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: 3/31/09
FORM N-CSR
ITEM 1. REPORTS TO STOCKHOLDERS
ANNUAL
REPORT
MARCH 31, 2009
HAWAIIAN
TAX-FREE
TRUST
A TAX-FREE INCOME INVESTMENT
[LOGO FOR HAWAIIAN TAX-FREE TRUST:
A PALM TREE IN FRONT OF A CIRCLE WHICH HAS A
ISLAND AND WATER WITHIN IT]
[LOGO OF AQUILA ONE OF THE
GROUP OF FUNDS: AQUILA GROUP OF FUNDS (R)
AN EAGLE'S HEAD]
[LOGO FOR HAWAIIAN TAX-FREE
TRUST: A PALM TREE IN FRONT OF A
CIRCLE WHICH HAS A ISLAND AND
WATER WITHIN IT]
SERVING HAWAII INVESTORS FOR MORE THAN TWO DECADES
HAWAIIAN TAX-FREE TRUST
"TRANSPARENCY - OUR PHILOSOPHY,
NOT JUST A WORD"
May, 2009
Dear Fellow Shareholder:
As I am sure you have noticed, one of the latest "buzz words" found in the
financial press and otherwise is TRANSPARENCY. In the financial world,
TRANSPARENCY refers to conducting one's business in an open and accountable way.
We wish to assure you that here at Hawaiian Tax-Free Trust, TRANSPARENCY is
not a "buzz word" -it is, and always has been, the way we do business.
As you may know, the mutual fund industry is one of the most highly
regulated industries in the entire nation. By law, mutual funds are required to
provide shareholders and potential shareholders with a wide variety of
information. At Hawaiian Tax-Free Trust, we have continually sought to go above
and beyond any and all legal requirements.
We have always strived to keep you as informed as possible about your
investment through a broad variety of communication efforts.
One of the best examples of these efforts is our Annual Shareholder
Meetings. Since the inception of the Trust we have held Annual and outreach
informational meetings in convenient locations specifically designed with you,
our shareholders, in mind.
It is worthy to note that we are one of the few mutual fund groups that
actually hold Annual Meetings and one of very few mutual fund groups that
actively encourage shareholder participation.
Our meetings are structured to try to provide you with as much information
as possible about your Trust. At the same time, we also want to hear from YOU,
our shareholders, because your input helps us in our desire to continue to
provide you with as high a quality product as possible with Hawaiian Tax-Free
Trust.
You can be assured that we will personally be available to meet with you
year after year. And, with this in mind, we know that we better handle things
properly - or we will hear about it for sure!
We have also continually sought to keep you as informed as possible about
your Trust through:
o informational "Thoughts For The Month,"
o letters, such as this one, attached to our Annual and Semi-Annual
reports, and
o other special communications.
NOT A PART OF THE ANNUAL REPORT
We furthermore make every effort to leave out fancy terms and financial
jargon, in order to speak to you in plain English. Why? We do this because we
truly want you (and every one of our shareholders) to know as much as you'd like
about your investment.
And, you can additionally be assured that non-routine shareholder matters
get the full attention of Aquila's management. Letters sent to our headquarters
often end up squarely on one or both of our desks.
So, there is no getting lost in the shuffle at Hawaiian Tax-Free Trust and
the Aquila Group of Funds. It's pretty easy for you to communicate with those of
us right at the top.
We do this because we truly believe that it is:
o YOUR money,
o invested in YOUR Trust,
o invested right here in projects in YOUR communities.
In short, we have always strived to operate in as TRANSPARENT a manner as
possible (and intend to continue to do so) because we feel you have the right to
know as much as you would like about your investment in Hawaiian Tax-Free Trust.
Thank you for your loyalty and confidence.
Sincerely,
/s/ Lacy B. Herrmann /s/ Diana P. Herrmann
Lacy B. Herrmann Diana P. Herrmann
Founder and Chairman Emeritus Vice Chair and President
NOT A PART OF THE ANNUAL REPORT
[LOGO FOR HAWAIIAN TAX-FREE
TRUST: A PALM TREE IN FRONT OF A
CIRCLE WHICH HAS A ISLAND AND
WATER WITHIN IT]
SERVING HAWAII INVESTORS FOR MORE THAN TWO DECADES
HAWAIIAN TAX-FREE TRUST
ANNUAL REPORT
MANAGEMENT DISCUSSION
U.S. ECONOMY
2008 was a pivotal year. It was punctuated by large and dramatic collapses of
several financial firms against a backdrop of extremely volatile financial
markets. This led to the creation of several new tools to allow the Federal
Reserve to try to stabilize the markets. In March 2008, Bear Stearns was the
first large investment bank to go down. There was a federally arranged and
structured liquidation deal that had JP Morgan absorb the company while the
Federal Reserve helped by absorbing many of the toxic assets.
In September 2008, Lehman Brothers fell. This time around, there was no
structured liquidation. The company was allowed to fail. This sent an immediate
and dramatic shockwave through the U.S. and global financial markets from which
we are still recovering. Among other things, the fall of Lehman caused the
multi-billion dollar Reserve Primary money market fund to "break the buck." This
meant that investors had to receive payment for their shares at less than $1.00.
This situation led to widespread concerns for the whole money market fund
industry. This was successfully calmed by the creation of a new U.S. Treasury
program to back the assets in the $4 trillion money market fund industry.
A couple of days after the Lehman situation, there came about the fall of the
world's largest insurance company - AIG. The government saw the enormous impacts
caused by the Lehman bankruptcy, so they took an 80% ownership stake in AIG to
try to prevent further collapse and chaos in the financial markets.
The real Gross Domestic Product (GDP) contracted by -0.8% for the full year
2008. However, in the 4th quarter of 2008, GDP contracted at an annualized rate
of -6.3%, which was followed by -6.1% in the 1st quarter of 2009. The U.S.
unemployment rate started the year at a solid 4.9% but ended the year at 7.2%.
Through April of 2009, the rate is now 8.9% and is expected to continue upwards.
Due to the slowing in the economy, inflation fears have diminished and the
bigger concern is now fending off deflation. The consensus view is that the
decreases in economic growth will start to bottom in the second half of 2009.
HAWAII ECONOMY
The Hawaii economy also experienced declines. Hawaii started the year with one
of the lowest unemployment rates in the country at 3.1%. By the end of the year
the unemployment rate increased to 5.1% and through March 2009, now stands at
7.1%. Decreases in tourism and construction are the primary causes. Total
visitor arrivals declined 10.6% in 2008 led by a 12.2% drop in domestic travel
and a 6.1% decrease in foreign travel. Domestic arrivals seemed to have
stabilized recently, although foreign travel is still slipping.
MANAGEMENT DISCUSSION (CONTINUED)
- --------------------------------------------------------------------------------
MUNICIPAL MARKET AND FUND PERFORMANCE
During the 12 months ended March 31, 2009, the municipal bond yield curve
"steepened" dramatically relating to the decrease in the Federal Funds rate from
2.25% in March 2008 to 0.25% in March 2009, in response to the financial market
crisis. One year municipal rates dropped from 1.92% to 0.62%, while 30-year
municipal rates remained stable from 4.96% to 4.91%.
The municipal market continued to feel many of the impacts of the subprime
mortgage crisis. One such example is with respect to the bond insurers. These
insurers over the past few years started to insure subprime-backed securities in
addition to municipal bonds. Many of these bond insurers saw their credit
ratings get downgraded as a result of their subprime exposures. It is important
to note, however, that due to our focus on the underlying credit quality of the
bonds in which we invest, we believe that Hawaiian Tax-Free Trust's underlying
municipal bonds remain of high credit quality, despite the downgrading of the
bond insurers. This explains much of our relative outperformance vs. other
municipal bond funds.
Another way municipal bonds were impacted was through the large scale
liquidations of some hedge funds that utilized leveraged municipal strategies
that blew up in the fourth quarter 2008 amidst the market volatility. Between
the hedge funds, insurance companies, and some large mutual funds liquidations,
the market was flooded with municipal bonds in the fourth quarter 2008. This
caused municipal yields to rise dramatically while treasury yields dropped as a
result of the flight to quality by investors.
Hawaiian Tax-Free Trust had a total return, without sales charges, of 1.09% for
its Class A shares, 0.28% for Class C shares, and 1.31% for Class Y shares for
the calendar year ending December 31, 2008. For the fiscal year ending March 31,
2009, the total return, without sales charges, was 4.43% for Class A shares,
3.60% for Class C shares, and 4.64% for Class Y shares. Total return reflects
the market fluctuation of the share price as well as reinvested dividends. The
Barclays Capital Quality Intermediate Municipal Bond Index had a total return of
4.49% for the calendar year 2008, and 5.60% for the Trust's fiscal year.
We believe that due to your Trust's prudent investment management, Hawaiian
Tax-Free Trust experienced much better performance than other Hawaii municipal
bond funds over the past 2 years and during this highly volatile period in the
financial markets. In fact, Hawaiian Tax-Free Trust was the only Hawaii
municipal bond fund to post a positive total return for the calendar year 2008.
OUTLOOK AND STRATEGY
There has been substantial monetary and fiscal stimulus enacted by Congress to
try to mitigate the effects of the slowing economy. It is our hope that we will
start to see some traction and recovery beginning to occur by the end of this
year or the beginning of 2010.
