FOUNDER AND ADMINISTRATOR
AQUILA MANAGEMENT CORPORATION
380 Madison Avenue, Suite 2300
New York, New York 10017
INVESTMENT ADVISER
PACIFIC CENTURY TRUST
a division of
BANK OF HAWAII
Financial Plaza of the Pacific
P.O. Box 3170
Honolulu, Hawaii 96802
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
Diana P. Herrmann, Executive Vice 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, 1998
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
<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
"ATTRACTIVE TAX-FREE RETURNS PLUS HIGH STABILITY"
November 16, 1998
Dear Investor:
In our last report letter to you, we discussed the impact of the
serious economic and currency problems of various countries in the Far East.
We observed that these problems have resulted in a "FLIGHT TO QUALITY."
Specifically, we pointed out that, on a comparative basis, the
economy of the United States has continued to be strong. As a result, the
U.S. dollar as a currency, as well as U.S. securities markets, have stood out
in the world as a "BEACON OF QUALITY." Hawaiian Tax-Free Trust enjoys this
high quality ranking.
Therefore, in this letter to you, we wish to focus upon the level
of TAX-FREE* return provided to you by Hawaiian Tax-Free Trust in the current
marketplace.
ATTRACTIVE TAX-FREE RETURNS
The current level of TAX-FREE return produced by Hawaiian
Tax-Free Trust is EXCEPTIONALLY ATTRACTIVE compared with taxable returns in
today's marketplace.
The rate of inflation in the United States has continued to be
relatively low throughout the recent expansion of the economy. This has
caused the level of interest rates to decline over recent years as well as
over the last few months.
This decline in interest rates has provided the opportunity for
various municipalities to finance new projects and also to refinance existing
projects at lower interest costs to them. Municipalities act much like you
and I would when refinancing home mortgages to take advantage of attractive
rates. Basically, they are acting to save money.
While interest rates generated by TAX-FREE municipal bonds have
declined over the years, they have not declined as much as rates on a taxable
investment. As a result, TAX-FREE municipal securities have become
EXCEPTIONALLY ATTRACTIVE - on a comparative basis - with other types of
fixed-income securities.
Indeed, while the benchmark 30-year maturity U.S. Treasury bond
is currently yielding approximately 5.22%, its interest income is still
subject to taxes. On the other hand, similar maturity municipal securities,
of comparable quality, are yielding roughly 5.05% - and these are TAX-FREE.
Thus, comparable TAX-FREE municipal bonds are yielding MORE THAN
95% of what high-quality TAXABLE bonds are paying. Consequently, with TAX-FREE
municipal securities, investors are getting to keep more of the actual return
paid. Most significantly, this level of return represents for investors one
of the best for TAX-FREE securities in recent years.
The advantage to you of owning a TAX-FREE investment such as
Hawaiian Tax-Free Trust is vividly illustrated in the following chart. This
chart compares the 4.70%** average level of distribution return for Class A
Shares (as measured against the maximum public offering price) for the past
twelve months with what you would have had to earn with a taxable investment.
<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 Distribution Rate
<C> <C> <C>
28% 7.25% 4.70%
31% 7.67% 4.70%
36% 8.29% 4.70%
39.6% 8.81% 4.70%
</TABLE>
As you will note, you would have to find taxable fixed-income
securities that would yield you a level of return quite a bit higher than
that achieved by your investment in Hawaiian Tax-Free Trust. Given the
current economic environment, such higher levels of yield would not be
possible to obtain, unless you took significant additional risk in the form
of lesser quality securities.
Consequently, the TAX-FREE return produced by Hawaiian Tax-Free
Trust in today's marketplace is EXCEPTIONALLY ATTRACTIVE.
STABILITY OF YOUR INVESTMENT
Additionally, Hawaiian Tax-Free Trust has always tried to achieve
a high level of STABILITY for your share value. This is one of the prime
objectives that shareholders in the Trust have indicated to us that they
would like to have - in addition to a good level of TAX-FREE return.
[Graphic of bar chart with the following information:]
SHARE NET ASSET VALUE
<TABLE>
<CAPTION>
In Dollars
<C> <C>
3/31/85 9.53
3/31/86 10.94
3/31/87 11.14
3/31/88 10.60
3/31/89 10.60
3/31/90 10.78
3/31/91 10.85
3/31/92 11.10
3/31/93 11.61
3/31/94 11.19
3/31/95 11.13
3/31/96 11.31
3/31/97 11.23
3/31/98 11.67
9/30/98 11.84
</TABLE>
As you will note from the above chart, the Class A share value of
the Trust has achieved a high level of stability since the Trust began.
<PAGE>
SLEEPING WELL AT NIGHT
We have always been conscious of the fact that many of our
shareholders are retirees or pre-retirees. Moreover, most shareholders have
indicated to us that they want the comfort of obtaining a high degree of
safety for their invested capital in the Trust.
Indeed, in our management of Hawaiian Tax-Free Trust, we have
always tried to ensure that you are able to "SLEEP WELL AT NIGHT" knowing
that your investment dollars are being well looked after.
Achieving an attractive level of tax-free return PLUS high
stability for your investment in Hawaiian Tax-Free Trust requires use of
various investment strategies.
We again want to highlight these various investment strategies
which the Trust uses to ensure that YOUR MONEY IS WELL PROTECTED.
These strategies include emphasis on municipal securities having
HIGH QUALITY credit ratings, BROAD DIVERSIFICATION with respect to both number
and nature of securities, and an INTERMEDIATE MATURITY level with the various
holdings in the Trust's portfolio.
The accompanying three pie charts illustrate these points.
