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 811-6707
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: 12/31/04
FORM N-CSR
ITEM 1. REPORTS TO STOCKHOLDERS.
SEMI-ANNUAL
REPORT
DECEMBER 31, 2004
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
AQUILA(SM) GROUP OF FUNDS
[Logo of the Aquila Group of Funds: an eagle's head]
AQUILA(SM)
GROUP OF FUNDS
SERVING RHODE ISLAND INVESTORS
FOR MORE THAN A DECADE
NARRAGANSETT INSURED
TAX-FREE INCOME FUND
380 Madison Avenue, Suite 2300 o New York, NY 10017
800-437-1020 o 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
SCHEDULE OF INVESTMENTS
DECEMBER 31, 2004
(UNAUDITED)
RATING
FACE MOODY'S, S&P
AMOUNT GENERAL OBLIGATION BONDS (43.5%) OR FITCH VALUE
- ------------ ------------------------------------------------------- ------------ ------------
Coventry, Rhode Island
$ 550,000 5.000%, 11/01/16 AMBAC Insured ........................ Aaa+/AAA+++ $ 596,326
550,000 5.000%, 11/01/17 AMBAC Insured ........................ Aaa+/AAA+++ 589,787
Cranston, Rhode Island
300,000 5.500%, 06/15/07 MBIA Insured ......................... Aaa+/AAA++ 310,662
500,000 2.750%, 02/15/09 FSA Insured .......................... Aaa+/AAA++ 501,735
1,000,000 3.125%, 02/15/11 FSA Insured .......................... Aaa+/AAA++ 998,050
500,000 5.450%, 11/15/11 FGIC Insured ......................... Aaa+/AAA++ 559,815
Cumberland, Rhode Island
250,000 3.750%, 02/01/13 FGIC Insured ......................... Aaa+/AAA++ 254,887
250,000 4.000%, 02/01/14 FGIC Insured ......................... Aaa+/AAA++ 257,652
250,000 4.000%, 02/01/15 FGIC Insured ......................... Aaa+/AAA++ 255,538
500,000 5.000%, 08/01/15 MBIA Insured ......................... Aaa+/AAA++ 530,670
250,000 4.000%, 02/01/16 FGIC Insured ......................... Aaa+/AAA++ 253,965
250,000 4.100%, 02/01/17 FGIC Insured ......................... Aaa+/AAA++ 254,122
250,000 4.150%, 02/01/18 FGIC Insured ......................... Aaa+/AAA++ 252,730
1,255,000 5.000%, 10/01/18 MBIA Insured ......................... Aaa+/AAA++ 1,336,813
1,040,000 5.200%, 10/01/21 MBIA Insured ......................... Aaa+/AAA++ 1,130,938
East Providence, Rhode Island
500,000 5.400%, 05/15/07 MBIA Insured ......................... Aaa+/AAA++ 515,790
Lincoln, Rhode Island
400,000 5.100%, 01/15/06 MBIA Insured ......................... Aaa+/AAA++ 404,720
250,000 5.750%, 08/01/15 FGIC Insured ......................... Aaa+/AAA+++ 260,350
New Shoreham, Rhode Island
245,000 4.000%, 11/15/15 AMBAC Insured ........................ Aaa+/AAA++ 250,302
255,000 4.250%, 11/15/16 AMBAC Insured ........................ Aaa+/AAA++ 263,249
270,000 4.250%, 11/15/17 AMBAC Insured ........................ Aaa+/AAA++ 277,071
910,000 4.800%, 04/15/18 AMBAC Insured ........................ Aaa+/AAA++ 956,110
285,000 4.500%, 11/15/18 AMBAC Insured ........................ Aaa+/AAA++ 294,713
1,105,000 5.000%, 04/15/22 AMBAC Insured ........................ Aaa+/AAA++ 1,161,289
Newport, Rhode Island
1,000,000 4.500%, 11/01/15 AMBAC Insured ........................ Aaa+/AAA+++ 1,056,830
1,000,000 4.750%, 11/01/18 AMBAC Insured ........................ Aaa+/AAA+++ 1,052,590
800,000 5.000%, 11/01/20 AMBAC Insured ........................ Aaa+/AAA+++ 852,920
North Providence, Rhode Island
400,000 5.700%, 07/01/08 MBIA Insured ......................... Aaa+/AAA++ 440,376
500,000 3.500%, 10/15/13 FSA Insured .......................... Aaa+/AAA++ 501,110
RATING
FACE MOODY'S, S&P
AMOUNT GENERAL OBLIGATION BONDS (CONTINUED) OR FITCH VALUE
- ------------ ------------------------------------------------------- ------------ ------------
North Providence, Rhode Island (continued)
$ 500,000 4.700%, 09/15/14 FSA Insured .......................... Aaa+/AAA++ $ 533,665
500,000 3.650%, 10/15/14 FSA Insured .......................... Aaa+/AAA++ 503,345
500,000 3.750%, 10/15/15 FSA Insured .......................... Aaa+/AAA++ 500,350
Pawtucket, Rhode Island
600,000 4.300%, 09/15/09 AMBAC Insured ........................ Aaa+/AAA+++ 640,404
795,000 3.500%, 04/15/10 AMBAC Insured ........................ Aaa+/AAA+++ 814,636
250,000 4.400%, 09/15/10 AMBAC Insured ........................ Aaa+/AAA+++ 268,322
825,000 3.500%, 04/15/11 AMBAC Insured ........................ Aaa+/AAA+++ 840,832
850,000 3.625%, 04/15/12 AMBAC Insured ........................ Aaa+/AAA+++ 866,057
880,000 3.750%, 04/15/13 AMBAC Insured ........................ Aaa+/AAA+++ 896,262
910,000 4.000%, 04/15/14 AMBAC Insured ........................ Aaa+/AAA+++ 935,435
Providence, Rhode Island
700,000 5.500%, 01/15/11 FSA Insured .......................... Aaa+/AAA++ 746,480
1,925,000 5.200%, 04/01/11 AMBAC Insured ........................ Aaa+/AAA+++ 2,120,657
1,000,000 3.600%, 07/15/13 Series A FSA Insured ................. Aaa+/AAA++ 1,009,520
1,000,000 5.000%, 01/15/16 FGIC Insured ......................... Aaa+/AAA++ 1,082,180
1,000,000 5.000%, 01/15/17 FGIC Insured ......................... Aaa+/AAA++ 1,071,510
1,000,000 5.000%, 01/15/18 FGIC Insured ......................... Aaa+/AAA++ 1,063,720
Rhode Island Consolidated Capital
Development Loan
1,000,000 5.250%, 11/01/11 Series C MBIA Insured ................ Aaa+/AAA++ 1,124,050
1,000,000 5.000%, 06/01/14 Series B FGIC Insured ................ Aaa+/AAA++ 1,083,590
1,000,000 5.000%, 09/01/14 Series A FGIC Insured ................ Aaa+/AAA++ 1,071,210
2,000,000 5.000%, 08/01/15 Series B FGIC Insured ................ Aaa+/AAA++ 2,148,000
