INVESTMENT ADVISER
PACIFIC CENTURY TRUST
a division of
BANK OF HAWAII
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
PFPC Inc.
400 Bellevue Parkway
Wilmington, Delaware 19809
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, 1997
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's head]
ONE OF THE
AQUILASM GROUP OF FUNDS
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[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
"INCREASED SAFETY IN NUMBERS"
November 17, 1997
Dear Investor:
A childhood lesson that is often imparted generation after
generation is "don't wander off by yourself - stick with the crowd." The
underlying premise is that there is "safety in numbers."
The idea of increased safety in numbers is also very appropriate
when discussing municipal bond funds. In fact, one of the most significant
benefits gained by owning shares of a municipal bond mutual fund is that of
"numbers."
Participating in the ownership of many different issues through
such a fund is generally less risky than purchasing individual issues.
Instead of having your money ride on a handful of securities, you can spread
the risk over a larger number of issues. And, you have the advantage of a
skilled and knowledgeable portfolio manager selecting and continuously
monitoring each security in the portfolio.
But, how does the manager decide which security to purchase?
After all, you need to know the crowd with whom you're about to associate.
Being with a large unruly group could be far worse than being alone.
KNOWING THE TERRITORY
Shareholders of Hawaiian Tax-Free Trust have the added advantage
of having a locally-based portfolio manager. Pacific Century Trust (formerly
Hawaiian Trust Company, Ltd.), a division of Bank of Hawaii, located in
Honolulu, is well aware of the issues facing the state as a whole, as well as
the nuances of many of the cities and counties.
FINDING THE RIGHT MIX
Unfortunately, there is no foolproof test to follow when
considering an issue for purchase. Security selection is really more art than
science. A portfolio manager needs to look for a security which meets certain
specific criteria and which fits in with the overall mix of the portfolio and
the Trust's investment objective.
Among other things, Pacific Century Trust carefully examines a
security's yield, quality, maturity, and whether or not its inclusion in the
portfolio enhances overall diversification.
Keeping in mind the Trust's objective of providing as high a
level of current income as is consistent with preservation of capital, let's
take a look at each of these areas.
QUALITY
As you know, the Trust limits its investments to only those
securities in the top four credit ratings or equivalent. We have adopted this
policy since we have found from experience that high quality is best in the
long run. Of course, it is true that securities which possess a lower credit
rating generally produce a higher yield, since investors require compensation
for the additional potential
<PAGE>
risk. However, purchasing solely for yield can cause feelings of unease for
a risk adverse investor. Consequently, Hawaiian Tax-Free Trust looks for
high quality securities which should produce relatively good yields.
Currently, 94.4% of the investment portfolio is in the top three credit
ratings - AAA, AA, AND A. Such high quality helps preserve shareholders'
capital and promotes stability. Further, in response to Hawaii's present
economic difficulties, 72.3% of the Trust's portfolio has been insured
by specialized insurance companies - just in case.
MATURITY
The key here is to assemble a blend of maturities which offers a
reasonable level of DOUBLE TAX-FREE* return yet still avoids the problem of
excessive market price volatility. As you probably are aware, short-term
maturities tend to have very little price fluctuation, but generally produce
a substantially lesser rate of return than longer maturity securities.
Conversely, long-term maturities usually produce a higher return level, but
have a much higher price volatility factor than shorter-term issues since
they reflect the risks associated with potential interest rate changes over
the extended life of the municipal bond.
By creating a blend of maturities, the Trust attempts to provide
you with a satisfactory level of return without subjecting the share price to
excessive swings as interest rates move up and down.
The Trust utilizes a spread of maturities for the portfolio which
centers upon the relatively intermediate term average maturity of 14.6 years.
In constructing the portfolio, maturities of securities in the Trust range
from one year and under to over 20 years in length. However, in order to
achieve a reasonably high level of stability for the Trust's share value, in
good markets and bad and in up and down interest rate environments, the focus
has been to keep the average of maturities relatively limited in term.
DIVERSIFICATION
Having a breadth of participation in the portfolio helps to
spread risk and protect against any significant loss of principal in the
event of unforseen problems with any particular security.
Although Hawaiian Tax-Free Trust is classified a
"non-diversified" fund under the Investment Company Act of 1940, the Trust
does attempt to vary its portfolio in several ways. First, there is the use
of a number of issues. At September 30, 1997, over 230 issues made up the
Trust's portfolio, with no one issue representing more than 3.5% of the
Trust's net assets. Next, there is investment among different types of
municipal projects - universities, basic services, utilities, health care,
pollution control, etc. - so that there is no undue concentration in any one
type of municipal project. And, finally, there is variety achieved through
geographic representation throughout various cities, counties, and
communities within Hawaii.
Such portfolio mixture by number of issues, by geographic
distribution, and by variety of projects lends itself to a further high level
of preservation and stability for your investment in the Trust.
HOW IS OUR "GROUP" DOING?
As you have seen, selecting investments for the Trust's portfolio
is really a balancing act. On one side, you have yield and, on the other, you
have risk. The Trust strives to construct a portfolio which keeps these two
opposing forces on an even keel - accepting a reasonable level of risk to
achieve a satisfactory return.
As mentioned, the Trust strives 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.
Is our security selection process working well for us? We believe
it is.