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 intend to 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, 2009
as compared with the Barclays Capital Quality Intermediate Municipal Bond Index
(the "Barclays Capital Index") (formerly known as the Lehman Brothers Quality
Intermediate Municipal Bond 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 Barclays
Capital 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:]
Cost of Trust Class A Shares Trust Class A Shares Barclays
Living Index no sales charge with sales charge Capital Index
03/99 10,000 10,000 9,600 10,000
03/00 10,376 9,904 9,504 10,100
03/01 10,679 10,871 10,432 11,075
03/02 10,836 11,224 10,771 11,494
03/03 11,164 12,114 11,625 12,585
03/04 11,358 12,872 12,352 13,193
03/05 11,715 12,945 12,423 13,299
03/06 12,109 13,285 12,749 13,636
03/07 12,446 13,834 13,275 14,281
03/08 12,941 14,140 13,569 15,061
03/09 12,891 14,775 14,179 15,905
AVERAGE ANNUAL TOTAL RETURN
FOR PERIODS ENDED MARCH 31, 2009
----------------------------------------
SINCE
CLASS AND INCEPTION DATE 1 YEAR 5 YEARS 10 YEARS INCEPTION
- --------------------------------------------------- ------- ------- -------- ---------
Class A (commenced operations on 2/20/85)
With Maximum Sales Charge .................... 0.29% 2.10% 3.55% 6.09%
Without Sales Charge ......................... 4.43% 2.94% 3.98% 6.27%
Class C (commenced operations on 4/01/96)
With CDSC .................................... 2.57% 2.12% 3.15% 3.66%
Without CDSC ................................. 3.60% 2.12% 3.15% 3.66%
Class Y (commenced operations on 4/01/96)
No Sales Charge .............................. 4.64% 3.16% 4.19% 4.88%
Barclays Capital Index ............................ 5.60% 3.81% 4.75% 5.89%* (Class A)
5.09% (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, 2009 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 four 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 the year ended March 31, 2005 were 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, 2009, by correspondence with
the custodian and brokers. 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, 2009, 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 four 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 27, 2009
- --------------------------------------------------------------------------------
HAWAIIAN TAX-FREE TRUST
SCHEDULE OF INVESTMENTS
MARCH 31, 2009
RATING
PRINCIPAL MOODY'S/
AMOUNT MUNICIPAL BONDS (92.8%) S&P VALUE
- ---------------- ----------------------------------------------------------- ----------- ----------------
GENERAL OBLIGATION BONDS (57.1%):
-----------------------------------------------------------
City and County of Honolulu, Hawaii, National-re
FGIC Insured Series C
$ 3,130,000 5.125%, 07/01/11 .......................................... Aa2/AA $ 3,188,500
City and County of Honolulu, Hawaii, National-re
FGIC Insured
8,270,000 5.000%, 07/01/21 .......................................... Aa2/AA 8,826,075
City and County of Honolulu, Hawaii, FGIC Insured
7,720,000 5.000%, 07/01/21 .......................................... Aa2/AA 8,239,093
City and County of Honolulu, Hawaii, National-re
FGIC Insured
1,000,000 5.000%, 07/01/22 .......................................... Aa2/AA 1,059,820
City and County of Honolulu, Hawaii, National-re
Insured
8,500,000 5.000%, 07/01/17 .......................................... Aa2/AA 9,271,460
City and County of Honolulu, Hawaii, Series A,
National-re FGIC Insured
1,715,000 6.000%, 01/01/11 .......................................... Aa2/AA 1,857,894
5,000 5.750%, 04/01/11 .......................................... Aa2/AA 5,414
City and County of Honolulu, Hawaii, Series A,
FGIC-TCRS Insured
1,580,000 6.000%, 01/01/12 .......................................... Aa2/AA 1,770,422
3,025,000 5.750%, 04/01/13 .......................................... Aa2/AA 3,459,662
City and County of Honolulu, Hawaii, Series A, FSA
Insured
2,500,000 5.000%, 09/01/09 .......................................... Aa2/AAA 2,544,550
City and County of Honolulu, Hawaii, Series A, FSA
Insured
3,000,000 5.000%, 07/01/29 .......................................... Aa2/AAA 3,087,570
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 3,849,720
2,000,000 5.125%, 09/01/20 .......................................... Aaa/AAA 2,188,000
RATING
PRINCIPAL MOODY'S/
AMOUNT GENERAL OBLIGATION BONDS (CONTINUED) S&P VALUE
- ---------------- ----------------------------------------------------------- ----------- ----------------
City and County of Honolulu, Hawaii, Series A,
National-re Insured
$ 5,000,000 5.000%, 07/01/21 .......................................... Aa2/AA $ 5,353,400
5,000,000 5.000%, 07/01/22 .......................................... Aa2/AA 5,313,300
City and County of Honolulu, Hawaii, Series A,
National-re Insured, Prerefunded 03/01/13 @100,
Collateral: U.S. Government Securities
1,885,000 5.250%, 03/01/15 .......................................... Aaa/AAA 2,140,983
3,005,000 5.250%, 03/01/17 .......................................... Aaa/AAA 3,413,079
1,255,000 5.250%, 03/01/18 .......................................... Aaa/AAA 1,425,429
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 4,467,406
920,000 6.000%, 01/01/12 .......................................... #Aaa/AAA 1,036,987
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 4,372,128
775,000 5.750%, 04/01/13 .......................................... Aaa/AAA 895,714
City and County of Honolulu, Hawaii Refunded - 1995
Series A, Escrowed to Maturity, National-re Insured,
Collateral: U.S. Government Securities
1,355,000 6.000%, 11/01/09 .......................................... #Aaa/AAA 1,398,184
860,000 6.000%, 11/01/09 .......................................... Aaa/AAA 887,408
1,090,000 6.000%, 11/01/10 .......................................... Aaa/AAA 1,178,682
410,000 6.000%, 11/01/10 .......................................... #Aaa/AAA 443,358
City and County of Honolulu, Hawaii, 2003 - Series A,
National-re Insured, Unrefunded Portion
1,115,000 5.250%, 03/01/15 .......................................... Aa2/AA 1,228,552
1,775,000 5.250%, 03/01/17 .......................................... Aa2/AA 1,925,396
745,000 5.250%, 03/01/18 .......................................... Aa2/AA 801,844
City and County of Honolulu, Hawaii, Series B,
FGIC-TCRS Insured, Unrefunded Portion
7,310,000 5.500%, 10/01/11 .......................................... Aa2/AA 8,057,374
City and County of Honolulu, Hawaii, Series B, FSA
Insured, Custodial Receipts, Unrefunded Portion
3,955,000 8.000%, 10/01/10 .......................................... Aa2/AAA 4,361,495
RATING
PRINCIPAL MOODY'S/
AMOUNT GENERAL OBLIGATION BONDS (CONTINUED) S&P VALUE
- ---------------- ----------------------------------------------------------- ----------- --------------
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 $ 2,650,715
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 4,585,008
1,395,000 5.000%, 07/01/20 .......................................... Aaa/AAA 1,424,518
City and County of Honolulu, Hawaii, Series C,
Prerefunded 7/1/09 @101 National-re FGIC Insured
7,750,000 5.125%, 07/01/14 .......................................... Aa2/AA 7,877,565
2,510,000 5.000%, 07/01/18 .......................................... Aa2/AA 2,545,793
City and County of Honolulu, Hawaii, Series C,
National-re FGIC Insured
1,650,000 5.125%, 07/01/12 .......................................... Aa2/AA 1,680,838
City and County of Honolulu, Hawaii, Series C,
National-re Insured
6,740,000 5.000%, 07/01/18 .......................................... Aa2/AA 7,314,112
City and County of Honolulu, Hawaii, Series D,
National-re Insured
3,750,000 5.000%, 07/01/19 .......................................... Aa2/AA 4,023,712
6,080,000 5.000%, 07/01/21 .......................................... Aa2/AA 6,457,507
City and County of Honolulu, Hawaii, Series F,
National-re FGIC Insured
1,000,000 5.250%, 07/01/19 .......................................... Aa2/AA 1,093,240
5,335,000 5.250%, 07/01/20 .......................................... Aa2/AA 5,788,902
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 1,312,549
1,050,000 6.000%, 12/01/15 .......................................... Aaa/AAA 1,282,827
County of Hawaii
1,890,000 5.500%, 07/15/22 .......................................... A1/AA- 2,058,947
2,245,000 5.500%, 07/15/23 .......................................... A1/AA- 2,417,191
1,990,000 5.750%, 07/15/24 .......................................... A1/AA- 2,158,056
2,370,000 5.750%, 07/15/25 .......................................... A1/AA- 2,542,370
3,585,000 6.000%, 07/15/27 .......................................... A1/AA- 3,851,115
RATING
PRINCIPAL MOODY'S/
AMOUNT GENERAL OBLIGATION BONDS (CONTINUED) S&P VALUE
- ---------------- ----------------------------------------------------------- ----------- ----------------
County of Hawaii, National-re Insured
$ 2,010,000 5.250%, 07/15/21 .......................................... A1/AA- $ 2,131,404
County of Hawaii, FGIC Insured, Prerefunded
07/15/11 @100
1,065,000 5.500%, 07/15/14 .......................................... A1/A+ 1,171,372
1,340,000 5.500%, 07/15/15 .......................................... A1/A+ 1,473,839
County of Hawaii, Series A, CIFG Insured
