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: 06/30/07
FORM N-CSR
ITEM 1. REPORTS TO STOCKHOLDERS.
ANNUAL
REPORT
JUNE 30, 2007
A TAX-FREE INCOME INVESTMENT
[LOGO OF NARRAGANSETT INSURED TAX-FREE INCOME FUND:
RECTANGLE WITH PROFILE VIEW OF A SAILBOAT ON TOP OF
WAVES AND THREE SEAGULLS FLYING ABOVE IT]
[LOGO OF THE AQUILA
GROUP OF FUNDS: ONE OF THE
AN EAGLE'S HEAD] AQUILA GROUP OF FUNDS (SM)
[LOGO OF NARRAGANSETT INSURED TAX-FREE INCOME FUND:
RECTANGLE WITH PROFILE VIEW OF A SAILBOAT ON TOP
OF WAVES AND THREE SEAGULLS FLYING ABOVE IT]
SERVING RHODE ISLAND INVESTORS FOR 15 YEARS
NARRAGANSETT INSURED TAX-FREE INCOME FUND
"PROFESSIONAL MANAGEMENT"
August, 2007
Dear Fellow Shareholder:
Rising interest rates, reaching for yield and tightening yield curves - these
are all topics that have been in the news as of late. While there is a plethora
of information available on these topics and others if you are interested, the
good news is that when it comes to Narragansett Insured Tax-Free Income Fund you
don't need to be versed in "financialese" any more than you wish.
Why? Because one of the conveniences afforded you through an investment in
Narragansett Insured Tax-Free Income Fund is local active professional portfolio
management. The Fund's portfolio managers continuously monitor economic,
monetary and financial trends and adjust the portfolio accordingly as and when
they deem appropriate.
Your Fund's portfolio managers provide ongoing surveillance of the marketplace
and strive to maneuver cautiously through its ups and downs - much like a ship's
captain whose job it is to ride out sudden storms.
Not unlike the prudent ship's captain who ensures that the cargo is properly
balanced and positioned, the Fund's portfolio managers are constantly monitoring
the investment portfolio and the economic weather conditions striving to provide
as stable a net asset value and as high a level of tax-free income as possible.
As with a ship in choppy seas, your investment requires constant vigilance and
nimble reflexes in all phases of its management. This does not, however,
NOT A PART OF THE ANNUAL REPORT
mean selling and buying securities continuously based upon market blips. What it
does mean is being a keen observer of the scene, monitoring securities very
carefully and taking action as appropriate whenever significant changes occur or
are anticipated.
Your portfolio managers seek opportunities that make sense within the prevailing
marketplace and which provide double tax-free income while maintaining the
overall conservative nature of the portfolio.
In short, your professional managers do the work for you. So, the next time you
come across a boring, complex analysis of the bond market, feel free to flip
right past it. Your Fund's portfolio management team's job (and their passion)
is to keep on top of and make sense out of all the news. Thus, like a seasoned
traveler, you can enjoy your trip knowing that there are experienced eyes
watching the waters and steady hands on the helm.
Sincerely,
/s/ Lacy B. Herrmann /s/ Diana P. Herrmann
Lacy B. Herrmann Diana P. Herrmann
Founder and Chairman Emeritus President
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 THREE SEAGULLS FLYING ABOVE IT]
SERVING RHODE ISLAND INVESTORS FOR 15 YEARS
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 while staying within its
self-imposed quality restraints. 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 less than
12 years has been and will likely 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, 2007
fiscal year end, the portfolio had an average maturity of 8.7 years.
Equity markets have surprised many investors as all major U.S. equity
markets have performed well year to-date through June, 2007. The S&P 500, Dow
Jones Industrials, and NASDAQ indices were up 7.0%, 8.8%, and 8.2%,
respectively. International equity markets have fared even better than U.S.
markets as Europe, China, and Japan have continued to expand at unanticipated
levels. The broad market Europe, Australia, and Far East ("EAFE") index showed a
return of 11.2% for the same time period. The pace of potential mergers and
continued stock buy back programs has helped propel the equity markets in
addition to decent earnings announcements across the board. The only thing that
appears to be in the way of further gains is the drag from the slowing home
building market, which has yet to be reflected in recent consumer spending
figures. Should a prolonged downturn exist because of fallout from the much
publicized home foreclosures and credit card delinquencies, we would not be
surprised to see a correction in the equity market.
It has been exactly one year since the last interest rate hike and the
Federal Reserve (the "Fed") has remained on hold with the Federal Funds target
rate set at 5.25%. The Fed's concern generally continues to be inflation as
measured by Personal Consumption Expenditure ("PCE"). In addition, the Fed has
kept close tabs on the core Consumer Price Index ("CPI") and labor costs, the
latter of which has been deemed to have been particularly stubborn. The Fed has
also not been shy about its intention to raise rates further if inflation
remains elevated. In response, U.S. Treasury yields have moved to over 5% and
the yield curve has begun to show a positive slope.
Further competition from foreign markets has also had an impact on yields
of U.S. Treasury securities. Recent rates hikes by the European Central Bank and
others have begun to bring world rates more in line with the U.S. This has
started some reallocation of bond purchases to other markets outside of the U.S.
This means that there is now more competition for capital, and we expect
Treasury rates to adjust when fixed income investors make their allocations.
MANAGEMENT DISCUSSION (CONTINUED)
Given the current Federal and Rhode Island income tax rates, we believe
Narragansett Insured Tax-Free Income 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 the Fund's 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, 2007 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
6/97 10,000 10,000 9,600 10,000
6/98 10,169 10,804 10,376 10,695
6/99 10,381 10,949 10,515 11,019
6/00 10,712 11,229 10,784 11,463
6/01 11,099 12,324 11,835 12,476
6/02 11,230 13,058 12,541 13,343
6/03 11,462 14,250 13,686 14,387
6/04 11,811 14,104 13,546 14,436
6/05 12,142 15,124 14,525 15,214
6/06 12,648 15,015 14,420 15,266
6/07 12,986 15,669 15,048 15,905
AVERAGE ANNUAL TOTAL RETURN
FOR PERIODS ENDED JUNE 30, 2007
------------------------------------------
SINCE
1 YEAR 5 YEARS 10 YEARS INCEPTION
------ ------- -------- ---------
Class A (commenced operations on 9/10/92)
With Sales Charge ...................... (0.06)% 2.87% 4.17% 4.98%
Without Sales Charge ................... 4.10 3.72 4.59 5.27
Class C (commenced operations on 5/1/96)
With CDSC .............................. 2.19 2.84 3.68 3.95
Without CDSC ........................... 3.22 2.84 3.68 3.95
Class Y (commenced operations on 5/1/96)
No Sales Charge ........................ 4.25 3.87 4.79 5.09
Class I (commenced operations on 11/4/98)
No Sales Charge ........................ 3.96 3.65 n/a 4.06
Lehman Index ................................... 4.19 3.57 4.75 5.17* (Class A)
4.50** (Class C&Y)
4.30+ (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, 2007, and the related statement of operations for the year
then ended, and the statements of changes in net assets and the financial
highlights for each of the two years in the period 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 audits. The financial
highlights for each of the years in the three 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 highlights.
We conducted our audits 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 audits 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, 2007, by correspondence with the
custodian. 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 audits provide 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, 2007, the results of
its operations for the year then ended, and the changes in its net assets and
the financial highlights for each of the two years in the period then ended, in
conformity with accounting principles generally accepted in the United States of
America.
