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: 6/30/09
Date of reporting period: 6/30/09
FORM N-CSR
ITEM 1. REPORTS TO STOCKHOLDERS.
ANNUAL
REPORT
JUNE 30, 2009
A TAX-FREE INCOME INVESTMENT
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GROUP OF FUNDS: ONE OF THE
AN EAGLE'S HEAD] AQUILA GROUP OF FUNDS (R)
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SERVING RHODE ISLAND INVESTORS FOR MORE THAN 15 YEARS
NARRAGANSETT INSURED TAX-FREE INCOME FUND
"SOME COMFORT IN UNSETTLING TIMES"
August, 2009
Dear Fellow Shareholder:
We know it. And, you know it too. The United States has seen better
economic days.
Like it or not, unpleasant market cycles do occur periodically. This tends
to distract some people's focus from the longer-term objective that influenced
their investment decision in the first place.
Our shareholder and financial professional surveys have consistently
indicated over the years that the original investment objective and decision for
investors in Narragansett Insured Tax-Free Income Fund, has generally been
aligned with the Fund's objective: to seek as high a level of current income
exempt from Rhode Island state and regular Federal income taxes as is consistent
with preservation of capital.
How does the Fund seek to fulfill its and your investment objective?
Perhaps the single most significant matter we wish to emphasize is the
element of professional management that we have continually sought to bring to
bear on your behalf. The job of investment managers is to be keen observers of
the scene, setting aside emotions. This is particularly true in the constantly
changing environment that exists today. One must make every effort to be as
objective as possible, adjusting the portfolio of investments as necessary, to
try to be of most benefit to shareholders.
Management of Narragansett Insured Tax-Free Income Fund and its municipal
bond portfolio management team believe that when you are dealing with
investments, quality counts.
As you may recall, there are nine separate credit ratings assignable to
municipal securities, ranging from the most conservative to the highly
speculative. For protection of investors' capital, the Fund's prospectus
intentionally limits its purchases to securities rated (or, if unrated, deemed
by the Investment Sub-Adviser to be) investment grade quality - that is rated
within the four highest credit ratings: AAA, AA, A, AND BBB.
NOT A PART OF THE ANNUAL REPORT
In general, the higher the quality rating of a municipal security, the
greater or more reliable the cash flow there is for the municipality to cover
interest and principal payments when due on the security. While exaggerated
price changes may occur in emotionally charged securities markets, they normally
are not reflective of a municipal issuer's capability to pay interest and
principal in a timely manner on any particular security. It is the cash flow and
solidness of the municipal issuer that count - and this is reflected in the
quality level of the credit rating.
We can assure you that the Fund's portfolio management team pays
considerable attention to this factor before any security is purchased for the
portfolio as well as in conducting continuing analysis and evaluation with each
and every security once it is a part of the Fund's investment portfolio. It is
additionally important for you to know that, with any insured securities, our
portfolio management team has always sought to look beyond the insurance to the
credit quality of the underlying issuer rather than relying upon any insurance.
We fully recognize that the current times can be unsettling. However, we
hope that you are comforted to know that we believe you have a knowledgeable
team of financial experts, which has continually sought to carefully choose the
securities in the Fund's portfolio and seeks to continuously monitor your
investment in Narragansett Insured Tax-Free Income Fund.
Sincerely,
[PHOTO OMITTED]
/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
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NARRAGANSETT INSURED TAX-FREE INCOME FUND
ANNUAL REPORT
MANAGEMENT DISCUSSION
Narragansett Insured Tax-Free Income Fund (the "Fund") seeks to provide as high
a level of double tax-free income as possible while staying within the
intentionally self-imposed quality restraints. The Fund strives to accomplish
this by generally purchasing only those municipal securities rated AAA by a
nationally renowned credit rating service. 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. We strive to
maintain a maximum average maturity profile of less than 12 years 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, 2009
fiscal year-end, the portfolio had an average maturity of 8.6 years.
Equity markets have performed admirably in the most recent quarter as all major
U.S. equity markets are feeling some relief as the economy shows some signs of
recovery. As of June 30, 2009, the Dow Jones Industrials, S&P 500, and NASDAQ
indices had found their way back from the brink and posted year-to-date returns
of -2.01%, 3.16%, and 16.98%, respectively. International stock markets, having
not fared well in 2008, have bounced back as well during the first half of 2009.
The Europe, Australasia, and Far East (EAFE) Index has risen by 8.09%
year-to-date besting most of the U.S. market. The latest jobs data shows that
job losses continue to rise as the unemployment rate nationally has reached
9.5%. Although the unemployment rate is a lagging indicator, it is generally
expected that the rate will move higher over the next few months before leveling
off. In the near term, the Federal government fiscal stimulus is expected to
offset some of the weakness of the consumer sector. However, the fiscal stimulus
has been slow to arrive and, in our estimate, will not likely have an impact
upon the U.S. economy until 2010.
