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: 9/30/05
FORM N-CSR
ITEM 1. REPORTS TO STOCKHOLDERS
SEMI-ANNUAL
REPORT
SEPTEMBER 30, 2005
HAWAIIAN
TAX-FREE
TRUST
A TAX-FREE INCOME INVESTMENT
[LOGO OF HAWAIIAN TAX-FREE TRUST:
A PALM TREE IN FRONT OF A CIRCLE
WHICH HAS AN ISLAND AND WATER WITHIN IT] (R)
[LOGO OF THE AQUILA
GROUP OF FUNDS: ONE OF THE
AN EAGLE'S HEAD] AQUILA(SM) GROUP OF FUNDS
[LOGO OF HAWAIIAN TAX-FREE TRUST:
A PALM TREE IN FRONT OF A CIRCLE
WHICH HAS AN ISLAND AND WATER WITHIN IT] (R)
SERVING HAWAII INVESTORS FOR MORE THAN TWO DECADES
HAWAIIAN TAX-FREE TRUST
"DON'T WAIT UNTIL TOMORROW"
November, 2005
Dear Fellow Shareholder:
Are there things that you wish that you had done today? Yesterday? 10
years ago? We are all guilty of sometimes putting off to tomorrow things we
really should do today. However, when it comes to investing for one's retirement
and future needs, any delay can prove to be extremely costly.
LIFE EXPECTANCY
As you probably know, continuing advances in medicine and a renewed focus
on healthier life styles have contributed to life expectancy in the United
States reaching an all-time high. The average American can now expect to live
77.6 years. It probably won't surprise you to learn that this increase is in
keeping with historical trends. U.S. life expectancies have risen an average of
2/10th of a year, each and every year since 1990.
AN OPTIMISTIC, YET REALISTIC APPROACH
While it is certainly always hoped for, and may be fully expected, that
plans will come to fruition in exactly the manner anticipated, it is always best
to also have a realistic approach to most future dealings - especially when it
comes to investing and one's retirement planning.
INADEQUACY OF SOCIAL SECURITY -- Coupled with a population that is living
longer is a society which is reproducing less. This is creating a phenomenon
known as "global aging." It is anticipated that before too long, the number of
retired persons will outweigh the number of individuals in the workforce. This
situation may well wreak havoc with the Social Security system.
While we may not realize the full impact of global aging in our lifetimes,
it does bring to light that perhaps it may not be wise to rely solely on Social
Security for one's retirement needs. Many financial experts suggest that one
should plan to have 75% - 80% of their current income available at retirement so
that they can maintain their current standard of living. For many people, Social
Security alone will not even come close to providing this suggested percentage,
if it truly is an accurate estimate.
PRECARIOUSNESS OF PENSION PLANS -- When you read about such industry
leaders as Bethlehem Steel, United Airlines, Enron and WorldCom having
significant financial problems, it reminds us all that our corporate pension
plans may not be 100% safe. Therefore, relying solely upon income from corporate
pension plans for retirement may also not necessarily be a wise thing to do.
INFLATION -- With so much uncertainty in this world today, going back to
the olden days of "placing your savings under your mattress for safe-keeping"
might not seem like such a bad idea. However, while this method is better than
not saving at all, it does not take into consideration the effect of an often
overlooked risk factor - inflation. A dollar placed safely under one's mattress
today may still be there in a few years. But, it is unlikely that it will still
have the same purchasing power
that it does today. The dollar may still look and feel the same as it did when
it was first tucked away. But, in actuality, inflation will most likely take a
bite out of its purchasing power. In other words, it will no longer have the
same "bang for the buck."
As you probably are aware, the Consumer Price Index (CPI) measures the
average price of a 'basket' of goods and services at regular intervals. It
should come as no surprise to you that the cost for that basket of goods and
services continues to rise year after year. In fact, as you will note from the
chart below, in the past 20 years, the CPI has come very close to doubling.
Year CPI
---- ---
1985 $105.5
1990 $127.4
1995 $150.3
2000 $168.8
2005 $190.7
As you can see, each dollar buys substantially less each year. So, while
one may have enough money to cover their living expenses right at the moment, it
is also important to ask oneself if you will be able to say the same thing 10,
20 or more years from now.
PLAN AHEAD AND DIVERSIFY
Unfortunately, many of us probably know a retired person who has been
forced back to work in order to keep up with their living expenses. And, we may
know someone who has had to adopt a diminished life style in order to keep their
expenses under control.
Our best advice for everyone in order to avoid these types of situations
is to:
1) sit down with a financial professional and develop a sound financial
plan;
2) start saving as early as possible;
3) have a diversified portfolio of investments; and
4) have a diversified pool of resources to rely upon for your
retirement, not depending solely on Social Security or a pension
plan.
No matter where you choose to place your cash reserves - in Hawaiian
Tax-Free Trust or elsewhere - don't wait until tomorrow to prepare for your
future. If you haven't already done so, start a savings plan today that will,
hopefully, enable you to reach your goals.
Sincerely,
/s/ Diana P. Herrmann /s/ Lacy B. Herrmann
Diana P. Herrmann Lacy B. Herrmann
Vice Chair & President Founder & Chairman Emeritus
NOT A PART OF THE SEMI-ANNUAL REPORT
HAWAIIAN TAX-FREE TRUST
SCHEDULE OF INVESTMENTS
SEPTEMBER 30, 2005
(UNAUDITED)
RATING
FACE MOODY'S/
AMOUNT HAWAII GENERAL OBLIGATION BONDS (54.6%) S&P VALUE
- ------------ ----------------------------------------------------------- --------- ------------
City and County of Honolulu, Hawaii, Series A,
Escrowed to Maturity, FGIC Insured
$ 3,995,000 5.750%, 04/01/11 .......................................... Aaa/NR $ 4,474,200
City and County of Honolulu, Hawaii , Series A,
Escrowed to Maturity, FGIC Insured
4,110,000 6.000%, 01/01/11 .......................................... Aaa/AAA 4,631,189
920,000 6.000%, 01/01/12 .......................................... Aaa/AAA 1,048,956
775,000 5.750%, 04/01/13 .......................................... Aaa/AAA 884,074
City and County of Honolulu, Hawaii, Series A,
Escrowed to Maturity, MBIA Insured
1,355,000 6.000%, 11/01/09 .......................................... Aaa/AAA 1,499,294
410,000 6.000%, 11/01/10 .......................................... Aaa/AAA 461,098
City and County of Honolulu, Hawaii, Series A,
FGIC Insured
9,970,000 7.350%, 07/01/07 .......................................... Aaa/AAA 10,690,033
3,600,000 7.350%, 07/01/08 .......................................... Aaa/AAA 3,995,532
1,715,000 6.000%, 01/01/11 .......................................... Aaa/AAA 1,924,607
5,000 5.750%, 04/01/11 .......................................... Aaa/AAA 5,586
1,580,000 6.000%, 01/01/12 .......................................... Aaa/AAA 1,793,885
3,025,000 5.750%, 04/01/13 .......................................... Aaa/AAA 3,437,973
City and County of Honolulu, Hawaii, Series A,
FSA Insured
2,500,000 5.000%, 09/01/09 .......................................... Aaa/AAA 2,662,950
City and County of Honolulu, Hawaii, Series A
MBIA Insured
860,000 6.000%, 11/01/09 .......................................... Aaa/AAA 951,581
1,090,000 6.000%, 11/01/10 .......................................... Aaa/AAA 1,225,847
370,000 5.250%, 03/01/12 .......................................... Aaa/AAA 405,520
745,000 5.250%, 03/01/18 .......................................... Aaa/AAA 808,124
1,115,000 5.250%, 03/01/15 .......................................... Aaa/AAA 1,220,724
1,715,000 5.250%, 03/01/16 .......................................... Aaa/AAA 1,875,301
4,655,000 5.000%, 07/01/16 .......................................... Aaa/AAA 5,092,151
1,775,000 5.250%, 03/01/17 .......................................... Aaa/AAA 1,932,549
RATING
FACE MOODY'S/
AMOUNT HAWAII GENERAL OBLIGATION BONDS (CONTINUED) S&P VALUE
- ------------ ----------------------------------------------------------- --------- ------------
City and County of Honolulu, Hawaii, Prerefunded
Series A, Escrowed to Maturity, MBIA Insured
$ 630,000 5.250%, 03/01/12 .......................................... Aaa/AAA $ 693,510