<PAGE>
RATE OF RETURN
From October 1, 1996 through September 30, 1997, the Trust
distributed to shareholders a DOUBLE TAX-FREE income return, as measured
against the maximum public offering price, at the annualized rate of
approximately 4.97%**.
One would have to earn an annualized taxable return of 7.61% at
the 28% Federal tax bracket and the even higher return of 9.05% at the 39.6%
Federal tax bracket in order to match the Trust's DOUBLE TAX-FREE rate. 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 and/or longer maturity securities.
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, however, that although there is indeed
increased safety in numbers, we are not able to eliminate 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 create a mix of securities which will
help moderate these forces.
OUR PLEDGE TO YOU
All associated with Hawaiian Tax-Free Trust pledge to you our
continued diligence in the operation of the Trust for your benefit.
Your confidence in Hawaiian Tax-Free Trust is most valued and
appreciated.
Sincerely,
/s/ Lacy B. Herrmann
Lacy B. Herrmann
President and Chairman
of the Board of Trustees
* A portion of dividend income may be subject to Federal and
state taxes, including the alternative minimum tax.
** The performance shown represents that of Class A shares.
Such performance data quoted represents past performance and is not
indicative of future results. The investment return and principal
value of an investment will fluctuate so that an investor's shares,
when redeemed, may be worth more or less than their original cost.
The average annual total return as of 9/30/97 for the past one-year
period was 3.42%; for the past five year period was 5.25%; and for
the past 10-year period was 7.26%. These returns take into account
the maximum sales charge of 4%. As of 9/30/97, the 30-day SEC yield
was 4.34%.
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<TABLE>
<CAPTION>
HAWAIIAN TAX-FREE TRUST
STATEMENT OF INVESTMENTS
SEPTEMBER 30, 1997 (Unaudited)
RATING
FACE MOODY'S/
AMOUNT HAWAII (99.5%) 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 $ 2,993,663
4,290,000 5.700%, 10/01/17 4,407,975
Board of Regents, University of Hawaii University
System Revenue Bonds, Series I, FGIC Insured, Aaa/AAA
145,000 4.600%, 10/01/01 147,538
155,000 4.700%, 10/01/02 158,294
1,110,000 5.300%, 10/01/08 1,153,013
2,825,000 5.500%, 10/01/18 2,892,094
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 1,133,600
1,750,000 5.800%, 07/01/16 1,837,500
1,500,000 5.800%, 07/01/21 1,569,375
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 8,130,000
City and County of Honolulu, Hawaii General
Obligation Bonds Series A, FGIC Insured, Aaa/AAA
5,385,000 7.300%, 07/01/03 6,159,094
2,895,000 7.350%, 07/01/05 3,408,863
4,790,000 7.350%, 07/01/06 5,712,075
9,970,000 7.350%, 07/01/07 12,026,313
3,600,000 7.350%, 07/01/08 4,383,000
2,500,000 6.000%, 01/01/12 2,756,250
1,000,000 5.625%, 09/01/14 1,036,250
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City and County of Honolulu, Hawaii General
Obligation Bonds Series 1995, MBIA Insured, Aaa/AAA
2,215,000 6.000%, 11/01/09 2,458,650
1,500,000 6.000%, 11/01/10 1,659,375
1,000,000 5.250%, 11/01/13 1,008,750
1,835,000 5.500%, 11/01/14 1,878,581
3,130,000 5.000%, 11/01/15 3,043,925
City and County of Honolulu, Hawaii General
Obligation Bonds Series 1994A, FGIC Insured, Aaa/AAA
1,000,000 5.700%, 04/01/09 1,078,750
4,000,000 5.750%, 04/01/11 4,275,000
3,800,000 5.750%, 04/01/13 4,089,750
City and County of Honolulu, Hawaii General
Obligation Bonds Series 1994B, FGIC Insured, Aaa/AAA
4,480,000 6.000%, 06/01/10 4,765,600
2,030,000 6.100%, 06/01/11 2,167,025
3,000,000 6.100%, 06/01/12 3,191,250
4,650,000 6.125%, 06/01/13 4,940,625
4,155,000 6.125%, 06/01/14 4,404,300
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 6,422,063
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 10,351,250
City and County of Honolulu, Hawaii General
Obligation Water Bonds, Series 1992, FGIC
Insured, Aaa/AAA
1,125,000 6.000%, 12/01/12 1,244,531
1,050,000 6.000%, 12/01/15 1,156,313
<PAGE>
City and County of Honolulu Improvement
District No. 261 (Halawa Business Park),
Improvement District Bonds, NR/NR*
365,000 6.700%, 10/15/04 401,044
355,000 6.800%, 10/15/05 394,050
345,000 6.900%, 10/15/06 383,813
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
