INVESTMENT ADVISER
HAWAIIAN TRUST COMPANY, LIMITED
Financial Plaza of the Pacific
P.O. Box 3170
Honolulu, Hawaii 96802
ADMINISTRATOR AND FOUNDER
AQUILA MANAGEMENT CORPORATION
380 Madison Avenue, Suite 2300
New York, New York 10017
BOARD OF TRUSTEES
Lacy B. Herrmann, Chairman
Vernon R. Alden
Arthur K. Carlson
William M. Cole
Thomas W. Courtney
Richard W. Gushman, II
Stanley W. Hong
Theodore T. Mason
Russell K. Okata
Douglas Philpotts
Oswald K. Stender
OFFICERS
Lacy B. Herrmann, President
Sherri Foster, Senior Vice President
William C. Wallace, Senior Vice President
Rose F. Marotta, Chief Financial Officer
Richard F. West, Treasurer
Edward M.W. Hines, Secretary
DISTRIBUTOR
AQUILA DISTRIBUTORS, INC.
380 Madison Avenue, Suite 2300
New York, New York 10017
CUSTODIAN
BANK ONE TRUST COMPANY, N.A.
100 East Broad Street
Columbus, Ohio 43271
TRANSFER AND SHAREHOLDER SERVICING AGENT
ADMINISTRATIVE DATA
MANAGEMENT CORP.
581 Main Street
Woodbridge, New Jersey 07095-1198
INDEPENDENT AUDITORS
KPMG PEAT MARWICK LLP
345 Park Avenue
New York, New York 10154
Further information is contained in the Prospectus,
which must precede or accompany this report.
<PAGE>
ANNUAL
REPORT
MARCH 31, 1996
HAWAIIAN
TAX-FREE
TRUST
A TAX-FREE INCOME INVESTMENT
[Logo of Hawaiian Tax-Free Trust-a palm tree in front of a circle which has
an island and water within it]
One of the
AQUILAsm Group of Funds
[Logo of Hawaiian Tax-Free Trust-a palm tree in front of a circle which has
an island and water within it]
SERVING HAWAII INVESTORS FOR OVER A DECADE
HAWAIIAN TAX-FREE TRUST
ANNUAL REPORT
"GETTING WHAT YOU PAY FOR"
May 20, 1996
Dear Investor:
Think about this for a few moments. Whenever you purchase
something - a product or a service - you always devote some attention to
whether you are getting what you pay for. This query as to value translates
into examination of the various elements and features of the product or
service, such as: quality, dependability, consistency of performance, and
convenience.
This very same value examination of elements and features should
also apply to any investments you might make.
That is why we believe it is important to devote this particular
Annual Report letter to reviewing what you are getting through the investment
in Hawaiian Tax-Free Trust that you paid for.
WHAT HAWAIIAN TAX-FREE TRUST PROVIDES
When you and other shareholders in Hawaiian Tax-Free Trust
acquired your investments in the Trust, the elements and features that we
believe you sought to achieve are:
* a high level of tax-free income,
* a high level of preservation of your capital,
* a high level of share stability with your investment, and
* conveniences in how your investment is handled.
Thus, management of the Trust has consistently worked hard to
provide these elements and features to you - throughout the constantly
changing economic and securities market conditions existent since the Trust
commenced operations in February, 1985.
Let's look at how Hawaiian Tax-Free Trust has performed since the
Trust's inception and specifically over the past fiscal year.
RATE OF RETURN
Over the life of the Trust considerable attention has been paid
to trying to provide shareholders with as HIGH A LEVEL OF DOUBLE TAX-FREE
income as practicable, commensurate with the degree of capital preservation
we strive to achieve.
We believe that this goal has been well attained over the years.
The following chart shows the average level of DOUBLE TAX-FREE
income distributed to shareholders over the past fiscal year, as measured
against the maximum public offering price.
[Graphic of Bar Chart with the following information:]
<TABLE>
<CAPTION>
HAWAIIAN TAX-FREE TRUST'S DOUBLE TAX-FREE DISTRIBUTION RATE AS COMPARED TO
THE TAXABLE EQUIVALENT RATE AN INVESTOR WOULD HAVE TO EARN AT VARIOUS TAX
BRACKETS
Tax Bracket Taxable Equivalent Rate Double Tax-Free Equivalent Rate
<S> <C> <C>
28% 7.89% 5.11%
31% 8.23% 5.11%
36% 8.87% 5.11%
39.6% 9.40% 5.11%
</TABLE>
As you will note from this chart, the bottom bar shows the
average DOUBLE TAX-FREE rate of return distributed by the Trust over the past
fiscal year. The top bar shows the level of taxable return that one would
have had to achieve in order to match this DOUBLE TAX-FREE level, at each
Federal income tax bracket - e.g., those investors in the 31% Federal income
tax bracket plus State of Hawaii income tax would have had to earn 8.23% from
a taxable investment in order to match the 5.11% DOUBLE TAX-FREE return
distributed by the Trust.
It is important to note that it would not have been possible over
the twelve-month period, from April 1, 1995 through March 31, 1996, of
Hawaiian Tax-Free Trust's past fiscal year to find fixed-income investments
of a taxable nature that would produce the same level of after-tax return
achieved by the Trust, unless one settled for a much lower quality and higher
risk investment.
QUALITY OF THE TRUST'S PORTFOLIO
As we have stressed to shareholders over the years, preservation
and safety of investors' capital is one of our foremost goals. Quality with
individual investments is the most important ingredient in providing the
means to this end.
That is why the investment portfolio of Hawaiian Tax-Free Trust
has been constructed with such a high quality orientation. Of the nine
separate credit ratings assignable to municipal securities by the
nationally-renown credit rating services, we have specifically limited the
Trust's investments to ONLY THE TOP FOUR RATINGS - AAA, AA, A, AND BAA.
While high creditworthiness of securities in the Trust's
portfolio has always been emphasized, the budgetary and economic situation in
Hawaii in recent years has intensified our concerns. Accordingly, we have
taken very specific action in the quality construction of the Trust's
investment portfolio for your benefit and that of all shareholders.
It is important for you to know that at the Trust's fiscal
year-end, March 31, 1996, over 75% of the investments in the portfolio were
rated AAA - the very highest credit rating assignable. The rating of the
portfolio is in the process of being further upgraded, so that shortly
approximately 80% of the Trust's investments will be AAA. Moreover, a
sizeable portion of the Trust's overall investments are insured by
nationally-renown specialized insurance companies as additional protection
for timely payment of principal and interest when due. The credit rating,
with the balance of the portfolio, is primarily AA.
This represents EXCEPTIONALLY HIGH QUALITY investment standards
and, therefore, a high level of safety for your invested capital.
[Graphic of Pie Chart with the following information:]
<TABLE>
<CAPTION>
PORTFOLIO DISTRIBUTION BY QUALITY
(BY CREDIT RATING)
AS OF MARCH 31, 1996
<S> <C>
AAA 75.5%
AA 14.2%
A 3.6%
Below A & Not Rated* 6.7%
<FN>
* ANY SECURITY NOT RATED MUST BE 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.
</FN>
</TABLE>
You should be conscious of the fact that a key element in the
assigning of credit ratings to municipal securities by nationally-renown
rating services is the level of cash flow that a municipality and its
municipal issues possess in order to ensure timely repayment of principal and
payment of interest when due. Consequently, with the high credit rating
level the Trust offers, preservation of shareholders' capital is very high.
Moreover, you should be aware that the Trust's Investment
Adviser, Hawaiian Trust Company, Ltd., is constantly reviewing each and every
security in the portfolio as to ALL aspects of creditworthiness. The Board
of Trustees and management of Hawaiian Tax-Free Trust want all shareholders
to have the comfort of "SLEEPING WELL AT NIGHT" knowing that very close
attention is being paid to their investments in the Trust.
SHARE PRICE STABILITY
Hawaiian Tax-Free Trust was created as a long-term investment for
its shareholders. As such, it has portfolio securities with various
maturities. Some securities have very short maturities, while others extend
up to 25 - 30 years. Thus, as changes take place in the marketplace, the
price of the Trust's shares can and will fluctuate.