With the amount of monetary and fiscal stimulus being introduced, we believe
inflation appears to be on the horizon. The main concern as a fixed income
portfolio manager is with both monetary and fiscal stimulus-when does inflation
kick in and when does it end? We feel that the full effect of both forms of
stimulus have yet to be felt in higher prices but expect that within the next
year or so we will begin to feel the effects of inflation. The Federal Reserve
(the "Fed") has brought the Federal Funds target rate to 0.00% - 0.25% and
expects this range to be supported for quite some time. In addition, the
quantitative easing the Fed has provided is unprecedented and concerns abound
that monetary policy may prove difficult to maneuver once the Fed must provide a
less accommodating stance. The markets have moved in sympathy with the yield
curve, steepening in anticipation of higher inflation. If you leave out food and
energy, consumer inflation numbers look reasonable in our view. Producer prices
appear ominous to us but that has yet to translate into higher consumer prices.
MANAGEMENT DISCUSSION (CONTINUED)
While the Fed appears to be jawboning the policy tightening theme, U.S.
Treasuries are beginning to digest the latest market data that predicts a more
protracted economic downturn. In addition, the Fed has increased its purchases
of U.S. Treasury and U.S. Agency securities, keeping intermediate and
longer-term rates low. The fiscal stimulus needed to fund the bailout and
stimulus programs depends on the U.S. Treasury continuing to issue securities to
fund these massive programs. Ultimately, buyers will require a higher yield to
invest in these securities. As the U.S. continues in recession, foreign buyers
will need to maintain their appetite for U.S. debt in order to keep interest
rates in check. Should foreign appetite for U.S. bonds weaken, interest rates
would be expected to rise further.
The average annual return for the Fund's Class A shares for the full year ending
June 30, 2009 was 4.30%. This was below the 6.73% return of the Barclays Capital
U.S. Treasury Index for the same period. Returns during this period for the Dow,
S&P 500, and NASDAQ were -22.99%, -26.21%, and -19.13%, respectively. Returns
for the Fund were somewhat volatile during the latter half of 2008 as the
municipal market in general was rocked by the auction-rate securities debacle
and a "flight to quality" towards the end of 2008. Municipal market returns for
the first half of 2009 were impressive as investors took advantage of higher
municipal yields relative to other fixed income instruments.
As has always been the case, it is most important to look at the underlying
credit rating(s) when buying bonds for the portfolio. Insurance is a secondary
factor that can provide additional liquidity and safety to ensure timely payment
of interest and the ultimate payment of principal. As your locally-based
portfolio managers, we do not rely solely on insurance. Rather, we use our
knowledge of the city, town, or project in which we are investing. This should
be of additional comfort to you, our shareholders, particularly during these
uncertain times.
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 Fund shareholders.
The Fund's investment sub-adviser intends to continue to oversee the portfolio
with a strong emphasis on achieving a balance between share price stability,
acceptable double tax-free income return, and the highest standards of credit
quality.
PERFORMANCE REPORT
The following graph illustrates the value of $10,000 invested in the Class
A shares of Narragansett Insured Tax-Free Income Fund for the 10-year period
ended June 30, 2009 as compared with the Barclays Capital Quality Intermediate
Municipal Bond Index (the "Barclays Capital Index") (formerly known as 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 Barclays Capital Index does not include any operating expenses
nor sales charges and being nationally oriented, does not reflect state specific
bond market performance for the limited number of states in which the
Narragansett Insured Tax-Free Income Fund may invest.
[Graphic of a line chart with the following information:]
NITFIF NITFIF
Cost of Fund Class A Shares Fund Class A Shares Barclays
Living Index no sales charge with sales charge Capital Index
6/99 10,000 10,000 9,600 10,000
6/00 10,373 10,217 9,812 10,403
6/01 10,710 11,213 10,768 11,322
6/02 10,824 11,881 11,410 12,110
6/03 11,053 12,966 12,451 13,057
6/04 11,414 12,833 12,324 13,102
6/05 11,703 13,761 13,215 13,807
6/06 12,208 13,662 13,120 13,854
6/07 12,536 14,222 13,657 14,434
6/08 13,166 14,773 14,187 15,214
6/09 12,978 15,465 14,821 16,238
AVERAGE ANNUAL TOTAL RETURN
FOR PERIODS ENDED JUNE 30, 2009
----------------------------------------
SINCE
1 YEAR 5 YEARS 10 YEARS INCEPTION
------ ------- -------- ---------
Class A (commenced operations on 9/10/92)
With Maximum Sales Charge ..................... 0.16% 2.85% 4.03% 4.88%
Without Sales Charge .......................... 4.30 3.70 4.46 5.14
Class C (commenced operations on 5/01/96)
With CDSC ..................................... 2.39 2.85 3.57 3.85
Without CDSC .................................. 3.42 2.85 3.57 3.85
Class I (commenced operations on 11/04/98)
No Sales Charge ............................... 4.17 3.61 4.40 4.05
Class Y (commenced operations on 5/01/96)
No Sales Charge ............................... 4.46 3.86 4.61 4.97
Barclays Capital Index .......................... 6.73 4.39 4.97 5.27* (Class A)
4.32** (Class C&Y)
4.63+ (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 5/01/96.
