per share (100/96 of $11.51 adjusted to nearest cent) .................... $ 11.99
============
CLASS C
Net Assets .............................................................................. $ 37,603,154
============
Capital shares outstanding .............................................................. 3,269,535
============
Net asset value and offering price per share ............................................ $ 11.50
============
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) ........................................... $ 11.50*
============
CLASS Y
Net Assets .............................................................................. $ 20,687,531
============
Capital shares outstanding .............................................................. 1,795,100
============
Net asset value, offering and redemption price per share ................................ $ 11.52
============
See accompanying notes to financial statements.
HAWAIIAN TAX-FREE TRUST
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED MARCH 31, 2005
Investment Income:
Interest income ............................................ $ 34,415,343
Expenses:
Investment Adviser fees (note 3) ........................... $ 1,038,454
Administrator fees (note 3) ................................ 1,928,568
Distribution and service fees (note 3) ..................... 1,737,001
Transfer and shareholder servicing agent fees .............. 390,708
Shareholders' reports and proxy statements ................. 149,470
Legal fees (note 3) ........................................ 143,873
Trustees' fees and expenses (note 8) ....................... 139,462
Insurance .................................................. 78,641
Custodian fees ............................................. 55,852
Auditing and tax fees ...................................... 41,895
Registration fees and dues ................................. 36,580
Chief Compliance Officer (note 3) .......................... 2,266
Miscellaneous .............................................. 33,383
------------
5,776,153
Expenses paid indirectly (note 6) .......................... (47,052)
------------
Net expenses ............................................... 5,729,101
------------
Net investment income ...................................... 28,686,242
Realized and Unrealized Gain (Loss) on Investments:
Net realized gain (loss) from securities transactions ...... 1,286,593
Change in unrealized appreciation on investments ........... (20,663,429)
------------
Net realized and unrealized gain (loss) on investments ..... (19,376,836)
------------
Net change in net assets resulting from operations ......... $ 9,309,406
============
See accompanying notes to financial statements.
HAWAIIAN TAX-FREE TRUST
STATEMENTS OF CHANGES IN NET ASSETS
YEAR ENDED YEAR ENDED
MARCH 31, 2005 MARCH 31, 2004
-------------- --------------
OPERATIONS:
Net investment income .................................... $ 28,686,242 $ 28,704,948
Net realized gain (loss) from securities transactions .... 1,286,593 986,153
Change in unrealized appreciation on investments ......... (20,663,429) 4,749,938
------------- -------------
Net change in net assets resulting from operations ....... 9,309,406 34,441,039
------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS (NOTE 10):
Class A Shares:
Net investment income .................................... (26,594,626) (26,573,300)
Net realized gain on investments ......................... (1,165,988) --
Class C Shares:
Net investment income .................................... (1,158,762) (1,134,456)
Net realized gain on investments ......................... (65,029) --
Class Y Shares:
Net investment income .................................... (926,612) (997,192)
Net realized gain on investments ......................... (37,109) --
------------- -------------
Change in net assets from distributions .................. (29,948,126) (28,704,948)
------------- -------------
CAPITAL SHARE TRANSACTIONS (NOTE 7):
Proceeds from shares sold ................................ 62,021,734 66,381,406
Reinvested dividends and distributions ................... 17,008,650 15,988,808
Cost of shares redeemed .................................. (74,491,462) (66,720,092)
------------- -------------
Change in net assets from capital share transactions ..... 4,538,922 15,650,122
------------- -------------
Change in net assets .................................. (16,099,798) 21,386,213
NET ASSETS:
Beginning of period ...................................... 755,360,636 733,974,423
------------- -------------
End of period* ........................................... $ 739,260,838 $ 755,360,636
============= =============
* Includes undistributed net investment income of: ....... $ 2,090,319 $ 2,084,077
============= =============
See accompanying notes to financial statements.