City and County of Honolulu, Hawaii,
Prerefunded 03/01/13 @ 100, Series A,
MBIA Insured
1,885,000 5.250%, 03/01/15 .......................................... Aaa/AAA 2,086,846
2,885,000 5.250%, 03/01/16 ......................................... Aaa/AAA 3,193,926
3,005,000 5.250%, 03/01/17 ......................................... Aaa/AAA 3,326,775
1,255,000 5.250%, 03/01/18 ......................................... Aaa/AAA 1,389,385
City and County of Honolulu, Hawaii, Series A,
MBIA Insured
5,000,000 5.000%, 07/01/14 .......................................... Aaa/AAA 5,465,650
7,650,000 5.000%, 07/01/18 .......................................... Aaa/AAA 8,248,765
6,250,000 5.000%, 07/01/19 .......................................... Aaa/AAA 6,707,937
City and County of Honolulu, Hawaii, Series A,
Prerefunded 09/01/06 @ 102, FGIC Insured
440,000 5.625%, 09/01/14 .......................................... Aaa/AAA 459,444
City and County of Honolulu, Hawaii, Series A,
Prerefunded 09/01/11 @ 100, FSA Insured
3,500,000 5.375%, 09/01/18 .......................................... Aaa/AAA 3,870,860
2,000,000 5.125%, 09/01/20 .......................................... Aaa/AAA 2,185,360
City and County of Honolulu, Hawaii, Series A,
Prerefunded 11/01/05 @ 101, MBIA Insured
2,280,000 5.000%, 11/01/15 .......................................... Aaa/AAA 2,306,608
City and County of Honolulu, Hawaii, Series B
Prerefunded 07/01/09 @ 101, FGIC Insured
600,000 5.125%, 07/01/11 .......................................... Aaa/AAA 646,800
City and County of Honolulu, Hawaii, Series B
FGIC Insured
7,310,000 5.500%, 10/01/11 .......................................... Aaa/AAA 8,122,872
4,490,000 5.000%, 07/01/19 .......................................... Aaa/AAA 4,820,554
1,395,000 5.000%, 07/01/20 .......................................... Aaa/AAA 1,497,700
City and County of Honolulu, Hawaii, Series B,
MBIA Insured
4,000,000 5.000%, 07/01/10 .......................................... Aaa/AAA 4,294,040
5,000,000 5.000%, 07/01/12 .......................................... Aaa/AAA 5,427,750
3,000,000 5.000%, 07/01/13 .......................................... Aaa/AAA 3,270,750
2,930,000 5.000%, 07/01/18 .......................................... Aaa/AAA 3,159,331
RATING
FACE MOODY'S/
AMOUNT HAWAII GENERAL OBLIGATION BONDS (CONTINUED) S&P VALUE
- ------------ ----------------------------------------------------------- --------- ------------
City and County of Honolulu, Hawaii, Series B,
Prerefunded 07/01/09 @ 101, FGIC Insured
$ 2,595,000 5.125%, 07/01/15 .......................................... Aaa/AAA $ 2,797,410
City and County of Honolulu, Hawaii, Series B,
Prerefunded 11/01/07 @ 101, FGIC Insured
930,000 5.000%, 11/01/13 .......................................... Aaa/AAA 977,365
1,060,000 5.000%, 11/01/14 .......................................... Aaa/AAA 1,113,986
530,000 5.000%, 11/01/16 .......................................... Aaa/AAA 556,993
1,400,000 5.000%, 11/01/17 .......................................... Aaa/AAA 1,471,302
City and County of Honolulu, Hawaii, Series C,
MBIA Insured
6,945,000 5.000%, 07/01/19 .......................................... Aaa/AAA 7,453,860
City and County of Honolulu, Hawaii, Series C
FGIC Insured
7,750,000 5.125%, 07/01/14 .......................................... Aaa/AAA 8,303,350
2,510,000 5.000%, 07/01/18 .......................................... Aaa/AAA 2,663,060
City and County of Honolulu, Hawaii, Series D,
MBIA Insured
1,100,000 5.000%, 07/01/14 .......................................... Aaa/AAA 1,202,443
6,450,000 5.000%, 07/01/20 .......................................... Aaa/AAA 6,901,178
City and County of Honolulu, Hawaii, Water Utility
Refunding and Improvement, Escrowed to Maturity,
FGIC Insured
1,125,000 6.000%, 12/01/12 .......................................... Aaa/AAA 1,298,531
1,050,000 6.000%, 12/01/15 .......................................... Aaa/AAA 1,241,121
County of Hawaii, Series A, FGIC Insured
1,700,000 5.450%, 05/01/07 .......................................... Aaa/AAA 1,762,135
3,170,000 5.500%, 05/01/08 .......................................... Aaa/AAA 3,354,209
2,500,000 5.550%, 05/01/09 .......................................... Aaa/AAA 2,695,900
4,905,000 5.600%, 05/01/11 .......................................... Aaa/AAA 5,440,577
1,000,000 5.600%, 05/01/12 .......................................... Aaa/AAA 1,118,580
1,000,000 5.600%, 05/01/13 .......................................... Aaa/AAA 1,127,970
1,465,000 5.500%, 07/15/16 .......................................... Aaa/AAA 1,596,982
County of Hawaii, Series A, FSA Insured
1,000,000 5.375%, 05/15/13 .......................................... Aaa/AAA 1,078,230
1,000,000 5.400%, 05/15/15 .......................................... Aaa/AAA 1,077,300
1,000,000 5.000%, 07/15/16 .......................................... Aaa/AAA 1,073,820
RATING
FACE MOODY'S/
AMOUNT HAWAII GENERAL OBLIGATION BONDS (CONTINUED) S&P VALUE
- ------------ ----------------------------------------------------------- --------- ------------
County of Hawaii, Series A, FSA Insured (continued)
$ 2,000,000 5.000%, 07/15/17 .......................................... Aaa/AAA $ 2,137,960
1,470,000 5.625%, 05/15/18 .......................................... Aaa/AAA 1,590,099
1,000,000 5.000%, 07/15/18 .......................................... Aaa/AAA 1,064,840
County of Hawaii, Series A, Prerefunded
02/01/06 @ 101.5, FGIC Insured
1,900,000 5.000%, 02/01/11 .......................................... Aaa/AAA 1,941,686
1,970,000 5.100%, 02/01/12 .......................................... Aaa/AAA 2,013,852
2,440,000 5.200%, 02/01/16 .......................................... Aaa/AAA 2,495,095
County of Hawaii, Series B, MBIA Insured
1,060,000 4.250%, 07/15/09 .......................................... Aaa/AAA 1,098,881
County of Kauai, Hawaii, Series A, Prerefunded
08/01/10 @ 100, FGIC Insured
1,000,000 6.125%, 08/01/13 .......................................... Aaa/AAA 1,125,880
1,010,000 6.250%, 08/01/14 .......................................... Aaa/AAA 1,142,734
1,000,000 6.250%, 08/01/15 .......................................... Aaa/AAA 1,131,420
1,000,000 6.250%, 08/01/16 .......................................... Aaa/AAA 1,131,420
1,275,000 6.250%, 08/01/17 .......................................... Aaa/AAA 1,442,560
County of Kauai, Hawaii Refunding Bonds, Series A
MBIA Insured
1,010,000 5.700%, 02/01/07 .......................................... Aaa/AAA 1,020,645
1,125,000 5.625%, 08/01/13 .......................................... Aaa/AAA 1,244,261
1,620,000 5.625%, 08/01/14 .......................................... Aaa/AAA 1,789,047
1,035,000 5.625%, 08/01/17 .......................................... Aaa/AAA 1,136,171
1,000,000 5.625%, 08/01/18 .......................................... Aaa/AAA 1,096,100
2,360,000 5.500%, 08/01/20 .......................................... Aaa/AAA 2,562,512
County of Kauai, Hawaii Refunding Bonds,
Series B & C, AMBAC Insured
435,000 5.900%, 08/01/08 .......................................... Aaa/AAA 467,286
1,355,000 5.900%, 08/01/08 .......................................... Aaa/AAA 1,455,568
1,300,000 5.950%, 08/01/10 .......................................... Aaa/AAA 1,451,736
County of Maui, Hawaii, MBIA Insured
1,100,000 5.000%, 09/01/08 .......................................... Aaa/AAA 1,156,672
County of Maui, Hawaii, MBIA Insured
4,000,000 5.000%, 03/01/17 .......................................... Aaa/AAA 4,323,880
2,500,000 5.000%, 03/01/18 .......................................... Aaa/AAA 2,690,225
1,105,000 5.000%, 03/01/19 .......................................... Aaa/AAA 1,183,709
RATING
FACE MOODY'S/
AMOUNT HAWAII GENERAL OBLIGATION BONDS (CONTINUED) S&P VALUE
- ------------ ----------------------------------------------------------- --------- ------------
County of Maui, Hawaii, Series A, FGIC Insured
Prerefunded 03/01/08 @ 101
$ 1,200,000 5.125%, 03/01/14 .......................................... Aaa/AAA $ 1,269,312
1,050,000 5.125%, 03/01/16 .......................................... Aaa/AAA 1,110,648
2,590,000 5.250%, 03/01/18 .......................................... Aaa/AAA 2,747,058
County of Maui, Hawaii, Series A, MBIA Insured