[Graphic of pie chart with the following information:]
<TABLE>
<CAPTION>
PORTFOLIO DISTRIBUTION BY QUALITY
(By Credit Rating)
<S> <C>
AAA 74.9%
AA 15.8%
A 4.3%
Below A and Not Rated 5.0%
</TABLE>
[Graphic of pie chart with the following information:]
<TABLE>
<CAPTION>
PORTFOLIO DISTRIBUTION BY PROJECT
<S> <C>
Airports 2.8%
Harbor 7.4%
Electric 6.0%
Highway 5.0%
Water & Sewer 3.3%
Hospital 12.9%
Housing 14.2%
General Obligations 14.6%
Improvement District 1.5%
County General Obligations 25.7%
Education 1.8%
Transportation 2.0%
Other 2.8%
</TABLE>
[Graphic of pie chart with the following information:]
<TABLE>
<CAPTION>
PORTFOLIO DISTRIBUTION BY MATURITY
(In Years)
<S> <C>
Under 1 0.2%
1 - 5 10.8%
5 - 10 16.4%
10 - 20 49.7%
20 - 30 18.2%
Over 30 4.7%
</TABLE>
At September 30, 1998, 90.7% of the Trust's overall portfolio was
rated AAA or AA - the two HIGHEST quality credit ratings available for
securities. Moreover, at this date 72% of the portfolio was insured by AAA
rated specialized insurance companies.
<PAGE>
There are presently 215 individual issues in the Trust's
portfolio, representing a broad diversification in number and variety of
project categories throughout the State.
The average overall maturity of the portfolio is in the
intermediate range of 15.32 years. And, the duration is 6 years.
Basically, all these factors are designed to give you "PEACE OF
MIND" with your investment in Hawaiian Tax-Free Trust - providing attractive
TAX-FREE return PLUS high STABILITY.
KEEPING YOU IN MIND
We want you to know, that since the inception of Hawaiian
Tax-Free Trust, we have always kept in mind the level of TAX-FREE return you
receive from your investment in the Trust.
We also keep in mind the HIGH DEGREE OF STABILITY that we want
your investment to possess.
We achieve this through paying attention to the various areas we
have highlighted above.
These are the PRIME FOCUSES that we continue to have for you with
the Trust.
YOUR CONFIDENCE VALUED
We value the opportunity to be of service to you. It is our
intent to consistently work in your interest with your investment in Hawaiian
Tax-Free Trust.
Sincerely,
/s/ Lacy B. Herrmann
Lacy B. Herrmann
President and Chairman
of the Board of Trustees
* In certain circumstances, a small portion of the dividends paid by
the Trust may be subject to income taxes, including the alternative
minimum tax.
** The distribution rate shown represents that of Class A shares. Such
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. Different classes of shares are
offered by the Trust and their distribution rate and performance will
vary because of differences in sales charges and fees paid by
shareholders investing in different classes. The Trust's Class A Shares
average annual total return as of September 30, 1998 for the past
one-year period was 7.81%; for the past five-year period was 4.60%;
for the past ten-year period was 6.79%; and since inception was 7.81%.
These returns take into consideration the maximum sales charge of 4%.
As of September 30, 1998, the Trust's Class A Shares 30-day SEC yield
was 3.93% (its taxable equivalent rate is 6.06% in the 28% tax bracket,
6.33% in the 31% tax bracket, 6.82% in the 36% tax bracket, and 7.23%
in the 39.6% tax bracket).
<PAGE>
HAWAIIAN TAX-FREE TRUST
STATEMENT OF INVESTMENTS
SEPTEMBER 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
RATING
FACE MOODY'S
AMOUNT HAWAII (97.2%) S&P VALUE
<C> <S> <C> <C>
Board of Regents, University of Hawaii Aaa/AAA
University System Revenue Bonds,
Series G, AMBAC Insured,
$2,910,000 5.650%, 10/01/12 $ 3,070,050
4,290,000 5.700%, 10/01/17 4,531,313
Board of Regents, University of Hawaii Aaa/AAA
University System Revenue Bonds,
Series I, FGIC Insured,
1,110,000 5.300%, 10/01/08 1,187,700
2,825,000 5.500%, 10/01/18 3,005,094
Board of Water Supply City and County Aaa/AAA
of Honolulu, Hawaii Water System
Revenue Bonds, Series 1996, MBIA Insured,
1,090,000 5.400%, 07/01/09 1,173,113
1,750,000 5.800%, 07/01/16 1,885,625
1,500,000 5.800%, 07/01/21 1,603,125
City and County of Honolulu NR/NR*
Multifamily Housing Revenue Bonds
(Cambridge Park Project) 1988 Series A,
8,000,000 5.850%, 12/01/02 8,130,000
City and County of Honolulu, Hawaii Aaa/AAA
General Obligation Bonds Series A, FGIC
Insured,
5,385,000 7.300%, 07/01/03 6,172,556
2,895,000 7.350%, 07/01/05 3,455,906
4,790,000 7.350%, 07/01/06 5,807,875
9,970,000 7.350%, 07/01/07 12,275,563
3,600,000 7.350%, 07/01/08 4,477,500
2,500,000 6.000%, 01/01/12 2,875,000
1,000,000 5.625%, 09/01/14 1,081,250
City and County of Honolulu, Hawaii Aaa/AAA
General Obligation Bonds Series B, FGIC
Insured,
1,750,000 5.000%, 11/01/13 1,804,688
2,000,000 5.000%, 11/01/14 2,050,000
1,000,000 5.000%, 11/01/16 1,017,500
2,645,000 5.000%, 11/01/17 2,684,675
<PAGE>
City and County of Honolulu, Hawaii Aaa/AAA
