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: 3/31/08
FORM N-CSR
ITEM 1. REPORTS TO STOCKHOLDERS
Annual
Report
March 31, 2008
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
"A MORE PREDICTABLE RIDE"
May, 2008
Dear Fellow Shareholder:
If you've read any of our previous shareholder communications, you know
that we try to skip the financial jargon and speak in terms to which the average
person can relate and understand.
The recent movements in the stock market got us to thinking about how risk
tolerance mirrors choosing rides at an amusement park.
In our younger days, we always enjoyed the thrill of roller coasters. If
you're like us, you can vividly remember holding your breath with anticipation
as you climbed and climbed to the top, never knowing just when you would finally
get there. Then, just as you began to relax, the coaster would begin its
decline. The ride to the bottom seemed like it would never end as you laughed,
screamed, and implored the heavens to let you make it through alive.
Much of what has transpired in the stock market over the last year or so
has reminded us of our younger roller-coaster riding days. Of course, the ride
to the "top" of the market is always exhilarating. But, as we've matured, we've
come to realize that roller coasters have lost some of their allure.
We no longer find adrenaline-pumping adventures so attractive. While you
can be brought to dizzying heights, some dramatic lows are also inevitable. For
those of us who don't have the stomach for this type of volatility, especially
with our investment money, a more stable alternative may be the ticket.
We like to think of investing in a tax-free municipal bond fund, such as
Hawaiian Tax-Free Trust, as more like riding the swings at a county fair. There
is definitely some up and down movement, but you usually don't go quite that
far. In general, you know what to expect next and the ride is fairly pleasant.
NOT A PART OF THE ANNUAL REPORT
Of course, we believe that there is a place in everyone's life for roller
coasters. But, as one matures, it might be prudent to have the more stable
predictable swings begin to play a larger role. After all, what good are highs
if they are often followed by lows?
Sincerely,
/s/ Lacy B. Herrmann /s/ Diana P. Herrmann
Lacy B. Herrmann Diana P. Herrmann
Founder and Chairman Emeritus President
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 2007-2008
2007 was an active year - the first half of the year had markets concerned
about global inflation and interest rates were high, while the second half of
the year had markets concerned about global economic problems due to fallout
from the subprime-driven credit crunch.
U.S. ECONOMY
Here are some of the highlights of how the U.S. economic environment has
changed since summer 2007:
o In July 2007, sub-prime mortgage lending risks emerge and hedge
funds collapse.
o Severe liquidity constraints in asset-backed commercial paper.
o Instantaneous increase in liquidity risk via interbank lending rates
and credit risk via corporate borrowing costs in August 2007.
o All-time high for equity indexes following September 2007 FOMC rate
cut followed by "bear" drop
o Municipal Bond insurer ratings downgrades due to their exposure to
subprime debt.
o Liquidity problems with auction rate securities, as investment banks
cease support of auctions.
o "Credit crunch" - less bank lending, wealth compression, higher
credit defaults, large sales of hedge fund portfolios.
o Federal Reserve cuts target fed funds rate 3.25% through April 2008.
o 75 basis point reduction in discount rate (rate banks borrow at from
Fed window) vs. fed funds rate over the same time period.
o Extraordinary Fed liquidity facilities established--Term Auction
Facility, Primary Dealer Credit Facility, Term Securities Lending
Facility--expanding liquidity provision from commercial to
investment banks.
o Future anticipated reforms to: (1) supervision; (2) transparency (3)
professional certification; (4) capital adequacy; and (4) liquidity
risk analytics and management; among others.
US real Gross Domestic Product (GDP) growth slowed from +3% in recent
years to +0.6%, at annualized rates, from October 2007-March 2008, in a slowdown
of a kind not experienced since the 1967 "credit crunch."
HAWAII ECONOMY
A series of shocks to Hawaii's economy lowers the forecast: "slowing...to
nil." Hawaii forecast estimates will experience greater than normal uncertainty
as effects of the following play out:
o Downward Hawaii payroll employment revisions for 2006-2007 in
February.
o Withdrawal of two of three NCL interisland cruise ships offering
weekly service.
o Closure of Molokai Ranch.
o Shutdown of Aloha Airlines transpacific passenger and interisland
passenger and cargo service.
o Shutdown of ATA transpacific passenger service.
MANAGEMENT DISCUSSION (CONTINUED)
Our April 2008 Hawaii economic forecast has been adjusted downward to
reflect an immediate 15-20% loss of transpacific lift and an expectation of slow
replacement amid high and volatile aviation fuel costs, capital market
constraints, a global shortage of new aircraft, and weakness in U.S.
discretionary consumption. Our current forecast estimates are in flux--we
anticipate: (a) real Hawaii personal income growth slipping to a range of 0-1%
from 2008 through 2009; (b) Hawai visitor arrivals down due to less airline
capacity to the islands, -3.9% change in 2008, with some recovery in 2009; (c) a
sharp -7.6% change in 2008 domestic arrivals (+4.8% in 2009); (d) moderation of
recent losses of foreign travel from a weaker dollar, a -1.5% change in 2008
international arrivals (and +1.2% in 2009); (d) offsetting commodity pressures
(higher) and fundamental factors (lower) leaving our inflation forecast
unchanged - 4.5% (2008) and 2.5% (2009).
MUNICIPAL MARKET AND FUND PERFORMANCE
During the 12 months ended March 31, 2008, the municipal bond yield curve
"steepened" dramatically responding to the Federal Reserve decrease in the Fed
Funds rate from 5.25% in March 2007 to 2.25% in March 2008 in response to
concerns about economic growth slowing. 1 year municipal rates dropped from
3.55% to 1.92%, while 30 year municipal rates increased from 4.19% to 4.96%.
The municipal market itself felt many of the impacts of the subprime
crisis through the channel of municipal bond insurers. These insurers over the
past few years started to insure subprime-backed securities in addition to
municipal bonds. Although the portfolio's underlying municipal bonds remain of
high credit quality, many bonds saw their credit ratings downgraded as the value
of bond insurance evaporated due to the insurers' exposure to subprime mortgage
defaults. This had the effect of making long term municipal bonds cheaper (due
to bond insurer downgrades and increased supply of long term bonds) and lower
rates (i.e. higher bond prices) on short term municipals due to flight to
quality concerns and overnight the Fed Funds rate decreases.
Hawaiian Tax-Free Trust had a total return, without sales charges, of
2.96% for its Class A shares, 2.14% for Class C shares, and 3.16% for Class Y
shares for the calendar year ending December 31, 2007. For the fiscal year
ending March 31, 2008, the total return, without sales charges, was 2.49% for
Class A shares, 1.59% for Class C shares, and 2.70% for Class Y shares. Total
return reflects the market fluctuation of the share price as well as reinvested
dividends. The Lehman Brothers Quality Intermediate Municipal Bond Index had a
total return of 4.88% for the calendar year 2007 and 5.46% for the Trust's
fiscal year.
We believe that due to the Trust's prudent investment management and high
quality portfolio (98.4% as of March 31, 2008 ), Hawaiian Tax Free Trust has
experienced much better performance than other Hawaii municipal bond funds over
the past 15 months during this highly volatile period in the financial markets.
OUTLOOK AND STRATEGY
There has been substantial monetary and fiscal stimulus enacted to try to
mitigate the effects of the slowing economy and many believe the Federal Reserve
would like to see how much impact this stimulus has had before taking any
additional steps. We will hopefully start to see some traction and recovery
starting to occur by the beginning of next year.
