UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES
Investment Company Act file number 811-4084
Hawaiian Tax-Free Trust
(Exact name of Registrant as specified in charter)
380 Madison Avenue
New York, New York 10017
(Address of principal executive offices) (Zip code)
Joseph P. DiMaggio
380 Madison Avenue
New York, New York 10017
(Name and address of agent for service)
Registrant's telephone number, including area code:
(212) 697-6666
Date of fiscal year end: 3/31
Date of reporting period: 9/30/09
FORM N-CSR
ITEM 1. REPORTS TO STOCKHOLDERS
SEMI-ANNUAL
REPORT
SEPTEMBER 30, 2009
HAWAIIAN
TAX-FREE
TRUST
A TAX-FREE INCOME INVESTMENT
[LOGO OF HAWAII TAX-FREE TRUST:
A PALM TREE IN FRONT OF A CIRCLE
WHICH HAS AN ISLAND AND WATER
WITHIN IT]
[LOGO OF AQUILA
GROUP OF FUNDS:
AN EAGLE'S HEAD] AQUILA GROUP OF FUNDS (R)
[LOGO OF HAWAII TAX-FREE TRUST:
A PALM TREE IN FRONT OF A CIRCLE
WHICH HAS AN ISLAND AND WATER
WITHIN IT]
SERVING HAWAII INVESTORS FOR 25 YEARS
HAWAIIAN TAX-FREE TRUST
"SOME COMFORT IN UNSETTLING TIMES"
November, 2009
Dear Fellow Shareholder:
We know it. And, you know it too. The United States has seen better
economic days.
Like it or not, unpleasant market cycles do occur periodically. This tends
to distract some people's focus from the longer-term objective that influenced
their investment decision in the first place.
Our shareholder and financial professional surveys have consistently
indicated over the years that the original investment objective and decision for
investors in Hawaiian Tax-Free Trust, has generally been aligned with the
Trust's objective: to seek as high a level of current income exempt from Hawaii
state and regular Federal income taxes as is consistent with preservation of
capital.
How does the Trust seek to fulfill its and your investment objective?
Perhaps the single most significant matter we wish to emphasize is the
element of professional management that we have continually sought to bring to
bear on your behalf. The job of investment managers is to be keen observers of
the scene, setting aside emotions. This is particularly true in the constantly
changing environment that exists today. One must make every effort to be as
objective as possible, adjusting the portfolio of investments as necessary, to
try to be of most benefit to shareholders.
Management of Hawaiian Tax-Free Trust and its municipal bond portfolio
management team believe that when you are dealing with investments, quality
counts.
As you may recall, there are nine separate credit ratings assignable to
municipal securities, ranging from the most conservative to the highly
speculative. For protection of investors' capital, the Trust intentionally
limits its purchases to securities rated (or, if unrated, deemed by the
Investment Adviser to be) investment grade quality - that is rated within the
four highest credit ratings: AAA, AA, A, and BBB.
NOT A PART OF THE SEMI-ANNUAL REPORT
In general, the higher the quality rating of a municipal security, the
greater or more reliable the cash flow there is for the municipality to cover
interest and principal payments when due on the security. While exaggerated
price changes may occur in emotionally charged securities markets, they normally
are not reflective of a municipal issuer's capability to pay interest and
principal in a timely manner on any particular security. It is the cash flow and
solidness of the municipal issuer that count - and this is reflected in the
quality level of the credit rating.
We can assure you that the Trust's portfolio management team pays
considerable attention to this factor before any security is purchased for the
portfolio as well as in conducting continuing analysis and evaluation with each
and every security once it is a part of the Trust's investment portfolio. It is
additionally important for you to know that, with any insured securities, our
portfolio management team has always sought to look beyond the insurance to the
credit quality of the underlying issuer rather than relying upon any insurance.
We fully recognize that the current times can be unsettling. However, we
hope that you are comforted to know that we believe you have a knowledgeable
team of financial experts, which has continually sought to carefully choose the
securities in the Trust's portfolio and seeks to continuously monitor your
investment in Hawaiian Tax-Free Trust.
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 SEMI-ANNUAL REPORT
HAWAIIAN TAX-FREE TRUST
SCHEDULE OF INVESTMENTS
SEPTEMBER 30, 2009 (UNAUDITED)
RATING
PRINCIPAL MOODY'S/
AMOUNT MUNICIPAL BONDS (91.1%) S&P VALUE
- ----------- ----------------------------------------------------------- --------- ------------
GENERAL OBLIGATION BONDS (55.6%):
-----------------------------------------------------------
City and County of Honolulu, Hawaii, FGIC Insured
$ 7,720,000 5.000%, 07/01/21 .......................................... Aa2/AA $ 8,679,673
City and County of Honolulu, Hawaii, National Public
Finance Guarantee Insured
8,500,000 5.000%, 07/01/17 .......................................... Aa2/AA 9,577,460
City and County of Honolulu, Hawaii, National Public
Finance Guarantee, FGIC Insured
8,270,000 5.000%, 07/01/21 .......................................... Aa2/AA 9,298,044
1,000,000 5.000%, 07/01/22 .......................................... Aa2/AA 1,118,660
City and County of Honolulu, Hawaii Refunding,
Series A
8,105,000 5.000%, 07/01/27 .......................................... Aa2/AA 8,785,901
City and County of Honolulu, Hawaii, Series A,
Prerefunded to 09/01/11 @100
5,000,000 5.250%, 09/01/22 .......................................... Aa2/AAA 5,420,900
City and County of Honolulu, Hawaii, Series A,
FGIC-TCRS Insured
1,580,000 6.000%, 01/01/12 .......................................... Aa2/AA 1,751,462
3,025,000 5.750%, 04/01/13 .......................................... Aa2/AA 3,467,073
City and County of Honolulu, Hawaii, Series A,
FSA Insured
3,000,000 5.000%, 07/01/29 .......................................... Aa2/AAA 3,241,320
City and County of Honolulu, Hawaii , Series A, FSA
Insured, Prerefunded to 09/01/11 @100, Collateral:
U.S. Treasury Obligations & Resolution Funding
Corporation
3,500,000 5.375%, 09/01/18 .......................................... Aaa/AAA 3,802,890
2,000,000 5.125%, 09/01/20 .......................................... Aaa/AAA 2,163,640
City and County of Honolulu, Hawaii, Series A,
National Public Finance Guarantee Insured
5,000,000 5.000%, 07/01/21 .......................................... Aa2/AA 5,621,550
5,000,000 5.000%, 07/01/22 .......................................... Aa2/AA 5,593,300
City and County of Honolulu, Hawaii, Series A,
National Public Finance Guarantee, FGIC Insured
1,715,000 6.000%, 01/01/11 .......................................... Aa2/AA 1,825,360
RATING
PRINCIPAL MOODY'S/
AMOUNT GENERAL OBLIGATION BONDS (CONTINUED) S&P VALUE
- ----------- ----------------------------------------------------------- --------- ------------
City and County of Honolulu, Hawaii, Series A,
National Public Finance Guarantee, FGIC Insured,
Unrefunded Portion
$ 5,000 5.750%, 04/01/11 .......................................... Aa2/AA $ 5,334
City and County of Honolulu, Hawaii, Series A,
Refunding
2,000,000 5.250%, 04/01/17 .......................................... Aa2/AA 2,351,100
5,000,000 5.000%, 04/01/19 .......................................... Aa2/AA 5,838,450
3,930,000 5.000%, 04/01/20 .......................................... Aa2/AA 4,592,559
City and County of Honolulu, Hawaii, Series A,
National Public Finance Guarantee Insured,
Prerefunded to 03/01/13 @100, Collateral: U.S.
