UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES
Investment Company Act file number 811-06707
Narragansett Insured Tax-Free Income Fund
(Exact name of Registrant as specified in charter)
380 Madison Avenue
New York, New York 10017
(Address of principal executive offices) (Zip code)
Joseph P. DiMaggio
380 Madison Avenue
New York, New York 10017
(Name and address of agent for service)
Registrant's telephone number, including area code: (212) 697-6666
Date of fiscal year end: 6/30
Date of reporting period: 12/31/03
FORM N-CSR
ITEM 1. REPORTS TO STOCKHOLDERS.
[Logo of the Aquila Group of Funds: an eagle's head]
SERVING RHODE ISLAND INVESTORS
FOR MORE THAN A DECADE
AQUILASM
GROUP OF FUNDS
NARRAGANSETT INSURED
TAX-FREE INCOME FUND
380 Madison Avenue, Suite 2300 * New York, NY 10017
800-437-1020 * 212-697-6666
[Logo of Narragansett Insured Tax-Free Income Fund: rectangle with profile view
of a sailboat on top of waves and three seagulls flying above it]
SEMI-ANNUAL REPORT
NARRAGANSETT INSURED TAX-FREE INCOME FUND
STATEMENT OF INVESTMENTS
DECEMBER 31, 2003
(UNAUDITED)
RATING
FACE MOODY'S, S&P
AMOUNT GENERAL OBLIGATION BONDS (44.6%) OR FITCH VALUE
- ------------- ---------------------------------------------------- ------------ -------------
Coventry, Rhode Island
$ 550,000 5.000%, 11/01/16 AMBAC Insured................... Aaa+/AAA+++ $ 597,438
550,000 5.000%, 11/01/17 AMBAC Insured................... Aaa+/AAA+++ 591,937
Cranston, Rhode Island
300,000 5.500%, 06/15/07 MBIA Insured.................... Aaa+/AAA++ 324,000
500,000 5.450%, 11/15/11 FGIC Insured.................... Aaa+/AAA++ 576,875
Cumberland, Rhode Island
250,000 3.750%, 02/01/13 FGIC Insured.................... Aaa+/AAA++ 255,313
250,000 4.000%, 02/01/14 FGIC Insured.................... Aaa+/AAA++ 257,500
250,000 4.000%, 02/01/15 FGIC Insured.................... Aaa+/AAA++ 255,000
500,000 5.000%, 08/01/15 MBIA Insured.................... Aaa+/AAA++ 551,250
250,000 4.000%, 02/01/16 FGIC Insured.................... Aaa+/AAA++ 252,500
250,000 4.100%, 02/01/17 FGIC Insured.................... Aaa+/AAA++ 252,500
250,000 4.150%, 02/01/18 FGIC Insured.................... Aaa+/AAA++ 251,563
1,255,000 5.000%, 10/01/18 MBIA Insured.................... Aaa+/AAA++ 1,336,575
1,040,000 5.200%, 10/01/21 MBIA Insured.................... Aaa+/AAA++ 1,110,200
East Providence, Rhode Island
500,000 5.400%, 05/15/07 MBIA Insured.................... Aaa+/AAA++ 535,000
350,000 3.375%, 05/15/15 MBIA Insured.................... Aaa+/AAA++ 335,125
Lincoln, Rhode Island
400,000 5.100%, 01/15/06 MBIA Insured.................... Aaa+/AAA++ 409,500
250,000 5.750%, 08/01/15 FGIC Insured.................... Aaa+/AAA+++ 272,188
New Shoreham, Rhode Island
245,000 4.000%, 11/15/15 AMBAC Insured................... AAA++/AAA+++ 249,900
255,000 4.250%, 11/15/16 AMBAC Insured................... AAA++/AAA+++ 262,331
270,000 4.250%, 11/15/17 AMBAC Insured................... AAA++/AAA+++ 275,738
910,000 4.800%, 04/15/18 AMBAC Insured................... AAA++/AAA+++ 956,637
285,000 4.500%, 11/15/18 AMBAC Insured................... AAA++/AAA+++ 294,262
1,105,000 5.000%, 04/15/22 AMBAC Insured................... AAA++/AAA+++ 1,149,200
Newport, Rhode Island
250,000 4.900%, 05/15/06 FGIC Insured.................... Aaa+/AAA++ 257,985
500,000 5.000%, 05/15/07 FGIC Insured.................... Aaa+/AAA++ 516,425
150,000 6.550%, 08/15/07 MBIA Insured.................... Aaa+/AAA++ 152,928
500,000 5.100%, 05/15/08 FGIC Insured.................... Aaa+/AAA++ 516,600
Newport, Rhode Island (continued)
$ 1,000,000 4.500%, 11/01/15 AMBAC Insured................... Aaa+/AAA+++ $ 1,058,750
1,000,000 4.750%, 11/01/18 AMBAC Insured................... Aaa+/AAA+++ 1,052,500
800,000 5.000%, 11/01/20 AMBAC Insured................... Aaa+/AAA+++ 849,000
North Providence, Rhode Island
500,000 3.500%, 10/15/13 FSA Insured..................... Aaa+/AAA++ 500,625
500,000 3.650%, 10/15/14 FSA Insured..................... Aaa+/AAA++ 501,875
500,000 3.750%, 10/15/15 FSA Insured..................... Aaa+/AAA++ 497,500
400,000 5.700%, 07/01/08 MBIA Insured.................... Aaa+/AAA++ 459,000
500,000 4.700%, 09/15/14 FSA Insured..................... Aaa+/AAA+++ 536,250
Pawtucket, Rhode Island
600,000 4.300%, 09/15/09 AMBAC Insured................... Aaa+/AAA+++ 651,750
795,000 3.500%, 04/15/10, AMBAC Insured.................. Aaa+/AAA+++ 825,806
250,000 4.400%, 09/15/10 AMBAC Insured................... Aaa+/AAA+++ 272,187
825,000 3.500%, 04/15/11 AMBAC Insured................... Aaa+/AAA+++ 846,656
850,000 3.625%, 04/15/12 AMBAC Insured................... Aaa+/AAA+++ 870,187
880,000 3.750%, 04/15/13 AMBAC Insured................... Aaa+/AAA+++ 896,500
910,000 4.000%, 04/15/14 AMBAC Insured................... Aaa+/AAA+++ 935,025
Providence, Rhode Island
700,000 5.500%, 01/15/11 FSA Insured..................... Aaa+/AAA++ 769,125
1,925,000 5.200%, 04/01/11 AMBAC Insured................... Aaa+/AAA+++ 2,160,812
1,000,000 5.000%, 01/15/16 FGIC Insured.................... Aaa+/AAA++ 1,080,000
1,000,000 5.000%, 01/15/17 FGIC Insured.................... Aaa+/AAA++ 1,073,750
1,000,000 5.000%, 01/15/18 FGIC Insured.................... Aaa+/AAA++ 1,067,500
Rhode Island Consolidated Capital
Development Loan
1,000,000 5.250%, 11/01/11 Series C MBIA Insured........... Aaa+/AAA++ 1,145,000
1,000,000 5.000%, 06/01/14 Series B FGIC Insured........... Aaa+/AAA++ 1,088,750