1,850,000 5.000%, 07/15/20 .......................................... A1/AA- 1,958,595
County of Hawaii, Series A, National-re FGIC Insured
2,500,000 5.550%, 05/01/09 .......................................... A1/AA- 2,508,525
4,905,000 5.600%, 05/01/11 .......................................... A1/AA- 5,310,643
1,000,000 5.600%, 05/01/12 .......................................... A1/AA- 1,111,990
1,000,000 5.600%, 05/01/13 .......................................... A1/AA- 1,128,980
County of Hawaii Series A, FGIC Insured, Prerefunded
to 07/15/11 @ 100 Collateral: State and Local
Government Securities
1,465,000 5.500%, 07/15/16 .......................................... Aaa/AAA 1,611,324
1,025,000 5.125%, 07/15/20 .......................................... A1/A+ 1,118,736
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 1,015,850
1,470,000 5.625%, 05/15/18 .......................................... Aaa/AAA 1,493,682
County of Hawaii, Series A, FSA Insured
1,000,000 5.000%, 07/15/16 .......................................... Aa3/AAA 1,086,920
2,000,000 5.000%, 07/15/17 .......................................... Aa3/AAA 2,158,740
1,000,000 5.000%, 07/15/18 .......................................... Aa3/AAA 1,057,910
County of Kauai, Hawaii, National-re Insured,
Prerefunded 08/01/11 @100, Collateral: State &
Local Government Series 100%
140,000 5.625%, 08/01/13 .......................................... Aaa/AAA 154,997
560,000 5.625%, 08/01/14 .......................................... Aaa/AAA 619,987
355,000 5.625%, 08/01/17 .......................................... Aaa/AAA 393,028
345,000 5.625%, 08/01/18 .......................................... Aaa/AAA 381,956
805,000 5.500%, 08/01/20 .......................................... Aaa/AAA 888,921
RATING
PRINCIPAL MOODY'S/
AMOUNT GENERAL OBLIGATION BONDS (CONTINUED) S&P VALUE
- ---------------- ----------------------------------------------------------- ----------- ----------------
County of Kauai, Hawaii, National-re Insured,
Unrefunded Portion
$ 985,000 5.625%, 08/01/13 .......................................... A1/AA- $ 1,072,606
1,060,000 5.625%, 08/01/14 .......................................... A1/AA- 1,143,666
680,000 5.625%, 08/01/17 .......................................... A1/AA- 722,813
655,000 5.625%, 08/01/18 .......................................... A1/AA- 693,049
1,555,000 5.500%, 08/01/20 .......................................... A1/AA- 1,625,628
County of Kauai, Hawaii, Series A, National-re FGIC
Insured
1,000,000 5.000%, 08/01/23 .......................................... A1/AA- 1,027,760
1,555,000 5.000%, 08/01/24 .......................................... A1/AA- 1,587,002
1,500,000 5.000%, 08/01/25 .......................................... A1/AA- 1,517,745
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 1,086,043
1,000,000 6.250%, 08/01/15 .......................................... Aaa/AAA 1,075,290
1,000,000 6.250%, 08/01/16 .......................................... Aaa/AAA 1,075,290
1,275,000 6.250%, 08/01/17 .......................................... Aaa/AAA 1,370,995
1,480,000 6.250%, 08/01/20 .......................................... A3/A+ 1,591,429
County of Kauai, Hawaii, 2005-Series A, National-re
FGIC Insured
1,560,000 5.000%, 08/01/16 .......................................... A1/AA- 1,719,635
2,010,000 5.000%, 08/01/17 .......................................... A1/AA- 2,178,518
2,060,000 5.000%, 08/01/18 .......................................... A1/AA- 2,207,352
1,075,000 5.000%, 08/01/19 .......................................... A1/AA- 1,138,834
County of Kauai, Hawaii Refunding Bonds, Series B &
C, AMBAC Insured
1,300,000 5.950%, 08/01/10 .......................................... A1/A+ 1,369,381
County of Maui, Hawaii, National-re FGIC Insured
1,125,000 5.250%, 03/01/18 .......................................... Aa2/AA 1,174,421
County of Maui, Hawaii, National-re Insured
1,250,000 3.800%, 03/01/16 .......................................... Aa2/AA 1,314,163
1,105,000 5.000%, 03/01/19 .......................................... Aa2/AA 1,187,897
County of Maui, Hawaii, 2001 - Series A, National-re
Insured, Partially Prerefunded 03/01/11 @100,
Collateral: U.S. Government Securities
465,000 5.500%, 03/01/18 ......................................... Aaa/AAA 505,343
RATING
PRINCIPAL MOODY'S/
AMOUNT GENERAL OBLIGATION BONDS (CONTINUED) S&P VALUE
- ---------------- ----------------------------------------------------------- ----------- ----------------
County of Maui, Hawaii, Series A, National-re
Insured, Unrefunded Balance
$ 535,000 5.500%, 03/01/18 .......................................... Aa2/AA $ 560,461
County of Maui, Hawaii, 2002 - Series A, National-re
Insured, Prerefunded to 03/01/12 @100, Collateral:
U.S. Government Securities
1,105,000 5.250%, 03/01/15 .......................................... Aaa/AAA 1,231,965
1,205,000 5.250%, 03/01/16 .......................................... Aaa/AAA 1,343,455
1,000,000 5.250%, 03/01/18 .......................................... Aaa/AAA 1,114,900
1,750,000 5.250%, 03/01/19 .......................................... Aaa/AAA 1,951,075
1,000,000 5.000%, 03/01/20 .......................................... Aaa/AAA 1,107,780
County of Maui, Hawaii, Series B, National-re FGIC
Insured
1,065,000 5.250%, 03/01/11 .......................................... Aa2/AA 1,149,827
County of Maui, Hawaii, Series C, National-re FGIC
Insured
1,020,000 5.250%, 03/01/16 .......................................... Aa2/AA 1,073,958
1,250,000 5.250%, 03/01/20 .......................................... Aa2/AA 1,284,225
Puerto Rico Commonwealth Refunding Public
Improvement Series A
5,000,000 5.000%, 07/01/10 .......................................... Baa3/BBB- 4,996,650
Puerto Rico Commonwealth Public Improvement,
National-re Insured, Econ. Defeased to call,
7/1/2010 @100, Collateral: Agencies
1,800,000 5.250%, 07/01/13 .......................................... Aaa/AAA 1,894,338
State of Hawaii, AMBAC Insured
5,000,000 5.000%, 07/01/16 .......................................... Aa2/AA 5,641,250
State of Hawaii, National-re FGIC Insured
2,330,000 6.000%, 12/01/12 .......................................... Aa2/AA 2,689,496
State of Hawaii, National-re Insured
5,000,000 5.000%, 10/01/22 .......................................... Aa2/AA 5,292,450
State of Hawaii, Series BZ, National-re FGIC Insured
3,700,000 6.000%, 10/01/11 .......................................... Aa2/AA 4,123,539
3,500,000 6.000%, 10/01/12 .......................................... Aa2/AA 4,023,915
State of Hawaii, Series CA, National-re FGIC Insured
2,000,000 5.750%, 01/01/11 .......................................... Aa2/AA 2,158,040
State of Hawaii, Series CH
1,000,000 4.750%, 11/01/11 .......................................... Aa2/AA 1,081,070
RATING
PRINCIPAL MOODY'S/
AMOUNT GENERAL OBLIGATION BONDS (CONTINUED) S&P VALUE
- ---------------- ----------------------------------------------------------- ----------- ----------------
State of Hawaii, Series CL, National-re FGIC Insured
$ 2,305,000 6.000%, 03/01/11 .......................................... Aa2/AA $ 2,514,317
State of Hawaii, Series CM, National-re FGIC Insured
3,000,000 6.500%, 12/01/15 .......................................... Aa2/AA 3,690,600
State of Hawaii, Series CS, National-re Insured
5,500,000 5.000%, 04/01/09 .......................................... Aa2/AA 5,500,609
State of Hawaii, Series CU, Prerefunded 10/01/10
@100, National-re Insured, Collateral: State &
Local Government Series 100%
3,000,000 5.600%, 10/01/19 .......................................... Aaa/AAA 3,213,480
State of Hawaii, Series CV, National-re FGIC Insured
11,000,000 5.000%, 08/01/20 .......................................... Aa2/AA 11,350,350
5,000,000 5.250%, 08/01/21 .......................................... Aa2/AA 5,180,100
1,015,000 5.000%, 08/01/21 .......................................... Aa2/AA 1,045,947
State of Hawaii, Series CX, FSA Insured
8,725,000 5.500%, 02/01/13 .......................................... Aa2/AAA 9,580,486
3,075,000 5.500%, 02/01/16 .......................................... Aa2/AAA 3,321,738
2,500,000 5.500%, 02/01/21 .......................................... Aa2/AAA 2,636,825
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 3,378,270
State of Hawaii, Series DE, National-re Insured
16,000,000 5.000%, 10/01/21 .......................................... Aa2/AA 17,091,200
2,500,000 5.000%, 10/01/24 .......................................... Aa2/AA 2,603,450
State of Hawaii, Series DF, AMBAC Insured
3,500,000 5.000%, 07/01/18 .......................................... Aa2/AA 3,843,455
10,000,000 5.000%, 07/01/22 .......................................... Aa2/AA 10,712,600
5,000,000 5.000%, 07/01/23 .......................................... Aa2/AA 5,304,750
10,000,000 5.000%, 07/01/24 .......................................... Aa2/AA 10,518,900
5,000,000 5.000%, 07/01/25 .......................................... Aa2/AA 5,225,750
State of Hawaii, Series DG, AMBAC Insured,
Refunding
2,000,000 5.000%, 07/01/17 .......................................... Aa2/AA 2,237,020
State of Hawaii, Series DI, FSA Insured
5,000,000 5.000%, 03/01/20 .......................................... Aa2/AAA 5,440,700