Government Securities
1,885,000 5.250%, 03/01/15 .......................................... Aaa/AAA 2,141,002
3,005,000 5.250%, 03/01/17 .......................................... Aaa/AAA 3,413,109
1,255,000 5.250%, 03/01/18 .......................................... Aaa/AAA 1,425,442
City and County of Honolulu, Hawaii, Series A 1993,
FGIC - TCRS Insured, Escrowed to Maturity,
Collateral: U.S. Government Securities
4,110,000 6.000%, 01/01/11 .......................................... #Aaa/AAA 4,381,342
920,000 6.000%, 01/01/12 .......................................... #Aaa/AAA 1,023,095
City and County of Honolulu, Hawaii Series A 1994,
FGIC Insured, Escrowed to Maturity, Collateral:
U.S. Government Securities
3,995,000 5.750%, 04/01/11 .......................................... #Aaa/NR 4,297,022
775,000 5.750%, 04/01/13 .......................................... Aaa/AAA 894,559
City and County of Honolulu, Hawaii, Series A,
Refunded - 1995 Escrowed to Maturity, National
Public Finance Guarantee Insured, Collateral:
U.S. Government Securities
1,355,000 6.000%, 11/01/09 .......................................... #Aaa/AAA 1,361,348
860,000 6.000%, 11/01/09 .......................................... Aaa/AAA 864,029
1,090,000 6.000%, 11/01/10 .......................................... Aaa/AAA 1,154,997
410,000 6.000%, 11/01/10 .......................................... #Aaa/AAA 434,448
RATING
PRINCIPAL MOODY'S/
AMOUNT GENERAL OBLIGATION BONDS (CONTINUED) S&P VALUE
- ----------- ----------------------------------------------------------- --------- ------------
City and County of Honolulu, Hawaii, Series A 2003,
National Public Finance Guarantee Insured,
Unrefunded Portion
$ 1,115,000 5.250%, 03/01/15 .......................................... Aa2/AA $ 1,246,202
1,775,000 5.250%, 03/01/17 .......................................... Aa2/AA 1,965,830
745,000 5.250%, 03/01/18 .......................................... Aa2/AA 818,114
City and County of Honolulu, Hawaii, Series B,
FGIC-TCRS Insured, Unrefunded Portion
7,310,000 5.500%, 10/01/11 .......................................... Aa2/AA 7,968,339
City and County of Honolulu, Hawaii, Series B, FSA
Insured, Custodial Receipts, Unrefunded Portion
3,955,000 8.000%, 10/01/10 .......................................... Aa2/AAA 4,246,839
City and County of Honolulu, Hawaii, Series C,
National Public Finance Guarantee Insured
6,740,000 5.000%, 07/01/18 .......................................... Aa2/AA 7,639,251
City and County of Honolulu, Hawaii, Series D,
National Public Finance Guarantee Insured
3,750,000 5.000%, 07/01/19 .......................................... Aa2/AA 4,218,263
6,080,000 5.000%, 07/01/21 .......................................... Aa2/AA 6,835,805
City and County of Honolulu, Hawaii, Series F,
National Public Finance Guarantee, FGIC Insured
1,000,000 5.250%, 07/01/19 .......................................... Aa2/AA 1,143,830
5,335,000 5.250%, 07/01/20 .......................................... Aa2/AA 6,099,292
City and County of Honolulu, Hawaii Refunding,
Series F, National Public Finance Guarantee
FGIC Insured
1,500,000 5.000%, 07/01/28 .......................................... Aa2/AA 1,632,255
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 1,298,138
1,050,000 6.000%, 12/01/15 .......................................... Aaa/AAA 1,302,389
County of Hawaii
1,890,000 5.500%, 07/15/22 .......................................... A1/AA- 2,276,448
2,245,000 5.500%, 07/15/23 .......................................... A1/AA- 2,690,520
1,990,000 5.750%, 07/15/24 .......................................... A1/AA- 2,411,184
2,370,000 5.750%, 07/15/25 .......................................... A1/AA- 2,853,338
3,585,000 6.000%, 07/15/27 .......................................... A1/AA- 4,329,389
RATING
PRINCIPAL MOODY'S/
AMOUNT GENERAL OBLIGATION BONDS (CONTINUED) S&P VALUE
- ----------- ----------------------------------------------------------- --------- ------------
County of Hawaii, National Public Finance
Guarantee Insured
$ 2,010,000 5.250%, 07/15/21 .......................................... A1/AA- $ 2,183,684
County of Hawaii, FGIC Insured, Prerefunded to
07/15/11 @100
1,065,000 5.500%, 07/15/14 .......................................... A1/A+ 1,154,353
1,340,000 5.500%, 07/15/15 .......................................... A1/A+ 1,452,426
County of Hawaii, Series A
1,900,000 5.000%, 07/15/17 .......................................... A1/AA- 2,191,688
County of Hawaii, Series A, CIFG Insured
1,850,000 5.000%, 07/15/20 .......................................... A1/AA- 2,026,582
County of Hawaii, Series A, National Public Finance
Guarantee, FGIC Insured
4,905,000 5.600%, 05/01/11 .......................................... A1/AA- 5,249,674
1,000,000 5.600%, 05/01/12 .......................................... A1/AA- 1,105,470
1,000,000 5.600%, 05/01/13 .......................................... A1/AA- 1,134,970
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 1,587,913
1,025,000 5.125%, 07/15/20 .......................................... A1/A+ 1,104,222
County of Hawaii, Series A, FSA Insured
1,000,000 5.000%, 07/15/16 .......................................... Aa3/AAA 1,094,090
2,000,000 5.000%, 07/15/17 .......................................... Aa3/AAA 2,176,080
1,000,000 5.000%, 07/15/18 .......................................... Aa3/AAA 1,070,150
County of Kauai, Hawaii, National Public Finance
Guarantee Insured, Prerefunded to 08/01/11 @100,
Collateral: State & Local Government Series 100%
140,000 5.625%, 08/01/13 .......................................... Aaa/AAA 152,622
560,000 5.625%, 08/01/14 .......................................... Aaa/AAA 610,490
355,000 5.625%, 08/01/17 .......................................... Aaa/AAA 387,007
345,000 5.625%, 08/01/18 .......................................... Aaa/AAA 376,105
805,000 5.500%, 08/01/20 .......................................... Aaa/AAA 875,760
County of Kauai, Hawaii, National Public Finance
Guarantee Insured, Unrefunded Portion
985,000 5.625%, 08/01/13 .......................................... Baa1/AA- 1,059,407
1,060,000 5.625%, 08/01/14 .......................................... Baa1/AA- 1,132,928
RATING
PRINCIPAL MOODY'S/
AMOUNT GENERAL OBLIGATION BONDS (CONTINUED) S&P VALUE
- ----------- ----------------------------------------------------------- --------- ------------
County of Kauai, Hawaii, National Public Finance
Guarantee Insured, Unrefunded Portion (continued)
$ 680,000 5.625%, 08/01/17 .......................................... Baa1/AA- $ 717,720
655,000 5.625%, 08/01/18 .......................................... Baa1/AA- 689,296
1,555,000 5.500%, 08/01/20 .......................................... Baa1/AA- 1,623,933
County of Kauai, Hawaii, Series A, National Public
Finance Guarantee, FGIC Insured
1,000,000 5.000%, 08/01/23 .......................................... A1/AA- 1,071,270
1,555,000 5.000%, 08/01/24 .......................................... A1/AA- 1,660,771
1,500,000 5.000%, 08/01/25 .......................................... A1/AA- 1,593,945
County of Kauai, Hawaii, Series A, FGIC Insured,
Prerefunded to 8/01/10 @100, Collateral: State &
Local Government Series 100%
1,010,000 6.250%, 08/01/14 .......................................... Aaa/AAA 1,058,450
1,000,000 6.250%, 08/01/15 .......................................... Aaa/AAA 1,047,970
1,000,000 6.250%, 08/01/16 .......................................... Aaa/AAA 1,047,970
1,275,000 6.250%, 08/01/17 .......................................... Aaa/AAA 1,336,162
1,480,000 6.250%, 08/01/20 .......................................... A3/A+ 1,550,996
County of Kauai, Hawaii, 2005-Series A, National
Public Finance Guarantee, FGIC Insured
1,560,000 5.000%, 08/01/16 .......................................... A1/AA- 1,747,590
2,010,000 5.000%, 08/01/17 .......................................... A1/AA- 2,218,678
2,060,000 5.000%, 08/01/18 .......................................... A1/AA- 2,254,320
1,075,000 5.000%, 08/01/19 .......................................... A1/AA- 1,168,665
County of Kauai, Hawaii Refunding Bonds, Series B &
C, AMBAC Insured
1,300,000 5.950%, 08/01/10 .......................................... NR/NR** 1,345,968
County of Maui, Hawaii, National Public Finance
Guarantee, FGIC Insured
1,125,000 5.250%, 03/01/18 .......................................... Aa2/AA 1,168,549
County of Maui, Hawaii, National Public Finance
Guarantee Insured
1,250,000 3.800%, 03/01/16 .......................................... Aa2/AA 1,344,112
1,105,000 5.000%, 03/01/19 .......................................... Aa2/AA 1,215,069
County of Maui, Hawaii, 2001 - Series A, National
Public Finance Guarantee Insured, Partially
Prerefunded to 03/01/11 @100, Collateral: U.S.