+ From commencement of operations on 11/04/98.
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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, 2009 and the related statement of operations for the year
then ended, the statements of changes in net assets for each of the two years in
the period then ended, and the financial highlights for each of the four 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 the year ended June 30, 2005 were
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, 2009, 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, 2009, the results of
its operations for the year then ended, the changes in its net assets for each
of the two years in the period then ended, and the financial highlights for each
of the four 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 28, 2009
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NARRAGANSETT INSURED TAX-FREE INCOME FUND
SCHEDULE OF INVESTMENTS
JUNE 30, 2009
RATING
PRINCIPAL MOODY'S, S&P
AMOUNT GENERAL OBLIGATION BONDS (38.6%) OR FITCH VALUE
- --------------- ------------------------------------------------------ ------------ ------------
Bristol, Rhode Island
$ 2,200,000 4.000%, 02/15/26 Assured Guaranty Insured ............ Aa2/AAA/NR $ 2,210,406
2,500,000 4.375%, 02/15/29 Assured Guaranty Insured ............ Aa2/AAA/NR 2,526,300
Coventry, Rhode Island
550,000 5.000%, 11/01/16 AMBAC Insured ....................... A1/NR/NR 577,049
550,000 5.000%, 11/01/17 AMBAC Insured ....................... A1/NR/NR 574,651
Cranston, Rhode Island
1,000,000 4.250%, 04/01/18 National-re Insured ................. Baa1/A/BBB+ 1,019,320
1,000,000 4.250%, 04/01/19 National-re Insured ................. Baa1/A/BBB+ 1,008,700
1,000,000 4.300%, 04/01/20 National-re Insured ................. Baa1/A/BBB+ 1,002,850
250,000 5.000%, 02/15/22 FSA Insured ......................... Aa3/AAA/AA+ 255,242
1,000,000 4.500%, 04/01/23 National-re Insured ................. Baa1/A/BBB+ 1,010,360
250,000 5.000%, 02/15/24 FSA Insured ......................... Aa3/AAA/AA+ 252,752
2,455,000 4.625%, 07/01/25 FSA Insured ......................... Aa3/AAA/AA+ 2,418,175
1,500,000 4.500%, 04/01/26 National-re Insured ................. Baa1/A/BBB+ 1,468,815
Cumberland, Rhode Island
250,000 4.000%, 02/01/14 National-re FGIC Insured ............ A3/A/NR 263,075
250,000 4.000%, 02/01/15 National-re FGIC Insured ............ A3/A/NR 259,775
250,000 4.000%, 02/01/16 National-re FGIC Insured ............ A3/A/NR 257,885
250,000 4.100%, 02/01/17 National-re FGIC Insured ............ A3/A/NR 257,955
1,000,000 4.250%, 08/01/17 FSA Insured ......................... Aa3/AAA/AA+ 1,086,740
250,000 4.150%, 02/01/18 National-re FGIC Insured ............ A3/A/NR 257,265
600,000 4.250%, 08/01/18 FSA Insured ........................ Aa3/AAA/AA+ 648,258
1,255,000 5.000%, 10/01/18 National-re Insured ................. A3/AA/NR 1,289,086
1,040,000 5.200%, 10/01/21 National-re Insured ................. A3/A/NR 1,067,498
Lincoln, Rhode Island
1,000,000 4.500%, 08/01/24 National-re Insured ................. Aa3/NR/AA- 1,041,130
1,275,000 4.500%, 08/01/25 National-re Insured ................. Aa3/NR/AA- 1,321,040
2,000,000 4.500%, 08/01/26 National-re Insured ................. Aa3/NR/AA- 2,062,240
New Shoreham, Rhode Island
245,000 4.000%, 11/15/15 AMBAC Insured ....................... NR/AA/NR 254,036
255,000 4.250%, 11/15/16 AMBAC Insured ....................... NR/AA/NR 264,606