1,500,000 4.750%, 09/01/17 Series A FGIC Insured ................ Aaa+/AAA++ 1,557,930
South Kingstown, Rhode Island
500,000 5.500%, 06/15/12 FGIC Insured ......................... Aaa+/AAA+++ 562,305
State of Rhode Island
1,000,000 5.000%, 07/15/05 FGIC Insured ......................... Aaa+/AAA++ 1,015,820
1,000,000 5.125%, 07/15/11 FGIC Insured ......................... Aaa+/AAA++ 1,081,370
4,000,000 5.000%, 08/01/14 FGIC Insured ......................... Aaa+/AAA++ 4,342,120
1,500,000 5.000%, 09/01/15 FGIC Insured ......................... Aaa+/AAA++ 1,593,450
2,000,000 5.250%, 11/01/17 FGIC Insured ......................... Aaa+/AAA++ 2,214,500
2,500,000 5.000%, 09/01/18 MBIA Insured ......................... Aaa+/AAA++ 2,676,000
2,000,000 5.000%, 09/01/19 MBIA Insured ......................... Aaa+/AAA++ 2,136,800
1,500,000 5.000%, 09/01/20 MBIA Insured ......................... Aaa+/AAA++ 1,596,255
RATING
FACE MOODY'S, S&P
AMOUNT GENERAL OBLIGATION BONDS (CONTINUED) OR FITCH VALUE
- ------------ ------------------------------------------------------- ------------ ------------
Warwick, Rhode Island
$ 665,000 4.250%, 07/15/14 AMBAC Insured ........................ Aaa+/AAA++ $ 695,058
195,000 5.600%, 08/01/14 FSA Insured .......................... Aaa+/AAA++ 208,513
700,000 4.375%, 07/15/15 AMBAC Insured ........................ Aaa+/AAA++ 731,731
770,000 4.600%, 07/15/17 AMBAC Insured ........................ Aaa+/AAA++ 806,906
1,000,000 5.000%, 03/01/18 FGIC Insured ......................... Aaa+/AAA++ 1,071,800
810,000 4.700%, 07/15/18 AMBAC Insured ........................ Aaa+/AAA++ 847,066
1,000,000 5.000%, 01/15/19 FGIC Insured ......................... Aaa+/AAA++ 1,063,720
855,000 4.750%, 07/15/19 AMBAC Insured ........................ Aaa+/AAA++ 890,671
500,000 5.000%, 01/15/20 FGIC Insured ......................... Aaa+/AAA++ 530,200
West Warwick, Rhode Island
500,000 4.875%, 03/01/16 AMBAC Insured ........................ Aaa+/AAA+++ 534,345
670,000 5.000%, 03/01/17 AMBAC Insured ........................ Aaa+/AAA+++ 715,165
700,000 5.050%, 03/01/18 AMBAC Insured ........................ Aaa+/AAA+++ 755,699
735,000 5.100%, 03/01/19 AMBAC Insured ........................ Aaa+/AAA+++ 789,574
Woonsocket, Rhode Island
385,000 5.125%, 03/01/11 MBIA Insured ......................... Aaa+/AAA++ 391,021
655,000 4.450%, 12/15/12 FGIC Insured ......................... Aaa+/AAA+++ 693,894
685,000 4.550%, 12/15/13 FGIC Insured ......................... Aaa+/AAA+++ 724,264
------------
Total General Obligation Bonds ..................... 65,917,512
------------
REVENUE BONDS (55.7%)
DEVELOPMENT REVENUE BONDS (9.1%)
Rhode Island Convention Center Authority
500,000 5.000%, 05/15/07 Series 1993 B MBIA Insured ........... Aaa+/AAA++ 530,245
2,000,000 5.000%, 05/15/23 Series 1993 C MBIA Insured ........... Aaa+/AAA++ 2,024,280
Rhode Island Public Building Authority State
Public Projects
1,000,000 5.250%, 02/01/09 Series 1998 A AMBAC Insured .......... Aaa+/AAA++ 1,087,290
500,000 5.000%, 12/15/09 Series 1999 A AMBAC Insured .......... Aaa+/AAA++ 550,210
1,000,000 5.250%, 12/15/14 Series 1998 FSA Insured .............. Aaa+/AAA++ 1,102,850
500,000 5.500%, 12/15/14 Series 1996 B MBIA Insured ........... Aaa+/AAA++ 538,215
500,000 5.500%, 12/15/15 Series 1996 B MBIA Insured ........... Aaa+/AAA++ 538,215
Rhode Island State Economic Development Corp.,
Airport Revenue
1,000,000 5.000%, 07/01/18 Series B FSA Insured ................. Aaa+/AAA++ 1,057,720
RATING
FACE MOODY'S, S&P
AMOUNT REVENUE BONDS (CONTINUED) OR FITCH VALUE
- ------------ ------------------------------------------------------- ------------ ------------
DEVELOPMENT REVENUE BONDS (CONTINUED)
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++ $ 2,045,560
1,000,000 4.000%, 06/15/15 Series A AMBAC Insured ............... Aaa+/AAA++ 1,023,030
Rhode Island State Economic Development Corp.,
University of Rhode Island
750,000 4.800%, 11/01/11 Series 1999 FSA Insured .............. Aaa+/NR 807,885
750,000 4.900%, 11/01/12 Series 1999 FSA Insured .............. Aaa+/NR 807,030
750,000 4.900%, 11/01/13 Series 1999 FSA Insured .............. Aaa+/NR 803,910
750,000 5.000%, 11/01/14 Series 1999 FSA Insured .............. Aaa+/NR 808,950
------------
Total Development Revenue Bonds .................... 13,725,390
------------
HIGHER EDUCATION REVENUE BONDS (28.1%)
Providence, Rhode Island Public Building Authority,
School Projects
1,395,000 4.000%, 12/15/12 Series 2003 A MBIA Insured ........... Aaa+/AAA++ 1,459,756
1,450,000 4.000%, 12/15/13 Series 2003 A MBIA Insured ........... Aaa+/AAA++ 1,503,955
1,505,000 4.000%, 12/15/14 Series 2003 A MBIA Insured ........... Aaa+/AAA++ 1,550,451
1,570,000 4.000%, 12/15/15 Series 2003 A MBIA Insured ........... Aaa+/AAA++ 1,604,305
1,630,000 4.000%, 12/15/16 Series 2003 A MBIA Insured ........... Aaa+/AAA++ 1,655,510
Rhode Island Health & Education Building Corp.,
Brown University
2,000,000 5.250%, 09/01/17 Series 1993 MBIA Insured ............. AAA++/AAA+++ 2,186,240
1,000,000 5.000%, 09/01/23 Series 1993 MBIA Insured ............. Aaa+/AAA++ 1,048,390
Rhode Island Health & Education Building Corp.,
Bryant College
1,000,000 5.125%, 06/01/19 AMBAC Insured ........................ Aaa+/AAA++ 1,076,770
230,000 5.000%, 12/01/21 AMBAC Insured ........................ Aaa+/AAA++ 243,466
Rhode Island Health & Education Building Corp.,
Higher Educational Facilities