Government Securities
465,000 5.500%, 03/01/18 ......................................... Aaa/AAA 496,908
RATING
PRINCIPAL MOODY'S/
AMOUNT GENERAL OBLIGATION BONDS (CONTINUED) S&P VALUE
- ----------- ----------------------------------------------------------- --------- ------------
County of Maui, Hawaii, Series A, National Public
Finance Guarantee Insured, Unrefunded Balance
$ 535,000 5.500%, 03/01/18 ......................................... Aa2/AA $ 557,170
County of Maui, Hawaii, 2002 - Series A, National
Public Finance Guarantee Insured, Prerefunded to
03/01/12 @100, Collateral: U.S. Government
Securities
1,105,000 5.250%, 03/01/15 .......................................... Aaa/AAA 1,219,677
1,205,000 5.250%, 03/01/16 .......................................... Aaa/AAA 1,330,055
1,000,000 5.250%, 03/01/18 .......................................... Aaa/AAA 1,103,780
1,750,000 5.250%, 03/01/19 .......................................... Aaa/AAA 1,931,615
1,000,000 5.000%, 03/01/20 .......................................... Aaa/AAA 1,097,850
County of Maui, Hawaii, Series B, National Public
Finance Guarantee, FGIC Insured
1,065,000 5.250%, 03/01/11 ......................................... Aa2/AA 1,130,945
County of Maui, Hawaii, Series C, National Public
Finance Guarantee, FGIC Insured
1,020,000 5.250%, 03/01/16 .......................................... Aa2/AA 1,065,696
1,250,000 5.250%, 03/01/20 .......................................... Aa2/AA 1,286,650
Puerto Rico Commonwealth Refunding Public
Improvement, Series A
5,000,000 5.000%, 07/01/10 .......................................... Baa3/BBB- 5,071,550
Puerto Rico Commonwealth Public Improvement,
National Public Finance Guarantee Insured, Econ.
Defeased to call, 7/1/2010 @100, Collateral:
Agencies
1,800,000 5.250%, 07/01/13 .......................................... Aaa/AAA 1,854,918
State of Hawaii, AMBAC Insured
5,000,000 5.000%, 07/01/16 .......................................... Aa2/AA 5,710,200
State of Hawaii, National Public Finance Guarantee,
FGIC Insured
2,330,000 6.000%, 12/01/12 .......................................... Aa2/AA 2,674,467
State of Hawaii, National Public Finance Guarantee
Insured
5,000,000 5.000%, 10/01/22 .......................................... Aa2/AA 5,440,800
RATING
PRINCIPAL MOODY'S/
AMOUNT GENERAL OBLIGATION BONDS (CONTINUED) S&P VALUE
- ----------- ----------------------------------------------------------- --------- ------------
State of Hawaii, Series BZ, National Public Finance
Guarantee, FGIC Insured
$ 3,700,000 6.000%, 10/01/11 .......................................... Aa2/AA $ 4,069,593
3,500,000 6.000%, 10/01/12 .......................................... Aa2/AA 3,988,460
State of Hawaii, Series CA, National Public Finance
Guarantee, FGIC Insured
2,000,000 5.750%, 01/01/11 .......................................... Aa2/AA 2,122,540
State of Hawaii, Series CH
1,000,000 4.750%, 11/01/11 .......................................... Aa2/AA 1,079,720
State of Hawaii, Series CL, National Public Finance
Guarantee, FGIC Insured
2,305,000 6.000%, 03/01/11 .......................................... Aa2/AA 2,473,196
State of Hawaii, Series CM, National Public Finance
Guarantee, FGIC Insured
3,000,000 6.500%, 12/01/15 .......................................... Aa2/AA 3,754,440
State of Hawaii, Series CU, Prerefunded to 10/01/10
@100, National Public Finance Guarantee Insured,
Collateral: State & Local Government Series 100%
3,000,000 5.600%, 10/01/19 .......................................... Aaa/AAA 3,153,180
State of Hawaii, Series CV, National Public Finance
Guarantee, FGIC Insured
11,000,000 5.000%, 08/01/20 .......................................... Aa2/AA 11,644,270
5,000,000 5.250%, 08/01/21 .......................................... Aa2/AA 5,281,850
1,015,000 5.000%, 08/01/21 .......................................... Aa2/AA 1,071,444
State of Hawaii, Series CX, FSA Insured
8,725,000 5.500%, 02/01/13 .......................................... Aa2/AAA 9,549,861
3,075,000 5.500%, 02/01/16 .......................................... Aa2/AAA 3,327,427
2,500,000 5.500%, 02/01/21 .......................................... Aa2/AAA 2,682,150
State of Hawaii, Series CZ, Prerefunded to 07/01/12 @100
2,000,000 5.250%, 07/01/15 .......................................... Aa2/AAA 2,230,200
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 3,345,300
State of Hawaii, Series DD, National Public Finance
Guarantee Insured
5,000,000 5.250%, 05/01/23 .......................................... Aa2/AA 5,454,850
RATING
PRINCIPAL MOODY'S/
AMOUNT GENERAL OBLIGATION BONDS (CONTINUED) S&P VALUE
- ----------- ----------------------------------------------------------- --------- ------------
State of Hawaii, Series DE, National Public Finance
Guarantee Insured
$16,000,000 5.000%, 10/01/21 .......................................... Aa2/AA $ 17,511,200
2,500,000 5.000%, 10/01/24 .......................................... Aa2/AA 2,697,600
State of Hawaii, Series DF, AMBAC Insured
3,500,000 5.000%, 07/01/18 .......................................... Aa2/AA 3,917,270
10,000,000 5.000%, 07/01/22 .......................................... Aa2/AA 11,057,900
5,000,000 5.000%, 07/01/23 .......................................... Aa2/AA 5,504,000
10,000,000 5.000%, 07/01/24 .......................................... Aa2/AA 10,952,900
5,000,000 5.000%, 07/01/25 .......................................... Aa2/AA 5,459,950
State of Hawaii, Series DG, AMBAC Insured,
Refunding
2,000,000 5.000%, 07/01/17 .......................................... Aa2/AA 2,270,280
State of Hawaii, Series DI, FSA Insured
5,000,000 5.000%, 03/01/20 .......................................... Aa2/AAA 5,603,450
2,750,000 5.000%, 03/01/21 .......................................... Aa2/AAA 3,063,197
5,000,000 5.000%, 03/01/22 .......................................... Aa2/AAA 5,538,750
State of Hawaii, Series DJ, AMBAC Insured
5,000,000 5.000%, 04/01/23 .......................................... Aa2/AA 5,612,800
State of Hawaii, Series DJ, FSA-CR AMBAC Insured
5,000,000 5.000%, 04/01/23 .......................................... NR/AAA*** 5,612,800
State of Hawaii, Series DK
5,000,000 5.000%, 05/01/12 .......................................... Aa2/AA 5,493,200
7,000,000 5.000%, 05/01/19 .......................................... Aa2/AA 8,114,260
State of Hawaii, Series DQ
10,000,000 5.000%, 06/01/23 .......................................... Aa2/AA 11,439,900
------------
Total General Obligation Bonds ............................ 426,537,769
------------
REVENUE BONDS (35.5%):
-----------------------------------------------------------
Board of Regents, University of Hawaii, University
System , Series A, FGIC Insured, Prerefunded to
07/15/12 @100, Collateral: State & Local
Government Series 100%
2,000,000 5.500%, 07/15/19 .......................................... Aaa/AAA 2,244,160
2,000,000 5.500%, 07/15/21 .......................................... Aaa/AAA 2,244,160
2,000,000 5.500%, 07/15/22 .......................................... Aaa/AAA 2,244,160
3,000,000 5.500%, 07/15/29 .......................................... Aaa/AAA 3,366,240
RATING
PRINCIPAL MOODY'S/
AMOUNT REVENUE BONDS (CONTINUED) S&P VALUE
- ----------- ----------------------------------------------------------- --------- ------------
Board of Regents, University of Hawaii, University
System, Series B, FSA Insured
$ 1,110,000 5.250%, 10/01/12 .......................................... Aa3/AAA $ 1,193,528
1,000,000 5.250%, 10/01/13 .......................................... Aa3/AAA 1,067,510
1,140,000 5.250%, 10/01/14 .......................................... Aa3/AAA 1,212,812
1,395,000 5.250%, 10/01/15 .......................................... Aa3/AAA 1,472,325
City and County of Honolulu, Hawaii Board of Water
Supply & System, FSA Insured, Prerefunded to 07/01/11
@100, Collateral: U.S. Government Securities
1,490,000 5.125%, 07/01/21 .......................................... Aaa/AAA 1,606,712
5,450,000 5.250%, 07/01/23 .......................................... Aaa/AAA 5,888,671
City and County of Honolulu, Hawaii Wastewater
Systems, National Public Finance Guarantee Insured
5,000,000 5.000%, 07/01/32 .......................................... A1/NR 5,146,550
City and County of Honolulu, Hawaii Wastewater
Systems, Series A, National Public Finance
Guarantee, FGIC Insured
1,825,000 5.000%, 07/01/22 .......................................... Aa3/AA- 1,982,917
City and County of Honolulu, Hawaii Wastewater
Systems, Senior Series, AMBAC Insured
1,810,000 5.500%, 07/01/11 .......................................... Aa3/NR 1,955,271
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 1,564,420