HAWAIIAN TAX-FREE TRUST
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2005
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. If market quotations
or a valuation from the pricing service is not readily available, the
security is valued 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 continue 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) MULTIPLE CLASS ALLOCATION: All income, expenses (other than class-specific
expenses), and unrealized gains or losses 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.
Aquila Investment Management LLC the ("Administrator"), a wholly-owned
subsidiary of Aquila Management Corporation, the Trust's founder and sponsor,
serves as the Administrator for the Trust under an Administration Agreement with
the Trust. 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, 2005.
Under the October 1, 2004 Compliance Agreement with the Administrator, the
Administrator is additionally compensated for Chief Compliance Officer related
services provided to enable the Trust to comply with Rule 38a-1 of the
Investment Company Act of 1940.
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, 2005, service fees on Class A
Shares amounted to $1,363,640 of which the Distributor retained $85,070.
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, 2005, amounted to $280,021. 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, 2005, amounted to $93,340. The total of these payments made
with respect to Class C Shares amounted to $373,361 of which the Distributor
retained $68,509.
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, 2005, total commissions on sales of Class A Shares amounted to
$1,205,424, of which the Distributor received $123,792.
c) OTHER RELATED PARTY TRANSACTIONS:
For the year ended March 31, 2005, the Trust incurred $136,677 of legal
fees allocable to Hollyer Brady Barrett & 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 Barrett & Hines LLP.
4. PURCHASES AND SALES OF SECURITIES
During the year ended March 31, 2005, purchases of securities and proceeds
from the sales of securities aggregated $100,896,739 and $74,835,955,
respectively.
At March 31, 2005 aggregate gross unrealized appreciation for all
securities in which there is an excess of value over tax cost amounted to
$32,889,342 and gross unrealized depreciation for all securities in which there
is an excess of tax cost over value amounted to $1,890,615 for a net unrealized
appreciation of $30,998,727. The tax cost of the Trust's securities at March 31,
2005 equaled $699,848,212.
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, 2005 MARCH 31, 2004
---------------------------- ----------------------------
SHARES AMOUNT SHARES AMOUNT
------ ------ ------ ------
CLASS A SHARES:
Proceeds from shares sold ..... 4,327,393 $ 50,338,345 4,338,910 $ 51,110,178
Reinvested distributions ...... 1,374,724 16,002,996 1,277,260 15,049,500
Cost of shares redeemed ....... (5,178,326) (60,145,678) (4,480,901) (52,720,550)
------------ ------------ ------------ ------------
Net change .................... 523,791 6,195,663 1,135,269 13,439,128
------------ ------------ ------------ ------------
CLASS C SHARES:
Proceeds from shares sold ..... 808,399 9,429,910 935,498 11,030,203
Reinvested distributions ...... 56,505 657,317 53,038 624,410
Cost of shares redeemed ....... (823,950) (9,543,036) (639,318) (7,518,842)
------------ ------------ ------------ ------------
Net change ................. 40,954 544,191 349,218 4,135,771
------------ ------------ ------------ ------------
CLASS Y SHARES:
Proceeds from shares sold ..... 193,962 2,253,479 359,896 4,241,025
Reinvested distributions ...... 29,901 348,337 26,724 314,898
Cost of shares redeemed ....... (410,603) (4,802,748) (553,321) (6,480,700)
------------ ------------ ------------ ------------
Net change ................. (186,740) (2,200,932) (166,701) (1,924,777)
------------ ------------ ------------ ------------
Total transactions in Trust
shares ........................ 378,005 $ 4,538,922 1,317,786 $ 15,650,122
============ ============ ============ ============
8. TRUSTEES' FEES AND EXPENSES
During the fiscal year ended March 31, 2005 there were 8 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 rate of $15,750 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, 2005, such
meeting-related expenses averaged $3,170 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. INCOME TAX INFORMATION AND 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 portion of the dividends and distributions 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:
YEAR ENDED MARCH 31,
2005 2004
------------ ------------
Net tax-exempt income $ 28,668,394 $ 28,703,806
Ordinary income 11,607 1,142
Long term capital gain 1,268,125 --
------------ ------------
$ 29,948,126 $ 28,704,948
============ ============
The difference between book basis and tax basis unrealized appreciation is
attributable primarily to the treatment of market discount as interest income
for financial statement purposes.
