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.
SEMI-ANNUAL
REPORT
SEPTEMBER 30, 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)
(Logo of Aquila Group of Funds: eagle head)
ONE OF THE
AQUILAsm GROUP OF FUNDS
<PAGE>
(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
SEMI-ANNUAL REPORT
"PROTECTING YOUR INVESTMENT
WHILE EARNING TAX-FREE INCOME"
November 20, 1996
Dear Investor:
Hawaii is a great state. But, in spite of all Hawaii's positive
attributes, the State and some of its communities are still experiencing
certain financial difficulties.
Nevertheless, we do see prospects for a resurgence in various
business areas and we remain hopeful that, over time, the current financial
difficulties will pass. Meanwhile, though, we remain very realistic in our
investment management approach for Hawaiian Tax-Free Trust, and are not
viewing things through "rose-colored glasses."
CREDIT RISK PROTECTION
Management sees, as key goals of the Trust, seeking continuing
protection of investors' assets to the maximum extent practicable while at
the same time generating attractive returns for shareholders. This is why
the Trust's investment approach focuses only on municipal securities which
are in the TOP FOUR CREDIT RATINGS, or equivalent.
As an extra measure of capital preservation, management has sought to
have a substantial amount (approximately 75%) of the Trust's holdings of
municipal securities insured by nationally-renown specialized municipal bond
insurance companies. This insurance is designed to provide for the timely
payment of interest and principal when due, in the event an issuer should
default.
Our goal is to provide the maximum amount of credit risk protection
possible to our shareholders. We believe that this goal is of the utmost
importance for investors in the Trust because it allows all of us to sleep
better at night.
MARKET FORCES
While these steps help offset potential credit risks with the Trust's
investment holdings, they do not, however, address the market risk created by
various forces that are present with all types of securities. These market
forces can result in increases or decreases in share price and the rate of
return provided by the Trust to shareholders.
<TABLE>
<CAPTION>
9/30/96 9/30/95
<S> <C> <C>
Share Net Asset Value $11.31 $11.35
Distribution Yield 5.07%1 5.33%1
</TABLE>
We live in an ever changing world.
As the above table illustrates, the price of the Trust's shares can
and does move up and down over time. Also, the rate of DOUBLE TAX-FREE
income return distributed to shareholders can and will change. Movements in
these two key areas reflect the changes in market conditions that occurred
over the time period of this report.
Yet, while changes have occurred, looking at these numbers from a
broader perspective, there has tended to be a relatively high level of
stability to the Trust's performance results. In fact, the Trust's share
price movement has been more moderate than individual municipal securities
over these same time periods while income results compare favorably to what
occurred in the municipal securities market itself during this period.
You should be aware that several main factors have an impact upon the
markets for fixed income securities, including the tax-free municipal
securities in which the Trust invests.
Key among these are actions taken by the Federal Reserve Board. This
Federal government agency has the power to raise and lower interest rates in
key areas which, in turn, can have an effect on all types of fixed-income
securities. The Fed also can control the supply of money in our financial
system - increasing or decreasing the amount of dollars in circulation.
This, in turn, can affect the market.
The other key factor influencing the fixed-income markets is the
psychology of investors. By that, we mean the level of confidence that
investors as a whole have about our country's overall financial well-being.
We now live in a world that is always changing and very global in nature.
Consequently, the psychology factor within the financial markets is
influenced not only by the confidence level of investors in Hawaii and the
United States, but also by the confidence level of investors throughout the
world in the affairs of our country.
The share price and distribution return of the Trust are very much
driven by market forces. This is true whether investors own Hawaii
individual municipal securities directly, or whether they invest through a
portfolio of such securities like those in the Trust. It is important that
shareholders appreciate and understand the impact of market forces on their
investment in the Trust. It is also the reason why we say that an investment
in the Trust should always be viewed as LONG-TERM in nature.
<PAGE>
THE VALUE THE TRUST PROVIDES
While we must accept the fact that market forces have a significant
impact upon the Trust's performance, we also should recognize that Hawaiian
Tax-Free Trust provides certain specific advantages that help lessen the
impact of market forces of the Trust's shareholders.
The most significant advantage is the professional investment
management team of the Trust's Investment Adviser, Hawaiian Trust Company,
Ltd. Under the guidance of the Trust's management and the Trustees, the
Investment Adviser oversees, on a continuing basis, the investments of the
Trust. And, in doing so, they moderate forces that can or might cause
anxieties with investors. A very special element that the professional
investment management team brings to bear is the implementation of the
Trust's investment approach.
QUALITY FACTOR
A key factor in moderating the impact of market forces is quality -
quality of the municipal issues within the Trust's investment portfolio.
Quality of issues is very important when it comes to capital preservation.
That is why the Trust has chosen to invest in only those municipal
securities within the TOP FOUR CREDIT RATINGS - AAA, AA, A, and Baa - or
equivalent.
It is noteworthy that at the September 30, 1996 fiscal year end,
93.7% of the Trust's holdings carried a credit rating of A OR BETTER - the
top three ratings.
Moreover, 90.8% of the Trust's investments were rated AAA OR AA and
APPROXIMATELY 75% of the portfolio was insured, thereby ensuring a credit
rating of AAA.
DIVERSIFICATION FACTOR
Another very important factor that can moderate the impact of market
forces is diversification among portfolio holdings.