City and County of Honolulu, Hawaii Wastewater
Systems, Senior Series A, National Public Finance
Guarantee, FGIC Insured
3,370,000 5.000%, 07/01/18 .......................................... Aa3/AA- 3,722,772
2,000,000 5.000%, 07/01/24 .......................................... Aa3/AA- 2,154,660
City and 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 1,154,354
3,000,000 5.500%, 07/01/17 .......................................... Aaa/NR 3,251,700
2,310,000 5.500%, 07/01/18 .......................................... Aaa/NR 2,503,809
2,000,000 5.250%, 07/01/19 .......................................... Aaa/NR 2,159,160
RATING
PRINCIPAL MOODY'S/
AMOUNT REVENUE BONDS (CONTINUED) S&P VALUE
- ----------- ----------------------------------------------------------- --------- ------------
City and County of Honolulu, Hawaii Wastewater
System First Bond Resolution, Senior Series A,
National Public Finance Guarantee Insured
$ 1,000,000 5.000%, 07/01/36 .......................................... Aa3/AA- $ 1,043,480
City and County of Honolulu, Hawaii Wastewater
System Second Bond, Junior B-1 Remarket 09/15/06,
National Public Finance Guarantee Insured
1,340,000 5.000%, 07/01/18 .......................................... A1/AA 1,480,834
1,935,000 5.000%, 07/01/19 .......................................... A1/AA 2,122,405
2,035,000 5.000%, 07/01/20 .......................................... A1/AA 2,216,725
5,015,000 5.000%, 07/01/32 .......................................... A1/AA 5,161,990
City and County of Honolulu, Hawaii Water, National
Public Finance Guarantee, FGIC Insured
2,545,000 4.750%, 07/01/19 .......................................... Aa3/AA 2,723,990
Hawaii State
1,145,000 5.350%, 07/01/18 .......................................... Baa1/BBB+ 1,152,660
1,000,000 5.250%, 01/01/17 .......................................... Aa3/AA+ 1,181,750
1,000,000 5.250%, 01/01/18 .......................................... Aa3/AA+ 1,189,630
5,220,000 6.000%, 01/01/23 .......................................... Aa3/AA+ 6,465,649
Hawaii State Department of Budget and Finance
Special Purpose Revenue Linked Certificates
(Kapiolani Health Care)
4,120,000 6.400%, 07/01/13 .......................................... Baa1/BBB+ 4,335,847
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- 1,645,000
1,210,000 4.625%, 01/01/36 .......................................... NR/BBB- 967,092
Hawaii State Department of Budget and Finance
Special Purpose Revenue PAC Health, Series B,
LOC: Bank of Nova Scotia VRDO*, weekly reset
1,500,000 0.490%, 07/01/33 .......................................... Aaa/AAA 1,500,000
Hawaii State Department of Budget and Finance
Special Purpose Revenue Refunding Queens Health
System, Series A VRDO*, weekly reset
19,900,000 0.250%, 07/01/29 .......................................... VMIG1/A-1 19,900,000
RATING
PRINCIPAL MOODY'S/
AMOUNT REVENUE BONDS (CONTINUED) S&P VALUE
- ----------- ----------------------------------------------------------- --------- ------------
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/BBB $ 5,041,957
Hawaii State Department of Budget and Finance
Special Purpose Revenue (Hawaiian Electric
Company, Inc.), Series A, National Public Finance
Guarantee Insured
4,125,000 4.950%, 04/01/12 .......................................... Baa1/A 4,284,349
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 Public Finance
Guarantee Insured
5,700,000 5.650%, 10/01/27 .......................................... Baa1/A 5,768,799
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/BBB 1,011,410
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 989,490
Hawaii State Department of Budget and Finance
Special Purpose Revenue (Hawaiian Electric
Company, Inc.), Series D-AMT, AMBAC Insured
2,500,000 6.150%, 01/01/20 .......................................... Baa1/BBB 2,506,550
Hawaii State Department of Hawaiian Home Lands
605,000 4.000%, 04/01/11 .......................................... A2/NR 619,786
575,000 4.000%, 04/01/12 .......................................... A2/NR 593,153
730,000 4.500%, 04/01/14 .......................................... A2/NR 766,266
500,000 5.000%, 04/01/15 .......................................... A2/NR 535,865
715,000 5.000%, 04/01/17 .......................................... A2/NR 760,395
1,000,000 5.500%, 04/01/20 .......................................... A2/NR 1,081,350
RATING
PRINCIPAL MOODY'S/
AMOUNT REVENUE BONDS (CONTINUED) S&P VALUE
- ----------- ----------------------------------------------------------- --------- ------------
Honolulu, Hawaii City & County Wastewater Systems
Revenue, 1st Board Resolution-Senior, Series A
$ 2,455,000 5.000%, 07/01/21 .......................................... Aa3/AA- $ 2,800,075
2,800,000 5.000%, 07/01/22 .......................................... Aa3/AA- 3,168,648
3,300,000 5.000%, 07/01/23 .......................................... Aa3/AA- 3,711,147
2,500,000 5.000%, 07/01/24 .......................................... Aa3/AA- 2,793,950
Honolulu, Hawaii City & County Wastewater Systems
Revenue, 2nd BD Resolution-JR-Series A
1,155,000 4.000%, 07/01/13 .......................................... A1/A+ 1,241,683
1,000,000 4.000%, 07/01/14 .......................................... A1/A+ 1,077,280
1,000,000 5.000%, 07/01/20 .......................................... Aa3/AA- 1,150,450
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 2,846,816
10,000,000 5.400%, 07/01/29 .......................................... Aaa/AAA 10,038,400
2,770,000 5.750%, 07/01/30 .......................................... Aa1/AAA 2,770,609
910,000 5.400%, 07/01/30 .......................................... Aaa/AAA 913,185
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 9,369,261
6,800,000 5.300%, 07/01/28 .......................................... Aaa/AAA 6,834,204
Illinois Finance Authority Revenue University Chicago,
VRDO* weekly reset
5,000,000 0.250%, 08/01/43 .......................................... VMIG1/A-1 5,000,000
Puerto Rico Commonwealth Highway & Transportation
Authority Revenue, Series G, FGIC Insured
1,000,000 5.250%, 07/01/15 .......................................... Baa3/BBB 1,052,890
Puerto Rico Commonwealth Public Finance
Corporation Revenue Bonds, Series A, Prerefunded
to 08/01/11 @100, National Public Finance
Guarantee Insured, Collateral: 38% U.S. Treasury;
62% U.S. Government Securities
5,000,000 5.500%, 08/01/17 .......................................... Aaa/AAA 5,401,400
Puerto Rico Electric Power Authority Power Revenue
Bonds, Series QQ, Syncora Guarantee Inc. Insured
3,195,000 5.500%, 07/01/16 .......................................... A3/BBB+ 3,608,177
RATING
PRINCIPAL MOODY'S/
AMOUNT REVENUE BONDS (CONTINUED) S&P VALUE
- ----------- ----------------------------------------------------------- --------- ------------
Puerto Rico Electric Power Authority Power Revenue,
Series TT
$ 5,000,000 5.000%, 07/01/26 .......................................... A3/BBB+ $ 5,194,650
Puerto Rico Electric Power Authority Power Revenue,
Refunding, Series UU
1,000,000 4.250%, 07/01/13 .......................................... A3/BBB+ 1,065,010
State of Hawaii Airport System, AMT, National Public
Finance Guarantee, FGIC Insured
7,425,000 5.750%, 07/01/13 .......................................... A2/A 7,655,769
4,000,000 5.750%, 07/01/17 .......................................... A2/A 4,065,680
11,000,000 5.625%, 07/01/18 .......................................... A2/A 11,108,570
6,000,000 5.250%, 07/01/21 .......................................... A2/A 6,026,100
State of Hawaii Airport System, AMT, Second Series,
Escrowed to Maturity, National Public Finance
Guarantee Insured, Collateral: U.S. Government
Securities
4,125,000 6.900%, 07/01/12 .......................................... Aaa/AAA 4,346,677
State of Hawaii Airport System, Series B-AMT, National
Public Finance Guarantee, FGIC Insured
3,000,000 8.000%, 07/01/10 .......................................... A2/A 3,146,070
State of Hawaii Harbor Capital Improvement Revenue,
Series B-AMT, AMBAC Insured
3,000,000 5.500%, 07/01/19 .......................................... NR/NR** 3,172,140
State of Hawaii Harbor System Revenue, Series A-AMT,
FSA Insured
2,000,000 5.250%, 07/01/15 .......................................... Aa3/AAA 2,172,860
2,000,000 5.750%, 07/01/17 .......................................... Aa3/AAA 2,050,420
2,215,000 5.250%, 07/01/17 .......................................... Aa3/AAA 2,394,526
1,500,000 5.900%, 07/01/21 .......................................... Aa3/AAA 1,532,685
State of Hawaii Harbor System Revenue, Series A-AMT
2,415,000 4.750%, 01/01/11 .......................................... A1/A+ 2,480,205
State of Hawaii Highway Revenue Prerefunded to