Nevertheless, a key goal that management has consistently adhered
to is to provide shareholders with as HIGH A LEVEL OF SHARE PRICE STABILITY
as is practicable to achieve over a reasonable time period. Accomplishment
of this goal involves not only emphasizing a blend of differing maturities
with portfolio investments and high quality in security selection, but also
broad diversification among individual municipal issues. Through such
approach, the Trust's share price tends to even out over time.
The following chart illustrates the performance of the Trust's
share price since its inception on February 20, 1985. Viewed over such time
span, one can clearly see that the share price of the Trust has been highly
stable, despite the varying market conditions that existed on a short-term
basis over different year periods since the Trust's inception.
[Graphic of Bar Chart with the following information:]
<TABLE>
<CAPTION>
SHARE NET ASSET VALUE (IN DOLLARS)
<S> <C>
2/21/85 $9.60
3/31/85 $9.53
9/30/85 $10.11
3/31/86 $10.94
9/30/86 $10.88
3/31/87 $11.14
9/30/87 $10.19
3/31/88 $10.60
9/30/88 $10.66
3/31/89 $10.60
9/30/89 $10.75
3/31/90 $10.78
9/30/90 $10.62
3/31/91 $10.85
9/30/91 $11.06
3/31/92 $11.10
9/30/92 $11.37
3/31/93 $11.61
9/30/93 $11.91
3/31/94 $11.19
9/30/94 $11.03
3/31/95 $11.13
9/30/95 $11.35
3/31/96 $11.31
</TABLE>
CONVENIENCES
Hawaiian Tax-Free Trust provides investors with CONVENIENCES THAT
TAKE MANY FORMS. Some of the more significant ones include:
* providing a HIGHLY-DIVERSIFIED PORTFOLIO with an initial
investment of as little as ONLY $1,000; (Most individual municipal
securities are in denominations of $5,000 or more, thus requiring a
sizeable dollar amount if one were to create his/her own diversified
portfolio.)
* MONTHLY DIVIDENDS, thereby providing a regular and
continuous stream of income for investors in the Trust; (Municipal
securities purchased directly make interest payments only once every
six months.)
* PROFESSIONAL INVESTMENT MANAGEMENT on a continuous basis
researching and overseeing creditworthiness of each security in the
portfolio; (If one were investing on his/her own, this would have to
be done by the investor or by someone else having requisite knowledge
and experience.)
* RELIEF FROM HAVING TO DEAL WITH MUNICIPAL SECURITIES THAT
ARE "CALLED" by issuers prior to their redemption date - the Trust
automatically reinvests the proceeds of any "called" securities into
other investments; (Investors in individual municipal securities have
to be ever vigilant to make certain that their securities are not
being called, thereby interrupting the flow of interest payments to
them.)
* and, PROVIDING MONTHLY STATEMENTS of an investor's account
AS WELL AS A SEMI-ANNUAL AND ANNUAL REPORT detailing the progress of
the Trust. (Individual municipal securities generally provide very
little, if any, information to investors on an ongoing basis.)
______________________________
Viewed altogether, in a very objective manner, we believe the
various elements and features that Hawaiian Tax-Free Trust provides to
shareholders has offered you considerable value as an investment product over
this past fiscal year as well as since its inception.
Moreover, combining the individual investments of the numerous
Hawaii residents who are shareholders in the Trust into a sizeable pool of
capital has enabled Hawaiian Tax-Free Trust to become a force of significant
good for the State of Hawaii and its various communities through the Trust's
ability to finance a wide variety of vital public-purpose municipal projects
throughout the islands. These projects have aided the economic development
of Hawaii as well as improved the quality of life for Hawaii residents.
A LITTLE PERSPECTIVE
The action of the stock market during 1995 and to date in 1996
has generated a significant amount of excitement among investors. Whenever
such activity occurs, it is always important to remember that stocks and
bonds are entirely different types of investments. They are appropriate for
different type investment objectives.
Stocks are attractive for capital growth prospects. On the other
hand, bonds are primarily used for capital preservation - and, in the case of
municipal bonds, for tax-free income.
Individual equity securities can appreciate in value
significantly during one time period and then, when a disappointing earnings
report comes out, can just as easily drop in price by 20% - 30% IN JUST ONE
DAY - particularly in the highly volatile marketplace that currently exists.
Municipal bonds, on the other hand, generally do not fluctuate in
price very significantly, unless they have long maturities or are of low
quality. Sound municipal bonds, such as those in which Hawaiian Tax-Free
Trust invests, just plod along from year to year, producing a relatively high
level of capital preservation and a consistent and relatively decent level of
tax-free income return annually.
From surveys we have conducted, we note that the vast majority of
shareholders and potential investors in the Trust are retirees or
pre-retirees, between 55 - 75 years of age. Consequently, safety of one's
capital becomes of increasingly high priority for those individuals who will
be leaving or who already have left the work force.
Therefore, with those investors having as a key investment goal
the preservation of capital and a consistent income stream, we believe that
Hawaiian Tax-Free Trust can well continue to be the investment vehicle that
could serve one best.
Indeed, we believe that Hawaiian Tax-Free Trust is an investment
that you and other shareholders can count on when a key investment goal is
the preservation of capital and a consistent income stream.
SUMMARY EVALUATION OF THE TRUST'S PERFORMANCE
In our judgment, an objective buyer's evaluation of Hawaiian
Tax-Free Trust bears out the conclusion that you do get quality,
dependability, consistency of performance, and convenience through your
investment in the Trust. This translates to the fact that WITH THE HAWAIIAN
TAX-FREE TRUST YOU ARE "GETTING WHAT YOU PAY FOR."
YOUR CONFIDENCE APPRECIATED
Management of Hawaiian Tax-Free Trust again wishes to express its
appreciation to you for the confidence you have placed in the Trust through
your investment. Every effort will continue to be made over the future to
merit your ongoing faith.
Sincerely,
/s/ Lacy B. Herrmann
Lacy B. Herrmann
President and Chairman
of the Board of Trustees
MANAGEMENT DISCUSSION OF TRUST PERFORMANCE
The graph below illustrates the value of an initial $10,000
investment in Hawaiian Tax-Free Trust at inception of the Trust in February,
1985 and subsequently through the Trust's latest fiscal year end, March 31,
1996, as compared with a hypothetical similar size investment in the Lehman
Brothers Municipal Bond Index (the "Index") of municipal securities and the
Consumer Price Index (a cost of living index) over that same period. The
total return of the Trust is shown after deduction of the maximum sales
charge of 4% at the time of initial investment, and also reflects deduction
of the Trust's annual operating expenses and reinvestment of monthly
dividends and capital gains distributions without sales charge. On the other
hand, the Index does not reflect any sales charge nor operating expenses but
does reflect reinvestment of interest.
It should also be specifically noted that the Index is nationally
oriented and consisted, over the period covered by the graph, of an unmanaged
mix of between 8,000 to 30,000 investment-grade long-term municipal
securities of issuers throughout the United States. However, the Trust's
investment portfolio consisted of a significantly lesser number of
investment-grade tax-free municipal obligations, principally of Hawaii
issuers, over the same period. The maturities, market prices, and behavior of
the individual securities in the Trust's investment portfolio can be affected
by local and regional factors which might well result in variances from the
market action of the securities in the Index.
Consequently, much of the difference in performance of the Index
versus the Trust can be attributed to the lack of application of annual
operating expenses and initial sales charge to the Index. Additionally, a
portion of the difference in performance can be attributed to the different
characteristics in the single-state market of the securities in the Trust's
portfolio as compared with the national orientation of the securities in the
Index.
Since its inception, the Trust has been managed to provide as
stable a share value as possible consistent with producing a competitive
income return to shareholders. It has not been managed for maximum total
return, since one of the aims of management in structuring the portfolio of
the Trust is to reduce fluctuations in the price of the Trust's shares
resulting from changes in interest rates.