1,000,000 5.000%, 09/01/14 Series A FGIC Insured........... Aaa+/AAA++ 1,085,000
2,000,000 5.000%, 08/01/15 Series B FGIC Insured........... Aaa+/AAA++ 2,160,000
1,500,000 4.750%, 09/01/17 Series A FGIC Insured........... Aaa+/AAA++ 1,563,750
South Kingstown, Rhode Island
500,000 5.500%, 06/15/12 FGIC Insured.................... Aaa+/AAA+++ 570,000
State of Rhode Island
1,000,000 5.000%, 07/15/05 FGIC Insured.................... Aaa+/AAA++ 1,055,000
1,000,000 5.125%, 07/15/11 FGIC Insured.................... Aaa+/AAA++ 1,110,000
4,000,000 5.000%, 08/01/14 FGIC Insured.................... Aaa+/AAA++ 4,365,000
State of Rhode Island (continued)
$ 1,500,000 5.000%, 09/01/15 FGIC Insured.................... Aaa+/AAA++ $ 1,620,000
2,000,000 5.250%, 11/01/17 FGIC Insured.................... Aaa+/AAA++ 2,225,000
2,500,000 5.000%, 09/01/18 MBIA Insured.................... Aaa+/AAA++ 2,678,125
2,000,000 5.000%, 09/01/19 MBIA Insured.................... Aaa+/AAA++ 2,132,500
1,500,000 5.000%, 09/01/20 MBIA Insured.................... Aaa+/AAA++ 1,590,000
Warwick, Rhode Island
500,000 3.375%, 06/15/14 FGIC Insured.................... Aaa+/AAA++ 490,000
665,000 4.250%, 07/15/14 AMBAC Insured................... Aaa+/AAA++ 695,756
195,000 5.600%, 08/01/14 FSA Insured..................... Aaa+/AAA++ 216,206
700,000 4.375%, 07/15/15 AMBAC Insured................... Aaa+/AAA++ 732,375
735,000 4.500%, 07/15/16 AMBAC Insured................... Aaa+/AAA++ 768,075
770,000 4.600%, 07/15/17 AMBAC Insured................... Aaa+/AAA++ 804,650
1,000,000 5.000%, 03/01/18 FGIC Insured.................... Aaa+/AAA++ 1,076,250
810,000 4.700%, 07/15/18 AMBAC Insured................... Aaa+/AAA++ 847,463
1,000,000 5.000%, 01/15/19 FGIC Insured.................... Aaa+/AAA++ 1,062,500
855,000 4.750%, 07/15/19 AMBAC Insured................... Aaa+/AAA++ 891,338
500,000 5.000%, 01/15/20 FGIC Insured.................... Aaa+/AAA++ 528,750
West Warwick, Rhode Island
500,000 4.875%, 03/01/16 AMBAC Insured................... Aaa+/AAA+++ 535,000
670,000 5.000%, 03/01/17 AMBAC Insured................... Aaa+/AAA+++ 717,738
700,000 5.050%, 03/01/18 AMBAC Insured................... Aaa+/AAA+++ 749,875
735,000 5.100%, 03/01/19 AMBAC Insured................... Aaa+/AAA+++ 785,531
Woonsocket, Rhode Island
385,000 5.125%, 03/01/11 MBIA Insured.................... Aaa+/AAA++ 394,471
655,000 4.450%, 12/15/12 FGIC Insured.................... Aaa+/AAA+++ 700,031
685,000 4.550%, 12/15/13 FGIC Insured.................... Aaa+/AAA+++ 729,525
-------------
Total General Obligation Bonds................. 66,814,927
-------------
REVENUE BONDS (55.8%)
----------------------------------------------------
DEVELOPMENT REVENUE BONDS (9.3%)
----------------------------------------------------
Rhode Island Convention Center Authority
500,000 5.000%, 05/15/07 Series 1993 B MBIA Insured...... Aaa+/AAA++ 548,750
2,000,000 5.000%, 05/15/23 Series 1993 C MBIA Insured...... Aaa+/AAA++ 2,032,500
Rhode Island Public Building Authority State
Public Projects
$ 1,000,000 5.250%, 02/01/09 Series 1998 A
AMBAC Insured.................................... Aaa+/AAA++ $ 1,120,000
500,000 5.000%, 12/15/09 Series 1999 A
AMBAC Insured.................................... Aaa+/AAA++ 563,750
1,000,000 5.250%, 12/15/14 Series 1998 FSA Insured......... Aaa+/AAA++ 1,117,500
500,000 5.500%, 12/15/14 Series 1996 B MBIA Insured...... Aaa+/AAA++ 558,750
500,000 5.500%, 12/15/15 Series 1996 B MBIA Insured...... Aaa+/AAA++ 558,750
Rhode Island State Economic Development Corp.,
Airport Revenue
1,000,000 5.000%, 07/01/18 Series B FSA Insured............ Aaa+/AAA++ 1,060,000
Rhode Island State Economic Development Corp.,
Motor Fuel Tax Revenue (Rhode Island
Department of Transportation)
2,000,000 3.875%, 06/15/14 Series A AMBAC Insured.......... Aaa+/AAA++ 2,042,500
1,000,000 4.000%, 06/15/15 Series A AMBAC Insured.......... Aaa+/AAA++ 1,020,000
Rhode Island State Economic Development Corp.,
University of Rhode Island
750,000 4.800%, 11/01/11Series 1999 FSA Insured.......... Aaa+/NR 821,250
750,000 4.900%, 11/01/12 Series 1999 FSA Insured......... Aaa+/NR 816,563
750,000 4.900%, 11/01/13Series 1999 FSA Insured.......... Aaa+/NR 811,875
750,000 5.000%, 11/01/14 Series 1999 FSA Insured......... Aaa+/NR 818,437
-------------
Total Development Revenue Bonds.................. 13,890,625
-------------
HIGHER EDUCATION REVENUE BONDS (29.2%)
----------------------------------------------------
Providence, Rhode Island Public Building
Authority, School Projects
1,395,000 4.000%, 12/15/12 Series 2003 A MBIA Insured...... Aaa+/AAA++ 1,463,006
1,450,000 4.000%, 12/15/13 Series 2003 A MBIA Insured...... Aaa+/AAA++ 1,508,000
1,505,000 4.000%, 12/15/14 Series 2003 A MBIA Insured...... Aaa+/AAA++ 1,550,150
1,570,000 4.000%, 12/15/15 Series 2003 A MBIA Insured...... Aaa+/AAA++ 1,601,400
1,630,000 4.000%, 12/15/16 Series 2003 A MBIA Insured...... Aaa+/AAA++ 1,646,300
Rhode Island Health & Education Building Corp.,
Brown University
$ 2,000,000 5.250%, 09/01/17 Series 1993 MBIA Insured........ Aaa+/AAA+++ $ 2,195,000
1,000,000 5.000%, 09/01/23 Series 1993 MBIA Insured........ Aaa+/AAA++ 1,036,250
Rhode Island Health & Education Building Corp.,
Bryant College
1,000,000 5.125%, 06/01/19 AMBAC Insured................... Aaa+/AAA++ 1,068,750
230,000 5.000%, 12/01/21 AMBAC Insured................... Aaa+/AAA++ 242,075
Rhode Island Health & Education Building Corp.