2,750,000 5.000%, 03/01/21 .......................................... Aa2/AAA 2,966,177
5,000,000 5.000%, 03/01/22 .......................................... Aa2/AAA 5,342,700
RATING
PRINCIPAL MOODY'S/
AMOUNT GENERAL OBLIGATION BONDS (CONTINUED) S&P VALUE
- ---------------- ----------------------------------------------------------- ----------- ----------------
State of Hawaii, Series DJ, AMBAC Insured
$ 5,000,000 5.000%, 04/01/23 .......................................... Aa2/AA $ 5,342,750
State of Hawaii, Series DJ, FSA-CR AMBAC Insured
5,000,000 5.000%, 04/01/23 .......................................... AA2/AAA 5,346,300
State of Hawaii, Series DD National-re Insured
5,000,000 5.250%, 05/01/23 .......................................... Aa2/AA 5,275,050
State of Hawaii, Series DK
5,000,000 5.000%, 05/01/12 .......................................... Aa2/AA 5,518,050
7,000,000 5.000%, 05/01/19 .......................................... Aa2/AA 7,730,100
----------------
Total General Obligation Bonds ............................ 410,906,191
----------------
REVENUE BONDS (35.7%):
-----------------------------------------------------------
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 2,271,180
2,000,000 5.500%, 07/15/21 .......................................... Aaa/AAA 2,271,180
2,000,000 5.500%, 07/15/22 .......................................... Aaa/AAA 2,271,180
3,000,000 5.500%, 07/15/29 .......................................... Aaa/AAA 3,406,770
Board of Regents, University of .Hawaii, University
System, Series B, FSA Insured
1,110,000 5.250%, 10/01/12 .......................................... Aa3/AAA 1,206,692
1,000,000 5.250%, 10/01/13 .......................................... Aa3/AAA 1,072,880
1,140,000 5.250%, 10/01/14 .......................................... Aa3/AAA 1,216,494
1,395,000 5.250%, 10/01/15 .......................................... Aa3/AAA 1,474,724
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 1,629,196
5,450,000 5.250%, 07/01/23 .......................................... Aaa/AAA 5,974,236
City and County of Honolulu, Hawaii Wastewater
Systems, National-re FGIC Insured
1,395,000 5.000%, 07/01/12 .......................................... Aa3/AA- 1,420,305
RATING
PRINCIPAL MOODY'S/
AMOUNT REVENUE BONDS (CONTINUED) S&P VALUE
- ---------------- ----------------------------------------------------------- ----------- ----------------
City and County of Honolulu, Hawaii Wastewater
Systems, National-re Insured
$ 5,000,000 5.000%, 07/01/32 .......................................... A1/NR $ 5,008,650
City and County of Honolulu, Hawaii Wastewater
Systems, Series A, National-re FGIC Insured
1,825,000 5.000%, 07/01/22 .......................................... Aa3/AA- 1,914,571
City and County of Honolulu, Hawaii Wastewater
Systems, Junior Series, National-re FGIC Insured
2,000,000 5.250%, 07/01/18 .......................................... A1/AA- 2,030,580
5,055,000 5.000%, 07/01/23 .......................................... A1/AA- 5,089,172
City and County of Honolulu, Hawaii Wastewater
Systems, Senior Series, AMBAC Insured
1,810,000 5.500%, 07/01/11 .......................................... Aa3/NR 1,981,389
City & County of Honolulu, Hawaii Wastewater
Systems, Senior Series A, National-re FGIC Insured
3,370,000 5.000%, 07/01/18 .......................................... Aa3/AA- 3,649,205
2,000,000 5.000%, 07/01/24 .......................................... Aa3/AA- 2,061,460
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 1,172,086
3,000,000 5.500%, 07/01/17 .......................................... Aaa/NR 3,301,650
2,310,000 5.500%, 07/01/18 .......................................... Aaa/NR 2,542,271
2,000,000 5.250%, 07/01/19 .......................................... Aaa/NR 2,190,040
City and County of Honolulu, Hawaii Wastewater
System First Bond Resolution, Senior Series A,
National-re Insured
1,000,000 5.000%, 07/01/36 .......................................... Aa3/AA- 968,130
City and County of Honolulu, Hawaii Wastewater
System Second Bond, Junior B-1 Remarket
09/15/06, National-re Insured
1,340,000 5.000%, 07/01/18 .......................................... A1/NR 1,481,102
1,935,000 5.000%, 07/01/19 .......................................... A1/NR 2,112,749
2,035,000 5.000%, 07/01/20 .......................................... A1/NR 2,203,010
5,015,000 5.000%, 07/01/32 .......................................... A1/NR 5,023,676
RATING
PRINCIPAL MOODY'S/
AMOUNT REVENUE BONDS (CONTINUED) S&P VALUE
- ---------------- ----------------------------------------------------------- ----------- ----------------
City and County of Honolulu, Hawaii Water,
National-re FGIC Insured
$ 2,545,000 4.750%, 07/01/19 .......................................... Aa3/AA $ 2,667,491
City and County of Honolulu, Hawaii Board of Water
Supply Water Systems, FSA Insured, Unrefunded
Balance
1,510,000 5.125%, 07/01/21 .......................................... Aa3/AAA 1,556,840
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 1,554,859
1,245,000 4.450%, 07/01/11 .......................................... A3/NR 1,269,676
Hawaii State
1,145,000 5.350%, 07/01/18 .......................................... Baa1/BBB+ 1,039,614
Hawaii State
1,000,000 5.250%, 01/01/17 .......................................... Aa3/AA+ 1,164,170
1,000,000 5.250%, 01/01/18 .......................................... Aa3/AA+ 1,165,190
5,220,000 6.000%, 01/01/23 .......................................... Aa3/AA+ 6,110,480
Hawaii State Department of Budget and Finance,
AMBAC Insured, Weekly Reset VRDO*
11,700,000 4.500%, 07/01/28 .......................................... A1/A+ 11,700,000
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+ 5,519,400
Hawaii State Department of Budget and Finance
Special Purpose Revenue (Mid Pacific Institute),
Radian Insured
2,000,000 4.625%, 01/01/31 .......................................... NR/BBB+ 1,402,600
1,210,000 4.625%, 01/01/36 .......................................... NR/BBB+ 814,887
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 .......................................... Baa1/A 5,120,404
Hawaii State Department of Budget and Finance
Special Purpose Revenue (Hawaiian Electric
Company, Inc.), Series A, National-re Insured
4,125,000 4.950%, 04/01/12 .......................................... Baa1/AA- 4,135,230
RATING
PRINCIPAL MOODY'S/
AMOUNT REVENUE BONDS (CONTINUED) S&P VALUE
- ---------------- ------------------------------------------------------------ ----------- ----------------
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 ........................................... NR/BBB $ 4,105,450
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, National-re Insured
5,700,000 5.650%, 10/01/27 ........................................... Baa1/AA- 4,828,299
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 ........................................... Baa1/A 1,002,260
Hawaii State Department of Budget and Finance
Special Purpose Revenue (Hawaiian Electric
Company, Inc., and Subsidiaries Projects), Series
B-AMT, Syncora Guarantee Inc. Insured
1,000,000 5.000%, 12/01/22 ........................................... Baa1/BBB 899,570
Hawaii State Department of Budget and Finance
Special Purpose Reven (Hawaiian Electric
Company, Inc.), Series D-AMT, AMBAC Insured
2,500,000 6.150%, 01/01/20 ........................................... Baa1/A 2,505,100
Hawaii State Department of Hawaiian Home Lands
605,000 4.000%, 04/01/11 ........................................... A2/NR 621,002
575,000 4.000%, 04/01/12 ........................................... A2/NR 592,181
730,000 4.500%, 04/01/14 ........................................... A2/NR 753,046
500,000 5.000%, 04/01/15 ........................................... A2/NR 525,600
715,000 5.000%, 04/01/17 ........................................... A2/NR 739,753
1,000,000 5.500%, 04/01/20 ........................................... A2/NR 1,031,800
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 2,800,588
10,000,000 5.400%, 07/01/29 ........................................... Aaa/AAA 9,861,100
2,770,000 5.750%, 07/01/30 ........................................... Aaa/AAA 2,767,673
910,000 5.400%, 07/01/30 ........................................... Aaa/AAA 886,367
RATING
PRINCIPAL MOODY'S/
AMOUNT REVENUE BONDS (CONTINUED) S&P VALUE
- ---------------- ------------------------------------------------------------ ----------- ----------------
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 $ 9,359,630
6,800,000 5.300%, 07/01/28 ........................................... Aaa/AAA 6,801,836
Housing Finance and Development Corporation
(State of Hawaii) University of Hawaii Faculty
Housing Project, AMBAC Insured
1,790,000 5.650%, 10/01/16 ........................................... Aa3/A+ 1,790,483
4,000,000 5.700%, 10/01/25 ........................................... Aa3/A+ 3,827,040
Puerto Rico Commonwealth Highway & Transportation
Authority Revenue, Series G, FGIC Insured
1,000,000 5.250%, 07/01/15 ........................................... Baa3/BBB 967,530
Puerto Rico Commonwealth Public Finance
Corporation Revenue Bonds, Series A,
Prerefunded 08/01/11 @100, National-re Insured,
Collateral: 38% U.S. Treasury; 62% U.S.
