UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES
Investment Company Act file number 811-4084
Hawaiian Tax-Free Trust
(Exact name of Registrant as specified in charter)
380 Madison Avenue
New York, New York 10017
(Address of principal executive offices) (Zip code)
Joseph P. DiMaggio
380 Madison Avenue
New York, New York 10017
(Name and address of agent for service)
Registrant's telephone number, including area code:
(212) 697-6666
Date of fiscal year end: 3/31
Date of reporting period: 3/31/07
FORM N-CSR
ITEM 1. REPORTS TO STOCKHOLDERS
ANNUAL
REPORT
MARCH 31, 2007
HAWAIIAN
TAX-FREE
TRUST
A TAX-FREE INCOME INVESTMENT
[LOGO OF HAWAIIAN TAX-FREE TRUST:
A PLAM 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 GROUP OF FUNDS(SM)
[LOGO OF HAWAIIAN TAX-FREE TRUST:
A PLAM 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
"TAX-FREE IN BLACK AND WHITE"
May, 2007
Dear Fellow Shareholder:
We have all seen and heard the words "tax-free" over and over in various
contexts. In fact, the name of the Trust contains the words "tax-free." But,
what does that really mean to you in black and white?
As you know, you have to pay federal, state, and/or local taxes on the
dividends distributed to you by a taxable mutual fund. Thus, a bond fund which
invests in tax-free municipal bonds, such as Hawaiian Tax-Free Trust, may
actually generate more net dividend income than a taxable bond fund with a
higher stated yield.
How is this possible? Let's use a simple example.
Suppose you invest $10,000 in a hypothetical TAX-FREE municipal bond fund
with a yield of 4%, paying dividends that are EXEMPT FROM FEDERAL INCOME TAXES,
and you also invest $10,000 in a hypothetical TAXABLE bond fund with a yield of
5.5%, paying dividends that are TAXABLE AT THE FEDERAL LEVEL. The example below
shows the outcome for an investor in the 33% federal income tax bracket. As you
can see, your investment in the tax-free municipal bond fund would have ended up
with more after-tax income even though the fund's yield was lower.
[Graphic of a bar chart with the following information:]
Federal Interest Income
Income Taxes After Taxes
Tax-Free Municipal Bond Fund Yielding 4% $400 Assumes no taxes
Taxable Bond Fund Yielding 5.5% $181.50 Tax Rate 33% $368.50
To help you compare taxable bond funds versus tax-free municipal bond
funds, a taxable-equivalent yield is often used. The taxable-equivalent yield
provides you with the rate that a taxable bond fund would have to yield to give
you the same after-tax yield as a tax-free municipal bond fund. (You should be
aware that the calculation does not take into account the impact of state income
taxes, or any alternative minimum taxes, to which some investors may be
subject.)
NOT A PART OF THE ANNUAL REPORT
In its simplest terms,
- --------------------------------------------------------------------------------
Yield of tax-free municipal bond fund
------------------------------------- = Your taxable-equivalent yield
1.00 - your federal income tax rate
- --------------------------------------------------------------------------------
Using the above tax-free example of a 4% yield and a federal tax bracket
of 33%, the calculation would be as follows:
- --------------------------------------------------------------------------------
4
----------- = 5.97%
1.00 - 0.33
- --------------------------------------------------------------------------------
In other words, a tax-free investment of 4.00% and a taxable investment of
5.97% would provide the same yield after taxes.
EFFECT OF FEDERAL INCOME TAXES ON YIELDS OF TAX-EXEMPT AND TAXABLE
INSTRUMENTS
4.00% TAX-FREE BOND 5.97% TAXABLE BOND
Cash investment $10,000 $10,000
Interest $400 $597
33% Federal income tax $0 $197.01
Net return $400 $399.99
Yield on investment after federal taxes 4.0% 4.0%
You should be aware that dividends paid by tax-free municipal bond funds,
such as Hawaiian Tax-Free Trust, are often also exempt from state and/or local
taxes. FACTORING IN THE EXEMPTION AT THE STATE AND/OR LOCAL LEVEL WOULD HAVE THE
EFFECT OF INCREASING THE TAXABLE EQUIVALENT YIELD EVEN FURTHER.
So, the next time that you see the phrase "tax-free," remember that in
black and white, it oftentimes means more money into your pocket.
Sincerely,
/s/ Diana P. Herrmann /s/ Lacy B. Herrmann
Diana P. Herrmann Lacy B. Herrmann
President Founder and Chairman Emeritus
For certain investors, some dividends of your Trust may be subject to Federal
and State taxes, including the Alternative Minimum Tax. These hypothetical
examples are not intended to predict or project investment performance. Your own
results will vary. State and local taxes, fees and expenses, if any, are not
taken into account.
NOT A PART OF THE ANNUAL REPORT
[LOGO OF HAWAIIAN TAX-FREE TRUST:
A PLAM 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
ANNUAL REPORT
MANAGEMENT DISCUSSION
ECONOMY 2006-2007
The US economy began to decelerate in 2006, ending the year with fourth
quarter Gross Domestic Product (GDP) expanding at a 2.5% rate of growth in real
GDP. Approximately this same growth rate is likely during 2007, down from growth
rates closer to 3% or 3.5% during the mid-2000s. A sharp decline in residential
investment--contracting at nearly 20%, in annualized terms, during second half
2006--was the principal source to deceleration last year. During 2007 we expect
housing to stabilize, with housing starts down to an annual pace of 1.4 to 1.5
million units, off from the 2.2 million unit peak at the end of 2005. Balancing
the housing recession has been double-digit growth in US exports, around 10% in
real terms, and resilience in personal consumption expenditure. Exports comprise
roughly twice the GDP share of residential investment, and go a long way to
sustaining the economy's momentum. We expect a weaker dollar and strong
macroeconomic fundamentals overseas to keep US net exports increasing in 2007.
With personal consumption comprising 70% of GDP, concerns about contagion from
the housing decline are obviously worrisome to us. Either adverse effects of
falling home prices, or a consumer pullback related to mortgage lending worries,
could impair consumption. Our expectation is that these pressures may shave a
percentage point or two off consumption growth, but even at 2-3% its
contribution to GDP growth should be neutral at worst in 2007. Federal Reserve
monetary policy should keep short-term interest rates high to pre-empt higher
inflation, at least through mid-year 2007. Though US Treasury bond yields are
inverted relative to the overnight Fed Funds target rate, those bond yields
embody the market's expectation of eventually lower short-term interest rates,
probably towards the end of 2007.
Hawaii had outperformed the mainland economy for several years ending in
2006, but now and for the next several years we expect Hawaii's growth rate will
probably fall short of that of the nation. Although the US is experiencing full
employment with 4.5% unemployment and around 2.5% inflation--enough to keep the
Fed's monetary policy vigilant--Hawaii's unemployment/inflation mix is even more
potent. Recently, Hawaii's 2.0-2.5% monthly unemployment rates have reflected an
ultra-tight labor market and potential untoward wage pressures. Honolulu's 5.9%
inflation in 2006 is the flip side of an overheated local economy. The economy's
nominal growth rate was strong at 6%, but most of that was eaten up by inflation
leaving just a small real growth rate. While we expect the Honolulu Consumer
Price Index (CPI) to exhibit disinflation to maybe 4% in 2007, that will still
be high relative to the US urban average. Consequently, its effect on income
growth is likely to lead to real economic expansion of no more than 2% in the
islands during 2007. Housing is also in decline in Hawaii, as it is across the
country, although nonresidential construction makes up for some of the decline.
Tourism seems to have hit a plateau: after peaking at record levels in 2005,
MANAGEMENT DISCUSSION (CONTINUED)
visitor counts while remaining at peak arrival numbers, have failed to trend
higher and, adjusted for inflation, visitor spending has been declining at a
2-3% rate. With the housing boom ended, and the lift from tourism suspended,
after years of record growth, Hawaii's economy should expect slower growth for
the next few years.
MUNICIPAL MARKET AND FUND PERFORMANCE
During the 12 months ended March 31, 2007, the municipal bond yield curve
"flattened" significantly responding to the Federal Reserve increase in the Fed
Funds rate from 4.75% in March 2006 to 5.25% in June 2006. At the August 2006
meeting, the Federal Reserve stopped after a string of 17 straight 0.25%
increases. The bond markets anticipated that these rate increases were enough to
slow the economy and inflation and that the next Federal Reserve move would be
to cut interest rates. As a result, municipal rates on the short end of the
curve were only 3 basis points higher year over year, while long term rates were
down year over year by 20 basis points. These changes represented continued
yield curve "flattening" with short-term yields rising closer to long-term
yields.
Hawaiian Tax-Free Trust had a total return, without sales charges, of
3.50% for its Class A shares, 2.67% for Class C shares, and 3.79% for Class Y
shares for the calendar year ending December 31, 2006. For the fiscal year
ending March 31, 2007, the total return, without sales charges, was 4.28% for
Class A shares, 3.55% for Class C shares, and 4.49% for Class Y shares. Total
return reflects the market fluctuation of the share price as well as reinvested
dividends and capital gain distributions. The Lehman Brothers Quality
Intermediate Municipal Bond Index had a total return of 3.78% for the calendar
year 2006 and 4.74% for the Trust's fiscal year.
OUTLOOK AND STRATEGY
We believe the Federal Reserve's firming should ease to monetary
neutrality later in 2007, allowing US economic potential to be realized along a
3% real GDP growth path, with core inflation subsiding below 2.5%, accompanied
by a yield curve transition from "flat" to modestly steep. Potential low
probability, high risk geopolitical events remain as market threats.
In managing Hawaiian Tax-Free Trust's portfolio, we keep in mind the
Trust's goal of seeking to maintain a relatively high level of double tax-free
income together with reasonable principal preservation. Accordingly, we
continually seek to manage the Trust conservatively both in terms of credit
quality and interest rate risk by investing primarily in highly rated municipal
bonds with intermediate maturities. In the year going forward, we will look for
opportunities to optimize the portfolio's positioning along the yield curve.
PERFORMANCE REPORT
The following graph illustrates the value of $10,000 invested in the Class
A shares of Hawaiian Tax-Free Trust for the 10-year period ended March 31, 2007
as compared with the Lehman Brothers Quality Intermediate Municipal Bond Index
(the "Lehman Index") and the Consumer Price Index (a cost of living index). The
performance of each of the other classes is not shown in the graph but is
included in the table below. It should be noted that the Lehman Index does not
include any operating expenses nor sales charges and being nationally oriented,
does not reflect state specific bond market performance.
[Graphic of a line chart with the following information:]
Trust's Class A Shares
Lehman Brothers
Cost of Trust Class A Shares Trust Class A Shares Quality Intermediate
Living Index no sales charge with sales charge Municipal Bond Index
3/97 10,000 10,000 9,600 10,000
3/98 10,138 10,940 10,501 10,845
3/99 10,313 11,500 11,039 11,475
3/00 10,700 11,391 10,933 11,589
3/01 11,013 12,503 12,000 12,708
3/02 11,175 12,909 12,390 13,189
3/03 11,513 13,932 13,373 14,441
3/04 11,713 14,804 14,210 15,138
3/05 12,081 14,888 14,290 15,260
3/06 12,488 15,279 14,666 15,646
3/07 12,838 15,877 15,240 16,388
AVERAGE ANNUAL TOTAL RETURN
FOR PERIODS ENDED MARCH 31, 2007
-----------------------------------------------
SINCE
1 YEAR 5 YEARS 10 YEARS INCEPTION
------ ------- -------- ---------
Class A (2/20/85)
With Sales Charge.......... 0.13% 3.36% 4.30% 6.33%
Without Sales Charge....... 4.28% 4.21% 4.73% 6.53%
Class C (4/01/96)
With CDSC.................. 2.51% 3.38% 3.90% 3.86%
Without CDSC............... 3.55% 3.38% 3.90% 3.86%
Class Y (4/01/96)
No Sales Charge............ 4.49% 4.42% 5.01% 5.11%
Lehman Index................... 4.74% 4.44% 5.06% 5.93%* (Class A)
5.01% (Class C&Y)
* From commencement of the index on 1/1/87.