07/01/11 @100, FSA Insured, Collateral: State &
Local Government Series 100%
1,530,000 5.375%, 07/01/14 .......................................... Aaa/AAA 1,656,454
2,720,000 5.500%, 07/01/19 .......................................... Aaa/AAA 2,824,312
1,110,000 5.500%, 07/01/20 .......................................... Aaa/AAA 1,152,568
2,000,000 5.375%, 07/01/20 .......................................... Aaa/AAA 2,165,300
RATING
PRINCIPAL MOODY'S/
AMOUNT REVENUE BONDS (CONTINUED) S&P VALUE
- ----------- ----------------------------------------------------------- --------- ------------
State of Hawaii Highway Revenue, Series A, FSA
Insured
$ 1,000,000 5.000%, 07/01/20 .......................................... Aa3/AAA $ 1,084,900
2,000,000 5.000%, 07/01/22 .......................................... Aa3/AAA 2,161,120
State of Hawaii Highway Revenue, Series B, FSA
Insured
2,000,000 5.000%, 07/01/16 .......................................... Aa3/AAA 2,231,680
University of Hawaii Revenue, Series A
1,000,000 4.000%, 10/01/18 .......................................... Aa3/A+ 1,070,130
University of Hawaii Revenue
2,725,000 5.500%, 10/01/22 .......................................... Aa3/A+ 3,153,697
University of Hawaii Revenue, AGC-ICC National
Public Finance Guarantee Insured
2,000,000 5.000%, 10/01/23 .......................................... Aa2/AAA 2,208,040
University of Hawaii University System Revenue,
FGIC Insured, Prerefunded to 07/12/12 @100
Collateral: State and Local Government Securities
1,650,000 5.125%, 07/15/32 .......................................... Aa3/A+ 1,834,536
University of Hawaii National Public Finance
Guarantee Insured
5,000,000 5.000%, 07/15/21 .......................................... Aa3/A+ 5,470,900
------------
Total Revenue Bonds ...................................... 272,385,487
------------
Total Investments (cost $661,638,141-note 4) .............. 91.1% 698,923,256
Other assets less liabilities ............................. 8.9 68,619,501
--------- ------------
NET ASSETS ................................................ 100.0% $767,542,757
========= ============
PERCENT OF
PORTFOLIO DISTRIBUTION BY QUALITY RATING PORTFOLIO+
---------------------------------------- ----------
Aaa or #Aaa or VMIG1of Moody's or AAA of S&P .............. 8.9%
Prerefunded bonds ++ ...................................... 16.2
Aa of Moody's ............................................. 53.4
A of Moody's .............................................. 15.3
Baa of Moody's or BBB of S&P .............................. 5.6
Not rated** ............................................... 0.6
---------
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.
** Any security not rated (NR) by any of the approved credit rating services
has been determined by the Investment Adviser to have sufficient quality
to be ranked in the top four credit ratings if a credit rating were to be
assigned by a rating service.
FITCH RATING
- ------------
*** AA
PORTFOLIO ABBREVIATIONS:
------------------------
AMBAC American Municipal Bond Assurance Corporation
AGC Assured Guaranty Insurance
AMT Alternative Minimum Tax
CIFG CDC IXIS Financial Guaranty
CR Custodial Receipt
FGIC Financial Guaranty Insurance Co.
FNMA Federal National Mortgage Association
FSA Financial Securities Assurance
NR Not Rated
TCRS Transferable Custodial Receipts
VRDO Variable Rate Demand Obligation
Note: National Public Finance Guarantee was formerly known as National-re
On November 2, 2009, Assured Guaranty Ltd., the holding company for Assured
Guaranty Corp. and Financial Security Assurance inc. ("FSA"), announced that
pending regulatory approval, it will change the name of its subsidiary FSA to
Assured Guaranty Municipal Corp. The Company also plans to change the names of
the FSA companies worldwide.
See accompanying notes to financial statements.
HAWAIIAN TAX-FREE TRUST
STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 30, 2009 (UNAUDITED)
ASSETS
Investments at value (cost $661,638,141) ................................................ $ 698,923,256
Cash .................................................................................... 59,433,567
Interest receivable ..................................................................... 8,852,454
Receivable for Trust shares sold ........................................................ 1,673,501
Other assets ............................................................................ 56,045
-----------------
Total assets ............................................................................ 768,938,823
-----------------
LIABILITIES
Payable for Trust shares redeemed ....................................................... 610,746
Dividends payable ....................................................................... 440,979
Adviser and Administrator fees payable .................................................. 249,396
Accrued expenses ........................................................................ 94,945
-----------------
Total liabilities ....................................................................... 1,396,066
-----------------
NET ASSETS ...................................................................................... $ 767,542,757
=================
Net Assets consist of:
Capital Stock - Authorized an unlimited number of shares, par value $0.01 per share ..... $ 668,998
Additional paid-in capital .............................................................. 737,285,478
Net unrealized appreciation on investments (note 4) ..................................... 37,285,115
Accumulated net realized loss on investments ............................................ (7,696,834)
-----------------
$ 767,542,757
=================
CLASS A
Net Assets .............................................................................. $ 690,959,664
=================
Capital shares outstanding .............................................................. 60,226,406
=================
Net asset value and redemption price per share .......................................... $ 11.47
=================
Maximum offering price per share (100/96 of $11.47 adjusted to nearest cent) ............ $ 11.95
=================
CLASS C
Net Assets .............................................................................. $ 45,294,852
=================
Capital shares outstanding .............................................................. 3,950,713
=================
Net asset value and offering price per share ............................................ $ 11.46
=================
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) ...................................... $ 11.46*
=================
CLASS Y
Net Assets .............................................................................. $ 31,288,241
=================
Capital shares outstanding .............................................................. 2,722,724
=================
Net asset value, offering and redemption price per share ................................ $ 11.49
=================
See accompanying notes to financial statements.
HAWAIIAN TAX-FREE TRUST
STATEMENT OF OPERATIONS
SIX MONTHS ENDED SEPTEMBER 30, 2009
(UNAUDITED)
INVESTMENT INCOME:
Interest income ...................................... $ 14,767,558
Expenses:
Investment Adviser fees (note 3) ..................... $ 518,802
Administrator fees (note 3) .......................... 963,495
Distribution and service fees (note 3) ............... 867,073
Transfer and shareholder servicing agent fees ........ 224,629
Trustees' fees and expenses (note 8) ................. 71,281
Legal fees (note 3) .................................. 60,116
Shareholders' reports and proxy statements ........... 47,715
Insurance ............................................ 23,342
Custodian fees (note 6) ............................. 21,929
Registration fees and dues ........................... 17,983
Auditing and tax fees ................................ 11,482
Chief compliance officer (note 3) .................... 2,158
Miscellaneous ........................................ 20,789
------------
2,850,794
Expenses paid indirectly (note 6) .................... (1,998)
------------
Net expenses ......................................... 2,848,796
------------
Net investment income ................................ 11,918,762
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain (loss) from securities transactions (649,396)
Change in unrealized appreciation on investments ..... 17,870,700
------------
Net realized and unrealized gain (loss) on investments 17,221,304
------------
Net change in net assets resulting from operations ... $ 29,140,066
============
See accompanying notes to financial statements.