Higher Educational Facilities
500,000 3.500%, 09/15/13 Series 2003 B MBIA Insured...... Aaa+/AAA++ 500,625
1,010,000 3.625%, 09/15/14 Series 2003 B MBIA Insured...... Aaa+/AAA++ 1,011,263
600,000 3.625%, 09/15/14 Series 2003 C MBIA Insured...... Aaa+/AAA++ 600,750
1,050,000 4.000%, 09/15/15 Series 2003 B MBIA Insured...... Aaa+/AAA++ 1,072,312
500,000 4.000%, 09/15/15 Series 2003 C MBIA Insured...... Aaa+/AAA++ 510,625
1,040,000 4.000%, 09/15/16 Series 2003 B MBIA Insured...... Aaa+/AAA++ 1,050,400
500,000 4.000%, 09/15/16 Series 2003 C MBIA Insured...... Aaa+/AAA++ 505,000
Rhode Island Health & Education Building Corp.,
Johnson & Wales University
1,360,000 4.000%, 04/01/12 Series 2003 XLCA Insured........ Aaa+/AAA++ 1,422,900
3,210,000 4.000%, 04/01/13 Series 2003 XLCA Insured........ Aaa+/AAA++ 3,342,413
2,000,000 4.000%, 04/01/14 Series 2003 XLCA Insured........ Aaa+/AAA++ 2,060,000
465,000 5.500%, 04/01/15 1999 Series A MBIA Insured...... Aaa+/AAA++ 541,725
900,000 5.500%, 04/01/16 1999 Series A MBIA Insured...... Aaa+/AAA++ 1,051,875
785,000 5.500%, 04/01/17 1999 Series A MBIA Insured...... Aaa+/AAA++ 908,638
2,000,000 5.000%, 04/01/29 1999 Series A MBIA Insured...... Aaa+/AAA++ 2,062,500
Rhode Island Health & Education Building Corp.,
Rhode Island School of Design
505,000 4.700%, 06/01/18 Series 2001 MBIA Insured........ Aaa+/AAA++ 530,250
280,000 4.750%, 06/01/19 Series 2001 MBIA Insured........ Aaa+/AAA++ 292,950
Rhode Island Health & Education Building Corp.,
Roger Williams University
500,000 5.125%, 11/15/11 AMBAC Insured................... Aaa+/AAA++ 562,500
1,000,000 5.500%, 11/15/11 Series 1996 S AMBAC Insured..... NR/AAA++ 1,115,000
Rhode Island Health & Education Building Corp.,
Roger Williams University (continued)
$ 1,000,000 5.125%, 11/15/14 Series 1996 S AMBAC Insured..... Aaa+/AAA++ $ 1,105,000
1,000,000 5.000%, 11/15/18 Series 1996 S AMBAC Insured..... Aaa+/AAA++ 1,082,500
Rhode Island Health & Education Facilities
Authority Providence College
1,000,000 4.250%, 11/01/14 XLCA Insured.................... Aaa+/AAA++ 1,048,750
2,500,000 4.375%, 11/01/15 XLCA Insured.................... Aaa+/AAA++ 2,618,750
2,500,000 4.500%, 11/01/16 XLCA Insured.................... Aaa+/AAA++ 2,615,625
1,000,000 4.500%, 11/01/17 XLCA Insured.................... Aaa+/AAA++ 1,038,750
Providence, Rhode Island Public Building School &
Public Facilities Project
1,500,000 5.250%, 12/15/17 AMBAC Insured................... Aaa+/AAA++ 1,657,500
1,000,000 5.250%, 12/15/19 AMBAC Insured................... Aaa+/AAA++ 1,095,000
-------------
Total Higher Education Revenue Bonds............. 43,714,532
-------------
MORTGAGE REVENUE MULTI-FAMILY BONDS (0.3%)
----------------------------------------------------
Rhode Island Housing & Mortgage Finance Corp.,
225,000 5.450%, 07/01/04 Series 1995 A
AMBAC Insured.................................... Aaa+/AAA++ 228,438
235,000 5.550%, 07/01/05 Series 1995 A
AMBAC Insured.................................... Aaa+/AAA++ 245,281
-------------
Total Mortgage Revenue Multi-Family Bonds........ 473,719
-------------
POLLUTION CONTROL REVENUE BONDS (4.5%)
----------------------------------------------------
Rhode Island Clean Water Finance Agency, Water
Pollution Control Bonds
1,800,000 5.000%, 10/01/18 Series 2002 B MBIA Insured...... Aaa+/AAA++ 1,930,500
4,765,000 4.375%, 10/01/21 Series 2002 B MBIA Insured...... Aaa+/AAA++ 4,782,869
-------------
Total Pollution Control Revenue Bonds............ 6,713,369
-------------
WATER AND SEWER REVENUE BONDS (8.6%)
----------------------------------------------------
Bristol County, Rhode Island Water Authority
300,000 5.000%, 12/01/08 Series 1997 A MBIA Insured...... Aaa+/AAA++ 324,375
750,000 5.250%, 07/01/17 Series 1997 A MBIA Insured...... Aaa+/AAA++ 818,437
Kent County, Rhode Island Water Authority
Revenue Bonds
$ 250,000 5.700%, 07/15/04 Series 1994 A MBIA Insured...... Aaa+/AAA++ $ 256,083
500,000 4.000%, 07/15/12 Series 2002 A MBIA Insured...... Aaa+/AAA++ 525,625
1,055,000 4.150%, 07/15/14 Series 2002 A MBIA Insured...... Aaa+/AAA++ 1,095,881
Rhode Island Clean Water Protection
Finance Agency,
1,000,000 5.125%, 10/01/11 Series 1999 C MBIA Insured...... Aaa+/AAA++ 1,121,250
500,000 4.600% , 10/01/13 Series A AMBAC Insured......... Aaa+/AAA++ 528,750
500,000 4.750%, 10/01/14 Series A AMBAC Insured.......... Aaa+/AAA++ 530,625
1,250,000 5.400%, 10/01/15 Series A MBIA Insured........... Aaa+/AAA++ 1,451,563
2,000,000 4.750%, 10/01/18 Series A AMBAC Insured.......... Aaa+/AAA++ 2,070,000
500,000 4.750%, 10/01/20 Series A AMBAC Insured.......... Aaa+/AAA++ 514,375
Rhode Island Water Resources Board Public
Drinking Water Protection Revenue Bond
1,500,000 4.000%, 03/01/14 MBIA Insured.................... Aaa+/AAA++ 1,541,250
1,000,000 4.250%, 03/01/15 MBIA Insured.................... Aaa+/AAA++ 1,038,750
Rhode Island Clean Water Protection
200,000 5.300%, 10/01/07 1993 Series 1993 A
MBIA Insured..................................... Aaa+/AAA++ 223,000
300,000 5.400%, 10/01/09 1993 Series 1993 A
MBIA Insured..................................... Aaa+/AAA++ 343,500
500,000 4.500%, 10/01/11 1993 Series 1993 B
AMBAC Insured.................................... Aaa+/AAA++ 535,000
-------------
Total Water and Sewer Revenue Bonds.............. 12,918,464
-------------
OTHER REVENUE BONDS (3.9%)
----------------------------------------------------
Rhode Island State Capital Development Loan
1,500,000 5.400%, 08/01/08 MBIA Insured.................... Aaa+/AAA++ 1,640,625
1,135,000 5.000%, 08/01/11 MBIA Insured.................... Aaa+/AAA++ 1,237,150
State of Rhode Island Certificates of Participation,
Howard Center Improvements
400,000 5.250%, 10/01/10 MBIA Insured.................... Aaa+/AAA++ 446,000
200,000 5.375%, 10/01/16 MBIA Insured.................... Aaa+/AAA++ 221,750
State of Rhode Island Depositors Economic
Protection Corp.