As of March 31, 2005, the components of distributable earnings on a tax
basis were as follows:
Undistributed long term capital gain $ 458,984
Unrealized appreciation 30,998,727
Undistributed tax-exempt income 2,001,862
------------
$ 33,459,573
============
- --------------------------------------------------------------------------------
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, 2005, $28,668,394 of dividends paid by
Hawaiian Tax-Free Trust, constituting 95.73% of total dividends paid during
fiscal 2005, were exempt-interest dividends, exempt from regular Federal income
tax and Hawaii state income tax; $1,268,125 of dividends paid by the Trust
constituting 4.23% of total dividends paid during the fiscal year were capital
gain distributions; and the balance was ordinary dividend income.
Prior to January 31, 2005, shareholders were mailed IRS Form 1099-DIV
which contained information on the status of distributions paid for the 2004
CALENDAR YEAR.
- --------------------------------------------------------------------------------
HAWAIIAN TAX-FREE TRUST
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
CLASS A
--------------------------------------------------
YEAR ENDED MARCH (31,)
--------------------------------------------------
2005 2004 2003 2002 2001
------ ------ ------ ------ ------
Net asset value, beginning of period ...................... $11.83 $11.73 $11.26 $11.37 $10.94
------ ------ ------ ------ ------
Income (loss) from investment operations:
Net investment income + ................................ 0.45 0.46 0.48 0.51 0.54
Net gain (loss) on securities (both realized
and unrealized) ..................................... (0.30) 0.10 0.47 (0.10) 0.43
------ ------ ------ ------ ------
Total from investment operations ....................... 0.15 0.56 0.95 0.41 0.97
------ ------ ------ ------ ------
Less distributions (note 10):
Dividends from net investment income ................... (0.45) (0.46) (0.48) (0.52) (0.54)
Distributions from capital gains ....................... (0.02) -- -- -- --
------ ------ ------ ------ ------
Total distributions .................................... (0.47) (0.46) (0.48) (0.52) (0.54)
------ ------ ------ ------ ------
Net asset value, end of period ............................ $11.51 $11.83 $11.73 $11.26 $11.37
====== ====== ====== ====== ======
Total return (not reflecting sales charge) ................ 1.33% 4.83% 8.57% 3.62% 9.14%
Ratios/supplemental data
Net assets, end of period (in millions) ................ $ 681 $ 694 $ 675 $ 625 $ 593
Ratio of expenses to average net assets ................ 0.74% 0.73% 0.71% 0.72% 0.74%
Ratio of net investment income to average
net assets .......................................... 3.90% 3.89% 4.15% 4.51% 4.88%
Portfolio turnover rate ................................ 10% 8% 5% 13% 11%
The expense ratios after giving effect to the expense offset for uninvested cash balances were:
Ratio of expenses to average net assets ................ 0.74% 0.72% 0.70% 0.70% 0.72%
- ----------
+ Per share amounts have been calculated using the monthly average shares
method.
See accompanying notes to financial statements.