At September 30, 1996, the Trust had 297 SEPARATE ISSUES in its
investment portfolio, representing many different municipal projects in
numerous communities throughout the islands of Hawaii.
Such diversification tends to offset the risk of problems with any
individual security which might have an adverse impact on the Trust's
performance.
MATURITY FACTOR
By varying the different maturities of the securities in the Trust's
portfolio, it is possible to reduce the extremes in volatility that can come
about with market fluctuations. As you are aware, short maturity securities
possess little fluctuation in price, but pay low yields. On the other hand,
long maturity securities give higher yields, but have considerable price
volatility due to uncertainties about interest rates and other market factors
that may occur between the present and the specified maturity date. The
Trust seeks an average intermediate maturity within the investment portfolio.
At September 30, 1996, the average maturity was the intermediate level of
15.5 YEARS, which is intended to provide an adequate income return, but with
only moderate volatility in share price.
<PAGE>
(Graphic of Bar Chart with the following information:)
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
<TABLE>
<CAPTION>
Tax Bracket Taxable Equivalent Rate Double Tax-Free Equivalent Rate
<C> <C> <C>
28% 7.83% 5.07%
31% 8.17% 5.07%
36% 8.81% 5.07%
39.6% 9.33% 5.07%
</TABLE>
INCOME RETURN
As the table on page two illustrates, the trailing 12-month yield
distributed to shareholders, as measured against the average maximum public
offering price, was running at the rate of 5.07%1 at September 30, 1996.
This was somewhat lower than six months and a year earlier. However,
it reflects the declining level of general market returns on municipal
securities over this period.
Despite the modest decline in yield to shareholders, it must be
remembered that this income amount from the Trust is DOUBLE TAX-FREE.2
It is worth noting from the above graph that one would have had to
earn a substantially higher income from a TAXABLE investment in order to
match the DOUBLE TAX-FREE amount distributed by the Trust.
As you will note, if one were in the 28% Federal income tax bracket,
a TAXABLE return of 7.83% would have to be achieved to match the 5.07% DOUBLE
TAX-FREE return of the Trust. In the highest Federal income tax bracket of
39.6%, the equivalent return would have had to have been 9.33%. In general,
it would not have been possible for an investor to obtain such levels of
taxable return unless additional risk was taken in the form of lesser quality
or longer maturity securities, or both such elements.
COMMITMENT TO CONSISTENCY
Management is committed to providing shareholders with as consistent
investment and overall performance results from Hawaiian Tax-Free Trust as
are possible to achieve, considering prevailing market forces.
You should be aware that we are not able to eliminate completely the
fluctuations from market forces that swirl around us on a continuing basis.
However, as indicated, a number of investment management techniques
are used by the Trust to moderate existing market forces.
YOUR CONFIDENCE APPRECIATED
Your confidence in Hawaiian Tax-Free Trust is greatly appreciated.
You can be assured that management will do everything in its power to merit
your continued trust.
Sincerely,
/s/ Lacy B. Herrmann
Lacy B. Herrmann
President and Chairman
of the Board of Trustees
______________________________________________________________________________
1 The share prices and distribution yields indicated in the above table are
for the 12-month periods ended September 30, 1996 and September 30,1995,
respectively. The yields indicated are an average of the income distributed
to shareholders over the 12-month periods as measured against the average of
the maximum public offering price over the same periods. The SEC yields (a
standardized yield formulated by the Securities and Exchange Commission) over
these same periods were 4.50% and 5.08% respectively. Total return of the
Trust over these same periods, reflecting changing share prices due to market
fluctuations, were 5.13% and 9.33% respectively. In keeping with industry
standards, total return figures do not include sales charges, but do reflect
reinvestment of dividends. Different classes of shares are offered and their
performance will vary because of differences in sales charges and level of
related fees paid by shareholders in different classes. The performance shown
represents that of Class A shares, adjusted to reflect the absence of sales
charges, which is currently a maximum amount of 4.00% for this Class.
The performance data quoted represents past performance and is not predictive
of future results. The investment return and principal value of an investment
in the Trust will fluctuate so that price of investor's shares, when
redeemed, may be more or less than original cost.
2 A portion of the return may be subject to alternative minimum tax for some
investors.