TAIT, WELLER & BAKER LLP
Philadelphia, Pennsylvania
August 17, 2007
- --------------------------------------------------------------------------------
NARRAGANSETT INSURED TAX-FREE INCOME FUND
SCHEDULE OF INVESTMENTS
JUNE 30, 2007
RATING
PRINCIPAL MOODY'S, S&P
AMOUNT GENERAL OBLIGATION BONDS (45.4%) OR FITCH VALUE
- --------------- ------------------------------------------------------ ------------ --------------
Coventry, Rhode Island
$ 550,000 5.000%, 11/01/16 AMBAC Insured ...................... Aaa+/AAA+++ $ 574,233
550,000 5.000%, 11/01/17 AMBAC Insured ...................... Aaa+/AAA+++ 571,125
Cranston, Rhode Island
500,000 5.450%, 11/15/11 FGIC Insured ....................... Aaa+/AAA++ 522,780
1,000,000 4.250%, 04/01/18 MBIA Insured ....................... Aaa+/AAA++ 993,980
1,000,000 4.250%, 04/01/19 MBIA Insured ....................... Aaa+/AAA++ 989,010
1,000,000 4.300%, 04/01/20 MBIA Insured ....................... Aaa+/AAA++ 990,270
1,500,000 4.500%, 04/01/26 MBIA Insured ....................... Aaa+/AAA++ 1,471,965
Cumberland, Rhode Island
250,000 4.000%, 02/01/14 FGIC Insured ....................... Aaa+/AAA++ 249,280
250,000 4.000%, 02/01/15 FGIC Insured ....................... Aaa+/AAA++ 248,702
500,000 5.000%, 08/01/15 MBIA Insured ....................... Aaa+/AAA++ 514,745
250,000 4.000%, 02/01/16 FGIC Insured ....................... Aaa+/AAA++ 247,668
250,000 4.100%, 02/01/17 FGIC Insured ....................... Aaa+/AAA++ 248,430
250,000 4.150%, 02/01/18 FGIC Insured ....................... Aaa+/AAA++ 248,303
1,255,000 5.000%, 10/01/18 MBIA Insured ....................... Aaa+/AAA++ 1,297,469
1,040,000 5.200%, 10/01/21 MBIA Insured ....................... Aaa+/AAA++ 1,082,390
Lincoln, Rhode Island
2,000,000 4.500%, 08/01/26 MBIA Insured ....................... Aaa+/AAA+++ 1,987,280
New Shoreham, Rhode Island
245,000 4.000%, 11/15/15 AMBAC Insured ...................... Aaa+/AAA++ 243,442
255,000 4.250%, 11/15/16 AMBAC Insured ...................... Aaa+/AAA++ 256,446
270,000 4.250%, 11/15/17 AMBAC Insured ...................... Aaa+/AAA++ 270,888
910,000 4.800%, 04/15/18 AMBAC Insured ...................... Aaa+/AAA++ 932,168
285,000 4.500%, 11/15/18 AMBAC Insured ...................... Aaa+/AAA++ 288,642
1,105,000 5.000%, 04/15/22 AMBAC Insured ...................... Aaa+/AAA++ 1,144,780
Newport, Rhode Island
1,000,000 4.500%, 11/01/15 AMBAC Insured ...................... Aaa+/AAA+++ 1,022,590
1,000,000 4.750%, 11/01/18 AMBAC Insured ...................... Aaa+/AAA+++ 1,027,410
800,000 5.000%, 11/01/20 AMBAC Insured ...................... Aaa+/AAA+++ 830,088
North Kingstown, Rhode Island
500,000 3.750%, 10/01/12 FGIC Insured ....................... Aaa+/AAA++ 494,820
RATING
PRINCIPAL MOODY'S, S&P
AMOUNT GENERAL OBLIGATION BONDS (CONTINUED) OR FITCH VALUE
- --------------- ------------------------------------------------------ ------------ --------------
North Providence, Rhode Island
$ 400,000 5.700%, 07/01/08 MBIA Insured ....................... Aaa+/AAA++ $ 408,000
500,000 4.700%, 09/15/14 FSA Insured ........................ Aaa+/AAA++ 512,395
500,000 3.650%, 10/15/14 FSA Insured ........................ Aaa+/AAA++ 483,390
500,000 3.750%, 10/15/15 FSA Insured ........................ Aaa+/AAA++ 483,175
Pawtucket, Rhode Island
600,000 4.300%, 09/15/09 AMBAC Insured ...................... Aaa+/AAA+++ 606,228
250,000 4.400%, 09/15/10 AMBAC Insured ...................... Aaa+/AAA+++ 253,932
910,000 4.000%, 04/15/14 AMBAC Insured ...................... Aaa+/AAA+++ 907,279
Providence, Rhode Island
700,000 5.500%, 01/15/11 FSA Insured ........................ Aaa+/AAA++ 707,581
1,000,000 5.000%, 01/15/16 FGIC Insured ....................... Aaa+/AAA++ 1,043,630
1,000,000 5.000%, 01/15/17 FGIC Insured ....................... Aaa+/AAA++ 1,043,630
1,000,000 5.000%, 01/15/18 FGIC Insured ....................... Aaa+/AAA++ 1,043,630
Rhode Island Consolidated Capital
Development Loan
1,000,000 5.125%, 07/15/11 FGIC Insured ....................... Aaa+/AAA++ 1,021,310
1,135,000 5.000%, 08/01/11 MBIA Insured ....................... Aaa+/AAA++ 1,147,315
1,000,000 5.000%, 09/01/14 Series A FGIC Insured .............. Aaa+/AAA++ 1,023,770
1,500,000 5.000%, 09/01/15 FGIC Insured ....................... Aaa+/AAA++ 1,535,655
1,500,000 4.750%, 09/01/17 Series A FGIC Insured .............. Aaa+/AAA++ 1,531,455
South Kingstown, Rhode Island
500,000 5.500%, 06/15/12 FGIC Insured ....................... Aaa+/AAA+++ 526,645
State of Rhode Island
1,000,000 5.250%, 11/01/11 Series C MBIA Insured .............. Aaa+/AAA++ 1,051,950
2,000,000 5.000%, 08/01/12 Series B MBIA Insured .............. Aaa+/AAA++ 2,093,740
1,000,000 5.000%, 06/01/14 Series B FGIC Insured .............. Aaa+/AAA++ 1,035,060
4,000,000 5.000%, 08/01/14 FGIC Insured ....................... Aaa+/AAA++ 4,145,800
2,000,000 5.000%, 08/01/15 Series B FGIC Insured .............. Aaa+/AAA++ 2,066,820
2,000,000 4.500%, 02/01/17 MBIA Insured ....................... Aaa+/AAA++ 2,031,800
2,000,000 5.250%, 11/01/17 FGIC Insured ....................... Aaa+/AAA++ 2,119,640
2,500,000 5.000%, 09/01/18 MBIA Insured ....................... Aaa+/AAA++ 2,604,200
2,000,000 5.000%, 09/01/19 MBIA Insured ....................... Aaa+/AAA++ 2,081,580
1,500,000 5.000%, 09/01/20 MBIA Insured ....................... Aaa+/AAA++ 1,558,845
Warwick, Rhode Island
665,000 4.250%, 07/15/14 AMBAC Insured ...................... Aaa+/AAA++ 670,985
195,000 5.600%, 08/01/14 FSA Insured ........................ Aaa+/AAA++ 199,144
RATING
PRINCIPAL MOODY'S, S&P
AMOUNT GENERAL OBLIGATION BONDS (CONTINUED) OR FITCH VALUE
- --------------- ------------------------------------------------------ ------------ --------------
Warwick, Rhode Island (continued)