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
CLASS C
--------------------------------------------------
YEAR ENDED MARCH 31,
--------------------------------------------------
2005 2004 2003 2002 2001
------ ------ ------ ------ ------
Net asset value, beginning of period ........... $11.82 $11.73 $11.26 $11.36 $10.93
------ ------ ------ ------ ------
Income (loss) from investment operations:
Net investment income + ..................... 0.36 0.36 0.38 0.41 0.45
Net gain (loss) on securities (both
realized and unrealized) .................. (0.30) 0.09 0.48 (0.08) 0.43
------ ------ ------ ------ ------
Total from investment operations ............ 0.06 0.45 0.86 0.33 0.88
------ ------ ------ ------ ------
Less distributions (note 10):
Dividends from net investment income ........ (0.36) (0.36) (0.39) (0.43) (0.45)
Distributions from capital gains ............ (0.02) -- -- -- --
------ ------ ------ ------ ------
Total distributions ......................... (0.38) (0.36) (0.39) (0.43) (0.45)
------ ------ ------ ------ ------
Net asset value, end of period ................. $11.50 $11.82 $11.73 $11.26 $11.36
====== ====== ====== ====== ======
Total return (not reflecting sales charge) ..... 0.53% 3.91% 7.70% 2.91% 8.28%
Ratios/supplemental data
Net assets, end of period (in millions) ..... $ 37.6 $ 38.2 $ 33.8 $ 24.1 $ 15.0
Ratio of expenses to average net assets ..... 1.54% 1.54% 1.51% 1.51% 1.54%
Ratio of net investment income to
average net assets ........................ 3.10% 3.08% 3.33% 3.68% 4.06%
Portfolio turnover rate ..................... 10% 8% 5% 13% 11%
The expense ratios after giving effect to the expense offset for uninvested cash balances were:
Ratio of expenses to average net assets ..... 1.54% 1.52% 1.50% 1.50% 1.51%
CLASS Y
--------------------------------------------------
YEAR ENDED MARCH 31,
--------------------------------------------------
2005 2004 2003 2002 2001
------ ------ ------ ------ ------
Net asset value, beginning of period ........... $11.84 $11.75 $11.28 $11.39 $10.95
------ ------ ------ ------ ------
Income (loss) from investment operations:
Net investment income + ..................... 0.48 0.48 0.50 0.52 0.55
Net gain (loss) on securities (both
realized and unrealized) .................. (0.30) 0.09 0.47 (0.09) 0.45
------ ------ ------ ------ ------
Total from investment operations ............ 0.18 0.57 0.97 0.43 1.00
------ ------ ------ ------ ------
Less distributions (note 10):
Dividends from net investment income ........ (0.48) (0.48) (0.50) (0.54) (0.56)
Distributions from capital gains ............ (0.02) -- -- -- --
------ ------ ------ ------ ------
Total distributions ......................... (0.50) (0.48) (0.50) (0.54) (0.56)
------ ------ ------ ------ ------
Net asset value, end of period ................. $11.52 $11.84 $11.75 $11.28 $11.39
====== ====== ====== ====== ======
Total return (not reflecting sales charge) ..... 1.54% 4.97% 8.77% 3.80% 9.44%
Ratios/supplemental data
Net assets, end of period (in millions) ..... $ 20.7 $ 23.5 $ 25.2 $ 19.3 $ 7.9
Ratio of expenses to average net assets ..... 0.54% 0.53% 0.51% 0.52% 0.54%
Ratio of net investment income to
average net assets ........................ 4.09% 4.09% 4.33% 4.69% 5.00%
Portfolio turnover rate ..................... 10% 8% 5% 13% 11%
The expense ratios after giving effect to the expense offset for uninvested cash balances were:
Ratio of expenses to average net assets ..... 0.54% 0.52% 0.50% 0.50% 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)(2)
NUMBER OF
POSITIONS PORTFOLIOS OTHER DIRECTORSHIPS
HELD WITH IN FUND HELD BY TRUSTEE
NAME, TRUST AND PRINCIPAL COMPLEX(5) (THE POSITION HELD IS
ADDRESS(3) LENGTH OF OCCUPATION(S) OVERSEEN A DIRECTORSHIP UNLESS
AND DATE OF BIRTH SERVICE(4) DURING PAST 5 YEARS BY TRUSTEE INDICATED OTHERWISE.)