<PAGE>
<TABLE>
<CAPTION>
HAWAIIAN TAX-FREE TRUST
STATEMENT OF INVESTMENTS
SEPTEMBER 30, 1996 (UNAUDITED)
RATING
FACE MOODY'S/
AMOUNT HAWAII (96.9%) S&P VALUE
<C> <S> <C> <C>
Board of Regents, University
of Hawaii University System
Revenue Bonds, Series G,
AMBAC Insured, Aaa/AAA
$ 2,910,000 5.650%, 10/01/12 $ 2,920,912
4,290,000 5.700%, 10/01/17 4,306,087
Board of Regents, University of
Hawaii University System
Revenue Bonds, Series I, FGIC
Insured, Aaa/AAA
145,000 4.600%, 10/01/01 144,637
155,000 4.700%, 10/01/02 154,612
1,110,000 5.300%, 10/01/08 1,104,450
2,825,000 5.500%, 10/01/18 2,772,031
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 1,084,550
1,750,000 5.800%, 07/01/16 1,780,625
1,500,000 5.800%, 07/01/21 1,518,750
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 8,100,000
City and County of Honolulu,
Hawaii General Obligation
Bonds Series A, FGIC Insured, Aaa/AAA
5,385,000 7.300%, 07/01/03 6,091,781
2,895,000 7.350%, 07/01/05 3,361,819
4,790,000 7.350%, 07/01/06 5,592,325
9,970,000 7.350%, 07/01/07 11,727,212
3,600,000 7.350%, 07/01/08 4,243,500
2,500,000 6.000%, 01/01/12 2,615,625
1,000,000 5.625%, 09/01/14 998,750
City and County of Honolulu,
Hawaii General Obligation
Bonds Series 1995, MBIA
Insured, Aaa/AAA
2,215,000 6.000%, 11/01/09 2,350,669
1,500,000 6.000%, 11/01/10 1,582,500
1,000,000 5.250%, 11/01/13 957,500
1,835,000 5.500%, 11/01/14 1,796,006
3,130,000 5.000%, 11/01/15 2,863,950
<PAGE>
City and County of Honolulu,
Hawaii General Obligation
Bonds Series 1994A, FGIC
Insured, Aaa/AAA
1,000,000 5.700%, 04/01/09 1,027,500
4,000,000 5.750%, 04/01/11 4,085,000
3,800,000 5.750%, 04/01/13 3,885,500
City and County of Honolulu,
Hawaii General Obligation
Bonds Series 1994B, FGIC
Insured, Aaa/AAA
4,480,000 6.000%, 06/01/10 4,648,000
2,030,000 6.100%, 06/01/11 2,118,812
3,000,000 6.100%, 06/01/12 3,131,250
4,650,000 6.125%, 06/01/13 4,847,625
4,155,000 6.125%, 06/01/14 4,326,394
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 6,116,250
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 9,812,250
1,050,000 6.000%, 12/01/15 1,103,812
City and County of Honolulu,
Hawaii General Obligation Water
Bonds, Series 1992, FGIC
Insured, NR/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%, 10/15/04 403,325
355,000 6.800%, 10/15/05 395,825
345,000 6.900%, 10/15/06 386,831
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 3,232,500
<PAGE>
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 3,138,750
Kauai County General Obligation
Bonds, MBIA Insured Aaa/AAA
535,000 6.400%, 02/01/02 538,916
570,000 6.500%, 02/01/03 574,355
Kauai County General Obligation
Escrow to Maturity Bonds, A/NR
615,000 9.000%, 08/01/04 774,900
665,000 9.000%, 08/01/05 850,369
County of Kauai, State of Hawaii
General Obligation Refunding
Bonds, 1992 Series A,B & C,
AMBAC Insured, Aaa/AAA
155,000 5.250%, 04/01/01 158,487
295,000 5.250%, 08/01/01 302,006
930,000 5.250%, 08/01/01 952,087
330,000 5.450%, 08/01/03 340,725
1,030,000 5.450%, 08/01/03 1,063,475
435,000 5.900%, 08/01/08 454,031
1,355,000 5.900%, 08/01/08 1,414,281
1,300,000 5.950%, 08/01/10 1,363,375
County of Kauai, State of Hawaii
General Obligation Refunding
Bonds, Series 1994A & 1994B,
MBIA Insured, Aaa/AAA
170,000 5.100%, 02/01/01 172,762
365,000 5.200%, 02/01/02 371,844
185,000 5.200%, 02/01/02 188,469
460,000 5.300%, 02/01/03 470,350
190,000 5.300%, 02/01/03 194,275
185,000 5.400%, 02/01/04 189,625
215,000 5.500%, 02/01/05 220,912
215,000 5.600%, 02/01/06 220,644
1,010,000 5.700%, 02/01/07 1,036,513
<PAGE>
Kauai County General Obligation
Public Improvement Bonds
Series 1990 Pre-Refunded Bonds,
AMBAC Insured, Aaa/AAA
780,000 7.100%, 08/01/01 858,975
960,000 7.300%, 08/01/04 1,063,200
1,030,000 7.350%, 08/01/05 1,143,300
1,185,000 7.450%, 08/01/07 1,318,312
1,370,000 7.500%, 08/01/09 1,527,550
1,470,000 7.500%, 08/01/10 1,639,050
County of Kauai, State of Hawaii
Rental Housing Revenue Bonds
(Paanau Project) Series 1992, NR/NR*
2,050,000 7.250%, 04/01/12 2,114,062
County of Maui, Hawaii General
Obligation Refunding Bonds
Series A, MBIA Insured, Aaa/AAA
1,075,000 6.000%, 06/01/15 1,109,937
County of Maui, Hawaii General
Obligation Refunding Bonds
1995, FGIC Insured, Aaa/AAA
685,000 5.350%, 06/01/02 703,837
720,000 5.150%, 06/01/03 730,800
755,000 5.150%, 06/01/04 762,550
930,000 5.050%, 06/01/08 898,612
980,000 5.050%, 06/01/09 940,800
1,040,000 5.150%, 06/01/10 1,001,000
1,100,000 5.200%, 06/01/11 1,057,375
1,160,000 5.200%, 06/01/12 1,107,800
1,230,000 5.200%, 06/01/13 1,171,575