In managing Hawaiian Tax-Free Trust, we keep in mind the Trust's goal of
maintaining a relatively high level of double tax-free income together with
reasonable principal preservation. Accordingly, we 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, 2008
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:]
HTFT HTFT Lehman Brothers
Cost of Class A Shares Class A Shares Quality Intermediate
Living Index no sales charge with sales charge Municipal Bond Index
03/98 10,000 10,000 9,600 10,000
03/99 10,173 10,515 10,092 10,581
03/00 10,555 10,415 9,995 10,687
03/01 10,863 11,432 10,971 11,718
03/02 11,023 11,803 11,327 12,162
03/03 11,356 12,739 12,225 13,316
03/04 11,554 13,536 12,991 13,959
03/05 11,917 13,613 13,064 14,071
03/06 12,318 13,971 13,408 14,428
03/07 12,660 14,548 13,961 15,111
03/08 13,164 14,879 14,280 15,936
Average Annual Total Return
for periods ended March 31, 2008
-----------------------------------------------------
Since
1 Year 5 Years 10 Years Inception
--------- --------- ---------- ---------
Class A (Commenced operations on 2/20/85)
With Sales Charge .................... (1.59)% 2.18% 3.63% 6.16%
Without Sales Charge ................. 2.49% 3.02% 4.05% 6.35%
Class C (Commenced operations on 4/01/96)
With CDSC ............................ 0.57% 2.18% 3.23% 3.67%
Without CDSC ......................... 1.59% 2.18% 3.23% 3.67%
Class Y (Commenced operations on 4/01/96)
No Sales Charge ...................... 2.70% 3.23% 4.27% 4.91%
Lehman Index ............................ 5.46% 3.66% 4.77% 5.91%* (Class A)
5.05% (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, 2008 and the related statement of operations for the year then ended, the
statements of changes in net assets for each of the two years in the period then
ended, and the financial highlights for each of the three 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 two 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, 2008, 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, 2008, the results of its operations for
the year then ended, the changes in its net assets for each of the two years in
the period then ended, and the financial highlights for each of the three 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 28, 2008
HAWAIIAN TAX-FREE TRUST
SCHEDULE OF INVESTMENTS
MARCH 31, 2008
RATING
PRINCIPAL MOODY'S/
AMOUNT MUNICIPAL BONDS (97.4%) S&P VALUE
- ------------ -------------------------------------------------------- -------- ------------
GENERAL OBLIGATION BONDS (48.6%):
City and County of Honolulu, Hawaii, FGIC
Insured Series C
$ 3,130,000 5.125%, 07/01/11 ....................................... Aa2/AA $ 3,256,358
City and County of Honolulu, Hawaii, Series A,
FGIC Insured
1,715,000 6.000%, 01/01/11 ....................................... Aa2/AA 1,864,599
5,000 5.750%, 04/01/11 ....................................... Aa2/AA 5,446
1,580,000 6.000%, 01/01/12 ....................................... Aa2/AA 1,748,381
3,025,000 5.750%, 04/01/13 ....................................... Aa2/AA 3,379,923
City and County of Honolulu, Hawaii, Series A,
FSA Insured
2,500,000 5.000%, 09/01/09 ....................................... Aaa/AAA 2,594,925
City and County of Honolulu, Hawaii, Series A,
FSA Insured
3,000,000 5.000%, 07/01/29 ....................................... Aaa/AAA 3,024,090
City and County of Honolulu, Hawaii, Series A,
FSA Insured, Prerefunded 09/01/11 @100,
Collateral: U.S. Treasury Obligations &
Resolution Funding Corporation
3,500,000 5.375%, 09/01/18 ....................................... Aaa/AAA 3,791,165
2,000,000 5.125%, 09/01/20 ....................................... Aaa/AAA 2,150,220
City and County of Honolulu, Hawaii, Series A,
MBIA Insured
5,000,000 5.000%, 07/01/21 ....................................... Aaa/AAA 5,221,900
5,000,000 5.000%, 07/01/22 ....................................... Aaa/AAA 5,187,200
5,000,000 5.000%, 07/01/26 ....................................... Aaa/AAA 5,066,300
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 2,078,194
3,005,000 5.250%, 03/01/17 ....................................... Aaa/AAA 3,312,982
1,255,000 5.250%, 03/01/18 ....................................... Aaa/AAA 1,383,625
RATING
PRINCIPAL MOODY'S/
AMOUNT GENERAL OBLIGATION BONDS (CONTINUED) S&P VALUE
- ------------ -------------------------------------------------------- -------- ------------
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 $ 4,477,639
920,000 6.000%, 01/01/12 ....................................... #Aaa/AAA 1,020,804
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 4,355,269
775,000 5.750%, 04/01/13 ....................................... Aaa/AAA 871,642
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 1,437,005
860,000 6.000%, 11/01/09 ....................................... Aaa/AAA 912,047
1,090,000 6.000%, 11/01/10 ....................................... Aaa/AAA 1,188,351
410,000 6.000%, 11/01/10 ....................................... #Aaa/AAA 446,994
City and County of Honolulu, Hawaii, 2003- Series
A, MBIA Insured, Unrefunded Portion
1,115,000 5.250%, 03/01/15 ....................................... Aaa/AAA 1,210,689
1,775,000 5.250%, 03/01/17 ....................................... Aaa/AAA 1,894,990
745,000 5.250%, 03/01/18 ....................................... Aaa/AAA 792,270
City and County of Honolulu, Hawaii, Series B,
FGIC Insured, Unrefunded Portion
7,310,000 5.500%, 10/01/11 ....................................... Aa2/AA 7,983,032
City and County of Honolulu, Hawaii, Series B,
FSA Insured, Custodial Receipts,
Unrefunded Portion
3,955,000 8.000%, 10/01/10 ....................................... Aaa/AAA 4,496,400
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 2,716,783
RATING
PRINCIPAL MOODY'S/
AMOUNT GENERAL OBLIGATION BONDS (CONTINUED) S&P VALUE
- ------------ -------------------------------------------------------- -------- ------------
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 $ 4,693,846
1,395,000 5.000%, 07/01/20 ....................................... Aaa/AAA 1,458,333
City and County of Honolulu, Hawaii, Series C,
FGIC Insured
7,750,000 5.125%, 07/01/14 ....................................... Aaa/AAA 8,031,790
2,510,000 5.000%, 07/01/18 ....................................... Aaa/AAA 2,586,505
City and County of Honolulu, Hawaii, Series C,
FGIC Insured
2,750,000 5.125%, 07/01/12 ....................................... Aa2/AA 2,854,803
City and County of Honolulu, Hawaii, Series C,
MBIA Insured
6,740,000 5.000%, 07/01/18 ....................................... Aaa/AAA 7,194,815
City and County of Honolulu, Hawaii, Series D,
MBIA Insured
3,750,000 5.000%, 07/01/19 ....................................... Aaa/AAA 3,964,275
6,080,000 5.000%, 07/01/21 ....................................... Aaa/AAA 6,349,830
City and County of Honolulu, Hawaii, Series F,
FGIC Insured
1,000,000 5.250%, 07/01/19 ....................................... Aa2/AA 1,059,810
5,335,000 5.250%, 07/01/20 ....................................... Aa2/AA 5,616,688
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 1,273,883
1,050,000 6.000%, 12/01/15 ....................................... Aaa/AAA 1,235,041
County of Hawaii, Series A, CIFG Insured
1,850,000 5.000%, 07/15/20 ....................................... A1/A+ 1,980,591
County of Hawaii, Series A, FGIC Insured
2,500,000 5.550%, 05/01/09 ....................................... A1/A+ 2,585,950
4,905,000 5.600%, 05/01/11 ....................................... A1/A+ 5,325,309
RATING
PRINCIPAL MOODY'S/
AMOUNT GENERAL OBLIGATION BONDS (CONTINUED) S&P VALUE
- ------------ -------------------------------------------------------- -------- ------------
County of Hawaii, Series A, FGIC Insured (continued)
$ 1,000,000 5.600%, 05/01/12 ....................................... A1/A+ $ 1,100,280
1,000,000 5.600%, 05/01/13 ....................................... A1/A+ 1,113,120
County of Hawaii Series A, FGIC Insured,
Prerefunded to 07/15/11 @ 100 Collateral: State
and Local Government Securities
1,025,000 5.125%, 07/15/20 ....................................... A1/A+ 1,102,551
County of Hawaii, Series A, FGIC Insured,
Prerefunded to 07/15/11 @ 100, Collateral: State &
Local Government Series 100%
1,465,000 5.500%, 07/15/16 ....................................... Aaa/AAA 1,592,997
County of Hawaii, Series A, FSA Insured,
Prerefunded to 05/15/09 @ 101, Collateral State &
Local Government Series 100%
1,000,000 5.400%, 05/15/15 ....................................... Aaa/AAA 1,046,780
1,470,000 5.625%, 05/15/18 ....................................... Aaa/AAA 1,542,397
County of Hawaii, Series A, FSA Insured
1,000,000 5.000%, 07/15/16 ....................................... Aaa/AAA 1,071,230