1,105,000 5.250%, 03/01/15 .......................................... Aaa/AAA 1,200,538
1,205,000 5.250%, 03/01/16 .......................................... Aaa/AAA 1,307,750
1,000,000 5.250%, 03/01/18 .......................................... Aaa/AAA 1,074,660
1,750,000 5.250%, 03/01/19 .......................................... Aaa/AAA 1,874,513
County of Maui, Hawai, Series A, MBIA Insured
1,000,000 5.500%, 03/01/18 .......................................... NR/AAA 1,081,310
County of Maui, Hawaii, Series A,
Prerefunded 09/01/07 @ 101, FGIC Insured
1,130,000 5.250%, 09/01/13 .......................................... Aaa/AAA 1,189,122
1,265,000 5.250%, 09/01/15 .......................................... Aaa/AAA 1,331,185
1,335,000 5.250%, 09/01/16 .......................................... Aaa/AAA 1,404,847
County of Maui, Hawaii, Series A,
Prerefunded 03/01/08 @101, FGIC Insured
250,000 5.000%, 03/01/10 .......................................... Aaa/AAA 263,722
County of Maui, Hawaii, Unrefunded Series A,
FGIC Insured
750,000 5.000%, 03/01/10 .......................................... Aaa/AAA 787,410
County of Maui, Hawaii, Series B, FGIC Insured
1,065,000 5.250%, 03/01/11 .......................................... Aaa/AAA 1,159,860
County of Maui, Hawaii, Series B, MBIA Insured
825,000 5.375%, 09/01/13 .......................................... Aaa/AAA 916,468
County of Maui, Hawaii Refunding Bonds, Series B,
MBIA Insured
1,445,000 5.375%, 09/01/12 .......................................... Aaa/AAA 1,604,268
County of Maui, Hawaii, Series C, FGIC Insured
1,020,000 5.250%, 03/01/16 .......................................... Aaa/AAA 1,098,856
1,000,000 5.250%, 03/01/17 .......................................... Aaa/AAA 1,076,800
1,250,000 5.250%, 03/01/20 .......................................... Aaa/AAA 1,345,362
State of Hawaii, Series BW, FSA Insured
1,000,000 6.400%, 03/01/09 .......................................... Aaa/AAA 1,105,160
RATING
FACE MOODY'S/
AMOUNT HAWAII GENERAL OBLIGATION BONDS (CONTINUED) S&P VALUE
- ------------ ----------------------------------------------------------- --------- ------------
State of Hawaii, Series BZ, FGIC Insured
$ 3,700,000 6.000%, 10/01/11 .......................................... Aaa/AAA $ 4,210,859
3,500,000 6.000%, 10/01/12 .......................................... Aaa/AAA 4,024,265
State of Hawai, Series CA, FGIC Insured
2,000,000 5.750%, 01/01/11 .......................................... Aaa/AAA 2,220,660
State of Hawaii, Series CC
590,000 5.125%, 02/01/07 .......................................... Aa3/AA- 605,723
State of Hawaii, Series CH
1,000,000 4.750%, 11/01/11 .......................................... Aa3/AA- 1,070,080
State of Hawaii, Series CH, FGIC Insured
5,000,000 6.000%, 11/01/07 .......................................... Aaa/AAA 5,291,800
3,390,000 6.000%, 11/01/08 .......................................... Aaa/AAA 3,672,794
State of Hawaii, Series CI
1,500,000 4.700%, 11/01/07 .......................................... Aa3/AA- 1,548,690
State of Hawaii, Series CL, FGIC Insured
2,305,000 6.000%, 03/01/11 .......................................... Aaa/AAA 2,594,946
State of Hawaii, Series CM, FGIC Insured
3,000,000 6.500%, 12/01/15 .......................................... Aaa/AAA 3,671,340
State of Hawaii, Series CN, FGIC Insured
Prerefunded 03/01/07 @ 102
4,000,000 5.250%, 03/01/10 .......................................... Aaa/AAA 4,206,400
4,000,000 5.250%, 03/01/13 .......................................... Aaa/AAA 4,206,400
3,000,000 5.500%, 03/01/14 .......................................... Aaa/AAA 3,165,060
7,950,000 5.250%, 03/01/15 .......................................... Aaa/AAA 8,360,220
1,000,000 5.250%, 03/01/17 .......................................... Aaa/AAA 1,051,600
State of Hawaii, Series CP Prerefunded, FGIC Insured
3,565,000 5.000%, 10/01/13 .......................................... Aaa/AAA 3,740,897
1,565,000 5.000%, 10/01/14 .......................................... Aaa/AAA 1,642,217
3,565,000 5.000%, 10/01/15 .......................................... Aaa/AAA 3,740,897
5,135,000 5.000%, 10/01/17 .......................................... Aaa/AAA 5,388,361
State of Hawaii, Series CP Unrefunded, FGIC Insured
1,435,000 5.000%, 10/01/13 .......................................... Aaa/AAA 1,499,833
630,000 5.000%, 10/01/14 .......................................... Aaa/AAA 658,344
1,435,000 5.000%, 10/01/15 .......................................... Aaa/AAA 1,499,833
2,060,000 5.000%, 10/01/17 .......................................... Aaa/AAA 2,151,052
RATING
FACE MOODY'S/
AMOUNT HAWAII GENERAL OBLIGATION BONDS (CONTINUED) S&P VALUE
- ------------ ----------------------------------------------------------- --------- ------------
State of Hawaii, Series CR, MBIA Insured
Prerefunded 04/01/08 @ 101
$ 1,000,000 5.250%, 04/01/13 .......................................... Aaa/AAA $ 1,062,360
5,000,000 5.000%, 04/01/16 .......................................... Aaa/AAA 5,282,050
9,600,000 5.000%, 04/01/17 .......................................... Aaa/AAA 10,141,536
State of Hawaii, Series CS, MBIA Insured
5,500,000 5.000%, 04/01/09 .......................................... Aaa/AAA 5,822,465
State of Hawaii, Series CU, MBIA Insured
1,250,000 5.750%, 10/01/08 .......................................... Aaa/AAA 1,342,750
1,000,000 5.750%, 10/01/09 .......................................... Aaa/AAA 1,094,390
State of Hawaii, Series CU, Prerefunded 10/01/10
@ 100, MBIA Insured
3,000,000 5.600%, 10/01/19 .......................................... Aaa/AAA 3,317,910
State of Hawaii, Series CV, FGIC Insured
11,000,000 5.000%, 08/01/20 .......................................... Aaa/AAA 11,554,070
5,000,000 5.250%, 08/01/21 .......................................... Aaa/AAA 5,407,750
1,015,000 5.000%, 08/01/21 .......................................... Aaa/AAA 1,063,436
State of Hawaii, Series CX, FSA Insured
2,000,000 5.250%, 02/01/12 .......................................... Aaa/AAA 2,189,740
8,725,000 5.500%, 02/01/13 .......................................... Aaa/AAA 9,680,475
500,000 5.000%, 02/01/19 .......................................... Aaa/AAA 525,380
2,500,000 5.500%, 02/01/21 .......................................... Aaa/AAA 2,726,450
State of Hawaii, Series CY, FSA Insured
2,500,000 5.750%, 02/01/14 .......................................... Aaa/AAA 2,856,375
2,000,000 5.750%, 02/01/15 .......................................... Aaa/AAA 2,300,240
State of Hawaii, Series CZ, Prerefunded, FSA Insured
1,255,000 5.250%, 07/01/16 .......................................... Aaa/AAA 1,384,177
State of Hawaii, Series CZ, Unrefunded, FSA Insured
8,135,000 5.250%, 07/01/16 .......................................... Aaa/AAA 8,835,017
State of Hawaii, Series CZ, FSA Insured
1,500,000 5.250%, 07/01/12 .......................................... Aaa/AAA 1,650,615
3,000,000 5.250%, 07/01/17 .......................................... Aaa/AAA 3,308,790
3,000,000 5.250%, 07/01/18 .......................................... Aaa/AAA 3,234,120
State of Hawaii, Series DD, MBIA Insured
2,000,000 4.250%, 05/01/10 .......................................... Aaa/AAA 2,085,160
RATING
FACE MOODY'S/
AMOUNT HAWAII GENERAL OBLIGATION BONDS (CONTINUED) S&P VALUE
- ------------ ----------------------------------------------------------- --------- ------------
State of Hawaii, Series DD, Prerefunded,
MBIA Insured
$ 2,530,000 5.000%, 05/01/18 .......................................... Aaa/AAA $ 2,769,642
State of Hawaii, Series DD Unrefunded,
MBIA Insured
1,470,000 5.000%, 05/01/18 .......................................... Aaa/AAA 1,573,547
------------
404,776,143
------------
HAWAII REVENUE BONDS (37.0%)
Board of Regents, University of Hawaii,
University System, Series A, FGIC Insured
1,805,000 5.500%, 07/15/14 .......................................... Aaa/AAA 2,004,940
1,090,000 5.500%, 07/15/16 .......................................... Aaa/AAA 1,207,295
2,000,000 5.500%, 07/15/19 .......................................... Aaa/AAA 2,197,600
2,000,000 5.500%, 07/15/21 .......................................... Aaa/AAA 2,192,600
2,000,000 5.500%, 07/15/22 .......................................... Aaa/AAA 2,202,620
3,000,000 5.500%, 07/15/29 .......................................... Aaa/AAA 3,264,660