$ 135,000 5.500%, 08/01/06 Series 1992 B MBIA Insured....... Aaa+/AAA++ $ 148,500
300,000 5.800%, 08/01/09 Series 1993 B MBIA Insured...... Aaa+/AAA++ 351,000
500,000 6.000%, 08/01/17 Series 1992 B MBIA Insured....... Aaa+/AAA++ 543,750
1,045,000 5.250%, 08/01/21 Series 1993 B MBIA Insured
(Escrowed to Maturity)........................... Aaa+/AAA++ 1,193,912
-------------
Total Other Revenue Bonds........................ 5,782,687
-------------
Total Revenue Bonds............................ 83,493,396
-------------
Total Investments (cost $142,529,372*)... 100.4% 150,308,323
Other assets less liabilities............ (0.4) (580,956)
----- -------------
Net Assets............................... 100.0% $ 149,727,367
===== =============
* See note 4.
Rating Services:
+ Moody's Investors Service
++ Standard & Poor's
+++ Fitch
NR- Not rated by two of the ratings services.
PORTFOLIO ABBREVIATIONS:
AMBAC - American Municipal Bond Assurance Corp.
FGIC - Financial Guaranty Insurance Co.
FSA - Financial Security Assurance
MBIA - Municipal Bond Investors Assurance
XLCA - XL Capital Assurance Inc.
See accompanying notes to financial statements.
NARRAGANSETT INSURED TAX-FREE INCOME FUND
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 2003 (UNAUDITED)
ASSETS
Investments at value (cost $142,529,372) ....................................................... $ 150,308,323
Receivable for Fund shares sold ................................................................ 508,672
Interest receivable ............................................................................ 1,737,037
Receivable for investment securities sold ...................................................... 25,000
Other assets ................................................................................... 6,082
-------------
Total assets ................................................................................... 152,585,114
-------------
LIABILITIES
Cash overdraft ................................................................................. 2,045,712
Payable for Fund shares redeemed ............................................................... 547,370
Dividends payable .............................................................................. 178,377
Distribution fees payable ...................................................................... 68,801
Management fee payable ......................................................................... 14,568
Accrued expenses ............................................................................... 2,919
-------------
Total liabilities .............................................................................. 2,857,747
-------------
NET ASSETS ........................................................................................ $ 149,727,367
=============
Net Assets consist of:
Capital Stock - Authorized 80,000,000 shares, par value $.01 per share ......................... $ 138,066
Additional paid-in capital ..................................................................... 142,579,867
Net unrealized appreciation on investments (note 4) ............................................ 7,778,951
Accumulated net realized loss on investments ................................................... (607,658)
Distributions in excess of net investment income ............................................... (161,859)
-------------
$ 149,727,367
=============
CLASS A
Net Assets ..................................................................................... $ 105,987,921
=============
Capital shares outstanding ..................................................................... 9,773,250
=============
Net asset value and redemption price per share ................................................. $ 10.84
=============
Offering price per share (100/96 of $10.84 adjusted to nearest cent) ........................... $ 11.29
=============
CLASS C
Net Assets ..................................................................................... $ 22,471,679
=============
Capital shares outstanding ..................................................................... 2,072,339
=============
Net asset value and offering price per share ................................................... $ 10.84
=============
Redemption price per share (*a charge of 1% is imposed on the redemption
proceeds of the shares, or on the original price, whichever is lower, if redeemed
during the first 12 months after purchase) .................................................. $ 10.84*
=============
CLASS I
Net Assets ..................................................................................... $ 691,491
=============
Capital shares outstanding ..................................................................... 63,803
=============
Net asset value, offering and redemption price per share ....................................... $ 10.84
=============
CLASS Y
Net Assets ..................................................................................... $ 20,576,276
=============
Capital shares outstanding ..................................................................... 1,897,209
=============
Net asset value, offering and redemption price per share ....................................... $ 10.85
=============
See accompanying notes to financial statements.
NARRAGANSETT INSURED TAX-FREE INCOME FUND
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED DECEMBER 31, 2003
(UNAUDITED)
Investment Income:
Interest income ................................................... $3,215,209
Expenses:
Management fee (note 3) ........................................... $ 370,098
Distribution and service fees (note 3) ............................ 191,054
Trustees' fees and expenses (note 8) .............................. 49,406
Fund accounting fees .............................................. 28,822
Transfer and shareholder servicing agent fees ..................... 26,952
Shareholders' reports and proxy statements ........................ 24,016
Legal fees ........................................................ 20,996
Auditing and tax fees ............................................. 11,234
Custodian fees .................................................... 10,268
Registration fees and dues ........................................ 4,914
Miscellaneous ..................................................... 14,996
-----------
Total Expenses .................................................... 752,756
Management fee waived (note 3) .................................... (288,026)
Expenses paid indirectly (note 6) ................................. (8,144)
-----------
Net expenses ...................................................... 456,586
----------
Net investment income ............................................. 2,758,623
Realized and Unrealized Gain (Loss) on Investments:
Net realized gain (loss) from securities transactions ............. 91,730
Change in unrealized appreciation on investments .................. (1,005,047)
-----------
Net realized and unrealized gain (loss) on investments ............ (913,317)
----------
Net change in net assets resulting from operations ................ $1,845,306
==========
See accompanying notes to financial statements.
NARRAGANSETT INSURED TAX-FREE INCOME FUND
STATEMENTS OF CHANGES IN NET ASSETS
SIX MONTHS ENDED
DECEMBER 31, 2003 YEAR ENDED
(UNAUDITED) JUNE 30, 2003
----------------- -------------
OPERATIONS:
Net investment income ....................................................... $ 2,758,623 $ 5,028,971
Net realized gain (loss) from securities transactions ....................... 91,730 286,562
Change in unrealized appreciation on investments ............................ (1,005,047) 5,341,554
------------- -------------
Change in net assets from operations ..................................... 1,845,306 10,657,087
------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS (NOTE 9):
Class A Shares:
Net investment income ....................................................... (2,079,685) (3,889,489)
Class C Shares:
Net investment income ....................................................... (342,684) (607,348)
Class I Shares:
Net investment income ....................................................... (10,421) (16,746)
Class Y Shares:
Net investment income ....................................................... (390,128) (637,034)
------------- -------------
Change in net assets from distributions .................................. (2,822,918) (5,150,617)
------------- -------------
CAPITAL SHARE TRANSACTIONS (NOTE 7):
Proceeds from shares sold ................................................... 16,340,426 44,058,438
Reinvested dividends and distributions ...................................... 1,778,882 3,417,773
Cost of shares redeemed ..................................................... (15,448,549) (19,044,516)
------------- -------------
Change in net assets from capital share transactions ........................ 2,670,759 28,431,695
------------- -------------
Change in net assets ..................................................... 1,693,147 33,938,165
NET ASSETS:
Beginning of period ......................................................... 148,034,220 114,096,055
------------- -------------
End of period* .............................................................. $ 149,727,367 $ 148,034,220
============= =============
* Includes distributions in excess of net investment income of: ............. $ (161,859) $ (97,564)
============= =============
See accompanying notes to financial statements.
