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: 06/30/06
FORM N-CSR
ITEM 1. REPORTS TO STOCKHOLDERS.
ANNUAL
REPORT
JUNE 30, 2006
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 TREE SEAGULLS FLYING ABOVE IT]
[LOGO OF THE AQUILA
GROUP OF FUNDS: ONE OF THE
AN EAGLE'S HEAD] AQUILA(SM) GROUP OF FUNDS
[LOGO OF NARRAGANSETT INSURED TAX-FREE INCOME FUND:
RECTANGLE WITH PROFILE VIEW OF A SAILBOAT ON TOP
OF WAVES AND TREE SEAGULLS FLYING ABOVE IT]
SERVING RHODE ISLAND INVESTORS FOR MORE THAN A DECADE
NARRAGANSETT INSURED TAX-FREE INCOME FUND
"BUILT TO RIDE THE WAVES"
August, 2006
Dear Fellow Shareholder:
As you are no doubt aware, the financial markets have certainly had their
fair share of crests and troughs recently - one day the markets are up, and the
next day, they are down. Riding these waves is not always easy for investors.
The management of Narragansett Insured Tax-Free Income Fund understands
investors' apprehension when it comes to fluctuations with your hard-earned
investment monies. And, this concern is especially pertinent as it relates to
saving for and funding your retirement.
With this very real and inevitable concern in mind, Narragansett Insured
Tax-Free Income Fund has endeavored to structure the Fund to "ride the waves"
with the least upset to investors as possible. How do we go about seeking to
accomplish this?
INVESTMENT QUALITY
No matter what quality rating exists with a security, it will still be
subject to market fluctuations. However, our experience has been that
top-quality ratings do not fluctuate as much as lower quality ratings.
Furthermore, when they do fluctuate, they tend to fluctuate less and return to
their base market price at a quicker rate than lower-grade securities.
This is why 100% of Narragansett Insured Tax-Free Income Fund's investment
securities are AAA rated.
INTERMEDIATE MATURITY
As we have emphasized in the past, long-term bonds tend to produce a
higher return than short-term bonds. However, such longer maturity bonds also
tend to experience a higher degree of volatility in their price.
Narragansett Insured Tax-Free Income Fund balances out longer-term
maturities by having a portion of the Fund's investments in shorter-term
maturities. Through utilizing a blend of maturities - both shorter-term and
longer-term - Narragansett Insured Tax-Free Income Fund attempts to provide a
satisfactory level of return without subjecting the share price to excessive
swings as interest rates increase and decrease. We feel that this focus on
keeping the average of maturities relatively intermediate in term takes the best
that each investment has to offer - gaining stability from the shorter-term
maturities and higher yields from the longer-term maturities.
NOT A PART OF THE ANNUAL REPORT
DIVERSIFICATION OF THE PORTFOLIO
To the maximum extent possible, Narragansett Insured Tax-Free Income Fund
strives to invest in as many projects as possible throughout the state. The
portfolio might be comprised of a school district bond in Providence, a
transportation bond in Newport and a housing bond in Westerly. In this way, we
strive to ensure that no one project, type of project, or area of the State can
have any significant adverse influence upon your investment in the Fund.
TAX-FREE INCOME
No matter what return Narragansett Insured Tax-Free Income Fund provides,
it must be remembered that you would have to earn significantly more from a
taxable investment in order to be equal to what you get to keep from a tax-free
investment.
As an example, you would have to earn 6.8%* on a taxable investment in
order to equal the tax-free level of 4%.
Keep this illustration in mind the next time you examine the yield that
Narragansett Insured Tax-Free Income Fund offers you. You will find that a 3%,
4% or 5% tax-free yield looks considerably more attractive to you when you
consider the implications of taxes.
SUMMARY
The Fund uses this combination of quality, maturity, and diversification
as it seeks to provide you with as high a level of tax-free income as is
consistent with preservation of capital.
As we are sure you are aware, there is no way to take ALL the waves out of
investing. But, you can rest assured that Narragansett Insured Tax-Free Income
Fund continually strives to do its very best to make sure your ride is as smooth
as possible.
Sincerely,
/s/ Diana P. Herrmann /s/ Lacy B. Herrmann
Diana P. Herrmann Lacy B. Herrmann
President Founder and Chairman Emeritus
* For illustration purposes only - assumes a 35% Federal and 9.9% state
tax-rate. This does not represent past or future performance of any investment.
NOT A PART OF THE ANNUAL REPORT
[LOGO OF NARRAGANSETT INSURED TAX-FREE INCOME FUND:
RECTANGLE WITH PROFILE VIEW OF A SAILBOAT ON TOP
OF WAVES AND TREE SEAGULLS FLYING ABOVE IT]
SERVING RHODE ISLAND INVESTORS FOR MORE THAN A DECADE
NARRAGANSETT INSURED TAX-FREE INCOME FUND
ANNUAL REPORT
MANAGEMENT DISCUSSION
Narragansett Insured Tax-Free Income Fund (the "Fund") seeks to provide
the highest level of double tax-free income possible as is consistent with
preservation of investors' capital. The Fund strives to accomplish this by
purchasing only municipal securities rated AAA by nationally renowned credit
rating services. As an extra measure of credit protection to shareholders, all
securities owned by the Fund are insured to provide for the timely payment of
principal and interest when due. A maximum average maturity profile of under 15
years has been and will continue to be maintained for the Fund's portfolio in
order to produce a reasonable level of income return with relatively high
stability for the Fund's share price. At the June 30, 2006 fiscal year end, the
portfolio had an average maturity of 9.3 years.
Equity markets have been in global retreat since early May. After racking
up solid gains through April, the S&P 500 and DJIA are essentially flat year to
date and the NASDAQ is at a loss. International markets are not faring any
better and emerging markets, in particular, have gone into the tank with a
decline of better than 25% from their May 9th high. Ironically, the carnage in
stocks occurred after U.S. companies enjoyed an outstanding first quarter as the
S&P 500 posted earnings gains of nearly 15%.
Equity markets have tumbled in tandem with commodity prices, particularly
gold, energy, and copper, which had spiked up sharply. As commodity prices rose,
the outlook for healthy growth began to be tinged by expectations for higher
inflation. This did not escape the notice of monetary authorities as the Federal
Reserve (the "Fed") and other major central banks began to loudly declare their
inflation fighting bona fides. Inflation fears have since given way to concern
that the Fed will not only quash inflation but growth as well.
After two years, with a total of and 4 1/4% in interest rate hikes, bond
investors are at long last dancing to the tune called by the Fed. Yields on 5
and 10 year Treasury notes have risen by about 60 basis points since year end to
hover at the 5% level and are up by over 1% in the past year. Although the Fed
began tightening short term rates in June 2004, it had little effect until
recently in boosting longer term yields due to strong foreign demand for U.S.
debt.
Fed officials have become increasingly vocal about inflation concerns and
major foreign central banks are also more hawkish. Investors seem to have taken
note and seem to be wondering if the Fed has any plans to ever pause raising
rates. It is probable that Fed tightening should conclude before long. Higher
short term rates by themselves were not sufficient to curtail growth. However,
higher bond yields have not only boosted the cost of mortgage financing but also
have begun to deflate the housing bubble. The result is curbing consumer demand.
With the Fed raising interest rates in 17 consecutive meetings since June
2004, the Fed has established its measured pace in the face of a stronger
economy and higher inflation. The market anticipates another one or two
additional rate hikes. The Federal Funds rate ("Fed Funds") has
MANAGEMENT DISCUSSION OF FUND PERFORMANCE (CONTINUED)
typically averaged 2% above the core Consumer Price Index ("CPI") over the past
forty years while the real rate on the 10-year Treasury has been approximately
3%. While inflation has remained relatively low with the core CPI up about 2.6%
for the year ended June 30, 2006, the rate is expected to moderate to about 2.5%
as productivity gains continue and wage gains remain measured. If this
materializes over time it could result in a Fed Funds rate of 4.5% which would
be in line with the historical relationship.
Given the current Federal income tax rates and the Rhode Island income tax
rate, we believe the Fund presently produces an attractive yield for Rhode
Island residents when compared to taxable fixed-income securities.
Management believes that having available to the Fund a locally-based
investment manager, with extensive knowledge and experience in the Rhode Island
municipal market continues to add considerable value to the portfolio and
provides a distinct benefit to Fund shareholders.
The Fund's investment Sub-Adviser intends to continue to oversee the
portfolio with a strong emphasis on achieving a balance between share price
stability, acceptable double tax-free income return, and the highest standards
of credit quality.
PERFORMANCE REPORT
The following graph illustrates the value of $10,000 invested in the Class
A shares of Narragansett Insured Tax-Free Income Fund for the 10-year period
ended June 30, 2006 as compared with the Lehman Brothers Quality Intermediate
Municipal Bond Index and the Consumer Price Index (a cost of living index). The
performance of each of the other classes is not shown in the graph but is
included in the table below. It should be noted that the Lehman Index does not
include any operating expenses nor sales charges and being nationally oriented,
does not reflect state specific bond market performance.