$ 700,000 4.375%, 07/15/15 AMBAC Insured ...................... Aaa+/AAA++ $ 708,974
770,000 4.600%, 07/15/17 AMBAC Insured ...................... Aaa+/AAA++ 784,522
1,000,000 5.000%, 03/01/18 FGIC Insured ....................... Aaa+/AAA++ 1,025,410
905,000 4.250%, 01/15/18 XLCA Insured ....................... Aaa+/AAA++ 903,471
810,000 4.700%, 07/15/18 AMBAC Insured ...................... Aaa+/AAA++ 826,338
1,000,000 5.000%, 01/15/19 FGIC Insured ....................... Aaa+/AAA++ 1,040,610
855,000 4.750%, 07/15/19 AMBAC Insured ...................... Aaa+/AAA++ 871,442
500,000 5.000%, 01/15/20 FGIC Insured ....................... Aaa+/AAA++ 519,805
West Warwick, Rhode Island
500,000 4.875%, 03/01/16 AMBAC Insured ...................... Aaa+/AAA+++ 515,605
670,000 5.000%, 03/01/17 AMBAC Insured ...................... Aaa+/AAA+++ 695,862
700,000 5.050%, 03/01/18 AMBAC Insured ...................... Aaa+/AAA+++ 729,995
735,000 5.100%, 03/01/19 AMBAC Insured ...................... Aaa+/AAA+++ 766,774
Westerly, Rhode Island
900,000 4.000%, 07/01/17 MBIA Insured ....................... Aaa+/AAA++ 891,225
900,000 4.000%, 07/01/18 MBIA Insured ....................... Aaa+/AAA++ 886,617
Woonsocket, Rhode Island
655,000 4.450%, 12/15/12 FGIC Insured ....................... Aaa+/AAA+++ 663,960
685,000 4.550%, 12/15/13 FGIC Insured ....................... Aaa+/AAA+++ 696,556
--------------
Total General Obligation Bonds ................... 67,214,654
--------------
REVENUE BONDS (54.8%)
DEVELOPMENT REVENUE BONDS (8.6%)
Providence Rhode Island Redevelopment Agency
Revenue Refunding Public Safety Building Project
1,925,000 5.200%, 04/01/11 AMBAC Insured (pre-refunded) ....... Aaa+/AAA+++ 2,003,559
Rhode Island Convention Center Authority
Revenue Refunding
925,000 5.000%, 05/15/10 Series 1993 B MBIA Insured ......... Aaa+/AAA++ 953,009
Rhode Island Public Building Authority State
Public Projects
1,000,000 5.250%, 02/01/09 Series 1998 A AMBAC Insured ........ Aaa+/AAA++ 1,018,230
Rhode Island State Economic Development Corp.,
Airport Revenue
1,000,000 5.000%, 07/01/18 Series B FSA Insured ............... Aaa+/AAA++ 1,017,650
RATING
PRINCIPAL MOODY'S, S&P
AMOUNT REVENUE BONDS (CONTINUED) OR FITCH VALUE
- --------------- ------------------------------------------------------ ------------ --------------
DEVELOPMENT REVENUE BONDS (CONTINUED)
Rhode Island State Economic Development Corp.,
Airport Revenue Refunding
$ 1,670,000 5.000%, 07/01/13 Series C MBIA Insured .............. Aaa+/AAA++ $ 1,745,484
Rhode Island State Economic Development Corp.,
Motor Fuel Tax Revenue (Rhode Island
Department of Transportation)
1,000,000 4.000%, 06/15/15 Series A AMBAC Insured ............. Aaa+/AAA++ 993,930
1,000,000 4.000%, 06/15/18 Series 2006A AMBAC Insured ......... Aaa+/AAA++ 976,570
Rhode Island State Economic Development Corp.,
(Rhode Island Airport Corp. Intermodal
Facility Project)
1,000,000 4.250%, 07/01/17 CIFG Assurance North
America, Inc. Insured ............................ Aaa+/AAA++ 984,800
Rhode Island State Economic Development Corp.,
University of Rhode Island
750,000 4.800%, 11/01/11 Series 1999 FSA Insured ............ Aaa+/NR 766,343
750,000 4.900%, 11/01/12 Series 1999 FSA Insured ............ Aaa+/NR 769,358
750,000 4.900%, 11/01/13 Series 1999 FSA Insured ............ Aaa+/NR 770,295
750,000 5.000%, 11/01/14 Series 1999 FSA Insured ............ Aaa+/NR 774,960
--------------
Total Development Revenue Bonds 12,774,188
--------------
HIGHER EDUCATION REVENUE BONDS (30.2%)
Providence, Rhode Island Public Building
Authority, School Projects
500,000 5.500%, 12/15/14 Series 1996 B MBIA Insured ......... Aaa+/AAA++ 508,830
500,000 5.500%, 12/15/15 Series 1996 B MBIA Insured ......... Aaa+/AAA++ 508,830
1,000,000 5.250%, 12/15/14 Series 1998 FSA Insured ............ Aaa+/AAA++ 1,038,540
500,000 5.000%, 12/15/09 Series 1999 A AMBAC Insured ........ Aaa+/AAA++ 513,870
1,395,000 4.000%, 12/15/12 Series 2003 A MBIA Insured ......... Aaa+/AAA++ 1,397,009
1,450,000 4.000%, 12/15/13 Series 2003 A MBIA Insured ......... Aaa+/AAA++ 1,448,332
1,505,000 4.000%, 12/15/14 Series 2003 A MBIA Insured ......... Aaa+/AAA++ 1,500,169
1,570,000 4.000%, 12/15/15 Series 2003 A MBIA Insured ......... Aaa+/AAA++ 1,559,968
1,630,000 4.000%, 12/15/16 Series 2003 A MBIA Insured ......... Aaa+/AAA++ 1,612,282
Providence, Rhode Island Public Building School
& Public Facilities Project
1,500,000 5.250%, 12/15/17 AMBAC Insured ...................... Aaa+/AAA++ 1,572,240
1,000,000 5.250%, 12/15/19 AMBAC Insured ...................... Aaa+/AAA++ 1,046,730
RATING
PRINCIPAL MOODY'S, S&P
AMOUNT REVENUE BONDS (CONTINUED) OR FITCH VALUE
- --------------- ------------------------------------------------------ ------------ --------------
HIGHER EDUCATION REVENUE BONDS (CONTINUED)
Rhode Island Health & Education Building Corp.,
Brown University
$ 2,000,000 5.250%, 09/01/17 Series 1993 MBIA Insured ........... Aaa+/AAA++ $ 2,091,620
1,000,000 5.000%, 09/01/23 Series 1993 MBIA Insured ........... Aaa+/AAA++ 1,011,250
Rhode Island Health & Education Building Corp.,
Bryant College
1,000,000 5.125%, 06/01/19 AMBAC Insured ...................... Aaa+/AAA++ 1,039,680
230,000 5.000%, 12/01/21 AMBAC Insured ...................... Aaa+/AAA++ 236,948
Rhode Island Health & Education Building Corp.,
Higher Educational Facilities
1,010,000 3.625%, 09/15/14 Series 2003 B MBIA Insured ......... Aaa+/AAA++ 966,974
1,050,000 4.000%, 09/15/15 Series 2003 B MBIA Insured ......... Aaa+/AAA++ 1,036,235
1,040,000 4.000%, 09/15/16 Series 2003 B MBIA Insured ......... Aaa+/AAA++ 1,021,103
600,000 3.625%, 09/15/14 Series 2003 C MBIA Insured ......... Aaa+/AAA++ 574,440
500,000 4.000%, 09/15/15 Series 2003 C MBIA Insured ......... Aaa+/AAA++ 493,445
500,000 4.000%, 09/15/16 Series 2003 C MBIA Insured ......... Aaa+/AAA++ 490,915