500,000 3.500%, 09/15/13 Series 2003 B MBIA Insured ........... Aaa+/AAA++ 499,240
1,010,000 3.625%, 09/15/14 Series 2003 B MBIA Insured ........... Aaa+/AAA++ 1,007,101
600,000 3.625%, 09/15/14 Series 2003 C MBIA Insured ........... Aaa+/AAA++ 598,278
1,050,000 4.000%, 09/15/15 Series 2003 B MBIA Insured ........... Aaa+/AAA++ 1,074,759
500,000 4.000%, 09/15/15 Series 2003 C MBIA Insured ........... Aaa+/AAA++ 509,925
1,040,000 4.000%, 09/15/16 Series 2003 B MBIA Insured ........... Aaa+/AAA++ 1,057,545
500,000 4.000%, 09/15/16 Series 2003 C MBIA Insured ........... Aaa+/AAA++ 506,585
RATING
FACE MOODY'S, S&P
AMOUNT REVENUE BONDS (CONTINUED) OR FITCH VALUE
- ------------ ------------------------------------------------------- ------------ ------------
HIGHER EDUCATION REVENUE BONDS (CONTINUED)
Rhode Island Health & Education Building Corp.,
Johnson & Wales University
$ 1,360,000 4.000%, 04/01/12 Series 2003 XLCA Insured ............. Aaa+/AAA++ $ 1,413,693
3,210,000 4.000%, 04/01/13 Series 2003 XLCA Insured ............. Aaa+/AAA++ 3,319,236
2,000,000 4.000%, 04/01/14 Series 2003 XLCA Insured ............. Aaa+/AAA++ 2,055,080
465,000 5.500%, 04/01/15 1999 Series A MBIA Insured ........... Aaa+/AAA++ 536,196
900,000 5.500%, 04/01/16 1999 Series A MBIA Insured ........... Aaa+/AAA++ 1,040,625
785,000 5.500%, 04/01/17 1999 Series A MBIA Insured ........... Aaa+/AAA++ 908,755
Rhode Island Health & Education Building Corp.,
Rhode Island School of Design
505,000 4.700%, 06/01/18 Series 2001 MBIA Insured ............. Aaa+/AAA++ 530,376
280,000 4.750%, 06/01/19 Series 2001 MBIA Insured ............. Aaa+/AAA++ 293,835
Rhode Island Health & Education Building Corp.,
Roger Williams University
1,000,000 5.500%, 11/15/11 Series 1996 S AMBAC Insured .......... NR/AAA++ 1,074,240
500,000 5.125%, 11/15/11 AMBAC Insured ........................ Aaa+/AAA++ 544,480
1,000,000 5.125%, 11/15/14 Series 1996 S AMBAC Insured .......... Aaa+/AAA++ 1,098,580
1,000,000 5.000%, 11/15/18 Series 1996 S AMBAC Insured .......... Aaa+/AAA++ 1,062,940
Rhode Island State Health Educational Building Corp.,
University of Rhode Island
1,000,000 3.500%, 09/15/13 Series 2004 A ........................ Aaa+/AAA++ 1,002,200
Rhode Island Health & Education Facilities Authority
Providence College
1,000,000 4.250%, 11/01/14 XLCA Insured ......................... Aaa+/AAA++ 1,047,940
2,500,000 4.375%, 11/01/15 XLCA Insured ......................... Aaa+/AAA++ 2,620,150
2,500,000 4.500%, 11/01/16 XLCA Insured ......................... Aaa+/AAA++ 2,626,200
1,000,000 4.500%, 11/01/17 XLCA Insured ......................... Aaa+/AAA++ 1,039,830
Providence, Rhode Island Public Building School
& Public Facilities Project
1,500,000 5.250%, 12/15/17 AMBAC Insured ........................ Aaa+/AAA++ 1,646,355
1,000,000 5.250%, 12/15/19 AMBAC Insured ........................ Aaa+/AAA++ 1,099,280
------------
Total Higher Education Revenue Bonds ............... 42,542,267
------------
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++ 1,919,916
4,765,000 4.375%, 10/01/21 Series 2002 B MBIA Insured ........... Aaa+/AAA++ 4,813,079
------------
Total Pollution Control Revenue Bonds .............. 6,732,995
------------
RATING
FACE MOODY'S, S&P
AMOUNT REVENUE BONDS (CONTINUED) OR FITCH VALUE
- ------------ ------------------------------------------------------- ------------ ------------
WATER AND SEWER REVENUE BONDS (10.3%)
Bristol County, Rhode Island Water Authority
$ 300,000 5.000%, 12/01/08 Series 1997 A MBIA Insured ........... Aaa+/AAA++ $ 313,896
750,000 5.250%, 07/01/17 Series 1997 A MBIA Insured ........... Aaa+/AAA++ 801,997
1,000,000 3.250%, 12/01/12 Ser. 2004 Refdg. A MBIA Insured ...... Aaa+/AAA++ 994,460
1,000,000 3.500%, 12/01/13 Ser. 2004 Refdg. A MBIA Insured ...... Aaa+/AAA++ 1,002,260
1,000,000 3.500%, 12/01/14 Ser. 2004 Refdg. A MBIA Insured ...... Aaa+/AAA++ 994,180
Kent County, Rhode Island Water Authority
Revenue Bonds
500,000 4.000%, 07/15/12 Series 2002 A MBIA Insured ........... Aaa+/AAA++ 522,140
1,055,000 4.150%, 07/15/14 Series 2002 A MBIA Insured ........... Aaa+/AAA++ 1,095,776
Rhode Island Clean Water Protection
200,000 5.300%, 10/01/07 1993 Ser. 1993 A MBIA Insured ........ Aaa+/AAA++ 215,002
300,000 5.400%, 10/01/09 1993 Ser. 1993 A MBIA Insured ........ Aaa+/AAA++ 334,941
500,000 4.500%, 10/01/11 1993 Ser. 1993 B AMBAC Insured ....... Aaa+/AAA++ 527,225
Rhode Island Clean Water Protection Finance Agency,
1,000,000 5.125%, 10/01/11 Series 1999 C MBIA Insured ........... Aaa+/AAA++ 1,094,100
500,000 4.600%, 10/01/13 Series A AMBAC Insured ............... Aaa+/AAA++ 524,695
500,000 4.750%, 10/01/14 Series A AMBAC Insured ............... Aaa+/AAA++ 531,315
1,250,000 5.400%, 10/01/15 Series A MBIA Insured ................ Aaa+/AAA++ 1,438,038
2,000,000 4.750%, 10/01/18 Series A AMBAC Insured ............... Aaa+/AAA++ 2,079,820
500,000 4.750%, 10/01/20 Series A AMBAC Insured ............... Aaa+/AAA++ 514,710
Rhode Island Water Resources Board Public Drinking
Water Protection Revenue Bond
1,500,000 4.000%, 03/01/14 MBIA Insured ......................... Aaa+/AAA++ 1,541,310
1,000,000 4.250%, 03/01/15 MBIA Insured ......................... Aaa+/AAA++ 1,038,720
------------
Total Water and Sewer Revenue Bonds ................ 15,564,585
------------
OTHER REVENUE BONDS (3.7%)
Rhode Island State Capital Development Loan
1,500,000 5.400%, 08/01/08 MBIA Insured ......................... Aaa+/AAA++ 1,589,205