270,000 4.250%, 11/15/17 AMBAC Insured ....................... NR/AA/NR 279,385
910,000 4.800%, 04/15/18 AMBAC Insured ....................... NR/AA/NR 946,364
285,000 4.500%, 11/15/18 AMBAC Insured ....................... NR/AA/NR 295,961
1,105,000 5.000%, 04/15/22 AMBAC Insured ....................... NR/AA/NR 1,143,377
RATING
PRINCIPAL MOODY'S, S&P
AMOUNT GENERAL OBLIGATION BONDS (CONTINUED) OR FITCH VALUE
- --------------- ------------------------------------------------------ ------------ ------------
Newport, Rhode Island
$ 1,000,000 4.500%, 11/01/15 AMBAC Insured ....................... Aa3/NR/NR $ 1,046,110
1,000,000 4.750%, 11/01/18 AMBAC Insured ....................... Aa3/NR/NR 1,036,800
800,000 5.000%, 11/01/20 AMBAC Insured ....................... Aa3/NR/NR 829,312
North Kingstown, Rhode Island
500,000 3.750%, 10/01/12 National-re FGIC Insured ............ Aa3/AA/NR 535,565
North Providence, Rhode Island
500,000 4.700%, 09/15/14 FSA Insured ......................... Aa3/AAA/AA+ 523,630
500,000 3.650%, 10/15/14 FSA Insured ......................... Aa3/AAA/AA+ 523,785
500,000 3.750%, 10/15/15 FSA Insured ......................... Aa3/AAA/AA+ 516,345
250,000 4.000%, 10/15/17 FSA Insured ......................... Aa3/AAA/AA+ 256,412
Pawtucket, Rhode Island
250,000 4.400%, 09/15/10 AMBAC Insured ....................... A3/NR/NR 257,652
910,000 4.000%, 04/15/14 AMBAC Insured ....................... A3/NR/BBB+ 942,132
Providence, Rhode Island
700,000 5.500%, 01/15/11 FSA Insured ......................... Aa3/AAA/AA+ 700,140
500,000 5.000%, 07/15/14 FSA Insured ......................... Aa3/AAA/AA+ 566,000
1,000,000 5.000%, 01/15/16 FGIC Insured (pre-refunded) ......... A3/A/A 1,070,870
1,000,000 5.000%, 01/15/17 FGIC Insured (pre-refunded) ......... A3/A/A 1,070,870
1,000,000 5.000%, 01/15/18 FGIC Insured (pre-refunded) ......... A3/A/A 1,070,870
South Kingstown, Rhode Island
500,000 5.500%, 06/15/12 FGIC Insured (pre-refunded) ......... Aa2/NR/NR 529,020
State of Rhode Island
4,000,000 5.000%, 08/01/14 Series A National-re FGIC Insured ... Aa3/AA/AA- 4,208,680
2,000,000 5.000%, 08/01/12 Series B National-re Insured ........ Aa3/AA/AA- 2,212,380
1,000,000 5.000%, 06/01/14 Series B National-re FGIC Insured ... Aa3/AA/AA- 1,048,050
2,000,000 5.000%, 08/01/15 Series B National-re FGIC Insured ... Aa3/AA/AA- 2,090,300
1,000,000 5.250%, 11/01/11 Series C National-re Insured ........ Aa3/AA/AA- 1,089,220
3,000,000 5.000%, 09/01/18 Series C National-re Insured ........ Aa3/AA/AA- 3,159,930
2,000,000 5.000%, 09/01/19 Series C National-re Insured ........ Aa3/AA/AA- 2,108,340
1,500,000 5.000%, 09/01/20 Series C National-re Insured ........ Aa3/AA/AA- 1,580,610
2,000,000 4.500%, 02/01/17 National-re Insured ................. Aa3/AA/AA- 2,093,200
2,000,000 5.250%, 11/01/17 FGIC Insured (pre-refunded) ......... Aa3/AA/AA- 2,252,320
RATING
PRINCIPAL MOODY'S, S&P
AMOUNT GENERAL OBLIGATION BONDS (CONTINUED) OR FITCH VALUE
- --------------- ------------------------------------------------------ ------------ ------------
Warwick, Rhode Island
$ 250,000 4.000%, 07/15/11 AMBAC Insured ....................... A1/AA-/NR $ 264,167
250,000 4.125%, 07/15/13 AMBAC Insured ....................... A1/AA-/NR 263,857
665,000 4.250%, 07/15/14 AMBAC Insured ....................... A1/AA-/NR 696,321
700,000 4.375%, 07/15/15 AMBAC Insured ....................... A1/AA-/NR 726,600
1,000,000 4.000%, 08/01/16 FSA Insured Series 2008 ............ Aa3/AAA/AA+ 1,079,800