As can be observed, however, the pattern of the Trust's results
and that of the Index over the period since inception of the Trust track
quite similarly, even though they are not entirely comparable in character.
[Graphic of Line Chart with the following information:]
<TABLE>
<CAPTION>
PERFORMANCE COMPARISON
Lehman Brothers Trust After Sales Cost of
Municipal Bond Index Charge and Expenses Living Index
<S> <C> <C> <C>
2/85 10,000 9,600 10,000
3/85 10,086 9,571 10,019
3/86 12,817 11,912 10,178
3/87 14,223 13,022 10,562
3/88 14,580 13,306 10,974
3/89 15,629 14,268 11,536
3/90 17,277 15,537 12,079
3/91 18,872 16,693 12,669
3/92 20,758 18,216 13,062
3/93 23,818 20,206 13,483
3/94 24,370 20,654 13,801
3/95 26,189 21,842 14,223
3/96 28384 23406 14625
</TABLE>
<TABLE>
<CAPTION>
Trust's average annual total return
<S> <C> <C> <C> <C>
For the Period Ended 1 5 10 Life of Trust
March 31, 1996 Year Years Years Since 2/20/85
Including Sales Charge 2.91% 5.99% 6.55% 7.95%
and Expenses
</TABLE>
MANAGEMENT DISCUSSION OF TRUST PERFORMANCE (CONTINUED)
OUR VIEW OF 1995
The calendar year 1995 was characterized by a remarkable bounce
back in performance in the bond markets. Municipal investors who stayed the
course in keeping with the long-term strategy of their bond funds through the
difficult times in 1994, were amply rewarded by this strong performance in
1995. These solid performance results occurred despite the strong challenge
posed by "Flat Tax" proposals echoing through the congressional chambers and
touted by Presidential hopefuls. While the imminence of such sweeping tax
reform may have been pushed back a few years, it is fully anticipated that
there will in the future be changes of some type to the tax code. As
Investment Adviser, Hawaiian Trust Company, Ltd., will remain highly
sensitive to market changes driven by the matter of tax change proposals as
they occur and will react to those changes in a prudent manner.
During 1995, Hawaiian Tax-Free Trust was faced not only with
national issues that had a sweeping effect on the municipal marketplace, but
also with the considerable fiscal challenges within our own home State. A
year ago, we spoke of the growing concerns over the State of Hawaii deficit.
At the close of Hawaii's 1996 legislative session, we became even more
critically aware of the additional fiscal constraints necessary and which
have yet to be fully implemented in order to maintain effective governmental
activities, without any additional burden being placed on taxpayers. The
impact of these fiscal pressures on the debt service abilities of the
municipal issuing entities of the State is of paramount concern to management
of the Trust. We have continued to be an active observer at all levels of
local government, specifically in the venue of public finance. Our regular
meetings with the rating agencies of the State's municipal securities confirm
that while Hawaii still has far to go in eliminating the deficit, the State
and counties have taken, and are continuing to take, the right steps in their
debt management policies. We feel confident that the State's governmental
officials will do everything prudent in order to maintain Hawaii's AA general
obligation rating.
One of our primary strategies is to maintain the highest credit
quality portfolio practicable while providing a high level of double
tax-exempt income. Motivated by concern for safety of shareholders'
investments, the Trust has deliberately acquired the highest percentage of
AAA-rated Hawaii municipal bonds of all the single-state-oriented municipal
funds serving Hawaii. In volatile markets - whether due to uncertainty of
interest rate direction or negative credit pressures - high quality will
always be the best defense against price volatility. The stable share price
of the Trust over its 11-year existence is the best graphic depiction of the
merits of this strategy.
LOOKING AT THE YEAR 1996
Investors have once again been tested as to their steadfastness
at the close of the first quarter of 1996. Although the specter of the "flat
tax" has abated, the economy's growth rate and the possible increasing level
of inflation have sparked a rise in interest rates. The U.S. Treasury long
bond has risen in yield by approximately 80 basis points from December of
1995 to May of 1996. For the long-term investor in Hawaiian Tax-Free Trust,
we feel that once again this represents an opportunity for new or incremental
investments at very attractive levels. Our view is that inflation is well
under control and that current high levels of debt of individuals could well
cause the consumer to slow spending. Since consumer spending represents
approximately two-thirds of our country's Gross Domestic Product, this would
be a signal for interest rates to come down over time.
Hawaiian Tax-Free Trust has always been managed with a very keen
eye toward credit quality. Going forward, we will continue this strategy in
order to protect principal and seek to provide a highly safe investment for
our shareholders.
<PAGE>
KPMG Peat Marwick LLP
Certified Public Accountants
INDEPENDENT AUDITORS' REPORT
To the Board of Trustees and Shareholders of
Hawaiian Tax-Free Trust:
We have audited the accompanying statement of assets and liabilities of
Hawaiian Tax-Free Trust, including the statement of investments, as of March
31, 1996, the related statement of operations for the year then ended, the
statements of changes in net assets for each of the years in the two-year
period then ended, and the financial highlights for each of the years in the
five-year period then ended. These financial statements and financial
highlights are the responsibility of the Trust's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. Our procedures included confirmation of
securities owned as of March 31, 1996, by correspondence with the custodian.
An audit also includes assessing the accounting principles used, and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the financial
position of Hawaiian Tax-Free Trust as of March 31, 1996, the results of its
operations for the year then ended, the changes in its net assets for each of
the years in the two-year period then ended, and the financial highlights for
each of the years in the five-year period then ended, in conformity with
generally accepted accounting principles.
KPMG Peat Marwick LLP
New York, New York
May 10, 1996
<PAGE>
<TABLE>
<CAPTION>
HAWAIIAN TAX-FREE TRUST
STATEMENT OF INVESTMENTS
MARCH 31, 1996
RATING
FACE MOODY'S/
AMOUNT HAWAII (98.5%) S&P VALUE
<C> <S> <C> <C>
Board of Regents, University
of Hawaii University Aaa/AAA
System Revenue Bonds, Series
G, AMBAC Insured,
$2,910,000 5.650%, 10/01/12 $2,884,537
4,290,000 5.700%, 10/01/17 4,220,288
Board of Regents, University
of Hawaii University Aaa/AAA
System Revenue Bonds,
Series I, FGIC Insured,
145,000 4.600%, 10/01/01 144,456
155,000 4.700%, 10/01/02 154,225
1,110,000 5.300%, 10/01/08 1,101,675