Government Securities
5,000,000 5.500%, 08/01/17 ........................................... Aaa/AAA 5,472,600
Puerto Rico Electric Power Authority Power Revenue
Bonds Series QQ, Syncora Guarantee Inc. Insured
3,195,000 5.500%, 07/01/16 ........................................... A3/BBB+ 3,183,402
Puerto Rico Electric Power Authority Power Revenue
Series TT
7,000,000 5.000%, 07/01/26 ........................................... A3/BBB+ 5,764,010
Puerto Rico Electric Power Authority Power Revenue,
Refunding Series UU
1,000,000 4.250%, 07/01/13 ........................................... A3/BBB+ 962,380
State of Hawaii Airport System, AMT, National-re
FGIC Insured
7,425,000 5.750%, 07/01/13 ........................................... A2/AA- 7,560,135
4,000,000 5.750%, 07/01/17 ........................................... A2/AA- 3,997,000
11,000,000 5.625%, 07/01/18 ........................................... A2/AA- 10,893,630
6,000,000 5.250%, 07/01/21 ........................................... A2/AA- 5,753,580
State of Hawaii Airport System, AMT, Second Series,
Escrowed to Maturity, National-re Insured,
Collateral: U.S. Government Securities
5,340,000 6.900%, 07/01/12 ........................................... Aaa/AAA 5,704,722
RATING
PRINCIPAL MOODY'S/
AMOUNT REVENUE BONDS (CONTINUED) S&P VALUE
- ---------------- ----------------------------------------------------------- ----------- ----------------
State of Hawaii Airport System, Series B-AMT,
National-re FGIC Insured
$ 3,000,000 8.000%, 07/01/10 .......................................... A2/AA- $ 3,175,200
State of Hawaii Harbor Capital Improvement Revenue,
Series B-AMT, AMBAC Insured
3,000,000 5.500%, 07/01/19 .......................................... Baa1/A+ 3,146,640
State of Hawaii Harbor System Revenue, Series
A-AMT, FSA Insured
2,000,000 5.250%, 07/01/15 .......................................... Aa3/AAA 2,114,160
2,000,000 5.750%, 07/01/17 .......................................... Aa3/AAA 2,056,780
2,215,000 5.250%, 07/01/17 .......................................... Aa3/AAA 2,303,445
1,500,000 5.900%, 07/01/21 .......................................... Aa3/AAA 1,531,380
State of Hawaii Harbor System Revenue, Series A-AMT
2,415,000 4.750%, 01/01/11 .......................................... A1/A+ 2,496,216
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 1,679,603
2,720,000 5.500%, 07/01/19 .......................................... Aaa/AAA 2,888,477
1,110,000 5.500%, 07/01/20 .......................................... Aaa/AAA 1,178,753
2,000,000 5.375%, 07/01/20 .......................................... Aaa/AAA 2,195,560
State of Hawaii Highway Revenue, Series A, FSA
Insured
1,000,000 5.000%, 07/01/20 .......................................... Aa3/AAA 1,054,150
2,000,000 5.000%, 07/01/22 .......................................... Aa3/AAA 2,085,840
State of Hawaii Highway Revenue, Series B, FSA
Insured
2,000,000 5.000%, 07/01/16 .......................................... Aa3/AAA 2,196,260
University of Hawaii Revenue, AGC-ICC National-re
Insured
2,000,000 5.000%, 10/01/23 .......................................... Aa2/AAA 2,104,580
University of Hawaii University System Revenue,
FGIC Insured, Prerefunded 07/12/12 @ 100
Collateral: State and Local Government Securities
1,650,000 5.125%, 07/15/32 .......................................... Aa3/A+ 1,853,891
RATING
PRINCIPAL MOODY'S/
AMOUNT REVENUE BONDS (CONTINUED) S&P VALUE
- ---------------- ----------------------------------------------------------- ----------- ----------------
University of Hawaii National-re Insured
$ 5,000,000 5.000%, 07/15/21 .......................................... Aa3/AA- $ 5,274,150
----------------
Total Revenue Bonds ....................................... 257,458,271
----------------
SHARES INVESTMENT COMPANY (5.3%):
- ---------------- -----------------------------------------------------------
38,001,204 Goldman Sachs Financial Square Tax-Free
Money Market Fund, Institutional Share Class ......... 38,001,204
----------------
Total Investments (cost $686,951,251-note 4) .............. 98.1% 706,365,666
Other assets less liabilities ............................. 1.9 13,779,340
----------- ----------------
NET ASSETS ................................................ 100.0% $720,145,006
=========== ================
Percent of
Portfolio Distribution by Quality Rating (unaudited) Portfolio +
----------------------------------------------------------- -----------
Aaa or #Aaa of Moody's 9.6%
Pre-refunded bonds ++ 17.3
Aa of Moody's 49.3
A of Moody's 18.1
Baa of Moody's or BBB of S&P 5.7
-----------
100.0%
===========
+ Calculated using the Moody's rating except where noted.
++ Pre-refunded bonds are bonds for which U.S. Government Obligations
have been placed in escrow to retire the bonds at their earliest
call date.
* 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.
Note: National Public Finance Guarantee Corporation (National-re) is the new
name for MBIA Inc.'s U. S. public finance platform.
PORTFOLIO ABBREVIATIONS:
------------------------
AMBAC American Municipal Bond Assurance Corporation
AGC Assured Guaranty Insurance
AMT Alternative Minimum Tax
CIFG CDC IXIS Financial Guaranty
FGIC Financial Guaranty Insurance Co.
FNMA Federal National Mortgage Association
FSA Financial Securities Assurance
National-re National Public Finance Guarantee Corporation
National-re FGIC Reinsured FGIC bonds
MBIA Municipal Bond Investors Assurance
NR Not Rated
TCRS Transferable Custodial Receipts
VRDO Variable Rate Demand Obligation
See accompanying notes to financial statements.
HAWAIIAN TAX-FREE TRUST
STATEMENT OF ASSETS AND LIABILITIES
MARCH 31, 2009
ASSETS
Investments at value (cost $686,951,251) .......................................... $ 706,365,666
Cash .............................................................................. 2,240,489
Interest receivable ............................................................... 9,186,147
Receivable for Trust shares sold .................................................. 8,476,864
Other assets ...................................................................... 17,137
-------------
Total assets ...................................................................... 726,286,303
-------------
LIABILITIES
Payable for investment securities purchased ....................................... 4,246,585
Payable for Trust shares redeemed ................................................. 893,304
Dividends payable ................................................................. 475,847
Adviser and Administrator fees payable ............................................ 240,572
Distribution and service fees payable ............................................. 138,282
Accrued expenses .................................................................. 146,707
-------------
Total liabilities ................................................................. 6,141,297
-------------
NET ASSETS ............................................................................. $ 720,145,006
=============
Net Assets consist of:
Capital Stock - Authorized an unlimited number of shares, par value $0.01 per share $ 642,294
Additional paid-in capital ........................................................ 707,135,735
Net unrealized appreciation on investments (note 4) ............................... 19,414,415
Accumulated net realized loss on investments ...................................... (7,047,438)
-------------
$ 720,145,006
=============
CLASS A
Net Assets ........................................................................ $ 656,299,123
=============
Capital shares outstanding ........................................................ 58,536,918
=============
Net asset value and redemption price per share .................................... $ 11.21
=============
Maximum offering price per share (100/96 of $11.21 adjusted to nearest cent) ...... $ 11.68
=============
CLASS C
Net Assets ........................................................................ $ 34,200,634
=============
Capital shares outstanding ........................................................ 3,052,512
=============
Net asset value and offering price per share ...................................... $ 11.20
=============
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) ......................... $ 11.20*
=============
CLASS Y
Net Assets ........................................................................ $ 29,645,249
=============
Capital shares outstanding ........................................................ 2,639,980
=============
Net asset value, offering and redemption price per share .......................... $ 11.23
=============
See accompanying notes to financial statements.