1,135,000 5.000%, 08/01/11 MBIA Insured ......................... Aaa+/AAA++ 1,222,089
State of Rhode Island Certificates of Participation,
Howard Center Improvements
400,000 5.250%, 10/01/10 MBIA Insured ......................... Aaa+/AAA++ 430,784
200,000 5.375%, 10/01/16 MBIA Insured ......................... Aaa+/AAA++ 215,772
RATING
FACE MOODY'S, S&P
AMOUNT REVENUE BONDS (CONTINUED) OR FITCH VALUE
- ------------ ------------------------------------------------------- ------------ ------------
OTHER REVENUE BONDS (CONTINUED)
State of Rhode Island Depositors Economic
Protection Corp.
$ 135,000 5.500%, 08/01/06 Series 1992 B MBIA Insured ........... Aaa+/AAA++ $ 141,931
300,000 5.800%, 08/01/09 Series 1993 B MBIA Insured ........... Aaa+/AAA++ 341,403
500,000 6.000%, 08/01/17 Series 1992 B MBIA Insured ........... Aaa+/AAA++ 539,405
1,045,000 5.250%, 08/01/21 Series 1993 B MBIA Insured
(Escrowed to Maturity) ............................. Aaa+/AAA++ 1,174,611
------------
Total Other Revenue Bonds .......................... 5,655,200
------------
Total Revenue Bonds .............................. 84,220,437
------------
Total Investments (cost $143,277,532*) .... 99.2% 150,137,949
Other assets less liabilities ............. 0.8 1,235,322
----- ------------
Net Assets ................................ 100.0% $151,373,271
===== ============
* See note 4.
Portfolio Distribution By Quality Rating (unaudited)
Aaa of Moody's or AAA of S&P or Fitch ................. 100%
Rating Services:
+ Moody's Investors Service
++ Standard & Poor's
+++ Fitch
NR Not rated by two of the three 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
See accompanying notes to financial statements.
NARRAGANSETT INSURED TAX-FREE INCOME FUND
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 2004 (unaudited)
ASSETS
Investments at value (cost $143,277,532) ................................................. $150,137,949
Interest receivable ...................................................................... 1,703,479
Receivable for Fund shares sold .......................................................... 723,885
Other assets ............................................................................. 4,273
------------
Total assets ............................................................................. 152,569,586
------------
LIABILITIES
Cash overdraft ........................................................................... 799,116
Payable for Fund shares redeemed ......................................................... 145,753
Dividends payable ........................................................................ 153,294
Distribution and service fees payable .................................................... 57,953
Management fee payable ................................................................... 14,070
Accrued expenses ......................................................................... 26,129
------------
Total liabilities ........................................................................ 1,196,315
------------
NET ASSETS .................................................................................. $151,373,271
------------
Net Assets consist of:
Capital Stock - Authorized 80,000,000 shares, par value $.01 per share ................... $ 140,570
Additional paid-in capital ............................................................... 145,361,724
Net unrealized appreciation on investments (note 4) ...................................... 6,860,417
Accumulated net realized loss on investments ............................................. (787,438)
Distributions in excess of net investment income ......................................... (202,002)
------------
$151,373,271
============
CLASS A
Net Assets ............................................................................... $105,036,123
============
Capital shares outstanding ............................................................... 9,753,881
============
Net asset value and redemption price per share ........................................... $ 10.77
============
Offering price per share (100/96 of $10.77 adjusted to nearest cent) ..................... $ 11.22
============
CLASS C
Net Assets ............................................................................... $ 18,936,767
============
Capital shares outstanding ............................................................... 1,758,696
============
Net asset value and offering price per share ............................................. $ 10.77
============
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) ............................................ $ 10.77*
============
CLASS I
Net Assets ............................................................................... $ 822,308
============
Capital shares outstanding ............................................................... 76,406
============
Net asset value, offering and redemption price per share ................................. $ 10.76
============
CLASS Y
Net Assets ............................................................................... $ 26,578,073
============
Capital shares outstanding ............................................................... 2,468,049
============
Net asset value, offering and redemption price per share ................................. $ 10.77
============
See accompanying notes to financial statements.