Rhode Island Health & Education Building Corp.,
Johnson & Wales University
465,000 5.500%, 04/01/15 Series 1999 A MBIA Insured ......... Aaa+/AAA++ 509,059
900,000 5.500%, 04/01/16 Series 1999 A MBIA Insured ......... Aaa+/AAA++ 991,008
785,000 5.500%, 04/01/17 Series 1999 A MBIA Insured ......... Aaa+/AAA++ 868,477
1,360,000 4.000%, 04/01/12 Series 2003 XLCA Insured ........... Aaa+/AAA++ 1,358,776
3,210,000 4.000%, 04/01/13 Series 2003 XLCA Insured ........... Aaa+/AAA++ 3,203,323
2,000,000 4.000%, 04/01/14 Series 2003 XLCA Insured ........... Aaa+/AAA++ 1,988,220
Rhode Island Health & Education Building Corp.,
Rhode Island School of Design
505,000 4.700%, 06/01/18 Series 2001 MBIA Insured ........... Aaa+/AAA++ 516,741
280,000 4.750%, 06/01/19 Series 2001 MBIA Insured ........... Aaa+/AAA++ 286,205
Rhode Island Health & Education Building Corp.,
Roger Williams University
500,000 5.125%, 11/15/11 AMBAC Insured ...................... Aaa+/AAA++ 517,980
1,000,000 5.125%, 11/15/14 Series 1996 S AMBAC Insured ........ Aaa+/AAA++ 1,035,830
1,000,000 5.000%, 11/15/18 Series 1996 S AMBAC Insured ........ Aaa+/AAA++ 1,031,750
Rhode Island Health & Educational Building Corp.,
University of Rhode Island
1,200,000 4.000%, 09/15/11 Series 2005 G AMBAC Insured ........ Aaa+/AAA++ 1,203,168
1,200,000 4.125%, 09/15/12 Series 2005 G AMBAC Insured ........ Aaa+/AAA++ 1,208,592
1,200,000 4.125%, 09/15/13 Series 2005 G AMBAC Insured ........ Aaa+/AAA++ 1,208,760
RATING
PRINCIPAL MOODY'S, S&P
AMOUNT REVENUE BONDS BONDS (CONTINUED) OR FITCH VALUE
- --------------- ------------------------------------------------------ ------------ --------------
HIGHER EDUCATION REVENUE BONDS (CONTINUED)
Rhode Island Health & Education Facilities
Authority Providence College
$ 1,000,000 4.250%, 11/01/14 XLCA Insured ....................... Aaa+/AAA++ $ 1,008,230
2,500,000 4.375%, 11/01/15 XLCA Insured ....................... Aaa+/AAA++ 2,518,425
2,500,000 4.500%, 11/01/16 XLCA Insured ....................... Aaa+/AAA++ 2,542,525
1,000,000 4.500%, 11/01/17 XLCA Insured ....................... Aaa+/AAA++ 1,012,020
--------------
Total Higher Education Revenue Bonds ............. 44,678,499
--------------
HOUSING REVENUE BONDS (0.7%)
Rhode Island Housing & Mortgage Finance Corp.
Homeowner Opportunity
1,000,000 3.750%, 10/01/13 Series 50-A MBIA Insured ........... AAA++/AAA+++ 978,150
--------------
POLLUTION CONTROL REVENUE BONDS (4.5%)
Rhode Island Clean Water Finance Agency, Water
Pollution Control Bonds
1,800,000 5.000%, 10/01/18 Series 2002 B MBIA Insured ......... Aaa+/AAA++ 1,862,694
4,765,000 4.375%, 10/01/21 Series 2002 B MBIA Insured ......... Aaa+/AAA++ 4,757,233
--------------
Total Pollution Control Revenue Bonds ............ 6,619,927
--------------
WATER AND SEWER REVENUE BONDS (9.1%)
Bristol County, Rhode Island Water Authority
750,000 5.250%, 07/01/17 Series 1997 A MBIA Insured ......... Aaa+/AAA++ 758,385
1,000,000 3.500%, 12/01/13 Series 2004 Refunding A
MBIA Insured ..................................... Aaa+/AAA++ 962,280
1,000,000 3.500%, 12/01/14 Series 2004 Refunding A
MBIA Insured ..................................... Aaa+/AAA++ 955,310
Kent County, Rhode Island Water Authority
500,000 4.000%, 07/15/12 Series 2002 A MBIA Insured ......... Aaa+/AAA++ 500,670
1,055,000 4.150%, 07/15/14 Series 2002 A MBIA Insured ......... Aaa+/AAA++ 1,059,747
Rhode Island Clean Water Protection Finance Agency
300,000 5.400%, 10/01/09 1993 Series 1993 A MBIA Insured .... Aaa+/AAA++ 310,191
500,000 4.500%, 10/01/11 1993 Series 1993 B
AMBAC Insured .................................... Aaa+/AAA++ 504,315
1,000,000 5.125%, 10/01/11 Series 1999 C MBIA Insured ......... Aaa+/AAA++ 1,026,820
500,000 4.600%, 10/01/13 Series A AMBAC Insured ............. Aaa+/AAA++ 506,120
500,000 4.750%, 10/01/14 Series A AMBAC Insured ............. Aaa+/AAA++ 508,460
1,250,000 5.400%, 10/01/15 Series A MBIA Insured .............. Aaa+/AAA++ 1,328,150
2,000,000 4.750%, 10/01/18 Series A AMBAC Insured ............. Aaa+/AAA++ 2,028,280
500,000 4.750%, 10/01/20 Series A AMBAC Insured ............. Aaa+/AAA++ 505,255
RATING
PRINCIPAL MOODY'S, S&P
AMOUNT REVENUE BONDS (CONTINUED) OR FITCH VALUE
- --------------- ------------------------------------------------------ ------------ --------------
WATER AND SEWER REVENUE BONDS (CONTINUED)
Rhode Island Water Resources Board Public
Drinking Water Protection
$ 1,500,000 4.000%, 03/01/14 MBIA Insured ....................... Aaa+/AAA++ $ 1,495,605
1,000,000 4.250%, 03/01/15 MBIA Insured ....................... Aaa+/AAA++ 1,009,210
--------------
Total Water and Sewer Revenue Bonds .............. 13,458,798
--------------
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++ 405,336
200,000 5.375%, 10/01/16 MBIA Insured ....................... Aaa+/AAA++ 202,726
State of Rhode Island Depositors Economic
Protection Corp.
500,000 6.000%, 08/01/17 Series 1992 B MBIA Insured ......... Aaa+/AAA++ 536,160
300,000 5.800%, 08/01/09 Series 1993 B MBIA Insured ......... Aaa+/AAA++ 311,718
1,045,000 5.250%, 08/01/21 Series 1993 B MBIA Insured
ETM (pre-refunded) ............................... Aaa+/AAA++ 1,090,520
--------------
Total Other Revenue Bonds ........................ 2,546,460
--------------
Total Revenue Bonds ............................ 81,056,022
--------------
Total Investments (cost $146,815,419 - note 4) ...... 100.2% 148,270,676
Other assets less liabilities ....................... (0.2) (251,967)
----- --------------
Net Assets .......................................... 100.0% $ 148,018,709
===== ==============
Rating Services:
+ Moody's Investors Service
++ Standard & Poor's
+++ Fitch
NR - Not rated by two of the three ratings 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.