Total return figures shown for the Trust reflect any change in price and assume
all distributions within the period were invested in additional shares. Returns
for Class A shares are calculated with and without the effect of the initial 4%
maximum sales charge. Returns for Class C shares are calculated with and without
the effect of the 1% contingent deferred sales charge (CDSC) imposed on
redemptions made within the first 12 months after purchase. Class Y shares are
sold without any sales charge. The rates of return will vary and the principal
value of an investment will fluctuate with market conditions. Shares, if
redeemed, may be worth more or less than their original cost. Dividend income
may be subject to Federal and state income taxes and/or the Federal alternative
minimum tax. Past performance is not predictive of future investment results.
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Trustees and Shareholders of
Hawaiian Tax-Free Trust:
We have audited the accompanying statement of assets and liabilities,
including the schedule of investments, of Hawaiian Tax-Free Trust as of March
31, 2007 and the related statement of operations for the year then ended, and
the changes in net assets and the financial highlights for each of the two years
in the period then ended. These financial statements and financial highlights
are the responsibility of the Trust's management. Our responsibility is to
express an opinion on these financial statements and financial highlights based
on our audits. The financial highlights for each of the years in the three year
period ended March 31, 2005 have been audited by other auditors, whose report
dated May 23, 2005 expressed an unqualified opinion on such financial
highlights.
We conducted our audits in accordance with the standards of the Public
Company Accounting Oversight Board (United States). Those standards require that
we plan and perform the audit to obtain reasonable assurance about whether the
financial statements and financial highlights are free of material misstatement.
The Trust is not required to have, nor were we engaged to perform, an audit of
the Trust's internal control over financial reporting. Our audits included
consideration of internal control over financial reporting as a basis for
designing audit procedures that are appropriate in the circumstances, but not
for the purpose of expressing an opinion on the effectiveness of the Trust's
internal control over financial reporting. Accordingly, we express no such
opinion. An audit also includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. Our procedures included
confirmation of securities owned as of March 31, 2007, by correspondence with
the custodian. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
Hawaiian Tax-Free Trust as of March 31, 2007, the results of its operations for
the year then ended, and the changes in its net assets and the financial
highlights for each of the two years in the period then ended, in conformity
with accounting principles generally accepted in the United States of America.
TAIT, WELLER & BAKER LLP
Philadelphia, Pennsylvania
May 18, 2007
- --------------------------------------------------------------------------------
HAWAIIAN TAX-FREE TRUST
SCHEDULE OF INVESTMENTS
MARCH 31, 2007
RATING
PRINCIPAL MOODY'S/
AMOUNT MUNICIPAL BONDS (99.1%) S&P VALUE
- ------------- ------------------------------------------------------------------- ---------- -------------
HAWAII (93.5%)
-------------------------------------------------------------------
HAWAII GENERAL OBLIGATION BONDS (55.0%)
-------------------------------------------------------------------
City and County of Honolulu, Hawaii, Series A,
FGIC Insured
$ 9,970,000 7.350%, 07/01/07 .................................................. Aaa/AAA $ 10,056,938
3,600,000 7.350%, 07/01/08 .................................................. Aaa/AAA 3,761,316
1,715,000 6.000%, 01/01/11 .................................................. Aaa/AAA 1,854,652
5,000 5.750%, 04/01/11 .................................................. Aaa/AAA 5,375
1,580,000 6.000%, 01/01/12 .................................................. Aaa/AAA 1,738,774
3,025,000 5.750%, 04/01/13 .................................................. Aaa/AAA 3,353,818
City and County of Honolulu, Hawaii, Series A,
FSA Insured
2,500,000 5.000%, 09/01/09 .................................................. Aaa/AAA 2,577,050
City and County of Honolulu, Hawaii, Series A,
FSA Insured, Prerefunded 09/01/11 @100,
Collateral: U.S. Treasury Obligations & Resolution
Funding Corp.
3,500,000 5.375%, 09/01/18 .................................................. Aaa/AAA 3,743,670
2,000,000 5.125%, 09/01/20 .................................................. Aaa/AAA 2,119,060
City and County of Honolulu, Hawaii, Series A,
MBIA Insured
9,335,000 5.000%, 07/01/21 .................................................. Aaa/AAA 9,964,086
5,000,000 5.000%, 07/01/22 .................................................. Aaa/AAA 5,326,100
City and County of Honolulu, Hawaii, Series A,
MBIA Insured, Prerefunded 03/01/13 @100,
Collateral: U.S. Government Securities
1,885,000 5.250%, 03/01/15 .................................................. Aaa/AAA 2,040,795
3,005,000 5.250%, 03/01/17 .................................................. Aaa/AAA 3,253,363
1,255,000 5.250%, 03/01/18 .................................................. Aaa/AAA 1,358,726
City and County of Honolulu, Hawaii, 1993 Series
A, FGIC - TCRS Insured, Escrowed to Maturity,
Collateral: U.S. Government Securities
4,110,000 6.000%, 01/01/11 .................................................. #Aaa/AAA 4,447,678
920,000 6.000%, 01/01/12 .................................................. #Aaa/AAA 1,013,297
RATING
PRINCIPAL MOODY'S/
AMOUNT HAWAII (CONTINUED) S&P VALUE
- ------------- ------------------------------------------------------------------- ---------- -------------
City and County of Honolulu, Hawaii 1994 Series
A, FGIC Insured, Escrowed to Maturity, Collateral:
U.S. Government Securities
$ 3,995,000 5.750%, 04/01/11 .................................................. Aaa/NR $ 4,307,089
775,000 5.750%, 04/01/13 .................................................. Aaa/AAA 860,560
City and County of Honolulu, Hawaii Refunded -
1995 Series A, Escrowed to Maturity, MBIA
Insured, Collateral: U.S. Government Securities
1,355,000 6.000%, 11/01/09 .................................................. #Aaa/AAA 1,434,254
860,000 6.000%, 11/01/09 .................................................. Aaa/AAA 910,301
1,090,000 6.000%, 11/01/10 .................................................. Aaa/AAA 1,176,230
410,000 6.000%, 11/01/10 .................................................. #Aaa/AAA 442,435
City and County of Honolulu, Hawaii, 2003- Series
A, MBIA Insured, Unrefunded Portion
1,115,000 5.250%, 03/01/15 .................................................. Aaa/AAA 1,210,243
1,775,000 5.250%, 03/01/17 .................................................. Aaa/AAA 1,915,846
745,000 5.250%, 03/01/18 .................................................. Aaa/AAA 802,067
City and County of Honolulu, Hawaii, Series B,
FGIC Insured, Unrefunded Portion
7,310,000 5.500%, 10/01/11 .................................................. Aaa/AAA 7,865,560
City and County of Honolulu, Hawaii, Series B,
FGIC Insured, Prerefunded 11/01/07 @101,
Collateral: U.S. Treasury Obligations & Agencies
930,000 5.000%, 11/01/13 .................................................. Aaa/AAA 946,694
1,060,000 5.000%, 11/01/14 .................................................. Aaa/AAA 1,079,027
530,000 5.000%, 11/01/16 .................................................. Aaa/AAA 539,514
1,400,000 5.000%, 11/01/17 .................................................. Aaa/AAA 1,425,130
City and County of Honolulu, Hawaii, Series B,
FGIC Insured, Prerefunded 07/01/09 @101,
Collateral: U.S. Treasury & Agency Obligations
2,595,000 5.125%, 07/01/15 .................................................. Aaa/AAA 2,703,315
City and County of Honolulu, Hawaii, Series B,
FGIC Insured, Prerefunded to 07/01/09 @101,
Collateral: U.S. Government Securities
4,490,000 5.000%, 07/01/19 .................................................. Aaa/AAA 4,665,424
1,395,000 5.000%, 07/01/20 .................................................. Aaa/AAA 1,449,503
RATING
PRINCIPAL MOODY'S/
AMOUNT HAWAII (CONTINUED) S&P VALUE
- ------------- ------------------------------------------------------------------- ---------- -------------
City and County of Honolulu, Hawaii, Series B,
MBIA Insured
$ 5,000,000 5.000%, 07/01/12 .................................................. Aaa/AAA $ 5,314,200
City and County of Honolulu, Hawaii, Series C,
FGIC Insured
7,750,000 5.125%, 07/01/14 .................................................. Aaa/AAA 8,056,435
2,510,000 5.000%, 07/01/18 .................................................. Aaa/AAA 2,599,256
City and County of Honolulu, Hawaii, Series C,
MBIA Insured
6,740,000 5.000%, 07/01/18 .................................................. Aaa/AAA 7,243,141
City and County of Honolulu, Hawaii, Series D,
MBIA Insured
3,750,000 5.000%, 07/01/19 .................................................. Aaa/AAA 4,019,025
6,080,000 5.000%, 07/01/21 .................................................. Aaa/AAA 6,489,731
City and County of Honolulu, Hawaii, Series F,
FGIC Insured
1,000,000 5.250%, 07/01/19 .................................................. Aaa/AAA 1,092,100
5,335,000 5.250%, 07/01/20 .................................................. Aaa/AAA 5,810,669
City and County of Honolulu, Hawaii , Water Utility
Refunding and Improvement, Escrowed to Maturity,
FGIC Insured, Collateral: U.S. Government Securities
1,125,000 6.000%, 12/01/12 .................................................. Aaa/AAA 1,258,988
1,050,000 6.000%, 12/01/15 .................................................. Aaa/AAA 1,221,549
County of Hawaii, Series A, CIFG Insured
2,850,000 5.000%, 07/15/20 .................................................. Aaa/AAA 3,068,965
County of Hawaii, Series A, FGIC Insured
1,700,000 5.450%, 05/01/07 .................................................. Aaa/AAA 1,702,272
3,170,000 5.500%, 05/01/08 .................................................. Aaa/AAA 3,231,181
2,500,000 5.550%, 05/01/09 .................................................. Aaa/AAA 2,593,500
4,905,000 5.600%, 05/01/11 .................................................. Aaa/AAA 5,263,997
1,000,000 5.600%, 05/01/12 .................................................. Aaa/AAA 1,088,600
1,000,000 5.600%, 05/01/13 .................................................. Aaa/AAA 1,101,920
1,465,000 5.500%, 07/15/16 .................................................. Aaa/AAA 1,572,619
RATING
PRINCIPAL MOODY'S/
AMOUNT HAWAII (CONTINUED) S&P VALUE
- ------------- ------------------------------------------------------------------- ---------- -------------
County of Hawaii, Series A, FSA Insured
$ 1,000,000 5.400%, 05/15/15 .................................................. Aaa/AAA $ 1,045,560
1,000,000 5.000%, 07/15/16 .................................................. Aaa/AAA 1,064,130
2,000,000 5.000%, 07/15/17 .................................................. Aaa/AAA 2,123,680
1,470,000 5.625%, 05/15/18 .................................................. Aaa/AAA 1,543,632
1,000,000 5.000%, 07/15/18 .................................................. Aaa/AAA 1,058,980
County of Hawaii, Series B
1,000,000 5.000%, 07/15/09 .................................................. A1/A+ 1,029,230
County of Hawaii, Series C, AMBAC Insured
1,755,000 5.000%, 07/15/20 .................................................. Aaa/AAA 1,932,448
1,840,000 5.000%, 07/15/21 .................................................. Aaa/AAA 2,034,359
County of Kauai, Hawaii, MBIA Insured, Prerefunded
08/01/11 @100, Collateral: State & Local
Government Series 100%
140,000 5.625%, 08/01/13 .................................................. Aaa/AAA 151,078
560,000 5.625%, 08/01/14 .................................................. Aaa/AAA 604,313
355,000 5.625%, 08/01/17 .................................................. Aaa/AAA 383,091
345,000 5.625%, 08/01/18 .................................................. Aaa/AAA 372,300
805,000 5.500%, 08/01/20 .................................................. Aaa/AAA 864,707
County of Kauai, Hawaii, MBIA Insured,
Unrefunded Portion
985,000 5.625%, 08/01/13 .................................................. Aaa/AAA 1,060,904
1,060,000 5.625%, 08/01/14 .................................................. Aaa/AAA 1,141,238
680,000 5.625%, 08/01/17 .................................................. Aaa/AAA 730,429
655,000 5.625%, 08/01/18 .................................................. Aaa/AAA 703,306
1,555,000 5.500%, 08/01/20 .................................................. Aaa/AAA 1,660,709
County of Kauai, Hawaii, Series A, FGIC Insured
1,000,000 5.000%, 08/01/23 .................................................. Aaa/AAA 1,063,610
1,500,000 5.000%, 08/01/25 .................................................. Aaa/AAA 1,591,065
County of Kauai, Hawaii, Series A, FGIC Insured,
Prerefunded 08/01/10 @100, Collateral: State &
Local Government Series 100%
1,000,000 6.125%, 08/01/13 .................................................. Aaa/AAA 1,077,750
1,010,000 6.250%, 08/01/14 .................................................. Aaa/AAA 1,092,446
1,000,000 6.250%, 08/01/15 .................................................. Aaa/AAA 1,081,630
1,000,000 6.250%, 08/01/16 .................................................. Aaa/AAA 1,081,630
1,275,000 6.250%, 08/01/17 .................................................. Aaa/AAA 1,379,078
RATING
PRINCIPAL MOODY'S/
AMOUNT HAWAII (CONTINUED) S&P VALUE
- ------------- ------------------------------------------------------------------- ---------- -------------
County of Kauai, Hawaii, 2005-Series A, FGIC Insured
$ 1,560,000 5.000%, 08/01/16 .................................................. Aaa/AAA $ 1,687,826
2,010,000 5.000%, 08/01/17 .................................................. Aaa/AAA 2,168,750
2,060,000 5.000%, 08/01/18 .................................................. Aaa/AAA 2,215,097
1,075,000 5.000%, 08/01/19 .................................................. Aaa/AAA 1,152,787
County of Kauai, Hawaii Refunding Bonds, Series
B & C, AMBAC Insured
1,355,000 5.900%, 08/01/08 .................................................. Aaa/AAA 1,394,187
435,000 5.900%, 08/01/08 .................................................. Aaa/AAA 447,580
1,300,000 5.950%, 08/01/10 .................................................. Aaa/AAA 1,392,742
County of Maui, Hawaii, MBIA Insured
1,250,000 3.800%, 03/01/16 .................................................. Aaa/AAA 1,236,925
1,105,000 5.000%, 03/01/19 .................................................. Aaa/AAA 1,181,565
County of Maui, Hawaii, Series A, FGIC Insured,
Prerefunded 09/01/07 @101, Collateral: U.S.