[Graphic of a line chart with the following information:]
Lehman Brothers
Cost of Fund Class A Shares Fund Class A Shares Quality Intermediate
Living Index no sales charge with sales charge Municipal Bond Index
6/96 $10,000 $10,000 $ 9,600 $10,000
6/97 10,230 10,819 10,390 10,684
6/98 10,402 11,659 11,197 11,426
6/99 10,606 11,816 11,348 11,772
6/00 11,002 12,119 11,638 12,247
6/01 11,359 13,300 12,772 13,329
6/02 11,481 14,092 13,533 14,256
6/03 11,723 15,379 14,769 15,371
6/04 12,106 15,221 14,618 15,424
6/05 12,412 16,322 15,675 16,254
6/06 12,948 16,244 15,600 16,309
AVERAGE ANNUAL TOTAL RETURN
FOR PERIODS ENDED JUNE 30, 2006
------------------------------------------
SINCE
1 YEAR 5 YEARS 10 YEARS INCEPTION
------ ------- -------- ---------
Class A (9/10/92)
With Sales Charge .. -4.54% 3.26% 4.55% 5.04%
Without Sales Charge -0.56 4.11 4.97 5.36
Class C (5/1/96)
With CDSC .......... -2.38 3.22 4.04 4.02
Without CDSC ....... -1.40 3.22 4.04 4.02
Class Y (5/1/96)
No Sales Charge .... -0.40 4.26 5.21 5.17
Class I (11/4/98)
No Sales Charge .... -0.67 4.06 n/a 4.07
Lehman Index ......... 0.34 4.12 5.01 5.24* (Class A)
4.95** (Class C&Y)
4.31+ (Class I)
Total return figures shown for the Fund reflect any change in price and assume
all distributions within the period were invested in additional shares. Returns
for Class A shares are calculated with and without the effect of the initial 4%
maximum sales charge. Returns for Class C shares are calculated with and without
the effect of the 1% contingent deferred sales charge (CDSC), imposed on
redemptions made within the first 12 months after purchase. Class Y and Class I
shares are sold without any sales charge. The rates of return will vary and the
principal value of an investment will fluctuate with market conditions. Shares,
if redeemed, may be worth more or less than their original cost. A portion of
each class's income may be subject to federal and state income taxes. Past
performance is not predictive of future investment results.
* From commencement of operations on 9/10/92.
** From commencement of operations on 5/1/96.
+ From commencement of operations on 11/4/98.
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Trustees and Shareholders of
Narragansett Insured Tax-Free Income Fund:
We have audited the accompanying statement of assets and liabilities,
including the schedule of investments, of Narragansett Insured Tax-Free Income
Fund as of June 30, 2006, and the related statement of operations, changes in
net assets, and the financial highlights for the year then ended. These
financial statements and financial highlights are the responsibility of the
Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audit. The statement
of changes in net assets for the year ended June 30, 2005 and the financial
highlights for each of the years in the four year period ended June 30, 2005
have been audited by other auditors, whose report dated August 12, 2005
expressed an unqualified opinion on such financial statement and financial
highlights.
We conducted our audit in accordance with the standards of the Public
Company Accounting Oversight Board (United States). Those standards require that
we plan and perform the audit to obtain reasonable assurance about whether the
financial statements and financial highlights are free of material misstatement.
The Fund is not required to have, nor were we engaged to perform an audit of the
Fund's internal control over financial reporting. Our audit included
consideration of internal control over financial reporting as a basis for
designing audit procedures that are appropriate in the circumstances, but not
for the purpose of expressing an opinion on the effectiveness of the Fund's
internal control over financial reporting. Accordingly, we express no such
opinion. An audit also includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. Our procedures included
confirmation of securities owned as of June 30, 2006, by correspondence with the
custodian and brokers. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
Narragansett Insured Tax-Free Income Fund as of June 30, 2006, the results of
its operations, the changes in its net assets and the financial highlights for
the year then ended, in conformity with accounting principles generally accepted
in the United States of America.
TAIT, WELLER & BAKER LLP
Philadelphia, Pennsylvania
August 11, 2006
- --------------------------------------------------------------------------------
NARRAGANSETT INSURED TAX-FREE INCOME FUND
SCHEDULE OF INVESTMENTS
JUNE 30, 2006
RATING
PRINCIPAL MOODY'S, S&P
AMOUNT GENERAL OBLIGATION BONDS (45.3%) OR FITCH VALUE
- ------------ ------------------------------------------------------------- ------------ ------------
Coventry, Rhode Island
$ 550,000 5.000%, 11/01/16 AMBAC Insured .............................. Aaa+/AAA+++ $ 573,820
550,000 5.000%, 11/01/17 AMBAC Insured .............................. Aaa+/AAA+++ 570,091
Cranston, Rhode Island
500,000 5.450%, 11/15/11 FGIC Insured ............................... Aaa+/AAA++ 528,700
1,000,000 4.250%, 04/01/18 MBIA Insured ............................... Aaa+/AAA++ 979,130
1,000,000 4.250%, 04/01/19 MBIA Insured ............................... Aaa+/AAA++ 974,010
1,000,000 4.300%, 04/01/20 MBIA Insured ............................... Aaa+/AAA++ 973,610
Cumberland, Rhode Island
250,000 3.750%, 02/01/13 FGIC Insured ............................... Aaa+/AAA++ 244,127
250,000 4.000%, 02/01/14 FGIC Insured ............................... Aaa+/AAA++ 247,100
250,000 4.000%, 02/01/15 FGIC Insured ............................... Aaa+/AAA++ 245,897
500,000 5.000%, 08/01/15 MBIA Insured ............................... Aaa+/AAA++ 521,375
250,000 4.000%, 02/01/16 FGIC Insured ............................... Aaa+/AAA++ 242,635
250,000 4.100%, 02/01/17 FGIC Insured ............................... Aaa+/AAA++ 244,950
250,000 4.150%, 02/01/18 FGIC Insured ............................... Aaa+/AAA++ 244,595
1,255,000 5.000%, 10/01/18 MBIA Insured ............................... Aaa+/AAA++ 1,295,122
1,040,000 5.200%, 10/01/21 MBIA Insured ............................... Aaa+/AAA++ 1,096,358
New Shoreham, Rhode Island
245,000 4.000%, 11/15/15 AMBAC Insured .............................. Aaa+/AAA++ 240,487
255,000 4.250%, 11/15/16 AMBAC Insured .............................. Aaa+/AAA++ 254,143
270,000 4.250%, 11/15/17 AMBAC Insured .............................. Aaa+/AAA++ 267,827
910,000 4.800%, 04/15/18 AMBAC Insured .............................. Aaa+/AAA++ 928,791
285,000 4.500%, 11/15/18 AMBAC Insured .............................. Aaa+/AAA++ 286,710
1,105,000 5.000%, 04/15/22 AMBAC Insured .............................. Aaa+/AAA++ 1,144,681
Newport, Rhode Island
1,000,000 4.500%, 11/01/15 AMBAC Insured .............................. Aaa+/AAA+++ 1,016,160
1,000,000 4.750%, 11/01/18 AMBAC Insured .............................. Aaa+/AAA+++ 1,021,010
800,000 5.000%, 11/01/20 AMBAC Insured .............................. Aaa+/AAA+++ 828,456
North Kingstown, Rhode Island
500,000 3.750%, 10/01/12 FGIC Insured ............................... Aaa+/AAA++ 489,080
North Providence, Rhode Island
400,000 5.700%, 07/01/08 MBIA Insured ............................... Aaa+/AAA++ 415,352
500,000 3.500%, 10/15/13 FSA Insured ................................ Aaa+/AAA++ 474,720
RATING
PRINCIPAL 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++ $ 511,995
500,000 3.650%, 10/15/14 FSA Insured ................................ Aaa+/AAA++ 475,870
500,000 3.750%, 10/15/15 FSA Insured ................................ Aaa+/AAA++ 474,475
Pawtucket, Rhode Island
600,000 4.300%, 09/15/09 AMBAC Insured .............................. Aaa+/AAA+++ 607,830
250,000 4.400%, 09/15/10 AMBAC Insured .............................. Aaa+/AAA+++ 254,778
850,000 3.625%, 04/15/12 AMBAC Insured .............................. Aaa+/AAA+++ 827,552
545,000 3.500%, 07/01/12 FGIC Insured ............................... Aaa+/AAA+++ 524,753
910,000 4.000%, 04/15/14 AMBAC Insured .............................. Aaa+/AAA+++ 899,171
Providence, Rhode Island
700,000 5.500%, 01/15/11 FSA Insured ................................ Aaa+/AAA++ 712,985
1,925,000 5.200%, 04/01/11 AMBAC Insured (pre-refunded) ............... Aaa+/AAA+++ 2,020,230
1,000,000 3.600%, 07/15/13 Series A FSA Insured ....................... Aaa+/AAA++ 960,760
1,000,000 5.000%, 01/15/16 FGIC Insured ............................... Aaa+/AAA++ 1,043,030
1,000,000 5.000%, 01/15/17 FGIC Insured ............................... Aaa+/AAA++ 1,037,160
1,000,000 5.000%, 01/15/18 FGIC Insured ............................... Aaa+/AAA++ 1,033,820
Rhode Island Consolidated Capital Development Loan
1,000,000 5.125%, 07/15/11 FGIC Insured ............................... Aaa+/AAA++ 1,032,870
1,135,000 5.000%, 08/01/11 MBIA Insured ............................... Aaa+/AAA++ 1,161,094
1,000,000 5.000%, 09/01/14 Series A FGIC Insured ...................... Aaa+/AAA++ 1,034,170
1,500,000 5.000%, 09/01/15 FGIC Insured ............................... Aaa+/AAA++ 1,551,255
1,500,000 4.750%, 09/01/17 Series A FGIC Insured ...................... Aaa+/AAA++ 1,535,565
South Kingstown, Rhode Island
500,000 5.500%, 06/15/12 FGIC Insured ............................... Aaa+/AAA+++ 533,060
500,000 3.400%, 06/15/12 AMBAC Insured .............................. Aaa+/NR 477,905
State of Rhode Island
1,000,000 5.250%, 11/01/11 Series C MBIA Insured ...................... Aaa+/AAA++ 1,060,290
2,000,000 5.000%, 08/01/12 Series B MBIA Insured ...................... Aaa+/AAA++ 2,105,680
1,000,000 5.000%, 06/01/14 Series B FGIC Insured ...................... Aaa+/AAA++ 1,038,670
4,000,000 5.000%, 08/01/14 FGIC Insured ............................... Aaa+/AAA++ 4,159,440