- ----------------- ---------- ------------------- ---------- ---------------------
INTERESTED TRUSTEES(6) Trustee since Vice Chair and Chief Executive Officer of 10 None
2004, President Aquila Management Corporation, Founder of
Diana P. Herrmann since 1998 and the Aquila(sm) Group of Funds(7) and parent
New York, NY Vice Chair of Aquila Investment Management LLC,
(02/25/58) since 2003 Administrator, since 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; Chief Executive Officer and 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 (2004) and head of its Small Funds
Committee since 2004; active in charitable
and volunteer organizations.
NON-INTERESTED TRUSTEES
Theodore T. Mason Chair of the Executive Director, East Wind Power Partners 10 Trustee, Pimco Advisors
New York, NY Board of LTD since 1994 and Louisiana Power Partners, VIT.
(11/24/35) Trustees 1999-2003; Treasurer, Alumni Association of
since 2004 SUNY Maritime College since 2004 (President,
and Trustee 2002-2003; First Vice President, 2000-2001,
since 1984 Second Vice President, 1998-2000) and
director of the same organization since
1997; Director, STCM Management Company,
Inc., 1973-2004; 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, 2000-2004; and the
Maritime College at Fort Schuyler
Foundation, Inc. since 2000.
Thomas W. Courtney Trustee President, Courtney Associates, Inc., a 5 Chairman of the Board
Sewickley, PA since 1984 venture 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;
Chairman of the Board
of Pimco Advisors VIT.
Stanley W. Hong Trustee President, Waste Management of Hawaii, Inc. 4 Trustee, Pacific
Honolulu, HI since 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 stock funds; director,
Trust Estate since 2001; President and Chief First Insurance Co. of
Executive Officer, The Chamber of Commerce Hawaii, Ltd., Lanihau
of Hawaii, 1996-2001; director, Hawaii Properties, Ltd.
Public Television Foundation since 1998;
Regent, Chaminade 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 Executive Director, Hawaii Government 4 Trustee, Pacific
Honolulu, HI since 1992 Employees Association AFSCME Local 152, Capital Funds, which
(03/22/44) AFL-CIO since 1981; International Vice includes 11 bond and
President, American Federation of State, stock funds; Chairman,
County and Municipal Employees, AFL-CIO Royal State Group.
since 1981; director of various civic and
charitable organizations.
Douglas Philpotts Trustee Retired; formerly director, Chairman of the 4 Trustee, Pacific
Honolulu, HI since 1992 Board and President of Hawaiian Trust Capital Funds, which
(11/21/31) Company, Limited; present or former director includes 11 bond and
of various Hawaii-based civic and charitable stock funds.
organizations.
Oswald K. Stender Trustee Director, Hawaiian Electric Industries, 4 Trustee, Pacific
Honolulu, HI since 1992 Inc., a public utility holding company, Capital Funds, which
(10/08/31) 1993-2004; trustee, the Bernice Pauahi includes 11 bond and
Bishop Estate 1990-1999; trustee, Office of stock funds; director,
Hawaiian Affairs and a member or trustee of Grace Pacific
several community organizations. Corporation, an asphalt
paving company, and ACE
Trucking Inc., a
trucking company.
CHAIRMAN EMERITUS
Because of his importance to the shareholders and to enable the Board of
Trustees to continue to have the benefit of his counsel, Mr. Lacy B. Herrmann
has agreed to continue to be Chairman Emeritus. The Chairman Emeritus may attend
Board meetings but has no voting power.