2,965,000 7.800%, 07/01/24 3,224,438
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 3,247,500
Kauai County General Obligation Escrowed to
Maturity Bonds, A/NR
615,000 9.000%, 08/01/04 779,513
665,000 9.000%, 08/01/05 862,006
County of Kauai, State of Hawaii General
Obligation Refunding Bonds, 1992 Series
A,B & C, AMBAC Insured, Aaa/AAA
155,000 5.250%, 04/01/01 160,038
295,000 5.250%, 08/01/01 305,325
930,000 5.250%, 08/01/01 962,550
330,000 5.450%, 08/01/03 347,738
1,030,000 5.450%, 08/01/03 1,085,363
435,000 5.900%, 08/01/08 477,413
1,355,000 5.900%, 08/01/08 1,487,113
1,300,000 5.950%, 08/01/10 1,430,000
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County of Kauai, State of Hawaii General
Obligation Refunding Bonds, Series 1994A
& 1994B, MBIA Insured, Aaa/AAA
170,000 5.100%, 02/01/01 174,463
365,000 5.200%, 02/01/02 377,319
185,000 5.200%, 02/01/02 191,244
460,000 5.300%, 02/01/03 479,550
190,000 5.300%, 02/01/03 198,075
185,000 5.400%, 02/01/04 194,250
215,000 5.500%, 02/01/05 227,094
215,000 5.600%, 02/01/06 228,975
1,010,000 5.700%, 02/01/07 1,079,438
Kauai County General Obligation Public
Improvement Bonds Series 1990 Pre-Refunded
Bonds, AMBAC Insured, Aaa/AAA
780,000 7.100%, 08/01/01 850,200
960,000 7.300%, 08/01/04 1,052,400
1,030,000 7.350%, 08/01/05 1,130,425
1,185,000 7.450%, 08/01/07 1,303,500
1,370,000 7.500%, 08/01/09 1,508,713
1,470,000 7.500%, 08/01/10 1,618,838
County of Maui, Hawaii General Obligation
Refunding Bonds Series A, MBIA Insured, Aaa/AAA
1,075,000 6.000%, 06/01/15 1,139,500
County of Maui, Hawaii General Obligation
Refunding Bonds 1995, FGIC Insured, Aaa/AAA
720,000 5.150%, 06/01/03 747,000
930,000 5.050%, 06/01/08 947,438
980,000 5.050%, 06/01/09 991,025
1,040,000 5.150%, 06/01/10 1,051,700
1,100,000 5.200%, 06/01/11 1,112,375
1,160,000 5.200%, 06/01/12 1,168,700
1,230,000 5.200%, 06/01/13 1,234,613
1,300,000 5.250%, 06/01/14 1,304,875
1,380,000 5.250%, 06/01/15 1,380,000
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County of Maui, Hawaii General Obligation
Refunding Bonds 1993 Series B, 1993 Series C,
1993 Series D, 1993 Series E, FGIC Insured, Aaa/AAA
1,815,000 5.000%, 09/01/07 1,851,300
2,125,000 5.000%, 09/01/08 2,154,219
1,000,000 5.000%, 09/01/09 1,007,500
1,000,000 5.000%, 09/01/10 1,000,000
3,000,000 5.125%, 12/15/11 3,015,000
1,245,000 5.750%, 01/01/13 1,277,681
1,045,000 5.125%, 12/15/13 1,043,694
County of Maui, Hawaii General Obligation 1997
Series A, FGIC Insured, Aaa/AAA
1,130,000 5.250%, 09/01/13 1,141,300
1,265,000 5.250%, 09/01/15 1,266,581
1,335,000 5.250%, 09/01/16 1,328,325
Maui County General Obligation Pre-Refunded
Bonds, AMBAC Insured, Aaa/AAA
3,000,000 6.800%, 12/01/10 3,270,000
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 1,332,188
1,300,000 6.300%, 12/01/04 1,418,625
1,390,000 6.400%, 12/01/05 1,522,050
1,280,000 6.500%, 12/01/06 1,406,400
1,250,000 6.600%, 12/01/07 1,378,125
1,690,000 6.650%, 12/01/08 1,865,338
1,470,000 6.650%, 12/01/09 1,622,513
1,930,000 6.700%, 12/01/10 2,135,063
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 3,595,500
5,000,000 6.600%, 07/01/22 5,300,000
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Department of Budget and Finance of the State
of Hawaii Special Purpose Revenue Bonds
(Lutheran Good Samaritan Society Project),
AMBAC Insured, Aaa/AAA
2,045,000 4.700%, 11/01/06 2,050,113
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%, 11/01/01 706,125
730,000 4.500%, 11/01/02 737,300
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 8,333,604
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 6,097,000
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 14,267,500
Department of Budget and Finance of the State
of Hawaii Special Purpose Revenue Bonds
(Hawaiian Electric Comapny, Inc. Project),
Series 1996A, MBIA Insured, Aaa/AAA
1,000,000 6.200%, 05/01/26 1,060,000
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 2,258,304
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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 3,774,444
11,450,000 6.250%, 03/01/21 12,036,813
Department of Budget and Finance of the State
of Hawaii Special Purpose Revenue (Kapiolani
Health Care System) Series 1993, MBIA Insured, Aaa/AAA
1,000,000 6.300%, 07/01/08 1,092,500
6,000,000 6.400%, 07/01/13 6,555,000
Department of Budget and Finance of the State
of Hawaii Special Purpose Revenue (Kapiolani