HAWAIIAN TAX-FREE TRUST
STATEMENT OF OPERATIONS
YEAR ENDED MARCH 31, 2009
INVESTMENT INCOME:
Interest income ...................................... $ 31,510,947
Expenses:
Investment Adviser fees (note 3) ..................... $ 971,087
Administrator fees (note 3) .......................... 1,803,457
Distribution and service fees (note 3) ............... 1,580,492
Transfer and shareholder servicing agent fees ........ 449,047
Trustees' fees and expenses (note 8) ................. 133,918
Shareholders' reports and proxy statements ........... 125,523
Legal fees (note 3) .................................. 105,349
Custodian fees (note 6) .............................. 61,821
Insurance ............................................ 44,734
Registration fees and dues ........................... 34,753
Auditing and tax fees ................................ 20,500
Chief compliance officer (note 3) .................... 4,016
Miscellaneous ........................................ 39,415
------------
5,374,112
Expenses paid indirectly (note 6) .................... (34,669)
------------
Net expenses ......................................... 5,339,443
------------
Net investment income ................................ 26,171,504
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain (loss) from securities transactions (2,652,004)
Change in unrealized appreciation on investments ..... 6,350,206
------------
Net realized and unrealized gain (loss) on investments 3,698,202
------------
Net change in net assets resulting from operations ... $ 29,869,706
============
See accompanying notes to financial statements.
HAWAIIAN TAX-FREE TRUST
STATEMENTS OF CHANGES IN NET ASSETS
Year Ended Year Ended
March 31, 2009 March 31, 2008
-------------- --------------
OPERATIONS:
Net investment income ............................... $ 26,171,504 $ 27,962,010
Net realized gain (loss) from securities transactions (2,652,004) (2,121,827)
Change in unrealized appreciation on investments .... 6,350,206 (9,440,361)
-------------- --------------
Net change in net assets resulting from operations .. 29,869,706 16,399,822
-------------- --------------
DISTRIBUTIONS TO SHAREHOLDERS (NOTE 10):
Class A Shares:
Net investment income ............................... (24,028,313) (25,819,784)
Class C Shares:
Net investment income ............................... (944,768) (1,046,088)
Class Y Shares:
Net investment income ............................... (1,198,423) (1,096,179)
-------------- --------------
Change in net assets from distributions ............. (26,171,504) (27,962,051)
-------------- --------------
CAPITAL SHARE TRANSACTIONS (NOTE 7):
Proceeds from shares sold ........................... 83,043,846 64,036,491
Reinvested dividends and distributions .............. 14,291,379 15,209,682
Cost of shares redeemed ............................. (74,338,238) (77,925,829)
-------------- --------------
Change in net assets from capital share transactions 22,996,987 1,320,344
-------------- --------------
Change in net assets .......................... 26,695,189 (10,241,885)
NET ASSETS:
Beginning of period ................................. 693,449,817 703,691,702
-------------- --------------
End of period* ...................................... $ 720,145,006 $ 693,449,817
============== ==============
* Includes undistributed net investment income of: $ -- $ --
============== ==============
See accompanying notes to financial statements.
HAWAIIAN TAX-FREE TRUST
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2009
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. Class
I Shares are sold at net asset value without any sales charge, redemption fees,
or contingent deferred sales charge. Class I Shares carry a distribution fee and
a service fee. 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) FAIR VALUE MEASUREMENTS: The Trust adopted Financial Accounting Standards
Board Statement of Financial Accounting Standards No. 157, "Fair Value
Measurements" ("SFAS 157"), effective April 1, 2008. SFAS 157 established
a three-tier hierarchy of inputs to establish classification of fair value
measurements for disclosure purposes. Inputs may be observable or
unobservable. Observable inputs reflect the assumptions market
participants would use in pricing the asset or liability developed based
on market data obtained from sources independent of the reporting entity.
Unobservable inputs reflect the reporting entity's own assumptions about
the assumptions market participants would use in pricing the asset or
liability developed based on the best information available in the
circumstances. The Trust's investments are assigned levels based upon the
observability.
The three-tier hierarchy of inputs is summarized below:
Level 1 - quoted prices in active markets for identical securities
Level 2 - other significant observable inputs (including quoted prices for
similar securities, interest rates, prepayment speeds, credit risk, etc.)
Level 3 - significant unobservable inputs (including the Trust's own
assumptions in determining the fair value of investments)
The inputs or methodology used for valuing securities are not necessarily
an indication of the risk associated with investing in those securities.
The following is a summary of the valuation inputs, representing 100% of
the Trust's investments, used to value the Trust's net assets as of March
31, 2009:
Valuation Inputs Investments in Securities
---------------- -------------------------
Level 1 - Quoted Prices ..................... $ --
Level 2 - Other Significant Observable Inputs 706,365,666
Level 3 - Significant Unobservable Inputs ... --
-------------------------
Total ....................................... $ 706,365,666
=========================
c) 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.
d) 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.
The Trust has adapted FASB Interpretation No. 48 "Accounting for
Uncertainty in Income Taxes" ("FIN 48"). Management has reviewed the tax
positions for each of the open tax years (2006-2009) and has determined
that implementation of FIN 48 did not have a material impact on the
Trust's financial statements.
e) MULTIPLE CLASS ALLOCATIONS: 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.
f) 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.
g) 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. There were no reclassifications for
the year ended March 31, 2009.
h) ACCOUNTING PRONOUNCEMENT: In April 2009, the Financial Accounting
Standards Board ("FASB") issued FASB Staff Position No. 157-4,
"Determining Fair Value When the Volume and Level of Activity for the
Asset or Liability Have Significantly Decreased and Identifying
Transactions That Are Not Orderly" ("FSP 157-4"). FSP 157-4 provides
additional guidance for estimating fair value in accordance with FASB
Statement of Financial Accounting Standards No. 157, "Fair Value
Measurements" ("FAS 157"), when the volume and level of activity for the
asset or liability have significantly decreased as well as guidance on
identifying circumstances that indicate a transaction is not orderly. FSP
157-4 is effective for fiscal years and interim periods ending after June
15, 2009. Management is currently evaluating the impact the adoption of
FSP 157-4 will have on the Trust's financial statement disclosures.
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 to the Trust, 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, 2009.
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, 2009, service fees on Class A
Shares amounted to $1,264,155 of which the Distributor retained $67,973.
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 average net assets represented by Class C Shares and for
the year ended March 31, 2009, amounted to $237,253. 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 average net assets
represented by Class C Shares and for the year ended March 31, 2009, amounted to
$79,084. The total of these payments made with respect to Class C Shares
amounted to $316,337 of which the Distributor retained $65,889.
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 intermediaries having offices
within Hawaii, with the bulk of sales commissions inuring to such
intermediaries. For the year ended March 31, 2009, total commissions on sales of
Class A Shares amounted to $953,601, of which the Distributor received $95,959.
c) OTHER RELATED PARTY TRANSACTIONS:
For the year ended March 31, 2009, the Trust incurred $103,908 of legal
fees allocable to Butzel Long PC, counsel to the Trust, for legal services in
conjunction with the Trust's ongoing operations. The Secretary of the Trust is a
shareholder in that firm.
4. PURCHASES AND SALES OF SECURITIES
During the year ended March 31, 2009, purchases of securities and proceeds
from the sales of securities aggregated $123,665,457 and $66,922,731,
respectively.
At March 31, 2009, the aggregate tax cost for all securites was
$686,951,251. At March 31, 2009, the aggregate gross unrealized appreciation for
all securities in which there is an excess of value over tax cost amounted to
$25,621,864 and aggregate gross unrealized depreciation for all securities in
which there is an excess of tax cost over value amounted to $6,207,449 for a net
unrealized appreciation of $19,414,415.
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, 2009 March 31, 2008
----------------------------- -----------------------------
Shares Amount Shares Amount
------------ ------------ ------------ ------------
CLASS A SHARES:
Proceeds from shares sold 5,712,522 $ 63,202,155 4,318,450 $ 48,490,243
Reinvested distributions 1,227,268 13,568,739 1,286,401 14,423,477
Cost of shares redeemed . (5,407,984) (59,401,745) (5,538,391) (62,146,434)
------------ ------------ ------------ ------------
Net change .............. 1,531,806 17,369,149 66,460 767,286
------------ ------------ ------------ ------------
CLASS C SHARES:
Proceeds from shares sold 1,069,537 11,877,503 597,453 6,699,220
Reinvested distributions 46,720 516,072 50,009 560,330
Cost of shares redeemed . (775,037) (8,542,960) (1,081,173) (12,122,217)
------------ ------------ ------------ ------------
Net change ........ 341,220 3,850,615 (433,711) (4,862,667)
------------ ------------ ------------ ------------
CLASS Y SHARES:
Proceeds from shares sold 713,237 7,941,203 785,291 8,847,028
Reinvested distributions 20,755 229,553 20,124 225,875
Cost of shares redeemed . (578,910) (6,393,533) (326,264) (3,657,178)
------------ ------------ ------------ ------------
Net change ........ 155,082 1,777,223 479,151 5,415,725
------------ ------------ ------------ ------------
Total transactions in Trust
shares .................. 2,028,108 $ 22,996,987 111,900 $ 1,320,344
============ ============ ============ ============
8. TRUSTEES' FEES AND EXPENSES
At March 31, 2009 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, 2009 was
$110,229, 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, 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, 2009, such meeting-related expenses amounted to $23,689.
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, 2009 the Trust had a
capital loss carryover of $4,723,575, of which $2,273,607 expires in 2015,
$1,251,412 expires in 2016 and $1,198,556 expires in 2017. 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, 2009 there were
post-October capital loss deferrals of $2,323,863, which will be recognized in
the following year.