770,000 4.600%, 07/15/17 AMBAC Insured ....................... A1/AA-/NR 794,109
1,015,000 4.000%, 08/01/17 FSA Insured Series 2008 ............ Aa3/AAA/AA+ 1,084,994
905,000 4.250%, 01/15/18 Syncora Guarantee Inc. Insured ...... A1/AA-/NR 922,041
810,000 4.700%, 07/15/18 AMBAC Insured ....................... A1/AA-/NR 832,972
1,000,000 5.000%, 01/15/19 National-re FGIC Insured ............ A1/AA-/NR 1,027,800
855,000 4.750%, 07/15/19 AMBAC Insured ....................... A1/AA-/NR 875,537
500,000 5.000%, 01/15/20 National-re FGIC Insured ............ A1/AA-/NR 513,150
West Warwick, Rhode Island
500,000 4.875%, 03/01/16 AMBAC Insured ....................... A3/NR/BBB 519,050
670,000 5.000%, 03/01/17 AMBAC Insured ....................... A3/NR/BBB 696,083
700,000 5.050%, 03/01/18 AMBAC Insured ....................... A3/NR/BBB 725,788
735,000 5.100%, 03/01/19 AMBAC Insured ....................... A3/NR/BBB 759,799
Westerly, Rhode Island
900,000 4.000%, 07/01/17 National-re Insured ................. Aa3/AA-/NR 939,591
900,000 4.000%, 07/01/18 National-re Insured ................. Aa3/AA-/NR 926,550
Woonsocket, Rhode Island
655,000 4.450%, 12/15/12 National-re FGIC Insured ............ Baa1/NR/A- 667,858
685,000 4.550%, 12/15/13 National-re FGIC Insured ............ Baa1/NR/A- 697,522
------------
Total General Obligation Bonds ....................... 75,652,428
------------
REVENUE BONDS (60.1%)
------------------------------------------------------
DEVELOPMENT REVENUE BONDS (12.6%)
Providence, Rhode Island Redevelopment Agency
Revenue Refunding Public Safety Building Project
1,925,000 5.200%, 04/01/11 Series A 1999 AMBAC Insured
(pre-refunded) ................................... Baa2/NR/NR 2,011,587
500,000 5.300%, 04/01/12 AMBAC Insured 1999 Series A
(pre-refunded) ................................... Baa2/NR/NR 522,855
2,000,000 4.750%, 04/01/22 AMBAC Insured Series A .............. Baa2/A-/NR 1,868,220
RATING
PRINCIPAL MOODY'S, S&P
AMOUNT REVENUE BONDS (CONTINUED) OR FITCH VALUE
- --------------- ------------------------------------------------------ ------------ ------------
DEVELOPMENT REVENUE BONDS (CONTINUED)
Rhode Island Convention Center Authority
Revenue Refunding
$ 1,350,000 5.000%, 05/15/10 National-re Insured Series 1993 B ... Baa1/A/NR $ 1,366,915
2,000,000 5.000%, 05/15/21 FSA Insured ......................... Aa3/AAA/AA+ 2,028,260
1,500,000 5.500%, 05/15/27 Assured Guaranty Insured Series A ... Aa2/AAA/AA 1,523,850
Rhode Island State Economic Development Corp.,
Airport Revenue
540,000 4.625%, 07/01/26 Assured Guaranty Insured Series B ... Aa2/AAA/AA 530,334
1,670,000 5.000%, 07/01/13 National-re Insured Series C ........ A2/A/A 1,790,708
1,000,000 5.000%, 07/01/18 Assured Guaranty Insured Series C ... Aa2/AAA/AA 1,075,640
1,500,000 5.000%, 07/01/22 National-re Insured Series C ........ A2/A/A 1,534,230
Rhode Island State Economic Development Corp.,
Motor Fuel Tax Revenue (Rhode Island
Department of Transportation)
500,000 3.750%, 06/15/13 AMBAC Insured Series 2003 A ......... A2/A+/A 507,690
1,000,000 4.000%, 06/15/15 Series A AMBAC Insured .............. A2/A+/A 1,004,330
2,385,000 4.700%, 06/15/23 Series 2003A AMBAC Insured .......... A2/A+/A 2,356,118
1,000,000 4.000%, 06/15/18 Series 2006A AMBAC Insured .......... A2/A+/A 980,810
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 ...................... Baa1/BBB+/NR 960,670
Rhode Island Economic Development Corp.