2,825,000 5.500%, 10/01/18 2,708,469
Board of Water Supply City and
County of Honolulu, Hawaii
Water System Revenue Bonds,
Series 1996, MBIA Insured, Aaa/AAA
1,090,000 5.400%, 07/01/09+ 1,081,825
1,750,000 5.800%, 07/01/16+ 1,752,188
1,500,000 5.800%, 07/01/21+ 1,494,375
City and County of Honolulu
Multifamily Housing Revenue
Bonds (Cambridge Park Project)
1988 Series A, NR/NR*
8,000,000 5.850%, 12/01/02 8,090,000
City and County of Honolulu,
Hawaii General Obligation
Bonds Series A, FGIC Insured, Aaa/AAA
5,385,000 7.300%, 07/01/03 6,165,825
2,895,000 7.350%, 07/01/05 3,383,531
4,790,000 7.350%, 07/01/06 5,622,263
9,970,000 7.350%, 07/01/07 11,826,913
3,600,000 7.350%, 07/01/08 4,261,500
2,500,000 6.000%, 01/01/12 2,634,375
City and County of Honolulu,
Hawaii General Obligation Bonds
Series 1995, MBIA Insured, Aaa/AAA
2,215,000 6.000%, 11/01/09 2,345,131
1,000,000 5.000%, 11/01/12 936,250
1,000,000 5.250%, 11/01/13 956,250
1,835,000 5.500%, 11/01/14 1,805,181
3,130,000 5.000%, 11/01/15 2,875,688
City and County of Honolulu,
Hawaii General Obligation
Bonds Series 1994A, FGIC
Insured, Aaa/AAA
1,000,000 5.700%, 04/01/09 1,033,750
4,000,000 5.750%, 04/01/11 4,075,000
3,800,000 5.750%, 04/01/13 3,909,250
City and County of Honolulu,
Hawaii General Obligation
Bonds Series 1994B, FGIC
Insured, Aaa/AAA
4,480,000 6.000%, 06/01/10 4,664,800
2,030,000 6.100%, 06/01/11 2,113,738
3,000,000 6.100%, 06/01/12 3,127,500
4,650,000 6.125%, 06/01/13 4,853,438
4,155,000 6.125%, 06/01/14 4,310,813
City and County of Honolulu
Hawaii General Obligation
Bonds, Refunding and
Improvement Series, 1993A
Fixed Rate Bonds, FGIC
Insured, Aaa/AAA
5,825,000 6.000%, 01/01/11 6,101,688
City and County of Honolulu
Hawaii General Obligation
Bonds, Refunding and
Improvement Series, 1993B
Fixed Rate Bonds, FGIC
Insured, Aaa/AAA
9,800,000 5.500%, 10/01/11 9,775,500
1,050,000 6.000%, 12/01/15 1,106,438
City and County of Honolulu,
Hawaii General Obligation
Water Bonds, Series 1992,
FGIC Insured, Aaa/AAA
1,125,000 6.000%, 12/01/12 1,179,844
City and County of Honolulu
Improvement District No. 261
(Halawa Business Park),
Improvement District Bonds, NR/NR*
365,000 6.700%, 10/15/04 407,887
355,000 6.800%, 10/15/05 400,262
345,000 6.900%, 10/15/06 389,850
City and County of Honolulu
Mortgage Revenue Refunding
Bonds, Series 1992A (FHA
Insured Mortgage Loan--Smith-
Beretania Apartments Section
8 Assisted Project), MBIA
Insured, Aaa/AAA
3,000,000 7.800%, 07/01/24 3,236,250
City and County of Honolulu
Multifamily Housing Revenue
Bonds (GNMA Collateralized -
Waipahu Towers Project) 1995
Series A, NR/AAA
3,000,000 6.900%, 06/20/35 3,123,750
Kauai County General Obligation
Bonds, MBIA Insured, Aaa/AAA
535,000 6.400%, 02/01/02 545,138
570,000 6.500%, 02/01/03 580,790
Kauai County General Obligation
Escrow to Maturity Bonds, A/NR
615,000 9.000%, 08/01/04 783,356
665,000 9.000%, 08/01/05 858,681
County of Kauai, State of Hawaii
General Obligation Refunding
Bonds, 1992 Series A,B & C,
AMBAC Insured, Aaa/AAA
270,000 4.950%, 08/01/99 274,050
845,000 4.950%, 08/01/99 861,900
155,000 5.250%, 04/01/01 159,456
295,000 5.250%, 08/01/01 303,850
930,000 5.250%, 08/01/01 959,062
330,000 5.450%, 08/01/03 343,200
1,030,000 5.450%, 08/01/03 1,073,775
435,000 5.900%, 08/01/08 455,662
1,355,000 5.900%, 08/01/08 1,427,831
1,300,000 5.950%, 08/01/10 1,356,875
County of Kauai, State of
Hawaii General Obligation
Refunding Bonds, Series
1994A & 1994B, MBIA
Insured, Aaa/AAA
145,000 5.000%, 02/01/00 147,719
110,000 5.000%, 02/01/00 112,062
170,000 5.100%, 02/01/01 173,825
365,000 5.200%, 02/01/02 375,037
185,000 5.200%, 02/01/02 190,087
460,000 5.300%, 02/01/03 474,375
190,000 5.300%, 02/01/03 195,937
185,000 5.400%, 02/01/04 191,475
215,000 5.500%, 02/01/05 222,525
215,000 5.600%, 02/01/06 222,256
1,010,000 5.700%, 02/01/07 1,049,138
Kauai County General Obligation
Public Improvement Bonds
Series 1990 Pre-Refunded
Bonds, AMBAC Insured, Aaa/AAA
780,000 7.100%, 08/01/01 866,775
960,000 7.300%, 08/01/04 1,074,000
1,030,000 7.350%, 08/01/05 1,154,888
1,185,000 7.450%, 08/01/07 1,333,125
1,370,000 7.500%, 08/01/09 1,544,675
1,470,000 7.500%, 08/01/10 1,657,425
Kauai County General Obligation
Public Improvement Bonds
Series 1990 Escrowed to
Maturity Bonds, AMBAC Insured, Aaa/AAA
680,000 6.900%, 08/01/99 735,250
County of Kauai, State of Hawaii
Rental Housing Revenue Bonds
(Paanau Project) Series 1992, NR/NR*
2,115,000 7.250%, 04/01/12 2,191,669
County of Maui, Hawaii General
Obligation Refunding Bonds
1995, FGIC Insured, Aaa/AAA
685,000 5.350%, 06/01/02 705,550
720,000 5.150%, 06/01/03 730,800
755,000 5.150%, 06/01/04 762,550
835,000 4.850%, 06/01/06 815,169
880,000 4.950%, 06/01/07 864,600
930,000 5.050%, 06/01/08 907,912
980,000 5.050%, 06/01/09 946,925
1,040,000 5.150%, 06/01/10 1,007,500
1,100,000 5.200%, 06/01/11 1,057,375
1,160,000 5.200%, 06/01/12 1,103,450
1,230,000 5.200%, 06/01/13 1,162,350
1,300,000 5.250%, 06/01/14 1,225,250
1,380,000 5.250%, 06/01/15 1,298,925
County of Maui, Hawaii General
Obligation Refunding Bonds
1993 Series B, 1993 Series C,
1993 Series D, 1993 Series E,
FGIC Insured, Aaa/AAA
750,000 5.000%, 09/01/03 754,687
1,815,000 5.000%, 09/01/07 1,780,969
2,125,000 5.000%, 09/01/08 2,058,594
1,000,000 5.000%, 09/01/09 957,500
1,000,000 5.000%, 09/01/10 951,250
3,000,000 5.125%, 12/15/11 2,861,250
1,245,000 5.750%, 01/01/13 1,252,781
1,045,000 5.125%, 12/15/13 982,300
Maui County General Obligation
Pre-Refunded Bonds, AMBAC
Insured, Aaa/AAA
3,000,000 6.800%, 12/01/09 3,318,750
3,590,000 6.800%, 12/01/10 3,971,438
Maui County Water System
Revenue Pre-Refunded Bonds,
FGIC Insured, Aaa/AAA
1,150,000 6.100%, 12/01/02 1,246,313
1,225,000 6.200%, 12/01/03 1,333,719
1,300,000 6.300%, 12/01/04 1,421,875
1,390,000 6.400%, 12/01/05 1,527,263
1,280,000 6.500%, 12/01/06 1,412,800
1,250,000 6.600%, 12/01/07 1,385,938
1,690,000 6.650%, 12/01/08 1,878,012
1,470,000 6.650%, 12/01/09 1,633,537
1,930,000 6.700%, 12/01/10 2,149,537
1,730,000 6.700%, 12/01/11 1,926,788
Department of Budget and
Finance of the State of
Hawaii Special Purpose
Revenue Bonds (Citizens
Utilities Company Project), NR/AA+
3,400,000 6.900%, 11/01/15++ 3,621,000
7,000,000 7.375%, 11/01/15++ 7,250,390
14,000,000 7.900%, 09/01/18++ 14,190,820
5,000,000 6.600%, 07/01/22++ 5,181,250
Department of Budget and
Finance of the State of
Hawaii Special Purpose
Revenue Bonds (Lutheran
Good Samaritan Society
Project), AMBAC Insured, Aaa/AAA
2,200,000 4.700%, 11/01/06 2,131,250
Department of Budget and Finance
of the State of Hawaii Special
Purpose Revenue Bonds (The
Evangelical Lutheran Good
Samaritan Society), Refunding
Series 1993, AMBAC Insured, Aaa/AAA
620,000 4.100%, 11/01/98 616,900
645,000 4.200%, 11/01/99 637,744
675,000 4.300%, 11/01/00 664,875
700,000 4.400%, 11/01/01 688,625
730,000 4.500%, 11/01/02 718,137
Department of Budget and
Finance of the State of
Hawaii Special Purpose
Revenue Bonds (Hawaiian
Electric Company Inc.