2,000,000 5.000%, 07/15/17 ....................................... Aaa/AAA 2,125,600
1,000,000 5.000%, 07/15/18 ....................................... Aaa/AAA 1,055,920
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 153,646
560,000 5.625%, 08/01/14 ....................................... Aaa/AAA 614,583
355,000 5.625%, 08/01/17 ....................................... Aaa/AAA 389,602
345,000 5.625%, 08/01/18 ....................................... Aaa/AAA 378,627
805,000 5.500%, 08/01/20 ....................................... Aaa/AAA 880,276
County of Kauai, Hawaii, MBIA Insured,
Unrefunded Portion
985,000 5.625%, 08/01/13 ....................................... Aaa/AAA 1,067,563
1,060,000 5.625%, 08/01/14 ....................................... Aaa/AAA 1,145,701
680,000 5.625%, 08/01/17 ....................................... Aaa/AAA 725,866
655,000 5.625%, 08/01/18 ....................................... Aaa/AAA 687,403
1,555,000 5.500%, 08/01/20 ....................................... Aaa/AAA 1,633,341
RATING
PRINCIPAL MOODY'S/
AMOUNT GENERAL OBLIGATION BONDS (CONTINUED) S&P VALUE
- ------------ -------------------------------------------------------- -------- ------------
County of Kauai, Hawaii, Series A, FGIC Insured
$ 1,000,000 5.000%, 08/01/23 ....................................... A1/A+ $ 1,037,810
1,555,000 5.000%, 08/01/24 ....................................... A1/A+ 1,602,987
1,500,000 5.000%, 08/01/25 ....................................... A1/A+ 1,536,870
County of Kauai, Hawaii, Series A, FGIC
Insured, Prerefunded 08/01/10 @100,
Collateral: State & Local Government
Series 100%
1,010,000 6.250%, 08/01/14 ....................................... Aaa/AAA 1,100,122
1,000,000 6.250%, 08/01/15 ....................................... Aaa/AAA 1,089,230
1,000,000 6.250%, 08/01/16 ....................................... Aaa/AAA 1,089,230
1,275,000 6.250%, 08/01/17 ....................................... Aaa/AAA 1,388,768
1,480,000 6.250%, 08/01/20 ....................................... A3/A+ 1,612,060
County of Kauai, Hawaii, 2005 - Series A,
FGIC Insured
1,560,000 5.000%, 08/01/16 ....................................... A1/A+ 1,708,964
2,010,000 5.000%, 08/01/17 ....................................... A1/A+ 2,178,961
2,060,000 5.000%, 08/01/18 ....................................... A1/A+ 2,213,985
1,075,000 5.000%, 08/01/19 ....................................... A1/A+ 1,144,047
County of Kauai, Hawaii Refunding Bonds, Series
B & C, AMBAC Insured
435,000 5.900%, 08/01/08 ....................................... Aaa/AAA 440,786
1,300,000 5.950%, 08/01/10 ....................................... Aaa/AAA 1,401,985
County of Maui, Hawaii, MBIA Insured
1,250,000 3.800%, 03/01/16 ....................................... Aaa/AAA 1,253,738
1,105,000 5.000%, 03/01/19 ....................................... Aaa/AAA 1,162,250
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 503,242
County of Maui, Hawaii, Series A, MBIA Insured,
Unrefunded Balance
535,000 5.500%, 03/01/18 ....................................... Aaa/AAA 563,141
RATING
PRINCIPAL MOODY'S/
AMOUNT GENERAL OBLIGATION BONDS (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 $ 1,202,892
1,205,000 5.250%, 03/01/16 ....................................... Aaa/AAA 1,311,751
1,000,000 5.250%, 03/01/18 ....................................... Aaa/AAA 1,088,590
1,750,000 5.250%, 03/01/19 ....................................... Aaa/AAA 1,905,033
1,000,000 5.000%, 03/01/20 ....................................... Aaa/AAA 1,079,400
County of Maui, Hawaii, Series B, FGIC Insured
1,065,000 5.250%, 03/01/11 ....................................... Aa2/AA 1,140,519
County of Maui, Hawaii, Series C, FGIC Insured
1,020,000 5.250%, 03/01/16 ....................................... Aa2/AA 1,070,113
1,250,000 5.250%, 03/01/20 ....................................... Aa2/AA 1,289,363
Puerto Rico Commonwealth Public Improvement
General Obligation Bonds, MBIA Insured, Econ.
Defeased to call, 7/1/2010 @100,
Collateral: Agencies
1,800,000 5.250%, 07/01/13 ....................................... Aaa/AAA 1,907,730
Puerto Rico Commonwealth Public Improvement
General Obligation Bonds Refunding, Series A,
MBIA Insured
6,245,000 5.500%, 07/01/20 ....................................... Aaa/AAA 6,627,881
Puerto Rico Commonwealth Public Improvement
General Obligation Bonds, Series CR, FSA Insured
1,060,000 5.250%, 07/01/17 ....................................... Aaa/AAA 1,148,701
State of Hawaii, Series BZ, FGIC Insured
3,700,000 6.000%, 10/01/11 ....................................... Aa2/AA 4,101,931
3,500,000 6.000%, 10/01/12 ....................................... Aa2/AA 3,935,295
State of Hawaii, Series CA, FGIC Insured
2,000,000 5.750%, 01/01/11 ....................................... Aa2/AA 2,161,320
State of Hawaii, Series CH
1,000,000 4.750%, 11/01/11 ....................................... Aa2/AA 1,069,800
State of Hawaii, Series CL, FGIC Insured
2,305,000 6.000%, 03/01/11 ....................................... Aa2/AA 2,517,198
RATING
PRINCIPAL MOODY'S/
AMOUNT GENERAL OBLIGATION BONDS (CONTINUED) S&P VALUE
- ------------ -------------------------------------------------------- -------- ------------
State of Hawaii, Series CM, FGIC Insured
$ 3,000,000 6.500%, 12/01/15 ....................................... Aa2/AA $ 3,577,800
State of Hawaii, Series CP, FGIC Insured, Unrefunded
1,435,000 5.000%, 10/01/13 ....................................... Aa2/AA1 1,450,742
630,000 5.000%, 10/01/14 ....................................... Aa2/AA1 636,911
1,435,000 5.000%, 10/01/15 ....................................... Aa2/AA1 1,450,742
2,060,000 5.000%, 10/01/17 ....................................... Aa2/AA1 2,082,598
State of Hawaii, Series CS, MBIA Insured
5,500,000 5.000%, 04/01/09 ....................................... Aaa/AAA 5,664,395
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 3,237,150
State of Hawaii, Series CV, FGIC Insured
11,000,000 5.000%, 08/01/20 ....................................... Aa2/AA 11,273,460
5,000,000 5.250%, 08/01/21 ....................................... Aa2/AA 5,158,050
1,015,000 5.000%, 08/01/21 ....................................... Aa2/AA 1,037,381
State of Hawaii, Series CX, FSA Insured
8,725,000 5.500%, 02/01/13 ....................................... Aaa/AAA 9,517,753
3,075,000 5.500%, 02/01/16 ....................................... Aaa/AAA 3,324,290
2,500,000 5.500%, 02/01/21 ....................................... Aaa/AAA 2,633,525
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 3,287,040
State of Hawaii, Series DE, MBIA Insured
10,000,000 5.000%, 10/01/21 ....................................... Aaa/AAA 10,375,800
2,500,000 5.000%, 10/01/24 ....................................... Aaa/AAA 2,548,550
State of Hawaii, Series DF, AMBAC Insured
3,500,000 5.000%, 07/01/18 ....................................... Aaa/AAA 3,713,500
10,000,000 5.000%, 07/01/22 ....................................... Aaa/AAA 10,343,000
5,000,000 5.000%, 07/01/23 ....................................... Aaa/AAA 5,140,300
10,000,000 5.000%, 07/01/24 ....................................... Aaa/AAA 10,212,500
5,000,000 5.000%, 07/01/25 ....................................... Aaa/AAA 5,075,500
RATING
PRINCIPAL MOODY'S/
AMOUNT GENERAL OBLIGATION BONDS (CONTINUED) S&P VALUE
- ------------ -------------------------------------------------------- -------- ------------
State of Hawaii, Series DG, AMBAC Insured, Refunding
$ 2,000,000 5.000%, 07/01/17 ....................................... Aaa/AAA $ 2,146,700
State of Hawaii, Series DI, FSA Insured
5,000,000 5.000%, 03/01/20 ....................................... Aaa/AAA 5,287,400
2,750,000 5.000%, 03/01/21 ....................................... Aaa/AAA 2,891,020
5,000,000 5.000%, 03/01/22 ....................................... Aaa/AAA 5,218,800
State of Hawaii, Series DJ, AMBAC Insured
5,000,000 5.000%, 04/01/23 ....................................... Aaa/AAA 5,168,300
State of Hawaii, Series DJ, FSA-CR AMBAC Insured
5,000,000 5.000%, 04/01/23 ....................................... Aaa/AAA 5,205,750
-------------
Total General Obligation Bonds ......................... 337,752,825
-------------
REVENUE BONDS (48.8%):
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 2,204,560
2,000,000 5.500%, 07/15/21 ....................................... Aaa/AAA 2,204,560
2,000,000 5.500%, 07/15/22 ....................................... Aaa/AAA 2,204,560
3,000,000 5.500%, 07/15/29 ....................................... Aaa/AAA 3,306,840
Board of Regents, University of Hawaii, University
System, Series B, FSA Insured
1,110,000 5.250%, 10/01/12 ....................................... Aaa/AAA 1,196,858