CIFG - CDC IXIS Financial Guaranty
ETM - Escrowed to Maturity
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, 2007
ASSETS
Investments at value (cost $146,815,419) ............................................................... $ 148,270,676
Interest receivable .................................................................................... 1,875,422
Receivable for Fund shares sold ........................................................................ 145,674
Other assets ........................................................................................... 7,646
-------------
Total assets ........................................................................................... 150,299,418
-------------
LIABILITIES
Cash overdraft ......................................................................................... 1,324,596
Payable for Fund shares redeemed ....................................................................... 669,894
Dividends payable ...................................................................................... 148,931
Distribution and service fees payable .................................................................. 24,224
Management fee payable ................................................................................. 18,364
Accrued expenses ....................................................................................... 94,700
-------------
Total liabilities ...................................................................................... 2,280,709
-------------
NET ASSETS ................................................................................................ $ 148,018,709
=============
Net Assets consist of:
Capital Stock - Authorized 80,000,000 shares, par value $0.01 per share ................................ $ 142,781
Additional paid-in capital ............................................................................. 147,315,085
Net unrealized appreciation on investments (note 4) .................................................... 1,455,257
Accumulated net realized loss on investments ........................................................... (907,365)
Undistributed net investment income .................................................................... 12,951
-------------
$ 148,018,709
=============
CLASS A
Net Assets ............................................................................................. $ 98,749,287
=============
Capital shares outstanding ............................................................................. 9,525,494
=============
Net asset value and redemption price per share ......................................................... $ 10.37
=============
Offering price per share (100/96 of $10.37 adjusted to nearest cent) ................................... $ 10.80
=============
CLASS C
Net Assets ............................................................................................. $ 14,034,391
=============
Capital shares outstanding ............................................................................. 1,353,996
=============
Net asset value and offering price per share ........................................................... $ 10.37
=============
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) .......................................................... $ 10.37*
=============
CLASS I
Net Assets ............................................................................................. $ 826,222
=============
Capital shares outstanding ............................................................................. 79,709
=============
Net asset value, offering and redemption price per share ............................................... $ 10.37
=============
CLASS Y
Net Assets ............................................................................................. $ 34,408,809
=============
Capital shares outstanding ............................................................................. 3,318,946
=============
Net asset value, offering and redemption price per share ............................................... $ 10.37
=============
See accompanying notes to financial statements.
NARRAGANSETT INSURED TAX-FREE INCOME FUND
STATEMENT OF OPERATIONS
YEAR ENDED JUNE 30, 2007
INVESTMENT INCOME:
Interest income .............................................................. $ 6,568,129
Expenses:
Management fee (note 3) ...................................................... $ 762,636
Distribution and service fees (note 3) ....................................... 309,451
Trustees' fees and expenses (note 8) ......................................... 146,628
Transfer and shareholder servicing agent fees (note 3) ....................... 107,021
Legal fees (note 3) .......................................................... 71,107
Shareholders' reports and proxy statements ................................... 53,319
Fund accounting fees ......................................................... 47,446
Custodian fees ............................................................... 44,206
Auditing and tax fees ........................................................ 19,999
Registration fees and dues ................................................... 14,390
Insurance .................................................................... 10,675
Chief compliance officer (note 3) ............................................ 4,995
Miscellaneous ................................................................ 63,613
-----------
Total expenses ............................................................... 1,655,486
Management fee waived (note 3) ............................................... (534,974)
Expenses paid indirectly (note 6) ............................................ (8,682)
-----------
Net expenses ................................................................. 1,111,830
-------------
Net investment income ........................................................ 5,456,299
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain (loss) from securities transactions ........................ (97,580)
Change in unrealized appreciation on investments ............................. 695,973
-----------
Net realized and unrealized gain (loss) on investments ....................... 598,393
-------------
Net change in net assets resulting from operations ........................... $ 6,054,692
=============
See accompanying notes to financial statements.
NARRAGANSETT INSURED TAX-FREE INCOME FUND
STATEMENTS OF CHANGES IN NET ASSETS
YEAR ENDED YEAR ENDED
JUNE 30, 2007 JUNE 30, 2006
--------------- --------------
OPERATIONS:
Net investment income .......................................... $ 5,456,299 $ 5,463,632
Net realized gain (loss) from securities transactions .......... (97,580) (66,138)
Change in unrealized appreciation on investments ............... 695,973 (6,471,758)
------------- -------------
Change in net assets from operations ........................ 6,054,692 (1,074,264)
------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS (note 9):
Class A Shares:
Net investment income .......................................... (3,835,965) (3,880,873)
Class C Shares:
Net investment income .......................................... (443,679) (512,514)
Class I Shares:
Net investment income .......................................... (27,009) (44,086)
Class Y Shares:
Net investment income .......................................... (1,306,184) (1,170,418)
------------- -------------
Change in net assets from distributions ..................... (5,612,837) (5,607,891)
------------- -------------
CAPITAL SHARE TRANSACTIONS (note 7):
Proceeds from shares sold ...................................... 15,170,793 28,611,766
Reinvested dividends and distributions ......................... 2,561,412 2,612,391
Cost of shares redeemed ........................................ (22,978,923) (25,755,083)
------------- -------------
Change in net assets from capital share transactions ........... (5,246,718) 5,469,074
------------- -------------
Change in net assets ........................................ (4,804,863) (1,213,081)
NET ASSETS:
Beginning of period ............................................ 152,823,572 154,036,653
------------- -------------
End of period* ................................................. $ 148,018,709 $ 152,823,572
============= =============
* Includes undistributed net investment income and
distributions in excess of net investment income of: ........ $ 12,951 $ (109,035)
============= =============
See accompanying notes to financial statements.
NARRAGANSETT INSURED TAX-FREE INCOME FUND
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2007
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) ACCOUNTING PRONOUNCEMENTS: In July 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 to be implemented no later than December 31, 2007 and
is to be applied to all open tax years as of that date. At this time,
management does not believe the adoption of FIN 48 will result in any
material impact on the Fund's financial statements.
In September 2006, FASB issued FASB Statement No. 157, "Fair Value
Measurement" ("SFAS 157"), which defines fair value, establishes a
framework for measuring fair value, and expands disclosures about
fair value measurements. SFAS 157 is effective for fiscal years beginning
after November 15, 2007, and interim periods within those fiscal years.
The Fund believes adoption of SFAS 157 will have no material impact on the
Fund's financial statements.
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, 2007, the Fund incurred management fees of
$762,636 of which $534,974 was waived. The Manager has contractually undertaken
to waive fees and/or reimburse Fund expenses during the period July 1, 2006
through June 30, 2007 so that total Fund expenses would not exceed 0.85% for
Class A Shares, 1.70% for Class C Shares, 1.02% for Class I Shares or 0.70% for
Class Y Shares.
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, 2007, distribution fees on Class A Shares
amounted to $154,124, of which the Distributor retained $4,386.
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, 2007 amounted to $115,372. 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, 2007, amounted to $38,457. The total of these payments
with respect to Class C Shares amounted to $153,829, of which the Distributor
retained $38,573.
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, 2007,
these payments were made at the average annual rate of 0.35% of such net assets
amounting to $2,622 of which $1,498 related to the Plan and $1,124 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, 2007, total commissions on sales of Class A Shares amounted to $121,372, of
which the Distributor received $12,009.
c) Other Related Party Transactions:
For the year ended June 30, 2007, the Fund incurred $68,894 of legal fees
allocable to Hollyer Brady Barrett & Hines LLP ("Hollyer Brady") and its
successor, Butzel Long PC, counsel to the Fund, for legal services in
conjunction with the Fund's ongoing operations. The Secretary of the Fund was a
partner at Hollyer Brady and is a shareholder of its successor.
4. PURCHASES AND SALES OF SECURITIES
During the year ended June 30, 2007, purchases of securities and proceeds
from the sales of securities aggregated $3,586,810 and $9,039,838, respectively.
At June 30, 2007, the aggregate tax cost for all securities was
$146,802,468. At June 30, 2007, the aggregate gross unrealized appreciation for
all securities in which there is an excess of value over tax cost amounted to
$2,391,145 and aggregate gross unrealized depreciation for all securities in
which there is an excess of tax cost over value amounted to $922,937, for a net
unrealized appreciation of $1,468,208.
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, 2007, 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, 2007, 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.