Lacy B. Herrmann Founder, Founder and Chairman of the Board, Aquila N/A N/A
New York, NY Chairman Management Corporation, the sponsoring
(05/12/29) Emeritus since organization and parent of the Manager or
2004, Trustee, Administrator and/or Adviser or Sub-Adviser
1984-2004, to each fund of the Aquila(sm) Group of
and Chairman Funds; Chairman of the Manager or
of the Board Administrator and/or Adviser or Sub-Adviser
of Trustees, to each since 2004; Founder, Chairman
1984-2003 Emeritus and Trustee of Aquila Rocky
Mountain Equity Fund, Tax-Free Fund For
Utah, Narragansett Insured Tax-Free Income
Fund and Tax-Free Trust of Arizona; Founder
and Chairman Emeritus of Hawaiian Tax-Free
Trust, Pacific Capital Cash Assets Trust,
Pacific Capital Tax-Free Cash Assets Trust,
Pacific Capital U.S. Government Securities
Cash Assets Trust, Tax-Free Fund of
Colorado, Churchill Tax-Free Fund of
Kentucky and Tax-Free Trust of Oregon;
previously Chairman and a Trustee of each
fund in the Aquila(sm) Group of Funds since
its establishment until 2004 or 2005;
Director of the Distributor since 1981 and
formerly Vice President or Secretary,
1981-1998; Trustee Emeritus, Brown
University and the Hopkins School; active in
university, school and charitable
organizations.
OFFICERS
Charles E. Childs, III Executive Executive Vice President of all funds in the N/A N/A
New York, NY Vice President Aquila(sm) Group of Funds and the
(04/01/57) since 2003 Administrator and Administrator's parent
since 2003; formerly Senior Vice President,
corporate development, 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 Aquila
Money-Market Funds, 1988-2003.
Sherri Foster Senior Vice Senior Vice President, Hawaiian Tax-Free N/A N/A
Lahaina, HI President Trust since 1993 and formerly Vice President
(07/27/50) since 1993 or Assistant Vice President; Vice President
or Assistant Vice 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 N/A N/A
New York, NY since 1998 1995; Vice President, Hawaiian Tax-Free
(05/06/61) Trust since 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.
Robert W. Anderson Chief Chief Compliance Officer of the Trust, the N/A N/A
New York, NY Compliance Administrator and the Distributor since
(08/23/40) Officer since 2004, Compliance Officer of the
2004 and Administrator or its predecessor and current
Assistant parent since 1998 and Assistant Secretary of
Secretary the Aquila(sm) Group of Funds since 2000;
since 2000 Consultant, The Wadsworth Group, 1995-1998.
Joseph P. DiMaggio Chief Financial Chief Financial Officer of the Aquila(sm) N/A N/A
New York, NY Officer since Group of Funds since 2003 and Treasurer
(11/06/56) 2003 and since 2000; Controller, Van Eck Global
Treasurer Funds, 1993-2000.
since 2000
Edward M. W. Hines Secretary Partner, Hollyer Brady Barrett & Hines LLP, N/A N/A
New York, NY since 1984 legal counsel to the Trust, since 1989;
(12/16/39) Secretary of the Aquila(sm) Group of Funds.
John M. Herndon Assistant Assistant Secretary of the Aquila(sm) Group N/A N/A
New York, NY Secretary of Funds since 1995 and Vice President of
(12/17/39) since 1995 the three 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 N/A N/A
New York, NY Treasurer of Funds since 2000; Assistant Vice
(11/02/66) since 2000 President of the 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) From time to time Bank of Hawaii may enter into normal investment
management, commercial banking and lending arrangements with one or more
of the Trustees of the Trust and their affiliates. The Asset Management
Group of Bank of Hawaii is the Trust's investment adviser.
(3) The mailing address of each Trustee and officer is c/o Hawaiian Tax-Free
Trust, 380 Madison Avenue, Suite 2300, New York, NY 10017.
(4) Each Trustee holds office until the next annual meeting of shareholders or
until his or her successor is elected and qualifies. The term of office of
each officer is one year.
(5) Includes certain Aquila-sponsored funds that are dormant and have no
public shareholders.
(6) Ms. Herrmann is an interested person of the Trust as an officer of the
Trust, as a director, officer and shareholder of the Administrator's
corporate parent, as an officer and Manager of the Administrator, and as a
shareholder and director of the Distributor.