1,300,000 5.250%, 06/01/14 1,241,500
1,380,000 5.250%, 06/01/15 1,314,450
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 1,765,087
2,125,000 5.000%, 09/01/08 2,042,656
1,000,000 5.000%, 09/01/09 955,000
1,000,000 5.000%, 09/01/10 947,500
3,000,000 5.125%, 12/15/11 2,857,500
<PAGE>
County of Maui, Hawaii General
Obligation Refunding Bonds
1993 Series B, 1993 Series C,
1993 Series D, 1993 Series E,
FGIC Insured, (continued)
1,245,000 5.750%, 01/01/13 1,265,231
1,045,000 5.125%, 12/15/13 986,219
Maui County General Obligation
Pre-Refunded Bonds, AMBAC
Insured, Aaa/AAA
3,000,000 6.800%, 12/01/09 3,288,750
3,000,000 6.800%, 12/01/10 3,288,750
Maui County Water System Revenue
Pre-Refunded Bonds, FGIC
Insured, Aaa/AAA
1,150,000 6.100%, 12/01/02 1,240,562
1,225,000 6.200%, 12/01/03 1,326,062
1,300,000 6.300%, 12/01/04 1,413,750
1,390,000 6.400%, 12/01/05 1,518,575
1,280,000 6.500%, 12/01/06 1,403,200
1,250,000 6.600%, 12/01/07 1,376,562
1,690,000 6.650%, 12/01/08 1,865,337
1,470,000 6.650%, 12/01/09 1,622,512
1,930,000 6.700%, 12/01/10 2,135,062
1,730,000 6.700%, 12/01/11 1,913,813
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 3,616,750
7,000,000 7.375%, 11/01/15 7,155,330
5,000,000 6.600%, 07/01/22 5,200,000
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 2,123,000
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
700,000 4.400%, 11/01/01 692,125
730,000 4.500%, 11/01/02 720,875
<PAGE>
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 8,351,424
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 5,306,250
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 6,160,000
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 13,780,000
Department of Budget and Finance
of the State of Hawaii Special
Purpose Revenue Bonds (Hawaiian
Electric Company, Inc. Project),
Series 1996A, MBIA Insured, Aaa/AAA
1,000,000 6.200%, 05/01/26 1,027,500
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 2,263,133
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 3,729,881
11,450,000 6.250%, 03/01/21 11,779,188
Department of Budget and Finance
of the State of Hawaii Special
Purpose Revenue (Kapiolani
Health Care System) Series 1993,
MBIA Insured, Aaa/AAA
6,000,000 6.400%, 07/01/13 6,330,000
<PAGE>
Department of Budget and Finance
of the State of Hawaii Special
Purpose Revenue (Kapiolani
Health Care System) Series 1996,
MBIA Insured, NR/AAA
1,000,000 6.000%, 07/01/11 1,038,750
1,000,000 6.200%, 07/01/16 1,046,250
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 3,435,000
11,200,000 7.650%, 07/01/19 12,852,000
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 1,974,875
9,750,000 6.500%, 07/01/12 10,152,188
2,910,000 6.200%, 07/01/22 3,179,175
Department of Budget and Finance
of the State of Hawaii Special
Purpose Revenue Bonds (The
Queen's Health System),
Series A, Aa/AA
4,000,000 6.050%, 07/01/16 4,075,000
8,625,000 6.000%, 07/01/20 8,722,031
3,500,000 5.750%, 07/01/26 3,434,375
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 21,300,000
Department of Hawaiian Home
Lands (State of Hawaii) Revenue
Bonds, Series 1991, NR/NR*
610,000 6.700%, 07/01/97 619,791
655,000 6.800%, 07/01/98 677,106
700,000 6.900%, 07/01/99 733,250
745,000 7.000%, 07/01/00 790,631
800,000 7.100%, 07/01/01 861,000
855,000 7.200%, 07/01/02 934,088
915,000 7.300%, 07/01/03 999,637
<PAGE>
Department of Hawaiian Home
Lands (State of Hawaii) Revenue
Bonds, Series 1991, (continued)
985,000 7.400%, 07/01/04 1,076,113
1,055,000 7.500%, 07/01/05 1,152,588
1,135,000 7.550%, 07/01/06 1,237,150
1,225,000 7.600%, 07/01/07 1,332,188
1,415,000 7.650%, 07/01/09 1,533,506
1,520,000 7.650%, 07/01/10 1,647,300
1,640,000 7.650%, 07/01/11 1,777,350
Department of Transportation of
the State of Hawaii Special
Facility Revenue Bonds (Matson
Terminals, Inc.), Refunding
Series 1993, NR/A-
11,875,000 5.750%, 03/01/13 11,667,188
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 6,049,744
1,260,000 9.250%, 07/01/17 1,280,475
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 2,132,969
4,000,000 5.700%, 10/01/25 4,015,000
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 1,945,000
3,000,000 5.700%, 07/01/18 2,883,750
Housing Finance and Development
Corporation (State of Hawaii)
Single Family Mortage Purchase
Revenue Bonds, Aa/A
1,135,000 8.125%, 07/01/19 1,193,169
7,075,000 7.000%, 07/01/31 7,393,375
<PAGE>
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 2,453,125
15,500,000 5.850%, 07/01/17 15,345,000
10,000,000 6.000%, 07/01/26 9,825,000