Project), MBIA Insured, Aaa/AAA
8,100,000 6.875%, 04/01/12 8,413,389
Department of Budget and
Finance of the State of
Hawaii Special Purpose
Revenue Bonds (Hawaiian
Electric Company, Inc. and
Subsidiaries Projects)
Series 1992, MBIA Insured, Aaa/AAA
5,000,000 6.550%, 12/01/22 5,275,000
Department of Budget and
Finance of the State of
Hawaii Special Purpose
Revenue Bonds (Hawaiian
Electric Light Company, Inc.
Project), MBIA Insured, Aaa/AAA
555,000 6.875%, 04/01/12 576,473
Department of Budget and Finance
of the State of Hawaii Special
Purpose Revenue Bonds
(Hawaiian Electric Light
Company, Inc. Project), MBIA
Insured, Aaa/AAA
5,600,000 7.200%, 12/01/14 6,174,000
Department of Budget and Finance
of the State of Hawaii Special
Purpose Revenue Bonds
(Hawaiian Electric Co., Inc.,
and Subsidiaries Projects),
Series 1990C, MBIA Insured, Aaa/AAA
4,000,000 5.450%, 11/01/23 3,715,000
Department of Budget and Finance
of the State of Hawaii Special
Purpose Revenue Bonds
(Hawaiian Electric Co., Inc.,
and Subsidiaries Projects),
Series 1995A, MBIA Insured, Aaa/AAA
13,000,000 6.600%, 01/01/25 13,731,250
Department of Budget and Finance
of the State of Hawaii Special
Purpose Revenue Bonds (Maui
Electric Company, Limited
Project), MBIA Insured, Aaa/AAA
2,195,000 6.875%, 04/01/12 2,279,925
Department of Budget and Finance
of the State of Hawaii Special
Purpose Revenue Bonds (Kaiser-
Permanente Medical Care
Program), Aa3/AA
3,565,000 6.500%, 03/01/11 3,712,056
11,450,000 6.250%, 03/01/21 11,721,938
Department of Budget and Finance
of the State of Hawaii Special
Purpose Revenue Pre-Refunded
Bonds - Kapiolani Health Care
System (Pali Momi Medical
Center Project), Series 1991, Aaa/AAA
3,000,000 7.600%, 07/01/10 3,468,750
11,200,000 7.650%, 07/01/19 12,978,000
Department of Budget and Finance
of the State of Hawaii Special
Purpose Revenue Bonds
(Kapiolani Health Care System
Obligated Group), Series 1993, A/A
6,000,000 6.400%, 07/01/13 6,052,500
Department of Budget and Finance
of the State of Hawaii Special
Purpose Revenue Bonds (The
Queen's Medical Center
Project), FGIC Insured, Aaa/AAA
1,850,000 7.000%, 07/01/08 1,972,563
9,750,000 6.500%, 07/01/12 10,018,125
2,910,000 6.200%, 07/01/22 2,997,300
Department of Budget and
Finance of the State of
Hawaii Special Purpose
Revenue Bonds (St. Francis
Medical Centers), Refunding
Series 1992, CGIC Insured, Aaa/AAA
20,000,000 6.500%, 07/01/22 21,075,000
Department of Hawaiian Home
Lands (State of Hawaii)
Revenue Bonds, Series 1991, NR/NR*
580,000 6.500%, 07/01/96 583,080
610,000 6.700%, 07/01/97 626,012
655,000 6.800%, 07/01/98 682,019
700,000 6.900%, 07/01/99 737,625
745,000 7.000%, 07/01/00 794,356
800,000 7.100%, 07/01/01 862,000
855,000 7.200%, 07/01/02 934,087
915,000 7.300%, 07/01/03 999,637
985,000 7.400%, 07/01/04 1,074,881
1,055,000 7.500%, 07/01/05 1,151,269
1,135,000 7.550%, 07/01/06 1,235,731
1,225,000 7.600%, 07/01/07 1,330,656
1,415,000 7.650%, 07/01/09 1,529,969
1,520,000 7.650%, 07/01/10 1,643,500
1,640,000 7.650%, 07/01/11 1,773,250
Department of Transportation
of the State of Hawaii
Special Facility Revenue
Bonds (Matson Terminals,
Inc.), Refunding Series 1993, NR/A-
11,375,000 5.750%, 03/01/13 11,175,938
Hawaii Housing Authority Single
Family Mortgage Purchase
Revenue Bonds, 1986 Series B, Aa/A
3,810,000 7.375%, 07/01/16 3,910,013
5,895,000 8.000%, 07/01/16 6,083,994
1,260,000 9.250%, 07/01/17 1,288,186
Housing Finance and Development
Corporation (State of Hawaii)
University of Hawaii Faculty
Housing Project, AMBAC
Insured, Aaa/AAA
2,125,000 5.650%, 10/01/16 2,093,125
4,000,000 5.700%, 10/01/25 3,925,000
Housing Finance and Development
Corporation (State of Hawaii)
Rental Housing System Revenue
Bonds 1993 Series A, A1/NR
2,000,000 5.600%, 07/01/12 1,925,000
3,000,000 5.700%, 07/01/18 2,850,000
Housing Finance and Development
Corporation (State of Hawaii)
Single Family Mortage
Purchase Revenue Bonds, Aa/A
1,135,000 8.125%, 07/01/19 1,200,263
7,075,000 7.000%, 07/01/31 7,296,094
Housing Finance and Development
Corporation (State of Hawaii)
Single Family Mortage
Purchase Revenue Bonds 1994
Series A & B, Aa/A
2,500,000 5.700%, 07/01/13 2,443,750
15,500,000 5.850%, 07/01/17 15,248,125
10,000,000 6.000%, 07/01/26 9,675,000
County of Hawaii, Hawaii
General Obligation Pre-
Refunded Refunding and
Improvement Series 1990A,
FGIC Insured, Aaa/AAA
2,380,000 7.250%, 06/01/08 2,650,725
2,550,000 7.300%, 06/01/09 2,843,250
County of Hawaii, Hawaii General
Obligation Bonds Refunding and
Improvement Series 1993A, FGIC
Insured, Aaa/AAA
1,000,000 5.200%, 05/01/04 1,022,500
2,700,000 5.450%, 05/01/07 2,777,625
3,170,000 5.500%, 05/01/08 3,237,363
1,500,000 5.550%, 05/01/09 1,526,250
4,905,000 5.600%, 05/01/11 4,972,444
1,000,000 5.600%, 05/01/12 1,011,250
1,000,000 5.600%, 05/01/13 1,012,500
County of Hawaii, Hawaii Public
Improvement Bonds 1996 Series
A, FGIC Insured, Aaa/AAA
1,260,000 4.500%, 02/01/02 1,250,550
1,440,000 4.500%, 02/01/05 1,393,200
1,900,000 5.000%, 02/01/11 1,797,875
1,970,000 5.100%, 02/01/12 1,869,038
2,205,000 5.200%, 02/01/14 2,097,506
2,440,000 5.200%, 02/01/16 2,299,700
Hawaii Community Development
Authority Improvement District
Bonds (Kakaako Community
Development District
Improvement District 3), NR/NR*
135,000 6.700%, 07/01/96 135,853
140,000 6.800%, 07/01/97 144,550
150,000 6.900%, 07/01/98 158,625
160,000 7.000%, 07/01/99 172,200
995,000 7.300%, 07/01/04 1,111,913
1,490,000 7.400%, 07/01/10 1,637,138
Hawaii Community Development
Authority Improvement District
Refunding Bonds (Kakaako
Community Development District
Improvement District 1), NR/NR*
235,000 4.700%, 07/01/99 237,056