1,000,000 5.250%, 10/01/13 ....................................... Aaa/AAA 1,072,740
1,140,000 5.250%, 10/01/14 ....................................... Aaa/AAA 1,215,901
1,395,000 5.250%, 10/01/15 ....................................... Aaa/AAA 1,480,779
Broward County, Florida School Board, Weekly
Reset VRDO*, FSA Insured
7,315,000 2.100%, 07/01/21 ....................................... Aaa/AAA 7,315,000
City and County of Honolulu, Hawaii Board of Water
Supply & System, FSA Insured, Prerefunded 07/01/11
@100, Collateral: U.S. Government Securities
1,490,000 5.125%, 07/01/21 ....................................... Aaa/AAA 1,608,679
5,450,000 5.250%, 07/01/23 ....................................... Aaa/AAA 5,905,184
RATING
PRINCIPAL MOODY'S/
AMOUNT REVENUE BONDS (CONTINUED) S&P VALUE
- ------------ -------------------------------------------------------- -------- ------------
City and County of Honolulu, Hawaii Board of Water
Supply & System, Series A, MBIA Insured
$ 1,575,000 4.750%, 07/01/31 ....................................... Aaa/AAA $ 1,550,918
City and County of Honolulu, Hawaii Multi-Family
Revenue - Maunakea Apartments, FHA Insured -
GNMA Collateral, AMT
2,835,000 6.400%, 05/20/30 ....................................... Aaa/AAA 2,925,380
City and County of Honolulu, Hawaii Wastewater
Systems, FGIC Insured
1,395,000 5.000%, 07/01/12 ....................................... Aa3/NR 1,444,648
City and County of Honolulu, Hawaii Wastewater
Systems, MBIA Insured
5,000,000 5.000%, 07/01/32 ....................................... Aaa/AAA 4,978,750
City and County of Honolulu, Hawaii Wastewater
Systems, Series A, FGIC Insured
1,825,000 5.000%, 07/01/22 ....................................... Aa3/AA- 1,899,077
City and County of Honolulu, Hawaii Wastewater
Systems, Junior Series, FGIC Insured
2,000,000 5.250%, 07/01/18 ....................................... A1/NR2 2,055,860
5,055,000 5.000%, 07/01/23 ....................................... A1/NR2 5,110,201
City and County of Honolulu, Hawaii Wastewater
Systems, Senior Series, AMBAC Insured
1,810,000 5.500%, 07/01/11 ....................................... Aaa/AAA 1,965,751
City & County of Honolulu, Hawaii Wastewater
Systems, Senior Series A, FGIC Insured
3,370,000 5.000%, 07/01/18 ....................................... Aa3/AA- 3,608,394
2,000,000 5.000%, 07/01/24 ....................................... Aa3/AA- 2,054,880
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 1,160,456
3,000,000 5.500%, 07/01/17 ....................................... Aaa/NR 3,268,890
2,310,000 5.500%, 07/01/18 ....................................... Aaa/NR 2,517,045
2,000,000 5.250%, 07/01/19 ....................................... Aaa/NR 2,163,800
RATING
PRINCIPAL MOODY'S/
AMOUNT REVENUE BONDS (CONTINUED) S&P VALUE
- ------------ -------------------------------------------------------- -------- ------------
City and County of Honolulu, Hawaii Wastewater
System First Bond Resolution, Senior Series A,
MBIA Insured
$ 1,000,000 5.000%, 07/01/36 ....................................... Aaa/AAA $ 987,990
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 1,441,036
1,935,000 5.000%, 07/01/19 ....................................... Aaa/AAA 2,058,453
2,035,000 5.000%, 07/01/20 ....................................... Aaa/AAA 2,148,777
19,715,000 5.000%, 07/01/32 ....................................... Aaa/AAA 19,631,211
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 1,557,399
Department of Hawaiian Home Lands (State of
Hawaii), Prerefunded to 07/01/09 @101,
Collateral: U.S. Government Securities
1,525,000 4.350%, 07/01/10 ....................................... A3/NR 1,577,338
1,245,000 4.450%, 07/01/11 ....................................... A3/NR 1,284,728
Fort Lauderdale, Florida Revenue, Weekly Reset
VRDO*, FSA Insured
4,500,000 2.100%, 06/01/32 ....................................... Aaa/AAA 4,500,000
Hawaii State Department of Budget and Finance,
AMBAC Insured, Weekly Reset VRDO*
20,000,000 4.250%, 07/01/28 ....................................... Aaa/AAA 20,000,000
Hawaii State Department of Budget and Finance
Special Purpose Revenue (Chaminade University,
Honolulu), Radian Insured
1,000,000 5.000%, 01/01/26 ....................................... Aa/AA 949,990
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+ 5,494,850
RATING
PRINCIPAL MOODY'S/
AMOUNT REVENUE BONDS (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 ....................................... Aa/AA $ 1,722,980
1,210,000 4.625%, 01/01/36 ....................................... Aa/AA 1,006,296
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 5,223,329
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 4,435,324
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 ....................................... Baa1/BBB 4,646,850
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 5,848,542
Hawaii State Department of Budget & Finance,
Special Purpose Revenue (Hawaiian Electric Co.)
Series B-AMT, AMBAC Insured
1,000,000 5.750%, 12/01/18 ....................................... Aaa/AAA 1,028,360
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 ....................................... A3/A- 1,002,620
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 2,553,100
RATING
PRINCIPAL MOODY'S/
AMOUNT REVENUE BONDS (CONTINUED) S&P VALUE
- ------------ -------------------------------------------------------- -------- ------------
Hawaii State Department of Budget and Finance
Special Purpose Revenue (Hawaii Pacific Health),
Series B, Weekly Reset VRDO*, Radian Insured,
LOC: Bank of Nova Scotia
$ 15,000,000 5.200%, 07/01/33 ....................................... Aaa/AAA $ 15,000,000
Hawaii State Department of Budget and Finance
Special Purpose Revenue (Hawaii Pacific Health),
Series B-2, Weekly Reset VRDO*, Radian Insured,
SPA: Bank of Nova Scotia
16,090,000 5.200%, 07/01/33 ....................................... Aaa/AAA 16,090,000
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 2,777,656
10,000,000 5.400%, 07/01/29 ....................................... Aaa/AAA 9,874,700
2,770,000 5.750%, 07/01/30 ....................................... Aaa/AAA 2,794,847
910,000 5.400%, 07/01/30 ....................................... Aaa/AAA 901,774
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 9,460,797
6,800,000 5.300%, 07/01/28 ....................................... Aaa/AAA 6,693,240
Housing Finance and Development Corporation
(State of Hawaii) University of Hawaii Faculty
Housing Project, AMBAC Insured
1,960,000 5.650%, 10/01/16 ....................................... Aaa/AAA 1,962,764
4,000,000 5.700%, 10/01/25 ....................................... Aaa/AAA 4,005,800
Maryland State Economic Development,
AMBAC Insured, Daily Reset VRDO*
5,100,000 4.000%, 07/01/34 ....................................... Aaa/AAA 5,100,000
Puerto Rico Commonwealth Aqueduct and Sewer
Authority Revenue Bonds, MBIA Insured
2,500,000 5.000%, 07/01/15 ....................................... Aaa/AAA 2,522,175
Puerto Rico Commonwealth Highway & Transportation
Authority Revenue, Series G, FGIC Insured
1,000,000 5.250%, 07/01/15 ....................................... Baa3/BBB+ 1,040,780
RATING
PRINCIPAL MOODY'S/
AMOUNT REVENUE BONDS (CONTINUED) S&P VALUE
- ------------ -------------------------------------------------------- -------- ------------
Puerto Rico Commonwealth Public Finance
Corporation 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 $ 5,459,200
Puerto Rico Electric Power Authority Power Revenue
Bonds Series QQ, XLCA Insured
3,195,000 5.500%, 07/01/16 ....................................... A3/A- 3,463,156
Puerto Rico Electric Power Authority Power Revenue
Series TT
7,000,000 5.000%, 07/01/26 ....................................... A3/BBB+ 6,851,880
Puerto Rico Electric Power Authority Power Revenue,
Refunding Series UU
1,000,000 4.250%, 07/01/13 ....................................... A3/BBB+ 1,023,080
State of Hawaii Airport System, AMT, FGIC Insured
14,925,000 5.750%, 07/01/13 ....................................... A2/A- 15,345,139
4,000,000 5.750%, 07/01/17 ....................................... A2/A- 4,074,080
11,000,000 5.625%, 07/01/18 ....................................... A2/A- 11,133,650
6,000,000 5.250%, 07/01/21 ....................................... A2/A- 5,926,260
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 7,040,727
State of Hawaii Airport System, Series B-AMT,
FGIC Insured
3,000,000 8.000%, 07/01/10 ....................................... A2/A- 3,240,120
State of Hawaii Harbor Capital Improvement
Revenue, Series B-AMT, AMBAC Insured
3,000,000 5.500%, 07/01/19 ....................................... Aaa/AAA 3,152,340