General Obligation Bonds Series
1995, MBIA Insured,
2,215,000 6.000%, 11/01/09 2,552,788
1,500,000 6.000%, 11/01/10 1,734,375
1,000,000 5.250%, 11/01/13 1,043,750
1,835,000 5.500%, 11/01/14 1,947,394
3,130,000 5.000%, 11/01/15 3,180,863
City and County of Honolulu, Hawaii Aaa/AAA
General Obligation Bonds Series
1994A, FGIC Insured,
4,000,000 5.750%, 04/01/11 4,510,000
3,800,000 5.750%, 04/01/13 4,289,250
City and County of Honolulu, Hawaii Aaa/AAA
General Obligation Bonds Series
1994B, FGIC Insured,
2,030,000 6.100%, 06/01/11 2,271,063
4,650,000 6.125%, 06/01/13 5,208,000
City and County of Honolulu Hawaii Aaa/AAA
General Obligation Bonds, Refunding
and Improvement Series, 1993A
Fixed Rate Bonds, FGIC Insured,
5,825,000 6.000%, 01/01/11 6,684,188
City and County of Honolulu Hawaii Aaa/AAA
General Obligation Bonds, Refunding and
Improvement Series, 1993B
Fixed Rate Bonds, FGIC Insured,
9,800,000 5.500%, 10/01/11 10,841,250
1,050,000 6.000%, 12/01/15 1,218,000
City and County of Honolulu, Hawaii Aaa/AAA
General Obligation Water Bonds,
Series 1992, MBIA Insured,
1,125,000 6.000%, 12/01/12 1,302,188
<PAGE>
City and County of Honolulu NR/NR*
Improvement District No. 261
(Halawa Business Park), Improvement
District Bonds,
365,000 6.700%, 10/15/04 407,888
355,000 6.800%, 10/15/05 402,038
345,000 6.900%, 10/15/06 390,281
City and County of Honolulu Aaa/AAA
Mortgage Revenue Refunding-FHA
District No. 221 Bonds MBIA FHA Insured
2,925,000 7.800%, 07/01/24 3,151,688
Kauai County General Obligation A/NR
Escrowed to Maturity Bonds,
615,000 9.000%, 08/01/04 773,363
665,000 9.000%, 08/01/05 859,513
County of Kauai, State of Hawaii Aaa/AAA
General Obligation Refunding Bonds,
1992 Series A,B & C, AMBAC Insured,
930,000 5.250%, 08/01/01 967,200
330,000 5.450%, 08/01/03 353,100
1,030,000 5.450%, 08/01/03 1,102,100
435,000 5.900%, 08/01/08 493,725
1,355,000 5.900%, 08/01/08 1,537,925
1,300,000 5.950%, 08/01/10 1,493,375
County of Kauai, State of Hawaii Aaa/AAA
General Obligation Refunding Bonds,
Series 1994A & 1994B, MBIA Insured,
365,000 5.200%, 02/01/02 380,969
460,000 5.300%, 02/01/03 486,450
190,000 5.300%, 02/01/03 200,925
185,000 5.400%, 02/01/04 197,950
215,000 5.500%, 02/01/05 233,006
215,000 5.600%, 02/01/06 234,081
1,010,000 5.700%, 02/01/07 1,102,163
<PAGE>
Kauai County General Obligation Aaa/AAA
Public Improvement Bonds Series
1990 Pre-Refunded Bonds, AMBAC Insured,
1,030,000 7.350%, 08/01/05 1,105,963
1,185,000 7.450%, 08/01/07 1,275,356
1,370,000 7.500%, 08/01/09 1,474,463
1,470,000 7.500%, 08/01/10 1,582,088
County of Maui, Hawaii General Aaa/AAA
Obligation Refunding Bonds Series A,
MBIA Insured,
1,075,000 6.000%, 06/01/15 1,173,094
County of Maui, Hawaii General Aaa/AAA
Obligation Refunding Bonds 1995,
FGIC Insured,
930,000 5.050%, 06/01/08 976,500
980,000 5.050%, 06/01/09 1,024,100
1,040,000 5.150%, 06/01/10 1,086,800
1,100,000 5.200%, 06/01/11 1,146,750
1,160,000 5.200%, 06/01/12 1,203,500
1,230,000 5.200%, 06/01/13 1,273,050
1,300,000 5.250%, 06/01/14 1,343,875
1,380,000 5.250%, 06/01/15 1,421,400
County of Maui, Hawaii General Aaa/AAA
Obligation Refunding Bonds 1993
Series B, 1993 Series C, 1993
Series D, 1993 Series E,
FGIC Insured,
1,815,000 5.000%, 09/01/07 1,901,213
2,125,000 5.000%, 09/01/08 2,215,313
1,000,000 5.000%, 09/01/09 1,038,750
1,000,000 5.000%, 09/01/10 1,035,000
3,000,000 5.125%, 12/15/11 3,112,500
1,245,000 5.750%, 01/01/13 1,310,363
1,045,000 5.125%, 12/15/13 1,075,044
<PAGE>
County of Maui, Hawaii General Aaa/AAA
Obligation 1997 Series A, FGIC Insured,
1,130,000 5.250%, 09/01/13 1,187,913
1,265,000 5.250%, 09/01/15 1,315,600
1,335,000 5.250%, 09/01/16 1,385,063
County of Maui, Hawaii General Aaa/AAA
Obligation 1998 Series A, FGIC Insured,
1,200,000 5.125%, 03/01/14 1,243,500
1,050,000 5.125%, 03/01/16 1,080,188
2,590,000 5.250%, 03/01/18 2,680,650
Maui County Water System Aaa/AAA
Revenue Pre-Refunded Bonds, FGIC Insured,
1,150,000 6.100%, 12/01/02 1,240,563
1,225,000 6.200%, 12/01/03 1,324,531
1,300,000 6.300%, 12/01/04 1,408,875
1,390,000 6.400%, 12/01/05 1,511,625
1,280,000 6.500%, 12/01/06 1,395,200
1,250,000 6.600%, 12/01/07 1,365,625
1,500,000 6.650%, 12/01/08 1,642,500
1,470,000 6.650%, 12/01/09 1,609,650
1,860,000 6.700%, 12/01/10 2,039,025
1,560,000 6.700%, 12/01/11 1,710,150
Department of Budget and Finance of the State of NR/AA-
Hawaii Special Purpose Revenue Bonds
(Citizens Utilities Company Project),
3,400,000 6.900%, 11/01/15 3,527,500
5,000,000 6.600%, 07/01/22 5,350,000
Department of Budget and Finance of the State of Aaa/AAA
Hawaii Special Purpose Revenue Bonds (Lutheran
Good Samaritan Society Project), AMBAC Insured,
1,880,000 4.700%, 11/01/06 1,934,050
<PAGE>
Department of Budget and Finance of Aaa/AAA
the State of Hawaii Special Purpose
Revenue Bonds (Hawaiian Electric Company, Inc.