The tax character of distributions:
Year Ended March 31,
2009 2008
----------- -----------
Net tax-exempt income $25,982,787 $27,803,667
Ordinary income 188,717 158,384
Long-term capital gain -- --
----------- -----------
$26,171,504 $27,962,051
=========== ===========
As of March 31, 2009, the components of distributable earnings on a tax basis
were as follows:
Unrealized appreciation $ 19,414,415
Undistributed tax-exempt income 475,847
Other accumulated losses (7,047,438)
Other temporary differences (475,847)
------------
$ 12,366,977
============
The difference between book basis and tax basis unrealized appreciation is
attributable primarily to premium/discount adjustments. The difference between
book basis and tax basis undistributed income is due to the timing difference in
recognizing dividends paid.
11. RECENT DEVELOPMENT
Over the past year, 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,
----------------------------------------------------------------
2009 2008 2007 2006 2005
-------- -------- -------- -------- --------
Net asset value, beginning of period ......... $ 11.15 $ 11.33 $ 11.32 $ 11.51 $ 11.83
-------- -------- -------- -------- --------
Income (loss) from investment operations:
Net investment income + ................. 0.42 0.46 0.46 0.43 0.45
Net gain (loss) on securities (both
realized and unrealized) ............. 0.06 (0.18) 0.02 (0.18) (0.30)
-------- -------- -------- -------- --------
Total from investment operations ........ 0.48 0.28 0.48 0.25 0.15
-------- -------- -------- -------- --------
Less distributions (note 10):
Dividends from net investment income .... (0.42) (0.46) (0.46) (0.43) (0.45))
Distributions from capital gains ........ -- -- (0.01) (0.01) (0.02)
-------- -------- -------- -------- --------
Total distributions ..................... (0.42) (0.46) (0.47) (0.44) (0.47)
-------- -------- -------- -------- --------
Net asset value, end of period ............... $ 11.21 $ 11.15 $ 11.33 $ 11.32 $ 11.51
======== ======== ======== ======== ========
Total return (not reflecting sales charge) ... 4.43% 2.49% 4.28% 2.19% 1.33%
Ratios/supplemental data
Net assets, end of period (in millions) . $ 656 $ 636 $ 645 $ 666 $ 681
Ratio of expenses to average net assets . 0.75% 0.75% 0.75% 0.74% 0.74%
Ratio of net investment income to average
net assets ........................ 3.80% 4.06% 3.99% 3.76% 3.90%
Portfolio turnover rate ................. 10% 18% 38% 22% 10%
The expense ratios after giving effect to the expense offset for uninvested cash balances were:
Ratio of expenses to average net assets . 0.74% 0.75% 0.75% 0.74% 0.74%
- ----------
+ Per share amounts have been calculated using the monthly average shares
method.
See accompanying notes to financial statements.
HAWAIIAN TAX-FREE TRUST
FINANCIAL HIGHLIGHTS (CONTINUED)
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
Class C
----------------------------------------------------------------
Year Ended March 31,
----------------------------------------------------------------
2009 2008 2007 2006 2005
-------- -------- -------- -------- --------
Net asset value,
beginning of period ............ $ 11.14 $ 11.33 $ 11.31 $ 11.50 $ 11.82
-------- -------- -------- -------- --------
Income (loss) from
investment operations:
Net investment income + ..... 0.33 0.37 0.36 0.34 0.36
Net gain (loss) on
securities (both
realized and unrealized) 0.06 (0.19) 0.03 (0.18) (0.30)
-------- -------- -------- -------- --------
Total from investment
operations ............. 0.39 0.18 0.39 0.16 0.06
-------- -------- -------- -------- --------
Less distributions (note 10):
Dividends from net
investment income ...... (0.33) (0.37) (0.36) (0.34) (0.36)
Distributions from
capital gains .......... -- -- (0.01) (0.01) (0.02)
-------- -------- -------- -------- --------
Total distributions ......... (0.33) (0.37) (0.37) (0.35) (0.38)
-------- -------- -------- -------- --------
Net asset value, end of period . $ 11.20 $ 11.14 $ 11.33 $ 11.31 $ 11.50
======== ======== ======== ======== ========
Total return (not
reflecting sales charge) ....... 3.60% 1.59% 3.55% 1.37% 0.53%
Ratios/supplemental data
Net assets, end of
period (in millions) ... $ 34.2 $ 30.2 $ 35.6 $ 36.7 $ 37.6
Ratio of expenses to
average net assets ..... 1.55% 1.55% 1.55% 1.54% 1.54%
Ratio of net
investment income to
average net assets ..... 2.99% 3.26% 3.19% 2.96% 3.10%
Portfolio turnover rate ..... 10% 18% 38% 22% 10%
The expense ratios after giving effect to the expense offset for uninvested cash balances were:
Ratio of expenses to
average net assets ..... 1.54% 1.55% 1.55% 1.54% 1.54%
Class Y
----------------------------------------------------------------
Year Ended March 31,
----------------------------------------------------------------
2009 2008 2007 2006 2005
-------- -------- -------- -------- --------
Net asset value,
beginning of period ............ $ 11.17 $ 11.35 $ 11.34 $ 11.52 $ 11.84
-------- -------- -------- -------- --------
Income (loss) from
investment operations:
Net investment income + ..... 0.44 0.48 0.48 0.46 0.48
Net gain (loss) on
securities (both
realized and unrealized) 0.06 (0.18) 0.02 (0.18) (0.30)
-------- -------- -------- -------- --------
Total from investment
operations ............. 0.50 0.30 0.50 0.28 0.18
-------- -------- -------- -------- --------
Less distributions (note 10):
Dividends from net
investment income ...... (0.44) (0.48) (0.48) (0.45) (0.48)
Distributions from
capital gains .......... -- -- (0.01) (0.01) (0.02)
-------- -------- -------- -------- --------
Total distributions ......... (0.44) (0.48) (0.49) (0.46) (0.50)
-------- -------- -------- -------- --------
Net asset value, end of period . $ 11.23 $ 11.17 $ 11.35 $ 11.34 $ 11.52
======== ======== ======== ======== ========
Total return (not
reflecting sales charge) ....... 4.64% 2.70% 4.49% 2.48% 1.54%
Ratios/supplemental data
Net assets, end of
period (in millions) ... $ 29.6 $ 27.7 $ 22.8 $ 18.5 $ 20.7
Ratio of expenses to
average net assets 0.55% 0.55% 0.55% 0.54% 0.54%
Ratio of net
investment income to
average net assets ..... 4.00% 4.26% 4.19% 3.96% 4.09%
Portfolio turnover rate ..... 10% 18% 38% 22% 10%
The expense ratios after giving effect to the expense offset for uninvested cash balances were:
Ratio of expenses to
average net assets ..... 0.54% 0.55% 0.55% 0.54% 0.54%
- ----------
+ 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 of Vice Chair and Chief Executive Officer of 12 ICI Mutual Insurance
New York, NY the Board Aquila Management Corporation, Founder Company
(02/25/58) of Trustees of the Aquila Group of Funds and parent of
since 2003, Aquila Investment Management LLC,
President Administrator since 2004, President since
since 1998 1997, Chief Operating Officer, 1997-2008,
and Trustee a Director since 1984, Secretary since 1986
since 2004 and previously its Executive Vice President,
Senior Vice President or Vice President,
1986-1997; Chief Executive Officer and
Vice Chair since 2004, President and
Manager of the Administrator since 2003,
and Chief Operating Officer of the
Administrator, 2003-2008; 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; Governor,
Investment Company Institute (a trade
organization for the U.S. mutual 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.
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.)
- ----------------- ---------- ------------------- ---------- ---------------------
NON-INTERESTED TRUSTEES
Theodore T. Mason Chair of Executive Director, East Wind Power 8 Trustee, Premier VIT.
New York, NY the Board Partners LTD since 1994 and Louisiana
(11/24/35) of Trustees Power Partners, 1999-2003; Treasurer, Fort
since 2004 Schuyler Maritime Alumni Association, Inc.,
and Trustee successor to Alumni Association of SUNY
since 1984 Maritime College, since 2004 (President,
2002-2003, First Vice President, 2000-
2001, Second Vice President, 1998-2000)
and director of the same organization since
1997; Director, STCM Management
Company, Inc., 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.
Thomas W. Courtney Trustee President, Courtney Associates, Inc., a 5 Chairman of the Board of
Sewickley, PA since 1984 venture capital firm, since 1988. 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.
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.)
- ----------------- ---------- ------------------- ---------- ---------------------
Stanley W. Hong Trustee President, Waste Management of Hawaii, 4 Trustee, Pacific Capital
Honolulu, HI since 1992 Inc. and Corporate Vice President - Hawaii Funds(R), which includes
(04/05/36) Area for Waste Management, Inc., 2001- 12 bond and stock funds;
2005; Trustee, The King William Charles First Insurance Co. of
Lunalilo Trust Estate since 2001; President Hawaii, Ltd., Lanihau
and Chief Executive Officer, The Chamber Properties, Ltd., The
of Commerce of Hawaii, 1996-2001; Westye Group - West
Director PBS - Hawaii Foundation since (Hawaii), Inc., Heald
1998; Regent, Chaminade University of Education LLC.
Honolulu since 1991; Trustee, the Nature
Conservancy of Hawaii since 1998; Trustee,
Child and Family Service since 2005;
Director, The East West Center Foundation
since 2006; St. Louis School since 2007;
and a director of other corporate and
community organizations.