State of Hawaii Harbor System Revenue, Series A-AMT,
FSA Insured Insured
2,000,000 5.250%, 07/01/15 ....................................... Aaa/AAA 2,188,660
2,000,000 5.750%, 07/01/17 ....................................... Aaa/AAA 2,101,840
2,215,000 5.250%, 07/01/17 ....................................... Aaa/AAA 2,410,983
1,500,000 5.900%, 07/01/21 ....................................... Aaa/AAA 1,568,280
RATING
PRINCIPAL MOODY'S/
AMOUNT REVENUE BONDS (CONTINUED) S&P VALUE
- ------------ -------------------------------------------------------- -------- ------------
State of Hawaii Harbor System Revenue,
Series A-AMT
$ 2,415,000 4.750%, 01/01/11 ....................................... A1/A+ $ 2,523,482
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 1,663,707
2,720,000 5.500%, 07/01/19 ....................................... Aaa/AAA 2,909,856
1,110,000 5.500%, 07/01/20 ....................................... Aaa/AAA 1,187,478
2,000,000 5.375%, 07/01/20 ....................................... Aaa/AAA 2,174,780
State of Hawaii Highway Revenue, Series A,
FSA Insured
1,000,000 5.000%, 07/01/20 ....................................... Aaa/AAA 1,046,920
2,000,000 5.000%, 07/01/22 ....................................... Aaa/AAA 2,068,600
State of Hawaii Highway Revenue, Series B,
FSA Insured
2,000,000 5.000%, 07/01/16 ....................................... Aaa/AAA 2,169,080
Texas Tech University Revenues, 7th Series, MBIA
Insured, Prerefunded 02/18/12 @ 100 Collateral:
State and Local Government Securities
1,000,000 5.500%, 08/15/18 ....................................... Aaa/AAA 1,094,800
Tift County, Georgia Hospital Authority Revenue,
Weekly Reset VRDO*, AMBAC Insured
4,000,000 1.800%, 12/01/32 ....................................... Aaa/AAA 4,000,000
University of Hawaii Revenue, AGC-ICC MBIA Insured
2,000,000 5.000%, 10/01/23 ....................................... Aaa/AAA 2,071,380
University of Hawaii University System Revenue,
FGIC Insured, Prefunded 07/12/12 @ 100
Collateral: State and Local Government Securities
1,650,000 5.125%, 07/15/32 ....................................... Aa3/A+ 1,794,029
University of Illinois Revenue, Weekly Reset
VRDO*, AMBAC Insured
4,000,000 5.250%, 10/01/26 ....................................... Aaa/AAA 4,000,000
RATING
PRINCIPAL MOODY'S/
AMOUNT REVENUE BONDS (CONTINUED) S&P VALUE
- ------------ -------------------------------------------------------- -------- -------------
University of Toledo, Ohio General Receipts Bonds,
Weekly Reset VRDO*, FGIC Insured
$ 1,700,000 8.500%, 06/01/32 ....................................... A2/A $ 1,700,000
-------------
Total Revenue Bonds .................................... 339,126,924
-------------
Total Investments (cost $663,815,540-note 4) ........... 97.4% 676,879,749
Other assets less liabilities .......................... 2.6 16,570,068
-------- -------------
NET ASSETS ............................................. 100.0% $ 693,449,817
======== =============
PERCENT OF
PORTFOLIO DISTRIBUTION BY QUALITY RATING (UNAUDITED) PORTFOLIO
---------------------------------------------------- ---------
Aaa or #Aaa of Moody's or AAA of S&P or Fitch .......... 72.8%
Aa of Moody's or AA of S&P or Fitch .................... 11.9
A of Moody's or S&P .................................... 13.7
Baa of Moody's or BBB of S&P ........................... 1.6
--------
100.0%
========
* Variable rate demand obligations (VRDOs) are
payable upon demand within the same day for
securities with daily liquidity or seven days for
securities with weekly liquidity.
1 Rated AA by Fitch.
2 Rated A+ 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
GNMA Government National Mortgage Association
MBIA Municipal Bond Investors Assurance
NR Not Rated
TCRS Transferable Custodial Receipts
VRDO Variable Rate Demand Obligation
XLCA XL Capital Assurance
See accompanying notes to financial statements.
HAWAIIAN TAX-FREE TRUST
STATEMENT OF ASSETS AND LIABILITIES
MARCH 31, 2008
ASSETS
Investments at value (cost $663,815,540) .......................................... $ 676,879,749
Cash .............................................................................. 90,919
Interest receivable ............................................................... 8,749,900
Receivable for investment securities sold ......................................... 8,285,625
Receivable for Trust shares sold .................................................. 675,202
Other assets ...................................................................... 19,008
-------------
Total assets ...................................................................... 694,700,403
-------------
LIABILITIES
Dividends payable ................................................................. 514,900
Adviser and Administrator fees payable ............................................ 233,832
Payable for Trust shares redeemed ................................................. 224,054
Distribution and service fees payable ............................................. 132,478
Accrued expenses .................................................................. 145,322
-------------
Total liabilities ................................................................. 1,250,586
-------------
NET ASSETS .......................................................................... $ 693,449,817
=============
NET ASSETS CONSIST OF:
Capital Stock - Authorized an unlimited number of shares, par value $0.01 per share $ 622,013
Additional paid-in capital ........................................................ 684,159,029
Net unrealized appreciation on investments (note 4) ............................... 13,064,209
Accumulated net realized loss on investments ...................................... (4,395,434)
-------------
$ 693,449,817
=============
CLASS A
Net Assets ........................................................................ $ 635,501,108
=============
Capital shares outstanding ........................................................ 57,005,112
=============
Net asset value and redemption price per share .................................... $ 11.15
=============
Offering price per share (100/96 of $11.15 adjusted to nearest cent) .............. $ 11.61
=============
CLASS C
Net Assets ........................................................................ $ 30,203,585
=============
Capital shares outstanding ........................................................ 2,711,292
=============
Net asset value and offering price per share ...................................... $ 11.14
=============
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) ...................................... $ 11.14*
=============
CLASS Y
Net Assets ........................................................................ $ 27,745,124
=============
Capital shares outstanding ........................................................ 2,484,898
=============
Net asset value, offering and redemption price per share .......................... $ 11.17
=============
See accompanying notes to financial statements.
HAWAIIAN TAX-FREE TRUST
STATEMENT OF OPERATIONS
YEAR ENDED MARCH 31, 2008
INVESTMENT INCOME:
Interest income ...................................... $ 33,350,799
Expenses:
Investment Adviser fees (note 3) ..................... $ 969,765
Administrator fees (note 3) .......................... 1,801,002
Distribution and service fees (note 3) ............... 1,590,298
Transfer and shareholder servicing agent fees ........ 462,071
Trustees' fees and expenses (note 8) ................. 144,962
Legal fees (note 3) .................................. 106,390
Shareholders' reports and proxy statements ........... 104,547
Custodian fees (note 6) ............................. 73,382
Insurance ............................................ 51,094
Registration fees and dues ........................... 39,235
Auditing and tax fees ................................ 21,000
Chief compliance officer (note 3) .................... 4,557
Miscellaneous ........................................ 40,309
------------
5,408,612
Expenses paid indirectly (note 6) .................... (19,823)
------------
Net expenses ......................................... 5,388,789
------------
Net investment income ................................ 27,962,010
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain (loss) from securities transactions (2,121,827)
Change in unrealized appreciation on investments ..... (9,440,361)
------------
Net realized and unrealized gain (loss) on investments (11,562,188)
------------
Net change in net assets resulting from operations ... $ 16,399,822
============
See accompanying notes to financial statements.