7. Capital Share Transactions
Transactions in Capital Shares of the Fund were as follows:
YEAR ENDED YEAR ENDED
JUNE 30, 2007 JUNE 30, 2006
------------------------------- -------------------------------
SHARES AMOUNT SHARES AMOUNT
---------- ------------ ---------- ------------
CLASS A SHARES:
Proceeds from shares sold .............. 643,809 $ 6,762,397 1,156,856 $ 12,253,231
Reinvested distributions ............... 203,145 2,134,004 204,800 2,162,577
Cost of shares redeemed ................ (1,304,721) (13,685,665) (1,191,694) (12,588,656)
---------- ------------ ---------- ------------
Net change ..................... (457,767) (4,789,264) 169,962 1,827,152
---------- ------------ ---------- ------------
CLASS C SHARES:
Proceeds from shares sold .............. 151,378 1,590,583 320,132 3,381,363
Reinvested distributions ............... 16,970 178,232 23,511 248,414
Cost of shares redeemed ................ (420,314) (4,406,868) (501,280) (5,288,954)
---------- ------------ ---------- ------------
Net change ..................... (251,966) (2,638,053) (157,637) (1,659,177)
---------- ------------ ---------- ------------
CLASS I SHARES:
Proceeds from shares sold .............. 46,414 490,000 42,703 454,728
Reinvested distributions ............... 2,570 27,008 2,462 25,917
Cost of shares redeemed ................ (42,870) (451,484) (73,331) (768,550)
---------- ------------ ---------- ------------
Net change ..................... 6,114 65,524 (28,166) (287,905)
---------- ------------ ---------- ------------
CLASS Y SHARES:
Proceeds from shares sold .............. 601,991 6,327,813 1,182,830 12,522,444
Reinvested distributions ............... 21,137 222,168 16,650 175,483
Cost of shares redeemed ................ (422,081) (4,434,906) (675,731) (7,108,923)
---------- ------------ ---------- ------------
Net change ..................... 201,047 2,115,075 523,749 5,589,004
---------- ------------ ---------- ------------
Total transactions in Fund
shares ................................. (502,572) $ (5,246,718) 507,908 $ 5,469,074
========== ============ ========== ============
8. TRUSTEES' FEES AND EXPENSES
At June 30, 2007 there were 7 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, 2007 was $109,500, 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, 2007, such meeting-related expenses
amounted to $37,128.
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 undistributed net investment income in the
amount of $278,524 and debited additional paid-in capital in the amount of
$278,524 at June 30, 2007. This adjustment had no impact on the Fund's aggregate
net assests at June 30, 2007. Further, a small portion of the dividends may,
under some circumstances, be subject to taxes at ordinary income rates.
At June 30, 2007, the Fund had a capital loss carryover of $879,705 of
which $592,992 expires on June 30, 2009, $111,495 expires on June 30, 2013, and
$175,218 expires on June 30, 2015. 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, 2007 there were post-October capital loss deferrals
of $27,660 which will be recognized in the following year.
Tax character of distributions:
YEAR ENDED JUNE 30,
----------------------------
2007 2006
----------- -----------
Net tax-exempt income $ 5,334,313 $ 5,431,934
Ordinary income 278,524 175,957
----------- -----------
$ 5,612,837 $ 5,607,891
=========== ===========
As of June 30, 2007, the components of distributable earnings on a tax
basis were as follows:
Undistributed tax-exempt income $ 148,931
Accumulated net realized loss (879,705)
Unrealized appreciation 1,468,208
Post-October capital loss deferrals (27,660)
Other temporary differences (148,931)
-----------
$ 560,843
===========
At June 30, 2007, the difference between book basis and tax basis
unrealized appreciation was attributable primarily to the treatment of accretion
of discounts and amortization of premiums.
10. RECENT DEVELOPMENTS
In late May, 2007, the U. S. Supreme Court agreed to hear an appeal in
DEPARTMENT OF REVENUE OF KENTUCKY V. DAVIS, a case concerning the
constitutionality of differential tax treatment for interest from in-state vs.
out-of-state municipal securities, a practice which is common among the majority
of the states. If the U.S. Supreme Court affirms the prior decision, Kentucky
(and all other states that differentially tax interest on municipal bonds) may
then be required to accord equal income tax treatment to all municipal bond
interest. While it is impossible to predict the consequences of such an outcome,
they may include effects on the net asset values of the shares, and/or on the
tax treatment of the dividends, of some or all single-state municipal bond
funds, including the Fund. The case is expected to be heard and decided during
the U.S. Supreme Court's October 2007 - April 2008 term, with a decision likely
to be handed down in 2008.
NARRAGANSETT INSURED TAX-FREE INCOME FUND
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
Class A
-------------------------------------------------------------------------------
Year Ended June 30,
-------------------------------------------------------------------------------
2007 2006 2005 2004 2003
----------- ----------- ----------- ----------- -----------
Net asset value, beginning of period ......... $ 10.34 $ 10.79 $ 10.49 $ 10.92 $ 10.47
----------- ----------- ----------- ----------- -----------
Income (loss) from investment operations:
Net investment income + ................ 0.38 0.38 0.40 0.41 0.42
Net gain (loss) on securities
(both realized and unrealized) .... 0.04 (0.44) 0.31 (0.42) 0.47
----------- ----------- ----------- ----------- -----------
Total from investment operations ....... 0.42 (0.06) 0.71 (0.01) 0.89
----------- ----------- ----------- ----------- -----------
Less distributions (note 9):
Dividends from net investment income ... (0.39) (0.39) (0.41) (0.42) (0.44)
----------- ----------- ----------- ----------- -----------
Net asset value, end of period ............... $ 10.37 $ 10.34 $ 10.79 $ 10.49 $ 10.92
=========== =========== =========== =========== ===========
Total return (not reflecting sales charge) ... 4.10% (0.56)% 6.81% (0.10)% 8.64%
Ratios/supplemental data
Net assets, end of period (in thousands) $ 98,749 $ 103,222 $ 105,910 $ 101,413 $ 106,887
Ratio of expenses to average net assets 0.68% 0.67% 0.58% 0.53% 0.51%
Ratio of net investment income to
average net assets ................ 3.63% 3.61% 3.68% 3.82% 3.96%
Portfolio turnover rate ................ 2.37% 7.25% 2.20% 8.61% 11.74%
The expense and net investment income ratios without the effect of the waiver of a portion of the management fee and the expense
reimbursement were (note 3):
Ratio of expenses to average net assets 1.03% 1.03% 0.96% 0.91% 0.88%
Ratio of net investment income to
average net assets ................ 3.28% 3.25% 3.31% 3.44% 3.59%
The expense ratios after giving effect to the waiver, reimbursement and expense offset for uninvested cash balances were:
Ratio of expenses to average net assets 0.68% 0.67% 0.57% 0.52% 0.48%
Class C
-------------------------------------------------------------------------------
Year Ended June 30,
-------------------------------------------------------------------------------
2007 2006 2005 2004 2003
----------- ----------- ----------- ----------- -----------
Net asset value, beginning of period ......... $ 10.34 $ 10.79 $ 10.48 $ 10.92 $ 10.47
----------- ----------- ----------- ----------- -----------
Income (loss) from investment operations:
Net investment income + ................ 0.30 0.29 0.31 0.32 0.33
Net gain (loss) on securities
(both realized and unrealized) .... 0.03 (0.44) 0.31 (0.43) 0.47
----------- ----------- ----------- ----------- -----------
Total from investment operations ....... 0.33 (0.15) 0.62 (0.11) 0.80
----------- ----------- ----------- ----------- -----------