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 2,623,950
2,550,000 7.300%, 06/01/09 2,814,563
County of Hawaii, Hawaii General
Obligation Bonds Refunding and
Improvement Series 1993A,
FGIC Insured, Aaa/AAA
1,000,000 5.200%, 05/01/04 1,012,500
2,700,000 5.450%, 05/01/07 2,733,750
3,170,000 5.500%, 05/01/08 3,197,738
1,500,000 5.550%, 05/01/09 1,522,500
4,905,000 5.600%, 05/01/11 4,960,181
1,000,000 5.600%, 05/01/12 1,006,250
1,000,000 5.600%, 05/01/13 1,006,250
County of Hawaii, Hawaii Public
Improvement Bonds 1996 Series A,
FGIC Insured, Aaa/AAA
1,260,000 4.500%, 02/01/02 1,242,675
1,440,000 4.500%, 02/01/05 1,382,400
1,900,000 5.000%, 02/01/11 1,790,750
1,970,000 5.100%, 02/01/12 1,861,650
2,205,000 5.200%, 02/01/14 2,094,750
2,440,000 5.200%, 02/01/16 2,296,650
Hawaii Community Development
Authority Improvement District
Bonds (Kakaako Community
Development District Improvement
District 3), NR/NR*
140,000 6.800%, 07/01/97 142,510
150,000 6.900%, 07/01/98 156,000
160,000 7.000%, 07/01/99 169,400
995,000 7.300%, 07/01/04 1,099,475
1,490,000 7.400%, 07/01/10 1,624,100
<PAGE>
Hawaii Community Development
Authority Improvement District
Refunding Bonds (Kakaako
Community Development District
Improvement District 1), NR/NR*
235,000 4.700%, 07/01/99 235,588
245,000 4.850%, 07/01/00 245,919
255,000 5.000%, 07/01/01 256,594
270,000 5.100%, 07/01/02 272,025
280,000 5.200%, 07/01/03 282,450
300,000 5.300%, 07/01/04 303,000
235,000 5.400%, 07/01/05 237,644
Hawaii Community Development
Authority Improvement District
Refunding Bonds (Kakaako
Community Development District
Improvement District 2), NR/NR*
315,000 4.700%, 07/01/99 315,788
325,000 4.850%, 07/01/00 326,219
345,000 5.000%, 07/01/01 347,156
355,000 5.100%, 07/01/02 357,663
375,000 5.200%, 07/01/03 378,281
395,000 5.300%, 07/01/04 398,950
420,000 5.400%, 07/01/05 424,725
435,000 5.500%, 07/01/06 440,438
465,000 5.600%, 07/01/07 470,813
390,000 5.700%, 07/01/08 394,388
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 1,467,731
2,270,000 8.000%, 07/01/08 2,479,975
Hawaii Community Development
Authority Improvement District
Bonds (Kakaako Community
Development District Improvement
District 2) Escrowed to Maturity, NR/NR*
210,000 7.600%, 07/01/97 216,019
<PAGE>
State of Hawaii Airport System
Revenue Bonds, MBIA Insured, Aaa/AAA
1,000,000 6.200%, 07/01/00 1,051,250
1,150,000 5.250%, 07/01/00 1,177,313
6,455,000 6.900%, 07/01/12 7,326,425
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 1,065,000
State of Hawaii Airports System
Revenue Bonds Third Refunding
Series 1994, AMBAC Insured, Aaa/AAA
3,500,000 5.750%, 07/01/08 3,565,625
State of Hawaii General Obligation
Bonds, FGIC Insured, Aaa/AAA
6,000,000 8.000%, 02/01/01 6,742,500
2,000,000 5.750%, 01/01/11 2,050,000
3,700,000 6.000%, 10/01/11 3,889,625
3,500,000 6.000%, 10/01/12 3,670,625
State of Hawaii General Obligation
Bonds, FGIC Insured, Aaa/AAA
4,000,000 8.125%, 02/01/00 4,410,000
3,000,000 7.250%, 11/01/00 3,281,250
State of Hawaii General Obligation
Bonds of 1995, Series CK, FGIC
Insured, Aaa/AAA
5,555,000 5.250%, 09/01/09 5,430,013
1,000,000 5.600%, 09/01/13 1,001,250
3,000,000 5.600%, 09/01/14 2,996,250
State of Hawaii General Obligation
Bonds of 1995, Series CJ, FGIC
Insured, Aaa/AAA
5,000,000 6.250%, 01/01/14 5,225,000
5,000,000 6.250%, 01/01/15 5,206,250
State of Hawaii General Obligation
Refunding Bonds of 1993, Series
CE, FGIC Insured, Aaa/AAA
6,235,000 5.500%, 06/01/08 6,258,381
6,235,000 5.500%, 06/01/09 6,235,000
5,635,000 5.500%, 06/01/10 5,613,869
<PAGE>
State of Hawaii General Obligation
Refunding Bonds of 1993, Series
CH & Series CL, FGIC Insured, Aaa/AAA
5,000,000 6.000%, 11/01/07 5,337,500
3,390,000 6.000%, 11/01/08 3,601,875
2,305,000 6.000%, 03/01/11 2,420,250
1,285,000 4.750%, 11/01/13 1,162,925
State of Hawaii Harbor Capital
Improvements Revenue Bonds, MBIA
Insured, Aaa/AAA
2,205,000 6.200%, 07/01/08 2,337,300
State of Hawaii Harbor Capital
Improvements Revenue Bonds, MBIA
Insured, Aaa/AAA
14,000,000 7.250%, 07/01/10 15,295,000
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 4,066,563
State of Hawaii Harbor Revenue
Bonds, Refunding Series 1993,
FGIC Insured, Aaa/AAA
1,260,000 6.050%, 07/01/04 1,348,200
1,225,000 6.150%, 07/01/05 1,318,406
State of Hawaii Harbor Revenue
Bonds, Series of 1994, FGIC
Insured, Aaa/AAA
1,000,000 6.250%, 07/01/09 1,048,750
1,000,000 6.250%, 07/01/10 1,040,000
3,725,000 6.250%, 07/01/15 3,846,063
10,180,000 6.375%, 07/01/24 10,523,575
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 2,161,981