NARRAGANSETT INSURED TAX-FREE INCOME FUND
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
1. ORGANIZATION
Narragansett Insured Tax-Free Income Fund (the "Fund"), a non-diversified,
open-end investment company, was organized on January 22, 1992 as a
Massachusetts business trust and commenced operations on September 10, 1992. The
Fund is authorized to issue 80,000,000 shares and, since its inception to May 1,
1996, offered only one class of shares. On that date, the Fund 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 are sold
with a front-payment sales charge and bear an annual distribution 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. Class C Shares, together with a pro-rata portion
of all Class C Shares acquired through reinvestment of dividends and other
distributions paid in additional Class C Shares, automatically convert to Class
A Shares after 6 years. The Class Y shares are only offered to institutions
acting for an investor in a fiduciary, advisory, agency, custodian or similar
capacity and are not offered directly to 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 October 31, 1997, the
Fund established Class I shares, which are offered and sold only through
financial intermediaries and are not offered directly to retail investors. Class
I Shares are sold at net asset value without any sales charge, redemption fees,
or contingent deferred sales charge. Class I Shares carry a distribution fee and
a service fee. All classes of shares represent interests in the same portfolio
of investments and are identical as to rights and privileges and 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 Fund in the preparation of its financial statements. The policies are in
conformity with accounting principles generally accepted in the United States of
America for investment companies.
a) PORTFOLIO VALUATION: Municipal securities which have remaining maturities
of more than 60 days are valued each business day based upon information
provided by a nationally prominent independent pricing service and
periodically verified through other pricing services; in the case of
securities for which market quotations are readily available, securities
are valued at the mean of bid and asked quotations and in the case of other
securities, at fair value determined under procedures established by and
under the general supervision of the Board of Trustees. Securities which
mature in 60 days or less are valued at amortized cost if their term to
maturity at purchase is 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 exceeds 60 days.
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 on the accrual basis and is adjusted for amortization of
premium and accretion of original issue and market discount.
c) FEDERAL INCOME TAXES: It is the policy of the Fund to qualify as a
regulated investment company by complying with the provisions of the
Internal Revenue Code applicable to certain investment companies. The Fund
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 accounting principles generally accepted in the United States of
America 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:
Aquila Management Corporation (the "Manager"), the Fund's founder and
sponsor, serves as the Manager for the Fund under an Advisory and Administration
Agreement with the Fund. Refer to Note 10 for Subsequent Event footnote. The
portfolio management of the Fund has been delegated to a Sub-Adviser as
described below. Under the Advisory and Administration Agreement, the Manager
provides all administrative services to the Fund, other than those relating to
the day-to-day portfolio management. The Manager's services include providing
the office of the Fund and all related services as well as overseeing the
activities of the Sub-Adviser and all the various support organizations to the
Fund such as the shareholder servicing agent, custodian, legal counsel, fund
accounting agent, auditors and distributor. For its services, the Manager 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 0.50% on the Fund's net assets.
Citizens Investment Advisors, a department of Citizens Bank of Rhode Island
(the "Sub-Adviser") serves as the Investment Sub-Adviser for the Fund under a
Sub-Advisory Agreement between the Manager and the Sub-Adviser. Under this
agreement, the Sub-Adviser continuously provides, subject to oversight of the
Manager and the Board of Trustees of the Fund, the investment program of the
Fund and the composition of its portfolio, arranges for the purchases and sales
of portfolio securities, and provides for daily pricing of the Fund's portfolio.
For its services, the Sub-Adviser is entitled to receive a fee from the Manager
which is payable monthly and computed as of the close of business each day at
the annual rate of 0.23% on the Fund's average net assets.
For the year ended December 31, 2003, the Fund incurred management fees of
$370,098 of which $288,026 was voluntarily waived.
Specific details as to the nature and extent of the services provided by
the Manager and the Sub-Adviser are more fully defined in the Fund's Prospectus
and Statement of Additional Information.
B) DISTRIBUTION AND SERVICE FEES:
The Fund 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 Fund is authorized to make
distribution 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 Fund, 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 Fund's shares or
servicing of shareholder accounts. The Fund makes payment of this service fee at
the annual rate of 0.15% of the Fund's average net assets represented by Class A
Shares. For the six months ended December 31, 2003, distribution fees on Class A
Shares amounted to $79,575, of which the Distributor retained $1,697.
Under another part of the Plan, the Fund 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 Fund's Class C shares or
servicing of shareholder accounts. These payments are made at the annual rate of
0.75% of the Fund's average net assets represented by Class C Shares and for the
six months ended December 31, 2003 amounted to $83,509. In addition, under a
Shareholder Services Plan, the Fund 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 Fund's average net assets represented by Class C
Shares and for the six months ended December 31, 2003, amounted to $27,836. The
total of these payments with respect to Class C Shares amounted to $111,345, of
which the Distributor retained $18,943.
Under another part of the Plan, the Fund is authorized to make payments
with respect to Class I Shares to Qualified Recipients. Class I payments, under
the Plan, may not exceed, for any fiscal year of the Fund a rate (currently
0.05%) set from time to time by the Board of Trustees of not more than 0.25% of
the average annual net assets represented by the Class I Shares. In addition,
the Fund has a Shareholder Services Plan under which it may pay service fees
(currently 0.15%) of not more than 0.25% of the average annual net assets of the
Fund represented by Class I Shares. That is, the total payments under both plans
will not exceed 0.50% of such net assets. For the six months ended December 31,
2003, these payments were made at the average annual rate of 0.20% of such net
assets amounting to $534 of which $134 related to the Plan and $400 related to
the Shareholder Services Plan.
Specific details about the Plans are more fully defined in the Fund's
Prospectus and Statement of Additional Information.
Under a Distribution Agreement, the Distributor serves as the exclusive
distributor of the Fund's shares. Through agreements between the Distributor and
various broker-dealer firms ("dealers"), the Fund's shares are sold primarily
through the facilities of these dealers having offices within Rhode Island, with
the bulk of sales commissions inuring to such dealers. For the six months ended
December 31, 2003, total commissions on sales of Class A Shares amounted to
$203,213, of which the Distributor received $16,892.
C) OTHER RELATED PARTY TRANSACTIONS:
For the six months ended December 31, 2003, the Fund incurred $20,463 of
legal fees allocable to Hollyer Brady Smith & Hines LLP, counsel to the Fund for
legal fees in conjunction with the Fund's ongoing operations. The Secretary of
the Fund is a partner of Hollyer Brady Smith & Hines LLP.
4. PURCHASES AND SALES OF SECURITIES
During the six months ended December 31, 2003, purchases of securities and
proceeds from the sales of securities aggregated $17,106,430 and $7,343,900,
respectively.
At December 31, 2003, the aggregate tax cost for all securities was
$142,503,673. At December 31, 2003, the aggregate gross unrealized appreciation
for all securities in which there is an excess of market value over tax cost
amounted to $7,818,889 and aggregate gross unrealized depreciation for all
securities in which there is an excess of tax cost over market value amounted to
$14,239, for a net unrealized appreciation of $7,804,650.