Health Care System) Series 1996, MBIA Insured, Aaa/AAA
1,000,000 6.000%, 07/01/11 1,077,500
1,000,000 6.200%, 07/01/16 1,093,750
1,000,000 6.250%, 07/01/21 1,096,250
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 3,408,750
11,200,000 7.650%, 07/01/19 12,754,000
Department of Budget and Finance of the State of
Hawaii Special Purpose Revenue Pre-Refunded
Bonds, (The Queen's Medical Center Project),
FGIC Insured, Aaa/AAA
9,750,000 6.500%, 07/01/12 9,951,533
2,910,000 6.200%, 07/01/22 3,204,638
Department of Budget and Finance of the State
of Hawaii Special Purpose Revenue Bonds (The
Queen's Health System), Series A, Aa3/AA
4,000,000 6.050%, 07/01/16 4,230,000
8,625,000 6.000%, 07/01/20 9,045,469
3,500,000 5.750%, 07/01/26 3,552,500
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Department of Budget and Finance of the State
of Hawaii Special Purpose Revenue Bonds
(St. Francis Medical Centers), Refunding
Series 1992, FSA Insured, Aaa/AAA
20,000,000 6.500%, 07/01/22 21,600,000
Department of Hawaiian Home Lands (State of
Hawaii) Revenue Bonds, Series 1991, NR/NR*
655,000 6.800%, 07/01/98 666,227
700,000 6.900%, 07/01/99 724,500
745,000 7.000%, 07/01/00 788,769
800,000 7.100%, 07/01/01 863,000
855,000 7.200%, 07/01/02 935,156
915,000 7.300%, 07/01/03 1,001,925
985,000 7.400%, 07/01/04 1,082,269
1,055,000 7.500%, 07/01/05 1,160,500
1,135,000 7.550%, 07/01/06 1,244,244
1,225,000 7.600%, 07/01/07 1,339,844
1,415,000 7.650%, 07/01/09 1,545,888
1,520,000 7.650%, 07/01/10 1,660,600
1,640,000 7.650%, 07/01/11 1,787,600
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 12,201,563
Hawaii Housing Authority Single Family Mortgage
Purchase Revenue Bonds, 1986 Series B, Aa2/A
3,810,000 7.375%, 07/01/16 3,886,200
5,740,000 8.000%, 07/01/16 5,854,800
1,260,000 9.250%, 07/01/17 1,272,600
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 2,202,031
4,000,000 5.700%, 10/01/25 4,145,000
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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 2,042,500
3,000,000 5.700%, 07/01/18 3,052,500
Housing Finance and Development Corporation
(State of Hawaii) Single Family Mortgage
Purchase Revenue Bonds, Aa1/AA
1,135,000 8.125%, 07/01/19 1,177,404
7,075,000 7.000%, 07/01/31 7,508,344
Housing Finance and Development Corporation
(State of Hawaii) Single Family Mortgage
Purchase Revenue Bonds 1994 Series A & B, Aa1/AA
2,500,000 5.700%, 07/01/13 2,571,875
15,500,000 5.850%, 07/01/17 15,945,625
10,000,000 6.000%, 07/01/26 10,212,500
Housing Finance and Development Corporation
(State of Hawaii) Single Family Mortgage
Purchase Revenue Bonds 1997 Series A, FNMA
Insured, Aa1/AA
14,735,000 5.750%, 07/01/30 14,808,675
County of Hawaii, Hawaii General Obligation
Pre-Refunded Refunding and Improvement
Series 1990A, FGIC Insured, Aaa/AAA
2,550,000 7.300%, 06/01/09 2,785,875
County of Hawaii, Hawaii General Obligation
Bonds Refunding and Improvement Series
1993A, FGIC Insured, Aaa/AAA
1,000,000 5.200%, 05/01/04 1,040,000
2,700,000 5.450%, 05/01/07 2,868,750
3,170,000 5.500%, 05/01/08 3,368,125
2,500,000 5.550%, 05/01/09 2,665,625
4,905,000 5.600%, 05/01/11 5,223,825
1,000,000 5.600%, 05/01/12 1,062,500
1,000,000 5.600%, 05/01/13 1,060,000
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County of Hawaii, Hawaii Public Improvement
Bonds 1996 Series A FGIC Insured, Aaa/AAA
1,440,000 4.500%, 02/01/05 1,432,800
1,900,000 5.000%, 02/01/11 1,892,875
1,970,000 5.100%, 02/01/12 1,972,463
2,205,000 5.200%, 02/01/14 2,207,756
2,440,000 5.200%, 02/01/16 2,415,600
Hawaii Community Development Authority
Improvement District Bonds (Kakaako Community
Development District Improvement District 3), NR/NR*
150,000 6.900%, 07/01/98 153,269
160,000 7.000%, 07/01/99 166,800
995,000 7.300%, 07/01/04 1,089,525
1,490,000 7.400%, 07/01/10 1,627,825
Hawaii Community Development Authority
Improvement District Refunding Bonds (Kakaako
Community Development District Improvement
District 1), NR/NR*
235,000 4.700%, 07/01/99 236,175
245,000 4.850%, 07/01/00 246,838
255,000 5.000%, 07/01/01 257,869
270,000 5.100%, 07/01/02 273,713
280,000 5.200%, 07/01/03 284,550
300,000 5.300%, 07/01/04 305,625
230,000 5.400%, 07/01/05 238,050
Hawaii Community Development Authority
Improvement District Refunding Bonds (Kakaako
Community Development District Improvement
District 2), NR/NR*
315,000 4.700%, 07/01/99 316,575