(Rhode Island Department of Transportation)
1,500,000 5.250%, 06/15/21 Assured Guaranty Insured ............ Aa2/AAA/AA 1,561,245
Rhode Island State Economic Development Corp.,
University of Rhode Island
750,000 4.800%, 11/01/11 Series 1999 FSA Insured ............. Aa3/NR/AA+ 765,525
750,000 4.900%, 11/01/12 Series 1999 FSA Insured ............. Aa3/NR/AA+ 765,022
750,000 4.900%, 11/01/13 Series 1999 FSA Insured ............. Aa3/NR/AA+ 764,145
750,000 5.000%, 11/01/14 Series 1999 FSA Insured ............. Aa3/NR/AA+ 763,770
------------
Total Development Revenue Bonds ...................... 24,681,924
------------
RATING
PRINCIPAL MOODY'S, S&P
AMOUNT REVENUE BONDS (CONTINUED) OR FITCH VALUE
- --------------- ------------------------------------------------------ ------------ ------------
HIGHER EDUCATION REVENUE BONDS (33.5%)
Providence, Rhode Island Public Building Authority,
School Projects
$ 500,000 5.500%, 12/15/14 Series 1996 B National-re Insured ... Baa1/A/NR $ 500,065
500,000 5.500%, 12/15/15 Series 1996 B National-re Insured ... Baa1/A/NR 500,070
1,000,000 5.250%, 12/15/14 Series 1998 A FSA Insured ........... Aa3/AAA/AA+ 1,020,560
685,000 5.000%, 12/15/18 Series 1998 A FSA Insured ........... Aa3/AAA/AA+ 695,727
500,000 5.125%, 12/15/14 Series 1999 A AMBAC Insured ......... Baa1/A-/NR 505,405
250,000 5.250%, 12/15/15 Series 1999 A AMBAC Insured ......... Baa1/A-/NR 251,983
1,500,000 5.250%, 12/15/17 Series 1999 A AMBAC Insured ......... Baa1/A-/NR 1,499,955
1,000,000 5.250%, 12/15/19 Series 1999 A AMBAC Insured ......... Baa1/A-/NR 964,150
1,395,000 4.000%, 12/15/12 Series 2003 A National-re Insured ... Baa1/A/NR 1,424,672
1,450,000 4.000%, 12/15/13 Series 2003 A National-re Insured ... Baa1/A/NR 1,462,514
1,505,000 4.000%, 12/15/14 Series 2003 A National-re Insured ... Baa1/A/NR 1,501,328
1,570,000 4.000%, 12/15/15 Series 2003 A National-re Insured ... Baa1/A/NR 1,536,543
1,630,000 4.000%, 12/15/16 Series 2003 A National-re Insured ... Baa1/A/NR 1,561,768
150,000 5.500%, 12/15/13 National-re Insured 2006 Series B ... Baa1/A/NR 150,015
Rhode Island Economic Development Corp. Rhode
Island Department of Transportation
395,000 5.000%, 06/15/10 National-re FGIC Insured
Series 2006 A .................................... Aa3/A+/AA- 405,432
Rhode Island Health & Education Building Corp.,
Brown University
2,000,000 5.250%, 09/01/17 Series 1993 National-re Insured ..... Aa1/AA+/NR 2,093,060
Rhode Island Health & Education Building Corp.,
Bryant College
1,000,000 5.125%, 06/01/19 AMBAC Insured ....................... A2/A/NR 1,033,280
230,000 5.000%, 12/01/21 AMBAC Insured ....................... A2/A/NR 235,212
Rhode Island Health & Education Building Corp.,
Higher Educational Facilities
1,010,000 3.625%, 09/15/14 Series 2003 B National-re Insured ... Baa1/A/NR 1,024,695
1,050,000 4.000%, 09/15/15 Series 2003 B National-re Insured ... Baa1/A/NR 1,069,435
1,040,000 4.000%, 09/15/16 Series 2003 B National-re Insured ... Baa1/A/NR 1,047,946
600,000 3.625%, 09/15/14 Series 2003 C National-re Insured ... Baa1/A/NR 608,730
RATING
PRINCIPAL MOODY'S, S&P
AMOUNT REVENUE BONDS (CONTINUED) OR FITCH VALUE
- --------------- ------------------------------------------------------ ------------ ------------
HIGHER EDUCATION REVENUE BONDS (CONTINUED)
Rhode Island Health & Education Building Corp.,
Higher Educational Facilities (continued)
$ 500,000 4.000%, 09/15/15 Series 2003 C National-re Insured ... Baa1/A/NR $ 509,255
500,000 4.000%, 09/15/16 Series 2003 C National-re Insured ... Baa1/A/NR 503,820
1,500,000 4.250%, 05/15/21 Series A FSA Insured ................ Aa3/NR/AA+ 1,461,720
1,500,000 4.375%, 05/15/22 Series A FSA Insured ................ Aa3/NR/AA+ 1,468,860
Rhode Island Health & Education Building Corp.,
Johnson & Wales University
465,000 5.500%, 04/01/15 Series 1999 A National-re Insured ... Baa1/A/NR 475,267
900,000 5.500%, 04/01/16 Series 1999 A National-re Insured ... Baa1/A/NR 910,008
785,000 5.500%, 04/01/17 Series 1999 A National-re Insured ... Baa1/A/NR 789,836