245,000 4.850%, 07/01/00 247,450
255,000 5.000%, 07/01/01 258,187
270,000 5.100%, 07/01/02 274,050
280,000 5.200%, 07/01/03 284,900
300,000 5.300%, 07/01/04 305,625
240,000 5.400%, 07/01/05 245,100
Hawaii Community Development
Authority Improvement District
Refunding Bonds (Kakaako
Community Development District
Improvement District 2), NR/NR*
315,000 4.700%, 07/01/99 317,756
325,000 4.850%, 07/01/00 328,250
345,000 5.000%, 07/01/01 349,312
355,000 5.100%, 07/01/02 360,325
375,000 5.200%, 07/01/03 381,562
395,000 5.300%, 07/01/04 402,406
420,000 5.400%, 07/01/05 428,925
435,000 5.500%, 07/01/06 444,787
465,000 5.600%, 07/01/07 478,950
395,000 5.700%, 07/01/08 405,369
Hawaii Community Development
Authority Improvement
District Bonds (Kakaako
Community Development
District Improvement District
1) Pre-Refunded Bonds, NR/NR*
165,000 7.800%, 07/01/97 171,641
180,000 7.900%, 07/01/98 187,288
195,000 8.000%, 07/01/99 202,917
210,000 8.100%, 07/01/00 218,576
225,000 8.200%, 07/01/01 234,243
245,000 8.300%, 07/01/02 255,123
265,000 8.400%, 07/01/03 276,013
290,000 8.500%, 07/01/04 302,122
310,000 8.650%, 07/01/05 323,070
75,000 8.850%, 07/01/06 78,198
Hawaii Community Development
Authority Improvement District
Bonds (Kakaako Community
Development District
Improvement District 1)
Escrowed to Maturity, NR/NR*
155,000 7.700%, 07/01/96 156,590
Hawaii Community Development
Authority Improvement District
Bonds (Kakaako Community
Development District
Improvement District 2)
Pre-Refunded Bonds, NR/NR*
1,345,000 7.875%, 07/01/02 1,487,906
2,270,000 8.000%, 07/01/08 2,514,025
Hawaii Community Development
Authority Improvement District
Bonds (Kakaako Community
Development District
Improvement District 2)
Escrowed to Maturity, NR/NR*
200,000 7.400%, 07/01/96 201,908
210,000 7.600%, 07/01/97 219,712
State of Hawaii Airport System
Revenue Bonds, MBIA Insured, Aaa/AAA
1,000,000 6.200%, 07/01/00 1,057,500
1,150,000 5.250%, 07/01/00 1,181,625
2,375,000 7.400%, 07/01/02 2,668,906
6,150,000 7.500%, 07/01/04 6,348,830
6,455,000 6.900%, 07/01/12 7,286,081
3,000,000 7.000%, 07/01/18 3,270,000
4,025,000 7.000%, 07/01/18 4,387,250
1,000,000 6.750%, 07/01/21 1,067,500
State of Hawaii Airports System
Revenue Bonds Third
Refunding Series 1994, AMBAC
Insured, Aaa/AAA
3,500,000 5.750%, 07/01/08 3,561,250
State of Hawaii General
Obligation Bonds, FGIC
Insured, Aaa/AAA
6,000,000 8.000%, 02/01/01 6,855,000
2,000,000 5.750%, 01/01/11 2,075,000
3,700,000 6.000%, 10/01/11 3,898,875
3,500,000 6.000%, 10/01/12 3,675,000
State of Hawaii General
Obligation Bonds, FGIC
Insured, Aaa/AAA
4,000,000 8.125%, 02/01/00 4,490,000
3,000,000 7.250%, 11/01/00 3,326,250
State of Hawaii General
Obligation Bonds of 1995,
Series CK, FGIC Insured, Aaa/AAA
5,555,000 5.250%, 09/01/09 5,492,506
1,000,000 5.600%, 09/01/13 1,006,250
3,000,000 5.600%, 09/01/14 3,000,000
State of Hawaii General
Obligation Bonds of 1995,
Series CJ, FGIC Insured, Aaa/AAA
5,000,000 6.250%, 01/01/14 5,218,750
5,000,000 6.250%, 01/01/15 5,218,750
State of Hawaii General
Obligation Refunding Bonds
of 1991, Series BV, FGIC
Insured, Aaa/AAA
1,000,000 6.000%, 11/01/04 1,061,250
State of Hawaii General
Obligation Refunding Bonds
of 1993, Series CC, FGIC
Insured, Aaa/AAA
4,000,000 5.125%, 02/01/09 3,915,000
State of Hawaii General
Obligation Refunding Bonds
of 1993, Series CE, FGIC
Insured, Aaa/AAA
6,235,000 5.500%, 06/01/08 6,320,731
6,235,000 5.500%, 06/01/09 6,305,144
5,635,000 5.500%, 06/01/10 5,684,306
State of Hawaii General
Obligation Refunding Bonds
of 1993, Series CH, FGIC
Insured, Aaa/AAA
5,000,000 6.000%, 11/01/07 5,387,500
3,390,000 6.000%, 11/01/08 3,623,063
2,305,000 6.000%, 03/01/11 2,420,250
1,285,000 4.750%, 11/01/13 1,167,744
State of Hawaii Harbor Capital
Improvements Revenue Bonds,
MBIA Insured, Aaa/AAA
2,205,000 6.200%, 07/01/08 2,331,788
State of Hawaii Harbor Capital
Improvements Revenue Bonds,
MBIA Insured, Aaa/AAA
14,000,000 7.250%, 07/01/10 15,365,000
1,200,000 7.000%, 07/01/17 1,299,000
State of Hawaii Harbor Revenue
Bonds, Series 1992, FGIC
Insured, Aaa/AAA
3,850,000 6.500%, 07/01/19 4,042,500
State of Hawaii Harbor Revenue
Bonds, Refunding Series 1993,
FGIC Insured, Aaa/AAA
1,260,000 6.050%, 07/01/04 1,341,900
1,225,000 6.150%, 07/01/05 1,315,344
State of Hawaii Harbor Revenue
Bonds, Series of 1994, FGIC
Insured, Aaa/AAA
1,000,000 6.250%, 07/01/09 1,056,250
1,000,000 6.250%, 07/01/10 1,047,500
3,725,000 6.250%, 07/01/15 3,860,031
10,180,000 6.375%, 07/01/24 10,599,925
State of Hawaii Highway Revenue
Bonds Series 1993, FGIC
Insured, Aaa/AAA
4,000,000 4.875%, 07/01/07 3,880,000
3,900,000 5.000%, 07/01/08 3,783,000
2,255,000 5.000%, 07/01/09 2,164,800
4,575,000 5.000%, 07/01/10 4,340,531
2,220,000 5.000%, 07/01/11 2,078,475
3,850,000 5.000%, 07/01/12 3,575,688
2,750,000 5.000%, 07/01/13 2,530,000
Total Hawaii 649,762,489
GUAM (0.2%)
Government of Guam Ltd. Water
System Revenue Bonds, CGIC
Insured, Aaa/AAA
1,500,000 7.000%, 07/01/09 1,625,625
Total Guam 1,625,625
Total Investments - 98.7%
(Cost $627,285,731**) 651,388,114
Other assets in excess of
liablilities - 1.3% 8,537,194
Net Assets - 100% $ 659,925,308
<FN>
* Any security not rated must be 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.
</FN>
<FN>
+ When-issued security.
</FN>
<FN>
++ This security is pledged as collateral for the Trust's when-issued
commitments.
</FN>
<FN>
** Cost for Federal tax purposes is $625,933,071.
</FN>
</TABLE>
PORTFOLIO ABBREVIATIONS:
AMBAC American Municipal Bond Assurance Corp.
CGIC Capital Guaranty Insurance Co.
FGIC Financial Guaranty Insurance Co.
FHA Federal Housing Administration
MBIA Municipal Bond Investors Assurance Corp.