Series A), MBIA Insured,
5,000,000 5.650%, 10/01/27 5,443,750
Department of Budget and Finance of Aaa/AAA
the State of Hawaii Special Purpose
Revenue Bonds (The Queens Health System,
Series B), MBIA Insured,
8,000,000 5.250%, 07/01/23 8,280,000
Department of Budget and Finance of Aaa/AAA
the State of Hawaii Special Purpose
Revenue Bonds (The Evangelical Lutheran Good
Samaritan Society), Refunding Series 1993,
AMBAC Insured,
700,000 4.400%, 11/01/01 711,375
730,000 4.500%, 11/01/02 743,688
Department of Budget and Finance of the State of Aaa/AAA
Hawaii Special Purpose Revenue Bonds
(Hawaiian Electric Light Company, Inc. Project),
MBIA Insured,
5,600,000 7.200%, 12/01/14 5,955,152
Department of Budget and Finance of the State of Aaa/AAA
Hawaii Special Purpose Revenue Bonds
(Hawaiian Electric Co., Inc., and Subsidiaries
Projects), Series 1995A, MBIA Insured,
13,000,000 6.600%, 01/01/25 14,592,500
Department of Budget and Finance of the State of A3/A
Hawaii Special Purpose Revenue Bonds
(Kaiser-Permanente Medical Care Program),
3,565,000 6.500%, 03/01/11 3,801,181
4,500,000 6.250%, 03/01/21 4,758,750
<PAGE>
Department of Budget and Finance of the State of Aaa/AAA
Hawaii Special Purpose Revenue (Kapiolani
Health Care System) Series 1993, MBIA Insured,
1,000,000 6.300%, 07/01/08 1,107,500
6,000,000 6.400%, 07/01/13 6,697,500
Department of Budget and Finance of the State of Aaa/AAA
Hawaii Special Purpose Revenue (Kapiolani
Health Care System) Series 1996, MBIA Insured,
1,000,000 6.000%, 07/01/11 1,116,250
1,000,000 6.200%, 07/01/16 1,125,000
1,000,000 6.250%, 07/01/21 1,121,250
Department of Budget and Finance of the State of Aaa/AAA
Hawaii Special Purpose Revenue Pre-Refunded
Bonds - Kapiolani Health Care System
(Pali Momi Medical Center Project), Series 1991,
3,000,000 7.600%, 07/01/10 3,352,500
11,200,000 7.650%, 07/01/19 12,530,000
Department of Budget and Finance of the State of Aa3/AA
Hawaii Special Purpose Revenue Bonds
(The Queen's Health System), Series A,
4,000,000 6.050%, 07/01/16 4,380,000
8,625,000 6.000%, 07/01/20 9,379,688
3,500,000 5.750%, 07/01/26 3,701,250
Department of Budget and Finance of the State of Aaa/AAA
Hawaii Special Purpose Revenue Bonds
(St. Francis Medical Centers), Refunding
Series 1992, FSA Insured,
20,000,000 6.500%, 07/01/22 21,975,000
Department of Hawaiian Home Lands NR/NR*
(State of Hawaii) Revenue Bonds, Series 1991,
700,000 6.900%, 07/01/99 713,447
745,000 7.000%, 07/01/00 781,319
800,000 7.100%, 07/01/01 857,000
855,000 7.200%, 07/01/02 930,881
<PAGE>
915,000 7.300%, 07/01/03 997,350
985,000 7.400%, 07/01/04 1,074,881
1,055,000 7.500%, 07/01/05 1,152,588
1,135,000 7.550%, 07/01/06 1,239,988
1,225,000 7.600%, 07/01/07 1,336,781
1,415,000 7.650%, 07/01/09 1,537,044
1,520,000 7.650%, 07/01/10 1,649,200
1,640,000 7.650%, 07/01/11 1,777,350
Department of Transportation of the State of Hawaii NR/A-
Special Facility Revenue Bonds (Matson Terminals,
Inc.), Refunding Series 1993,
11,875,000 5.750%, 03/01/13 12,557,813
Housing Finance and Development Corporation Aaa/AAA
(State of Hawaii) University of Hawaii Faculty
Housing Project, AMBAC Insured,
2,125,000 5.650%, 10/01/16 2,257,813
4,000,000 5.700%, 10/01/25 4,245,000
Housing Finance and Development Corporation A1/NR
(State of Hawaii) Rental Housing System Revenue
Bonds of 1993 Series A,
2,000,000 5.600%, 07/01/12 2,087,500
3,000,000 5.700%, 07/01/18 3,108,750
Housing Finance and Development Corporation Aa1/AA
(State of Hawaii) Single Family Mortgage
Purchase Revenue Bonds, Series B
4,805,000 7.000%, 07/01/31 5,171,381
Housing Finance and Development Corporation Aa1/AA
(State of Hawaii) Single Family Mortgage Purchase
Revenue Bonds, AMT-Series A
8,295,000 6.000%, 07/01/26 8,647,538
<PAGE>
Housing Finance and Development Corporation Aa1/AA
(State of Hawaii) Single Family Mortgage
Purchase Revenue Bonds of 1994 Series A & B,
2,500,000 5.700%, 07/01/13 2,609,375
16,750,000 5.850%, 07/01/17 17,482,813
Housing Finance and Development Corporation Aa1/AA
(State of Hawaii) Single Family Mortgage Purchase
Revenue Bonds of 1997 Series A, FNMA Insured,
19,735,000 5.750%, 07/01/30 20,623,075
Housing Finance and Development Corporation Aa1/AA
(State of Hawaii) Single Family Mortgage Purchase
Revenue Bonds of 1997 Series B, FNMA Insured,
9,350,000 5.450%, 07/01/17 9,677,250
Housing Finance and Development Corporation Aa1/AA
(State of Hawaii) Single Family Mortgage Purchase
Revenue Bonds of 1998 Series B, FNMA Insured,
6,800,000 5.300%, 07/01/28 6,893,500
Housing Finance and Development Corporation Aa1/AA
(State of Hawaii) Single Family Mortgage Purchase
Revenue Bonds of 1998, AMT-Series A,