325,000 4.850%, 07/01/00 327,438
345,000 5.000%, 07/01/01 348,881
355,000 5.100%, 07/01/02 359,881
375,000 5.200%, 07/01/03 381,094
395,000 5.300%, 07/01/04 402,406
<PAGE>
Hawaii Community Development Authority
Improvement District Refunding Bonds (continued)
420,000 5.400%, 07/01/05 434,700
435,000 5.500%, 07/01/06 451,856
465,000 5.600%, 07/01/07 483,019
390,000 5.700%, 07/01/08 405,113
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 1,425,001
2,270,000 8.000%, 07/01/08 2,407,085
State of Hawaii Airport System Revenue Bonds,
MBIA Insured, Aaa/AAA
1,000,000 6.200%, 07/01/00 1,053,750
1,150,000 5.250%, 07/01/00 1,187,375
6,455,000 6.900%, 07/01/12 7,520,075
3,000,000 7.000%, 07/01/18 3,285,000
4,025,000 7.000%, 07/01/18 4,407,375
1,000,000 6.750%, 07/01/21 1,083,750
State of Hawaii Airports System Revenue
Bonds Third Refunding Series 1994, AMBAC
Insured, Aaa/AAA
3,500,000 5.750%, 07/01/08 3,692,500
State of Hawaii General Obligation Bonds,
FGIC Insured, Aaa/AAA
6,000,000 8.000%, 02/01/01 6,682,500
2,000,000 5.750%, 01/01/11 2,155,000
3,700,000 6.000%, 10/01/11 4,093,125
3,500,000 6.000%, 10/01/12 3,871,875
State of Hawaii General Obligation Bonds,
FGIC Insured, Aaa/AAA
4,000,000 8.125%, 02/01/00 4,345,000
3,000,000 7.250%, 11/01/00 3,262,500
<PAGE>
State of Hawaii General Obligation Bonds of
1996, Series CM, FGIC Insured, Aaa/AAA
3,000,000 6.500%, 12/01/15 3,476,250
State of Hawaii General Obligation Bonds of 1997,
Series CN, FGIC Insured, Aaa/AAA
1,950,000 5.250%, 03/01/15 1,952,438
7,000,000 5.500%, 03/01/16 7,122,500
State of Hawaii General Obligation Bonds of 1995,
Series CK, FGIC Insured, Aaa/AAA
5,555,000 5.250%, 09/01/09 5,686,931
1,000,000 5.600%, 09/01/13 1,030,000
3,000,000 5.600%, 09/01/14 3,078,750
State of Hawaii General Obligation Bonds of 1995,
Pre-Refunded, Series CJ, FGIC Insured, Aaa/AAA
5,000,000 6.250%, 01/01/14 5,562,500
5,000,000 6.250%, 01/01/15 5,562,500
State of Hawaii General Obligation Refunding
Bonds of 1993, Series CE, FGIC Insured, Aaa/AAA
6,235,000 5.500%, 06/01/08 6,499,988
6,235,000 5.500%, 06/01/09 6,468,813
5,635,000 5.500%, 06/01/10 5,818,138
State of Hawaii General Obligation Refunding
Bonds of 1993, Series CH, FGIC Insured, Aaa/AAA
5,000,000 6.000%, 11/01/07 5,543,750
3,390,000 6.000%, 11/01/08 3,771,375
State of Hawaii General Obligation Bonds of 1996,
Series CL, FGIC Insured, Aaa/AAA
2,305,000 6.000%, 03/01/11 2,541,263
State of Hawaii Harbor Capital Improvements
Revenue Bonds, MBIA Insured, Aaa/AAA
2,205,000 6.200%, 07/01/08 2,378,644
3,850,000 5.750%, 07/01/17 3,979,938
<PAGE>
State of Hawaii Harbor Capital Improvements
Revenue Bonds, MBIA Insured, Aaa/AAA
14,000,000 7.250%, 07/01/10 15,260,000
1,200,000 7.000%, 07/01/17 1,297,500
State of Hawaii Harbor Revenue Bonds, Series
1992, FGIC Insured, Aaa/AAA
3,850,000 6.500%, 07/01/19 4,138,750
State of Hawaii Harbor Revenue Bonds, Refunding
Series 1993, FGIC Insured, Aaa/AAA
1,260,000 6.050%, 07/01/04 1,382,850
1,225,000 6.150%, 07/01/05 1,347,500
State of Hawaii Harbor Revenue Bonds, Series of
1994, FGIC Insured, Aaa/AAA
1,000,000 6.250%, 07/01/09 1,090,000
1,000,000 6.250%, 07/01/10 1,081,250
3,725,000 6.250%, 07/01/15 3,995,063
10,180,000 6.375%, 07/01/24 10,892,600
State of Hawaii Highway Revenue Bonds Series
1993, FGIC Insured, Aaa/AAA
4,000,000 4.875%, 07/01/07 4,040,000
3,900,000 5.000%, 07/01/08 3,948,750
2,255,000 5.000%, 07/01/09 2,274,731
4,575,000 5.000%, 07/01/10 4,586,438
2,220,000 5.000%, 07/01/11 2,225,550
3,850,000 5.000%, 07/01/12 3,859,625
2,750,000 5.000%, 07/01/13 2,746,537
State of Hawaii Highway Revenue Bonds Series
1996, FGIC Insured, Aaa/AAA
3,705,000 5.600%, 07/01/13 3,839,306
2,000,000 5.250%, 07/01/16 1,995,000
Total Hawaii 659,771,544
<PAGE>
Guam (0.2%)
Government of Guam Ltd. Water System Revenue
Bonds, FSA Insured, Aaa/AAA
1,500,000 7.000%, 07/01/09 1,612,500
Total Guam 1,612,500
Total Investments (cost $621,592,072**) 99.7% 661,384,044
Other assets in excess of liablilities .3 1,756,401
Net Assets 100.0% $ 663,140,445
<FN> * Any security not rated has been determined by the
Investment Adviser to have sufficient quality to be
ranked in the top four credit ratings if a credit rating
were to be assigned by a rating service.</FN>
<FN>** Cost for Federal tax purposes is identical.</FN>
</TABLE>
PORTFOLIO ABBREVIATIONS:
AMBAC American Municipal Bond Assurance Corp.