Russell K. Okata Trustee Executive Director, Hawaii Government 5 Trustee, Pacific Capital
Honolulu, HI since 1992 Employees Association AFSCME Local 152, Funds(R), which includes
(03/22/44) AFL-CIO 1981-2007; International Vice 12 bond and stock funds.
President, American Federation of State,
County and Municipal Employees, AFL-CIO
1981-2007; director of various civic and
charitable organizations.
Douglas Philpotts Trustee Retired; formerly director, Chairman of the 4 Trustee, Pacific Capital
Honolulu, HI since 1992 Board and President of Hawaiian Trust Funds(R), which includes
(11/21/31) Company, Limited, a predecessor of The 12 bond and stock funds.
Asset Management Group of Bank of
Hawaii; present or former director of
various Hawaii-based civic and charitable
organizations.
NUMBER OF
POSITIONS PORTFOLIOS OTHER DIRECTORSHIPS
HELD WITH IN FUND HELD BY TRUSTEE
NAME, TRUST AND PRINCIPAL COMPLEX(5) (THE POSITION HELD IS
ADDRESS(3) LENGTH OF OCCUPATION(S) OVERSEEN A DIRECTORSHIP UNLESS
AND DATE OF BIRTH SERVICE(4) DURING PAST 5 YEARS BY TRUSTEE INDICATED OTHERWISE.)
- ----------------- ---------- ------------------- ---------- ---------------------
Oswald K. Stender Trustee Director, Hawaiian Electric Industries, Inc., 4 Trustee, Pacific Capital
Honolulu, HI since 1992 a public utility holding company, 1993- Funds(R), which includes
(10/08/31) 2004; trustee, the Bernice Pauahi Bishop 12 bond and stock funds;
Estate 1990-1999; trustee, Office of director, Grace Pacific
Hawaiian Affairs and a member or trustee Corporation, an asphalt
of several community organizations. 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 N/A N/A
New York, NY Chairman Management Corporation, the sponsoring
(05/12/29) Emeritus organization and parent of the Manager or
since 2004, Administrator and/or Adviser or Sub-Adviser
Trustee, to each fund of the Aquila Group of Funds;
1984-2004, Chairman of the Manager or Administrator
and Chairman and/or Adviser or Sub-Adviser to each since
of the Board 2004; Founder and Chairman Emeritus of
of Trustees, each fund in the Aquila Group of Funds;
1984-2003 previously Chairman and a Trustee of each
fund in the 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.
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.)
- ----------------- ---------- ------------------- ---------- ---------------------
OFFICERS
Charles E. Childs, III Executive Executive Vice President of all funds in the N/A N/A
New York, NY Vice President Aquila Group of Funds and the Administrator
(04/01/57) since 2003 and the Administrator's parent since 2003;
Executive Vice President and Chief
Operating Officer of the Administrator's
parent since 2008; formerly Senior Vice
President, corporate development, Vice
President, Assistant Vice President and
Associate of the Administrator's parent since
1987; Senior Vice President, Vice President
or Assistant Vice President of the Aquila
Money-Market Funds, 1988-2003.
Sherri Foster Senior Vice Senior Vice President, Hawaiian Tax-Free N/A N/A
Lahaina, HI President Trust since 1993 and formerly Vice
(07/27/50) since 1993 President or Assistant Vice President; Vice
President since 1997 and formerly Assistant
Vice President of the three Aquila Money-
Market Funds; Vice President, Aquila Rocky
Mountain Equity Fund since 2006;
Registered Representative of the Distributor
since 1985.
Stephen J. Caridi Vice President Vice President of the Distributor since 1995; N/A N/A
New York, NY since 1998 Vice President, Hawaiian Tax-Free Trust
(05/06/61) since 1998; Senior Vice President,
Narragansett Insured Tax-Free Income Fund
since 1998, Vice President 1996-1997;
Senior Vice President, Tax-Free Fund of
Colorado since 2004; Vice President, Aquila
Rocky Mountain Equity Fund since 2006.
Robert W. Anderson Chief Chief Compliance Officer of the Trust and N/A N/A
New York, NY Compliance each of the other funds in the Aquila Group
(08/23/40) Officer of Funds, the Administrator and the
since 2004 Distributor since 2004, Compliance Officer
and Assistant of the Administrator or its predecessor and
Secretary current parent 1998-2004; Assistant
since 2000 Secretary of the Aquila Group of Funds
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.)
- ----------------- ---------- ------------------- ---------- ---------------------
Joseph P. DiMaggio Chief Chief Financial Officer of the Aquila Group N/A N/A
New York, NY Financial of Funds since 2003 and Treasurer since
(11/06/56) Officer 2000.
since 2003
and Treasurer
since 2000
Edward M. W. Hines Secretary Shareholder of Butzel Long, a professional N/A N/A
New York, NY since 1984 corporation, counsel to the Trust, since 2007;
(12/16/39) Partner of Hollyer Brady Barrett & Hines
LLP, its predecessor as counsel, 1989-2007;
Secretary of the Aquila Group of Funds.
John M. Herndon Assistant Assistant Secretary of the Aquila Group of N/A N/A
New York, NY Secretary Funds since 1995 and Vice President of the
(12/17/39) since 1995 three Aquila Money-Market Funds since 1990;
Vice President of the Administrator or its
predecessor and current parent since 1990.
Lori A. Vindigni Assistant Assistant Treasurer of the Aquila Group of N/A N/A
New York, NY Treasurer Funds since 2000; Assistant Vice President
(11/02/66) since 2000 of the Administrator or 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 Municipal 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,
2008 and held for the six months ended March 31, 2009.
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, 2009
ACTUAL
TOTAL RETURN BEGINNING ENDING EXPENSES
WITHOUT ACCOUNT ACCOUNT PAID DURING
SALES CHARGES(1) VALUE VALUE THE PERIOD(2)
- --------------------------------------------------------------------------------
Class A 5.68% $1,000.00 $1,056.80 $3.81
- --------------------------------------------------------------------------------
Class C 5.26% $1,000.00 $1,052.60 $7.89
- --------------------------------------------------------------------------------
Class Y 5.78% $1,000.00 $1,057.80 $2.79
- --------------------------------------------------------------------------------
(1) ASSUMES REINVESTMENT OF ALL DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS, IF
ANY, AT NET ASSET VALUE AND DOES NOT REFLECT THE DEDUCTION OF THE
APPLICABLE SALES CHARGES WITH RESPECT TO CLASS A SHARES OR THE APPLICABLE
CONTINGENT DEFERRED SALES CHARGES ("CDSC") WITH RESPECT TO CLASS C SHARES.
TOTAL RETURN IS NOT ANNUALIZED, AS IT MAY NOT BE REPRESENTATIVE OF THE
TOTAL RETURN FOR THE YEAR.
(2) EXPENSES ARE EQUAL TO THE ANNUALIZED EXPENSE RATIO OF 0.74%, 1.54% AND
0.54% FOR THE TRUST'S CLASS A, C AND Y SHARES, RESPECTIVELY, MULTIPLIED BY
THE AVERAGE ACCOUNT VALUE OVER THE PERIOD, MULTIPLIED BY 182/365 (TO
REFLECT THE ONE-HALF YEAR PERIOD).
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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, 2009
HYPOTHETICAL
ANNUALIZED BEGINNING ENDING EXPENSES
TOTAL ACCOUNT ACCOUNT PAID DURING
RETURN VALUE VALUE THE PERIOD(1)
- --------------------------------------------------------------------------------
Class A 5.00% $1,000.00 $1,021.24 $3.74
- --------------------------------------------------------------------------------
Class C 5.00% $1,000.00 $1,017.25 $7.75
- --------------------------------------------------------------------------------
Class Y 5.00% $1,000.00 $1,022.24 $2.74
- --------------------------------------------------------------------------------
(1) EXPENSES ARE EQUAL TO THE ANNUALIZED EXPENSE RATIO OF 0.74%, 1.54% AND
0.54% FOR THE TRUST'S CLASS A, C AND Y SHARES, RESPECTIVELY, MULTIPLIED BY
THE AVERAGE ACCOUNT VALUE OVER THE PERIOD, MULTIPLIED BY 182/365 (TO
REFLECT THE ONE-HALF YEAR PERIOD).
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
FEDERAL TAX STATUS OF DISTRIBUTIONS (UNAUDITED)
This information is presented in order to comply with a requirement of the
Internal Revenue Code AND NO ACTION ON THE PART OF SHAREHOLDERS IS REQUIRED.
For the fiscal year ended March 31, 2009, $25,982,787 of dividends paid by
Hawaiian Tax-Free Trust, constituting 99.28% of total dividends paid during
fiscal 2009, 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, 2009, shareholders were mailed the appropriate tax
form(s) which contained information on the status of distributions paid for the
2008 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, D.C. 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, 2008 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.
- --------------------------------------------------------------------------------
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
PNC GLOBAL INVESTMENT SERVICING
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, 2009 (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 2008 and $18,900 in 2009.
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 $3,100 in 2008 and 2009, 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 3, 2009
By: /s/ Joseph P. DiMaggio
- ------------------------------------
Chief Financial Officer and Treasurer
June 3, 2009
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 3, 2009
By: /s/ Joseph P. DiMaggio
- ------------------------------------
Joseph P. DiMaggio
Chief Financial Officer and Treasurer
June 3, 2009
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.