(7) 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, which do not include the
dormant funds described in footnote 5, are called the "Aquila(sm) Group of
Funds."
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ANALYSIS OF EXPENSES (UNAUDITED)
As a shareholder of the Trust, you may incur two types of costs: (1)
transaction costs, including front-end sales charges with respect to Class A
shares or contingent deferred sales charges ("CDSC") with respect to Class C
shares; and (2) ongoing costs, including management fees; distribution and/or
service (12b-1) fees; and other Trust expenses. The tables below are intended to
help you understand your ongoing costs (in dollars) of investing in the Trust
and to compare these costs with the ongoing costs of investing in other mutual
funds.
The tables below are based on an investment of $1,000 invested on October
1, 2004 and held for the six months ended March 31, 2005.
ACTUAL EXPENSES
This table provides information about actual account values and actual
expenses. You may use the information provided in this table, together with the
amount you invested, to estimate the expenses that you paid over the period. To
estimate the expenses you paid on your account, divide your ending account value
by $1,000 (for example, an $8,600 ending account value divided by $1,000 = 8.6),
then multiply the result by the number under the heading entitled "Expenses Paid
During the Period".
FOR THE SIX MONTHS ENDED MARCH 31, 2005
ACTUAL
TOTAL RETURN BEGINNING ENDING EXPENSES
WITHOUT ACCOUNT ACCOUNT PAID DURING
SALES CHARGES(1) VALUE VALUE THE PERIOD(2)
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Class A 0.02% $1,000.00 $1,000.20 $3.69
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Class C (0.37)% $1,000.00 $ 996.30 $7.66
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Class Y 0.04% $1,000.00 $1,000.40 $2.69
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(1) ASSUMES REINVESTMENT OF ALL DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS, IF
ANY, AT NET ASSET VALUE AND DOES NOT REFLECT THE DEDUCTION OF THE
APPLICABLE SALES CHARGES WITH RESPECT TO CLASS A SHARES OR THE APPLICABLE
CONTINGENT DEFERRED SALES CHARGES ("CDSC") WITH RESPECT TO CLASS C SHARES.
TOTAL RETURN IS NOT ANNUALIZED, AS IT MAY NOT BE REPRESENTATIVE OF THE
TOTAL RETURN FOR THE YEAR.
(2) EXPENSES ARE EQUAL TO THE ANNUALIZED EXPENSE RATIO OF 0.74%, 1.54% AND
0.54% FOR THE TRUST'S CLASS A, C AND Y SHARES, RESPECTIVELY, MULTIPLIED BY
THE AVERAGE ACCOUNT VALUE OVER THE PERIOD, MULTIPLIED BY 182/365 (TO
REFLECT THE ONE-HALF YEAR PERIOD).
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ANALYSIS OF EXPENSES (UNAUDITED) (CONTINUED)
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The table below provides information about hypothetical account values and
hypothetical expenses based on the actual expense ratio and an assumed rate of
return of 5.00% per year before expenses, which is not the Trust's actual
return. The hypothetical account values and expenses may not be used to estimate
the actual ending account balance or expenses you paid for the period. You may
use the information provided in this table to compare the ongoing costs of
investing in the Trust and other mutual funds. To do so, compare this 5.00%
hypothetical example relating to the Trust with the 5.00% hypothetical examples
that appear in the shareholder reports of other mutual funds.
Please note that the expenses shown in the table below are meant to
highlight your ongoing costs only and do not reflect any transactional costs,
with respect to Class A shares. The example does not reflect the deduction of
the applicable sales charges or contingent deferred sales charges ("CDSC") with
respect to Class C shares. Therefore, the table is useful in comparing ongoing
costs only, and will not help you determine the relative total costs of owning
different mutual funds. In addition, if these transaction costs were included,
your costs would have been higher.