Board of Regents, University of Hawaii, University
System, Series B, FSA Insured
1,110,000 5.250%, 10/01/12 .......................................... Aaa/AAA 1,210,377
1,000,000 5.250%, 10/01/13 .......................................... Aaa/AAA 1,088,180
1,140,000 5.250%, 10/01/14 .......................................... Aaa/AAA 1,231,599
1,395,000 5.250%, 10/01/15 .......................................... Aaa/AAA 1,508,637
City and County Board of Honolulu, Hawaii Water
Supply, Series A, FGIC Insured
700,000 4.750%, 07/01/15 .......................................... Aaa/AAA 747,943
City and County of Honolulu, Hawaii Board of Water
Supply & System, FSA Insured
620,000 5.500%, 07/01/15 .......................................... Aaa/AAA 677,189
3,000,000 5.125%, 07/01/21 .......................................... Aaa/AAA 3,206,250
5,450,000 5.250%, 07/01/23 .......................................... Aaa/AAA 5,865,345
City and County of Honolulu, Hawaii Board of Water
Supply & System, Series A, FGIC Insured
1,000,000 3.000%, 07/01/11 .......................................... Aaa/AAA 968,760
600,000 4.000%, 07/01/13 .......................................... Aaa/AAA 614,022
1,365,000 4.000%, 07/01/14 .......................................... Aaa/AAA 1,391,181
2,700,000 4.750%, 07/01/16 .......................................... Aaa/AAA 2,870,478
2,805,000 4.750%, 07/01/17 .......................................... Aaa/AAA 2,967,185
RATING
FACE MOODY'S/
AMOUNT HAWAII REVENUE BONDS (CONTINUED) S&P VALUE
- ------------ ----------------------------------------------------------- --------- ------------
City and County of Honolulu, Hawaii Board of Water
Supply & System, Series A, FGIC Insured (continued)
$ 2,970,000 4.750%, 07/01/18 .......................................... Aaa/AAA $ 3,128,271
3,095,000 4.750%, 07/01/19 .......................................... Aaa/AAA 3,245,974
3,265,000 4.750%, 07/01/20 .......................................... Aaa/AAA 3,414,472
1,230,000 5.000%, 07/01/21 .......................................... Aaa/AAA 1,308,683
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 355,573
290,000 6.900%, 10/15/06 .......................................... NR/NR2 293,593
City and County of Honolulu, Hawaii Wastewater
Systems, FGIC Insured
1,395,000 5.000%, 07/01/12 .......................................... Aaa/NR 1,488,019
City and County of Honolulu, Hawaii Wastewater
Systems, Series A, FGIC Insured
3,950,000 5.000%, 07/01/16 .......................................... Aaa/AAA 4,285,710
1,000,000 5.000%, 07/01/17 .......................................... Aaa/AAA 1,079,110
2,825,000 5.000%, 07/01/22 .......................................... Aaa/AAA 3,001,619
City and County of Honolulu, Hawaii Wastewater
Systems, Junior Series, FGIC Insured
3,000,000 5.250%, 07/01/13 .......................................... Aaa/AAA 3,228,390
1,000,000 5.250%, 07/01/15 .......................................... Aaa/AAA 1,076,130
2,400,000 5.250%, 07/01/16 .......................................... Aaa/AAA 2,577,432
2,000,000 5.250%, 07/01/18 .......................................... Aaa/AAA 2,144,220
5,055,000 5.000%, 07/01/23 .......................................... Aaa/AAA 5,304,313
City and County of Honolulu, Hawaii Wastewater
Systems, Senior Series, AMBAC Insured
1,810,000 5.500%, 07/01/11 .......................................... Aaa/NR 2,003,580
1,065,000 5.500%, 07/01/16 .......................................... Aaa/NR 1,159,796
3,000,000 5.500%, 07/01/17 .......................................... Aaa/NR 3,258,960
2,310,000 5.500%, 07/01/18 .......................................... Aaa/NR 2,501,961
2,000,000 5.250%, 07/01/19 .......................................... Aaa/NR 2,159,920
Department of Budget and Finance of the State of
Hawaii Special Purpose (Hawaiian Electric
Company, Inc.), Series A, AMBAC Insured
4,965,000 5.500%, 12/01/14 .......................................... Aaa/AAA 5,384,691
RATING
FACE MOODY'S/
AMOUNT HAWAII REVENUE BONDS (CONTINUED) S&P VALUE
- ------------ ----------------------------------------------------------- --------- ------------
Department of Budget and Finance of the State of
Hawaii Special Purpose (Hawaiian Electric
Company, Inc.), Series A, MBIA Insured
$ 4,125,000 4.950%, 04/01/12 .......................................... Aaa/AAA $ 4,454,588
Department of Budget and Finance of the State of
Hawaii Special Purpose (Hawaiian Electric
Company, Inc.) Refunding Series A-AMT,
FGIC Insured
3,000,000 4.800%, 01/01/25 .......................................... Aaa/AAA 3,022,080
Department of Budget and Finance of the State of
Hawaii Special Purpose (Hawaiian Electric
Company, Inc., and Subsidiaries Projects),
Series A-AMT, MBIA Insured
5,700,000 5.650%, 10/01/27 .......................................... Aaa/AAA 6,198,978
Department of Budget and Finance of the State of
Hawaii Special Purpose (Hawaiian Electric
Company, Inc., and Subsidiaries Projects),
Series B-AMT, XL Capital Insured
1,000,000 5.000%, 12/01/22 .......................................... Aaa/AAA 1,037,280
Department of Budget and Finance of the State of
Hawaii Special Purpose (Hawaiian Electric
Company, Inc.), Series D-AMT, AMBAC Insured
2,500,000 6.150%, 01/01/20 .......................................... Aaa/AAA 2,727,400
Department of Budget and Finance of the State of
Hawaii Special Purpose (Kapiolani Health
Care System), MBIA Insured
Prerefunded 07/01/06 @ 102
1,000,000 6.000%, 07/01/11 .......................................... Aaa/AAA 1,042,480
1,000,000 6.200%, 07/01/16 .......................................... Aaa/AAA 1,043,930
1,000,000 6.250%, 07/01/21 .......................................... Aaa/AAA 1,044,290
Department of Budget and Finance of the State of
Hawaii (North Hawaii Community Hospital)
Special Purpose , VRDO1 Enhancement LOC -
First Hawaiian Bank expiring 05/26/09
1,675,000 2.79%, 05/01/19 ........................................... VMIG1/Aa3 1,675,000
RATING
FACE MOODY'S/
AMOUNT HAWAII REVENUE BONDS (CONTINUED) S&P VALUE
- ------------ ----------------------------------------------------------- -------- ------------
Department of Budget and Finance of the State of
Hawaii Special Purpose (The Evangelical Lutheran
Good Samaritan Society), AMBAC Insured
$ 490,000 4.700%, 11/01/06 .......................................... Aaa/AAA $ 499,026
Department of Budget and Finance of the State of
Hawaii Special Purpose (The Queen's Health
System), Series A, Prerefunded 07/01/06 @ 102
5,000,000 6.050%, 07/01/16 .......................................... A1/A+ 5,212,300
8,625,000 6.000%, 07/01/20 .......................................... A1/A+ 8,988,113
3,500,000 5.750%, 07/01/26 .......................................... A1/A+ 3,641,015
Department of Budget and Finance of the State of
Hawaii Special Purpose (The Queen's Health
System), Series B, MBIA Insured
8,000,000 5.250%, 07/01/23 .......................................... Aaa/AAA 8,464,400
Department of Hawaiian Home Lands (State of Hawaii)
1,310,000 4.150%, 07/01/08 .......................................... A3/NR 1,326,860
1,525,000 4.350%, 07/01/10 .......................................... A3/NR 1,569,652
1,245,000 4.450%, 07/01/11 .......................................... A3/NR 1,280,819
Hawaii Community Development Authority
Improvement District Special Assessment Bonds
(Kakaako Community Development District 2)
435,000 5.500%, 07/01/06 .......................................... NR/NR2 439,650
465,000 5.600%, 07/01/07 .......................................... NR/NR2 469,989
Housing Finance and Development Corporation
(State of Hawaii) Single Family Mortgage,
Series A-AMT, FNMA Insured
2,830,000 5.300%, 07/01/22 .......................................... Aaa/AAA 2,912,070
6,750,000 5.750%, 07/01/30 .......................................... Aaa/AAA 6,775,853
1,330,000 5.400%, 07/01/30 .......................................... Aaa/AAA 1,350,415
Housing Finance and Development Corporation
(State of Hawaii) Single Family Mortgage,
Series B, FNMA Insured
9,350,000 5.450%, 07/01/17 .......................................... Aaa/AAA 9,644,338
6,800,000 5.300%, 07/01/28 .......................................... Aaa/AAA 6,910,364
Housing Finance and Development Corporation
(State of Hawaii) University of Hawaii Faculty