Less distributions (note 9):
Dividends from net investment income ... (0.30) (0.30) (0.31) (0.33) (0.35)
----------- ----------- ----------- ----------- -----------
Net asset value, end of period ............... $ 10.37 $ 10.34 $ 10.79 $ 10.48 $ 10.92
=========== =========== =========== =========== ===========
Total return (not reflecting sales charge) ... 3.22% (1.40)% 6.01% (1.04)% 7.72%
Ratios/supplemental data
Net assets, end of period (in thousands) $ 14,034 $ 16,602 $ 19,031 $ 17,901 $ 22,506
Ratio of expenses to average net assets 1.53% 1.52% 1.43% 1.38% 1.35%
Ratio of net investment income to
average net assets ................ 2.78% 2.76% 2.83% 2.98% 3.10%
Portfolio turnover rate ................ 2.37% 7.25% 2.20% 8.61% 11.74%
The expense and net investment income ratios without the effect of the waiver of a portion of the management fee and the expense
reimbursement were (note 3):
Ratio of expenses to average net assets 1.88% 1.88% 1.81% 1.76% 1.72%
Ratio of net investment income to
average net assets ................ 2.43% 2.40% 2.45% 2.60% 2.73%
The expense ratios after giving effect to the waiver, reimbursement and expense offset for uninvested cash balances were:
Ratio of expenses to average net assets 1.53% 1.52% 1.42% 1.37% 1.33%
- ----------
+ 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,
-------------------------------------------------------------------------------
2007 2006 2005 2004 2003
----------- ----------- ----------- ----------- -----------
Net asset value, beginning of period ......... $ 10.34 $ 10.79 $ 10.48 $ 10.91 $ 10.47
----------- ----------- ----------- ----------- -----------
Income from investment operations:
Net investment income+ ................. 0.38 0.37 0.39 0.41 0.42
Net gain (loss) on securities (both
realized and unrealized) .......... 0.03 (0.44) 0.32 (0.42) 0.46
----------- ----------- ----------- ----------- -----------
Total from investment operations ....... 0.41 (0.07) 0.71 (0.01) 0.88
----------- ----------- ----------- ----------- -----------
Less distributions (note 9):
Dividends from net investment income ... (0.38) (0.38) (0.40) (0.42) (0.44)
----------- ----------- ----------- ----------- -----------
Net asset value, end of period ............... $ 10.37 $ 10.34 $ 10.79 $ 10.48 $ 10.91
=========== =========== =========== =========== ===========
Total return (not reflecting sales charge) ... 3.96% (0.67)% 6.89% (0.12)% 8.52%
Ratios/supplemental data
Net assets, end of period (in thousands) $ 826 $ 761 $ 1,098 $ 790 $ 449
Ratio of expenses to average net assets 0.81% 0.79% 0.58% 0.53% 0.52%
Ratio of net investment income to
average net assets ................ 3.50% 3.48% 3.68% 3.82% 3.95%
Portfolio turnover rate ................ 2.37% 7.25% 2.20% 8.61% 11.74%
The expense and net investment income ratios without the effect of the waiver of a portion of the management fee and the expense
reimbursement were (note 3):
Ratio of expenses to average net assets 1.15% 1.15% 0.96% 0.91% 0.89%
Ratio of net investment income to
average net assets ................ 3.15% 3.12% 3.30% 3.44% 3.58%
The expense ratios after giving effect to the waiver, reimbursement and expense offset for uninvested cash balances were:
Ratio of expenses to average net assets 0.80% 0.79% 0.57% 0.52% 0.49%
Class Y
-------------------------------------------------------------------------------
Year Ended June 30,
-------------------------------------------------------------------------------
2007 2006 2005 2004 2003
----------- ----------- ----------- ----------- -----------
Net asset value, beginning of period ......... $ 10.34 $ 10.79 $ 10.49 $ 10.92 $ 10.47
----------- ----------- ----------- ----------- -----------
Income from investment operations:
Net investment income+ ................. 0.40 0.40 0.41 0.43 0.45
Net gain (loss) on securities (both
realized and unrealized) .......... 0.04 (0.44) 0.31 (0.43) 0.45
----------- ----------- ----------- ----------- -----------
Total from investment operations ....... 0.44 (0.04) 0.72 -- 0.90
----------- ----------- ----------- ----------- -----------
Less distributions (note 9):
Dividends from net investment income ... (0.41) (0.41) (0.42) (0.43) (0.45)
----------- ----------- ----------- ----------- -----------
Net asset value, end of period ............... $ 10.37 $ 10.34 $ 10.79 $ 10.49 $ 10.92
=========== =========== =========== =========== ===========
Total return (not reflecting sales charge) ... 4.25% (0.40)% 6.98% 0.03% 8.80%
Ratios/supplemental data
Net assets, end of period (in thousands) $ 34,409 $ 32,239 $ 27,998 $ 22,113 $ 18,193
Ratio of expenses to average net assets 0.53% 0.52% 0.43% 0.38% 0.36%
Ratio of net investment income to
average net assets ................ 3.77% 3.76% 3.83% 3.97% 4.10%
Portfolio turnover rate ................ 2.37% 7.25% 2.20% 8.61% 11.74%
The expense and net investment income ratios without the effect of the waiver of a portion of the management fee and the expense
reimbursement were (note 3):
Ratio of expenses to average net assets 0.87% 0.88% 0.81% 0.76% 0.73%
Ratio of net investment income to
average net assets ................ 3.43% 3.39% 3.45% 3.59% 3.73%
The expense ratios after giving effect to the waiver, reimbursement and expense offset for uninvested cash balances were:
Ratio of expenses to average net assets 0.52% 0.52% 0.42% 0.37% 0.33%
- ----------
+ 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)
David A. Duffy Trustee Chairman, Rhode Island Convention Center 1 Citizens Bank of Rhode Island
North Kingstown, RI since 1995 Authority since 2003; retired Founder, and Connecticut since 1999;
(08/07/39) formerly President, Duffy & Shanley, Delta Dental of Rhode Island
Inc., a marketing communications firm, since 2004.
1973-2003; Transition Chairman for Gov.
Donald Carcieri (R.I.); past National
Chairman, National Conference for
Community and Justice (NCCJ); Past
Chair, Providence College President's
Council; Past Vice Chair, Providence
College Board of Trustees; officer or
director of numerous civic and
non-profit organizations.
Diana P. Herrmann Trustee since 2005 Vice Chair and Chief Executive Officer 12 ICI Mutual Insurance Company
New York, NY and President of Aquila Management Corporation,
(02/25/58) since 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.
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.)
- ----------------- ---------- ------------------- ---------- ---------------------
NON-INTERESTED TRUSTEES
William J. Nightingale Chair of Retired; formerly Chairman, founder 2 Ring's End, Inc.
Rowayton, CT the Board (1975) and Senior Advisor until 2000 of
(09/16/29) of Trustees since Nightingale & Associates, L.L.C., a
2005 and Trustee general management consulting firm
since 1992 focusing on interim management,
divestitures, turnaround of troubled
companies, corporate restructuring and
financial advisory services.
Timothy J. Leach Trustee since 2005 UC Berkeley Haas School of Business 3 None
Orinda, CA Executive Education, Lecturer since
(08/28/55) 2006; Regional Chief Executive Officer,
US Trust Company, N.A., 2005-2006;
Executive Vice President & 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; CEO,
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 Trust,
Louisville, KY since November 2002; Professor of Pikeville, KY and Texas
(11/14/48) Economics, University of Louisville, Roadhouse Inc.
1999-present; Kentucky Governor's
Senior 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
TRUSTEES EMERITUS(6)
Lacy B. Herrmann Founder and Founder and Chairman of the Board, N/A N/A
New York, NY Chairman Emeritus Aquila Management Corporation, the
(05/12/29) since 2005; sponsoring organization and parent of
Chairman of the the Manager or Administrator and/or
Board of Trustees, Adviser or Sub-Adviser to each fund of
1992-2005 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.