5. PORTFOLIO ORIENTATION
Since the Fund invests principally and may invest entirely in double
tax-free municipal obligations of issuers within Rhode Island, it is subject to
possible risks associated with economic, political, or legal developments or
industrial or regional matters specifically affecting Rhode Island and whatever
effects these may have upon Rhode Island issuers' ability to meet their
obligations. However, to mitigate against such risks, the Fund has chosen to
have at least 80% and possibly the entire number of issues in the portfolio
insured as to timely payment of principal and interest when due by nationally
prominent municipal bond insurance companies. At December 31, 2003, all of the
securities in the Fund were insured. While such insurance protects against
credit risks with portfolio securities, it does not insure against market risk
of fluctuations in the Fund's share price and income return.
The Fund is also permitted to invest in U.S. territorial municipal
obligations meeting comparable quality standards and providing income which is
exempt from both regular Federal and Rhode Island income taxes. The general
policy of the Fund is to invest in such securities only when comparable
securities of Rhode Island issuers are not available in the market. At December
31, 2003, the Fund had all of its net assets invested in Rhode Island municipal
issues.
6. EXPENSES
The Fund has negotiated an expense offset arrangement with its custodian
wherein it receives credit toward the reduction of custodian fees and other Fund
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 the 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.
7. CAPITAL SHARE TRANSACTIONS
Transactions in Capital Shares of the Fund were as follows:
SIX MONTHS ENDED
DECEMBER 31, 2003 YEAR ENDED
(UNAUDITED) JUNE 30, 2003
------------------------------ -------------------------------
SHARES AMOUNT SHARES AMOUNT
------ ------ ------ ------
CLASS A SHARES:
Proceeds from shares sold ........... 884,622 $ 9,500,210 2,511,973 $ 26,990,482
Reinvested distributions ............ 124,783 1,330,954 239,993 2,564,785
Cost of shares redeemed ............. (1,026,565) (10,980,717) (1,208,692) (13,117,881)
------------ ------------ ------------ ------------
Net change ....................... (17,160) (149,553) 1,543,274 16,437,386
------------ ------------ ------------ ------------
CLASS C SHARES:
Proceeds from shares sold ........... 341,259 3,629,061 851,696 9,125,462
Reinvested distributions ............ 19,448 207,610 32,560 348,204
Cost of shares redeemed ............. (350,093) (3,719,136) (312,631) (3,355,269)
------------ ------------ ------------ ------------
Net change ....................... 10,614 117,535 571,625 6,118,397
------------ ------------ ------------ ------------
CLASS I SHARES:
Proceeds from shares sold ........... 22,595 241,000 4,279 45,721
Reinvested distributions ............ 93 1,002 52 560
Cost of shares redeemed ............. -- -- (53) (592)
------------ ------------ ------------ ------------
Net change ....................... 22,688 242,002 4,278 45,689
------------ ------------ ------------ ------------
CLASS Y SHARES:
Proceeds from shares sold ........... 278,389 2,970,155 741,749 7,896,773
Reinvested distributions ............ 22,493 239,316 47,085 504,224
Cost of shares redeemed ............. (69,944) (748,696) (242,048) (2,570,774)
------------ ------------ ------------ ------------
Net change ....................... 230,938 2,460,775 546,786 5,830,223
------------ ------------ ------------ ------------
Total transactions in Fund
shares .............................. 247,080 $ 2,670,759 2,665,963 $ 28,431,695
============ ============ ============ ============
8. TRUSTEES' FEES AND EXPENSES
During the previous fiscal year ended June 30, 2003, there were eight
Trustees, one of which is affiliated with the Manager and is not paid any
trustee fees. Each Trustee's fees paid during the year were at the annual rate
of $6,500 for carrying out their responsibilities and attendance at regularly
scheduled Board Meetings. If additional or special meetings are scheduled for
the Fund, separate meeting fees are paid for each such meeting to those Trustees
in attendance. The Fund also reimburses Trustees for expenses such as travel,
accomodations, and meals incurred in connection with attendance at regularly
scheduled or special Board Meetings and at the Annual Meeting and outreach
meetings of Shareholders. For the previous fiscal year ended June 30, 2003, such
reimbursements averaged approximately $4,002 per Trustee.
9. DISTRIBUTIONS
The Fund declares dividends daily from net investment income and makes
payments monthly in additional shares at the net asset value per share, in cash,
or in a combination of both, at the shareholder's option. Net realized capital
gains, if any, are distributed annually and are taxable.
The Fund 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 Rhode Island income taxes.
However, due to differences between financial statement reporting and Federal
income tax reporting requirements, distributions made by the Fund may not be the
same as the Fund's net investment income, and/or net realized securities gains.
In this regard, the Fund credited distributions in excess of net investment
income in the amount of $86,229 and debited additional paid-in capital in the
amount of $86,229 at June 30, 2003. This adjustment had no impact on the Fund's
aggregate net assests at June 30, 2003. Further, a small portion of the
dividends may, under some circumstances, be subject to taxes at ordinary income
and/or capital gain rates.
At June 30, 2003, the Fund had a capital loss carryover of $699,388 which
expires on June 30, 2009. This carryover is available to offset future net
realized gains on securities transactions to the extent provided for in the
Internal Revenue Code. To the extent that this loss is used to offset future
realized capital gains, it is probable the gains so offset will not be
distributed.
Tax character of distributions paid by the Fund:
Year Ended June 30,
2003 2002
---------- ----------
Net tax-exempt income $5,052,703 $4,014,083
Ordinary income 97,914 31,879
---------- ----------
$5,150,617 $4,045,962
========== ==========
As of June 30, 2003, the components of distributable earnings on a tax
basis were as follows:
Accumulated net realized loss $ (699,388)
Unrealized appreciation 8,805,515
-----------
$ 8,106,127
===========
10. SUBSEQUENT EVENT
Effective January 1, 2004, Aquila Management Corporation, founder of the
Fund, assigned its Advisory and Administration Agreement and Sub-Advisory
Agreement to its wholly-owned subsidiary, Aquila Investment Management LLC,
which will continue the management of the Fund. The transfer was made for
reasons of corporate and tax planning and will have no effect on the management
of the Fund or the fees being paid. These changes will not affect the
sub-advisory arrangements with the Fund's Sub-Adviser, Citizens Investment
Advisors, a department of Citizens Bank of Rhode Island, which provides the Fund
with local advisory services.