Government Securities
1,130,000 5.250%, 09/01/13 .................................................. Aaa/AAA 1,148,792
1,265,000 5.250%, 09/01/15 .................................................. Aaa/AAA 1,286,037
1,335,000 5.250%, 09/01/16 .................................................. Aaa/AAA 1,357,201
County of Maui, Hawaii, Series A, FGIC Insured,
Prerefunded 03/01/08 @101, Collateral: U.S.
Government Securities
1,200,000 5.125%, 03/01/14 .................................................. Aaa/AAA 1,228,116
1,050,000 5.125%, 03/01/16 .................................................. Aaa/AAA 1,074,602
2,590,000 5.250%, 03/01/18 .................................................. Aaa/AAA 2,653,533
County of Maui, Hawaii, 2001 - Series A, MBIA
Insured, Partially Prerefunded 03/01/11 @100,
Collateral: U.S. Government Securities
465,000 5.500%, 03/01/18 .................................................. Aaa/AAA 496,401
County of Maui, Hawaii Unrefunded Balance -
Series A, MBIA Insured
535,000 5.500%, 03/01/18 .................................................. Aaa/AAA 568,523
RATING
PRINCIPAL MOODY'S/
AMOUNT HAWAII (CONTINUED) S&P VALUE
- ------------- ------------------------------------------------------------------- ---------- -------------
County of Maui, Hawaii, 2002 - Series A, MBIA
Insured, Prerefunded to 03/01/12 @ 100,
Collateral: U.S. Government Securities
$ 1,105,000 5.250%, 03/01/15 .................................................. Aaa/AAA $ 1,183,753
1,205,000 5.250%, 03/01/16 .................................................. Aaa/AAA 1,290,880
1,000,000 5.250%, 03/01/18 .................................................. Aaa/AAA 1,071,270
1,750,000 5.250%, 03/01/19 .................................................. Aaa/AAA 1,874,723
1,000,000 5.000%, 03/01/20 .................................................. Aaa/AAA 1,060,130
County of Maui, Hawaii, Series B, FGIC Insured
1,065,000 5.250%, 03/01/11 .................................................. Aaa/AAA 1,128,495
County of Maui, Hawaii, Series C, FGIC Insured
1,020,000 5.250%, 03/01/16 .................................................. Aaa/AAA 1,078,150
1,250,000 5.250%, 03/01/20 .................................................. Aaa/AAA 1,314,288
State of Hawaii, Series BZ, FGIC Insured
3,700,000 6.000%, 10/01/11 .................................................. Aaa/AAA 4,057,198
3,500,000 6.000%, 10/01/12 .................................................. Aaa/AAA 3,900,435
State of Hawaii, Series CA, FGIC Insured
2,000,000 5.750%, 01/01/11 .................................................. Aaa/AAA 2,145,520
State of Hawaii, Series CH
1,000,000 4.750%, 11/01/11 .................................................. Aa2/AA 1,043,370
State of Hawaii, Series CH, FGIC Insured
5,000,000 6.000%, 11/01/07 .................................................. Aaa/AAA 5,066,950
3,390,000 6.000%, 11/01/08 .................................................. Aaa/AAA 3,512,345
State of Hawaii, Series CL, FGIC Insured
2,305,000 6.000%, 03/01/11 .................................................. Aaa/AAA 2,504,037
State of Hawaii, Series CM, FGIC Insured
3,000,000 6.500%, 12/01/15 .................................................. Aaa/AAA 3,592,680
State of Hawaii, Series CP, FGIC Insured,
Prerefunded to 10/01/07 @101, Collateral: U.S.
Government Securities
3,565,000 5.000%, 10/01/13 .................................................. Aaa/AAA 3,624,999
1,565,000 5.000%, 10/01/14 .................................................. Aaa/AAA 1,591,339
3,565,000 5.000%, 10/01/15 .................................................. Aaa/AAA 3,624,999
5,135,000 5.000%, 10/01/17 .................................................. Aaa/AAA 5,221,422
RATING
PRINCIPAL MOODY'S/
AMOUNT HAWAII (CONTINUED) S&P VALUE
- ------------- ------------------------------------------------------------------- ---------- -------------
State of Hawaii, Series CP, FGIC Insured, Unrefunded
$ 1,435,000 5.000%, 10/01/13 .................................................. Aaa/AAA $ 1,457,946
630,000 5.000%, 10/01/14 .................................................. Aaa/AAA 640,074
1,435,000 5.000%, 10/01/15 .................................................. Aaa/AAA 1,457,816
2,060,000 5.000%, 10/01/17 .................................................. Aaa/AAA 2,092,342
State of Hawaii, Series CR, MBIA Insured,
Prerefunded 04/01/08 @101, Collateral: U.S.
Government Securities
1,000,000 5.250%, 04/01/13 .................................................. Aaa/AAA 1,025,880
5,000,000 5.000%, 04/01/16 .................................................. Aaa/AAA 5,117,300
9,600,000 5.000%, 04/01/17 .................................................. Aaa/AAA 9,825,216
State of Hawaii, Series CS, MBIA Insured
5,500,000 5.000%, 04/01/09 .................................................. Aaa/AAA 5,640,305
State of Hawaii, Series CU, Prerefunded 10/01/10
@100, MBIA Insured, Collateral: State & Local
Government Series 100%
3,000,000 5.600%, 10/01/19 .................................................. Aaa/AAA 3,193,170
State of Hawaii, Series CV, FGIC Insured
11,000,000 5.000%, 08/01/20 .................................................. Aaa/AAA 11,454,520
5,000,000 5.250%, 08/01/21 .................................................. Aaa/AAA 5,280,250
1,015,000 5.000%, 08/01/21 .................................................. Aaa/AAA 1,055,712
State of Hawaii, Series CX, FSA Insured
8,725,000 5.500%, 02/01/13 .................................................. Aaa/AAA 9,432,685
2,500,000 5.500%, 02/01/21 .................................................. Aaa/AAA 2,691,325
State of Hawaii, Series CZ, FSA Insured
14,000,000 5.250%, 07/01/18 .................................................. Aaa/AAA 14,928,340
State of Hawaii, Series CZ, FSA Insured
Prerefunded to 07/01/12 @100, Collateral: U.S.