FOR THE SIX MONTHS ENDED MARCH 31, 2005
HYPOTHETICAL
ANNUALIZED BEGINNING ENDING EXPENSES
TOTAL ACCOUNT ACCOUNT PAID DURING
RETURN VALUE VALUE THE PERIOD(1)
- --------------------------------------------------------------------------------
Class A 5.00% $1,000.00 $1,021.24 $3.73
- --------------------------------------------------------------------------------
Class C 5.00% $1,000.00 $1,017.25 $7.75
- --------------------------------------------------------------------------------
Class Y 5.00% $1,000.00 $1,022.24 $2.72
- --------------------------------------------------------------------------------
(1) EXPENSES ARE EQUAL TO THE ANNUALIZED EXPENSE RATIO OF 0.74%, 1.54% AND
0.54% FOR THE TRUST'S CLASS A, C AND Y SHARES, RESPECTIVELY, MULTIPLIED BY
THE AVERAGE ACCOUNT VALUE OVER THE PERIOD, MULTIPLIED BY 182/365 (TO
REFLECT THE ONE-HALF YEAR PERIOD).
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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 Trust
twice a year in the semi-annual and annual reports you receive. Additionally, 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.
The Trust additionally files a complete list of its portfolio holdings
with the SEC for the first and third quarters of each fiscal year on Form N-Q.
Forms N-Q are available free of charge on the SEC website at www.sec.gov. You
may also review or, for a fee, copy the forms at the SEC's Public Reference Room
in Washington, DC or by calling 800-SEC-0330.
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PROXY VOTING RECORD (UNAUDITED)
The Trust does not invest in equity securities. Accordingly, there were no
matters relating to a portfolio security considered at any shareholder meeting
held during the 12 months ended June 30, 2004 with respect to which the Trust
was entitled to vote. Applicable regulations require us to inform you that the
foregoing proxy voting information is available on the SEC website at
http://www.sec.gov.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PRIVACY NOTICES (UNAUDITED)
HAWAIIAN TAX-FREE TRUST
OUR PRIVACY POLICY. In providing services to you as an individual who owns or is
considering investing in shares of the Trust 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 us, such as the Trust's transfer
agent, distributor, investment adviser or sub-adviser, as permitted or required
by law, or as authorized by 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.
AQUILA DISTRIBUTORS, INC.
AQUILA INVESTMENT MANAGEMENT LLC
This Privacy Policy also has been adopted by Aquila Distributors, Inc. and
Aquila Investment Management LLC and applies to all nonpublic information about
you that each of these companies may obtain in connection with services provided
to the Trust or to you as a shareholder of the Trust.
- --------------------------------------------------------------------------------
FOUNDERS
Lacy B. Herrmann, Chairman Emeritus
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, Chair
Thomas W. Courtney
Diana P. Herrmann
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
Robert W. Anderson, Chief Compliance Officer
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 REGISTERED PUBLIC ACCOUNTING FIRM
KPMG LLP
345 Park Avenue
New York, New York 10154
Further information is contained in the Prospectus,
which must precede or accompany this report.
ITEM 2. CODE OF ETHICS.
(a) As of March 31, 2005 (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 $23,320 in 2005 and $21,200 in 2004.
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
$18,279 and $8,270 in 2005 and 2004, respectively, for return preparation
and tax compliance.
d) All Other Fees - There were no additional fees paid 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 of1940.
(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/ Diana P. Herrmann
- - ---------------------------------
Vice Chair, Trustee and President
June 9, 2005
By: /s/ Joseph P. DiMaggio
- - -----------------------------------
Chief Financial Officer and Treasurer
June 9, 2005
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/ Diana P. Herrmann
- - ---------------------------------
Diana P. Herrmann
Vice Chair and President
June 9, 2005
By: /s/ Joseph P. DiMaggio
- - -----------------------------------
Joseph P. DiMaggio
Chief Financial Officer and Treasurer
June 9, 2005
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.