FNMA Insured,
4,285,000 5.400%, 07/01/30 4,354,631
County of Hawaii, Hawaii General Aaa/AAA
Obligation Bonds Refunding and
Improvement Series 1993A, FGIC Insured,
1,000,000 5.200%, 05/01/04 1,062,500
2,700,000 5.450%, 05/01/07 2,956,500
3,170,000 5.500%, 05/01/08 3,490,963
2,500,000 5.550%, 05/01/09 2,771,875
4,905,000 5.600%, 05/01/11 5,456,813
1,000,000 5.600%, 05/01/12 1,112,500
1,000,000 5.600%, 05/01/13 1,113,750
<PAGE>
County of Hawaii, Hawaii Public Improvement Aaa/AAA
Bonds of 1996 Series A FGIC Insured,
1,440,000 4.500%, 02/01/05 1,481,400
1,900,000 5.000%, 02/01/11 1,978,375
1,970,000 5.100%, 02/01/12 2,051,263
2,205,000 5.200%, 02/01/14 2,293,200
2,440,000 5.200%, 02/01/16 2,519,300
Hawaii Community Development Authority NR/NR*
Improvement District Bonds (Kakaako Community
Development District Improvement District 3),
160,000 7.000%, 07/01/99 163,424
995,000 7.300%, 07/01/04 1,075,844
1,490,000 7.400%, 07/01/10 1,609,200
Hawaii Community Development Authority NR/NR*
Improvement District Refunding Bonds
(Kakaako Community Development
District Improvement District 1),
235,000 4.700%, 07/01/99 236,137
245,000 4.850%, 07/01/00 248,063
255,000 5.000%, 07/01/01 260,738
270,000 5.100%, 07/01/02 278,100
280,000 5.200%, 07/01/03 290,500
300,000 5.300%, 07/01/04 313,125
230,000 5.400%, 07/01/05 241,788
Hawaii Community Development Authority NR/NR*
Improvement District Refunding Bonds
(Kakaako Community Development
District Improvement District 2),
315,000 4.700%, 07/01/99 316,525
325,000 4.850%, 07/01/00 329,063
345,000 5.000%, 07/01/01 352,763
355,000 5.100%, 07/01/02 365,650
375,000 5.200%, 07/01/03 390,469
395,000 5.300%, 07/01/04 412,281
420,000 5.400%, 07/01/05 441,525
435,000 5.500%, 07/01/06 458,381
465,000 5.600%, 07/01/07 492,900
390,000 5.700%, 07/01/08 411,938
<PAGE>
State of Hawaii Airport System Aaa/AAA
Revenue Bonds, MBIA Insured,
1,150,000 5.250%, 07/01/00 1,180,188
6,455,000 6.900%, 07/01/12 7,810,550
3,000,000 7.000%, 07/01/18, FGIC Insured 3,288,750
4,025,000 7.000%, 07/01/18 4,412,406
1,000,000 6.750%, 07/01/21 1,085,000
State of Hawaii General Obligation Aaa/AAA
Bonds, FGIC Insured,
2,000,000 5.750%, 01/01/11 2,250,000
3,700,000 6.000%, 10/01/11 4,273,500
3,500,000 6.000%, 10/01/12 4,046,875
State of Hawaii General Obligation Aaa/AAA
Bonds of 1997, Series CP, FGIC Insured,
4,195,000 5.000%, 10/01/14 4,299,875
3,000,000 5.000%, 10/01/15 3,060,000
1,000,000 5.000%, 10/01/16 1,017,500
7,195,000 5.000%, 10/01/17 7,302,925
State of Hawaii General Obligation Aaa/AAA
Bonds of 1998, Series CR, MBIA Insured,
5,000,000 5.000%, 04/01/16 5,087,500
State of Hawaii General Obligation Aaa/AAA
Bonds of 1996, Series CM, FGIC Insured,
3,000,000 6.500%, 12/01/15 3,656,250
State of Hawaii General Obligation Aaa/AAA
Bonds of 1997, Series CN, FGIC Insured,
5,950,000 5.250%, 03/01/15 6,180,563
7,000,000 5.500%, 03/01/16 7,787,500
1,000,000 5.250%, 03/01/17 1,035,000
State of Hawaii General Obligation Aaa/AAA
Bonds of 1995, Series CK, FGIC Insured,
3,000,000 5.600%, 09/01/14 3,296,250
<PAGE>
State of Hawaii General Obligation Aaa/AAA
Bonds of 1998, Series CR, MBIA Insured,
12,000,000 5.000%, 04/01/17 12,195,000
State of Hawaii General Obligation Aaa/AAA
Bonds of 1995, Pre-Refunded, Series CJ,
FGIC Insured,
3,500,000 6.250%, 01/01/14 3,941,875
5,000,000 6.250%, 01/01/15 5,631,250
State of Hawaii General Obligation Aaa/AAA
Refunding Bonds of 1993, Series CH,
FGIC Insured,
5,000,000 6.000%, 11/01/07 5,706,250
3,390,000 6.000%, 11/01/08 3,885,788
State of Hawaii General Obligation Aaa/AAA
Refunding Bonds of 1993, Series CH,
FGIC Insured,
2,305,000 6.000%, 03/01/11 2,650,750
State of Hawaii Harbor Capital Aaa/AAA
Improvements Revenue Bonds, MBIA Insured,
2,205,000 6.200%, 07/01/08 2,408,963
3,850,000 5.750%, 07/01/17 4,172,438
State of Hawaii Harbor Capital Aaa/AAA
Improvements Revenue Bonds, MBIA Insured,
14,000,000 7.250%, 07/01/10 15,032,500
1,200,000 7.000%, 07/01/17 1,284,000
State of Hawaii Harbor Revenue Bonds, Aaa/AAA
Series 1992, FGIC Insured,
3,850,000 6.500%, 07/01/19 4,230,188
State of Hawaii Harbor Revenue Bonds, Aaa/AAA
Refunding Series 1993, FGIC Insured,
1,260,000 6.050%, 07/01/04 1,389,150
1,225,000 6.150%, 07/01/05 1,356,688
<PAGE>
State of Hawaii Harbor Revenue Bonds, Aaa/AAA
Series of 1994, FGIC Insured,
1,000,000 6.250%, 07/01/09 1,121,250
1,000,000 6.250%, 07/01/10 1,115,000
3,725,000 6.250%, 07/01/15 4,116,125
10,180,000 6.375%, 07/01/24 11,312,525
State of Hawaii Highway Revenue Aaa/AAA
Bonds Series 1993, FGIC Insured,
4,000,000 4.875%, 07/01/07 4,170,000
3,900,000 5.000%, 07/01/08 4,056,000
2,255,000 5.000%, 07/01/09 2,336,720