1,360,000 4.000%, 04/01/12 Series 2003
Syncora Guarantee Inc. Insured ................... NR/NR/NR* 1,346,046
3,210,000 4.000%, 04/01/13 Series 2003
Syncora Guarantee Inc. Insured ................... NR/NR/NR* 3,138,995
500,000 5.250%, 04/01/14 Series 2003
Syncora Guarantee Inc. Insured ................... NR/NR/NR* 507,575
2,000,000 4.000%, 04/01/14 Series 2003
Syncora Guarantee Inc. Insured ................... NR/NR/NR* 1,924,620
1,300,000 5.000%, 04/01/29 National-re Insured ................. Baa1/A/NR 1,114,412
Rhode Island Health & Educational Building Corp.,
Higher Education Facility, Rhode Island School
of Design
250,000 4.400%, 06/01/15 National-re Insured ................. A1/A/NR 260,670
585,000 4.600%, 06/01/17 National-re Insured ................. A1/A/NR 607,131
505,000 4.700%, 06/01/18 Series 2001 National-re Insured ..... A1/A/NR 522,251
280,000 4.750%, 06/01/19 Series 2001 National-re Insured ..... A1/A/NR 288,019
1,310,000 5.625%, 08/15/22 Syncora Guarantee Inc. Insured
Series D ......................................... A1/NR/NR 1,345,842
900,000 5.000%, 08/15/23 Syncora Guarantee Inc. Insured
Series D ......................................... A1/NR/NR 899,046
RATING
PRINCIPAL MOODY'S, S&P
AMOUNT REVENUE BONDS (CONTINUED) OR FITCH VALUE
- --------------- ------------------------------------------------------ ------------ ------------
HIGHER EDUCATION REVENUE BONDS (CONTINUED)
Rhode Island Health & Educational Building Corp.,
Higher Education Facility, Roger Williams
University
$ 500,000 5.000%, 11/15/24 AMBAC Insured ....................... NR/BBB/NR $ 487,930
Rhode Island Health & Education Building Corp.,
Lifespan Obligation
2,500,000 5.000%, 05/15/20 FSA Insured Series A ................ Aa3/AAA/AA+ 2,491,550
1,900,000 5.250%, 05/15/26 National-re Insured ................. A3/A/NR 1,780,642
Rhode Island Health & Education Building Corp.,
Public School Financing
1,000,000 5.000%, 05/15/17 Series 2006 A FSA Insured ........... Aa3/AAA/AA+ 1,097,100
500,000 5.000%, 05/15/20 Series 2007 A FSA Insured ........... Aa3/NR/AA+ 520,060
1,000,000 4.250%, 05/15/21 Series 2007 B FSA Insured ........... Aa3/AAA/AA+ 974,480
500,000 5.000%, 05/15/17 FSA Insured 2008 Series A ........... Aa3/NR/AA+ 538,295
2,000,000 4.750%, 05/15/29 FSA Insured Series A ................ Aa3/NR/AA+ 1,922,780
Rhode Island Health & Education Building Corp.,
Roger Williams University
500,000 5.125%, 11/15/11 AMBAC Insured ....................... NR/BBB/NR 507,410
1,000,000 5.125%, 11/15/14 Series 1996 S AMBAC Insured ......... NR/BBB/NR 1,020,190
1,000,000 5.000%, 11/15/18 Series 1996 S AMBAC Insured ......... NR/BBB/NR 1,008,040
Rhode Island Health & Educational Building Corp.,
University of Rhode Island
300,000 5.200%, 09/15/16 Series 2000 B AMBAC Insured
(pre-refunded) ................................... NR/A+/NR 318,852
800,000 5.000%, 09/15/23 Series 2003 C Refunding
National-re Insured .............................. Baa1/A/NR 807,768
1,200,000 4.000%, 09/15/11 Series 2005 G AMBAC Insured ......... A1/A+/NR 1,267,092
1,200,000 4.125%, 09/15/12 Series 2005 G AMBAC Insured ......... A1/A+/NR 1,291,176
1,200,000 4.125%, 09/15/13 Series 2005 G AMBAC Insured ......... A1/A+/NR 1,295,484
1,000,000 4.500%, 09/15/26 Series 2005 G Refunding
AMBAC Insured .................................... A1/A+/NR 958,310
RATING
PRINCIPAL MOODY'S, S&P
AMOUNT REVENUE 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 Syncora Guarantee Inc. Insured ...... A2/NR/NR $ 1,028,970
2,500,000 4.375%, 11/01/15 Syncora Guarantee Inc. Insured ...... A2/NR/NR 2,557,650
2,500,000 4.500%, 11/01/16 Syncora Guarantee Inc. Insured ...... A2/NR/NR 2,544,050
1,000,000 4.500%, 11/01/17 Syncora Guarantee Inc. Insured ...... A2/NR/NR 1,007,360
1,000,000 5.000%, 11/01/24 Syncora Guarantee Inc. Insured
Series 2003 A .................................... A2/NR/NR 992,530
------------
Total Higher Education Revenue Bonds ................. 65,583,637
------------
HOUSING REVENUE BONDS (0.5%)
Rhode Island Housing & Mortgage Finance Corp.