Housing Project, AMBAC Insured
2,125,000 5.650%, 10/01/16 .......................................... Aaa/AAA 2,154,325
4,000,000 5.700%, 10/01/25 .......................................... Aaa/AAA 4,055,360
RATING
FACE MOODY'S/
AMOUNT HAWAII REVENUE BONDS (CONTINUED) S&P VALUE
- ------------ ----------------------------------------------------------- --------- ------------
State of Hawaii Airport System, AMT FGIC Insured
$ 5,080,000 6.500%, 07/01/13 .......................................... Aaa/AAA $ 5,723,636
4,000,000 5.750%, 07/01/17 .......................................... Aaa/AAA 4,372,640
6,000,000 5.625%, 07/01/18 .......................................... Aaa/AAA 6,488,760
6,000,000 5.250%, 07/01/21 .......................................... Aaa/AAA 6,268,140
State of Hawaii Airport System, AMT, Second Series,
Escrowed to Maturity, MBIA Insured
6,455,000 6.900%, 07/01/12 .......................................... Aaa/AAA 7,312,482
State of Hawaii Airport System, Series B-AMT,
FGIC Insured
3,000,000 8.000%, 07/01/10 .......................................... Aaa/AAA 3,530,070
State of Hawaii Harbor Capital Improvement, AMT,
MBIA Insured
3,850,000 5.750%, 07/01/17 .......................................... Aaa/AAA 4,055,744
State of Hawaii Harbor Capital Improvement,
Series B-AMT, AMBAC Insured
3,000,000 5.500%, 07/01/19 .......................................... Aaa/AAA 3,230,280
State of Hawaii Harbor System, Series A, FSA Insured
1,350,000 4.500%, 01/01/07 .......................................... Aaa/AAA 1,373,895
1,285,000 4.500%, 01/01/08 .......................................... Aaa/AAA 1,322,728
State of Hawaii Harbor System, Series A-AMT,
FSA Insured
2,000,000 5.750%, 07/01/17 .......................................... Aaa/AAA 2,169,780
1,500,000 5.900%, 07/01/21 .......................................... Aaa/AAA 1,632,900
State of Hawaii Harbor System, Series B-AMT,
FSA Insured
870,000 5.000%, 01/01/07 .......................................... Aaa/AAA 890,114
1,220,000 5.000%, 01/01/08 .......................................... Aaa/AAA 1,263,542
3,275,000 4.500%, 01/01/09 .......................................... Aaa/AAA 3,383,435
2,000,000 5.000%, 01/01/11 .......................................... Aaa/AAA 2,129,540
State of Hawaii Highway
1,000,000 3.000%, 07/01/06 .......................................... Aa3/AA 1,000,550
1,140,000 3.000%, 07/01/07 .......................................... Aa3/AA 1,138,051
1,000,000 6.000%, 07/01/09 .......................................... Aa3/AA 1,097,500
State of Hawaii Highway, FSA Insured
1,000,000 3.000%, 07/01/08 .......................................... Aaa/AAA 996,580
750,000 3.000%, 07/01/09 .......................................... Aaa/AAA 744,472
1,500,000 3.000%, 07/01/10 .......................................... Aaa/AAA 1,471,065
1,500,000 3.000%, 07/01/11 .......................................... Aaa/AAA 1,455,975
RATING
FACE MOODY'S/
AMOUNT HAWAII REVENUE BONDS (CONTINUED) S&P VALUE
- ------------ ----------------------------------------------------------- --------- ------------
State of Hawaii Highway, Series A, FSA Insured
$ 1,000,000 5.000%, 07/01/20 .......................................... Aaa/AAA $ 1,069,950
State of Hawaii Highway, FSA Insured
825,000 4.800%, 07/01/08 .......................................... Aaa/AAA 860,854
State of Hawaii Highway, FSA Insured
Prerefunded 07/01/11 @ 100
1,000,000 5.375%, 07/01/19 .......................................... Aaa/AAA 1,103,230
State of Hawaii Highway, Callable 07/01/10 @ 100,
FSA Insured
2,000,000 4.500%, 07/01/10 .......................................... Aaa/AAA 2,103,500
2,000,000 4.500%, 07/01/11 .......................................... Aaa/AAA 2,110,520
5,105,000 5.000%, 07/01/12 .......................................... Aaa/AAA 5,541,733
State of Hawaii Highway, Callable 07/01/10 @ 100,
Prerefunded 07/01/11 @ 100 FSA Insured
500,000 5.250%, 07/01/13 .......................................... Aaa/AAA 548,380
1,530,000 5.375%, 07/01/14 .......................................... Aaa/AAA 1,687,942
250,000 5.125%, 07/01/14 .......................................... Aaa/AAA 270,080
2,720,000 5.500%, 07/01/19 .......................................... Aaa/AAA 2,982,888
1,110,000 5.500%, 07/01/20 .......................................... Aaa/AAA 1,217,281
2,000,000 5.375%, 07/01/20 .......................................... Aaa/AAA 2,206,460
State of Hawaii Highway, FGIC Insured
Prerefunded 07/01/06 @ 102
3,705,000 5.600%, 07/01/13 .......................................... Aaa/AAA 3,851,644
2,000,000 5.250%, 07/01/16 .......................................... Aaa/AAA 2,074,080
State of Hawaii Housing & Community Development,
FSA Insured
660,000 1.900%, 01/01/06 .......................................... Aaa/NR 657,690
910,000 2.900%, 01/01/09 .......................................... Aaa/NR 896,568
895,000 3.400%, 01/01/11 .......................................... Aaa/NR 891,143
670,000 3.450%, 07/01/11 .......................................... Aaa/NR 667,903
925,000 3.600%, 01/01/12 .......................................... Aaa/NR 923,936
960,000 3.600%, 07/01/12 .......................................... Aaa/NR 957,686
1,055,000 3.700%, 07/01/13 .......................................... Aaa/NR 1,052,141
------------
274,485,341
------------
RATING
FACE MOODY'S/
AMOUNT PUERTO RICO MUNICIPAL BONDS (5.2%) S&P VALUE
- ------------ ----------------------------------------------------------- --------- ------------
Puerto Rico Commonwealth Aqueduct and Sewer
Authority Revenue Bonds, MBIA Insured
$ 2,500,000 5.000%, 07/01/15 .......................................... Aaa/AAA $ 2,570,975
Puerto Rico Commonwealth Government Facilities
Revenue Bonds, Series A FSA Insured
1,600,000 5.250%, 07/01/19 .......................................... NR/AAA 1,806,096
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 6,231,027
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 5,569,700
Puerto Rico Commonwealth Public Improvement
General Obligation Bonds, Series A, FGIC Insured
4,000,000 5.500%, 07/01/13 .......................................... Aaa/AAA 4,514,880
2,000,000 5.500%, 07/01/16 .......................................... Aaa/AAA 2,287,900
Puerto Rico Commonwealth Public Improvement
General Obligation Bonds, Series A, FSA Insured
4,000,000 5.000%, 07/01/16 .......................................... Aaa/AAA 4,353,880
Puerto Rico Commonwealth Public Improvement
General Obligation Bonds, MBIA Insured
1,800,000 5.250%, 07/01/13 .......................................... Aaa/AAA 1,946,160
Puerto Rico Commonwealth Public Improvement
1,000,000 5.500%, 07/01/15 .......................................... NR/AAA 1,140,740
Puerto Rico Commonwealth Public Improvement
General Obligation Bonds, Series CR, FSA Insured
1,060,000 5.250%, 07/01/17 .......................................... Aaa/AAA 1,190,497
Puerto Rico Public Finance Corp., Prerefunded,
FNMA Collateralized
6,000,000 5.500%, 08/01/29 .......................................... Aaa/BBB- 6,646,320
------------
38,258,175
------------
RATING
FACE MOODY'S/
AMOUNT HAWAII COMMERCIAL PAPER (2.0%) S&P VALUE
- ------------ ----------------------------------------------------------- --------- ------------
City and County of Honolulu, Hawaii,
WestDeutsche Bank Insured
$ 10,000,000 2.650%, 12/01/05 .......................................... P1/A1+ $ 10,000,000
5,000,000 2.550%, 10/03/05 .......................................... P1/A1+ 5,000,000
------------
15,000,000
------------
Total Investments (Cost $702,481,135)3 .................... 98.8% 732,519,659
Other assets less liabilities ............................. 1.2% 8,660,719
----- ------------
Net Assets ................................................ 100.0% $741,180,378
===== ============
Percent of
Portfolio Distribution by Quality Rating (unaudited) Portfolio
----------------------------------------------------------- ----------
Aaa of Moody's and/or AAA of S&P. ......................... 93.6%
Aa of Moody's and/or AA of S&P. ........................... 1.1
A of Moody's and/or S&P. .................................. 5.1
Not rated (2) ............................................. 0.2
-----
100.0%
=====
(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 of the notes to financial statements.