NARRAGANSETT INSURED TAX-FREE INCOME FUND
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
CLASS A
-------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED JUNE 30,
12/31/03 --------------------------------------------------
(UNAUDITED) 2003 2002 2001 2000 1999
----------- ------ ------ ------ ------ ------
Net asset value, beginning of period ........... $10.92 $10.47 $10.32 $9.91 $10.16 $10.47
------ ------ ------ ------ ------ ------
Income (loss) from investment operations:
Net investment income + ..................... 0.21 0.42 0.45 0.47 0.49 0.49
Net gain (loss) on securities
(both realized and unrealized) ........... (0.08) 0.47 0.16 0.44 (0.24) (0.30)
------ ------ ------ ------ ------ ------
Total from investment operations ............ 0.13 0.89 0.61 0.91 0.25 0.19
------ ------ ------ ------ ------ ------
Less distributions (note 9):
Dividends from net investment income ........ (0.21) (0.44) (0.46) (0.50) (0.50) (0.50)
------ ------ ------ ------ ------ ------
Net asset value, end of period ................. $10.84 $10.92 $10.47 $10.32 $9.91 $10.16
====== ====== ====== ====== ====== ======
Total return (not reflecting sales charge) ..... 1.24%++ 8.64% 6.07% 9.19% 2.58% 1.74%
Ratios/supplemental data
Net assets, end of period (in thousands) .... $105,988 $106,887 $86,378 $67,669* $59,899 $66,611
Ratio of expenses to average net assets ..... 0.52%* 0.51% 0.49% 0.41% 0.41% 0.39%
Ratio of net investment income to
average net assets ....................... 3.82%* 3.96% 4.34% 4.65% 4.89% 4.61%
Portfolio turnover rate ..................... 5.07%++ 11.74% 6.02% 3.08% 8.66% 1.36%
The expense and net investment income ratios without the effect of the voluntary waiver of a portion of the management fee and the
voluntary expense reimbursement were:
Ratio of expenses to average net assets ..... 0.90%* 0.88% 0.88% 0.95% 0.95% 0.91%
Ratio of net investment income to
average net assets ....................... 3.44%* 3.59% 3.95% 4.11% 4.36% 4.09%
The expense ratios after giving effect to the waiver, reimbursement and expense offset for uninvested cash balances were:
Ratio of expenses to average net assets ..... 0.51%* 0.48% 0.46% 0.40% 0.38% 0.35%
CLASS I
----------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED JUNE 30, PERIOD
12/31/03 --------------------------------------- ENDED
(UNAUDITED) 2003 2002 2001 2000 6/30/99(1)
----------- ------ ------ ------ ------ ----------
Net asset value, beginning of period ........... $10.91 $10.47 $10.32 $9.90 $10.15 $10.54
------ ------ ------ ------ ------ ------
Income (loss) from investment operations:
Net investment income + ..................... 0.20 0.42 0.44 0.47 0.48 0.31
Net gain (loss) on securities
(both realized and unrealized) ........... (0.07) 0.46 0.17 0.43 (0.23) (0.38)
------ ------ ------ ------ ------ ------
Total from investment operations ............ 0.13 0.88 0.61 0.90 0.25 (0.07)
------ ------ ------ ------ ------ ------
Less distributions (note 9):
Dividends from net investment income ........ (0.20) (0.44) (0.46) (0.48) (0.50) (0.32)
------ ------ ------ ------ ------ ------
Net asset value, end of period ................. $10.84 $10.91 $10.47 $10.32 $ 9.90 $10.15
====== ====== ====== ====== ====== ======
Total return (not reflecting sales charge) ..... 1.33%++ 8.52% 6.05% 9.29% 2.56% (0.75)%++
Ratios/supplemental data
Net assets, end of period (in thousands) .... $691 $449 $386 $93 $75 $77
Ratio of expenses to average net assets ..... 0.53%* 0.52% 0.50% 0.41% 0.43% 0.49%*
Ratio of net investment income to
average net assets ....................... 3.81%* 3.95% 4.32% 4.65% 4.87% 4.54%*
Portfolio turnover rate ..................... 5.07%++ 11.74% 6.02% 3.08% 8.66% 1.36%++
The expense and net investment income ratios without the effect of the voluntary waiver of a portion of the management fee and the
voluntary expense reimbursement were:
Ratio of expenses to average net assets ..... 0.91%* 0.89% 0.89% 0.96% 0.97% 0.87%*
Ratio of net investment income to
average net assets ....................... 3.43%* 3.58% 3.93% 4.10% 4.34% 4.16%*
The expense ratios after giving effect to the waiver, reimbursement and expense offset for uninvested cash balances were:
Ratio of expenses to average net assets ..... 0.52%* 0.49% 0.48% 0.41% 0.40% 0.46%*
- ----------
(1) For the period November 4, 1998 (commencement of operations) through June
30, 1999.
+ Per share amounts have been calculated using the monthly average shares
method.
++ Not annualized.
* Annualized.
See accompanying notes to financial statements.
NARRAGANSETT INSURED TAX-FREE INCOME FUND
FINANCIAL HIGHLIGHTS (CONTINUED)
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
CLASS C
------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED JUNE 30,
12/31/03 --------------------------------------------------
(UNAUDITED) 2003 2002 2001 2000 1999
----------- ------ ------ ------ ------ ------
Net asset value, beginning of period ............ $10.92 $10.47 $10.32 $9.91 $10.16 $10.47
------ ------ ------ ------ ------ ------
Income from investment operations:
Net investment income+ ....................... 0.16 0.33 0.36 0.38 0.40 0.38
Net gain (loss) on securities (both
realized and unrealized) .................. (0.07) 0.47 0.16 0.43 (0.24) (0.29)
------ ------ ------ ------ ------ ------
Total from investment operations ............. 0.09 0.80 0.52 0.81 0.16 0.09
------ ------ ------ ------ ------ ------
Less distributions (note 9):
Dividends from net investment income ......... (0.17) (0.35) (0.37) (0.40) (0.41) (0.40)
------ ------ ------ ------ ------ ------
Net asset value, end of period .................. $10.84 $10.92 $10.47 $10.32 $9.91 $10.16
====== ====== ====== ====== ====== ======
Total return (not reflecting sales charge) ...... 0.81%++ 7.72% 5.16% 8.27% 1.71% 0.76%
Ratios/supplemental data
Net assets, end of period (in thousands) ..... $22,472 $22,506 $15,606 $7,023 $4,681 $4,213
Ratio of expenses to average net assets ...... 1.37%* 1.35% 1.34% 1.26% 1.26% 1.35%
Ratio of net investment income to
average net assets ........................ 2.98%* 3.10% 3.46% 3.78% 4.04% 3.65%
Portfolio turnover rate ...................... 5.07%++ 11.74% 6.02% 3.08%+ 8.66% 1.36%
The expense and net investment income ratios without the effect of the voluntary waiver of a portion of the management fee
and the voluntary expense reimbursement were:
Ratio of expenses to average net assets ...... 1.75%* 1.72% 1.72% 1.80% 1.80% 1.75%
Ratio of net investment income to
average net assets ........................ 2.60%* 2.73% 3.07% 3.24% 3.50% 3.25%
The expense ratios after giving effect to the waiver, reimbursement and expense offset for uninvested cash balances were:
Ratio of expenses to average net assets ...... 1.36%* 1.33% 1.31% 1.25% 1.23% 1.32%
CLASS Y
------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED JUNE 30,
12/31/03 --------------------------------------------------
(UNAUDITED) 2003 2002 2001 2000 1999
----------- ------ ------ ------ ------ ------
Net asset value, beginning of period ............ $10.92 $10.47 $10.32 $9.91 $10.16 $10.47
------ ------ ------ ------ ------ ------
Income from investment operations:
Net investment income+ ....................... 0.21 0.45 0.46 0.48 0.50 0.49
Net gain (loss) on securities (both
realized and unrealized) .................. (0.06) 0.45 0.17 0.44 (0.24) (0.30)
------ ------ ------ ------ ------ ------
Total from investment operations ............. 0.15 0.90 0.63 0.92 0.26 0.19
------ ------ ------ ------ ------ ------
Less distributions (note 9):
Dividends from net investment income ......... (0.22) (0.45) (0.48) (0.51) (0.51) (0.50)
------ ------ ------ ------ ------ ------
Net asset value, end of period .................. $10.85 $10.92 $10.47 $10.32 $ 9.91 $10.16
====== ====== ====== ====== ====== ======
Total return (not reflecting sales charge) ...... 1.41%++ 8.80% 6.22% 9.35% 2.73% 1.79%
Ratios/supplemental data
Net assets, end of period (in thousands) ..... $20,576 $18,193 $11,726 $3,332 $2,277 $4,250
Ratio of expenses to average net assets ...... 0.37%* 0.36% 0.34% 0.26% 0.26% 0.33%
Ratio of net investment income to
average net assets ........................ 3.98%* 4.10% 4.47% 4.79% 5.07% 4.65%
Portfolio turnover rate ...................... 5.07%++ 11.74% 6.02% 3.08% 8.66% 1.36%
The expense and net investment income ratios without the effect of the voluntary waiver of a portion of the management fee
and the voluntary expense reimbursement were:
Ratio of expenses to average net assets ...... 0.75%* 0.73% 0.73% 0.80% 0.79% 0.70%
Ratio of net investment income to
average net assets ........................ 3.60%* 3.73% 4.08% 4.24% 4.54% 4.29%
The expense ratios after giving effect to the waiver, reimbursement and expense offset for uninvested cash balances were:
Ratio of expenses to average net assets ...... 0.36%* 0.33% 0.31% 0.26% 0.23% 0.30%
- ----------
+ Per share amounts have been calculated using the monthly average shares
method.