FSA Financial Security Assurance
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, 1997 (UNAUDITED)
<S> <C>
ASSETS
Investments at value (identified cost - $621,592,072) $ 661,384,044
Cash 383,451
Interest receivable 10,727,896
Receivable for Trust shares sold 528,577
Other assets 11,529
Total assets 673,035,497
LIABILITIES
Payable for investment securities purchased 7,769,254
Payable for Trust shares redeemed 1,033,679
Dividends payable 366,145
Distribution fees payable 345,006
Adviser and Administrator fees payable 217,482
Accrued expenses 163,486
Total liabilities 9,895,052
NET ASSETS $ 663,140,445
Net Assets consist of:
Capital Stock, no par value, authorized an unlimited
number of shares $ 622,922,822
Accumulated net realized gain on investments 425,651
Net unrealized appreciation on investments 39,791,972
$ 663,140,445
CLASS A
Net Assets $ 656,720,468
Capital shares outstanding 56,705,024
Net asset value and redemption price per share $ 11.58
Offering price per share (100/96 of $11.58 adjusted
to nearest cent) $ 12.06
CLASS C
Net Assets $ 6,170,020
Capital shares outstanding 532,966
Net asset value and offering price per share $ 11.58
Redemption price per share (*varies by length of
time shares are held) $ *
CLASS Y
Net Assets $ 249,957
Capital shares outstanding 21,561
Net asset value, offering and redemption price per share $ 11.59
</TABLE>
See accompanying notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
HAWAIIAN TAX-FREE TRUST
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1997 (UNAUDITED)
<S> <C> <C>
INVESTMENT INCOME:
Interest income $ 18,988,507
Expenses:
Investment Adviser fees (note 3) $ 460,175
Administrator fees (note 3) 854,616
Distribution and service fees (note 3) 678,105
Transfer and shareholder servicing agent fees 155,000
Trustees' fees and expenses 95,000
Shareholders' reports and proxy statements 43,000
Custodian fees 36,000
Legal fees 30,000
Registration fees and dues 17,000
Audit and accounting fees 15,000
Insurance 6,000
Miscellaneous 34,701
2,424,597
Expenses paid indirectly (note 7) (36,000)
Net expenses 2,388,597
Net investment income 16,599,910
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain from securities
transactions 425,651
Change in net unrealized appreciation on
investments 19,943,875
Net realized and unrealized gain on investments 20,369,526
Net increase in net assets resulting from
operations $ 36,969,436
</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
Sept. 30, 1997 March 31, 1997
<S> <C> <C>
OPERATIONS:
Net investment income $ 16,599,910 $ 33,687,468
Net realized gain from securities
transactions 425,651 528,297
Change in unrealized appreciation on
investments 19,943,875 (4,593,162)
Change in net assets resulting
from operations 36,969,436 29,622,603
DISTRIBUTIONS TO SHAREHOLDERS (NOTE 6):
Class A Shares:
Net investment income (16,765,335) (33,607,523)
Net realized gain on investments - (721,443)
Class C Shares:
Net investment income (110,734) (79,938)
Net realized gain on investments - (3,408)
Class Y Shares:
Net investment income (249) (7)
Net realized gain on investments - -
Change in net assets from distributions (16,876,318) (34,412,319)
CAPITAL SHARE TRANSACTIONS (NOTE 8):
Proceeds from shares sold 28,372,180 44,348,965
Reinvested dividends and distributions 8,561,888 17,392,444
Cost of shares redeemed (40,242,644) (70,521,098)
Change in net assets from capital share
transactions (3,308,576) (8,779,689)
Change in net assets 16,784,542 (13,569,405)
NET ASSETS:
Beginning of period 646,355,903 659,925,308
End of period $663,140,445 $646,355,903
</TABLE>
See accompanying notes to financial statements.
<PAGE>
HAWAIIAN TAX-FREE TRUST
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
1. ORGANIZATION
Hawaiian Tax-Free Trust (the "Trust"), a non-diversified, open-end
investment company, was organized on May 7, 1984, as a Massachusetts business
trust and commenced operations on February 20, 1985. The Trust is authorized
to issue an unlimited number of shares and, 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 an annual service fee. Class C shares are sold with a level-payment
sales charge with no payment at time of purchase but level service and
distribution fees from date of purchase through a period of six years
thereafter. A contingent deferred sales charge of 1% is assessed to any Class
C shareholder who redeems shares of this Class within one year from the date
of purchase. The Class Y shares are only offered to institutions acting for
an investor in a fiduciary, advisory, agency, custodial or similar capacity.