PORTFOLIO ABBREVIATIONS:
------------------------
AMBAC - American Municipal Bond Assurance Corporation
AMT - Alternative Minimum Tax
FGIC - Financial Guaranty Insurance Company
FNMA - Federal National Mortgage Association
FSA - Financial Securities Assurance
LOC - Letter of Credit
MBIA - Municipal Bond Investors Assurance
VRDO - Variable Rate Demand Obligation
See accompanying notes to financial statements.
HAWAIIAN TAX-FREE TRUST
STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 30, 2005
(UNAUDITED)
ASSETS
Investments at value (cost $702,481,135) ............................................. $ 732,519,659
Cash ................................................................................. 179,644
Interest receivable .................................................................. 9,695,986
Receivable for Trust shares sold ..................................................... 159,266
Other assets ......................................................................... 51,194
-------------
Total assets ......................................................................... 742,605,749
-------------
LIABILITIES
Dividends payable .................................................................... 430,102
Distribution and service fees payable ................................................ 297,616
Payable for Trust shares redeemed .................................................... 292,091
Adviser and Administrator fees payable ............................................... 244,427
Accrued expenses ..................................................................... 161,135
-------------
Total liabilities .................................................................... 1,425,371
-------------
NET ASSETS .............................................................................. $ 741,180,378
=============
Net Assets consist of:
Capital Stock - Authorized an unlimited number of shares, par value $0.01 per share .. $ 644,063
Additional paid-in capital ........................................................... 707,073,417
Net unrealized appreciation on investments (note 4) .................................. 30,038,524
Accumulated net realized gain on investments ......................................... 1,334,057
Undistributed net investment income .................................................. 2,090,317
-------------
$ 741,180,378
=============
CLASS A
Net Assets ........................................................................... $ 683,268,140
=============
Capital shares outstanding ........................................................... 59,374,853
=============
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 ........................................................................... $ 36,876,945
=============
Capital shares outstanding ........................................................... 3,206,212
=============
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 ........................................................................... $ 21,035,293
=============
Capital shares outstanding ........................................................... 1,825,217
=============
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 SIX MONTHS ENDED SEPTEMBER 30, 2005
(UNAUDITED)
INVESTMENT INCOME:
Interest income .................................................. $ 16,742,276
Expenses:
Investment Adviser fees (note 3) ................................. $ 521,965
Administrator fees (note 3) ...................................... 969,371
Distribution and service fees (note 3) ........................... 871,621
Transfer and shareholder servicing agent fees .................... 202,743
Trustees' fees and expenses (note 8) ............................. 78,673
Legal fees (note 3) .............................................. 75,459
Shareholders' reports and proxy statements ....................... 64,858
Custodian fees ................................................... 62,638
Insurance ........................................................ 34,760
Registration fees and dues ....................................... 22,368
Auditing and tax fees ............................................ 13,007
Chief compliance officer (note 3) ................................ 2,278
Miscellaneous .................................................... 19,097
-------------
2,938,838
Expenses paid indirectly (note 6) ................................ (62,638)
-------------
Net expenses ..................................................... 2,876,200
-------------
Net investment income ............................................ 13,866,076
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain (loss) from securities transactions ............ 875,073
Change in unrealized appreciation on investments ................. (871,746)
-------------
Net realized and unrealized gain (loss) on investments ........... 3,327
-------------
Net change in net assets resulting from operations ............... $ 13,869,403
=============
See accompanying notes to financial statements.
HAWAIIAN TAX-FREE TRUST
STATEMENTS OF CHANGES IN NET ASSETS
SIX MONTHS ENDED
SEPTEMBER 30, 2005 YEAR ENDED
(UNAUDITED) MARCH 31, 2005
------------------ --------------
OPERATIONS:
Net investment income .............................................................. $ 13,866,076 $ 28,686,242
Net realized gain (loss) from securities transactions .............................. 875,073 1,286,593
Change in unrealized appreciation on investments ................................... (871,746) (20,663,429)
------------- -------------
Net change in net assets resulting from operations ................................. 13,869,403 9,309,406
------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS (NOTE 10):
Class A Shares:
Net investment income .............................................................. (12,909,476) (26,594,626)
Net realized gain on investments ................................................... -- (1,165,988)
Class C Shares:
Net investment income .............................................................. (542,494) (1,158,762)
Net realized gain on investments ................................................... -- (65,029)
Class Y Shares:
Net investment income .............................................................. (414,109) (926,612)
Net realized gain on investments ................................................... -- (37,109)
------------- -------------
Change in net assets from distributions ............................................ (13,866,079) (29,948,126)
------------- -------------
CAPITAL SHARE TRANSACTIONS (NOTE 7):
Proceeds from shares sold .......................................................... 29,765,590 62,021,734
Reinvested dividends and distributions ............................................. 7,834,687 17,008,650
Cost of shares redeemed ............................................................ (35,684,061) (74,491,462)
------------- -------------
Change in net assets from capital share transactions ............................... 1,916,216 4,538,922
------------- -------------
Change in net assets ............................................................ 1,919,540 (16,099,798)
NET ASSETS:
Beginning of period ................................................................ 739,260,838 755,360,636
------------- -------------
End of period* ..................................................................... $ 741,180,378 $ 739,260,838
============= =============
* Includes undistributed net investment income of: $ 2,090,317 $ 2,090,319
============= =============
See accompanying notes to financial statements.
HAWAIIAN TAX-FREE TRUST
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2005 (UNAUDITED)
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.
The Adviser and the Administrator each agree 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
six months ended September 30, 2005.
Under a 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.
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.
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 six months ended September 30, 2005, service fees on
Class A Shares amounted to $687,971 of which the Distributor retained $41,567.
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 six
months ended September 30, 2005, amounted to $137,738. 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 six months ended September 30, 2005, amounted to $45,912. The total
of these
payments made with respect to Class C Shares amounted to $183,650 of which the
Distributor retained $39,925.
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 six months
ended September 30, 2005, total commissions on sales of Class A Shares amounted
to $613,092, of which the Distributor received $60,737.
c) OTHER RELATED PARTY TRANSACTIONS:
For the six months ended September 30, 2005, the Trust incurred $71,565 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 that firm.
4. PURCHASES AND SALES OF SECURITIES
During the six months ended September 30, 2005, purchases of securities
and proceeds from the sales of securities aggregated $58,543,757 and
$62,837,435, respectively.
At September 30, 2005 aggregate gross unrealized appreciation for all
securities in which there is an excess of value over tax cost amounted to
$31,489,847 and gross unrealized depreciation for all securities in which there
is an excess of tax cost over value amounted to $1,451,323 for a net unrealized
appreciation of $30,038,524. The tax cost of the Trust's securities at September
30, 2005 equaled $702,481,135.