4,575,000 5.000%, 07/01/10 4,357,688
2,220,000 5.000%, 07/01/11 2,097,900
3,850,000 5.000%, 07/01/12 3,609,375
2,750,000 5.000%, 07/01/13 2,557,500
<PAGE>
State of Hawaii Highway Revenue
Bonds Series 1996, FGIC Insured, Aaa/AAA
3,705,000 5.600%, 07/01/13 3,705,000
Total Hawaii 633,582,402
GUAM (0.3%)
Government of Guam Ltd. Water
System Revenue Bonds, CGIC
Insured, Aaa/AAA
1,500,000 7.000%, 07/01/09 1,616,250
Total Guam 1,616,250
Total Investments - 97.2%
(Cost $611,014,235**) 635,198,652
Other assets in excess of
liablilities - 2.8% 18,322,298
Net Assets - 100% $ 653,520,950
<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>
** Cost for Federal tax purposes is identical.
</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
SEPTEMBER 30, 1996
(UNAUDITED)
<S> <C>
ASSETS
Investments at value (identified cost - $611,014,235) $ 635,198,652
Receivable for investment securities sold 14,280,000
Interest receivable 10,968,528
Receivable for Trust shares sold 592,727
Other assets 13,213
Total assets 661,053,120
LIABILITIES
Payable for investment securities purchased 5,714,665
Cash overdraft 492,574
Dividends payable 373,959
Payable for Trust shares redeemed 334,812
Distribution fees payable 331,375
Adviser and Administrator fees payable 210,751
Accrued expenses 74,034
Total liabilities 7,532,170
NET ASSETS $ 653,520,950
Net Assets consist of:
Capital Stock, no par value, authorized an unlimited
number of shares $ 628,714,434
Accumulated net realized gain on investments 622,099
Net unrealized appreciation on investments 24,184,417
$ 653,520,950
CLASS A
Net Assets $ 652,476,388
Capital shares outstanding 57,665,507
Net asset value and redemption price per share $ 11.31
Offering price per share (100/96 of $11.31 adjusted
to nearest cent) $ 11.78
CLASS C
Net Assets $ 1,044,459
Capital shares outstanding 92,372
Net asset value and offering price per share $ 11.31
Redemption price per share (*}}varies by length of time
shares are held) $ *
CLASS Y
Net Assets $ 103
Capital shares outstanding 9
Net asset value, offering and redemption price per share $ 11.31
</TABLE>
See accompanying notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
HAWAIIAN TAX-FREE TRUST
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1996
(UNAUDITED)
<S> <C> <C>
INVESTMENT INCOME:
Interest income $ 19,214,750
Expenses:
Investment Adviser fees (note B) $ 455,641
Administrator fees (note B) 846,193
Distribution fees (note B) 652,162
Transfer and shareholder servicing
agent fees 184,000
Trustees' fees and expenses 91,000
Legal fees 48,000
Shareholders' reports and proxy
statements 47,000
Custodian fees (note F) 38,139
Registration fees and dues 20,000
Audit and accounting fees 17,500
Insurance 5,700
Miscellaneous 46,475
2,451,810
Expenses paid indirectly (note F) (38,139)
Net expenses 2,413,671
Net investment income 16,801,079
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain from securities
transactions 377,692
Change in net unrealized appreciation
on investments 82,034
Net realized and unrealized gain on
investments 459,726
Net increase in net assets resulting
from operations $ 17,260,805
</TABLE>
See accompanying notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
HAWAIIAN TAX-FREE TRUST
STATEMENTS OF CHANGES IN NET ASSETS
(UNAUDITED)
SIX MONTHS ENDED YEAR ENDED
SEPTEMBER 30, 1996 MARCH 31, 1996
<S> <C> <C>
OPERATIONS:
Net investment income $ 16,801,079 $ 35,225,979
Net realized gain (loss) from
securities transactions 377,692 3,423,716
Change in unrealized appreciation on
investments 82,034 7,014,254
Change in net assets resulting from
operations 17,260,805 45,663,949
DISTRIBUTIONS TO SHAREHOLDERS (NOTE E):
Class A Shares:
Net investment income, tax-exempt (17,306,163) (34,763,602)
Net investment income, taxable - (16,422)
Net realized gain on investments - (445,955)
Class C Shares:
Net investment income (6,183) -
Net realized gain on investments - -
Class Y Shares:
Net investment income (4) -
Net realized gain on investments - -
Change in net assets from distributions (17,312,350) (35,225,979)
CAPITAL SHARE TRANSACTIONS (NOTE G):
Proceeds from shares sold 21,434,228 50,608,455
Reinvested dividends and distributions 8,715,014 17,419,894
Cost of shares redeemed (36,502,055) (61,096,857)
Change in net assets from capital
share transactions (6,352,813) 6,931,492
Change in net assets (6,404,358) 17,369,462
NET ASSETS:
Beginning of period 659,925,308 642,555,846
End of period $ 653,520,950 $ 659,925,308
</TABLE>
See accompanying notes to financial statements.