They are not available to individual retail investors. Class Y shares are
sold at net asset value without any sales charge, redemption fees, contingent
deferred sales charge or distribution or service fees. All classes of shares
represent interests in the same portfolio of investments and are identical as
to rights and privileges but differ with respect to the effect of sales
charges, the distribution and/or service fees borne by each class, expenses
specific to each class, voting rights on matters affecting a single class and
the exchange privileges of each class.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies followed by
the Trust in the preparation of its financial statements. The policies are in
conformity with generally accepted accounting principles for investment
companies.
a) PORTFOLIO VALUATION: Municipal securities which have remaining
maturities of more than 60 days are valued at fair value 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 conforms
to the amortization policy followed by the Trust for Federal
tax purposes.
<PAGE>
b) SECURITIES TRANSACTIONS AND RELATED INVESTMENT INCOME: Securities
transactions are recorded on the trade date. Realized gains and
losses from securities transactions are reported on the identified
cost basis. Interest income is recorded daily on the accrual basis
and is adjusted for amortization of premium and accretion of
original issue discount. Market discount is recognized upon
disposition of the security.
c) 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.
d) 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.
e) 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.
3. FEES AND RELATED PARTY TRANSACTIONS
a) MANAGEMENT ARRANGEMENTS:
Management affairs of the Trust are conducted through two separate
management arrangements.
On September 30, 1997, Pacific Century Trust (the "Adviser"), a division
of Bank of Hawaii, succeeded to the operations of Hawaiian Trust Company,
Limited, a subsidiary of Bank of Hawaii, which had served as Investment
Adviser to the Trust since 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
<PAGE>
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 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,
1997.
For the six months ended September 30, 1997, the Trust incurred fees
under the Advisory Agreement and Administration Agreement of $460,175 and
$854,616, respectively.
b) DISTRIBUTION AND SERVICE FEES:
The Trust has adopted a Distribution Plan (the "Plan") pursuant to Rule
12b-1 (the "Rule") under the Investment Company Act of 1940. Under one part
of the Plan, with respect to Class A Shares, the Trust is authorized to make
service fee payments to broker-dealers or others ("Qualified Recipients")
selected by the Distributor, including, but not limited to, any principal
underwriter of the Trust, with which the Distributor has entered into written
agreements contemplated by the Rule and which have rendered assistance in the
distribution and/or retention of the Trust's shares or servicing of
shareholder accounts. The Trust makes payment of this service fee at the
annual rate of 0.20% of the Trust's average net assets represented by Class A
Shares. For the six months ended September 30, 1997, service fees on Class A
Shares amounted to $652,214, of which the Distributor received $37,809.
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 six months ended September 30, 1997, amounted to $19,418. 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
<PAGE>
Shares and for the six months ended September 30, 1997, amounted to $6,473.
The total of these payments made with respect to Class C Shares amounted to
$25,891, of which the Distributor received $24,670.
Specific details about the Plans are more fully defined in the Trust's
Prospectus and Statement of Additional Information.
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,
1997, the Distributor received sales commissions in the amount of $57,842.
4. PURCHASES AND SALES OF SECURITIES
During the six months ended September 30, 1997, purchases of securities
and proceeds from the sales of securities aggregated $30,253,579 and
$24,021,139, respectively.
At September 30, 1997, aggregate gross unrealized appreciation for all
securities in which there is an excess of market value over tax cost amounted
to $39,813,700 and aggregate gross unrealized depreciation for all securities
in which there is an excess of tax cost over market value amounted to $21,728
for a net unrealized appreciation of $39,791,972.
5. PORTFOLIO ORIENTATION
Since the Trust invests principally and may invest entirely in double
tax-free municipal obligations of issuers within Hawaii, it is subject to
possible risks associated with economic, political, or legal developments or
industrial or regional matters specifically affecting Hawaii and whatever
effects these may have upon Hawaii issuers' ability to meet their
obligations.
6. 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
<PAGE>
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.
7. EXPENSES
The Trust has negotiated an expense offset arrangement with its custodian
wherein it receives credit toward the reduction of custodian fees and other
Trust expenses whenever there are uninvested cash balances. The Statement of
Operations reflects the total expenses before any offset, the amount of
offset and the net expenses. It is general intention of the Fund to invest,
to the extent practicable, some or all of cash balances in income-producing
assets rather than leave cash on deposit.