NARRAGANSETT INSURED TAX-FREE INCOME FUND
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED DECEMBER 31, 2004
(unaudited)
INVESTMENT INCOME:
Interest income ........................................... $3,206,046
Expenses:
Management fee (note 3) ................................... $ 376,392
Distribution and service fees (note 3) .................... 173,744
Trustees' fees and expenses (note 8) ...................... 49,382
Fund accounting fees ...................................... 41,040
Transfer and shareholder servicing agent fees ............. 40,221
Shareholders' reports and proxy statements ................ 29,597
Legal fees ................................................ 29,086
Custodian fees ............................................ 16,999
Auditing and tax fees ..................................... 12,026
Insurance ................................................. 5,151
Registration fees and dues ................................ 3,259
Chief compliance officer (note 3) ......................... 1,136
Miscellaneous ............................................. 17,320
----------
Total Expenses ............................................ 795,353
Management fee waived (note 3) ............................ (292,599)
Expenses paid indirectly (note 6) ......................... (11,919)
----------
Net expenses .............................................. 490,835
----------
Net investment income ..................................... 2,715,211
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain (loss) from securities transactions ..... 26,183
Change in unrealized appreciation on investments .......... 3,926,335
----------
Net realized and unrealized gain (loss) on investments .... 3,952,518
----------
Net change in net assets resulting from operations ........ $6,667,729
==========
See accompanying notes to financial statements.
NARRAGANSETT INSURED TAX-FREE INCOME FUND
STATEMENTS OF CHANGES IN NET ASSETS
SIX MONTHS ENDED
DECEMBER 31, 2004 YEAR ENDED
(UNAUDITED) JUNE 30, 2004
----------------- -----------------
OPERATIONS:
Net investment income ............................................... $ 2,715,211 $ 5,521,944
Net realized gain (loss) from securities transactions ............... 26,183 (114,233)
Change in unrealized appreciation on investments .................... 3,926,335 (5,849,916)
------------- -------------
Change in net assets from operations ............................. 6,667,729 (442,205)
------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS (NOTE 9):
Class A Shares:
Net investment income ............................................... (1,993,472) (4,139,249)
Class C Shares:
Net investment income ............................................... (276,419) (670,058)
Class I Shares:
Net investment income ............................................... (15,590) (25,311)
Class Y Shares:
Net investment income ............................................... (497,912) (817,674)
------------- -------------
Change in net assets from distributions .......................... (2,783,393) (5,652,292)
------------- -------------
CAPITAL SHARE TRANSACTIONS (NOTE 7):
Proceeds from shares sold ........................................... 12,718,483 30,370,186
Reinvested dividends and distributions .............................. 1,359,375 3,474,377
Cost of shares redeemed ............................................. (8,806,019) (33,567,190)
------------- -------------
Change in net assets from capital share transactions ................ 5,271,839 277,373
------------- -------------
Change in net assets ............................................. 9,156,175 (5,817,124)
NET ASSETS:
Beginning of period ................................................. 142,217,096 148,034,220
------------- -------------
End of period* ...................................................... $ 151,373,271 $ 142,217,096
============= =============
* Includes distributions in excess of net investment income of: ..... $ (202,002) $ (133,820)
============= =============
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 by the pricing service at the mean of bid and asked quotations.
If market quotations or a valuation from the pricing service is not
readily available, the security is valued 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) MULTIPLE CLASS ALLOCATIONS: All income, expenses (other than
class-specific expenses), and realized and unrealized gains or losses 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 Investment Management LLC (the "Manager"), a wholly-owned
subsidiary of Aquila Management Corporation, the Fund's founder and sponsor,
serves as the Manager for the Fund under an Advisory and Administration
Agreement with the Fund. 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 managing relationships
with 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 six months ended December 31, 2004, the Fund incurred management
fees of $376,392 of which $292,599 was voluntarily waived. Such waivers are
voluntary and can be terminated in the future at the Manager's discretion.
However, the Manager has indicated that it intends to continue waiving fees as
necessary in order that the Fund will remain competitive.
Under the October 1, 2004, Compliance Agreement with the Manager, the
Manager is compensated for Chief Compliance Officer related services provided to
enable the Fund to comply with Rule 38a-1 of the Investment Company Act of 1940.
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, 2004, distribution fees on Class A
Shares amounted to $79,122, of which the Distributor retained $1,945.
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, 2004 amounted to $70,812. 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, 2004, amounted to $23,604. The
total of these payments with respect to Class C Shares amounted to $94,416, of
which the Distributor retained $21,580.
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,
2004, these payments were made at the average annual rate of 0.20% of such net
assets amounting to $825 of which $206 related to the Plan and $619 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, 2004, total commissions on sales
of Class A Shares amounted to $125,022, of which the Distributor received
$11,027.
C) OTHER RELATED PARTY TRANSACTIONS:
For the six months ended December 31, 2004, the Fund incurred $28,496 of
legal fees allocable to Hollyer Brady Barrett & 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 Barrett & Hines LLP.
4. PURCHASES AND SALES OF SECURITIES
During the six months ended December 31, 2004, purchases of securities and
proceeds from the sales of securities aggregated $5,506,850 and $3,374,650,
respectively.
At December 31, 2004, the aggregate tax cost for all securities was
$143,245,957. At December 31, 2004, the aggregate gross unrealized appreciation
for all securities in which there is an excess of market value over tax cost
amounted to $6,938,096 and aggregate gross unrealized depreciation for all
securities in which there is an excess of tax cost over market value amounted to
$46,104, for a net unrealized appreciation of $6,891,992.