<PAGE>
HAWAIIAN TAX-FREE TRUST
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
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 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,
as was the case since inception, are sold with a front-payment sales charge
and bear a service fee. Class C shares are sold with no front-payment sales
charge but are assessed a contingent deferred sales charge if redeemed within
one year from the date of purchase and a level-payment charge for service and
distribution fees from date of purchase through six years thereafter. Class Y
shares are offered only to institutions acting for investors in a fiduciary,
advisory, agency, custodial or similar capacity, are not offered directly to
retail customers, and are 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 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.
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.
In Fiscal 1997, the Trust began amortizing bond premium using the
constant yield method. Accordingly, net unrealized appreciation and
additional paid-in capital have been adjusted by equal amounts at
the beginning of the year. This change had no effect on the Trust's
net asset value or distribution policy and now will conform to the
amortization policy followed by the Trust for Federal tax purposes.
(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.
<PAGE>
(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) ALLOCATION OF EXPENSES: Expenses, other than class-specific
expenses, 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.
(5) 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 Aquila Management
Corporation (the "Administrator"), the Trust's founder and sponsor. Under
this Agreement, the Administrator provides all administrative services, other
than those relating to the management of the Trust's investments. These
include providing the office of the Trust and all related services as well as
overseeing the activities of all the various support organizations to the
Trust such as the shareholder servicing agent, custodian, legal counsel,
auditors and distributor. For its services, the Administrator is entitled to
receive a fee which is payable monthly and computed as of the close of
business each day at the annual rate of 0.26 of 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) 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
<PAGE>
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, 1996.
For the six months ended September 30, 1996, the Trust incurred fees
under the Advisory Agreement and Administration Agreement of $455,641 and
$846,193, 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. For the six months ended September 30,
1996, the Distributor received sales commissions in the amount of $43,742.
The Trust has adopted a Distribution Plan (the "Plan") pursuant to Rule
12b-1 (the "Rule") under the Investment Company Act of 1940. Under one part
of the Plan, with respect to Class A Shares, the Trust is authorized to make
service fee payments to broker-dealers or others 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 ("Qualified
Recipients"). The Trust makes payment of this service fee at the annual rate
of 0.20% of the Trust's average net assets represented by Class A Shares. For
the six months ended September 30, 1996, service fees on Class A Shares
amounted to $650,607, of which the Distributor received $39,076.
Under another part of the Plan, the Trust is authorized to make payments
with respect to Class C Shares to Qualified Recipients which have rendered
assistance in the distribution and/or retention of the Trust's Class C shares
or servicing of shareholder accounts. These payments are made at the annual
rate of 0.75% of the Trust's net assets represented by Class C Shares and for
the period April 1, 1996 through September 30, 1996, amounted to $1,166, of
which the Distributor received $1,166.
In addition, under a Shareholder Services Plan, the Trust is authorized
to make service fee payments with respect to Class C Shares to Qualified
Recipients for providing personal services and/or maintenance of shareholder
accounts. These payments are made at the annual rate of 0.25% of the Trust's
net assets represented by Class C Shares and for the period April 1, 1996
through September 30, 1996, amounted to $389, of which the Distributor
received $389.
Specific details about the Plans are more fully defined in the Trust's
Prospectus and Statement of Additional Information.
NOTE C - PURCHASES AND SALES OF SECURITIES:
During the six months ended September 30, 1996, purchases of securities
and proceeds from the sales of securities aggregated $38,129,923 and
$54,257,546, respectively.
At September 30, 1996, aggregate gross unrealized appreciation for all
securities in which there is an excess of market value over tax cost amounted
to $27,654,797 and aggregate gross unrealized depreciation for all securities
in which there is an excess of tax cost over market value amounted to
$3,470,380 for a net unrealized appreciation of $24,184,417.
<PAGE>
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 dividend income may, under some circumstances, be subject to the
alternative minimum tax. Also, annual capital gains distributions, if any,
are taxable.
On September 23, 1996, the Board of Trustees declared a distribution from
realized long-term capital gains for the fiscal year ended March 31, 1996 in
the amount of $250,000. This distribution will be paid on December 27, 1996
to shareholders of record at the close of business on December 24, 1996.
Based on the shares outstanding at September 30, 1996, this distribution
amounts to $.0043 per share but the actual per share amount will be based on
the shares outstanding on the December 24, 1996 record date.
NOTE F - CUSTODIAN FEES:
The Trust has negotiated an expense offset arrangement with its custodian
wherein it receives credit toward the reduction of custodian fees whenever
there are uninvested cash balances. During the six months ended September 30,
1996, the Trust's custodian fees amounted to $38,139, all of which 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.