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:
Six Months Ended
September 30, 2005 Year Ended
(unaudited) March 31, 2005
----------------------------- -----------------------------
Shares Amount Shares Amount
------------ ------------ ------------ ------------
CLASS A SHARES:
Proceeds from shares sold .. 2,149,293 $ 24,913,130 4,327,393 $ 50,338,345
Reinvested distributions ... 638,450 7,398,264 1,374,724 16,002,996
Cost of shares redeemed .... (2,590,560) (30,008,885) (5,178,326) (60,145,678)
------------ ------------ ------------ ------------
Net change .............. 197,183 2,302,509 523,791 6,195,663
------------ ------------ ------------ ------------
CLASS C SHARES:
Proceeds from shares sold .. 300,668 3,475,160 808,399 9,429,910
Reinvested distributions ... 25,917 300,189 56,505 657,317
Cost of shares redeemed .... (389,908) (4,511,078) (823,950) (9,543,036)
------------ ------------ ------------ ------------
Net change .............. (63,323) (735,729) 40,954 544,191
------------ ------------ ------------ ------------
CLASS Y SHARES:
Proceeds from shares sold .. 118,745 1,377,300 193,962 2,253,479
Reinvested distributions ... 11,718 136,234 29,901 348,337
Cost of shares redeemed .... (100,346) (1,164,098) (410,603) (4,802,748)
------------ ------------ ------------ ------------
Net change .............. 30,117 349,436 (186,740) (2,200,932)
------------ ------------ ------------ ------------
Total transactions in Trust
shares ..................... 163,977 $ 1,916,216 378,005 $ 4,538,922
============ ============ ============ ============
8. TRUSTEES' FEES AND EXPENSES
At September 30, 2005 there were 7 Trustees, one of whom is affiliated
with the Manager and is not paid any fees. The total amount of Trustees' service
and attendance fees paid during the six months ended September 30, 2005 was
$65,454, to cover carrying out their responsibilities and attendance at
regularly scheduled quarterly Board Meeting and meetings of the Independent
Trustees held prior to each quarterly Board Meeting. When additional or special
meetings are held, the meeting fees are paid to those Trustees in attendance.
Trustees are reimbursed for their expenses such as travel, accommodations and
meals incurred in connection with attendance at Board Meetings and the Annual
Meeting of Shareholders. For the six months ended September 30, 2005, such
meeting-related expenses amounted to $13,219.
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
=============
11. CHANGE IN PRINCIPAL ACCOUNTANTS
KPMG LLP was previously the principal accountants for Hawaiian Tax-Free
Trust. On July 27, 2005 KPMG LLP declined to stand for reelection as the
principal accountants of the Trust and Tait, Weller and Baker LLP was engaged as
the principal accountants to audit the Trust's financial statements for the
fiscal year of 2006. The decision was made by the Audit Committee of the Board
of Trustees.
The audit reports of KPMG LLP on the Trust's financial statements as of
and for the years ended March 31, 2005 and 2004 did not contain an adverse
opinion or disclaimer of opinion, nor were they qualified or modified as to
uncertainty, audit scope, or accounting principles.
In connection with the audits of the two fiscal years ended March 31, 2005
and 2004 and the subsequent interim period through the opinion date of May 23,
2005, there were no reportable events or disagreements with KPMG LLP on any
matter of accounting principles or practices, financial statement disclosure, or
auditing scope or procedures, which disagreements if not resolved to the
satisfaction of KPMG LLP would have caused them to make reference in connection
with their opinion to the subject matter of the disagreements.
HAWAIIAN TAX-FREE TRUST
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
Class A
----------------------------------------------------------------------------
Six Months
Ended Year Ended March 31,
9/30/05 -----------------------------------------------------------
(unaudited) 2005 2004 2003 2002 2001
----------- ------- ------- ------- ------- -------
Net asset value, beginning of period $ 11.51 $ 11.83 $ 11.73 $ 11.26 $ 11.37 $ 10.94
------- ------- ------- ------- ------- -------
Income (loss) from investment operations:
Net investment income 0.22 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 0.22 0.15 0.56 0.95 0.41 0.97
------- ------- ------- ------- ------- -------
Less distributions (note 10):
Dividends from net investment income (0.22) (0.45) (0.46) (0.48) (0.52) (0.54)
Distributions from capital gains -- (0.02) -- -- -- --
------- ------- ------- ------- ------- -------
Total distributions (0.22) (0.47) (0.46) (0.48) (0.52) (0.54)
------- ------- ------- ------- ------- -------
Net asset value, end of period $ 11.51 $ 11.51 $ 11.83 $ 11.73 $ 11.26 $ 11.37
======= ======= ======= ======= ======= =======
Total return (not reflecting sales charge) 1.92%* 1.33% 4.83% 8.57% 3.62% 9.14%
Ratios/supplemental data
Net assets, end of period (in millions) $ 683 $ 681 $ 694 $ 675 $ 625 $ 593
Ratio of expenses to average net assets 0.75%** 0.74% 0.73% 0.71% 0.72% 0.74%
Ratio of net investment income to average
net assets 3.74%** 3.90% 3.89% 4.15% 4.51% 4.88%
Portfolio turnover rate 8%* 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%** 0.74% 0.72% 0.70% 0.70% 0.72%
- ----------
+ Per share amounts have been calculated using the monthly average shares
method.
* Not Annualized.
** Annualized.
See accompanying notes to financial statements.
HAWAIIAN TAX-FREE TRUST
FINANCIAL HIGHLIGHTS (continued)
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
Class C
----------------------------------------------------------------------------
Six Months
Ended Year Ended March 31,
9/30/05 -----------------------------------------------------------
(unaudited) 2005 2004 2003 2002 2001
----------- ------- ------- ------- ------- -------
Net asset value, beginning of period $ 11.50 $ 11.82 $ 11.73 $ 11.26 $ 11.36 $ 10.93
------- ------- ------- ------- ------- -------
Income (loss) from investment operations:
Net investment income 0.17 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 0.17 0.06 0.45 0.86 0.33 0.88
------- ------- ------- ------- ------- -------
Less distributions (note 10):
Dividends from net investment income (0.17) (0.36) (0.36) (0.39) (0.43) (0.45)
Distributions from capital gains -- (0.02) -- -- -- --
------- ------- ------- ------- ------- -------
Total distributions (0.17) (0.38) (0.36) (0.39) (0.43) (0.45)
------- ------- ------- ------- ------- -------
Net asset value, end of period $ 11.50 $ 11.50 $ 11.82 $ 11.73 $ 11.26 $ 11.36
======= ======= ======= ======= ======= =======
Total return (not reflecting sales charge) 1.51%* 0.53% 3.91% 7.70% 2.91% 8.28%
Ratios/supplemental data
Net assets, end of period (in millions) $ 36.9 $ 37.6 $ 38.2 $ 33.8 $ 24.1 $ 15.0
Ratio of expenses to average net assets 1.55%** 1.54% 1.54% 1.51% 1.51% 1.54%
Ratio of net investment income to
average net assets 2.94%** 3.10% 3.08% 3.33% 3.68% 4.06%
Portfolio turnover rate 8%* 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%** 1.54% 1.52% 1.50% 1.50% 1.51%
Class Y
----------------------------------------------------------------------------
Six Months
Ended Year Ended March 31,
9/30/05 -----------------------------------------------------------
(unaudited) 2005 2004 2003 2002 2001
----------- ------- ------- ------- ------- -------
Net asset value, beginning of period $ 11.52 $ 11.84 $ 11.75 $ 11.28 $ 11.39 $ 10.95
------- ------- ------- ------- ------- -------
Income (loss) from investment operations:
Net investment income 0.23 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 0.23 0.18 0.57 0.97 0.43 1.00
------- ------- ------- ------- ------- -------
Less distributions (note 10):
Dividends from net investment income (0.23) (0.48) (0.48) (0.50) (0.54) (0.56)
Distributions from capital gains -- (0.02) -- -- -- --
------- ------- ------- ------- ------- -------
Total distributions (0.23) (0.50) (0.48) (0.50) (0.54) (0.56)
------- ------- ------- ------- ------- -------
Net asset value, end of period $ 11.52 $ 11.52 $ 11.84 $ 11.75 $ 11.28 $ 11.39
======= ======= ======= ======= ======= =======
Total return (not reflecting sales charge) 2.00%* 1.54% 4.97% 8.77% 3.80% 9.44%
Ratios/supplemental data
Net assets, end of period (in millions) $ 21.0 $ 20.7 $ 23.5 $ 25.2 $ 19.3 $ 7.9
Ratio of expenses to average net assets 0.55%** 0.54% 0.53% 0.51% 0.52% 0.54%
Ratio of net investment income to
average net assets 3.93%** 4.09% 4.09% 4.33% 4.69% 5.00%
Portfolio turnover rate 8%* 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%** 0.54% 0.52% 0.50% 0.50% 0.51%
- ----------
+ Per share amounts have been calculated using the monthly average shares
method.