2,000,000 5.000%, 08/01/15 Series B FGIC Insured ...................... Aaa+/AAA++ 2,070,460
2,000,000 4.500%, 02/01/17 MBIA Insured ............................... Aaa+/AAA++ 2,015,260
2,000,000 5.250%, 11/01/17 FGIC Insured ............................... Aaa+/AAA++ 2,135,960
2,500,000 5.000%, 09/01/18 MBIA Insured ............................... Aaa+/AAA++ 2,607,125
RATING
PRINCIPAL MOODY'S, S&P
AMOUNT GENERAL OBLIGATION BONDS (CONTINUED) OR FITCH VALUE
- ------------ ------------------------------------------------------------- ------------ ------------
State of Rhode Island (continued)
$ 2,000,000 5.000%, 09/01/19 MBIA Insured ............................... Aaa+/AAA++ $ 2,084,480
1,500,000 5.000%, 09/01/20 MBIA Insured ............................... Aaa+/AAA++ 1,559,820
Warwick, Rhode Island
665,000 4.250%, 07/15/14 AMBAC Insured .............................. Aaa+/AAA++ 667,447
195,000 5.600%, 08/01/14 FSA Insured ................................ Aaa+/AAA++ 199,150
700,000 4.375%, 07/15/15 AMBAC Insured .............................. Aaa+/AAA++ 704,970
770,000 4.600%, 07/15/17 AMBAC Insured .............................. Aaa+/AAA++ 780,503
1,000,000 5.000%, 03/01/18 FGIC Insured ............................... Aaa+/AAA++ 1,032,060
905,000 4.250%, 01/15/18 XLCA Insured ............................... Aaa+/AAA++ 890,411
810,000 4.700%, 07/15/18 AMBAC Insured .............................. Aaa+/AAA++ 822,304
1,000,000 5.000%, 01/15/19 FGIC Insured ............................... Aaa+/AAA++ 1,041,770
855,000 4.750%, 07/15/19 AMBAC Insured .............................. Aaa+/AAA++ 866,158
500,000 5.000%, 01/15/20 FGIC Insured ............................... Aaa+/AAA++ 520,045
West Warwick, Rhode Island
500,000 4.875%, 03/01/16 AMBAC Insured .............................. Aaa+/AAA+++ 514,515
670,000 5.000%, 03/01/17 AMBAC Insured .............................. Aaa+/AAA+++ 695,319
700,000 5.050%, 03/01/18 AMBAC Insured .............................. Aaa+/AAA+++ 729,981
735,000 5.100%, 03/01/19 AMBAC Insured .............................. Aaa+/AAA+++ 766,811
Westerly, Rhode Island
900,000 4.000%, 07/01/17 MBIA Insured ............................... Aaa+/AAA++ 872,559
900,000 4.000%, 07/01/18 MBIA Insured ............................... Aaa+/AAA++ 866,781
Woonsocket, Rhode Island
655,000 4.450%, 12/15/12 FGIC Insured ............................... Aaa+/AAA+++ 665,270
685,000 4.550%, 12/15/13 FGIC Insured ............................... Aaa+/AAA+++ 697,385
------------
Total General Obligation Bonds 69,229,889
------------
REVENUE BONDS (55.1%)
DEVELOPMENT REVENUE BONDS (9.0%)
Providence Rhode Island Redevelopment Agency
Revenue Refunding Public Safety Building Project
1,000,000 3.700%, 04/01/13 Series 2005 A AMBAC Insured ................ Aaa+/AAA++ 966,460
Rhode Island Convention Center Authority
Revenue Refunding
925,000 5.000%, 05/15/10 Series 1993 B MBIA Insured ................. Aaa+/AAA++ 961,075
RATING
PRINCIPAL MOODY'S, S&P
AMOUNT REVENUE BONDS (CONTINUED) OR FITCH VALUE
- ------------ ------------------------------------------------------------- ------------ ------------
Rhode Island Public Building Authority State
Public Projects
$ 1,000,000 5.250%, 02/01/09 Series 1998 A AMBAC Insured ................ Aaa+/AAA++ $ 1,031,290
Rhode Island State Economic Development Corp.,
Airport Revenue
1,000,000 5.000%, 07/01/18 Series B FSA Insured ....................... Aaa+/AAA++ 1,026,800
Rhode Island State Economic Development Corp.
Airport Revenue Refunding
1,670,000 5.000%, 07/01/13 Series C MBIA Insured ...................... Aaa+/AAA++ 1,752,214
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++ 1,948,800
1,000,000 4.000%, 06/15/15 Series A AMBAC Insured ..................... Aaa+/AAA++ 982,270
1,000,000 4.000%, 06/15/18 Series 2006 A AMBAC Insured ................ Aaa+/AAA++ 952,290
Rhode Island State Economic Development
Corp. (Rhode Island Airport Corp. Intermodal
Facility Project)
1,000,000 4.250%, 07/01/17 CIFG Insured ............................... Aaa+/AAA++ 981,910
Rhode Island State Economic Development Corp.,
University of Rhode Island
750,000 4.800%, 11/01/11 Series 1999 FSA Insured .................... Aaa+/NR 770,850
750,000 4.900%, 11/01/12 Series 1999 FSA Insured .................... Aaa+/NR 773,490
750,000 4.900%, 11/01/13 Series 1999 FSA Insured .................... Aaa+/NR 773,490
750,000 5.000%, 11/01/14 Series 1999 FSA Insured .................... Aaa+/NR 778,538
------------
Total Development Revenue Bonds 13,699,477
------------
HIGHER EDUCATION REVENUE BONDS (30.7%)
Providence, Rhode Island Public Building
Authority, School Projects
500,000 5.000%, 12/15/09 Series 1999 A AMBAC Insured ................ Aaa+/AAA++ 518,030
500,000 5.000%, 12/15/09 Series 1999 A AMBAC Insured ................ Aaa+/AAA++ 513,615
500,000 5.500%, 12/15/15 Series 1996 B MBIA Insured ................. Aaa+/AAA++ 513,615
1,000,000 5.250%, 12/15/14 Series 1998 FSA Insured .................... Aaa+/AAA++ 1,048,850
1,395,000 4.000%, 12/15/12 Series 2003 A MBIA Insured ................. Aaa+/AAA++ 1,391,833
RATING
PRINCIPAL MOODY'S, S&P
AMOUNT REVENUE BONDS (CONTINUED) OR FITCH VALUE
- ------------ ------------------------------------------------------------- ------------ ------------
Providence, Rhode Island Public Building
Authority, School Projects (continued)
$ 1,450,000 4.000%, 12/15/13 Series 2003 A MBIA Insured ................. Aaa+/AAA++ $ 1,440,749
1,505,000 4.000%, 12/15/14 Series 2003 A MBIA Insured ................. Aaa+/AAA++ 1,485,871
1,570,000 4.000%, 12/15/15 Series 2003 A MBIA Insured ................. Aaa+/AAA++ 1,540,892
1,630,000 4.000%, 12/15/16 Series 2003 A MBIA Insured ................. Aaa+/AAA++ 1,577,367
Providence, Rhode Island Public Building School
& Public Facilities Project
1,500,000 5.250%, 12/15/17 AMBAC Insured .............................. Aaa+/AAA++ 1,581,855
1,000,000 5.250%, 12/15/19 AMBAC Insured .............................. Aaa+/AAA++ 1,052,280
Rhode Island Health & Education Building Corp.,
Brown University
2,000,000 5.250%, 09/01/17 Series 1993 MBIA Insured ................... Aaa++/AAA+++ 2,101,960
1,000,000 5.000%, 09/01/23 Series 1993 MBIA Insured ................... Aaa+/AAA++ 1,018,440
Rhode Island Health & Education Building Corp.,
Bryant College
1,000,000 5.125%, 06/01/19 AMBAC Insured .............................. Aaa+/AAA++ 1,040,450
230,000 5.000%, 12/01/21 AMBAC Insured .............................. Aaa+/AAA++ 237,121
Rhode Island Health & Education Building Corp.,
Higher Educational Facilities
500,000 3.500%, 09/15/13 Series 2003 B MBIA Insured ................. Aaa+/AAA++ 473,805
1,010,000 3.625%, 09/15/14 Series 2003 B MBIA Insured ................. Aaa+/AAA++ 951,026
1,050,000 4.000%, 09/15/15 Series 2003 B MBIA Insured ................. Aaa+/AAA++ 1,014,836
1,040,000 4.000%, 09/15/16 Series 2003 B MBIA Insured ................. Aaa+/AAA++ 996,746
600,000 3.625%, 09/15/14 Series 2003 C MBIA Insured ................. Aaa+/AAA++ 564,966
500,000 4.000%, 09/15/15 Series 2003 C MBIA Insured ................. Aaa+/AAA++ 483,255
500,000 4.000%, 09/15/16 Series 2003 C MBIA Insured ................. Aaa+/AAA++ 479,205
Rhode Island Health & Education Building Corp.,
Johnson & Wales University
465,000 5.500%, 04/01/15 Series 1999 A MBIA Insured ................. Aaa+/AAA++ 508,082
900,000 5.500%, 04/01/16 Series 1999 A MBIA Insured ................. Aaa+/AAA++ 986,616
785,000 5.500%, 04/01/17 Series 1999 A MBIA Insured ................. Aaa+/AAA++ 863,139
1,360,000 4.000%, 04/01/12 Series 2003 XLCA Insured ................... Aaa+/AAA++ 1,355,798
3,210,000 4.000%, 04/01/13 Series 2003 XLCA Insured ................... Aaa+/AAA++ 3,185,508
2,000,000 4.000%, 04/01/14 Series 2003 XLCA Insured ................... Aaa+/AAA++ 1,969,820
RATING
PRINCIPAL MOODY'S, S&P
AMOUNT REVENUE BONDS (CONTINUED) OR FITCH VALUE
- ------------ ------------------------------------------------------------- ------------ ------------
Rhode Island Health & Education Building Corp.,
Rhode Island School of Design
$ 505,000 4.700%, 06/01/18 Series 2001 MBIA Insured ................... Aaa+/AAA++ $ 513,615
280,000 4.750%, 06/01/19 Series 2001 MBIA Insured ................... Aaa+/AAA++ 284,934
Rhode Island Health & Education Building Corp.,
Roger Williams University
1,000,000 5.500%, 11/15/11 Series 1996 S AMBAC Insured ................ NR/AAA++ 1,025,820
500,000 5.125%, 11/15/11 AMBAC Insured .............................. Aaa+/AAA++ 523,010
1,000,000 5.125%, 11/15/14 Series 1996 S AMBAC Insured ................ Aaa+/AAA++ 1,044,510
1,000,000 5.000%, 11/15/18 Series 1996 S AMBAC Insured ................ Aaa+/AAA++ 1,033,510
Rhode Island Health & Educational Building Corp.,
University of Rhode Island
1,000,000 3.500%, 09/15/13 Series 2004 A AMBAC Insured ................ Aaa+/AAA++ 954,530
1,200,000 4.000%, 09/15/11 Series 2005 G AMBAC Insured ................ Aaa+/AAA++ 1,202,736
1,200,000 4.125%, 09/15/12 Series 2005 G AMBAC Insured ................ Aaa+/AAA++ 1,207,440
1,200,000 4.125%, 09/15/13 Series 2005 G AMBAC Insured ................ Aaa+/AAA++ 1,203,276
Rhode Island Health & Education Facilities
Authority Providence College
1,000,000 4.250%, 11/01/14 XLCA Insured ............................... Aaa+/AAA++ 1,001,200
2,500,000 4.375%, 11/01/15 XLCA Insured ............................... Aaa+/AAA++ 2,497,025
2,500,000 4.500%, 11/01/16 XLCA Insured ............................... Aaa+/AAA++ 2,523,150
1,000,000 4.500%, 11/01/17 XLCA Insured ............................... Aaa+/AAA++ 1,003,660
------------
Total Higher Education Revenue Bonds 46,914,146
------------
HOUSING REVENUE BONDS (0.6%)
Rhode Island Housing & Meeting Finance Corp.