See accompanying notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
HAWAIIAN TAX-FREE TRUST
STATEMENT OF ASSETS AND LIABILITIES
MARCH 31, 1996
<S> <C>
ASSETS
Investments at value (identified cost - $627,285,731) $651,388,114
Interest receivable 10,878,449
Receivable for investment securities sold 5,566,712
Receivable for Trust shares sold 735,801
Other assets 15,252
Total assets 668,584,328
LIABILITIES
Payable for investment securities purchased 4,373,669
Cash overdraft 2,854,465
Dividends payable 383,227
Payable for Trust shares redeemed 361,074
Distribution fees payable 334,372
Adviser and Administrator fees payable 224,508
Accrued expenses 127,705
Total liabilities 8,659,020
NET ASSETS (equivalent to $11.31 per share on 58,326,382
shares outstanding) $659,925,308
Net Assets consist of:
Capital Stock, no par value, authorized an unlimited
number of shares $635,578,518
Accumulated net realized gain on investments 244,407
Net unrealized appreciation on investments 24,102,383
$659,925,308
Net Asset Value, redemption price per share $11.31
Offering price per share (100/96 of $11.31 adjusted to
nearest cent) $11.78
</TABLE>
See accompanying notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
HAWAIIAN TAX-FREE TRUST
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED MARCH 31, 1996
<S> <C> <C>
INVESTMENT INCOME:
Interest income $40,010,926
Expenses:
Investment Adviser fees (note B) $929,291
Administrator fees (note B) 1,725,826
Distribution fees (note B) 1,330,035
Transfer and shareholder servicing agent
fees 322,607
Trustees' fees and expenses (note G) 153,681
Legal fees 75,396
Shareholders' reports and proxy statements 73,133
Custodian fees (note F) 63,366
Audit and accounting fees 34,342
Registration fees and dues 29,841
Insurance 13,774
Miscellaneous 95,179
4,846,471
Expenses paid indirectly (note F) (61,524)
Net expenses 4,784,947
Net investment income 35,225,979
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain from securities
transactions 3,423,716
Change in net unrealized appreciation on
investments 7,014,254
Net realized and unrealized gain on
investments 10,437,970
Net increase in net assets resulting from
operations $45,663,949
</TABLE>
See accompanying notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
HAWAIIAN TAX-FREE TRUST
STATEMENTS OF CHANGES IN NET ASSETS
YEAR ENDED MARCH 31,
1996 1995
<S> <C> <C>
OPERATIONS:
Net investment income $35,225,979 $36,068,894
Net realized gain (loss) from
securities transactions 3,423,716 (2,398,756)
Change in unrealized
appreciation on investments 7,014,254 1,508,137
Net increase in net assets
resulting from operations 45,663,949 35,178,275
DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income, tax-exempt
($0.60 and $0.62 per share,
respectively) (34,763,602) (35,999,720)
Net investment income, taxable (16,422) _
Net realized gain on investments
($0.01 and $0.05 per share,
respectively) (445,955) (3,078,620)
Total distributions (35,225,979) (39,078,340)
Net increase (decrease) from
investment activities 10,437,970 (3,900,065)
<CAPTION>
TRUST SHARE TRANSACTIONS:
SHARES
YEAR ENDED MARCH 31,
1996 1995
<S> <C> <C> <C> <C>
Shares sold 4,446,713 5,233,538 50,608,455 57,598,165
Shares issued through
reinvestment of
dividends and
distributions 1,529,160 1,758,109 17,419,894 19,239,084
Shares redeemed (5,357,030) (6,513,827) (61,096,857) (70,846,688)
Increase in shares
and net assets
derived from Trust
share transactions 618,843 477,820 6,931,492 5,990,561
Total increase in net
assets 17,369,462 2,090,496
NET ASSETS:
Beginning of year 642,555,846 640,465,350
End of year $659,925,308 $642,555,846
</TABLE>
See accompanying notes to financial statements.
<PAGE>
HAWAIIAN TAX-FREE TRUST
NOTES TO FINANCIAL STATEMENTS
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
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, since its inception, has issued
only one class of shares, to which these financial statements relate. It is
anticipated that the Trust will begin offering two additional classes of
shares during the second calendar quarter of 1996. The shares outstanding at
that time will be designated as Class A shares and, as is the case now, will
be sold with a front-end sales charge and bear a service fee. Class C shares
will be sold with no front-end sales charge but will be assessed a contingent
deferred sales charge if redeemed within 18 months from the time of purchase
and a level charge for service and distribution fees. Class Y shares will be
offered only to institutions acting for investors in a fiduciary, advisory,
agency custodial or similar capacity, and will not be offered directly to
retail customers, and will be sold at net asset value with no sales charge,
no redemption fee, no contingent deferred sales charge and no service or
distribution fees. All classes of shares will have identical rights and
privileges except 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 privilege of each class.
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 generally accepted accounting principles for investment
companies.
(1) PORTFOLIO VALUATION: Municipal securities which have remaining
maturities of more than 60 days are valued each business day based upon
information provided by a nationally prominent independent pricing
service and periodically verified through other pricing services; in the
case of securities for which market quotations are readily available,
securities are valued at the mean of bid and asked quotations and, in
the case of other securities, at fair value determined under procedures
established by and under the general supervision of the Board of
Trustees. Securities which mature in 60 days or less are valued at
amortized cost if their term to maturity at purchase was 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
exceeded 60 days.
(2) 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 premiums and accretion of discounts of securities
purchased at other than par with less than 60 days to maturity.
(3) FEDERAL INCOME TAXES: It is the policy of the Trust 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.
(4) USE OF ESTIMATES: The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported
amounts of 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.
NOTE B - MANAGEMENT ARRANGEMENTS AND FEES AND OTHER TRANSACTIONS WITH
AFFILIATES:
Management affairs of the Trust are conducted through two separate
management arrangements.
Hawaiian Trust Company, Limited (the "Adviser"), became Investment
Adviser to the Trust in February, 1985. In this role, under an Investment
Advisory Agreement, the Adviser supervises the Trust's investments and
provides various services to the Trust, including maintenance of the Trust's
accounting books and records, 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 1% of the net assets of the Trust.
The Trust also has an Administration Agreement with its founder and
sponsor, Aquila Management Corporation (the "Administrator", formerly
Sub-Adviser and Administrator). Under this Agreement, the Administrator
provides all administrative services, other than those relating to the
management of the Trust's investments. This includes 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 1% of the net assets of the Trust.
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.
The Adviser and the Administrator each agrees 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) 1.5% of the first $30 million of average annual net assets of
the Trust plus 1% of its average annual net assets in excess of $30 million,
or (ii) 25% of the Trust's total annual investment income. No such reduction
in fees was required during the year ended March 31, 1996.
For the year ended March 31, 1996, the Trust incurred fees under the
Advisory Agreement and the Administration Agreement of $929,291 and
$1,725,826, respectively.
Under a Distribution Agreement, Aquila Distributors, Inc. (the
"Distributor") serves as the exclusive distributor of the Trust's shares.
Through agreements between the Distributor and various broker-dealer firms
("dealers"), the Trust's shares are sold primarily through the facilities of
these dealers having offices within Hawaii, with the bulk of sales
commissions inuring to such dealers. However, for the year ended March 31,
1996, the Distributor received sales commissions in the amount of $112,083.
Effective March 27, 1992 the Trust adoped a Distribution Plan (the
"Plan") pursuant to Rule 12bb1 (the "Rule") under the Investment Company Act
of 1940. The Plan authorizes the Trust to make service fee payments at the
annual rate of 0.20% of the average net assets of the Trust to broker-dealers
or others selected by 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. During the year ended March 31, 1996,
service fees amounted to $1,330,035, of which the Distributor received
$78,658. Specific details about the Plan are more fully defined in the
Trust's Prospectus and Statement of Additional Information.
NOTE C - PURCHASES AND SALES OF SECURITIES:
During the year ended March 31, 1996, purchases of securities and
proceeds from the sales of securities aggregated $191,542,481 and
$182,155,969, respectively.