4,575,000 5.000%, 07/01/10 4,723,688
2,220,000 5.000%, 07/01/11 2,281,050
3,850,000 5.000%, 07/01/12 3,946,250
2,750,000 5.000%, 07/01/13 2,791,250
1,000,000 5.000%, 07/01/16 1,012,500
State of Hawaii Highway Revenue Aaa/AAA
Bonds Series 1996, FGIC Insured,
3,705,000 5.600%, 07/01/13 4,001,400
2,000,000 5.250%, 07/01/16 2,070,000
State of Hawaii Highway Revenue NR/AAA
Bonds Series 1996, MBIA-IBC Insured,
1,000,000 5.250%, 07/01/16 1,035,000
Total Hawaii 639,124,397
GUAM (0.2%)
Government of Guam Ltd. Aaa/AAA
Water System Revenue Bonds,
FSA Insured,
1,500,000 7.000%, 07/01/09 1,581,720
Total Guam 1,581,720
<PAGE>
PUERTO RICO (0.6%)
Puerto Rico Electric Power Authority Aaa/AAA
Power Revenue Bonds,
FSA Insured,
1,000,000 4.750%, 07/01/21 985,000
Puerto Rico Electric Power Authority Aaa/AAA
Power Revenue Bonds, Series DD
MBIA-IBC Insured,
2,700,000 5.000%, 07/01/28 2,727,000
Total Puerto Rico 3,712,000
Total Investments (cost $595,479,219**) 98.0% 644,418,117
Other assets in excess of liablilities 2.0 12,904,859
Net Assets 100.0% $657,322,976
<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 Co.
FGIC Financial Guaranty Insurance Co.
FHA Federal Housing Administration
FNMA Federal National Mortgage Association
MBIA Municipal Bond Investors Assurance Corp.
See accompanying notes to financial statements
<PAGE>
HAWAIIAN TAX-FREE TRUST
STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 30, 1998 (UNAUDITED)
<TABLE>
<S> <C>
ASSETS
Investments at value (cost $595,479,219) $ 644,418,117
Cash 3,834,401
Interest receivable 10,255,441
Receivable for Trust shares sold 244,366
Other assets 9,842
Total assets 658,762,167
LIABILITIES
Dividends payable 603,130
Distribution fees payable 342,740
Adviser and Administrator fees payable 214,913
Payable for Trust shares redeemed 198,583
Accrued expenses 79,825
Total liabilities 1,439,191
NET ASSETS $ 657,322,976
Net Assets consist of:
Capital Stock, no par value, authorized an unlimited
number of shares $ 603,177,991
Undistributed net realized gain on investments 3,213,617
Undistributed net investment income 1,992,470
Net unrealized appreciation on investments 48,938,898
$ 657,322,976
CLASS A
Net Assets $ 646,817,035
Capital shares outstanding 54,623,976
Net asset value and redemption price per share $ 11.84
Offering price per share (100/96 of $11.84 adjusted
to nearest cent) $ 12.33
CLASS C
Net Assets $ 8,412,498
Capital shares outstanding 710,768
Net asset value and offering price per share $ 11.84
Redemption price per share (*generally, a charge of
1% is imposed on the proceedsof shares redeemed
during the first 12 months after purchase.) $ 11.84*
CLASS Y
Net Assets $ 2,093,443
Capital shares outstanding 176,568
Net asset value, offering and redemption price per share $ 11.86
</TABLE>
See accompanying notes to financial statements
<PAGE>
HAWAIIAN TAX-FREE TRUST
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1998 (UNAUDITED)
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Interest income $18,049,364
Expenses:
Investment Adviser fees (note 3) $ 456,443
Administrator fees (note 3) 847,684
Distribution and service fees (note 3) 681,050
Transfer and shareholder servicing agent fees 165,000
Trustees' fees and expenses 100,000
Shareholders' reports and proxy statements 42,000
Legal fees 40,000
Custodian fees 28,000
Registration fees and dues 18,000
Audit and accounting fees 17,000
Insurance 6,000
Miscellaneous 27,862
2,429,039
Expenses paid indirectly (note 7) (98,962)
Net expenses 2,330,077
Net investment income 15,719,287
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain from securities transactions 3,213,617
Change in unrealized appreciation on investments 6,450,618
Net realized and unrealized gain on investments 9,664,235
Net increase in net assets resulting from operations $25,383,522
</TABLE>
See accompanying notes to financial statements
<PAGE>
HAWAIIAN TAX-FREE TRUST
STATEMENTS OF CHANGES IN NET ASSETS
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS YEAR ENDED
ENDED SEPTEMBER MARCH
30, 1998 31, 1998
<S> <C> <C>
OPERATIONS:
Net investment income $ 15,719,287 $ 32,660,069
Net realized gain from securities transactions 3,213,617 3,486,866
Change in unrealized appreciation on investments 6,450,618 22,640,184
Change in net assets resulting from operations 25,383,522 58,787,119
DISTRIBUTIONS TO SHAREHOLDERS (note 6):
Class A Shares:
Net investment income, tax-exempt (15,522,789) (29,979,152)
Distributions in excess of net investment income (109,721) -
Net realized gain on investments - (3,442,638)
Class C Shares:
Net investment income, tax-exempt (153,908) (217,304)
Distributions in excess of net investment income (1,922) -