Homeowner Opportunity
1,000,000 3.750%, 10/01/13 Series 50-A MBIA Insured ................... Aaa+/AAA+++ 975,500
------------
POLLUTION CONTROL REVENUE BONDS (4.3%)
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++ 1,857,240
4,765,000 4.375%, 10/01/21 Series 2002 B MBIA Insured ................. Aaa+/AAA++ 4,678,896
------------
Total Pollution Control Revenue Bonds 6,536,136
------------
RATING
PRINCIPAL MOODY'S, S&P
AMOUNT REVENUE BONDS (CONTINUED) OR FITCH VALUE
- ------------ ------------------------------------------------------------- ------------ ------------
WATER AND SEWER REVENUE BONDS (8.8%)
Bristol County, Rhode Island Water Authority
$ 750,000 5.250%, 07/01/17 Series 1997 A MBIA Insured ................. Aaa+/AAA++ $ 767,580
1,000,000 3.500%, 12/01/13 Series 2004 Refunding
A MBIA Insured ........................................... Aaa+/AAA++ 947,890
1,000,000 3.500%, 12/01/14 Series 2004 Refunding
A MBIA Insured ........................................... Aaa+/AAA++ 935,630
Kent County, Rhode Island Water Authority
500,000 4.000%, 07/15/12 Series 2002 A MBIA Insured ................. Aaa+/AAA++ 499,730
1,055,000 4.150%, 07/15/14 Series 2002 A MBIA Insured ................. Aaa+/AAA++ 1,052,848
Rhode Island Clean Water Protection
Finance Agency
300,000 5.400%, 10/01/09 1993 Series A MBIA Insured ................. Aaa+/AAA++ 313,818
500,000 4.500%, 10/01/11 1993 Series B AMBAC Insured ................ Aaa+/AAA++ 506,125
1,000,000 5.125%, 10/01/11 Series 1999 C MBIA Insured ................. Aaa+/AAA++ 1,036,540
500,000 4.600%, 10/01/13 Series A AMBAC Insured ..................... Aaa+/AAA++ 507,475
500,000 4.750%, 10/01/14 Series A AMBAC Insured ..................... Aaa+/AAA++ 512,315
1,250,000 5.400%, 10/01/15 Series A MBIA Insured ...................... Aaa+/AAA++ 1,342,863
2,000,000 4.750%, 10/01/18 Series A AMBAC Insured ..................... Aaa+/AAA++ 2,030,420
500,000 4.750%, 10/01/20 Series A AMBAC Insured ..................... Aaa+/AAA++ 504,590
Rhode Island Water Resources Board Public
Drinking Water Protection
1,500,000 4.000%, 03/01/14 MBIA Insured ............................... Aaa+/AAA++ 1,482,405
1,000,000 4.250%, 03/01/15 MBIA Insured ............................... Aaa+/AAA++ 1,003,450
------------
Total Water and Sewer Revenue Bonds 13,443,679
------------
OTHER REVENUE BONDS (1.7%)
State of Rhode Island Certificates of Participation,
Howard Center Improvements
400,000 5.250%, 10/01/10 MBIA Insured ............................... Aaa+/AAA++ 410,636
200,000 5.375%, 10/01/16 MBIA Insured ............................... Aaa+/AAA++ 205,616
RATING
PRINCIPAL MOODY'S, S&P
AMOUNT REVENUE BONDS (CONTINUED) OR FITCH VALUE
- ------------ ------------------------------------------------------------- ------------ ------------
OTHER REVENUE BONDS (CONTINUED)
State of Rhode Island Depositors Economic
Protection Corp.
$ 300,000 5.800%, 08/01/09 Series 1993 B MBIA Insured ................. Aaa+/AAA++ $ 316,419
500,000 6.000%, 08/01/17 Series 1992 B MBIA Insured ................. Aaa+/AAA++ 527,855
1,045,000 5.250%, 08/01/21 Series 1993 B MBIA Insured ETM
(pre-refunded) ........................................... Aaa+/AAA++ 1,101,263
------------
Total Other Revenue Bonds ................................ 2,561,789
------------
Total Revenue Bonds ................................... 84,130,727
------------
Total Investments (cost $152,601,332*) ........ 100.4% 153,360,616
Other assets less liabilities ................. (0.4) (537,044)
====== ============
Net Assets .................................... 100.0% $152,823,572
====== ============
* See note 4.
Rating Services:
+ Moody's Investors Service
++ Standard & Poor's
+++ Fitch
NR Not rated by two of the three rating services
PERCENT OF
PORTFOLIO DISTRIBUTION BY QUALITY RATING (UNAUDITED) PORTFOLIO
---------------------------------------------------- ----------
Aaa of Moody's or AAA of S&P or Fitch ........................ 100%
PORTFOLIO ABBREVIATIONS:
------------------------
AMBAC - American Municipal Bond Assurance Corp.
ETM - Escrowed to Maturity
CIFG - CIFG Assurance North America, Inc.
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
JUNE 30, 2006
ASSETS
Investments at value (cost $152,601,332) ......................................... $ 153,360,616
Interest receivable .............................................................. 1,777,253
Receivable for Fund shares sold .................................................. 295,262
Other assets ..................................................................... 18,468
-------------
Total assets ..................................................................... 155,451,599
-------------
LIABILITIES
Cash overdraft ..................................................................... 238,814
Payable for investment securities purchased ........................................ 1,796,552
Payable for Fund shares redeemed ................................................... 347,949
Dividends payable .................................................................. 145,799
Distribution and service fees payable .............................................. 54,548
Management fee payable ............................................................. 15,186
Accrued expenses ................................................................... 29,179
-------------
Total liabilities .................................................................. 2,628,027
-------------
NET ASSETS ............................................................................ $ 152,823,572
=============
Net Assets consist of:
Capital Stock - Authorized 80,000,000 shares, par value $0.01 per share ............ $ 147,807
Additional paid-in capital ......................................................... 152,835,301
Net unrealized appreciation on investments (note 4) ................................ 759,284
Accumulated net realized loss on investments ....................................... (809,785)
Distributions in excess of net investment income ................................... (109,035)
-------------
$ 152,823,572
=============
CLASS A
Net Assets ......................................................................... $ 103,221,630
=============
Capital shares outstanding ......................................................... 9,983,261
=============
Net asset value and redemption price per share ..................................... $ 10.34
=============
Offering price per share (100/96 of $10.34 adjusted to nearest cent) ............... $ 10.77
=============
CLASS C
Net Assets ......................................................................... $ 16,602,158
=============
Capital shares outstanding ......................................................... 1,605,962
=============
Net asset value and offering price per share ....................................... $ 10.34
=============
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) ...................................... $ 10.34*
=============
CLASS I
Net Assets ......................................................................... $ 760,860
=============
Capital shares outstanding ......................................................... 73,595
=============
Net asset value, offering and redemption price per share ........................... $ 10.34
=============
CLASS Y
Net Assets ......................................................................... $ 32,238,924
=============
Capital shares outstanding ......................................................... 3,117,899
=============
Net asset value, offering and redemption price per share ........................... $ 10.34
=============
See accompanying notes to financial statements.
NARRAGANSETT INSURED TAX-FREE INCOME FUND
STATEMENT OF OPERATIONS
YEAR ended JUNE 30, 2006
INVESTMENT INCOME:
Interest income ............................................. $ 6,601,924
Expenses:
Management fee (note 3) ..................................... $ 771,250
Distribution and service fees (note 3) ...................... 338,897
Trustees' fees and expenses (note 8) ........................ 182,991
Transfer and shareholder servicing agent fees ............... 121,971
Legal fees (note 3) ......................................... 69,607
Fund accounting fees ........................................ 56,409
Custodian fees .............................................. 51,735
Shareholders' reports and proxy statements .................. 39,993
Auditing and tax fees ....................................... 17,000
Registration fees and dues .................................. 12,036
Insurance ................................................... 9,759
Chief compliance officer (note 3) ........................... 4,544
Miscellaneous ............................................... 46,523
-------------
Total expenses .............................................. 1,722,715
Management fee waived (note 3) .............................. (560,437)
Expenses paid indirectly (note 6) ........................... (23,986)
-------------
Net expenses ................................................ 1,138,292
-------------
Net investment income ....................................... 5,463,632
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain (loss) from securities transactions ....... (66,138)
Change in unrealized appreciation on investments ............ (6,471,758)
-------------
Net realized and unrealized gain (loss) on investments ...... (6,537,896)
-------------
Net change in net assets resulting from operations .......... $ (1,074,264)
=============
See accompanying notes to financial statements.