HAWAIIAN TAX-FREE TRUST
STATEMENTS OF CHANGES IN NET ASSETS
Year Ended Year Ended
March 31, 2008 March 31, 2007
-------------- --------------
OPERATIONS:
Net investment income ............................... $ 27,962,010 $ 28,129,077
Net realized gain (loss) from securities transactions (2,121,827) (1,967,967)
Change in unrealized appreciation on investments .... (9,440,361) 3,729,213
-------------- --------------
Net change in net assets resulting from operations .. 16,399,822 29,890,323
-------------- --------------
DISTRIBUTIONS TO SHAREHOLDERS (NOTE 10):
Class A Shares:
Net investment income ............................... (25,819,784) (26,167,646)
Net realized gain on investments .................... -- (810,146)
Class C Shares:
Net investment income ............................... (1,046,088) (1,150,716)
Net realized gain on investments .................... -- (44,247)
Class Y Shares:
Net investment income ............................... (1,096,179) (810,971)
Net realized gain on investments .................... -- (20,665)
-------------- --------------
Change in net assets from distributions ............. (27,962,051 (29,004,391)
-------------- --------------
CAPITAL SHARE TRANSACTIONS (NOTE 7):
Proceeds from shares sold ........................... 64,036,491 57,436,680
Reinvested dividends and distributions .............. 15,209,682 16,061,923
Cost of shares redeemed ............................. (77,925,829) (91,696,642)
-------------- --------------
Change in net assets from capital share transactions 1,320,344 (18,198,039)
-------------- --------------
Change in net assets .............................. (10,241,885) (17,312,107)
NET ASSETS:
Beginning of period ................................. 703,691,702 721,003,809
-------------- --------------
End of period* ...................................... $ 693,449,817 $ 703,691,702
============== ==============
* Includes undistributed net investment income of: .. $ -- $ 2,090,481
============== ==============
See accompanying notes to financial statements.
HAWAIIAN TAX-FREE TRUST
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2008
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.
FASB Interpretation No. 48 "Accounting for Uncertainty in Income Taxes"
("FIN 48") was adopted on September 28, 2007. Management has reviewed the
tax positions for each of the open tax years (2004-2008) and has
determined that the implementation of FIN 48 did not have a material
impact on the Trust's financial statements.
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, 2008 a reclassification
was made to decrease undistributed net investment income by $2,090,440 and
decrease accumulated net realized loss on investments by $2,090,440.
g) ACCOUNTING PRONOUNCEMENT: 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, 2008.
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, 2008, service fees
on Class A Shares amounted to $1,269,862 of which the Distributor retained
$65,568.
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, 2008, amounted to $240,327. 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, 2008, amounted to $80,109. The total of these payments made
with respect to Class C Shares amounted to $320,436 of which the Distributor
retained $71,610.
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 brokerage and advisory firms ("intermediaries"), the Trust's shares
are sold primarily through the facilities of these intermediaries having offices
within Hawaii, with the bulk of sales commissions inuring to such
intermediaries. For the year ended March 31, 2008, total commissions on sales of
Class A Shares amounted to $844,728, of which the Distributor received $83,176.
c) OTHER RELATED PARTY TRANSACTIONS:
For the year ended March 31, 2008, the Trust incurred $2,061 of legal fees
allocable to Hollyer Brady Barrett & Hines LLP ("Hollyer Brady") and $102,900 to
its successor, Butzel Long PC, counsel to the Trust, for legal services in
conjunction with the Trust's ongoing operations. The Secretary of the Trust was
a partner at Hollyer Brady and is a shareholder of its successor.
4. PURCHASES AND SALES OF SECURITIES
During the year ended March 31, 2008, purchases of securities and proceeds
from the sales of securities aggregated $117,394,507 and $202,874,971,
respectively.
At March 31, 2008, the aggregate tax cost for all securites was
$663,611,794. At March 31, 2008, the aggregate gross unrealized appreciation for
all securities in which there is an excess of value over tax cost amounted to
$17,750,046 and aggregate gross unrealized depreciation for all securities in
which there is an excess of tax cost over value amounted to $4,482,091 for a net
unrealized appreciation of $13,267,955.
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, 2008 March 31, 2007
----------------------------- -----------------------------
Shares Amount Shares Amount
------------ ------------ ------------ ------------
CLASS A SHARES:
Proceeds from shares sold 4,318,450 $ 48,490,243 3,550,598 $ 40,253,734
Reinvested distributions 1,286,401 14,423,477 1,327,230 15,051,392
Cost of shares redeemed . (5,538,391) (62,146,434) (6,763,226) (76,719,811)
------------ ------------ ------------ ------------
Net change .............. 66,460 767,286 (1,885,398) (21,414,685)
------------ ------------ ------------ ------------
CLASS C SHARES:
Proceeds from shares sold 597,453 6,699,220 727,309 8,237,011
Reinvested distributions 50,009 560,330 58,995 668,510
Cost of shares redeemed . (1,081,173) (12,122,217) (881,719) (9,991,799)
------------ ------------ ------------ ------------
Net change ........... (433,711) (4,862,667) (95,415) (1,086,278)
------------ ------------ ------------ ------------
CLASS Y SHARES:
Proceeds from shares sold 785,291 8,847,028 784,085 8,945,935
Reinvested distributions 20,124 225,875 30,094 342,021
Cost of shares redeemed . (326,264) (3,657,178) (437,949) (4,985,032)
------------ ------------ ------------ ------------
Net change ........... 479,151 5,415,725 376,230 4,302,924
------------ ------------ ------------ ------------
Total transactions in Trust
shares .................. 111,900 $ 1,320,344 (1,604,583) $(18,198,039)
============ ============ ============ ============
8. TRUSTEES' FEES AND EXPENSES
At March 31, 2008 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, 2008 was
$116,382, 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 meetings
(Audit, Nominating, Shareholder and 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, 2008, such meeting-related expenses
amounted to $28,580.
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. Net realized capital gains, if any, are distributed annually
and are taxable. Dividends and capital gains distributions are paid in
additional shares at the net asset value per share, in cash, or in a combination
of both, at the shareholder's option.
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, 2008 the Trust had a
capital loss carryover of $3,525,019, of which $2,273,607 expires in 2015 and
$1,251,412 expires in 2016. 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. At
March 31, 2008 there were post-October capital loss deferrals of $870,415, which
will be recognized in the following year.
The tax character of distributions:
Year Ended March 31,
2008 2007
----------- -----------
Net tax-exempt income $27,803,667 $27,766,907
Ordinary income 158,384 362,426
Long term capital gain -- 875,058
----------- -----------
$27,962,051 $29,004,391
=========== ===========
As of March 31, 2008, the components of distributable earnings on a tax basis
were as follows:
Accumulated net realized loss $ (3,525,019)
Unrealized appreciation 13,064,179
Undistributed tax-exempt income 514,900
Other accumulated income (514,900)
Other accumulated gains/(losses) (870,415)
------------
$ 8,668,745
============
The difference between book and tax components of distributable earnings
consist of post-October losses and distributions for tax accounted for on a cash
basis.
11. RECENT DEVELOPMENTS
a) THE DAVIS CASE: In May, 2007, the U. S. Supreme Court agreed to hear an
appeal in DEPARTMENT OF REVENUE OF KENTUCKY V. DAVIS, a case concerning
the constitutionality of differential tax treatment for interest from
in-state vs. out-of-state municipal securities, a practice which is common
among the majority of the states. On May 19, 2008, the U. S. Supreme Court
upheld the right of states to tax interest on out-of-state municipal bonds
while exempting their own state's bond interest from taxation. The U. S.
Supreme Court said differential tax treatment for interest from in-state
vs. out-of-state municipal securities does not decriminate against
interstate commerce, but rather promotes the financing of essential
governmental services.
b) INSURERS: Over the past few months, municipal bond insurance companies
have been under review by the three major rating agencies Standard &
Poor's, Moody's and Fitch. The ratings of some of the insurance companies
have now either been downgraded and/or have a negative outlook. The
financial markets continue to assess the severity of the losses caused by
the subprime credit crisis and its impact on municipal bond insurance
companies and the prices of insured municipal bonds.
HAWAIIAN TAX-FREE TRUST
FINANCIAL HIGHLIGHTS
For a share outstanding throughout each period
Class A
----------------------------------------------------------------
Year Ended March 31,
----------------------------------------------------------------
2008 2007 2006 2005 2004
-------- -------- -------- -------- --------
Net asset value, beginning of period .......................... $ 11.33 $ 11.32 $ 11.51 $ 11.83 $ 11.73
-------- -------- -------- -------- --------
Income (loss) from investment operations:
Net investment income + .................................... 0.46 0.46 0.43 0.45 0.46
Net gain (loss) on securities (both realized
and unrealized) .......................................... (0.18) 0.02 (0.18) (0.30) 0.10
-------- -------- -------- -------- --------
Total from investment operations ........................... 0.28 0.48 0.25 0.15 0.56
-------- -------- -------- -------- --------
Less distributions (note 10):
Dividends from net investment income ....................... (0.46) (0.46) (0.43) (0.45) (0.46)
Distributions from capital gains ........................... -- (0.01) (0.01) (0.02) --
-------- -------- -------- -------- --------
Total distributions ........................................ (0.46) (0.47) (0.44) (0.47) (0.46)
-------- -------- -------- -------- --------
Net asset value, end of period ................................ $ 11.15 $ 11.33 $ 11.32 $ 11.51 $ 11.83
======== ======== ======== ======== ========
Total return (not reflecting sales charge) .................... 2.49% 4.28% 2.19% 1.33% 4.83%
Ratios/supplemental data
Net assets, end of period (in millions) .................... $ 636 $ 645 $ 666 $ 681 $ 694
Ratio of expenses to average net assets .................... 0.75% 0.75% 0.74% 0.74% 0.73%
Ratio of net investment income to average
net assets ............................................... 4.06% 3.99% 3.76% 3.90% 3.89%
Portfolio turnover rate .................................... 18% 38% 22% 10% 8%
The expense ratios after giving effect to the expense offset for uninvested cash balances were:
Ratio of expenses to average net assets .................... 0.75% 0.75% 0.74% 0.74% 0.72%
- ----------
+ Per share amounts have been calculated using the monthly average shares
method.