HAWAIIAN TAX-FREE TRUST
STATEMENTS OF CHANGES IN NET ASSETS
Six Months Ended
September 30, 2009 Year Ended
(unaudited) March 31, 2009
------------------ ------------------
OPERATIONS:
Net investment income ............................... $ 11,918,762 $ 26,171,504
Net realized gain (loss) from securities transactions (649,396) (2,652,004)
Change in unrealized appreciation on investments .... 17,870,700 6,350,206
------------------ ------------------
Net change in net assets resulting from operations .. 29,140,066 29,869,706
------------------ ------------------
DISTRIBUTIONS TO SHAREHOLDERS (note 10):
Class A Shares:
Net investment income ............................... (10,915,409) (24,028,313)
Class C Shares:
Net investment income ............................... (474,909) (944,768)
Class Y Shares:
Net investment income ............................... (528,444) (1,198,423)
------------------ ------------------
Change in net assets from distributions ............. (11,918,762) (26,171,504)
------------------ ------------------
CAPITAL SHARE TRANSACTIONS (note 7):
Proceeds from shares sold ........................... 54,725,100 83,043,846
Reinvested dividends and distributions .............. 6,528,258 14,291,379
Cost of shares redeemed ............................. (31,076,911) (74,338,238)
------------------ ------------------
Change in net assets from capital share transactions 30,176,447 22,996,987
------------------ ------------------
Change in net assets ........................ 47,397,751 26,695,189
NET ASSETS:
Beginning of period ................................. 720,145,006 693,449,817
------------------ ------------------
End of period ....................................... $ 767,542,757 $ 720,145,006
================== ==================
See accompanying notes to financial statements.
HAWAIIAN TAX-FREE TRUST
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2009 (UNAUDITED)
1. ORGANIZATION
Hawaiian Tax-Free Trust (the "Trust"), a non-diversified, open-end
investment company, was organized on May 7, 1984, as a Massachusetts business
trust and commenced operations on February 20, 1985. The Trust is authorized to
issue an unlimited number of shares and, from its inception to April 1, 1996,
offered only one class of shares. On that date, the Trust began offering two
additional classes of shares, Class C and Class Y Shares. All shares outstanding
prior to that date were designated as Class A Shares and are sold with a
front-payment sales charge and bear an annual distribution fee. Class C Shares
are sold with a level-payment sales charge with no payment at time of purchase
but level service and distribution fees from date of purchase through a period
of six years thereafter. A contingent deferred sales charge of 1% is assessed to
any Class C shareholder who redeems shares of this Class within one year from
the date of purchase. Class C Shares, together with a pro-rata portion of all
Class C Shares acquired through reinvestment of dividends and other
distributions paid in additional Class C Shares, automatically convert to Class
A Shares after 6 years. The Class Y Shares are only offered to institutions
acting for an investor in a fiduciary, advisory, agency, custodial or similar
capacity and are not offered directly to retail investors. Class Y Shares are
sold at net asset value without any sales charge, redemption fees, contingent
deferred sales charge or distribution or service fees. On July 21, 1998, the
Trust established Class I Shares, which are offered and sold only through
financial intermediaries and are not offered directly to retail investors. 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 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 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 (details of which can be found in the schedule of
investments), used to value the Trust's net assets as of September 30,
2009:
VALUATION INPUTS INVESTMENTS IN SECURITIES
---------------- -------------------------
Level 1 - Quoted Prices ..................... $ --
Level 2 - Other Significant Observable Inputs
Municipal Bonds ..................... 698,923,256
Level 3 - Significant Unobservable Inputs ... --
------------
Total ....................................... $698,923,256
============
c) ACCOUNTING PRONOUNCEMENTS: 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. The adoption of FSP 157-4 did not have an impact on the Trust's
financial statements and the Trust has made the required additional
disclosures.
In May 2009, the FASB issued SFAS No. 165, "Subsequent Events" (SFAS No.
165). The Trust adopted SFAS No. 165 which requires an entity to recognize
in the financial statements the effects of all subsequent events that
provide additional evidence about conditions that existed at the date of
the balance sheet. For non-recognized subsequent events that must be
disclosed to keep financial statements from being misleading, an entity is
required to disclose the nature of the event as well as an estimate of its
financial effect, or a statement that such an estimate cannot be made. In
addition, SFAS No. 165 requires an entity to disclose the date through
which subsequent events have been evaluated. The Trust has evaluated
subsequent events through the issuance of its financial statements on
November 23, 2009.
The Trust has adopted the provisions of Statement of Financial Accounting
Standards No. 161, "Disclosures about Derivative Instruments and Hedging
Activities" ("SFAS 161"), effective June 30, 2009. SFAS 161 requires
enhanced disclosures about a fund's derivative and hedging activities,
including how such activities are accounted for and their effect on a
fund's financial position, performance and cash flows. The Trust does not
invest in derivative instruments or engage in hedging activities. As a
result, SFAS 161 did not impact the Trust's financial statements.
d) 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.
e) 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 adopted 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.
f) 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.
g) 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.
h) 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.
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
six months ended September 30, 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
distribution 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
distribution fee at the annual rate of 0.20% of the Trust's average net assets
represented by Class A Shares. For the six months ended September 30, 2009,
service fees on Class A Shares amounted to $671,414 of which the Distributor
retained $33,601.
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 six months ended September 30, 2009, amounted to $146,744. 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 six months ended September 30, 2009, amounted to
$48,915. The total of these payments made with respect to Class C Shares
amounted to $195,659 of which the Distributor retained $38,357.
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 six months ended September 30, 2009, total commissions
on sales of Class A Shares amounted to $745,215, of which the Distributor
received $67,617.
c) OTHER RELATED PARTY TRANSACTIONS:
For the six months ended September 30, 2009, the Trust incurred $60,023 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 six months ended September 30, 2009, purchases of securities
and proceeds from the sales of securities aggregated $62,255,529, and
$61,971,590, respectively.
At September 30, 2009, the aggregate tax cost for all securites was
$661,638,141. At September 30, 2009, the aggregate gross unrealized appreciation
for all securities in which there is an excess of value over tax cost amounted
to $37,950,086 and aggregate gross unrealized depreciation for all securities in
which there is an excess of tax cost over value amounted to $664,971 for a net
unrealized appreciation of $37,285,115.
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:
SIX MONTHS ENDED
SEPTEMBER 30, 2009 YEAR ENDED
(UNAUDITED) MARCH 31, 2009
----------------------------- -----------------------------
SHARES AMOUNT SHARES AMOUNT
------------ ------------ ------------ ------------
CLASS A SHARES:
Proceeds from shares sold 3,381,697 $ 38,176,036 5,712,522 $ 63,202,155
Reinvested distributions 547,257 6,188,366 1,227,268 13,568,739
Cost of shares redeemed . (2,239,466) (25,268,701) (5,407,984) (59,401,745)
------------ ------------ ------------ ------------
Net change .............. 1,689,488 19,095,701 1,531,806 17,369,149
------------ ------------ ------------ ------------
CLASS C SHARES:
Proceeds from shares sold 1,156,946 13,061,623 1,069,537 11,877,503
Reinvested distributions 22,165 250,507 46,720 516,072
Cost of shares redeemed . (280,910) (3,164,843) (775,037) (8,542,960)
------------ ------------ ------------ ------------
Net change ...... 898,201 10,147,287 341,220 3,850,615
------------ ------------ ------------ ------------
CLASS Y SHARES:
Proceeds from shares sold 309,309 3,487,441 713,237 7,941,203
Reinvested distributions 7,917 89,385 20,755 229,553
Cost of shares redeemed . (234,482) (2,643,367) (578,910) (6,393,533)
------------ ------------ ------------ ------------
Net change ...... 82,744 933,459 155,082 1,777,223
------------ ------------ ------------ ------------
Total transactions in Trust
shares .................. 2,670,433 $ 30,176,447 2,028,108 $ 22,996,987
============ ============ ============ ============
8. TRUSTEES' FEES AND EXPENSES
At September 30, 2009 there were 8 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 six months ended September 30, 2009
was $59,826, 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
six months ended September 30, 2009, such meeting-related expenses amounted to
$11,455.
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. ONGOING DEVELOPMENT
Since December 2007, municipal bond insurance companies have been under
review by the three major rating agencies: Standard & Poor's, Moody's and Fitch.