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, 2004, 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, 2004, 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, 2004 YEAR ENDED
(UNAUDITED) JUNE 30, 2004
----------------------------- -----------------------------
SHARES AMOUNT SHARES AMOUNT
------ ------ ------ ------
CLASS A SHARES:
Proceeds from shares sold .... 455,819 $ 4,882,655 1,501,680 $ 16,143,865
Reinvested distributions ..... 104,838 1,128,576 237,866 2,543,682
Cost of shares redeemed ...... (478,989) (5,144,252) (1,857,743) (19,805,126)
------------ ------------ ------------ ------------
Net change ................ 81,668 866,979 (118,197) (1,117,579)
------------ ------------ ------------ ------------
CLASS C SHARES:
Proceeds from shares sold .... 208,447 2,235,023 526,213 5,626,850
Reinvested distributions ..... 15,068 162,172 37,896 405,643
Cost of shares redeemed ...... (172,276) (1,850,971) (918,377) (9,748,834)
------------ ------------ ------------ ------------
Net change ................ 51,239 546,224 (354,268) (3,716,341)
------------ ------------ ------------ ------------
CLASS I SHARES:
Proceeds from shares sold .... 4,861 52,404 33,611 362,059
Reinvested distributions ..... 346 3,708 655 7,014
Cost of shares redeemed ...... (4,182) (45,000) -- --
------------ ------------ ------------ ------------
Net change ................ 1,025 11,112 34,266 369,073
------------ ------------ ------------ ------------
CLASS Y SHARES:
Proceeds from shares sold .... 517,446 5,548,401 774,201 8,237,412
Reinvested distributions ..... 6,044 64,919 48,312 518,038
Cost of shares redeemed ...... (164,375) (1,765,796) (379,850) (4,013,230)
------------ ------------ ------------ ------------
Net change ................ 359,115 3,847,524 442,663 4,742,220
------------ ------------ ------------ ------------
Total transactions in Fund
shares ....................... 493,047 $ 5,271,839 4,464 $ 277,373
============ ============ ============ ============
8. TRUSTEES' FEES AND EXPENSES
During the previous fiscal year ended June 30, 2004, there were eight
Trustees, one of which is affiliated with the Manager and is not paid any
trustee fees. Each Trustee's fee paid during the year was at the annual rate of
$8,350 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 of Shareholders. For the previous fiscal year ended June 30, 2004, such
reimbursements averaged approximately $5,204 per Trustee.
9. INCOME TAX INFORMATION AND 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 $94,092 and debited additional paid-in capital in the
amount of $94,092 at June 30, 2004. This adjustment had no impact on the Fund's
aggregate net assests at June 30, 2004. Further, a small portion of the
dividends may, under some circumstances, be subject to taxes at ordinary income
rates.
At June 30, 2004, the Fund had a capital loss carryover of $632,152 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. The Fund utilized $67,236 of capital loss carryovers from a prior
year. In addition, the Fund incurred losses from November 1, 2003 through June
30, 2004 in the amount of $181,469 that will be treated as arising on July 1,
2004.
Tax character of distributions:
YEAR ENDED JUNE 30,
2004 2003
----------- -----------
Net tax-exempt income $ 5,557,238 $ 5,052,703
Ordinary income 95,054 97,914
----------- -----------
$ 5,652,292 $ 5,150,617
----------- -----------
As of June 30, 2004, the components of distributable earnings on a tax basis
were as follows:
Accumulated net realized loss $ (813,621)
Unrealized appreciation 2,961,795
-----------
$ 2,148,174
===========
At June 30, 2004, the difference between book basis and tax basis
unrealized appreciation was attributable primarily to the treatment of accretion
of discounts and amortization of premiums.
NARRAGANSETT INSURED TAX-FREE INCOME FUND
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
CLASS A
----------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED JUNE 30,
12/31/04 ------------------------------------------------------------
(UNAUDITED) 2004 2003 2002 2001 2000
----------- -------- -------- -------- -------- --------
Net asset value, beginning of period ............ $ 10.49 $ 10.92 $ 10.47 $ 10.32 $ 9.91 $ 10.16
Income (loss) from investment operations:
Net investment income + ...................... 0.20 0.41 0.42 0.45 0.47 0.49
Net gain (loss) on securities
(both realized and unrealized) ............ 0.28 (0.42) 0.47 0.16 0.44 (0.24)
-------- -------- -------- -------- -------- --------
Total from investment operations ............. 0.48 (0.01) 0.89 0.61 0.91 0.25
-------- -------- -------- -------- -------- --------
Less distributions (note 9):
Dividends from net investment income ......... (0.20) (0.42) (0.44) (0.46) (0.50) (0.50)
-------- -------- -------- -------- -------- --------
Net asset value, end of period .................. $ 10.77 $ 10.49 $ 10.92 $ 10.47 $ 10.32 $ 9.91
======== ======== ======== ======== ======== ========
Total return (not reflecting sales charge) ...... 4.63%* (0.10)% 8.64% 6.07% 9.19% 2.58%
Ratios/supplemental data
Net assets, end of period (in thousands) ..... $105,036 $101,413 $106,887 $ 86,378 $ 67,669 $ 59,899
Ratio of expenses to average net assets ...... 0.59%** 0.53% 0.51% 0.49% 0.41% 0.41%
Ratio of net investment income to
average net assets ........................ 3.67%** 3.82% 3.96% 4.34% 4.65% 4.89%
Portfolio turnover rate ...................... 2.31%* 8.61% 11.74% 6.02% 3.08% 8.66%
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 ...... 0.96%** 0.91% 0.88% 0.88% 0.95% 0.95%
Ratio of net investment income to
average net assets ........................ 3.30%** 3.44% 3.59% 3.95% 4.11% 4.36%
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 ...... 0.57%** 0.52% 0.48% 0.46% 0.40% 0.38%
CLASS C
----------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED JUNE 30,
12/31/04 ------------------------------------------------------------
(UNAUDITED) 2004 2003 2002 2001 2000
----------- -------- -------- -------- -------- --------
Net asset value, beginning of period ............ $ 10.48 $ 10.92 $ 10.47 $ 10.32 $ 9.91 $ 10.16
Income (loss) from investment operations:
Net investment income + ...................... 0.15 0.32 0.33 0.36 0.38 0.40
Net gain (loss) on securities
(both realized and unrealized) ............ 0.30 (0.43) 0.47 0.16 0.43 (0.24)
-------- -------- -------- -------- -------- --------
Total from investment operations ............. 0.45 (0.11) 0.80 0.52 0.81 0.16
-------- -------- -------- -------- -------- --------
Less distributions (note 9):
Dividends from net investment income ......... (0.16) (0.33) (0.35) (0.37) (0.40) (0.41)
-------- -------- -------- -------- -------- --------
Net asset value, end of period .................. $ 10.77 $ 10.48 $ 10.92 $ 10.47 $ 10.32 $ 9.91
======== ======== ======== ======== ======== ========
Total return (not reflecting sales charge) ...... 4.29%* (1.04)% 7.72% 5.16% 8.27% 1.71%
Ratios/supplemental data
Net assets, end of period (in thousands) ..... $ 18,937 $ 17,901 $ 22,506 $ 15,606 $ 7,023 $ 4,681
Ratio of expenses to average net assets ...... 1.44%** 1.38% 1.35% 1.34% 1.26% 1.26%
Ratio of net investment income to
average net assets ........................ 2.82%** 2.98% 3.10% 3.46% 3.78% 4.04%
Portfolio turnover rate ...................... 2.31%* 8.61% 11.74% 6.02% 3.08% 8.66%
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 ...... 1.81%** 1.76% 1.72% 1.72% 1.80% 1.80%
Ratio of net investment income to
average net assets ........................ 2.45%** 2.60% 2.73% 3.07% 3.24% 3.50%
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 ...... 1.42%** 1.37% 1.33% 1.31% 1.25% 1.23%
+ Per share amounts have been calculated using the monthly average shares
method.