NARRAGANSETT INSURED TAX-FREE INCOME FUND
STATEMENTS OF CHANGES IN NET ASSETS
YEAR ENDED YEAR ENDED
JUNE 30, 2006 JUNE 30, 2005
------------- -------------
OPERATIONS:
Net investment income ......................................... $ 5,463,632 $ 5,440,126
Net realized gain (loss) from securities transactions ......... (66,138) 69,974
Change in unrealized appreciation on investments .............. (6,471,758) 4,296,960
------------- -------------
Change in net assets from operations ....................... (1,074,264) 9,807,060
------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS (NOTE 9):
Class A Shares:
Net investment income ......................................... (3,880,873) (3,966,200)
Class C Shares:
Net investment income ......................................... (512,514) (552,548)
Class I Shares:
Net investment income ......................................... (44,086) (32,733)
Class Y Shares:
Net investment income ......................................... (1,170,418) (1,026,562)
------------- -------------
Change in net assets from distributions .................... (5,607,891) (5,578,043)
------------- -------------
CAPITAL SHARE TRANSACTIONS (NOTE 7):
Proceeds from shares sold ..................................... 28,611,766 23,466,693
Reinvested dividends and distributions ........................ 2,612,391 2,641,028
Cost of shares redeemed ....................................... (25,755,083) (18,517,181)
------------- -------------
Change in net assets from capital share transactions .......... 5,469,074 7,590,540
------------- -------------
Change in net assets ....................................... (1,213,081) 11,819,557
NET ASSETS:
Beginning of period ........................................... 154,036,653 142,217,096
------------- -------------
End of period* ................................................ $ 152,823,572 $ 154,036,653
============= =============
* Includes distributions in excess of net investment income of: $ (109,035) $ (140,733)
============= =============
See accompanying notes to financial statements.
NARRAGANSETT INSURED TAX-FREE INCOME FUND
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2006
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 in good
faith 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.
f) NEW ACCOUNTING PRONOUNCEMENT. On July 13, 2006, the Financial Accounting
Standards Board ("FASB") released FASB Interpretation No. 48 "Accounting
for Uncertainty in Income Taxes" ("FIN 48"). FIN 48 provides guidance for
how uncertain tax positions should be recognized, measured, presented and
disclosed in the financial statements. FIN 48 requires the evaluation of
tax positions taken or expected to be taken in the course of preparing the
Fund's tax returns to determine whether the tax positions are
"more-likely-than-not" of being sustained by the applicable tax authority.
Tax positions not deemed to meet the more-likely-than-not threshold would
be recorded as a tax benefit or expense in the current year. Adoption of
FIN 48 is required for fiscal years beginning after December 15, 2006 and
is to be applied to all open tax years as of the effective date.
Management believes that the adoption of FIN 48 will have no impact on the
financial statements of the Fund.
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, auditor 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 average 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 June 30, 2006, the Fund incurred management fees of
$771,250 of which $560,437 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 a 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 year ended June 30, 2006, distribution fees on Class A Shares
amounted to $157,038, of which the Distributor retained $3,927.
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
year ended June 30, 2006 amounted to $134,541. 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 year ended June 30, 2006, amounted to $44,847. The total of these payments
with respect to Class C Shares amounted to $179,388, of which the Distributor
retained $44,976.
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
0.20%) 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 year ended June 30, 2006,
these payments were made at the average annual rate of 0.20% of such net assets
amounting to $4,323 of which $2,470 related to the Plan and $1,853 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 year ended June
30, 2006, total commissions on sales of Class A Shares amounted to $196,711, of
which the Distributor received $18,128.
c) OTHER RELATED PARTY TRANSACTIONS:
For the year ended June 30, 2006, the Fund incurred $68,502 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 at that firm.
4. PURCHASES AND SALES OF SECURITIES
During the year ended June 30, 2006, purchases of securities and proceeds
from the sales of securities aggregated $19,524,302 and $11,114,553,
respectively.
At June 30, 2006, the aggregate tax cost for all securities was
$152,564,568. At June 30, 2006, the aggregate gross unrealized appreciation for
all securities in which there is an excess of market value over tax cost
amounted to $2,556,956 and aggregate gross unrealized depreciation for all
securities in which there is an excess of tax cost over market value amounted to
$1,760,908, for a net unrealized appreciation of $796,048.
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 June 30, 2006, 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 June 30,
2006, 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, its cash balances in income-producing assets rather than
leave cash uninvested.
7. CAPITAL SHARE TRANSACTIONS
Transactions in Capital Shares of the Fund were as follows:
Year Ended Year Ended
June 30, 2006 June 30, 2005
---------------------------------- ----------------------------------
Shares Amount Shares Amount
------ ------ ------ ------
CLASS A SHARES:
Proceeds from shares sold ................ 1,156,856 $ 12,253,231 931,519 $ 9,994,878
Reinvested distributions ................. 204,800 2,162,577 202,028 2,171,443
Cost of shares redeemed .................. (1,191,694) (12,588,656) (992,461) (10,653,817)
------------ ------------ ------------ ------------
Net change ............................. 169,962 1,827,152 141,086 1,512,504
------------ ------------ ------------ ------------
CLASS C SHARES:
Proceeds from shares sold ................ 320,132 3,381,363 401,962 4,311,527
Reinvested distributions ................. 23,511 248,414 28,360 304,774
Cost of shares redeemed .................. (501,280) (5,288,954) (374,180) (4,019,022)
------------ ------------ ------------ ------------
Net change ............................. (157,637) (1,659,177) 56,142 597,279
------------ ------------ ------------ ------------
CLASS I SHARES:
Proceeds from shares sold ................ 42,703 454,728 31,300 335,079
Reinvested distributions ................. 2,462 25,917 954 10,249
Cost of shares redeemed .................. (73,331) (768,550) (5,874) (63,159)
------------ ------------ ------------ ------------
Net change ............................. (28,166) (287,905) 26,380 282,169
------------ ------------ ------------ ------------
CLASS Y SHARES:
Proceeds from shares sold ................ 1,182,830 12,522,444 822,843 8,825,209
Reinvested distributions ................. 16,650 175,483 14,389 154,562
Cost of shares redeemed .................. (675,731) (7,108,923) (352,016) (3,781,183)
------------ ------------ ------------ ------------
Net change ............................. 523,749 5,589,004 485,216 5,198,588
------------ ------------ ------------ ------------
Total transactions in Fund
shares ................................... 507,908 $ 5,469,074 708,824 $ 7,590,540
============ ============ ============ ============
8. TRUSTEES' FEES AND EXPENSES
At June 30, 2006 there were 8 Trustees, one of which is affiliated with
the Manager and is not paid any fees. The total amount of Trustees' service and
attendance fees paid during the year ended June 30, 2006 was $132,775, to cover
carrying out their responsibilities and attendance at regularly scheduled
quarterly Board Meetings and meetings of the Independent Trustees held prior to
each quarterly Board Meeting. When additional or special meetings are held, the
meeting fees are paid to those Trustees in attendance. Trustees are reimbursed
for their expenses such as travel, accommodations, and meals incurred in
connection with attendance at Board Meetings and at the
Annual Meeting of Shareholders. For the year ended June 30, 2006, such
meeting-related expenses amounted to $50,216.
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 $131,004 and debited additional paid-in capital in the
amount of $131,004 at June 30, 2006. This adjustment had no impact on the Fund's
aggregate net assests at June 30, 2006. Further, a small portion of the
dividends may, under some circumstances, be subject to taxes at ordinary income
rates.
At June 30, 2006, the Fund had a capital loss carryover of $704,487 of
which $592,992 expires on June 30, 2009 and $111,495 which expires on June 30,
2013. 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. As of June 30, 2006
there were post-October capital loss deferrals of $105,298 which will be
recognized in the following year.
Tax character of distributions:
Year Ended June 30,
2006 2005
---------- ----------
Net tax-exempt income $5,431,934 $5,444,976
Ordinary income 175,957 133,067
---------- ----------
$5,607,891 $5,578,043
---------- ----------
As of June 30, 2006, the components of distributable earnings on a tax
basis were as follows:
Accumulated net realized loss $(704,487)
Unrealized appreciation 796,048
Post-October capital loss deferrals (105,298)
---------
$ (13,737)
=========
At June 30, 2006, 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
----------------------------------------------------------------------------
Year Ended June 30,
----------------------------------------------------------------------------
2006 2005 2004 2003 2002
-------- -------- -------- -------- --------
Net asset value, beginning of period ..... $ 10.79 $ 10.49 $ 10.92 $ 10.47 $ 10.32
-------- -------- -------- -------- --------
Income (loss) from investment operations:
Net investment income+ ................. 0.38 0.40 0.41 0.42 0.45
Net gain (loss) on securities
(both realized and unrealized) ....... (0.44) 0.31 (0.42) 0.47 0.16
-------- -------- -------- -------- --------
Total from investment operations ....... (0.06) 0.71 (0.01) 0.89 0.61
-------- -------- -------- -------- --------
Less distributions (note 9):
Dividends from net investment income ... (0.39) (0.41) (0.42) (0.44) (0.46)
-------- -------- -------- -------- --------
Net asset value, end of period ........... $ 10.34 $ 10.79 $ 10.49 $ 10.92 $ 10.47
======== ======== ======== ======== ========
Total return (not reflecting sales charge) (0.56)% 6.81% (0.10)% 8.64% 6.07%
Ratios/supplemental data
Net assets, end of period (in thousands) $103,222 $105,910 $101,413 $106,887 $ 86,378
Ratio of expenses to average net assets 0.67% 0.58% 0.53% 0.51% 0.49%
Ratio of net investment income to
average net assets ................... 3.61% 3.68% 3.82% 3.96% 4.34%
Portfolio turnover rate ................ 7.25% 2.20% 8.61% 11.74% 6.02%
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 (note 3):
Ratio of expenses to average net assets 1.03% 0.96% 0.91% 0.88% 0.88%
Ratio of net investment income to
average net assets ................... 3.25% 3.31% 3.44% 3.59% 3.95%
The expense ratios after giving effect to the waiver, reimbursement and expense offset for uninvested cash balances were
(note 3):
Ratio of expenses to average net assets 0.67% 0.57% 0.52% 0.48% 0.46%
Class C
------------------------------------------------------------------------
Year Ended June 30,
------------------------------------------------------------------------
2006 2005 2004 2003 2002
-------- -------- -------- -------- --------
Net asset value, beginning of period ..... $ 10.79 $ 10.48 $ 10.92 $ 10.47 $ 10.32
-------- -------- -------- -------- --------
Income (loss) from investment operations:
Net investment income+ ................. 0.29 0.31 0.32 0.33 0.36
Net gain (loss) on securities
(both realized and unrealized) ....... (0.44) 0.31 (0.43) 0.47 0.16
-------- -------- -------- -------- --------
Total from investment operations ....... (0.15) 0.62 (0.11) 0.80 0.52
-------- -------- -------- -------- --------
Less distributions (note 9):
Dividends from net investment income ... (0.30) (0.31) (0.33) (0.35) (0.37)
-------- -------- -------- -------- --------
Net asset value, end of period ........... $ 10.34 $ 10.79 $ 10.48 $ 10.92 $ 10.47
======== ======== ======== ======== ========
Total return (not reflecting sales charge) (1.40)% 6.01% (1.04)% 7.72% 5.16%
Ratios/supplemental data
Net assets, end of period (in thousands) $ 16,602 $ 19,031 $ 17,901 $ 22,506 $ 15,606
Ratio of expenses to average net assets 1.52% 1.43% 1.38% 1.35% 1.34%
Ratio of net investment income to
average net assets ................... 2.76% 2.83% 2.98% 3.10% 3.46%
Portfolio turnover rate ................ 7.25% 2.20% 8.61% 11.74% 6.02%
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 (note 3):
Ratio of expenses to average net assets 1.88% 1.81% 1.76% 1.72% 1.72%
Ratio of net investment income to
average net assets ................... 2.40% 2.45% 2.60% 2.73% 3.07%
The expense ratios after giving effect to the waiver, reimbursement and expense offset for uninvested cash balances were
(note 3):
Ratio of expenses to average net assets 1.52% 1.42% 1.37% 1.33% 1.31%
- ----------
+ Per share amounts have been calculated using the monthly average shares
method.