Government Securities
3,000,000 5.250%, 07/01/17 .................................................. Aaa/AAA 3,226,950
State of Hawaii, Series DE, MBIA Insured
10,000,000 5.000%, 10/01/21 .................................................. Aaa/AAA 10,621,900
Hawaii State, Series DF, AMBAC Insured
3,500,000 5.000%, 07/01/18 .................................................. Aaa/AAA 3,761,275
10,000,000 5.000%, 07/01/22 .................................................. Aaa/AAA 10,652,200
3,500,000 5.000%, 07/01/23 .................................................. Aaa/AAA 3,720,710
10,000,000 5.000%, 07/01/24 .................................................. Aaa/AAA 10,616,200
RATING
PRINCIPAL MOODY'S/
AMOUNT HAWAII (CONTINUED) S&P VALUE
- ------------- ------------------------------------------------------------------- ---------- -------------
Hawaii State, Series DG, AMBAC Insured, Refunding
$ 2,000,000 5.000%, 07/01/17 .................................................. Aaa/AAA $ 2,156,600
Hawaii State, Series DI, FSA Insured
5,000,000 5.000%, 03/01/20 .................................................. Aaa/AAA 5,371,450
2,750,000 5.000%, 03/01/21 .................................................. Aaa/AAA 2,947,890
5,000,000 5.000%, 03/01/22 .................................................. Aaa/AAA 5,348,200
-------------
Total Hawaii General Obligation Bonds 387,241,244
-------------
HAWAII REVENUE BONDS (38.5%)
-------------------------------------------------------------------
Board of Regents, University of Hawaii, University
System, Series A, FGIC Insured, Prerefunded to
07/15/12 @ 100, Collateral: State & Local
Government Series 100%
2,000,000 5.500%, 07/15/19 .................................................. Aaa/AAA 2,176,120
2,000,000 5.500%, 07/15/21 .................................................. Aaa/AAA 2,176,120
2,000,000 5.500%, 07/15/22 .................................................. Aaa/AAA 2,176,120
3,000,000 5.500%, 07/15/29 .................................................. Aaa/AAA 3,264,180
Board of Regents, University of Hawaii, University
System, Series B, FSA Insured
1,110,000 5.250%, 10/01/12 .................................................. Aaa/AAA 1,182,483
1,000,000 5.250%, 10/01/13 .................................................. Aaa/AAA 1,063,600
1,140,000 5.250%, 10/01/14 .................................................. Aaa/AAA 1,211,045
1,395,000 5.250%, 10/01/15 .................................................. Aaa/AAA 1,480,165
City and County of Honolulu, Hawaii Board of Water
Supply & System, FSA Insured, Prerefunded
07/01/2011 @100, U.S. Government Securities
1,490,000 5.125%, 07/01/21 .................................................. Aaa/AAA 1,576,763
City and County of Honolulu, Hawaii Board of Water
Supply & System, FSA Insured, Prerefunded to
07/01/11 @100, Collateral: U.S. Government
Securities
5,450,000 5.250%, 07/01/23 .................................................. Aaa/AAA 5,793,895
City and County of Honolulu, Hawaii Board of Water
Supply & System, Series A, FGIC Insured
1,230,000 5.000%, 07/01/21 .................................................. Aaa/AAA 1,304,218
RATING
PRINCIPAL MOODY'S/
AMOUNT HAWAII (CONTINUED) S&P VALUE
- ------------- ------------------------------------------------------------------- ---------- -------------
City and County of Honolulu, Hawaii Board of Water
Supply & System, Series A, MBIA Insured
$ 30,000,000 4.750%, 07/01/31 .................................................. Aaa/AAA $ 30,788,400
City and County of Honolulu, Hawaii Wastewater
Systems, FGIC Insured
1,395,000 5.000%, 07/01/12 .................................................. Aaa/NR 1,447,047
City and County of Honolulu, Hawaii Wastewater
Systems, Series A, FGIC Insured
2,825,000 5.000%, 07/01/22 .................................................. Aaa/AAA 3,009,247
City and County of Honolulu, Hawaii Wastewater
Systems, Junior Series, FGIC Insured
2,000,000 5.250%, 07/01/18 .................................................. Aaa/AAA 2,080,900
5,055,000 5.000%, 07/01/23 .................................................. Aaa/AAA 5,217,114
City and County of Honolulu, Hawaii Wastewater
Systems, Senior Series, AMBAC Insured
1,810,000 5.500%, 07/01/11 .................................................. Aaa/NR 1,940,374
City & County of Honolulu, Hawaii Wastewater
Systems, Senior Series A, FGIC Insured
2,000,000 5.000%, 07/01/24 .................................................. Aaa/AAA 2,123,240
City & County of Honolulu, Hawaii Wastewater
Systems, First Bond Resolution, Series SR,
Prerefunded to 07/01/11 @100, Collateral: State
& Local Government Series 100%
1,065,000 5.500%, 07/01/16 .................................................. Aaa/NR 1,142,575
3,000,000 5.500%, 07/01/17 .................................................. Aaa/NR 3,218,520
2,310,000 5.500%, 07/01/18 .................................................. Aaa/NR 2,478,260
2,000,000 5.250%, 07/01/19 .................................................. Aaa/NR 2,126,200
City and County of Honolulu, Hawaii Wastewater
System First Bond Resolution, Senior Series A,
MBIA Insured
4,560,000 4.500%, 07/01/32 .................................................. Aaa/AAA 4,518,914
1,000,000 5.000%, 07/01/36 .................................................. Aaa/AAA 1,056,760
City and County of Honolulu, Hawaii Wastewater
System, Second Bond, Junior A-1 Remarket
09/15/06, MBIA Insured
1,025,000 5.000%, 07/01/17 .................................................. Aaa/AAA 1,113,386
RATING
PRINCIPAL MOODY'S/
AMOUNT HAWAII (CONTINUED) S&P VALUE
- ------------- ------------------------------------------------------------------- ---------- -------------
City and County of Honolulu, Hawaii Wastewater
System Second Bond, Junior B-1 Remarket
09/15/06, MBIA Insured
$ 1,340,000 5.000%, 07/01/18 .................................................. Aaa/AAA $ 1,450,135
1,935,000 5.000%, 07/01/19 .................................................. Aaa/AAA 2,087,807
2,035,000 5.000%, 07/01/20 .................................................. Aaa/AAA 2,190,820
19,715,000 5.000%, 07/01/32 .................................................. Aaa/AAA 20,895,929
City and County of Honolulu, Hawaii Board of Water
Supply Water Systems, FSA Insured,
Unrefunded Balance
1,510,000 5.125%, 07/01/21 .................................................. Aaa/AAA 1,581,574
Department of Budget and Finance of the State of
Hawaii Special Purpose (The Queen's Health
System), Series B, MBIA Insured Prerefunded
to 07/01/08 @ 102, Collateral: U.S. Treasury
Strips 100%
8,000,000 5.250%, 07/01/23 .................................................. Aaa/AAA 8,314,480
Department of Hawaiian Home Lands (State of
Hawaii), Escrowed to Maturity, Collateral: US
Government Securities
1,310,000 4.150%, 07/01/08 .................................................. A3/NR 1,315,764
Department of Hawaiian Home Lands (State of
Hawaii), Prerefunded to 07/01/09 @ 101,
Collateral: US Government Securities
1,525,000 4.350%, 07/01/10 .................................................. A3/NR 1,549,812
1,245,000 4.450%, 07/01/11 .................................................. A3/NR 1,269,016
Hawaii State Department of Budget and Finance
Special Purpose Revenue (Chaminade University,
Honolulu), Radian Insured
1,000,000 5.000%, 01/01/26 .................................................. NR/AA(1) 1,047,520
Hawaii State Department of Budget and Finance
Special Purpose Revenue Linked Certificates
(Kapiolani Health Care)
5,000,000 6.400%, 07/01/13 .................................................. Baa1/BBB+ 5,463,300
RATING
PRINCIPAL MOODY'S/
AMOUNT HAWAII (CONTINUED) S&P VALUE
- ------------- ------------------------------------------------------------------- ---------- -------------
Hawaii State Department of Budget and Finance
Special Purpose Revenue (Mid Pacific Institute),
Radian Insured
$ 2,000,000 4.625%, 01/01/31 .................................................. NR/AA $ 2,003,440
1,210,000 4.625%, 01/01/36 .................................................. NR/AA 1,195,686
Hawaii State Department of Budget and Finance
Special Purpose Revenue (Hawaiian Electric
Company, Inc.), Series A, AMBAC Insured
4,965,000 5.500%, 12/01/14 .................................................. Aaa/AAA 5,232,762
Hawaii State Department of Budget and Finance
Special Purpose Revenue (Hawaiian Electric
Company, Inc.), Series A, MBIA Insured
4,125,000 4.950%, 04/01/12 .................................................. Aaa/AAA 4,363,837
Hawaii State Department of Budget and Finance
Special Purpose Revenue Refunding (Hawaiian
Electric Company, Inc.) Series A-AMT, FGIC Insured
5,000,000 4.800%, 01/01/25 .................................................. Aaa/AAA 5,077,200
Hawaii State Department of Budget and Finance of
the State of Hawaii Special Purpose Revenue
(Hawaiian Electric Company, Inc. and Subsidiaries
Projects), Series A-AMT, MBIA Insured
5,700,000 5.650%, 10/01/27 .................................................. Aaa/AAA 6,155,658
Hawaii State Department of Budget and Finance
Special Purpose Revenue Refunding (Hawaiian
Electric Company, Inc.) Series B-AMT, FGIC Insured
8,000,000 4.600%, 05/01/26 .................................................. Aaa/AAA 7,909,600
Hawaii State Department of Budget and Finance
Special Purpose Revenue (Hawaiian Electric
Company, Inc., and Subsidiaries Projects), Series
B-AMT, XL Capital Insured
1,000,000 5.000%, 12/01/22 .................................................. Aaa/AAA 1,036,090
Hawaii State Department of Budget and Finance
Special Purpose Revenue (Hawaiian Electric
Company, Inc.), Series D-AMT, AMBAC Insured
2,500,000 6.150%, 01/01/20 .................................................. Aaa/AAA 2,619,175
RATING
PRINCIPAL MOODY'S/
AMOUNT HAWAII (CONTINUED) S&P VALUE
- ------------- ------------------------------------------------------------------- ---------- -------------
Housing Finance and Development Corporation
(State of Hawaii) Single Family Mortgage, Series
A-AMT, FNMA Insured
$ 2,800,000 5.300%, 07/01/22 .................................................. Aaa/AAA $ 2,891,476
3,405,000 5.750%, 07/01/30 .................................................. Aaa/AAA 3,490,193
950,000 5.400%, 07/01/30 .................................................. Aaa/AAA 975,374
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 9,558,879
6,800,000 5.300%, 07/01/28 .................................................. Aaa/AAA 6,979,316
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 2,138,876
4,000,000 5.700%, 10/01/25 .................................................. Aaa/AAA 4,026,240
State of Hawaii Airport System, AMT, FGIC Insured
4,000,000 5.750%, 07/01/17 .................................................. Aaa/AAA 4,268,720
11,000,000 5.625%, 07/01/18 .................................................. Aaa/AAA 11,677,050
6,000,000 5.250%, 07/01/21 .................................................. Aaa/AAA 6,244,440
State of Hawaii Airport System, AMT, Second Series,
Escrowed to Maturity, MBIA Insured, Collateral:
U.S. Government Securities
6,455,000 6.900%, 07/01/12 .................................................. Aaa/AAA 7,055,057
State of Hawaii Airport System, Series B-AMT,
FGIC Insured
3,000,000 8.000%, 07/01/10 .................................................. Aaa/AAA 3,374,760
State of Hawaii Harbor Capital Improvement
Revenue, AMT, MBIA Insured
3,850,000 5.750%, 07/01/17 .................................................. Aaa/AAA 3,941,553
State of Hawaii Harbor Capital Improvement
Revenue, Series B-AMT, AMBAC Insured
3,000,000 5.500%, 07/01/19 .................................................. Aaa/AAA 3,199,020
RATING
PRINCIPAL MOODY'S/
AMOUNT HAWAII (CONTINUED) S&P VALUE
- ------------- ------------------------------------------------------------------- ---------- -------------
State of Hawaii Harbor System Revenue, Series
A-AMT, FSA Insured
$ 2,000,000 5.750%, 07/01/17 .................................................. Aaa/AAA $ 2,129,780
1,500,000 5.900%, 07/01/21 .................................................. Aaa/AAA 1,603,650
3,345,000 5.000%, 01/01/31 .................................................. Aaa/AAA 3,464,550
State of Hawaii Harbor System Revenue, Series A-AMT
2,415,000 4.750%, 01/01/11 .................................................. A1/A+ 2,481,461
State of Hawaii Harbor System Revenue, Series B-
AMT, FSA Insured
2,000,000 5.000%, 01/01/11 .................................................. Aaa/AAA 2,079,320
State of Hawaii Highway Revenue Prerefunded
07/01/11 @100, FSA Insured, Collateral: State &
Local Government Series 100%
1,530,000 5.375%, 07/01/14 .................................................. Aaa/AAA 1,633,994
2,720,000 5.500%, 07/01/19 .................................................. Aaa/AAA 2,874,931
2,000,000 5.375%, 07/01/20 .................................................. Aaa/AAA 2,135,940
1,110,000 5.500%, 07/01/20 .................................................. Aaa/AAA 1,173,226
State of Hawaii Highway Revenue, Series A,
FSA Insured
1,000,000 5.000%, 07/01/20 .................................................. Aaa/AAA 1,069,560
State of Hawaii Highway Revenue, Series B,
FSA Insured
2,000,000 5.000%, 07/01/16 .................................................. Aaa/AAA 2,162,460
University of Hawaii Revenue Refunding, Series A,
MBIA Insured
10,000,000 4.500%, 07/15/32 .................................................. Aaa/AAA 9,984,400
-------------
Total Hawaii Revenue Bonds 271,039,477
-------------
PUERTO RICO (5.6%)
-------------------------------------------------------------------
Puerto Rico Commonwealth Aqueduct and Sewer
Authority Revenue Bonds, MBIA Insured
2,500,000 5.000%, 07/01/15 .................................................. Aaa/AAA 2,526,700
Puerto Rico Commonwealth Government Facilities
Revenue Bonds, Series A, FSA Insured
1,600,000 5.250%, 07/01/19 .................................................. NR/AAA 1,803,584
RATING
PRINCIPAL MOODY'S/
AMOUNT PUERTO RICO (CONTINUED) S&P VALUE
- ------------- ------------------------------------------------------------------- ---------- -------------
Puerto Rico Commonwealth Highway & Transportation
Authority Revenue, Series G, FGIC Insured
$ 1,000,000 5.250%, 07/01/15 .................................................. Aaa/AAA $ 1,085,620
Puerto Rico Commonwealth Highway & Transportation
Authority Highway Revenue, Series AA,
MBIA Insured
1,000,000 5.500%, 07/01/18 .................................................. Aaa/AAA 1,139,540
Puerto Rico Commonwealth Infrastructure Finance
Authority Special Capital Appreciation, Series A,
AMBAC Insured
5,685,000 zero coupon, 07/01/29 ............................................. Aaa/AAA 2,159,334
Puerto Rico Commonwealth Infrastructure Finance
Authority Special Refunding, Series C,
AMBAC Insured
2,150,000 5.500%, 07/01/23 .................................................. Aaa/AAA 2,512,641
Puerto Rico Commonwealth Infrastructure Finance
Authority Special Capital Appreciation, Series C,
AMBAC Insured
1,775,000 zero coupon, 07/01/28 ............................................. Aaa/AAA 705,651
Puerto Rico Commonwealth Infrastructure Financing
Authority Refunding Special Tax, Series C,
FGIC Insured
5,000,000 5.500%, 07/01/22 .................................................. Aaa/AAA 5,818,200
Puerto Rico Commonwealth Public Finance Corp.