Vernon R. Alden Trustee Emeritus Retired; former director or trustee of N/A N/A
Boston, MA since 2006 various Fortune 500 companies, including
(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.
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.)
- ----------------- ---------- ------------------- ---------- ---------------------
OFFICERS
Charles E. Childs, III Executive Vice Executive Vice President of all funds in N/A N/A
New York, NY President the Aquila Group of Funds(SM) and the
(04/01/57) since 2003 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.
Stephen J. Caridi Senior Vice Vice President of the Distributor since N/A N/A
New York, NY President 1995; Vice President, Hawaiian Tax-Free
(05/06/61) since 1998 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; Vice
President, Aquila Rocky Mountain
Equity Fund since 2006.
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 Distributor since 2004, Compliance
since 2000 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 Chief Financial Officer of the Aquila N/A N/A
New York, NY Officer since 2003 Group of Funds(SM) since 2003 and
(11/06/56) and Treasurer Treasurer since 2000.
since 2000
Edward M. W. Hines Secretary Partner and then shareholder of legal N/A N/A
New York, NY since 1992 counsel to the Trust/Fund, Hollyer Brady
(12/16/39) Barrett & Hines LLP since 1989 and
thereafter its successor, Butzel
Long, since 2007; Secretary of the
Aquila Group of Funds(SM).
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 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, Senior Counsel,
since January 1, 2007; Assistant
Secretary - Advisor to the Board,
Narragansett Insured Tax-Free
Income Fund, since 2005, Trustee
2002-2005; director or trustee of
various educational, civic and
charitable organizations, including
Greater Providence Chamber of
Commerce, Ocean State Charities
Trust, Memorial Hospital of Rhode
Island, and The Pawtucket
Foundation.
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).
(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) Mr. Duffy is an interested person as a director of the Sub-Adviser. 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. Ms. Herrmann is the daughter of Lacy B. Herrmann, the Founder and
Chairman Emeritus of the Fund.
(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 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) A Trustee 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,
2007 and held for the six months ended June 30, 2007.
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".
SIX MONTHS ENDED JUNE 30, 2007
ACTUAL
TOTAL RETURN BEGINNING ENDING EXPENSES
WITHOUT ACCOUNT ACCOUNT PAID DURING
SALES CHARGES(1) VALUE VALUE THE PERIOD(2)
- --------------------------------------------------------------------------------
Class A 0.15% $1,000.00 $1,001.50 $3.23
- --------------------------------------------------------------------------------
Class C (0.18)% $1,000.00 $ 998.20 $7.43
- --------------------------------------------------------------------------------
Class I 0.18% $1,000.00 $1,001.80 $3.82
- --------------------------------------------------------------------------------
Class Y 0.22% $1,000.00 $1,002.20 $2.48
- --------------------------------------------------------------------------------
(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 0.65%, 1.50%, 0.77%
AND 0.50% 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).
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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.
SIX MONTHS ENDED JUNE 30, 2007
HYPOTHETICAL
ANNUALIZED BEGINNING ENDING EXPENSES
TOTAL ACCOUNT ACCOUNT PAID DURING
RETURN VALUE VALUE THE PERIOD(1)
- --------------------------------------------------------------------------------
Class A 5.00% $1,000.00 $1,021.57 $3.26
- --------------------------------------------------------------------------------
Class C 5.00% $1,000.00 $1,017.36 $7.50
- --------------------------------------------------------------------------------
Class I 5.00% $1,000.00 $1,020.98 $3.86
- --------------------------------------------------------------------------------
Class Y 5.00% $1,000.00 $1,022.32 $2.51
- --------------------------------------------------------------------------------
(1) EXPENSES ARE EQUAL TO THE ANNUALIZED EXPENSE RATIO OF 0.65%, 1.50%, 0.77%
AND 0.50% 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).
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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, 2007 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.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
FEDERAL TAX STATUS OF DISTRIBUTIONS (UNAUDITED)
This information is presented in order to comply with a requirement of the
Internal Revenue Code AND NO ACTION ON THE PART OF SHAREHOLDERS IS REQUIRED.
For the fiscal year ended June 30, 2007, $5,334,313 of dividends paid by
Narragansett Insured Tax-Free Income Fund, constituting 95.04% of total
dividends paid during the fiscal year ended June 30, 2007, were exempt-interest
dividends and the balance was ordinary dividend income.
Prior to January 31, 2007, shareholders were mailed the appropriate tax
form(s) which contained information on the status of distributions paid for the
2006 CALENDAR YEAR.
Prior to January 31, 2008, shareholders will be mailed the appropriate tax
form(s) which will contain information on the status of distributions paid for
the 2007 CALENDAR YEAR.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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 the 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 was 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.
- --------------------------------------------------------------------------------
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
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
TRANSFER AND SHAREHOLDER SERVICING AGENT
PFPC INC.
101 Sabin Street
Pawtucket, RI 02860
CUSTODIAN
JPMORGAN CHASE BANK, N.A.
1111 Polaris Parkway
Columbus, Ohio 43240
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, 2007 (the end of the reporting period) the
Trust has adopted a code of ethics that applies to the Trust'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 Trust'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 Trust's Code of Ethics that applies to the
Trust'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 Trust'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 professional services
rendered by the principal accountant for the audit of the Registrant's
annual financial statements were $16,000 in 2006 and $16,000 in 2007.
b) Audit Related Fees - There were no amounts billed for audit-related
fees over the past two years.
c) Tax Fees - The Registrant was billed by the principal accountant
$3,000 and $3,000 in 2006 and 2007, respectively, for return preparation
and tax compliance.
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 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable.
ITEM 6. SCHEDULE OF INVESTMENTS.
Included in Item 1 above
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR
CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
Not applicable.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
The Board of Directors of the Registrant has adopted a Nominating
Committee Charter which provides that the Nominating Committee (the 'Committee')
may consider and evaluate nominee candidates properly submitted by shareholders
if a vacancy among the Independent Trustees of the Registrant occurs and if,
based on the Board's then current size, composition and structure, the Committee
determines that the vacancy should be filled. The Committee will consider
candidates submitted by shareholders on the same basis as it considers and
evaluates candidates recommended by other sources. A copy of the qualifications
and procedures that must be met or followed by shareholders to properly submit
a nominee candidate to the Committee may be obtained by submitting a request
in writing to the Secretary of the Registrant.
ITEM 11. CONTROLS AND PROCEDURES.
(a) Based on their evaluation of the registrant's disclosure controls and
procedures (as defined in Rule 30a-2(c) under the Investment Company Act of
1940) as of a date within 90 days of the filing of this report, the registrant's
chief financial and executive officers have concluded that the disclosure
controls and procedures of the registrant are appropriately designed to ensure
that information required to be disclosed in the registrant's reports that are
filed under the Securities Exchange Act of 1934 are accumulated and communicated
to registrant's management, including its principal executive officer(s) and
principal financial officer(s), to allow timely decisions regarding required
disclosure and is recorded, processed, summarized and reported, within the time
periods specified in the rules and forms adopted by the Securities and Exchange
Commission.
(b) There have been no significant changes in registrant's internal controls or
in other factors that could significantly affect registrant's internal controls
subsequent to the date of the most recent evaluation, including no significant
deficiencies or material weaknesses that required corrective action.
ITEM 12. 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, 2007
By: /s/ Joseph P. DiMaggio
- - - -----------------------------------
Chief Financial Officer and Treasurer
September 7, 2007
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, 2007
By: /s/ Joseph P. DiMaggio
- - - -----------------------------------
Joseph P. DiMaggio
Chief Financial Officer and Treasurer
September 7, 2007
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.