See accompanying notes to financial statements.
NARRAGANSETT INSURED TAX-FREE INCOME FUND
FINANCIAL HIGHLIGHTS (CONTINUED)
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
Class I
----------------------------------------------------------------------------
Year Ended June 30,
2006 2005 2004 2003 2002
----------------------------------------------------------------------------
Net asset value, beginning of period ..... $ 10.79 $ 10.48 $ 10.91 $ 10.47 $ 10.32
-------- -------- -------- -------- --------
Income from investment operations:
Net investment income+ ............... 0.37 0.39 0.41 0.42 0.44
Net gain (loss) on securities (both
realized and unrealized) ......... (0.44) 0.32 (0.42) 0.46 0.17
-------- -------- -------- -------- --------
Total from investment operations ..... (0.07) 0.71 (0.01) 0.88 0.61
-------- -------- -------- -------- --------
Less distributions (note 9):
Dividends from net investment income . (0.38) (0.40) (0.42) (0.44) (0.46)
-------- -------- -------- -------- --------
Net asset value, end of period ........... $ 10.34 $ 10.79 $ 10.48 $ 10.91 $ 10.47
======== ======== ======== ======== ========
Total return (not reflecting sales charge) (0.67)% 6.89% (0.12)% 8.52% 6.05%
Ratios/supplemental data
Net assets, end of period (in thousands) $ 761 $ 1,098 $ 790 $ 449 $ 386
Ratio of expenses to average net assets 0.79% 0.58% 0.53% 0.52% 0.50%
Ratio of net investment income to
average net assets ............... 3.48% 3.68% 3.82% 3.95% 4.32%
Portfolio turnover rate .............. 7.25% 2.20% 8.61% 11.74% 6.02%
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 (note 3):
Ratio of expenses to average net assets 1.15% 0.96% 0.91% 0.89% 0.89%
Ratio of net investment income to
average net assets ............... 3.12% 3.30% 3.44% 3.58% 3.93%
The expense ratios after giving effect to the waiver, reimbursement and expense offset for uninvested cash balances were
(note 3):
Ratio of expenses to average net assets 0.79% 0.57% 0.52% 0.49% 0.48%
Class Y
------------------------------------------------------------------------
Year Ended June 30,
2006 2005 2004 2003 2002
------------------------------------------------------------------------
Net asset value, beginning of period ..... $ 10.79 $ 10.49 $ 10.92 $ 10.47 $ 10.32
-------- -------- -------- -------- --------
Income from investment operations:
Net investment income+ ............... 0.40 0.41 0.43 0.45 0.46
Net gain (loss) on securities (both
realized and unrealized) ......... (0.44) 0.31 (0.43) 0.45 0.17
-------- -------- -------- -------- --------
Total from investment operations ..... (0.04) 0.72 -- 0.90 0.63
-------- -------- -------- -------- --------
Less distributions (note 9):
Dividends from net investment income . (0.41) (0.42) (0.43) (0.45) (0.48)
-------- -------- -------- -------- --------
Net asset value, end of period ........... $ 10.34 $ 10.79 $ 10.49 $ 10.92 $ 10.47
======== ======== ======== ======== ========
Total return (not reflecting sales charge) (0.40)% 6.98% 0.03% 8.80% 6.22%
Ratios/supplemental data
Net assets, end of period (in thousands) $ 32,239 $ 27,998 $ 22,113 $ 18,193 $ 11,726
Ratio of expenses to average net assets 0.52% 0.43% 0.38% 0.36% 0.34%
Ratio of net investment income to
average net assets ............... 3.76% 3.83% 3.97% 4.10% 4.47%
Portfolio turnover rate .............. 7.25% 2.20% 8.61% 11.74% 6.02%
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 (note 3):
Ratio of expenses to average net assets 0.88% 0.81% 0.76% 0.73% 0.73%
Ratio of net investment income to
average net assets ............... 3.39% 3.45% 3.59% 3.73% 4.08%
The expense ratios after giving effect to the waiver, reimbursement and expense offset for uninvested cash balances were
(note 3):
Ratio of expenses to average net assets 0.52% 0.42% 0.37% 0.33% 0.31%
- ----------
+ Per share amounts have been calculated using the monthly average shares
method.
See accompanying notes to financial statements.
ADDITIONAL INFORMATION (UNAUDITED)
TRUSTEES(1)
AND OFFICERS
NUMBER OF
POSITIONS PORTFOLIOS OTHER DIRECTORSHIPS
HELD WITH IN FUND HELD BY TRUSTEE
NAME, FUND AND PRINCIPAL COMPLEX (THE POSITION HELD IS
ADDRESS(2) LENGTH OF OCCUPATION(S) OVERSEEN A DIRECTORSHIP UNLESS
AND DATE OF BIRTH SERVICE(3) DURING PAST 5 YEARS BY TRUSTEE INDICATED OTHERWISE.)
- ----------------- ---------- ------------------- ---------- ---------------------
INTERESTED TRUSTEES(4)
Diana P. Herrmann Trustee since 2005 Vice Chair and Chief Executive Officer 12 ICI Mutual Insurance
New York, NY and President since of Aquila Management Corporation, Company
(02/25/58) 1998 Founder of the Aquila Group of
Funds(SM)(5) and parent of Aquila
Investment Management LLC, Manager since
2004, President and Chief Operating
Officer since 1997, a Director since
1984, Secretary since 1986 and
previously its Executive Vice President,
Senior Vice President or Vice President,
1986-1997; Chief Executive Officer and
Vice Chair since 2004 and President,
Chief Operating Officer and Manager of
the Manager since 2003; Chair, Vice
Chair, President, Executive Vice
President or Senior Vice President of
funds in the Aquila Group of Funds(SM)
since 1986; Director of the Distributor
since 1997; trustee, Reserve
Money-Market Funds, 1999-2000 and
Reserve Private Equity Series,
1998-2000; Governor, Investment Company
Institute and head of its Small Funds
Committee since 2004; active in
charitable and volunteer organizations.
David A. Duffy Trustee since 1995 Chairman, Rhode Island Convention Center 1 Citizens Bank of
North Kingstown, RI Authority since 2003; retired Founder, Rhode Island and
(08/07/39) formerly President, Duffy & Shanley, Connecticut since
Inc., a marketing communications firm, 1999; Delta Dental of
1973-2003; Transition Chairman for Gov. Rhode Island since
Donald Carcieri (R.I.); past National 2004.
Chairman, National Conference for
Community and Justice (NCCJ); Chairman,
Providence College President's Council;
officer or director of numerous civic
and non-profit organizations.
NON-INTERESTED TRUSTEES
William J. Nightingale Chair of the Board Retired; formerly Chairman, founder 2 Ring's End, Inc.
Rowayton, CT of Trustees since (1975) and Senior Advisor until 2000 of
(09/16/29) 2005 and Trustee Nightingale & Associates, L.L.C., a
since 1992 general management consulting firm
focusing on interim management,
divestitures, turnaround of troubled
companies, corporate restructuring and
financial advisory services.
NUMBER OF
POSITIONS PORTFOLIOS OTHER DIRECTORSHIPS
HELD WITH IN FUND HELD BY TRUSTEE
NAME, FUND AND PRINCIPAL COMPLEX (THE POSITION HELD IS
ADDRESS(2) LENGTH OF OCCUPATION(S) OVERSEEN A DIRECTORSHIP UNLESS
AND DATE OF BIRTH SERVICE(3) DURING PAST 5 YEARS BY TRUSTEE INDICATED OTHERWISE.)
- ----------------- ---------- ------------------- ---------- ---------------------
Vernon R. Alden Trustee since 1992 Retired; former director or trustee of 1 Sonesta International
Boston, MA various Fortune 500 companies, including Hotels Corporation.
(04/07/23) Colgate-Palmolive and McGraw Hill;
formerly President of Ohio University
and Associate Dean of the Harvard
University Graduate School of Business
Administration; member of several
Japan-related advisory councils,
including Chairman of the Japan Society
of Boston; trustee of various cultural,
educational and civic organizations.
Timothy J. Leach Trustee since 2005 Regional Chief Executive Officer, US 2 None
Orinda, CA Trust Company, N.A., since 1995;
(08/28/55) Executive Vice President and Chief
Investment Officer, U.S. Trust Company,
New York, NY, 2004-2005; Executive Vice
President & Chief Investment Officer,
Private Asset Management Group, Wells
Fargo Bank, San Francisco, CA,
1999-2003; President and Chief
Investment Officer, ABN Amro Asset
Management (USA), 1998-1999; President &
Chief Investment Officer, Qualivest
Capital Management Inc. and Senior Vice
President & Chief Investment Officer,
Trust & Investment Group, US Bancorp,
Portland, OR, 1994-1998.