Revenue Bonds, Series A, Prerefunded 08/01/11
@100, MBIA Insured, Collateral: 38% U.S.
Treasury; 62% U.S. Government Securities
5,000,000 5.500%, 08/01/17 .................................................. Aaa/AAA 5,377,100
Puerto Rico Commonwealth Public Improvement
General Obligation Bonds, MBIA Insured
1,800,000 5.250%, 07/01/13 .................................................. Aaa/AAA 1,887,750
Puerto Rico Commonwealth Public Improvement
General Obligation Bonds, Series A, FGIC Insured
2,000,000 5.500%, 07/01/16 .................................................. Aaa/AAA 2,261,100
RATING
PRINCIPAL MOODY'S/
AMOUNT PUERTO RICO (CONTINUED) S&P VALUE
- ------------- ------------------------------------------------------------------- ---------- -------------
Puerto Rico Commonwealth Public Improvement
General Obligation Bonds Refunding, Series A,
MBIA Insured
$ 6,245,000 5.500%, 07/01/20 .................................................. Aaa/AAA $ 7,200,298
Puerto Rico Commonwealth Public Improvement
General Obligation Bonds, Series CR, FSA Insured
1,060,000 5.250%, 07/01/17 .................................................. Aaa/AAA 1,184,561
Puerto Rico Electric Power Authority Power Revenue
Bonds Series QQ, XLCA Insured
3,195,000 5.500%, 07/01/16 .................................................. Aaa/AAA 3,601,500
-------------
Total Puerto Rico 39,263,579
-------------
Total Investments (Cost $675,039,730 - note 4) .................... 99.1% 697,544,300
Other assets less liabilities ..................................... 0.9% 6,147,402
------ -------------
NET ASSETS ........................................................ 100.0% $ 703,691,702
====== =============
Percent of
Portfolio Distribution by Quality Rating (unaudited) Portfolio
---------------------------------------------------- ---------
Aaa or #Aaa of Moody's or AAA of S&P .............................. 97.4%
Aa of Moody's or AA of S&P ........................................ 0.7
A of Moody's or S&P ............................................... 1.1
Baa of Moody's or BBB of S&P ...................................... 0.8
------
100.0%
======
1 Rated AA by Fitch.
PORTFOLIO ABBREVIATIONS:
------------------------
AMBAC American Municipal Bond Assurance Corporation
AMT Alternative Minimum Tax
CIFG CDC IXIS Financial Guaranty
FGIC Financial Guaranty Insurance Co.
FNMA Federal National Mortgage Association
FSA Financial Securities Assurance
MBIA Municipal Bond Investors Assurance
NR Not Rated
TCRS Transferable Custodial Receipts
XLCA XL Capital Assurance
See accompanying notes to financial statements.
HAWAIIAN TAX-FREE TRUST
STATEMENT OF ASSETS AND LIABILITIES
YEAR ENDED MARCH 31, 2007
ASSETS
Investments at value (cost $675,039,730) ........................................... $ 697,544,300
Interest receivable ................................................................ 9,936,681
Receivable for Trust shares sold ................................................... 292,702
Other assets ....................................................................... 24,909
-------------
Total assets ....................................................................... 707,798,592
-------------
LIABILITIES
Cash overdraft ..................................................................... 2,891,465
Dividends payable .................................................................. 425,460
Payable for Trust shares redeemed .................................................. 277,911
Adviser and Administrator fees payable ............................................. 240,417
Distribution and service fees payable .............................................. 140,629
Accrued expenses ................................................................... 131,008
-------------
Total liabilities .................................................................. 4,106,890
-------------
NET ASSETS ............................................................................ $ 703,691,702
=============
Net Assets consist of:
Capital Stock - Authorized an unlimited number of shares, par value $0.01 per share $ 620,894
Additional paid-in capital ......................................................... 680,749,364
Net unrealized appreciation on investments (note 4) ................................ 22,504,570
Accumulated net realized loss on investments ....................................... (2,273,607)
Undistributed net investment income ................................................ 2,090,481
-------------
$ 703,691,702
=============
CLASS A
Net Assets ......................................................................... $ 645,306,564
=============
Capital shares outstanding ......................................................... 56,938,652
=============
Net asset value and redemption price per share ..................................... $ 11.33
=============
Offering price per share (100/96 of $11.33 adjusted to nearest cent) ............... $ 11.80
=============
CLASS C
Net Assets ......................................................................... $ 35,618,042
=============
Capital shares outstanding ......................................................... 3,145,003
=============
Net asset value and offering price per share ....................................... $ 11.33
=============
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) ...................................... $ 11.33*
=============
CLASS Y
Net Assets ......................................................................... $ 22,767,096
=============
Capital shares outstanding ......................................................... 2,005,747
=============
Net asset value, offering and redemption price per share ........................... $ 11.35
=============
See accompanying notes to financial statements.
HAWAIIAN TAX-FREE TRUST
STATEMENT OF OPERATIONS
YEAR ENDED MARCH 31, 2007
INVESTMENT INCOME:
Interest income ...................................... $ 33,688,407
Expenses:
Investment Adviser fees (note 3) ..................... $ 996,125
Administrator fees (note 3) .......................... 1,849,958
Distribution and service fees (note 3) ............... 1,673,343
Transfer and shareholder servicing agent fees ........ 488,201
Trustees' fees and expenses (note 8) ................. 135,248
Shareholders' reports and proxy statements ........... 110,921
Legal fees (note 3) .................................. 105,838
Insurance ............................................ 69,264
Custodian fees ....................................... 68,879
Registration fees and dues ........................... 24,851
Auditing and tax fees ................................ 22,304
Chief compliance officer (note 3) .................... 4,544
Miscellaneous ........................................ 32,445
------------
5,581,921
Expenses paid indirectly (note 6) .................... (22,591)
------------
Net expenses ......................................... 5,559,330
------------
Net investment income ................................ 28,129,077
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain (loss) from securities transactions (1,967,967)
Change in unrealized appreciation on investments ..... 3,729,213
------------
Net realized and unrealized gain (loss) on investments 1,761,246
------------
Net change in net assets resulting from operations ... $ 29,890,323
============
See accompanying notes to financial statements.
HAWAIIAN TAX-FREE TRUST
STATEMENTS OF CHANGES IN NET ASSETS
YEAR ENDED YEAR ENDED
MARCH 31, 2007 MARCH 31, 2006
-------------- --------------
OPERATIONS:
Net investment income ............................... $ 28,129,077 $ 27,521,571
Net realized gain (loss) from securities transactions (1,967,967) 569,433
Change in unrealized appreciation on investments .... 3,729,213 (12,134,913)
------------- -------------
Net change in net assets resulting from operations .. 29,890,323 15,956,091
------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS (note 10):
Class A Shares:
Net investment income ............................... (26,167,646) (25,641,795)
Net realized gain on investments .................... (810,146) (424,504)
Class C Shares:
Net investment income ............................... (1,150,716) (1,087,576)
Net realized gain on investments .................... (44,247) (22,878)
Class Y Shares:
Net investment income ............................... (810,971) (791,736)
Net realized gain on investments .................... (20,665) (11,663)
------------- -------------
Change in net assets from distributions ............. (29,004,391) (27,980,152)
------------- -------------
CAPITAL SHARE TRANSACTIONS (note 7):
Proceeds from shares sold ........................... 57,436,680 55,348,246
Reinvested dividends and distributions .............. 16,061,923 15,434,343
Cost of shares redeemed ............................. (91,696,642) (77,015,557)
------------- -------------
Change in net assets from capital share transactions (18,198,039) (6,232,968)
------------- -------------
Change in net assets ............................. (17,312,107) (18,257,029)
NET ASSETS:
Beginning of period ................................. 721,003,809 739,260,838
------------- -------------
End of period* ...................................... $ 703,691,702 $ 721,003,809
============= =============
* Includes undistributed net investment income of: .. $ 2,090,481 $ 2,090,783
============= =============
See accompanying notes to financial statements.
HAWAIIAN TAX-FREE TRUST
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2007
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 accounting principles generally accepted in the United States of
America.
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 by the pricing service 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 in good
faith 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 realized 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 accounting principles generally accepted in the United States of
America 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.
f) RECLASSIFICATION OF CAPITAL ACCOUNTS: Accounting principles generally
accepted in the United States of America require that certain components
of net assets relating to permanent differences be reclassified between
financial and tax reporting. These reclassifications have no effect on net
assets or net asset value per share. On March 31, 2007 a reclassification
was made to decrease undistributed net investment income by $46 and
decrease accumulated net realized loss on investments by $46.
g) NEW ACCOUNTING PRONOUNCEMENTS: In July 2006, the Financial Accounting
Standards Board ("FASB") released FASB Interpretation No. 48 "Accounting
for Uncertainty in income Taxes" ("FIN 48"). FIN 48 provides guidance for
how uncertain tax positions should be recognized, measured, presented and
disclosed in the financial statements. FIN 48 requires the evaluation of
tax positions taken or expected to be taken in the course of preparing the
Trust's tax returns to determine whether the tax positions are
"more-likely-than-not" of being sustained by the applicable tax authority.
Tax positions not deemed to meet the more-likely-than-not threshold would
be recorded as a tax benefit or expense in the current year. Adoption of
FIN 48 is required to be implemented no later than September 30, 2007 and
is to be applied to all open tax years as of that date. At this time,
management does not believe the adoption of FIN 48 will result in any
material impact.on the Trust's financial statements.
In September 2006, FASB issued FASB Statement No. 157, "Fair Value
Measurement" ("SFAS 157"), which defines fair value, establishes a
framework for measuring fair value, and expands disclosures about fair
value measurements. SFAS 157 is effective for fiscal years beginning after
November 15, 2007, and interim periods within those fiscal years. The
Trust believes adoption of SFAS 157 will have no material impact on the
Trust's financial statements.
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
year ended March 31, 2007.
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 year ended March 31, 2007, service fees on Class A
Shares amounted to $1,312,143 of which the Distributor retained $78,721.
Under another part of the Plan, the Trust is authorized to make payments
with respect to Class C Shares to Qualified Recipients which have rendered
assistance in the distribution and/or retention of the Trust's Class C shares or
servicing of shareholder accounts. These payments are made at the annual rate of
0.75% of the Trust's net assets represented by Class C Shares and for the year
ended March 31, 2007, amounted to $270,900. In addition, under a Shareholder
Services Plan, the Trust is authorized to make service fee payments with respect
to Class C Shares to Qualified Recipients for providing personal services and/or
maintenance of shareholder accounts. These payments are made at the annual rate
of 0.25% of the Trust's net assets represented by Class C Shares and for the
year ended March 31, 2007, amounted to $90,300. The total of these payments made
with respect to Class C Shares amounted to $361,200 of which the Distributor
retained $76,345.
Specific details about the Plans are more fully defined in the Trust's
Prospectus and Statement of Additional Information.