Net realized gain on investments - (37,620)
Class Y Shares:
Net investment income, tax-exempt (42,590) (19,583)
Distributions in excess of net investment income (299) -
Net realized gain on investments - (6,608)
Change in net assets from distributions (15,831,229) (33,702,905)
CAPITAL SHARE TRANSACTIONS (note 8):
Proceeds from shares sold 20,242,211 48,300,227
Reinvested dividends and distributions 8,146,164 17,263,035
Cost of shares redeemed (37,040,920) (80,580,151)
Change in net assets from capital share
transactions (8,652,545) (15,016,889)
Change in net assets 899,748 10,067,325
NET ASSETS:
Beginning of period 656,423,228 646,355,903
End of period $ 657,322,976 $ 656,423,228
</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. On July 21, 1998, the
Trust established Class I shares, which are offered and sold only through
financial intermediaries and are not offered directly to retail investors. At
September 30, 1998, there were no Class I Shares outstanding. All classes of
shares represent interests in the same portfolio of investments and are
identical as to rights and privileges but differ with respect to the effect
of sales charges, the distribution and/or service fees borne by each class,
expenses specific to each class, voting rights on matters affecting a single
class and the exchange privileges of each class.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies
followed by the Trust in the preparation of its financial statements. The
policies are in conformity with 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.
<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 and disclosure of contingent assets and liabilities
at the date of the financial statements and the reported amounts of
increases and decreases in net assets from operations during the reporting
period. Actual results could differ from those estimates.
3. FEES AND RELATED PARTY TRANSACTIONS
a) MANAGEMENT ARRANGEMENTS:
Management affairs of the Trust are conducted through two separate
management arrangements.
Pacific Century Trust (the "Adviser"), a division of Bank of
Hawaii, serves as Investment Adviser to the Trust. In this role, under an
Investment Advisory Agreement, the Adviser supervises the Trust's investments
and provides various services to the Trust, 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
<PAGE>
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 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,
1998.
For the six months ended September 30, 1998, the Trust incurred
fees under the Advisory Agreement and Administration Agreement of $456,443
and $847,684, 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 Aquila Distributors, Inc. (the "Distributor"),
including, but not limited to, any principal underwriter of the Trust, with
which the Distributor has entered into written agreements contemplated by 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, 1998, service fees on Class A Shares amounted to $642,708, of
which the Distributor received $35,462.
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, 1998, amounted to $28,757. 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 six months ended
September 30, 1998, amounted to $9,585. The total of these payments made with
respect to Class C Shares amounted to $38,342, of which the Distributor
received $21,004.
Specific details about the Plans are more fully defined in the
Trust's Prospectus and Statement of Additional Information.
Under a Distribution Agreement, the Distributor serves as the
exclusive distributor of the Trust's shares. Through agreements between the
Distributor and various 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, 1998, the Distributor received
commissions of $41,714 on sales of Class A Shares.
4. PURCHASES AND SALES OF SECURITIES
During the six months ended September 30, 1998, purchases of
securities and proceeds from the sales of securities aggregated $54,086,771
and $52,366,873, respectively.
At September 30, 1998, aggregate gross unrealized appreciation for
all securities in which there is an excess of market value over tax cost
amounted to $48,938,898 for a net unrealized appreciation of $48,938,898 on
sales of Class A Shares. There are no securities in which there is an excess
of tax cost over market value.
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 statement
reporting and Federal
<PAGE>
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.
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 Trust
to invest, to the extent practicable, some or all of cash balances in
income-producing assets rather than leave cash on deposit.