<PAGE>
NOTE G - CAPITAL SHARE TRANSACTIONS:
Transactions in Capital Shares of the Trust were as follows:
<TABLE>
<CAPTION>
Six Months Ended Year Ended
September 30, 1996 March 31, 1996
Shares Amount Shares Amount
<S> <C> <C> <C> <C>
CLASS A SHARES:
Proceeds from shares sold 1,816,469 $20,399,648 4,446,713 $ 50,608,455
Reinvested dividends and
distributions 773,995 8,711,118 1,529,160 17,419,894
Cost of shares redeemed (3,251,340) (36,502,055) (5,357,030) (61,096,857)
Net change (660,876) $(7,391,289) 618,843 $ 6,931,492
<CAPTION>
Period Ended
September 30, 1996*
Shares Amount
<S> <C> <C>
CLASS C SHARES:
Proceeds from shares sold 92,027 $ 1,034,480
Reinvested dividends and
distributions 345 3,893
Cost of shares redeemed - -
Net change 92,372 $ 1,038,373
<CAPTION>
Period Ended
September 30, 1996*
Shares Amount
<S> <C> <C>
Class Y Shares:
Proceeds from shares sold 9 $ 100
Reinvested dividends and
distributions - 3
Cost of shares redeemed - -
Net change 9 $ 103
Total transactions in Trust
shares (568,495) $(6,352,813) 618,843 $ 6,931,492
<FN>
* From April 1, 1996 (date of inception) through September 30, 1996.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
HAWAIIAN TAX-FREE TRUST
FINANCIAL HIGHLIGHTS
(UNAUDITED)
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
Class A(1)
Six Months
Class C(2) Class Y(2) Ended
Period ended Sept. 30, Year ended March 31
September 30, 1996 1996 1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of
Period $11.31 $11.31 $11.31 $11.13 $11.19 $11.60 $11.10 $10.85
Income from
Investment
Operations:
Net investment
income 0.22 0.31 0.30 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 0.22 0.31 0.30 0.79 0.61 0.25 1.18 0.96
Less Distributions:
Dividends from
net investment
income (0.22) (0.31) (0.30) (0.61) (0.62) (0.63) (0.68) (0.71)
Distributions
from capital
gains - - - - (0.05) (0.03) - -
Total
Distributions (0.22) (0.31) (0.30) 0.61 (0.67) (0.66) (0.68) (0.71)
Net Asset Value,
End of Period $11.31 $11.31 $11.31 $11.31 $11.13 $11.19 $11.60 $11.10
Total Return
(not reflecting
sales charge)
(%) 1.95# 3.29# 2.81# 7.16 5.75 2.01 10.98 9.15
Ratios/
Supplemental
Data
Net Assets,
End of Period
($ thousands) 1,044 0.1 652,476 659,925 642,556 640,465 597,828 475,469
Ratio of
Expenses to
Average Net
Assets (%) 1.54* 0.54* 0.74* 0.72 0.75 0.74 0.71 0.70
Ratio of Net
Investment
Income to
Average Net
Assets (%) 3.46* 5.58* 5.15* 5.32 5.65 5.46 5.92 6.44
Portfolio
Turnover
Rate (%) 6# 6# 6# 28 33 16 11 16
<CAPTION>
Net investment income per share and the ratios of income and expenses to
average net assets without the Adviser's and Administrator's voluntary waiver
of fees and the expense offset in custodian fees for uninvested cash balances
would have been:
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Investment
Income ($) 0.22 0.31 0.30 0.61 0.62 0.63 0.68 0.71
Ratio of
Expenses to
Average Net
Assets (%) 1.55* 0.55* 0.75* 0.73 0.77 0.76 0.73 0.72
Ratio of Net
Investment
Income to
Average Net
Assets (%) 3.44* 5.57* 5.14* 5.31 5.63 5.44 5.90 6.42
<FN>
(1) Designated as Class A Shares on April 1, 1996.
</FN>
<FN>
(2) New Class of Shares established on April 1, 1996.
</FN>
<FN>
# Not annualized.
</FN>
<FN>
* Annualized.
</FN>
</TABLE>
See accompanying notes to financial statements.
<PAGE>
REPORT ON THE ANNUAL AND SPECIAL MEETINGS OF SHAREHOLDERS (UNAUDITED)
A special meeting of Class Y Shareholders of Hawaiian Tax-Free Trust
(the "Trust") was held on April 4, 1996.1 At the meeting, the Class Y
Shareholders voted on and unanimously approved the provisions of the Trust's
Distribution Plan relating to Class Y Shares (votes for: 100 (100%)).
The Annual Meeting of Shareholders of the Trust was held on September
23, 1996.2 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, and Oswald K. Stender 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
392,331,746.13 affirmative votes (98.43%); no more than
6,245,443.86 votes were withheld for any Trustee (1.57%)), 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, 1997 (votes for: 392,331,746.13 (98.43%); votes against:
1,725,777.59 (0.43%); abstentions: 4,519,666.26 (1.13%); broker
non-votes: 0 (0.00%)).
________________________
1 On the record date for this meeting, 100 Class Y Shares of the Trust were
outstanding and entitled to vote. The holders of 100 Class Y Shares (100%)
entitled to vote were present in person at the meeting.
2 On the record date for this meeting, 57,998,826.29 Class A Shares,
15,153.01 Class C Shares, and 8.96 Class Y Shares were outstanding and
entitled to vote representing a total net asset value of $648,596,388.84. The
holders of shares entitled to vote representing a total net asset value of
$398,577,189.99 (61.45%) were present in person or by proxy at the meeting.