James R. Ramsey Trustee since 2004 President, University of Louisville 2 Community Bank and
Louisville, KY since November 2002; Professor of Trust, Pikeville, KY
(11/14/48) Economics, University of Louisville, and Texas Roadhouse
1999-present; Kentucky Governor's Senior Inc.
Policy Advisor and State Budget
Director, 1999-2002; Vice Chancellor for
Finance and Administration, the
University of North Carolina at Chapel
Hill, 1998 to 1999; previously Vice
President for Finance and Administration
at Western Kentucky University, State
Budget Director for the Commonwealth of
Kentucky, Chief State Economist and
Executive Director for the Office of
Financial Management and Economic
Analysis for the Commonwealth of
Kentucky, Adjunct Professor at the
University of Kentucky, Associate
Professor at Loyola University-New
Orleans and Assistant Professor at
Middle Tennessee State University.
NUMBER OF
POSITIONS PORTFOLIOS OTHER DIRECTORSHIPS
HELD WITH IN FUND HELD BY TRUSTEE
NAME, FUND AND PRINCIPAL COMPLEX (THE POSITION HELD IS
ADDRESS(2) LENGTH OF OCCUPATION(S) OVERSEEN A DIRECTORSHIP UNLESS
AND DATE OF BIRTH SERVICE(3) DURING PAST 5 YEARS BY TRUSTEE INDICATED OTHERWISE.)
- ----------------- ---------- ------------------- ---------- ---------------------
J. William Weeks Trustee since 1995 Retired; limited partner in real estate 1 None
Palm Beach, FL partnerships Alex, Brown & Sons No. 1
(06/22/27) and 2; formerly Senior Vice President or
Vice President of the Aquila Municipal
Bond Funds; and Vice President of the
Distributor.
Laureen L. White Trustee since 2005 President, Greater Providence Chamber of 1 None
North Kingstown, RI Commerce, since 2005, Executive Vice
(11/18/59) President 2004-2005 and Senior Vice
President, 1989-2002; Executive
Counselor to the Governor of Rhode
Island for Policy and Communications,
2003-2004.
OTHER INDIVIDUALS
CHAIRMAN EMERITUS(6)
Lacy B. Herrmann Founder, Chairman Founder and Chairman of the Board, N/A N/A
New York, NY Emeritus since 2005 Aquila Management Corporation, the
(05/12/29) and Chairman of the sponsoring organization and parent of
Board of Trustees, the Manager or Administrator and/or
1992-2005 Adviser or Sub-Adviser to each fund of
the Aquila Group of Funds(SM); Chairman of
the Manager or Administrator and/or
Adviser or Sub-Adviser to each since
2004; Founder and Chairman Emeritus of
each fund in the Aquila Group of
Funds(SM); previously Chairman and a
Trustee of each fund in the Aquila Group
of Funds(SM) since its establishment until
2004 or 2005; Director of the
Distributor since 1981 and formerly Vice
President or Secretary, 1981-1998;
Trustee Emeritus, Brown University and
the Hopkins School; active in
university, school and charitable
organizations.
OFFICERS
Charles E. Childs, III Executive Vice Executive Vice President of all funds in N/A N/A
New York, NY President since 2003 the Aquila Group of Funds(SM) and the
(04/01/57) Manager and the Manager's parent since
2003; formerly Senior Vice President,
corporate development, Vice President,
Assistant Vice President and Associate
of the Manager's parent since 1987;
Senior Vice President, Vice President or
Assistant Vice President of the Aquila
Money-Market Funds, 1988-2003.
NUMBER OF
POSITIONS PORTFOLIOS OTHER DIRECTORSHIPS
HELD WITH IN FUND HELD BY TRUSTEE
NAME, FUND AND PRINCIPAL COMPLEX (THE POSITION HELD IS
ADDRESS(2) LENGTH OF OCCUPATION(S) OVERSEEN A DIRECTORSHIP UNLESS
AND DATE OF BIRTH SERVICE(3) DURING PAST 5 YEARS BY TRUSTEE INDICATED OTHERWISE.)
- ----------------- ---------- ------------------- ---------- ---------------------
Stephen J. Caridi Senior Vice Vice President of the Distributor since N/A N/A
New York, NY President since 1998 1995; Vice President, Hawaiian Tax-Free
(05/06/61) Trust since 1998; Senior Vice President,
Narragansett Insured Tax-Free Income
Fund since 1998, Vice President
1996-1997; Senior Vice President,
Tax-Free Fund of Colorado since 2004;
Assistant Vice President, Tax-Free Fund
For Utah since 1993.
Robert W. Anderson Chief Compliance Chief Compliance Officer of the Fund and N/A N/A
New York, NY Officer since 2004 each of the other funds in the Aquila
(08/23/40) and Assistant Group of Funds(SM), the Manager and the
Secretary since 2000 Distributor since 2004, Compliance
Officer of the Manager or its
predecessor and current parent
1998-2004; Assistant Secretary of the
Aquila Group of Funds(SM) since 2000.
Joseph P. DiMaggio Chief Financial since 2000 Chief Financial Officer of N/A N/A
New York, NY Officer since 2003 the Aquila Group of Funds(SM) since 2003
(11/06/56) and Treasurer and Treasurer since 2000.
Edward M. W. Hines Secretary since 1992 Partner, Hollyer Brady Barrett & Hines N/A N/A
New York, NY LLP, legal counsel to the Fund, since
(12/16/39) 1989; Secretary of the Aquila Group of
Funds(SM).
John J. Partridge Assistant Secretary Founding Partner, Partridge, Snow & N/A N/A
Providence, RI - Advisor to the Hahn, LLP, a law firm, Providence, Rhode
(05/05/40) Board since 2005 Island, since 1988; Assistant Secretary
- Advisor to the Board, Narragansett
Insured Tax-Free Income Fund, since
2005, Trustee 2002-2005; director of
various educational, civic and
charitable organizations, including
Greater Providence Chamber of Commerce,
Ocean State Charities Trust and Memorial
Hospital of Rhode Island.
NUMBER OF
POSITIONS PORTFOLIOS OTHER DIRECTORSHIPS
HELD WITH IN FUND HELD BY TRUSTEE
NAME, FUND AND PRINCIPAL COMPLEX (THE POSITION HELD IS
ADDRESS(2) LENGTH OF OCCUPATION(S) OVERSEEN A DIRECTORSHIP UNLESS
AND DATE OF BIRTH SERVICE(3) DURING PAST 5 YEARS BY TRUSTEE INDICATED OTHERWISE.)
- ----------------- ---------- ------------------- ---------- ---------------------
John M. Herndon Assistant Secretary Assistant Secretary of the Aquila Group N/A N/A
New York, NY since 1995 of Funds(SM) since 1995 and Vice President
(12/17/39) of the three Aquila Money-Market Funds
since 1990; Vice President of the
Manager or its predecessor and current
parent since 1990.
Lori A. Vindigni Assistant Treasurer Assistant Treasurer of the Aquila Group N/A N/A
New York, NY since 2000 of Funds(SM) since 2000; Assistant Vice
(11/02/66) President of the Manager or its
predecessor and current parent since
1998; Fund Accountant for the Aquila
Group of Funds(SM), 1995-1998.
- ----------
(1) The Fund's Statement of Additional Information includes additional
information about the Trustees and is available, without charge, upon request by
calling 800-437-1020 (toll-free) or by visiting the EDGAR Database at the SEC's
internet site at www.sec.gov.
(2) The mailing address of each Trustee and officer is c/o Narragansett Insured
Tax-Free Income Fund, 380 Madison Avenue, New York, NY 10017.
(3) Each Trustee holds office until the next annual meeting of shareholders or
until his or her successor is elected and qualifies. The term of office of each
officer is one year.
(4) Ms. Herrmann is an interested person of the Fund as an officer of the Fund,
as a director, officer and shareholder of the Manager's corporate parent, as an
officer and Manager of the Manager, and as a shareholder and director of the
Distributor. Mr. Duffy is an interested person as a director of the Sub-Adviser.
(5) In this material Pacific Capital Cash Assets Trust, Pacific Capital U.S.
Government Securities Cash Assets Trust and Pacific Capital Tax-Free Cash Assets
Trust, each of which is a money-market fund, are called the "Aquila Money-Market
Funds"; Hawaiian Tax-Free Trust, Tax-Free Trust of Arizona, Tax-Free Trust of
Oregon, Tax-Free Fund of Colorado, Churchill Tax-Free Fund of Kentucky,
Narragansett Insured Tax-Free Income Fund and Tax-Free Fund For Utah, each of
which is a tax-free municipal bond fund, are called the "Aquila Municipal Bond
Funds"; Aquila Rocky Mountain Equity Fund is an equity fund; Aquila Three Peaks
High Income Fund is a high income corporate bond fund; considered together,
these 12 funds are called the "Aquila Group of Funds(SM)."
(6) The Chairman Emeritus may attend Board meetings but has no voting power.
- --------------------------------------------------------------------------------
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 table below is 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 table below is based on an investment of $1,000 invested on January 1,
2006 and held for the six months ended June 30, 2006.
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 JUNE 30, 2006
Actual
Total Return Beginning Ending Expenses
Without Account Account Paid During
Sales Charges(1) Value Value the Period(2)
- --------------------------------------------------------------------------------
Class A (0.55)% $1,000.00 $994.50 $3.46
- --------------------------------------------------------------------------------
Class C (0.97)% $1,000.00 $990.30 $7.70
- --------------------------------------------------------------------------------
Class I (0.51)% $1,000.00 $994.90 $4.02
- --------------------------------------------------------------------------------
Class Y (0.48)% $1,000.00 $995.20 $2.74
- --------------------------------------------------------------------------------
(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 0.70%, 1.56%, 0.81%
AND 0.55% FOR THE FUND'S CLASS A, C, I AND Y SHARES, RESPECTIVELY,
MULTIPLIED BY THE AVERAGE ACCOUNT VALUE OVER THE PERIOD, MULTIPLIED BY
181/365 (TO REFLECT THE ONE-HALF YEAR PERIOD).