Under a Distribution Agreement, the Distributor serves as the exclusive
distributor of the Trust's shares. Through agreements between the Distributor
and various broker-dealer firms ("dealers"), the Trust's shares are sold
primarily through the facilities of these dealers having offices within Hawaii,
with the bulk of sales commissions inuring to such dealers. For the year ended
March 31, 2007, total commissions on sales of Class A Shares amounted to
$955,378, of which the Distributor received $91,245.
c) OTHER RELATED PARTY TRANSACTIONS:
For the year ended March 31, 2007, the Trust incurred $104,065 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 at that firm.
4. PURCHASES AND SALES OF SECURITIES
During the year ended March 31, 2007, purchases of securities and proceeds
from the sales of securities aggregated $271,800,333 and $284,380,942,
respectively.
At March 31, 2007, the aggregate tax cost for all securites was
$675,039,730. At March 31, 2007, the aggregate gross unrealized appreciation for
all securities in which there is an excess of value over tax cost amounted to
$22,825,703 and aggregate gross unrealized depreciation for all securities in
which there is an excess of tax cost over value amounted to $321,133 for a net
unrealized appreciation of $22,504,570.
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.
7. CAPITAL SHARE TRANSACTIONS
Transactions in Capital Shares of the Trust were as follows:
Year Ended Year Ended
March 31, 2007 March 31, 2006
----------------------------- -----------------------------
Shares Amount Shares Amount
------------ ------------ ------------ ------------
CLASS A SHARES:
Proceeds from shares sold 3,550,598 $ 40,253,734 3,926,945 $ 45,218,301
Reinvested distributions 1,327,230 15,051,392 1,260,039 14,507,021
Cost of shares redeemed . (6,763,226) (76,719,811) (5,540,604) (63,720,316)
------------ ------------ ------------ ------------
Net change .............. (1,885,398) (21,414,685) (353,620) (3,994,994)
------------ ------------ ------------ ------------
CLASS C SHARES:
Proceeds from shares sold 727,309 8,237,011 668,607 7,668,853
Reinvested distributions 58,995 668,510 52,402 603,838
Cost of shares redeemed . (881,719) (9,991,799) (750,126) (8,622,247)
------------ ------------ ------------ ------------
Net change .......... (95,415) (1,086,278) (29,117) (349,556)
------------ ------------ ------------ ------------
CLASS Y SHARES:
Proceeds from shares sold 784,085 8,945,935 213,435 2,461,092
Reinvested distributions 30,094 342,021 28,085 323,484
Cost of shares redeemed . (437,949) (4,985,032) (407,103) (4,672,994)
------------ ------------ ------------ ------------
Net change .......... 376,230 4,302,924 (165,583) (1,888,418)
------------ ------------ ------------ ------------
Total transactions in Trust
shares .................. (1,604,583) $(18,198,039) (548,320) $ (6,232,968)
============ ============ ============ ============
8. TRUSTEES' FEES AND EXPENSES
At March 31, 2007 there were 7 Trustees, one of whom is affiliated with
the Administrator and is not paid any fees. The total amount of Trustees'
service and attendance fees paid during the year ended March 31, 2007 was
$116,400, to cover carrying out their responsibilities and attendance at
regularly scheduled quarterly Board Meetings and meetings of the Independent
Trustees held prior to each quarterly Board Meeting. 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
and Outreach Meetings of Shareholders. For the year ended March 31, 2007, such
meeting-related expenses amounted to $18,848.
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. At March 31, 2007 the Trust had a
capital loss carryover of $2,273,607 which expires in 2015. This carryover is
available to offset future net realized gains on securities transactions to the
extent provided for in the Internal Revenue Code. To the extent that this loss
carryover is used to offset future realized capital gains, it is probable the
gains so offset will not be distributed.
The tax character of distributions:
Year Ended March 31,
-----------------------------
2007 2006
----------- -----------
Net tax-exempt income $27,766,907 $27,503,747
Ordinary income 362,426 17,360
Long term capital gain 875,058 459,045
----------- -----------
$29,004,391 $27,980,152
=========== ===========
As of March 31, 2007, the components of distributable earnings on a tax
basis were as follows:
Accumulated net realized loss $ (2,273,607)
Unrealized appreciation 22,504,570
Undistributed tax-exempt income 2,090,481
------------
$ 22,321,444
============
HAWAIIAN TAX-FREE TRUST
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
Class A
----------------------------------------------------------------
Year Ended March 31,
----------------------------------------------------------------
2007 2006 2005 2004 2003
-------- -------- -------- -------- --------
Net asset value, beginning of period ......... $ 11.32 $ 11.51 $ 11.83 $ 11.73 $ 11.26
-------- -------- -------- -------- --------
Income (loss) from investment operations:
Net investment income + .................... 0.46 0.43 0.45 0.46 0.48
Net gain (loss) on securities (both realized
and unrealized) .......................... 0.02 (0.18) (0.30) 0.10 0.47
-------- -------- -------- -------- --------
Total from investment operations ........... 0.48 0.25 0.15 0.56 0.95
-------- -------- -------- -------- --------
Less distributions (note 10):
Dividends from net investment income ....... (0.46) (0.43) (0.45) (0.46) (0.48)
Distributions from capital gains ........... (0.01) (0.01) (0.02) -- --
-------- -------- -------- -------- --------
Total distributions ........................ (0.47) (0.44) (0.47) (0.46) (0.48)
-------- -------- -------- -------- --------
Net asset value, end of period ............... $ 11.33 $ 11.32 $ 11.51 $ 11.83 $ 11.73
======== ======== ======== ======== ========
Total return (not reflecting sales charge) ... 4.28% 2.19% 1.33% 4.83% 8.57%
Ratios/supplemental data
Net assets, end of period (in millions) .... $ 645 $ 666 $ 681 $ 694 $ 675
Ratio of expenses to average net assets .... 0.75% 0.74% 0.74% 0.73% 0.71%
Ratio of net investment income to average
net assets ............................... 3.99% 3.76% 3.90% 3.89% 4.15%
Portfolio turnover rate .................... 38% 22% 10% 8% 5%
The expense ratios after giving effect to the expense offset for uninvested cash balances were:
Ratio of expenses to average net assets .... 0.75% 0.74% 0.74% 0.72% 0.70%
- ----------
+ Per share amounts have been calculated using the monthly average shares
method.
See accompanying notes to financial statements.
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
Class C
----------------------------------------------------------------
Year Ended March 31,
----------------------------------------------------------------
2007 2006 2005 2004 2003
-------- -------- -------- -------- --------
Net asset value, beginning of period ................ $ 11.31 $ 11.50 $ 11.82 $ 11.73 $ 11.26
-------- -------- -------- -------- --------
Income (loss) from investment operations:
Net investment income + ........................ 0.36 0.34 0.36 0.36 0.38
Net gain (loss) on securities (both
realized and unrealized) ................... 0.03 (0.18) (0.30) 0.09 0.48
-------- -------- -------- -------- --------
Total from investment operations ............... 0.39 0.16 0.06 0.45 0.86
-------- -------- -------- -------- --------
Less distributions (note 10):
Dividends from net investment income ........... (0.36) (0.34) (0.36) (0.36) (0.39)
Distributions from capital gains ............... (0.01) (0.01) (0.02) -- --
-------- -------- -------- -------- --------
Total distributions ............................ (0.37) (0.35) (0.38) (0.36) (0.39)
-------- -------- -------- -------- --------
Net asset value, end of period ...................... $ 11.33 $ 11.31 $ 11.50 $ 11.82 $ 11.73
======== ======== ======== ======== ========
Total return (not reflecting sales charge) .......... 3.55% 1.37% 0.53% 3.91% 7.70%
Ratios/supplemental data
Net assets, end of period (in millions) ........ $ 35.6 $ 36.7 $ 37.6 $ 38.2 $ 33.8
Ratio of expenses to average net assets ........ 1.55% 1.54% 1.54% 1.54% 1.51%
Ratio of net investment income to
average net assets ......................... 3.19% 2.96% 3.10% 3.08% 3.33%
Portfolio turnover rate ........................ 38% 22% 10% 8% 5%
The expense ratios after giving effect to the expense offset for uninvested cash balances were:
Ratio of expenses to average net assets ........ 1.55% 1.54% 1.54% 1.52% 1.50%
Class Y
----------------------------------------------------------------
Year Ended March 31,
----------------------------------------------------------------
2007 2006 2005 2004 2003
-------- -------- -------- -------- --------
Net asset value, beginning of period ................ $ 11.34 $ 11.52 $ 11.84 $ 11.75 $ 11.28
-------- -------- -------- -------- --------
Income (loss) from investment operations:
Net investment income + ........................ 0.48 0.46 0.48 0.48 0.50
Net gain (loss) on securities (both
realized and unrealized) ................... 0.02 (0.18) (0.30) 0.09 0.47
-------- -------- -------- -------- --------
Total from investment operations ............... 0.50 0.28 0.18 0.57 0.97
-------- -------- -------- -------- --------
Less distributions (note 10):
Dividends from net investment income ........... (0.48) (0.45) (0.48) (0.48) (0.50)
Distributions from capital gains ............... (0.01) (0.01) (0.02) -- --
-------- -------- -------- -------- --------
Total distributions ............................ (0.49) (0.46) (0.50) (0.48) (0.50)
-------- -------- -------- -------- --------
Net asset value, end of period ...................... $ 11.35 $ 11.34 $ 11.52 $ 11.84 $ 11.75
======== ======== ======== ======== ========
Total return (not reflecting sales charge) .......... 4.49% 2.48% 1.54% 4.97% 8.77%
Ratios/supplemental data
Net assets, end of period (in millions) ........ $ 22.8 $ 18.5 $ 20.7 $ 23.5 $ 25.2
Ratio of expenses to average net assets ........ 0.55% 0.54% 0.54% 0.53% 0.51%
Ratio of net investment income to
average net assets ......................... 4.19% 3.96% 4.09% 4.09% 4.33%
Portfolio turnover rate ........................ 38% 22% 10% 8% 5%
The expense ratios after giving effect to the expense offset for uninvested cash balances were:
Ratio of expenses to average net assets ........ 0.55% 0.54% 0.54% 0.52% 0.50%
- ----------
+ Per share amounts have been calculated using the monthly average shares
method.
See accompanying notes to financial statements.
ADDITIONAL INFORMATION (UNAUDITED)
TRUSTEES AND OFFICERS(1)(2)
NUMBER OF
POSITIONS PORTFOLIOS OTHER DIRECTORSHIPS
HELD WITH IN FUND HELD BY TRUSTEE
NAME, TRUST AND PRINCIPAL COMPLEX(5) (THE POSITION HELD IS
ADDRESS(3) LENGTH OF OCCUPATION(S) OVERSEEN A DIRECTORSHIP UNLESS
AND DATE OF BIRTH SERVICE(4) DURING PAST 5 YEARS BY TRUSTEE INDICATED OTHERWISE.)
- ----------------- ---------- ------------------- ---------- ---------------------
INTERESTED TRUSTEE(6)
- ---------------------
Diana P. Herrmann Trustee since 2004, Vice Chair and Chief Executive Officer 12 ICI Mutual Insurance
New York, NY President since 1998 of Aquila Management Corporation, Company
(02/25/58) and Vice Chair since Founder of the Aquila Group of
2003 Funds(SM)(7) and parent of Aquila
Investment Management LLC,
Administrator, since 2004, President and
Chief Operating Officer since 1997, a
Director since 1984, Secretary since
1986 and previously its Executive Vice
President, Senior Vice President or Vice
President, 1986-1997; Chief Executive
Officer and Vice Chair since 2004 and
President, Chief Operating Officer and
Manager of the Administrator since 2003;
Chair, Vice Chair, President, Executive
Vice President or Senior Vice President
of funds in the Aquila Group of Funds(SM)
since 1986; Director of the Distributor
since 1997; trustee, Reserve
Money-Market Funds, 1999-2000 and
Reserve Private Equity Series,
1998-2000; Governor, Investment Company
Institute and head of its Small Funds
Committee since 2004; active in
charitable and volunteer organizations.
NON-INTERESTED TRUSTEES
- -----------------------
Theodore T. Mason Chair of the Board Executive Director, East Wind Power 8 Trustee, Premier VIT.