At March 31, 1996, aggregate gross unrealized appreciation for all
securities in which there is an excess of market value over tax cost amounted
to $29,440,708 and aggregate gross unrealized depreciation for all securities
in which there is an excess of tax cost over market value amounted to
$3,985,665 for a net unrealized appreciation of $25,455,043. At March 31,
1996, the Trust had realized taxable net capital gains of $734,347.
NOTE D - 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.
NOTE E - DISTRIBUTIONS:
The Trust declares dividends daily from net investment income and makes
payments monthly in additional shares at the net asset value per share or in
cash, at the shareholder's option. Net realized capital gains, if any, are
distributed annually.
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 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 small portion of the dividends may, under some
circumstances, be subject to ordinary income taxes. For certain shareholders,
some dividends may, under some circumstances, be subject to the alternative
minimum tax. Also, annual capital gains distributions, if any, are taxable.
NOTE F - CUSTODIAN FEES:
The Trust has negotiated an expense offset agreement with its custodian
wherein it receives credit toward the reduction of custodian fees whenever
there are uninvested cash balances. During the year ended March 31, 1996, the
Trust's custodian fees amounted to $63,366, of which $61,524 was offset by
such credits. The Trust could have invested its cash balances in an
income-producing asset if it had not agreed to a reduction in fees under the
expense offset arrangement with the custodian.
NOTE G - TRUSTEES' FEES AND EXPENSES:
During the fiscal year from April 1, 1995 through March 31, 1996, there
were 12 Trustees. Trustees' fees paid during the year were at the average
annual rate of $7,500 for carrying out their responsibilities and attendance
at regularly scheduled Board Meetings. If additional or special meetings are
scheduled for the Trust, separate meeting fees are paid for each such meeting
to those Trustees in attendance. The Trust also reimburses Trustees for
expenses such as travel, accommodations, and meals incurred in connection
with attendance at regularly scheduled or special Board Meetings and at the
Annual Meeting and outreach meetings of Shareholders. For the fiscal year
ended March 31, 1996 such reimbursements averaged approximately $4,100 per
Trustee. One of the Trustees, who is affiliated with the Administrator, is
not paid any Trustee fees.
<PAGE>
<TABLE>
<CAPTION>
HAWAIIAN TAX-FREE TRUST
FINANCIAL HIGHLIGHTS
For a share outstanding thoughout each year
Year ended March 31,
1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning
of Year $11.13 $11.19 $11.60 $11.10 $10.85
Income from Investment
Operations:
Net investment income 0.61 0.62 0.63 0.68 0.71
Net gain (loss) on
securities (both
realized and
unrealized) 0.18 (0.01) (0.38) 0.50 0.25
Total from Investment
Operations 0.79 0.61 0.25 1.18 0.96
Less Distributions:
Dividends from net
investment income (0.61) (0.62) (0.63) (0.68) (0.71)
Distributions from capital
gains - (0.05) (0.03) - -
Total Distributions (0.61) (0.67) (0.66) (0.68) (0.71)
Net Asset Value, End of Year $11.31 $11.13 $11.19 $11.60 $11.10
Total Return (not reflecting
sales load) 7.16% 5.75% 2.01% 10.98% 9.15%
Ratios/Supplemental Data
Net Assets, End of Year
(in thousands) $659,925 $642,556 $640,465 $597,828 $475,469
Ratio of Expenses to
Average Net Assets 0.72% 0.75% 0.74% 0.71% 0.70%
Ratio of Net Investment
Income to Average Net
Assets 5.32% 5.65% 5.46% 5.92% 6.44%
Portfolio Turnover Rate 28% 33% 16% 11% 16%
<CAPTION>
Net investment income per share and the ratios of income and expenses to
average net assets before expense offset in custodian fees for uninvested
cash balances would have been:
<S> <C> <C> <C> <C> <C>
Net Investment Income $0.61 $0.62 $0.63 $0.68 $0.71
Ratio of Expenses to Average
Net Assets 0.73% 0.77% 0.76% 0.73% 0.72%
Ratio of Net Investment
Income to Average Net
Assets 5.31% 5.63% 5.44% 5.90% 6.42%
</TABLE>
See accompanying notes to financial statements.
<PAGE>
REPORT ON THE ANNUAL AND SPECIAL MEETINGS OF SHAREHOLDERS (UNAUDITED)
The Annual Meeting of Shareholders of Hawaiian Tax-Free Trust (the
"Trust") was initially held on October 30, 1995 and an adjourned session of
the meeting was held on November 30, 1995.1 At the meeting, the following
matters were submitted to a shareholder vote and approved:
(i) the election of Lacy B. Herrmann, Vernon R. Alden, Arthur K.
Carlson, William M. Cole, Thomas W. Courtney, Richard W. Gushman, II, Stanley
W. Hong, Theodore T. Mason, Russell K. Okata, Douglas Philpotts, Oswald K.
Stender and Thelma Chun-Hoon Zen as Trustees to hold office until the next
annual meeting of the Trust's shareholders or until his or her successor is
duly elected (each Trustee received at least 39,169,669 affirmative votes
(95.70%); no more than 1,758,176 votes were withheld for any Trustee
(4.30%)), and
(ii) the ratification of the selection of KPMG Peat Marwick LLP as the
Trust's independent auditors for the fiscal year ending March 31, 1996 (votes
for: 39,003,726 (95.30%); votes against: 172,912 (0.42%); abstentions:
1,039,004 (2.54%); broker non-votes: 712,202 (1.74%)),
(iii) the approval of an amendment to the Trust's Declaration of Trust
to authorize the creation of classes of shares (votes for: 29,711,763
(72.60%); votes against: 2,691,679 (6.58%); abstentions: 2,452,743 (5.99%);
broker non-votes: 6,071,659 (14.83%)),
(iv) the approval of an amendment to the Trust's Declaration of Trust
to authorize voting by net asset value (votes for: 30,305,589 (74.05%); votes
against: 2,390,091 (5.84%); abstentions: 2,165,507 (5.29%); broker non-votes:
6,066,659 (14.82%)), and
(v) the approval of a new (amended and restated) Investment Advisory
Agreement (votes for: 27,145,856 (66.33%); votes against: 3,764,453 (9.20%);
abstentions: 2,592,921 (6.33%); broker non-votes: 7,424,615 (18.14%)).
A special meeting of Class C Shareholders of the Trust was held on
March 29, 1996.2 At the meeting, the Class C Shareholders voted on and
unanimously approved the provisions of the Trust's Distribution Plan relating
to Class C Shares (votes for: 100 (100%)).
___________
1 On the record date for this meeting, 58,244,011 shares of the Trust were
outstanding and entitled to vote. The holders of 40,927,845 shares (70.27%)
entitled to vote were present in person or by proxy at the meeting.
2 On the record date for this meeting, 100 Class C Shares of the Trust were
outstanding and entitled to vote. The holders of 100 Class C Shares (100%)
entitled to vote were present in person at the meeting.
FEDERAL TAX STATUS OF DISTRIBUTIONS (UNAUDITED)
This information is presented in order to comply with a requirement of
the Internal Revenue Code and NO CURRENT ACTION ON THE PART OF SHAREHOLDERS
IS REQUIRED.
For the fiscal year ended March 31, 1996, 98.69% of the total amount of
dividends paid by the Trust should be considered "exempt-interest dividends",
1.26% of such dividends should be considered a capital gain dividend and the
balance should be considered ordinary dividend income. 16.5% of the Trust's
dividends was derived from interest on "private activity bonds."
The Trust hereby designates $34,774,205 as exempt-interest dividends for
the fiscal year ended March 31, 1996, where such dividends are not subject to
regular federal income tax. The Trust also designates $445,955 as capital
gain dividends for federal income tax purposes for its fiscal year ended
March 31, 1996 where such amounts are taxable as long-term capital gains.
Prior to January 31, 1996, shareholders were mailed IRS Form 1099-DIV
which contained information on the status of distributions paid for the 1995
CALENDAR YEAR.