The ratings of most of the insurance companies have 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
----------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED MARCH 31,
9/30/09 ------------------------------------------------------------
(UNAUDITED) 2009 2008 2007 2006 2005
-------- -------- -------- -------- -------- --------
Net asset value, beginning of period ............... $ 11.21 $ 11.15 $ 11.33 $ 11.32 $ 11.51 $ 11.83
-------- -------- -------- -------- -------- --------
Income (loss) from investment operations:
Net investment income + .................... 0.18 0.42 0.46 0.46 0.43 0.45
Net gain (loss) on securities (both realized
and unrealized) .................... 0.26 0.06 (0.18) 0.02 (0.18) (0.30)
-------- -------- -------- -------- -------- --------
Total from investment operations ........... 0.44 0.48 0.28 0.48 0.25 0.15
-------- -------- -------- -------- -------- --------
Less distributions (note 10):
Dividends from net investment income ....... (0.18) (0.42) 0.46 (0.46) (0.43) (0.45)
Distributions from capital gains ........... -- -- -- (0.01) (0.01) (0.02)
-------- -------- -------- -------- -------- --------
Total distributions ........................ (0.18) (0.42) (0.46) (0.47) (0.44) (0.47)
-------- -------- -------- -------- -------- --------
Net asset value, end of period ..................... $ 11.47 $ 11.21 $ 11.15 $ 11.33 $ 11.32 $ 11.51
======== ======== ======== ======== ======== ========
Total return (not reflecting sales charge) ......... 4.00%* 4.43% 2.49% 4.28% 2.19% 1.33%
Ratios/supplemental data
Net assets, end of period (in millions) .... $ 691 $ 656 $ 636 $ 645 $ 666 $ 681
Ratio of expenses to average net assets .... 0.74%** 0.75% 0.75% 0.75% 0.74% 0.74%
Ratio of net investment income to average
net assets ......................... 3.25%** 3.80% 4.06% 3.99% 3.76% 3.90%
Portfolio turnover rate .................... 9%* 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 .... 0.73%** 0.74% 0.75% 0.75% 0.74% 0.74%
- ----------
+ Per share amounts have been calculated using the monthly average shares
method.
* Not annualized.
** Annualized.
See accompanying notes to financial statements.
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
Class C Class Y
Six Months Six Months
Ended Ended
9/30/09 Year Ended March 31, 9/30/09 Year Ended March 31,
CLASS C
----------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED MARCH 31,
9/30/09 ------------------------------------------------------------
(UNAUDITED) 2009 2008 2007 2006 2005
-------- -------- -------- -------- -------- --------
Net asset value, beginning of period .......... $ 11.20 $ 11.14 $ 11.33 $ 11.31 $ 11.50 $ 11.82
-------- -------- -------- -------- -------- --------
Income (loss) from investment operations:
Net investment income + ............... 0.14 0.33 0.37 0.36 0.34 0.36
Net gain (loss) on securities (both
realized and unrealized) ...... 0.26 0.06 (0.19) 0.03 (0.18) (0.30)
-------- -------- -------- -------- -------- --------
Total from investment operations ...... 0.40 0.39 0.18 0.39 0.16 0.06
-------- -------- -------- -------- -------- --------
Less distributions (note 10):
Dividends from net investment income .. (0.14) (0.33) (0.37) (0.36) (0.34) (0.36)
Distributions from capital gains ...... -- -- -- (0.01) (0.01) (0.02)
-------- -------- -------- -------- -------- --------
Total distributions ................... (0.14) (0.33) (0.37) (0.37) (0.35) (0.38)
-------- -------- -------- -------- -------- --------
Net asset value, end of period ................ $ 11.46 $ 11.20 $ 11.14 $ 11.33 $ 11.31 $ 11.50
======== ======== ======== ======== ======== ========
Total return (not reflecting sales charge) .... 3.58%* 3.60% 1.59% 3.55% 1.37% 0.53%
Ratios/supplemental data
Net assets, end of period (in millions) $ 45.3 $ 34.2 $ 30.2 $ 35.6 $ 36.7 $ 37.6
Ratio of expenses to average net assets 1.53%** 1.55% 1.55% 1.55% 1.54% 1.54%
Ratio of net investment income to
average net assets ............ 2.43%** 2.99% 3.26% 3.19% 2.96% 3.10%
Portfolio turnover rate ............... 9%* 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 1.53%** 1.54% 1.55% 1.55% 1.54% 1.54%
CLASS Y
----------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED MARCH 31,
9/30/09 ------------------------------------------------------------
(UNAUDITED) 2009 2008 2007 2006 2005
-------- -------- -------- -------- -------- --------
Net asset value, beginning of period .......... $ 11.23 $ 11.17 $ 11.35 $ 11.34 $ 11.52 $ 11.84
-------- -------- -------- -------- -------- --------
Income (loss) from investment operations:
Net investment income + ............... 0.20 0.44 0.48 0.48 0.46 0.48
Net gain (loss) on securities (both
realized and unrealized) ...... 0.26 0.06 (0.18) 0.02 (0.18) (0.30)
-------- -------- -------- -------- -------- --------
Total from investment operations ...... 0.46 0.50 0.30 0.50 0.28 0.18
-------- -------- -------- -------- -------- --------
Less distributions (note 10):
Dividends from net investment income .. (0.20) (0.44) (0.48) (0.48) (0.45) (0.48)
Distributions from capital gains ...... -- -- -- (0.01) (0.01) (0.02)
-------- -------- -------- -------- -------- --------
Total distributions ................... (0.20) (0.44) (0.48) (0.49) (0.46) (0.50)
-------- -------- -------- -------- -------- --------
Net asset value, end of period ................ $ 11.49 $ 11.23 $ 11.17 $ 11.35 $ 11.34 $ 11.52
======== ======== ======== ======== ======== ========
Total return (not reflecting sales charge) .... 4.10%* 4.64% 2.70% 4.49% 2.48% 1.54%
Ratios/supplemental data
Net assets, end of period (in millions) $ 31.3 $ 29.6 $ 27.7 $ 22.8 $ 18.5 $ 20.7
Ratio of expenses to average net assets 0.54%** 0.55% 0.55% 0.55% 0.54% 0.54%
Ratio of net investment income to
average net assets ............ 3.45%** 4.00% 4.26% 4.19% 3.96% 4.09%
Portfolio turnover rate ............... 9%* 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%** 0.54% 0.55% 0.55% 0.54% 0.54%
- ----------
+ Per share amounts have been calculated using the monthly average shares
method.
* Not annualized.
** Annualized.
See accompanying notes to financial statements.
ANALYSIS OF EXPENSES (UNAUDITED)
As a shareholder of the Trust, you may incur two types of costs: (1)
transaction costs, including front-end sales charges with respect to Class A
shares or contingent deferred sales charges ("CDSC") with respect to Class C
shares; and (2) ongoing costs, including management fees; distribution and/or
service (12b-1) fees; and other Trust expenses. The 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 April 1,
2009 and held for the six months ended September 30, 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 SEPTEMBER 30, 2009
ACTUAL
TOTAL RETURN BEGINNING ENDING EXPENSES
WITHOUT ACCOUNT ACCOUNT PAID DURING
SALES CHARGES(1) VALUE VALUE THE PERIOD(2)
- --------------------------------------------------------------------------------
Class A 4.00% $1,000.00 $1,040.00 $3.73
- --------------------------------------------------------------------------------
Class C 3.58% $1,000.00 $1,035.80 $7.81
- --------------------------------------------------------------------------------
Class Y 4.10% $1,000.00 $1,041.00 $2.76
- --------------------------------------------------------------------------------
(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 0.73%, 1.53% AND
0.54% FOR THE TRUST'S CLASS A, C AND Y SHARES, RESPECTIVELY, MULTIPLIED BY
THE AVERAGE ACCOUNT VALUE OVER THE PERIOD, MULTIPLIED BY 183/365 (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 SEPTEMBER 30, 2009
HYPOTHETICAL
ANNUALIZED BEGINNING ENDING EXPENSES
TOTAL ACCOUNT ACCOUNT PAID DURING
RETURN VALUE VALUE THE PERIOD(1)
- --------------------------------------------------------------------------------
Class A 5.00% $1,000.00 $1,021.41 $3.70
- --------------------------------------------------------------------------------
Class C 5.00% $1,000.00 $1,017.40 $7.74
- --------------------------------------------------------------------------------
Class Y 5.00% $1,000.00 $1,022.36 $2.74
- --------------------------------------------------------------------------------
(1) EXPENSES ARE EQUAL TO THE ANNUALIZED EXPENSE RATIO OF 0.73%, 1.53% AND
0.54% FOR THE TRUST'S CLASS A, C AND Y SHARES, RESPECTIVELY, MULTIPLIED BY
THE AVERAGE ACCOUNT VALUE OVER THE PERIOD, MULTIPLIED BY 183/365 (TO
REFLECT THE ONE-HALF YEAR PERIOD).