New York, NY of Trustees since Partners LTD since 1994 and Louisiana
(11/24/35) 2004 and Trustee Power Partners, 1999-2003; Treasurer,
since 1984 Alumni Association of SUNY Maritime
College since 2004 (President,
2002-2003, First Vice President,
2000-2001, Second Vice President,
1998-2000) and director of the same
organization since 1997; Director, STCM
Management Company, Inc., 1973-2004;
twice national officer of Naval Reserve
Association, commanding officer of four
naval reserve units and Captain, USNR
(Ret); director, The Navy League of the
United States New York Council since
2002; trustee, The Maritime Industry
Museum at Fort Schuyler, 2000-2004; and
the Maritime College at Fort Schuyler
Foundation, Inc. since 2000.
NUMBER OF
POSITIONS PORTFOLIOS OTHER DIRECTORSHIPS
HELD WITH IN FUND HELD BY TRUSTEE
NAME, TRUST AND PRINCIPAL COMPLEX(5) (THE POSITION HELD IS
ADDRESS(3) LENGTH OF OCCUPATION(S) OVERSEEN A DIRECTORSHIP UNLESS
AND DATE OF BIRTH SERVICE(4) DURING PAST 5 YEARS BY TRUSTEE INDICATED OTHERWISE.)
- ----------------- ---------- ------------------- ---------- ---------------------
Thomas W. Courtney Trustee President, Courtney Associates, Inc., a 5 Chairman of the Board
Sewickley, PA since 1984 venture capital firm, since 1988. of Oppenheimer Quest
(08/17/33) Value Funds Group,
Oppenheimer Small Cap
Value Fund, Oppenheimer
Midcap Fund, and
Oppenheimer Rochester
Group of Funds;
Chairman of the Board
of Premier VIT.
Stanley W. Hong Trustee since 1992 President, Waste Management of Hawaii, 4 Trustee, Pacific
Honolulu, HI Inc. and Corporate Vice President - Capital Funds, which
(04/05/36) Hawaii Area for Waste Management, Inc., includes 11 bond and
2001-2005; Trustee, The King William stock funds; First
Charles Lunalilo Trust Estate since Insurance Co. of
2001; President and Chief Executive Hawaii, Ltd., Lanihau
Officer, The Chamber of Commerce of Properties, Ltd., The
Hawaii, 1996-2001; Director PBS - Hawaii Westye Group - West
Foundation since 1998; Regent, Chaminade (Hawaii), Inc.
University of Honolulu since 1991;
Trustee, Heald College since 1998;
Trustee, the Nature Conservancy of
Hawaii since 1998; Trustee, Child and
Family Service since 2005; Director, The
East West Center Foundation since 2006;
and a director of other corporate and
community organizations.
Russell K. Okata Trustee since 1992 Executive Director, Hawaii Government 4 Trustee, Pacific
Honolulu, HI Employees Association AFSCME Local 152, Capital Funds, which
(03/22/44) AFL-CIO since 1981; International Vice includes 11 bond and
President, American Federation of State, stock funds; Chairman,
County and Municipal Employees, AFL-CIO Royal State Group
since 1981; director of various civic (insurance).
and charitable organizations.
Douglas Philpotts Trustee since 1992 Retired; formerly director, Chairman of 4 Trustee, Pacific
Honolulu, HI the Board and President of Hawaiian Capital Funds, which
(11/21/31) Trust Company, Limited, a predecessor of includes 11 bond and
The Asset Management Group of Bank of stock funds.
Hawaii; present or former director of
various Hawaii-based civic and
charitable organizations.
NUMBER OF
POSITIONS PORTFOLIOS OTHER DIRECTORSHIPS
HELD WITH IN FUND HELD BY TRUSTEE
NAME, TRUST AND PRINCIPAL COMPLEX(5) (THE POSITION HELD IS
ADDRESS(3) LENGTH OF OCCUPATION(S) OVERSEEN A DIRECTORSHIP UNLESS
AND DATE OF BIRTH SERVICE(4) DURING PAST 5 YEARS BY TRUSTEE INDICATED OTHERWISE.)
- ----------------- ---------- ------------------- ---------- ---------------------
Oswald K. Stender Trustee since 1992 Director, Hawaiian Electric Industries, 4 Trustee, Pacific
Honolulu, HI Inc., a public utility holding company, Capital Funds, which
(10/08/31) 1993-2004; trustee, the Bernice Pauahi includes 11 bond and
Bishop Estate 1990-1999; trustee, Office stock funds; director,
of Hawaiian Affairs and a member or Grace Pacific
trustee of several community Corporation, an asphalt
organizations. paving company, ACE
Trucking Inc. and
Hawaiian Telecom, a
telephone company
(communications).
OTHER INDIVIDUALS
CHAIRMAN EMERITUS(8)
- --------------------
Lacy B. Herrmann Founder, Chairman Founder and Chairman of the Board, N/A N/A
New York, NY Emeritus since 2004, Aquila Management Corporation, the
(05/12/29) Trustee, 1984-2004, sponsoring organization and parent of
and Chairman of the the Manager or Administrator and/or
Board of Trustees, Adviser or Sub-Adviser to each fund of
1984-2003 the Aquila Group of Funds(SM); Chairman
of the Manager or Administrator and/or
Adviser or Sub-Adviser to each since
2004; Founder and Chairman Emeritus of
each fund in the Aquila Group of
Funds(SM); previously Chairman and a
Trustee of each fund in the Aquila Group
of Funds(SM) since its establishment until
2004 or 2005; Director of the
Distributor since 1981 and formerly Vice
President or Secretary, 1981-1998;
Trustee Emeritus, Brown University and
the Hopkins School; active in
university, school and charitable
organizations.
OFFICERS
- --------
Charles E. Childs, III Executive Vice Executive Vice President of all funds in N/A N/A
New York, NY President since 2003 the Aquila Group of Funds(SM) and the
(04/01/57) Administrator and the Administrator's
parent since 2003; formerly Senior Vice
President, corporate development, Vice
President, Assistant Vice President and
Associate of the Administrator's parent
since 1987; Senior Vice President, Vice
President or Assistant Vice President of
the Aquila Money-Market Funds,
1988-2003.
NUMBER OF
POSITIONS PORTFOLIOS OTHER DIRECTORSHIPS
HELD WITH IN FUND HELD BY TRUSTEE
NAME, TRUST AND PRINCIPAL COMPLEX(5) (THE POSITION HELD IS
ADDRESS(3) LENGTH OF OCCUPATION(S) OVERSEEN A DIRECTORSHIP UNLESS
AND DATE OF BIRTH SERVICE(4) DURING PAST 5 YEARS BY TRUSTEE INDICATED OTHERWISE.)
- ----------------- ---------- ------------------- ---------- ---------------------
Sherri Foster Senior Vice Senior Vice President, Hawaiian Tax-Free N/A N/A
Lahaina, HI President since 1993 Trust since 1993 and formerly Vice
(07/27/50) President or Assistant Vice President;
Vice President since 1997 and formerly
Assistant Vice President of the three
Aquila Money-Market Funds; Vice
President, Aquila Rocky Mountain Equity
Fund since 2006; Registered
Representative of the Distributor since
1985.
Stephen J. Caridi Vice President since Vice President of the Distributor since N/A N/A
New York, NY 1998 1995; Vice President, Hawaiian Tax-Free
(05/06/61) Trust since 1998; Senior Vice President,
Narragansett Insured Tax-Free Income
Fund since 1998, Vice President
1996-1997; Senior Vice President,
Tax-Free Fund of Colorado since 2004;
Vice President, Aquila Rocky Mountain
Equity Fund since 2006.
Robert W. Anderson Chief Compliance Chief Compliance Officer of the Trust N/A N/A
New York, NY Officer since 2004 and each of the other funds in the
(08/23/40) and Assistant Aquila Group of Funds(SM), the
Secretary since 2000 Administrator and the Distributor since
2004, Compliance Officer of the
Administrator or its predecessor and
current parent 1998-2004; Assistant
Secretary of the Aquila Group of
Funds(SM) since 2000.
Joseph P. DiMaggio Chief Financial Chief Financial Officer of the Aquila N/A N/A
New York, NY Officer since 2003 Group of Funds(SM) since 2003 and
(11/06/56) and Treasurer since Treasurer since 2000.
2000
Edward M. W. Hines Secretary since 1984 Partner and then shareholder of legal N/A N/A
New York, NY counsel to the Trust, Hollyer Brady
(12/16/39) Barrett & Hines LLP since 1989 and
thereafter its successor, Butzel Long,
since 2007; Secretary of the Aquila
Group of Funds(SM).
NUMBER OF
POSITIONS PORTFOLIOS OTHER DIRECTORSHIPS
HELD WITH IN FUND HELD BY TRUSTEE
NAME, TRUST AND PRINCIPAL COMPLEX(5) (THE POSITION HELD IS
ADDRESS(3) LENGTH OF OCCUPATION(S) OVERSEEN A DIRECTORSHIP UNLESS
AND DATE OF BIRTH SERVICE(4) DURING PAST 5 YEARS BY TRUSTEE INDICATED OTHERWISE.)
- ----------------- ---------- ------------------- ---------- ---------------------
John M. Herndon Assistant Secretary Assistant Secretary of the Aquila Group N/A N/A
New York, NY since 1995 of Funds(SM) since 1995 and Vice President
(12/17/39) of the three Aquila Money-Market Funds
since 1990; Vice President of the
Administrator or its predecessor and
current parent since 1990.
Lori A. Vindigni Assistant Treasurer Assistant Treasurer of the Aquila Group N/A N/A
New York, NY since 2000 of Funds(SM) since 2000; Assistant Vice
(11/02/66) President of the Administrator or its
predecessor and current parent since
1998; Fund Accountant for the Aquila
Group of Funds(SM), 1995-1998.
- ----------
(1) The Trust's Statement of Additional Information includes additional
information about the Trustees and is available, without charge, upon
request by calling 800-437-1020 (toll free).
(2) From time to time Bank of Hawaii may enter into normal investment
management, commercial banking and lending arrangements with one or more
of the Trustees of the Trust and their affiliates. The Asset Management
Group of Bank of Hawaii is the Trust's investment adviser.
(3) The mailing address of each Trustee and officer is c/o Hawaiian Tax-Free
Trust, 380 Madison Avenue, Suite 2300, New York, NY 10017.
(4) Each Trustee holds office until the next annual meeting of shareholders or
until his or her successor is elected and qualifies. The term of office of
each officer is one year.
(5) Includes certain Aquila-sponsored funds that are dormant and have no
public shareholders.
(6) Ms. Herrmann is an interested person of the Trust as an officer of the
Trust, as a director, officer and shareholder of the Administrator's
corporate parent, as an officer and Manager of the Administrator, and as a
shareholder and director of the Distributor.
(7) In this material Pacific Capital Cash Assets Trust, Pacific Capital U.S.
Government Securities Cash Assets Trust and Pacific Capital Tax-Free Cash
Assets Trust, each of which is a money-market fund, are called the "Aquila
Money-Market Funds"; Hawaiian Tax-Free Trust, Tax-Free Trust of Arizona,
Tax-Free Trust of Oregon, Tax-Free Fund of Colorado, Churchill Tax-Free
Fund of Kentucky, Narragansett Insured Tax-Free Income Fund and Tax-Free
Fund For Utah, each of which is a tax-free municipal bond fund, are called
the "Aquila Bond Funds"; Aquila Rocky Mountain Equity Fund is an equity
fund; Aquila Three Peaks High Income Fund is a high income corporate bond
fund; considered together, these 12 funds, which do not include the
dormant funds described in footnote 5, are called the "Aquila Group of
Funds(SM)."
(8) The Chairman Emeritus may attend Board meetings but has no voting power.
- --------------------------------------------------------------------------------
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 table below is 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 table below is based on an investment of $1,000 invested on October 1,
2006 and held for the six months ended March 31, 2007.
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".