<PAGE>
8. CAPITAL SHARE TRANSACTIONS
Transactions in Capital Shares of the Trust were as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
SEPTEMBER 30, 1998 MARCH 31, 1998
SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C>
CLASS A SHARES:
Proceeds from shares sold 1,505,962 $ 17,564,509 3,752,188 $ 43,271,862
Reinvested distributions 687,790 8,034,772 1,480,881 17,114,154
Cost of shares redeemed (3,095,787) (36,114,787) (6,777,819) (78,338,324)
Net change (902,035) (10,515,506) (1,544,750) (17,952,308)
CLASS C SHARES:
Proceeds from shares sold 164,900 1,925,202 327,859 3,780,103
Reinvested distributions 6,843 79,914 10,794 123,070
Cost of shares redeemed (79,510) (926,133) (198,156) (2,241,827)
Net change 92,233 1,078,983 140,497 1,661,346
CLASS Y SHARES:
Proceeds from shares sold 64,455 752,500 107,201 1,248,262
Reinvested distributions 2,695 31,478 2,207 25,811
Cost of shares redeemed - - - -
Net change 67,150 783,978 109,408 1,274,073
Total transactions in Trust
shares (742,652) $ (8,652,545) (1,294,845) $(15,016,889)
</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, 1998 1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $11.67 $11.23 $11.31 $11.13 $11.19 $11.60
Income from Investment Operations:
Net investment income 0.28 0.57 0.59 0.61 0.62 0.63
Net gain (loss) on securities (both
realized and unrealized) 0.17 0.46 (0.08) 0.18 (0.01) (0.38)
Total from Investment Operations 0.45 1.03 0.51 0.79 0.61 0.25
Less Distributions (note 6):
Dividends from net investment income (0.28) (0.54) (0.58) (0.61) (0.62) (0.63)
Distributions from capital gains - (0.05) (0.01) - (0.05) (0.03)
Total Distributions (0.28) (0.59) (0.59) (0.61) (0.67) (0.66)
Net Asset Value, End of Period $11.84 $11.67 $11.23 $11.31 $11.13 $11.19
Total Return (not reflecting sales
charge)(%) 3.95+ 9.37 4.67 7.16 5.75 2.01
Ratios/Supplemental Data
Net Assets, End of Period
($ thousands) 646,817 647,930 640,989 659,925 642,556 640,465
Ratio of Expenses to Average Net
Assets (%) 0.71* 0.72 0.73 0.72 0.75 0.74
Ratio of Net Investment Income to
Average Net Assets (%) 4.83* 4.97 5.12 5.32 5.65 5.46
Portfolio Turnover Rate (%) 8+ 9 9 28 33 16
<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 ($) 0.28 0.57 0.59 0.61 0.62 0.63
Ratio of Expenses to Average Net
Assets (%) 0.74* 0.73 0.75 0.73 0.77 0.76
Ratio of Net Investment Income to
Average Net Assets (%) 4.80* 4.96 5.11 5.31 5.63 5.44
<FN> (1) Designated as Class A Shares on April 1, 1996. </FN>
<FN> + Not annualized. </FN>
<FN> * Annualized. </FN>
</TABLE>
See accompanying notes to financial statements
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
Class C(1) Class Y(1)
Six Months Six Months
Ended Year Ended March 31, Ended Year Ended March 31,
Sept. 30, 1998 1998 1997 Sept. 30, 1998 1998 1997
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $11.66 $11.23 $11.31 $11.68 $11.24 $11.31
Income from Investment Operations:
Net investment income 0.24 0.48 0.46 0.29 0.67 0.74
Net gain (loss) on securities (both
realized and unrealized) 0.18 0.45 (0.08) 0.19 0.45 (0.07)
Total from Investment Operations 0.42 0.93 0.38 0.48 1.12 0.67
Less Distributions (note 6):
Dividends from net investment income (0.24) (0.45) (0.45) (0.30) (0.63) (0.73)
Distributions from capital gains - (0.05) (0.01) - (0.05) (0.01)
Total Distributions (0.24) (0.50) (0.46) (0.30) (0.68) (0.74)
Net Asset Value, End of Period $11.84 $11.66 $11.23 $11.86 $11.68 $11.24
Total Return (not reflecting sales
charge) 3.63+ 8.40 3.41 4.14+ 10.24 6.14
Ratios/Supplemental Data
Net Assets, End of Period
($ thousands) 8,412 7,215 5,367 2,093 1,278 0.1
Ratio of Expenses to Average Net
Assets (%) 1.50* 1.51 1.51 0.51* 0.51 0.53
Ratio of Net Investment Income to
Average Net Assets (%) 4.01* 4.12 4.06 5.03* 5.03 4.92
Portfolio Turnover Rate (%) 8+ 9 9 8+ 9 9
<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 ($) 0.23 0.48 0.46 0.29 0.67 0.74
Ratio of Expenses to Average Net
Assets (%) 1.53* 1.52 1.53 0.54* 0.52 0.55
Ratio of Net Investment Income to
Average Net Assets (%) 3.98* 4.11 4.04 5.00* 5.02 4.94
<FN> (1) 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>
SHAREHOLDER MEETING RESULTS (UNAUDITED)
The Annual Meeting of Shareholders of Hawaiian Tax-Free Trust
(the "Trust") was held on September 10, 1998. The holders of shares
representing 72% of the total net asset value of the shares entitled to vote
were present in person or by proxy. At the meeting, the following matters
were voted upon and approved by the shareholders (the resulting votes for
each matter are presented below).
1. To elect Trustees.
<TABLE>
<CAPTION>
Number of Votes: Number of Votes:
TRUSTEE FOR WITHHELD TRUSTEE FOR WITHHELD
<S> <C> <C> <S> <C> <C>
Lacy B. Herrmann 461,201,536.31 8,503,969.01 Stanley W. Hong 463,380,444.08 6,325,061.24
Vernon R. Alden 462,280,847.93 7,424,657.39 Theodore T. Mason 463,350,498.86 6,355,006.46
Arthur K. Carlson 462,879,159.23 6,826,346.09 Russell K. Okata 463,393,129.37 6,312,387.63
William M. Cole 462,894,131.84 6,811,373.48 Douglas Philpotts 463,171,644.44 6,309,715.19
Thomas W. Courtney 463,269,158.96 6,436,346.36 Oswald K. Stender 463,254,139.69 6,343,978.34
Richard W. Gushman, II 463,156,123.34 6,549,381.98
</TABLE>
2. To ratify the selection of KPMG Peat Marwick LLP as the Trust's
independent auditors.
Number of Votes:
FOR AGAINST ABSTAIN
461,204,206.23 1,713,250.81 6,788,024.94
PREPARING FOR YEAR 2000 (UNAUDITED)
The Trustees and officers of the Trust have been monitoring
issues involving preparedness for the turn of the century for some time in an
effort to minimize any potential impact upon the Trust and its shareholders.
Our officers have focussed significant time and effort in order that the
various computerized functions that could affect the Trust at the beginning
of the year 2000 are ready.
The Trust is highly reliant on certain mission-critical
suppliers' services. Each supplier of these services has provided the Trust's
officers with assurances that it is actively addressing potential problems
relating to the year 2000. The officers, in turn, are monitoring the progress
of its suppliers, and currently see no significant cause for alarm with
respect to any of the Trust's suppliers.
Unfortunately, as you can well understand, we cannot guarantee
matters beyond our control, including supplier operations. We assure you,
however, that we recognize a responsibility to inform our shareholders if in
the future we become aware of any developments which would lead us to believe
that the Trust will be significantly affected by year 2000 problems.
We will continue to keep you up-to-date through future
communications.