SHAREHOLDER MEETING RESULTS (UNAUDITED)
The Annual Meeting of Shareholders of the Hawaiian Tax-Free Trust (the
"Trust") was held on September 24, 2009. The holders of shares representing 77%
of the total net asset value of the shares entitled to vote were present in
person or by proxy. At the meeting, the following matters were voted upon and
approved by the shareholders (the resulting votes are presented below).
1. To elect Trustees.
DOLLAR AMOUNT OF VOTES:
-----------------------
TRUSTEE FOR WITHHELD
------- --- --------
Thomas W. Courtney $557,649,142 $ 5,574,957
Diana P. Herrmann $558,460,470 $ 4,763,618
Stanley W. Hong $556,477,286 $ 6,746,813
Richard L. Humphreys $558,192,846 $ 5,031,241
Bert A. Kobayashi, Jr. $557,496,081 $ 5,728,027
Theodore T. Mason $558,802,742 $ 4,421,323
Glenn P. O'Flaherty $557,420,696 $ 5,803,392
Russell K. Okata $552,911,834 $ 10,312,254
2. To ratify the selection of Tait, Weller & Baker LLP as the Trust's
independent registered public accounting firm.
DOLLAR AMOUNT OF VOTES:
-----------------------
FOR AGAINST ABSTAIN
--- ------- -------
$555,739,666 $932,277 $6,552,146
ADDITIONAL INFORMATION (UNAUDITED)
RENEWAL OF THE INVESTMENT ADVISORY AGREEMENT
Renewal until June 30, 2010 of the Investment Advisory Agreement (the
"Advisory Agreement") between the Trust and the Adviser was approved by the
Board of Trustees and the independent Trustees in May, 2009. At a meeting called
and held for the foregoing purpose at which a majority of the independent
Trustees were present in person, the following materials were considered:
o Copies of the agreement to be renewed;
o A term sheet describing the material terms of the agreement;
o The Annual Report of the Trust for the year ended March 31, 2009;
o A report, prepared by the Adviser and Administrator and provided to
the Trustees for the Trustees' review, containing data about the
performance of the Trust, data about its fees, expenses and
purchases and redemptions of capital shares together with
comparisons of such data with similar data about other comparable
funds, as well as data as to the profitability of the Adviser and
the Administrator; and
o Quarterly materials reviewed at prior meetings on the Trust's
performance, operations, portfolio and compliance.
The Trustees reviewed materials relevant to, and considered, the following
factors.
THE NATURE, EXTENT, AND QUALITY OF THE SERVICES PROVIDED BY THE ADVISER.
The Adviser has employed Mr. Stephen K. Rodgers as portfolio manager for
the Trust and has provided facilities for credit analysis of the Trust's
portfolio securities. Mr. Rodgers, based in Honolulu, has provided local
information regarding specific holdings in the Trust's portfolio. The portfolio
manager has also been available to and has met with the brokerage and financial
planner community and with investors and prospective investors to provide them
with information generally about the Trust's portfolio, with which to assess the
Trust as an investment vehicle for residents of Hawaii in light of prevailing
interest rates and local economic conditions. In addition, he has been present
at all regular meetings of the Board and Shareholders.
The Board considered that the Adviser had provided all services the Board
deemed necessary or appropriate, including the specific services that the Board
has determined are required for the Trust, given that its purpose is to provide
shareholders with as high a level of current income exempt from Hawaii state and
regular Federal income taxes as is consistent with preservation of capital.
The Board concluded that the services provided were appropriate and
satisfactory and that the Trust would be well served if they continued.
Evaluation of this factor weighed in favor of renewal of the Advisory Agreement.
THE INVESTMENT PERFORMANCE OF THE TRUST AND ADVISER.
The Board reviewed each aspect of the Trust's performance and compared its
performance with that of 1) its local competitors, 2) single-state intermediate
municipal bond funds of similar duration and quality, and 3) a benchmark index.
It was noted that the materials provided by the Adviser indicated that compared
to the four competitive Hawaii funds, the Trust has had investment performance
that is generally higher compared to that of its peers and compared to an
average of investment performance of similarly-managed funds with the like
duration and quality portfolio characteristics for one-, three-, five- and
ten-year periods. Furthermore, the Trustees noted that the Trust's net asset
value generally fluctuated modestly compared to the four competitive Hawaii
funds over the past one-, three- and five- year periods. The Board considered
these results to be consistent with the purposes of the Trust.
The Board concluded that the performance of the Trust was good, in light
of market conditions, the length of its average maturities, its investment
objectives and its long-standing emphasis on minimizing risk. Evaluation of this
factor indicated to the Trustees that renewal of the Advisory Agreement would be
appropriate.
THE COSTS OF THE SERVICES TO BE PROVIDED AND PROFITS TO BE REALIZED BY THE
ADVISER AND ITS AFFILIATES FROM THE RELATIONSHIP WITH THE TRUST.
The information provided contained expense data for the Trust and its
competitors as well as data for all single-state tax-free municipal bond funds
nationwide, including data for all such front-end sales charge funds of a
comparable asset size. The materials also showed the profitability to the
Adviser of its services to the Trust.
The Board compared the expense and fee data with respect to the Trust to
similar data about other funds that it found to be relevant. The Board concluded
that the expenses of the Trust and the fees paid were similar to and were
reasonable as compared to those being paid by single-state tax-free municipal
bond funds nationwide, and by the Trust's local competitors.
The Board further concluded that the profitability to the Adviser did not
argue against approval of the fees to be paid under the Advisory Agreement.
THE EXTENT TO WHICH ECONOMIES OF SCALE WOULD BE REALIZED AS THE TRUST GROWS.
Data provided to the Trustees showed that the Trust's asset size had
increased in recent months after several years of general decline. They observed
that the extraordinary recent turbulence in the financial markets might make it
difficult to achieve substantial growth in assets in the near future. The
Trustees also noted that the materials indicated that the Trust's fees were
already generally lower than those of its peers, including those with
breakpoints. Evaluation of this factor indicated to the Board that the Advisory
Agreement should be renewed without addition of breakpoints at this time.
BENEFITS DERIVED OR TO BE DERIVED BY THE ADVISER AND ITS AFFILIATES FROM THE
RELATIONSHIP WITH THE TRUST.
The Board observed that, as is generally true of most fund complexes, the
Adviser and its affiliates, by providing services to a number of funds or other
investment clients including the Trust, were able to spread costs as they would
otherwise be unable to do. The Board noted that while that produces efficiencies
and increased profitability for the Adviser and its affiliates, it also makes
their services available to the Trust at favorable levels of quality and cost
which are more advantageous to the Trust than would otherwise have been
possible.
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 your Trust's entire list of portfolio securities twice a
year in the semi-annual and annual reports you receive. Additionally, under
Trust policies, the Administrator publicly discloses the complete schedule of
the Trust's portfolio holdings, as of each calendar quarter, generally by the
15th day after the end of each calendar quarter. Such information remains
accessible until the next schedule is made publicly available. You may obtain a
copy of the Trust's portfolio holding schedule for the most recently completed
period by visiting the Trust's website at WWW.AQUILAFUNDS.COM. The Trust also
discloses its five largest holdings by value as of the close of the last
business day of each calendar month in a posting to its website on the 5th
business day following the month end. This information remains on the website
until the next such posting. Whenever you wish to see a listing of your Trust's
portfolio other than in your shareholder reports, please check our website at
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 quarter ends of each fiscal year on Form
N-Q. Forms N-Q are available free of charge on the SEC website at WWW.SEC.GOV.
You may also review or, for a fee, copy the forms at the SEC's Public Reference
Room in Washington, D.C. or by calling 1-800-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, 2009 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
WWW.SEC.GOV.
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
Richard L. Humphreys
Bert A. Kobayashi, Jr.
Glenn P. O'Flaherty
Russell K. Okata
OFFICERS
Diana P. Herrmann, President
Maryann Bruce, Senior Vice 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, OH 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.
Not applicable
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
Not applicable
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
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 filing 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)(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
December 3, 2009
By: /s/ Joseph P. DiMaggio
- ------------------------------------
Chief Financial Officer and Treasurer
December 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
December 3, 2009
By: /s/ Joseph P. DiMaggio
- ------------------------------------
Joseph P. DiMaggio
Chief Financial Officer and Treasurer
December 3, 2009
HAWAIIAN TAX-FREE TRUST
EXHIBIT INDEX
(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.