* Not annualized
** Annualized
See accompanying notes to financial statements.
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
CLASS I
-----------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED JUNE 30,
12/31/04 -------------------------------------------------------
(UNAUDITED) 2004 2003 2002 2001 2000
----------- ------- ------- ------- ------- -------
Net asset value, beginning of period ............ $ 10.48 $ 10.91 $ 10.47 $ 10.32 $ 9.90 $ 10.15
Income from investment operations:
Net investment income+ ....................... 0.21 0.41 0.42 0.44 0.47 0.48
Net gain (loss) on securities (both
realized and unrealized) .................. 0.27 (0.42) 0.46 0.17 0.43 (0.23)
------- ------- ------- ------- ------- -------
Total from investment operations ............. 0.48 (0.01) 0.88 0.61 0.90 0.25
------- ------- ------- ------- ------- -------
Less distributions (note 9):
Dividends from net investment income ......... (0.20) (0.42) (0.44) (0.46) (0.48) (0.50)
------- ------- ------- ------- ------- -------
Net asset value, end of period .................. $ 10.76 $ 10.48 $ 10.91 $ 10.47 $ 10.32 $ 9.90
======= ======= ======= ======= ======= =======
Total return (not reflecting sales charge) ...... 4.61%* (0.12)% 8.52% 6.05% 9.29% 2.56%
Ratios/supplemental data
Net assets, end of period (in thousands) ..... $ 822 $ 790 $ 449 $ 386 $ 93 $ 75
Ratio of expenses to average net assets ...... 0.58%** 0.53% 0.52% 0.50% 0.41% 0.43%
Ratio of net investment income to
average net assets ........................ 3.67%** 3.82% 3.95% 4.32% 4.65% 4.87%
Portfolio turnover rate ...................... 2.31%* 8.61% 11.74% 6.02% 3.08% 8.66%
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 ...... 0.96%** 0.91% 0.89% 0.89% 0.96% 0.97%
Ratio of net investment income to
average net assets ........................ 3.30%** 3.44% 3.58% 3.93% 4.10% 4.34%
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 ...... 0.57%** 0.52% 0.49% 0.48% 0.41% 0.40%
CLASS Y
-----------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED JUNE 30,
12/31/04 -------------------------------------------------------
(UNAUDITED) 2004 2003 2002 2001 2000
----------- ------- ------- ------- ------- -------
Net asset value, beginning of period ............ $ 10.49 $ 10.92 $ 10.47 $ 10.32 $ 9.91 $ 10.16
Income from investment operations:
Net investment income+ ....................... 0.21 0.43 0.45 0.46 0.48 0.50
Net gain (loss) on securities (both
realized and unrealized) .................. 0.28 (0.43) 0.45 0.17 0.44 (0.24)
------- ------- ------- ------- ------- -------
Total from investment operations ............. 0.49 -- 0.90 0.63 0.92 0.26
------- ------- ------- ------- ------- -------
Less distributions (note 9):
Dividends from net investment income ......... (0.21) (0.43) (0.45) (0.48) (0.51) (0.51)
------- ------- ------- ------- ------- -------
Net asset value, end of period .................. $ 10.77 $ 10.49 $ 10.92 $ 10.47 $ 10.32 $ 9.91
======= ======= ======= ======= ======= =======
Total return (not reflecting sales charge) ...... 4.72%* 0.03% 8.80% 6.22% 9.35% 2.73%
Ratios/supplemental data
Net assets, end of period (in thousands) ..... $26,578 $22,113 $18,193 $11,726 $ 3,332 $ 2,277
Ratio of expenses to average net assets ...... 0.44%** 0.38% 0.36% 0.34% 0.26% 0.26%
Ratio of net investment income to
average net assets ........................ 3.82%** 3.97% 4.10% 4.47% 4.79% 5.07%
Portfolio turnover rate ...................... 2.31%* 8.61% 11.74% 6.02% 3.08% 8.66%
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 ...... 0.81%** 0.76% 0.73% 0.73% 0.80% 0.79%
Ratio of net investment income to
average net assets ........................ 3.45%** 3.59% 3.73% 4.08% 4.24% 4.54%
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 ...... 0.42%** 0.37% 0.33% 0.31% 0.26% 0.23%
+ Per share amounts have been calculated using the monthly average shares
method.
* Not annualized
** Annualized
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
ANALYSIS OF EXPENSES (UNAUDITED)
As a shareholder of the Fund, you may incur two types of costs: (1)
transaction costs, including front-end sales charges with respect to Class A
shares or contingent deferred sales charges ("CDSC") with respect to Class C
shares; and (2) ongoing costs, including management fees; distribution and/or
service (12b-1) fees; and other Fund expenses. The tables below are intended to
help you understand your ongoing costs (in dollars) of investing in the Fund and
to compare these costs with the ongoing costs of investing in other mutual
funds.
The tables below are based on an investment of $1,000 invested on July 1,
2004 and held for the six months ended December 31, 2004.
ACTUAL EXPENSES
This table provides information about actual account values and actual
expenses. You may use the information provided in this table, together with the
amount you invested, to estimate the expenses that you paid over the period. To
estimate the expenses you paid on your account, divide your ending account value
by $1,000 (for example, an $8,600 ending account value divided by $1,000 = 8.6),
then multiply the result by the number under the heading entitled "Expenses Paid
During the Period".
FOR THE SIX MONTHS ENDED DECEMBER 31, 2004
ACTUAL
TOTAL RETURN BEGINNING ENDING EXPENSES
WITHOUT ACCOUNT ACCOUNT PAID DURING
SALES CHARGES(1) VALUE VALUE THE PERIOD(2)
- --------------------------------------------------------------------------------
Class A 4.63% $1,000.00 $1,046.30 $2.94
- --------------------------------------------------------------------------------
Class C 4.29% $1,000.00 $1,042.90 $7.31
- --------------------------------------------------------------------------------
Class I 4.61% $1,000.00 $1,046.10 $2.94
- --------------------------------------------------------------------------------
Class Y 4.72% $1,000.00 $1,047.20 $2.17
- --------------------------------------------------------------------------------
(1) ASSUMES REINVESTMENT OF ALL DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS, IF
ANY, AT NET ASSET VALUE AND DOES NOT REFLECT THE DEDUCTION OF THE
APPLICABLE SALES CHARGES WITH RESPECT TO CLASS A SHARES OR THE APPLICABLE
CONTINGENT DEFERRED SALES CHARGES ("CDSC") WITH RESPECT TO CLASS C SHARES.
