Founder of Hawaiian Tax-Free Trust Dead at 83

NEW YORK – Lacy B. Herrmann might not be a household name in Hawaii, but you have seen the results of his quiet, behind the scenes community efforts if you’ve passed by the Kahului Fire Station on Maui, visited the Kona Community Aquatic Center on the Big Island or driven on the H-3 Freeway on Oahu.

Those Island development projects, and many more, were made possible, in part, by Hawaiian Tax-Free Trust, a pioneering investment entity Herrmann set up in 1985. Herrmann, a venture capitalist and entrepreneur, passed away peacefully in Sleepy Hollow, New York, on Sept. 24.

Herrmann was a financial visionary and one of the earliest creators of single-state, tax-free municipal bond funds. He created tax-free mutual funds that invest in municipal bonds used by cities, counties, states, school districts, redevelopment organizations and other government agencies to finance the construction of everything from highways to hospitals.

Hawaiian Tax-Free Trust enables its Hawaii shareholders to invest in landmark Hawaii development projects while providing the highest possible level of income exempt from Hawaii state and federal income taxes, consistent with preservation of capital.

“Hawaiian Tax-Free Trust’s investments have helped build modern-day Hawaii,” said Diana Herrmann, Lacy Herrmann’s daughter and CEO of Aquila Investment Management LLC, sponsor and administrator of Hawaiian Tax-Free Trust and similar municipal bond funds in six other states.

“Many in Hawaii may not know who my father was, but we are proud that his love of the Islands and the people of Hawaii resulted in so many positive developments being achieved,” she said. “The Kauai County Office Building and Kamalii Elementary School on Maui are just two of the many projects that were made possible because of Lacy Herrmann and Hawaiian Tax-Free Trust.”

Lacy Herrmann wasn’t the first person to see the win-win potential of tax-free municipal bond funds, but he found a niche in the market by targeting smaller-population states with high income tax rates. Investors in municipal bonds and mutual funds such as Hawaiian Tax-Free Trust, which finance municipal projects within the state where these investors reside, generally pay no federal or state taxes on income from these investments. Offering such tax breaks is a way for city, county and state governments to spur growth and improve infrastructure that could not be paid for with cash on hand and also to save taxpayers money because such bonds can pay lower interest and still attract investors thanks to their double – federal and state – tax-free status.

After founding Aquila Management Corporation and successfully launching Hawaiian Tax-Free Trust – the first fund of its type in Hawaii and one of only 32 such funds at that time nationwide – Herrmann created six more single-state tax-free municipal bond funds in Arizona, Colorado, Kentucky, Oregon, Rhode Island and Utah.

Herrmann’s single-state funds have been successful because he made sure they were overseen by local trustees, officers and portfolio managers. He also established the practice of holding annual shareholder meetings in each state home to one of his mutual funds. This practice has allowed shareholders to personally meet corporate representatives, ask questions and learn exactly how their money is being used. These “educational shareholder meetings” are what make Aquila unique among hundreds of other mutual fund sponsors, Diana Herrmann believes. (This year, Hawaiian Tax-Free Trust will hold outreach informational meetings in Hilo and Kona on October 24 and 25, respectively, and the annual meeting of shareholders will be held in Honolulu on October 27.)

Lacy Herrmann started down the path as an entrepreneur and venture capitalist in 1966. He was involved in all of Aquila’s and its predecessor companies’ operations since their inception in 1974. He served as chief executive officer of Aquila Management Corporation until 2004, when he handed over the reins to his daughter while retaining the role of chairman.

Today, the Aquila Group of Funds is a major player among municipal bond mutual fund sponsors and is well-established in the mutual fund industry. In 2003, Aquila was named the best fixed-income group in the first annual U.S. mutual fund awards given by New York-based Lipper Inc., a global leader in supplying mutual fund information.

Herrmann is survived by his wife Elizabeth, daughter Diana, son Conrad and two grandchildren.

Donations in memory of Lacy Herrmann may be made to the Kendal on Hudson Philanthropic Fund with checks payable to Kendal on Hudson or to a Brown University scholarship fund (The Lacy B. Herrmann’50, P’82 Financial Aid Fund - Account # 54766) set up in Herrmann’s honor with the goal of having a scholarship for Hawaii students exist in perpetuity.

ABOUT AQUILA GROUP OF FUNDS

The Aquila Group of Funds occupies a niche market in the fund industry, offering a selection of seven single-state municipal bond funds, along with a high yield corporate bond fund, and an equity fund. Aquila Management Corporation, together with its wholly owned subsidiary Aquila Investment Management LLC and affiliate, Aquila Distributors, Inc. is the privately held, independent founder, sponsor and distributor of the Aquila Group of Funds. Mutual funds are the core business of Aquila.

Before investing in any of the Aquila Group of Funds, carefully read about and consider the investment objectives, risks, charges, expenses, and other information found in the Fund prospectus. The prospectus is available from your financial advisor, or call 800-437-1020, or visit www.aquilafunds.com.

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