++ Not annualized.
* Annualized.
See accompanying notes to financial statements.
SHAREHOLDER MEETING RESULTS (UNAUDITED)
The Annual Meeting of Shareholders of Narragansett Insured Tax-Free Income Fund
(the "Fund") was held on September 4, 2003. The holders of shares representing
approximately 87% 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 are presented
below).
1. To elect Trustees.
Number of Votes:
TRUSTEE FOR WITHHELD
------- --- --------
Lacy B. Herrmann 10,198,323 1,198,818
Vernon R. Alden 10,196,418 1,200,723
Paul Y. Clinton 10,198,323 1,198,818
David A. Duffy 10,198,898 1,198,243
Willliam J. Nightingale 10,195,843 1,201,298
John J. Partridge 10,195,843 1,201,298
Cornelius T. Ryan 10,198,898 1,198,243
J. William Weeks 10,198,898 1,198,243
2. To ratify the selection of KPMG LLP as the Fund's independent auditors.
Number of Votes:
FOR AGAINST ABSTAIN
--- ------- -------
11,340,212 7,961 48,967
INFORMATION AVAILABLE (UNAUDITED)
Much of the information that the funds in the Aquila(sm) Group of Funds
produce is automatically sent to you and all other shareholders. Specifically,
you are routinely sent the entire list of portfolio of securities of your fund
twice a year in the semi-annual and annual reports you receive. You should know,
however, that we prepare, and have available, portfolio listings at the end of
each quarter.
Whenever you may be interested in seeing a listing of your trust's
portfolio other than in your shareholder reports, please check our website
(www.aquilafunds.com) or call us at 1-800-437-1020.
FOUNDER
AQUILA MANAGEMENT CORPORATION
MANAGER
AQUILA INVESTMENT MANAGEMENT LLC
380 Madison Avenue, Suite 2300
New York, New York 10017
INVESTMENT SUB-ADVISER
CITIZENS INVESTMENT ADVISORS,
A DEPARTMENT OF CITIZENS BANK
OF RHODE ISLAND
One Citizens Plaza
Providence, Rhode Island 02903
BOARD OF TRUSTEES
Lacy B. Herrmann, Chairman
Vernon R. Alden
Paul Y. Clinton
David A. Duffy
William J. Nightingale
John J. Partridge
Cornelius T. Ryan
J. William Weeks
OFFICERS
Diana P. Herrmann, Vice Chair and President
Stephen J. Caridi, Senior Vice President
Joseph P. DiMaggio, Chief Financial Officer
and 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.
1111 Polaris Parkway
Columbus, Ohio 43240
TRANSFER AND SHAREHOLDER SERVICING AGENT
PFPC INC.
760 Moore Road
King of Prussia, Pennsylvania 19406
INDEPENDENT AUDITORS
KPMG LLP
757 Third Avenue
New York, New York 10017
Further information is contained in the Prospectus, which must precede or
accompany this report.
SEMI-ANNUAL
REPORT
DECEMBER 31, 2003
A TAX-FREE INCOME INVESTMENT
[Logo of Narragansett Insured Tax-Free Income Fund: rectangle with profile view
of a sailboat on top of waves and three seagulls flying above it]
[Logo of the Aquila Group of Funds: an eagle's head]
ONE OF THE
AQUILASM GROUP OF FUNDS
ITEM 2. CODE OF ETHICS.
Not applicable.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
Not applicable.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Not applicable.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable.
ITEM 6. [RESERVED]
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR
CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
905: Not applicable.
ITEM 8. [RESERVED]
ITEM 9. CONTROLS AND PROCEDURES.
(a) Based on their evaluation of the registrant's disclosure controls and
procedures (as defined in Rule 30a-2(c) under the Investment Company Act of
1940) as of a date within 90 days of the fling of this report, the registrant's
chief financial and executive officers have concluded that the disclosure
controls and procedures of the registrant are appropriately designed to ensure
that information required to be disclosed in the registrant's reports that are
filed under the Securities Exchange Act of 1934 are accumulated and communicated
to registrant's management, including its principal executive officer(s) and
principal financial officer(s), to allow timely decisions regarding required
disclosure and is recorded, processed, summarized and reported, within the time
periods specified in the rules and forms adopted by the Securities and Exchange
Commission.
(b) There have been no significant changes in registrant's internal controls or
in other factors that could significantly affect registrant's internal controls
subsequent to the date of the most recent evaluation, including no significant
deficiencies or material weaknesses that required corrective action.
ITEM 10. EXHIBITS.
(a)(1) Not applicable.
(a)(2) Certifications of principal executive officer and principal financial
officer as required by Rule 30a-2(a) under the Investment Company Act of
1940.
(b) Certifications of principal executive officer and principal financial
officer as required by Rule 30a-2(b) under the Investment Company Act of 1940.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and
the Investment Company Act of 1940, the registrant has duly caused this report
to be signed on its behalf by the undersigned thereunto duly authorized.
NARRAGANSETT INSURED TAX-FREE INCOME FUND
By: /s/ Lacy B. Herrmann
- ---------------------------------
Chairman of the Board
March 8, 2004
By: /s/ Diana P. Herrmann
- ---------------------------------
Vice Chair and President
March 8, 2004
By: /s/ Joseph P. DiMaggio
- -----------------------------------
Chief Financial Officer
March 8, 2004
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on
the dates indicated.
By: /s/ Lacy B. Herrmann
- ---------------------------------
Lacy B. Herrmann
Chairman of the Board
March 8, 2004
By: /s/ Diana P. Herrmann
- ---------------------------------
Diana P. Herrmann
President
March 8, 2004
By: /s/ Joseph P. DiMaggio
- -----------------------------------
Joseph P. DiMaggio
Chief Financial Officer
March 8, 2004
NARRAGANSETT INSURED TAX-FREE INCOME FUND
EXHIBIT INDEX
(a) (2) Certifications of principal executive officer
and principal financial officer as required by Rule 30a-2(a)
under the Investment Company Act of 1940.
(b) Certification of chief executive officer and chief financial
officer as required by Rule 30a-2(b) of the Investment Company Act
of 1940.