TOTAL RETURN IS NOT ANNUALIZED, AS IT MAY NOT BE REPRESENTATIVE OF THE
TOTAL RETURN FOR THE YEAR.
(2) EXPENSES ARE EQUAL TO THE ANNUALIZED EXPENSE RATIO OF 0.57%, 1.42%, 0.57%
AND 0.42% FOR THE FUND'S CLASS A, C, I AND Y SHARES, RESPECTIVELY,
MULTIPLIED BY THE AVERAGE ACCOUNT VALUE OVER THE PERIOD, MULTIPLIED BY
184/365 (TO REFLECT THE ONE-HALF YEAR PERIOD).
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
ANALYSIS OF EXPENSES (UNAUDITED) (CONTINUED)
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The table below provides information about hypothetical account values and
hypothetical expenses based on the actual expense ratio and an assumed rate of
return of 5.00% per year before expenses, which is not the Fund's actual return.
The hypothetical account values and expenses may not be used to estimate the
actual ending account balance or expenses you paid for the period. You may use
the information provided in this table to compare the ongoing costs of investing
in the Fund and other mutual funds. To do so, compare this 5.00% hypothetical
example relating to the Fund with the 5.00% hypothetical examples that appear in
the shareholder reports of other mutual funds.
Please note that the expenses shown in the table below are meant to
highlight your ongoing costs only and do not reflect any transactional costs,
with respect to Class A shares. The example does not reflect the deduction of
contingent deferred sales charges ("CDSC") with respect to Class C shares.
Therefore, the table is useful in comparing ongoing costs only, and will not
help you determine the relative total costs of owning different mutual funds. In
addition, if these transaction costs were included, your costs would have been
higher.
FOR THE SIX MONTHS ENDED DECEMBER 31, 2004
HYPOTHETICAL
ANNUALIZED BEGINNING ENDING EXPENSES
TOTAL ACCOUNT ACCOUNT PAID DURING
RETURN VALUE VALUE THE PERIOD(1)
- --------------------------------------------------------------------------------
Class A 5.00% $1,000.00 $1,022.33 $2.91
- --------------------------------------------------------------------------------
Class C 5.00% $1,000.00 $1,018.05 $7.22
- --------------------------------------------------------------------------------
Class I 5.00% $1,000.00 $1,022.33 $2.91
- --------------------------------------------------------------------------------
Class Y 5.00% $1,000.00 $1,023.09 $2.14
- --------------------------------------------------------------------------------
(1) EXPENSES ARE EQUAL TO THE ANNUALIZED EXPENSE RATIO OF 0.57%, 1.42%, 0.57%
AND 0.42% FOR THE TRUST'S CLASS A, C, I AND Y SHARES, RESPECTIVELY,
MULTIPLIED BY THE AVERAGE ACCOUNT VALUE OVER THE PERIOD, MULTIPLIED BY
184/365 (TO REFLECT THE ONE-HALF YEAR PERIOD).
- --------------------------------------------------------------------------------
SHAREHOLDER MEETING RESULTS (UNAUDITED)
The Annual Meeting of Shareholders of Narragansett Insured Tax-Free Income Fund
(the "Fund") was held on October 14, 2004. 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.
NUMBER OF VOTES
-------------------------------
TRUSTEE FOR WITHHELD
------- --- --------
Lacy B. Herrmann 9,761,096 28,555
Vernon R. Alden 9,760,996 28,655
Paul Y. Clinton 9,760,996 28,655
David A. Duffy 9,761,596 28,055
Willliam J. Nightingale 9,761,596 28,055
John J. Partridge 9,761,596 28,055
Cornelius T. Ryan 9,760,262 29,390
J. William Weeks 9,759,901 29,751
2. To ratify the selection of KPMG LLP as the Fund's independent registered
public accounting firm.
Number of Votes:
FOR AGAINST ABSTAIN
--- ------- -------
9,765,890 7,131 16,630
- --------------------------------------------------------------------------------
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 securities of your Fund
twice a year in the semi-annual and annual reports you receive. Additionally, we
prepare, and have available, portfolio listings at the end of each quarter.
Whenever you may be interested in seeing a listing of your Fund's portfolio
other than in your shareholder reports, please check our website
(www.aquilafunds.com) or call us at 1-800-437-1020.
The Fund additionally files a complete list of its portfolio holdings with
the SEC for the first and third quarters of each fiscal year on Form N-Q. Forms
N-Q are available free of charge on the SEC website at www.sec.gov. You may also
review or, for a fee, copy the forms at the SEC's Public Reference Room in
Washington, DC or by calling 800-SEC-0330.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PROXY VOTING RECORD. The Fund does not invest in equity securities. Accordingly,
there were no matters relating to a portfolio security considered at any
shareholder meeting held during the 12 months ended June 30, 2004 with respect
to which the Fund was entitled to vote. Applicable regulations require us to
inform you that the foregoing proxy voting information is available on the SEC
website at http://www.sec.gov.
- --------------------------------------------------------------------------------
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
David A. Duffy
William J. Nightingale
John J. Partridge
James R. Ramsey
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 REGISTERED PUBLIC ACCOUNTING FIRM
KPMG LLP
757 Third Avenue
New York, New York 10017
Further information is contained in the Prospectus, which must precede or
accompany this report.
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
- ---------------------------------
Chair of the Board
February 28, 2005
By: /s/ Diana P. Herrmann
- ---------------------------------
Vice Chair and President
February 28, 2005
By: /s/ Joseph P. DiMaggio
- -----------------------------------
Chief Financial Officer and Treasurer
February 28, 2005
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
Chair of the Board
February 28, 2005
By: /s/ Diana P. Herrmann
- ---------------------------------
Diana P. Herrmann
Vice Chair and President
February 28, 2005
By: /s/ Joseph P. DiMaggio
- -----------------------------------
Joseph P. DiMaggio
Chief Financial Officer and Treasurer
February 28, 2005