8. CAPITAL SHARE TRANSACTIONS
Transactions in Capital Shares of the Trust were as follows:
<TABLE>
<CAPTION>
Six Months Ended 9/30/97 Year Ended 3/31/97
Shares Amount Shares Amount
<S> <C> <C> <C> <C>
CLASS A SHARES:
Proceeds from shares sold 2,259,553 $ 25,819,100 3,435,559 $ 38,837,050
Reinvested distributions 743,253 8,507,097 1,531,621 17,341,570
Cost of shares redeemed (3,368,543) (38,546,789) (6,222,801) (70,398,321)
Net change (365,737) (4,220,592) (1,255,621) (14,219,701)
CLASS C SHARES:
Proceeds from shares sold 201,427 2,303,080 484,452 5,511,815
Reinvested distributions 4,943 54,787 4,471 50,867
Cost of shares redeemed (151,442) (1,695,855) (10,885) (122,777)
Net change 54,928 662,012 478,038 5,439,905
CLASS Y SHARES:
Proceeds from shares sold 21,552 250,000 8 100
Reinvested distributions - 4 1 7
Cost of shares redeemed - - - -
Net change 21,552 250,004 9 107
Total transactions in
Trust shares (289,257) $ (3,308,576) (777,574) $ (8,779,689)
</TABLE>
<PAGE>
HAWAIIAN TAX-FREE TRUST
FINANCIAL HIGHLIGHTS
(UNAUDITED)
For a share outstanding throughout each period
<TABLE>
<CAPTION>
Class A(1)
Six Months
Ended Sept. Year ended March 31,
30, 1997 1997 1996 1995 1994 1993
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period $11.23 $11.31 $11.13 $11.19 $11.60 $11.10
Income from Investment
Operations:
Net investment income 0.29 0.59 0.61 0.62 0.63 0.68
Net gain (loss) on
securities (both
realized and
unrealized) 0.35 (0.08) 0.18 (0.01) (0.38) 0.50
Total from Investment
Operations 0.64 0.51 0.79 0.61 0.25 1.18
Less Distributions
(note 6):
Dividends from net
investment income (0.29) (0.58) (0.61) (0.62) (0.63) (0.68)
Distributions from
capital gains - (0.01) - (0.05) (0.03) -
Total Distributions (0.29) (0.59) (0.61) (0.67) (0.66) (0.68)
Net Asset Value, End
of Period $11.58 $11.23 $11.31 $11.13 $11.19 $11.60
Total Return (not
reflecting sales
charge) (%) 5.80# 4.67 7.16 5.75 2.01 10.98
Ratios/Supplemental Data
Net Assets, End of
Period ($ thousands) 656,720 640,989 659,925 642,556 640,465 597,828
Ratio of Expenses to
Average Net Assets
(%) 0.72* 0.73 0.72 0.75 0.74 0.71
Ratio of Net Investment
Income to Average Net
Assets (%) 5.06* 5.12 5.32 5.65 5.46 5.92
Portfolio Turnover Rate
(%) 2# 9 28 33 16 11
<CAPTION>
Net investment income per share and the ratios of income and expenses to
average net assets without the expense offset for uninvested cash balances
would have been:
<S> <C> <C> <C> <C> <C> <C>
Net Investment Income
($) 0.29 0.59 0.61 0.62 0.63 0.68
Ratio of Expenses to
Average Net Assets
(%) 0.73* 0.75 0.73 0.77 0.76 0.73
Ratio of Net Investment
Income to Average Net
Assets (%) 5.05* 5.11 5.31 5.63 5.44 5.90
<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>
For a share outstanding throughout each period
<TABLE>
<CAPTION>
Class C(1) Class Y(1)
Six Months Year Six Months Year
Ended Sept. Ended March Ended Sept. Ended March
30, 1997 31, 1997 30, 1997 31, 1997
<S> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period $11.23 $11.31 $11.24 $11.31
Income from Investment
Operations:
Net investment income 0.24 0.46 0.38 0.74
Net gain (loss) on
securities (both
realized and unrealized) 0.36 (0.08) 0.35 (0.07)
Total from Investment
Operations 0.60 0.38 0.73 0.67
Less Distributions (note 6):
Dividends from net
investment income (0.25) (0.45) (0.38) (0.73)
Distributions from
capital gains - (0.01) - (0.01)
Total Distributions (0.25) (0.46) (0.38) (0.74)
Net Asset Value, End of
Period $11.58 $11.23 $11.59 $11.24
Total Return (not
reflecting sales charge)
(%) 5.37# 3.41 6.57# 6.14
Ratios/Supplemental Data
Net Assets, End of Period
($ thousands) 6,170 5,367 250 0.1
Ratio of Expenses to
Average Net Assets (%) 1.51* 1.51 0.51* 0.53
Ratio of Net Investment
Income to Average Net
Assets (%) 4.19* 4.06 5.18* 4.92
Portfolio Turnover Rate
(%) 2# 9 2# 9
<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, the Administrator's voluntary expense reimbursement and the expense
offset in custodian fees for uninvested cash balances would have been:
<S> <C> <C> <C> <C>
Net Investment Income ($) 0.24 0.46 0.38 0.74
Ratio of Expenses to
Average Net Assets (%) 1.52* 1.53 0.52* 0.55
Ratio of Net Investment
Income to Average Net
Assets (%) 4.18* 4.04 5.17* 4.94
<FN> (1) New Class of Shares established on April 1, 1997.</FN>
<FN> # Not annualized.</FN>
<FN> * Annualized. </FN>
</TABLE>
See accompanying notes to financial statements.
<PAGE>
REPORT ON THE ANNUAL MEETING OF SHAREHOLDERS (UNAUDITED)
The Annual Meeting of Shareholders of Hawaiian Tax-Free Trust
(the "Trust") was held on September 29, 1997*. 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
401,321,102.741 affirmative votes (97.73%); no more than 9,310,477.659
votes were withheld for any Trustee (2.27%)), 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,
1998 (votes for: 402,892,893.850 (98.12%); votes against:
1,644,400.454 (0.40%); abstentions: 6,094,286.091 (1.48%); broker
non-votes: 0 (0.00%)).
________________________
* On the record date for this meeting, 56,921,512.12 Class A Shares,
428,986.35 Class C Shares, and 9.61 Class Y Shares were outstanding and
entitled to vote representing a total net asset value of $657,236,822.60 The
holders of shares entitled to vote representing a total net asset value of
$410,631,580.40 (62.48%) were present in person or by proxy at the meeting.