* Not Annualized.
** Annualized.
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
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 April 1,
2005 and held for the six months ended September 30, 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 SEPTEMBER 30, 2005
ACTUAL
TOTAL RETURN BEGINNING ENDING EXPENSES
WITHOUT ACCOUNT ACCOUNT PAID DURING
SALES CHARGES(1) VALUE VALUE THE PERIOD(2)
- --------------------------------------------------------------------------------
Class A 1.92% $1,000.00 $1,019.20 $3.75
- --------------------------------------------------------------------------------
Class C 1.51% $1,000.00 $1,015.10 $7.78
- --------------------------------------------------------------------------------
Class Y 2.00% $1,000.00 $1,020.00 $2.73
- --------------------------------------------------------------------------------
(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 183/365 (TO
REFLECT THE ONE-HALF YEAR PERIOD).
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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 SEPTEMBER 30, 2005
HYPOTHETICAL
ANNUALIZED BEGINNING ENDING EXPENSES
TOTAL ACCOUNT ACCOUNT PAID DURING
RETURN VALUE VALUE THE PERIOD(1)
- --------------------------------------------------------------------------------
Class A 5.00% $1,000.00 $1,021.36 $3.75
- --------------------------------------------------------------------------------
Class C 5.00% $1,000.00 $1,017.35 $7.79
- --------------------------------------------------------------------------------
Class Y 5.00% $1,000.00 $1,022.36 $2.74
- --------------------------------------------------------------------------------
(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 183/365 (TO
REFLECT THE ONE-HALF YEAR PERIOD).
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SHAREHOLDER MEETING RESULTS (UNAUDITED)
The Annual Meeting of Shareholders of the Hawaiian Tax-Free Trust (the
"Trust") was held on September 21, 2005. The holders of shares representing 67%
of the total net asset value of the shares entitled to vote were present in
person or by proxy. At the meeting, the following matters were voted upon and
approved by the shareholders (the resulting votes are presented below).
To elect Trustees.
Dollar Amount of Votes:
Trustee For Withheld
------- --- --------
Thomas W. Courtney $497,985,849 $3,719,484
Diana P. Herrmann $498,367,795 $3,337,538
Stanley W. Hong $498,162,217 $3,543,105
Theodore T. Mason $498,205,893 $3,499,440
Russell K. Okata $495,510,202 $6,195,131
Douglas Philpotts $497,067,823 $4,637,510
Oswald K. Stender $497,512,312 $4,193,021
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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
(http://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 http://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.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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, 2005 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.
- --------------------------------------------------------------------------------
ADDITIONAL INFORMATION (UNAUDITED)
RENEWAL OF THE INVESTMENT ADVISORY AGREEMENT
Renewal until June 30, 2006 of the Investment Advisory Agreement (the
"Advisory Agreement") between the Trust and the Adviser was approved by the
Board of Trustees and the independent Trustees in June, 2005. At a meeting
called and held for that purpose at which a majority of the independent Trustees
were present in person, the following materials were considered:
o Copies of the agreements to be renewed;
o A term sheet describing the material terms of the agreements;
o The Annual Report of the Trust for the year ended March 31, 2005;
o A Report by the Administrator containing data about the performance
of the Trust, data about its fees, expenses and purchases and
redemptions together with comparisons of such data with similar data
about other comparable funds, as well as data as to the
profitability of the Adviser and the Administrator; and
o Quarterly materials reviewed at prior meetings on the Trust's
performance, operations, portfolio and compliance.
The Trustees reviewed materials relevant to, and considered, the following
factors:
THE NATURE, EXTENT, AND QUALITY OF THE SERVICES PROVIDED BY THE ADVISER.
The Adviser has provided local management of the Trust's portfolio. The
Trustees noted that the Adviser employed as portfolio manager for the Trust, Mr.
Robert Crowell, and had provided facilities for credit analysis of the Trust's
portfolio securities. Mr. Crowell, based in Honolulu, has provided local
information regarding specific holdings in the Trust's portfolio. The portfolio
manager has also been available to and has met with the brokerage and financial
planner community and with investors and prospective investors to provide them
with information generally about the Trust's portfolio, with which to assess the
Trust as an investment vehicle for residents of Hawaii in light of prevailing
interest rates and local economic conditions.
The Board considered that the Adviser had provided all services the Board
deemed necessary or appropriate, including the specific services that the Board
has determined are required for the Trust, given that its purpose is to provide
shareholders with as high a level of current income exempt from Hawaii state and
regular Federal income taxes as is consistent with preservation of capital.
The Board concluded that a commendable quality of services was provided
and that the Trust would be well served if they continued. Evaluation of this
factor weighed in favor of renewal of the Advisory Agreement.
THE INVESTMENT PERFORMANCE OF THE TRUST AND ADVISER.
The Board determined it appropriate to consider the Trust's performance.
For the fiscal year ended March 31, 2005 the Trust's average annual rate of
return for Class A Shares was 1.33%; the net asset value of Class A Shares was
$11.83 at the beginning of the fiscal year and $11.51 at the end. Performance
for the other classes was similar.
The Board reviewed each aspect of the Trust's performance and compared its
performance with that of its local competitors and with national averages. It
was noted that the materials provided by the Administrator indicated that
compared to the four largest competitive Hawaii funds, the Trust has had
investment performance that is comparable to that of its peers for one-, five-
and ten-year periods, with lower rates of return explained by the Trust's
generally higher-quality portfolio and generally shorter average maturities. The
Board considered these results to be consistent with the purposes of the Trust.
The Board concluded that the performance of the Trust, in light of market
conditions, was satisfactory. Evaluation of this factor indicated to the
Trustees that renewal of the Advisory Agreement would be appropriate.
THE COSTS OF THE SERVICES TO BE PROVIDED AND PROFITS TO BE REALIZED BY THE
ADVISER AND ITS AFFILIATES FROM THE RELATIONSHIP WITH THE TRUST.
The information provided in connection with renewal contained expense data
for the Trust and its local competitors as well as data for all single-state
tax-free municipal bond funds nationwide, including data for all such front-end
load funds of a comparable asset size. The materials also showed the
profitability to the Adviser of its services to the Trust.
The Board compared the expense and fee data with respect to the Trust to
similar data about other funds that it found to be relevant. The Board concluded
that the expenses of the Trust and the fees paid were similar to and were
reasonable as compared to those being paid by its local competitors and
single-state tax-free municipal bond funds nationwide.
The Board considered that the foregoing indicated the appropriateness of
the costs of the services to the Trust, which was being well managed as
indicated by the factors considered previously.
The Board further concluded that the profitability to the Adviser did not
argue against approval of the fees to be paid under the Advisory Agreement.
THE EXTENT TO WHICH ECONOMIES OF SCALE WOULD BE REALIZED AS THE TRUST GROWS.
Data provided to the Trustees showed that the Trust's asset size had been
generally increasing in recent years. However, they concluded that the uncertain
interest rate environment might make it difficult to achieve substantial growth
in assets in the near future. The Trustees also noted that the materials
indicated that the Trust's fees were already generally lower than those of its
peers, including those with breakpoints. Evaluation of this factor indicated to
the Board that the Advisory Agreement should be renewed without addition of
breakpoints at this time.
BENEFITS DERIVED OR TO BE DERIVED BY THE ADVISER AND ITS AFFILIATES FROM THE
RELATIONSHIP WITH THE TRUST.
The Board observed that, as is generally true of most fund complexes, the
Adviser and its affiliates, by providing services to a number of funds or other
investment clients including the Trust, were able to spread costs as they would
otherwise be unable to do. The Board noted that while that produces efficiencies
and increased profitability for the Adviser and its affiliates, it also makes
their services available to the Trust at favorable levels of quality and cost
which are more advantageous to the Trust than would otherwise have been
possible.
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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
Tait, Weller and Baker LLP
1818 Market Street, Suite 2400
Philadelphia, PA 19103
Further information is contained in the Prospectus, which must precede or
accompany this report.
ITEM 2. CODE OF ETHICS.
Not applicable.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
Not applicable.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES
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)(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
December 7, 2005
By: /s/ Joseph P. DiMaggio
- - -----------------------------------
Chief Financial Officer and Treasurer
December 7, 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, President and Trustee
December 7, 2005
By: /s/ Joseph P. DiMaggio
- - -----------------------------------
Joseph P. DiMaggio
Chief Financial Officer and Treasurer
December 7, 2005
HAWAIIAN TAX-FREE TRUST
EXHIBIT INDEX
(a)(1) Not applicable.
(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.