See accompanying notes to financial statements.
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
Class C
----------------------------------------------------------------
Year Ended March 31,
----------------------------------------------------------------
2008 2007 2006 2005 2004
-------- -------- -------- -------- --------
2008 2007 2006 2005 2004
-------- -------- -------- -------- --------
Net asset value, beginning of period .......................... $ 11.33 $ 11.31 $ 11.50 $ 11.82 $ 11.73
-------- -------- -------- -------- --------
Income (loss) from investment operations:
Net investment income + .................................... 0.37 0.36 0.34 0.36 0.36
Net gain (loss) on securities (both
realized and unrealized) ................................. (0.19) 0.03 (0.18) (0.30) 0.09
-------- -------- -------- -------- --------
Total from investment operations ........................... 0.18 0.39 0.16 0.06 0.45
-------- -------- -------- -------- --------
Less distributions (note 10):
Dividends from net investment income ....................... (0.37) (0.36) (0.34) (0.36) (0.36)
Distributions from capital gains ........................... -- (0.01) (0.01) (0.02) --
-------- -------- -------- -------- --------
Total distributions ........................................ (0.37) (0.37) (0.35) (0.38) (0.36)
-------- -------- -------- -------- --------
Net asset value, end of period ................................ $ 11.14 $ 11.33 $ 11.31 $ 11.50 $ 11.82
======== ======== ======== ======== ========
Total return (not reflecting sales charge) .................... 1.59% 3.55% 1.37% 0.53% 3.91%
Ratios/supplemental data
Net assets, end of period (in millions) .................... $ 30.2 $ 35.6 $ 36.7 $ 37.6 $ 38.2
Ratio of expenses to average net assets .................... 1.55% 1.55% 1.54% 1.54% 1.54%
Ratio of net investment income to
average net assets ....................................... 3.26% 3.19% 2.96% 3.10% 3.08%
Portfolio turnover rate .................................... 18% 38% 22% 10% 8%
The expense ratios after giving effect to the expense offset for uninvested cash balances were:
Ratio of expenses to average net assets .................... 1.55% 1.55% 1.54% 1.54% 1.52%
Class Y
----------------------------------------------------------------
Year Ended March 31,
----------------------------------------------------------------
2008 2007 2006 2005 2004
-------- -------- -------- -------- --------
2008 2007 2006 2005 2004
-------- -------- -------- -------- --------
Net asset value, beginning of period .......................... $ 11.35 $ 11.34 $ 11.52 $ 11.84 $ 11.75
-------- -------- -------- -------- --------
Income (loss) from investment operations:
Net investment income + .................................... 0.48 0.48 0.46 0.48 0.48
Net gain (loss) on securities (both
realized and unrealized) ................................. (0.18) 0.02 (0.18) (0.30) 0.09
-------- -------- -------- -------- --------
Total from investment operations ........................... 0.30 0.50 0.28 0.18 0.57
-------- -------- -------- -------- --------
Less distributions (note 10):
Dividends from net investment income ....................... (0.48) (0.48) (0.45) (0.48) (0.48)
Distributions from capital gains ........................... -- (0.01) (0.01) (0.02) --
-------- -------- -------- -------- --------
Total distributions ........................................ (0.48) (0.49) (0.46) (0.50) (0.48)
-------- -------- -------- -------- --------
Net asset value, end of period ................................ $ 11.17 $ 11.35 $ 11.34 $ 11.52 $ 11.84
======== ======== ======== ======== ========
Total return (not reflecting sales charge) .................... 2.70% 4.49% 2.48% 1.54% 4.97%
Ratios/supplemental data
Net assets, end of period (in millions) .................... $ 27.7 $ 22.8 $ 18.5 $ 20.7 $ 23.5
Ratio of expenses to average net assets .................... 0.55% 0.55% 0.54% 0.54% 0.53%
Ratio of net investment income to
average net assets ....................................... 4.26% 4.19% 3.96% 4.09% 4.09%
Portfolio turnover rate .................................... 18% 38% 22% 10% 8%
The expense ratios after giving effect to the expense offset for uninvested cash balances were:
Ratio of expenses to average net assets .................... 0.55% 0.55% 0.54% 0.54% 0.52%
- ----------
+ 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 Vice Chair Vice Chair and Chief Executive Officer of Aquila 12 ICI Mutual Insurance
New York, NY of the Board Management Corporation, Founder of the Aquila Group of Company.
(02/25/58) of Trustees Funds and parent of Aquila Investment Management LLC,
since 2003, Administrator since 2004, President and Chief Operating
President Officer since 1997, a Director since 1984, Secretary
since 1998 since 1986 and previously its Executive Vice President,
and Trustee Senior Vice President or Vice President, 1986-1997; Chief
since 2004 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 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
(a trade organization for the U.S. fund industry
dedicated to protecting shareholder interests and
educating the public about investing) and head of its
Small Funds Committee since 2004; active in charitable
and volunteer organizations.
NON-INTERESTED TRUSTEES
Theodore T. Mason Chair of Executive Director, East Wind Power Partners LTD since 8 Trustee, Premier VIT.
New York, NY the Board 1994 and Louisiana Power Partners, 1999-2003; Treasurer,
(11/24/35) of Trustees Fort Schuyler Maritime Alumni Association, Inc.,
since 2004 successor to Alumni Association of SUNY Maritime College,
and Trustee since 2004 (President, 2002-2003, First Vice President,
since 1984 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 Fort Schuyler Maritime
Foundation, Inc., successor to 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 venture 5 Chairman of the Board
Sewickley, PA since 1984 capital firm, since 1988. of Oppenheimer Quest
(08/17/33) Value Funds Group,
Oppenheimer Small Cap
Value Fund,
Oppenheimer Midcap
Fund, and Oppenheimer
Rochester Group of
Funds; Chairman of
the Board of Premier
VIT.
Stanley W. Hong Trustee President, Waste Management of Hawaii, Inc. and Corporate 4 Trustee, Pacific
Honolulu, HI since 1992 Vice President - Hawaii Area for Waste Management, Inc., Capital Funds(R),
(04/05/36) 2001-2005; Trustee, The King William Charles Lunalilo which includes 12
Trust Estate since 2001; President and Chief Executive bond and stock funds;
Officer, The Chamber of Commerce of Hawaii, 1996-2001; First Insurance Co.
Director PBS - Hawaii Foundation since 1998; Regent, of Hawaii, Ltd.,
Chaminade University of Honolulu since 1991; Trustee, the Lanihau Properties,
Nature Conservancy of Hawaii since 1998; Trustee, Child Ltd., The Westye
and Family Service since 2005; Director, The East West Group - West
Center Foundation since 2006; St. Louis School since (Hawaii), Inc., Heald
2007; and a director of other corporate and community Education LLC.
organizations.
Russell K. Okata Trustee Executive Director, Hawaii Government Employees 5 Trustee, Pacific
Honolulu, HI since 1992 Association AFSCME Local 152, AFL-CIO 1981-2007; Capital Funds(R),
(03/22/44) International Vice President, American Federation of which includes 12
State, County and Municipal Employees, AFL-CIO 1981-2007; bond and stock funds;
director of various civic and charitable organizations. Chairman, Royal State
Group (insurance).
Douglas Philpotts Trustee Retired; formerly director, Chairman of the Board and 4 Trustee, Pacific
Honolulu, HI since 1992 President of Hawaiian Trust Company, Limited, a Capital Funds(R),
(11/21/31) predecessor of The Asset Management Group of Bank of which includes 12
Hawaii; present or former director of various bond and stock funds.
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 Director, Hawaiian Electric Industries, Inc., a public 4 Trustee, Pacific
Honolulu, HI since 1992 utility holding company, 1993-2004; trustee, the Bernice Capital Funds(R),
(10/08/31) Pauahi Bishop Estate 1990-1999; trustee, Office of which includes 12
Hawaiian Affairs and a member or trustee of several bond and stock funds;
community organizations. director, Grace
Pacific Corporation,
an asphalt paving
company, ACE Trucking
Inc. and Hawaiian
Telecom, a telephone
company
(communications).