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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 JUNE 30, 2006
Hypothetical
Annualized Beginning Ending Expenses
Total Account Account Paid During
Return Value Value the Period(1)
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Class A 5.00% $1,000.00 $1,021.32 $3.51
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Class C 5.00% $1,000.00 $1,017.06 $7.80
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Class I 5.00% $1,000.00 $1,020.76 $4.07
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Class Y 5.00% $1,000.00 $1,022.05 $2.78
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(1) EXPENSES ARE EQUAL TO THE ANNUALIZED EXPENSE RATIO OF 0.70%, 1.56%, 0.81%
AND 0.55% FOR THE TRUST'S CLASS A, C, I AND Y SHARES, RESPECTIVELY,
MULTIPLIED BY THE AVERAGE ACCOUNT VALUE OVER THE PERIOD, MULTIPLIED BY
181/365 (TO REFLECT THE ONE-HALF YEAR PERIOD).
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INFORMATION AVAILABLE (UNAUDITED)
Much of the information that the funds in the Aquila Group of Funds(SM)
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
http://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 http://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.
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PROXY VOTING RECORD (UNAUDITED)
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, 2006 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.
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FEDERAL TAX STATUS OF DISTRIBUTIONS (UNAUDITED)
This information is presented in order to comply with a requirement of the
Internal Revenue Code AND NO CURRENT ACTION ON THE PART OF SHAREHOLDERS IS
REQUIRED.
For the fiscal year ended June 30, 2006, $5,431,934 of dividends paid by
Narragansett Insured Tax-Free Income Fund, constituting 96.86% of total
dividends paid during the fiscal year ended June 30, 2006, were exempt-interest
dividends and the balance was ordinary dividend income.
Prior to January 31, 2006, shareholders were mailed IRS Form 1099-DIV
which contained information on the status of distributions paid for the 2005
CALENDAR YEAR.
Prior to January 31, 2007, shareholders will be mailed IRS Form 1099-DIV
which will contain information on the status of distributions paid for the 2006
CALENDAR YEAR.
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PRIVACY NOTICE (UNAUDITED)
NARRAGANSETT INSURED TAX-FREE INCOME FUND
OUR PRIVACY POLICY. In providing services to you as an individual who owns or is
considering investing in shares of the Fund, we collect certain non-public
personal information about you. Our policy is to keep this information strictly
safeguarded and confidential, and to use or disclose it only as necessary to
provide services to you or as otherwise permitted by law. Our privacy policy
applies equally to former shareholders and persons who inquire about a fund.
INFORMATION WE COLLECT. "Non-public personal information" is personally
identifiable financial information about you as an individual or your family.
The kinds of non-public personal information we have about you may include the
information you provide us on your share purchase application or in telephone
calls or correspondence with us, and information about your fund transactions
and holdings, how you voted your shares and the account where your shares are
held.
INFORMATION WE DISCLOSE. We disclose non-public personal information about you
to companies that provide necessary services to us, such as the Fund's transfer
agent, distributor, investment adviser or sub-adviser, as permitted or required
by law, or as authorized by you. Any other use is strictly prohibited. We do not
sell information about you or any of our fund shareholders to anyone.
NON-CALIFORNIA RESIDENTS: We also may disclose some of this information to
another fund in the Aquila Group of Funds(SM) (or its service providers) under
joint marketing agreements that permit the funds to use the information only to
provide you with information about other funds in the Aquila Group of Funds(SM)
or new services we are offering that may be of interest to you.
CALIFORNIA RESIDENTS ONLY: In addition, unless you "opt-out" of the following
disclosures using the form that is being mailed to you under separate cover, we
may disclose some of this information to another fund in the Aquila Group of
Funds(SM) (or its sevice providers) under joint marketing agreements that permit
the funds to use the information only to provide you with information about
other funds in the Aquila Group of Funds(SM) or new services we are offering
that may be of interest to you.
HOW WE SAFEGUARD YOUR INFORMATION. We restrict access to non-public personal
information about you to only those persons who need it to provide services to
you or who are permitted by law to receive it. We maintain physical, electronic
and procedural safeguards to protect the confidentiality of all non-public
personal information we have about you.
If you have any questions regarding our Privacy Policy, please contact us at
1-800-437-1020.
AQUILA DISTRIBUTORS, INC.
AQUILA INVESTMENT MANAGEMENT LLC
This Privacy Policy also has been adopted by Aquila Distributors, Inc. and
Aquila Investment Management LLC and applies to all non-public information about
you that each of these companies may obtain in connection with services provided
to the Fund or to you as a shareholder of the Fund.
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FOUNDERS
Lacy B. Herrmann, Chairman Emeritus
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
William J. Nightingale, Chair
Vernon R. Alden
David A. Duffy
Diana P. Herrmann
Timothy J. Leach
James R. Ramsey
J. William Weeks
Laureen L. White
OFFICERS
Diana P. Herrmann, President
Stephen J. Caridi, Senior Vice President
Robert W. Anderson, Chief Compliance Officer
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.
101 Sabin Street
Pawtuckett, RI 02860
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Tait, Weller & Baker LLP
1818 Market Street, Suite 2400
Philadelphia, PA 19103
Further information is contained in the Prospectus, which must precede or
accompany this report.
ITEM 2. CODE OF ETHICS.
(a) As of June 30, 2006 (the end of the reporting period) the
Trust has adopted a code of ethics that applies to the Fund's
principal executive officer(s)and principal financial officer(s)
and persons performing similar functions ("Covered Officers") as
defined in the Aquila Group of Funds Code of Ethics for Principal
Executive and Senior Financial Officers under Section 406 of the
Sarbanes-Oxley Act of 2002.;
(f)(1) Pursuant to Item 10(a)(1), a copy of the Fund's Code of
Ethics that applies to the Trust's principal executive officer(s)
and principal financial officer(s) and persons performing similar
functions is included as an exhibit to its annual report on this
Form N-CSR;
(f)(2) The text of the Fund's Code of Ethics that applies to the
Fund's principal executive officer(s) and principal financial
officer(s) and persons performing similar functions has been
posted on its Internet website which can be found at the Fund's
Internet address at aquilafunds.com.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
(a)(1)(ii) The Board of Trustees of the Fund has determined that
it does not have at least one audit committee financial expert
serving on its audit committee. The Fund does not have such a
person serving on the audit committee because none of the persons
currently serving as Trustees happens to have the technical
accounting and auditing expertise included in the definition of
"audit committee financial expert" recently adopted by the Securities
and Exchange Commission in connection with this Form N-CSR, and the
Board has not heretofore deemed it necessary to seek such a person
for election to the Board.
The primary mission of the Board, which is that of oversight over
the operations and affairs of the Fund, confronts the Trustees with
a wide and expanding range of issues and responsibilities. The
Trustees believe that, accordingly, it is essential that the Board's
membership consist of persons with as extensive experience as possible
in fulfilling the duties and responsibilities of mutual fund directors
and audit committee members and, ideally, with extensive experience
and background relating to the economic and financial sectors and
securities in which the Fund invests, including exposure to the
financial and accounting matters commonly encountered with respect
to those sectors and securities. The Board believes that its current
membership satisfies those criteria. It recognizes that it would
also be helpful to have a member with the relatively focused accounting
and auditing expertise reflected in the applicable definition of
"audit committee financial expert," just as additional members with
similarly focused technical expertise in other areas relevant to
the Fund's operations and affairs would also contribute added value.
However, the Board believes that the Fund is better served, and its
assets better employed, by a policy of hiring experts in various
the specialized area of technical accounting and
auditing matters, if and as the Board identifies the need, rather
than by seeking to expand its numbers by adding technical experts
in the areas constituting its domain of responsibility. The Fund's
Audit Committee Charter explicitly authorizes the Committee to
retain such experts as it deems necessary in fulfilling its duties
under the Charter.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES
a) Audit Fees - The aggregate fees billed for each of the last two
fiscal years for professional services rendered by the principal
accountant for the audit of the Registrant's annual financial statements
or services that are normally provided by the accountant in connection
with statutory and regulatory filings or engagements were $14,000 in 2006
and $17,000 in 2005.
b) Audit Related Fees - There were no amounts billed for audit-related
fees over the past two years other than stated above.
c) Tax Fees - The Registrant was billed by the principal accountant
$3,000 and $8,005 in 2006 and 2005, respectively, for tax return
preparation, tax compliance and tax planning.
d) All Other Fees - There were no additional fees paid for audit and non-
audit services other than those disclosed in a) thorough c) above.
e)(1) Currently, the audit committee of the Registrant pre-approves audit
services and fees on an engagement-by-engagement basis.
e)(2) None of the services described in b) through d) above were approved
by the audit committee pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of
Regulation S-X, all were pre-approved on an engagement-by-engagement basis.
f) No applicable.
g) There were no non-audit services fees billed by the Registrant's accountant
to the Registrant's investment adviser or distributor over the past two years.
h) Not applicable.
ITEM 10. EXHIBITS.
(a)(1) Aquila Group of Funds Code of Ethics for Principal Executive and
Senior Financial Officers under Section 406 of the Sarbanes-Oxley Act
of 2002.
(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/ Diana P. Herrmann
- - - ---------------------------------
President and Trustee
September 7, 2006
By: /s/ Joseph P. DiMaggio
- - - -----------------------------------
Chief Financial Officer and Treasurer
September 7, 2006
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/ Diana P. Herrmann
- - - ---------------------------------
Diana P. Herrmann
President and Trustee
September 7, 2006
By: /s/ Joseph P. DiMaggio
- - - -----------------------------------
Joseph P. DiMaggio
Chief Financial Officer and Treasurer
September 7, 2006
NARRAGANSETT INSURED TAX-FREE INCOME FUND
EXHIBIT INDEX
(a)(1) Aquila Group of Funds Code of Ethics for Principal Executive and
Senior Financial Officers under Section 406 of the Sarbanes-Oxley Act
of 2002.
(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.