SIX MONTHS ENDED MARCH 31, 2007
ACTUAL
TOTAL RETURN BEGINNING ENDING EXPENSES
WITHOUT ACCOUNT ACCOUNT PAID DURING
SALES CHARGES(1) VALUE VALUE THE PERIOD(2)
- --------------------------------------------------------------------------------
Class A 1.34% $1,000.00 $1,013.40 $3.76
- --------------------------------------------------------------------------------
Class C 1.44% $1,000.00 $1,014.40 $7.80
- --------------------------------------------------------------------------------
Class Y 1.53% $1,000.00 $1,015.30 $2.77
- --------------------------------------------------------------------------------
(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 0.75%, 1.55% AND
0.55% FOR THE TRUST'S CLASS A, C AND Y SHARES, RESPECTIVELY, MULTIPLIED BY
THE AVERAGE ACCOUNT VALUE OVER THE PERIOD, MULTIPLIED BY 182/365 (TO
REFLECT THE ONE-HALF YEAR PERIOD).
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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
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.
SIX MONTHS ENDED MARCH 31, 2007
Hypothetical
Annualized Beginning Ending Expenses
Total Account Account Paid During
Return Value Value the Period(1)
- --------------------------------------------------------------------------------
Class A 5.00% $1,000.00 $1,021.19 $3.78
- --------------------------------------------------------------------------------
Class C 5.00% $1,000.00 $1,017.20 $7.80
- --------------------------------------------------------------------------------
Class Y 5.00% $1,000.00 $1,022.19 $2.77
- --------------------------------------------------------------------------------
(1) EXPENSES ARE EQUAL TO THE ANNUALIZED EXPENSE RATIO OF 0.75%, 1.55% AND
0.55% FOR THE TRUST'S CLASS A, C AND Y SHARES, RESPECTIVELY, MULTIPLIED BY
THE AVERAGE ACCOUNT VALUE OVER THE PERIOD, MULTIPLIED BY 182/365 (TO
REFLECT THE ONE-HALF YEAR PERIOD).
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
FEDERAL TAX STATUS OF DISTRIBUTIONS (UNAUDITED)
This information is presented in order to comply with a requirement of the
Internal Revenue Code AND NO ACTION ON THE PART OF SHAREHOLDERS IS REQUIRED.
For the fiscal year ended March 31, 2007, $27,766,907 of dividends paid by
Hawaiian Tax-Free Trust, constituting 95.73% of total dividends paid during
fiscal 2007, were exempt-interest dividends, exempt from regular Federal income
tax and Hawaii state income tax; $875,058 of dividends paid by the Trust
constituting 3.02% of total dividends paid during the fiscal year were capital
gain distributions; and the balance was ordinary dividend income.
Prior to January 31, 2007, shareholders were mailed the appropriate tax
form(s) which contained information on the status of distributions paid for the
2006 CALENDAR YEAR.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
INFORMATION AVAILABLE (UNAUDITED)
Much of the information that the funds in the Aquila Group of Funds(SM)
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, 2006 with respect to which the Trust
was entitled to vote. Applicable regulations require us to inform you that the
foregoing proxy voting information is available on the SEC website at
http://www.sec.gov.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PRIVACY NOTICE (UNAUDITED)
HAWAIIAN TAX-FREE TRUST
OUR PRIVACY POLICY. In providing services to you as an individual who owns or is
considering investing in shares of the Trust, we collect certain non-public
personal information about you. Our policy is to keep this information strictly
safeguarded and confidential, and to use or disclose it only as necessary to
provide services to you or as otherwise permitted by law. Our privacy policy
applies equally to former shareholders and persons who inquire about the Trust.
INFORMATION WE COLLECT. "Non-public personal information" is personally
identifiable financial information about you as an individual or your family.
The kinds of non-public personal information we have about you may include the
information you provide us on your share purchase application or in telephone
calls or correspondence with us, and information about your fund transactions
and holdings, how you voted your shares and the account where your shares are
held.
INFORMATION WE DISCLOSE. We disclose non-public personal information about you
to companies that provide necessary services to us, such as the Trust's transfer
agent, distributor, investment adviser or sub-adviser, as permitted or required
by law, or as authorized by you. Any other use is strictly prohibited. We do not
sell information about you or any of our fund shareholders to anyone.
NON-CALIFORNIA RESIDENTS: We also may disclose some of this information to
another fund in the Aquila Group of Funds(SM) (or its service providers) under
joint marketing agreements that permit the funds to use the information only to
provide you with information about other funds in the Aquila Group of Funds(SM)
or new services we are offering that may be of interest to you.
CALIFORNIA RESIDENTS ONLY: In addition, unless you "opt-out" of the following
disclosures using the form that was mailed to you under separate cover, we may
disclose some of this information to another fund in the Aquila Group of
Funds(SM) (or its sevice providers) under joint marketing agreements that permit
the funds to use the information only to provide you with information about
other funds in the Aquila Group of Funds(SM) or new services we are offering
that may be of interest to you.
HOW WE SAFEGUARD YOUR INFORMATION. We restrict access to non-public personal
information about you to only those persons who need it to provide services to
you or who are permitted by law to receive it. We maintain physical, electronic
and procedural safeguards to protect the confidentiality of all non-public
personal information we have about you.
If you have any questions regarding our Privacy Policy, please contact us at
1-800-437-1020.
AQUILA DISTRIBUTORS, INC.
AQUILA INVESTMENT MANAGEMENT LLC
This Privacy Policy also has been adopted by Aquila Distributors, Inc. and
Aquila Investment Management LLC and applies to all non-public information about
you that each of these companies may obtain in connection with services provided
to the Trust or to you as a shareholder of the Trust.
- --------------------------------------------------------------------------------
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(THIS PAGE INTENTIONALLY LEFT BLANK)
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
Diana P. Herrmann, Vice Chair
Thomas W. Courtney
Stanley W. Hong
Russell K. Okata
Douglas Philpotts
Oswald K. Stender
OFFICERS
Diana P. Herrmann, 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
TRANSFER AND SHAREHOLDER SERVICING AGENT
PFPC Inc.
101 Sabin Street
Pawtucket, RI 02860
CUSTODIAN
JPMorgan Chase Bank, N.A.
1111 Polaris Parkway
Columbus, Ohio 43240
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Tait, Weller & 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.
(a) As of March 31, 2007 (the end of the reporting period) the
Trust has adopted a code of ethics that applies to the Trust's
principal executive officer(s)and principal financial officer(s)
and persons performing similar functions ("Covered Officers") as
defined in the Aquila Group of Funds Code of Ethics for Principal
Executive and Senior Financial Officers under Section 406 of the
Sarbanes-Oxley Act of 2002;
(f)(1) Pursuant to Item 10(a)(1), a copy of the Trust's Code of
Ethics that applies to the Trust's principal executive officer(s)
and principal financial officer(s) and persons performing similar
functions is included as an exhibit to its annual report on this
Form N-CSR;
(f)(2) The text of the Trust's Code of Ethics that applies to the
Trust's principal executive officer(s) and principal financial
officer(s) and persons performing similar functions has been
posted on its Internet website which can be found at the Trust's
Internet address at aquilafunds.com.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
(a)(1)(ii) The Board of Trustees of the Fund has determined that
it does not have at least one audit committee financial expert
serving on its audit committee. The Fund does not have such a
person serving on the audit committee because none of the persons
currently serving as Trustees happens to have the technical
accounting and auditing expertise included in the definition of
"audit committee financial expert" recently adopted by the Securities
and Exchange Commission in connection with this Form N-CSR, and the
Board has not heretofore deemed it necessary to seek such a person
for election to the Board.
The primary mission of the Board, which is that of oversight over
the operations and affairs of the Fund, confronts the Trustees with
a wide and expanding range of issues and responsibilities. The
Trustees believe that, accordingly, it is essential that the Board's
membership consist of persons with as extensive experience as possible
in fulfilling the duties and responsibilities of mutual fund directors
and audit committee members and, ideally, with extensive experience
and background relating to the economic and financial sectors and
securities in which the Fund invests, including exposure to the
financial and accounting matters commonly encountered with respect
to those sectors and securities. The Board believes that its current
membership satisfies those criteria. It recognizes that it would
also be helpful to have a member with the relatively focused accounting
and auditing expertise reflected in the applicable definition of
"audit committee financial expert," just as additional members with
similarly focused technical expertise in other areas relevant to
the Fund's operations and affairs would also contribute added value.
However, the Board believes that the Fund is better served, and its
assets better employed, by a policy of hiring experts in various
areas, including the specialized area of technical accounting and
auditing matters, if and as the Board identifies the need, rather
than by seeking to expand its numbers by adding technical experts
in the areas constituting its domain of responsibility. The Fund's
Audit Committee Charter explicitly authorizes the Committee to
retain such experts as it deems necessary in fulfilling its duties
under the Charter.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES
a) Audit Fees - The aggregate fees billed for professional services
rendered by the principal accountant for the audit of the Registrant's
annual financial statements were $18,000 in 2006 and $18,000
in 2007.
b) Audit Related Fees - There were no amounts billed for audit-related
fees over the past two years.
c) Tax Fees - The Registrant was billed by the principal accountant
for return preparation and tax compliance were $3,000 and
$3,000, respectively, in 2006 and 2007.
d) All Other Fees - There were no additional fees paid for audit and
non-audit services other than those disclosed in a) thorough c) above.
e)(1) Currently, the audit committee of the Registrant pre-approves audit
services and fees on an engagement-by-engagement basis
e)(2) None of the services described in b) through d) above were approved
by the audit committee pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of
Regulation S-X, all were pre-approved on an engagement-by-engagement basis.
f) No applicable.
g) There were no non-audit services fees billed by the Registrant's accountant
to the Registrant's investment adviser or distributor over the past two years
h) Not applicable.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable.
ITEM 6. SCHEDULE OF INVESTMENTS.
Included in Item 1 above
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR
CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
Not applicable.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
The Board of Directors of the Registrant has adopted a Nominating
Committee Charter which provides that the Nominating Committee (the 'Committee')
may consider and evaluate nominee candidates properly submitted by shareholders
if a vacancy among the Independent Trustees of the Registrant occurs and if,
based on the Board's then current size, composition and structure, the Committee
determines that the vacancy should be filled. The Committee will consider
candidates submitted by shareholders on the same basis as it considers and
evaluates candidates recommended by other sources. A copy of the qualifications
and procedures that must be met or followed by shareholders to properly submit
a nominee candidate to the Committee may be obtained by submitting a request
in writing to the Secretary of the Registrant.
ITEM 11. 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 12. EXHIBITS.
(a)(1) Aquila Group of Funds Code of Ethics for Principal Executive and
Senior Financial Officers under Section 406 of the Sarbanes-Oxley Act of 2002.
(a)(2) Certifications of principal executive officer and principal financial
officer as required by Rule 30a-2(a) under the Investment Company Act of1940.
(b) Certifications of principal executive officer and principal financial
officer as required by Rule 30a-2(b) under the Investment Company Act of
1940.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934
and the Investment Company Act of 1940, the registrant has duly caused this
report to be signed on its behalf by the undersigned thereunto duly authorized.
HAWAIIAN TAX-FREE TRUST
By: /s/ Diana P. Herrmann
- - ---------------------------------
Vice Chair, President and Trustee
June 7, 2007
By: /s/ Joseph P. DiMaggio
- - -----------------------------------
Chief Financial Officer and Treasurer
June 7, 2007
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
June 7, 2007
By: /s/ Joseph P. DiMaggio
- - -----------------------------------
Joseph P. DiMaggio
Chief Financial Officer and Treasurer
June 7, 2007
HAWAIIAN TAX-FREE TRUST
EXHIBIT INDEX
(a)(1) Aquila Group of Funds Code of Ethics for Principal Executive and
Senior Financial Officers under Section 406 of the Sarbanes-Oxley Act of 2002.
(a) (2)Certifications of principal executive officer
and principal financial officer as required by Rule 30a-2(a)
under the Investment Company Act of 1940.
(b) Certification of chief executive officer and chief financial
officer as required by Rule 30a-2(b) of the Investment Company Act
of 1940.