OTHER INDIVIDUALS
CHAIRMAN EMERITUS(8)
Lacy B. Herrmann Founder and Founder and Chairman of the Board, Aquila Management N/A N/A
New York, NY Chairman Corporation, the sponsoring organization and parent of
(05/12/29) Emeritus since the Manager or Administrator and/or Adviser or
2004, Trustee, Sub-Adviser to each fund of the Aquila Group of Funds;
1984-2004, and Chairman of the Manager or Administrator and/or Adviser
Chairman of or Sub-Adviser to each since 2004; Founder and Chairman
the Board Emeritus of each fund in the Aquila Group of Funds;
of Trustees, previously Chairman and a Trustee of each fund in the
1984-2003 Aquila Group of Funds since its establishment until 2004
or 2005; Director of the Distributor since 1981 and
formerly Vice President or Secretary, 1981-1998; Trustee
Emeritus, Brown University and the Hopkins School; active
in university, school and charitable organizations.
OFFICERS
Charles E. Childs, III Executive Executive Vice President of all funds in the Aquila Group N/A N/A
New York, NY Vice President of Funds and the Administrator and the Administrator's
(04/01/57) since 2003 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 Trust since 1993 N/A N/A
Lahaina, HI President and formerly Vice President or Assistant Vice President;
(07/27/50) since 1993 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 Vice President of the Distributor since 1995; Vice N/A N/A
New York, NY since 1998 President, Hawaiian Tax-Free Trust since 1998; Senior
(05/06/61) 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 Chief Compliance Officer of the Trust and each of the N/A N/A
New York, NY Compliance other funds in the Aquila Group of Funds, the
(08/23/40) Officer since Administrator and the Distributor since 2004, Compliance
2004 and Officer of the Administrator or its predecessor and
Assistant current parent 1998-2004; Assistant Secretary of the
Secretary Aquila Group of Funds since 2000.
since 2000
Joseph P. DiMaggio Chief Chief Financial Officer of the Aquila Group of Funds N/A N/A
New York, NY Financial since 2003 and Treasurer since 2000.
(11/06/56) Officer since
2003 and
Treasurer
since 2000
Edward M. W. Hines Secretary Shareholder of Butzel Long, a professional corporation, N/A N/A
New York, NY since 1984 counsel to the Trust, since 2007; Partner of Hollyer
(12/16/39) Brady Barrett & Hines LLP, its predecessor as counsel,
1989-2007; Secretary of the Aquila Group of Funds.
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 Assistant Secretary of the Aquila Group of Funds since N/A N/A
New York, NY Secretary 1995 and Vice President of the three Aquila Money-Market
(12/17/39) since 1995 Funds since 1990; Vice President of the Administrator or
its predecessor and current parent since 1990.
Lori A. Vindigni Assistant Assistant Treasurer of the Aquila Group of Funds since N/A N/A
New York, NY Treasurer 2000; Assistant Vice President of the Administrator or
(11/02/66) since 2000 its predecessor and current parent since 1998; Fund
Accountant for the Aquila Group of Funds, 1995-1998.
- ----------------
(1) The Trust's Statement of Additional Information includes additional
information about the Trustees and is available, without charge, upon request by
calling 800-437-1020 (toll free) or by visiting the EDGAR Database at the SEC's
internet site at www.sec.gov.
(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. Ms. Herrmann is the daughter of Lacy B. Herrmann,
the Founder and Chairman Emeritus of the Trust.
(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."
(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,
2007 and held for the six months ended March 31, 2008.
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, 2008
Actual
Total Return Beginning Ending Expenses
Without Account Account Paid During
Sales Charges(1) Value Value the Period(2)
- --------------------------------------------------------------------------------
Class A 1.38% $1,000.00 $1,013.80 $3.73
- --------------------------------------------------------------------------------
Class C 0.98% $1,000.00 $1,009.80 $7.69
- --------------------------------------------------------------------------------
Class Y 1.49% $1,000.00 $1,014.90 $2.72
- --------------------------------------------------------------------------------
(1) ASSUMES REINVESTMENT OF ALL DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS, IF
ANY, AT NET ASSET VALUE AND DOES NOT REFLECT THE DEDUCTION OF THE
APPLICABLE SALES CHARGES WITH RESPECT TO CLASS A SHARES OR THE APPLICABLE
CONTINGENT DEFERRED SALES CHARGES ("CDSC") WITH RESPECT TO CLASS C SHARES.
TOTAL RETURN IS NOT ANNUALIZED, AS IT MAY NOT BE REPRESENTATIVE OF THE
TOTAL RETURN FOR THE YEAR.
(2) EXPENSES ARE EQUAL TO THE ANNUALIZED EXPENSE RATIO OF 0.74%, 1.53% AND
0.54% FOR THE TRUST'S CLASS A, C AND Y SHARES, RESPECTIVELY, MULTIPLIED BY
THE AVERAGE ACCOUNT VALUE OVER THE PERIOD, MULTIPLIED BY 183/366 (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, 2008
Hypothetical
Annualized Beginning Ending Expenses
Total Account Account Paid During
Return Value Value the Period(1)
- --------------------------------------------------------------------------------
Class A 5.00% $1,000.00 $1,021.30 $3.74
- --------------------------------------------------------------------------------
Class C 5.00% $1,000.00 $1,017.35 $7.72
- --------------------------------------------------------------------------------
Class Y 5.00% $1,000.00 $1,022.30 $2.73
- --------------------------------------------------------------------------------
(1) EXPENSES ARE EQUAL TO THE ANNUALIZED EXPENSE RATIO OF 0.74%, 1.53% AND
0.54% FOR THE TRUST'S CLASS A, C AND Y SHARES, RESPECTIVELY, MULTIPLIED BY
THE AVERAGE ACCOUNT VALUE OVER THE PERIOD, MULTIPLIED BY 183/366 (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, 2008, $27,803,667 of dividends paid by
Hawaiian Tax-Free Trust, constituting 99.43% of total dividends paid during
fiscal 2008, were exempt-interest dividends, exempt from regular Federal income
tax and Hawaii state income tax; and the balance was ordinary dividend income.
Prior to January 31, 2008, shareholders were mailed IRS Form 1099-DIV
which contained information on the status of distributions paid for the 2007
CALENDAR YEAR.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
INFORMATION AVAILABLE (UNAUDITED)
Much of the information that the funds in the Aquila Group of Funds
produce is automatically sent to you and all other shareholders. Specifically,
you are routinely sent the entire list of portfolio securities of your Trust
twice a year in the semi-annual and annual reports you receive. Additionally, we
prepare, and have available, portfolio listings at the end of each quarter.
Whenever you may be interested in seeing a listing of your Trust's portfolio
other than in your shareholder reports, please check our website
http://www.aquilafunds.com or call us at 1-800-437-1020.
The Trust additionally files a complete list of its portfolio holdings
with the SEC for the first and third quarters of each fiscal year on Form N-Q.
Forms N-Q are available free of charge on the SEC website at http://www.sec.gov.
You may also review or, for a fee, copy the forms at the SEC's Public Reference
Room in Washington, DC or by calling 800-SEC-0330.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PROXY VOTING RECORD (UNAUDITED)
The Trust does not invest in equity securities. Accordingly, there were no
matters relating to a portfolio security considered at any shareholder meeting
held during the 12 months ended June 30, 2007 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 (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 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
(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 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.
- --------------------------------------------------------------------------------
(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, 2008 (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
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
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 2007 and $18,000 in 2008.
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
$3,000 and $3,000 in 2007 and 2008, respectively, for return preparation
and tax compliance.
d) All Other Fees - There were no additional fees paid for audit and
non-audit services other than those disclosed in a) thorough c) above.
e)(1) Currently, the audit committee of the Registrant pre-approves audit
services and fees on an engagement-by-engagement basis
e)(2) None of the services described in b) through d) above were approved
by the audit committee pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of
Regulation S-X, all were pre-approved on an engagement-by-engagement basis.
f) No applicable.
g) There were no non-audit services fees billed by the Registrant's accountant
to the Registrant's investment adviser or distributor over the past two years
h) Not applicable.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable.
ITEM 6. 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 5, 2008
By: /s/ Joseph P. DiMaggio
- - -----------------------------------
Chief Financial Officer and Treasurer
June 5, 2008
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 5, 2008
By: /s/ Joseph P. DiMaggio
- - -----------------------------------
Joseph P. DiMaggio
Chief Financial Officer and Treasurer
June 5, 2008
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.