Homeowner Opportunity
1,000,000 3.750%, 10/01/13 Series 50-A National-re Insured ..... A2/AA+/NR 1,042,550
------------
LEASE REVENUE BONDS (1.4%)
Rhode Island Certificates of Participation (Central
Power Plant)
1,000,000 4.000%, 10/01/20 Series D FSA Insured ................ Aa3/AAA/AA+ 1,002,740
Rhode Island Certificates of Participation (Kent
County Court House Project)
250,000 5.000%, 10/01/22 National-re Insured Series 2004 A ... A1/AA-/A+ 250,437
Rhode Island Certificates of Participation (School
for the Deaf Project)
1,000,000 5.500%, 04/01/27 Series C 2009 AGC Insured ........... Aa2/AAA/AA 1,005,150
500,000 5.625%, 04/01/29 Series C 2009 AGC Insured ........... Aa2/AAA/AA 503,115
------------
Total Lease Revenue Bonds ............................ 2,761,442
------------
POLLUTION CONTROL REVENUE BONDS (3.4%)
Rhode Island Clean Water Finance Agency, Water
Pollution Control Bonds
1,800,000 5.000%, 10/01/18 Series 2002 B National-re Insured ... Aaa/AA/NR 1,882,962
4,765,000 4.375%, 10/01/21 Series 2002 B National-re Insured ... Aaa/AA/NR 4,818,463
------------
Total Pollution Control Revenue Bonds ................ 6,701,425
------------
RATING
PRINCIPAL MOODY'S, S&P
AMOUNT REVENUE BONDS (CONTINUED) OR FITCH VALUE
- --------------- ------------------------------------------------------ ------------ ------------
WATER AND SEWER REVENUE BONDS (7.1%)
Bristol County, Rhode Island Water Authority
$ 750,000 5.250%, 07/01/17 Series 1997 A National-re Insured ... Baa1/A/NR $ 750,435
1,000,000 3.500%, 12/01/13 Series 2004 Refunding A
National-re Insured .............................. Baa1/A/NR 1,025,860
1,000,000 3.500%, 12/01/14 Series 2004 Refunding A
National-re Insured .............................. Baa1/A/NR 1,011,280
Kent County, Rhode Island Water Authority
500,000 4.000%, 07/15/12 Series 2002 A National-re Insured ... Baa1/A/NR 537,755
1,055,000 4.150%, 07/15/14 Series 2002 A National-re Insured ... Baa1/A/NR 1,101,642
Narragansett, Rhode Island Bay Commission Water
Authority
365,000 5.000%, 08/01/27 National-re Insured Series A ........ Baa1/AA-/NR 369,176
Rhode Island Clean Water Protection Finance Agency
1,250,000 5.400%, 10/01/15 1993 Series A National-re Insured ... Aaa/A/NR 1,380,875
500,000 4.600%, 10/01/13 Series A AMBAC Insured .............. Aaa/BBB/NR 503,005
500,000 4.750%, 10/01/14 Series A AMBAC Insured .............. Aaa/BBB/NR 502,820
2,000,000 4.750%, 10/01/18 Series A AMBAC Insured .............. Aaa/BBB/NR 2,006,460
500,000 4.750%, 10/01/20 1999 Series A AMBAC Insured ......... Aaa/BBB/NR 501,115
500,000 4.500%, 10/01/11 1993 Series B AMBAC Insured ......... Aa1/BBB/NR 503,675
1,000,000 5.125%, 10/01/11 1999 Series C National-re Insured ... Aaa/AA/NR 1,009,280
Rhode Island Water Resources Board Public
Drinking Water Protection
1,500,000 4.000%, 03/01/14 Series 2002 National-re Insured ..... Baa1/A/NR 1,556,580
595,000 4.250%, 03/01/15 Series 2002 National-re Insured ..... Baa1/AA-/NR 613,195
405,000 4.250%, 03/01/15 Series 2002 National-re Insured
(pre-refunded) ................................... NR/AA-/NR 436,821
------------
Total Water and Sewer Revenue Bonds .................. 13,809,974
------------
OTHER REVENUE BONDS (1.6%)
Rhode Island Refunding Bond Authority State
Public Projects
500,000 5.250%, 02/01/10 AMBAC Insured Series 1998 A ......... A1/AA-/NR 500,235
RATING
PRINCIPAL MOODY'S, S&P
AMOUNT REVENUE BONDS (CONTINUED) OR FITCH VALUE
- --------------- ------------------------------------------------------ ------------ ------------
OTHER REVENUE BONDS (CONTINUED)
State of Rhode Island Depositors Economic
Protection Corp.
$ 445,000 6.550%, 08/01/10 National-re Insured ETM ............. NR/AA/NR $ 456,744
500,000 6.000%, 08/01/17 Series 1992 B National-re
Insured ETM ...................................... NR/A/NR 542,555
250,000 5.750%, 08/01/21 Series A FSA Insured ETM ............ NR/NR/NR* 297,370
1,045,000 5.250%, 08/01/21 Series 1993 B National-re
Insured ETM (pre-refunded) ....................... NR/A/NR 1,110,427
215,000 6.375%, 08/01/22 National-re Insured Series A ETM .... NR/AA-/AAA 269,326
------------
Total Other Revenue Bonds ............................ 3,176,657
------------
Total Revenue Bonds .............................. 117,757,609
------------
Total Investments (cost $189,867,198-note 4) ......... 98.7% 193,410,037
Other assets less liabilities ........................ 1.3 2,622,842
----- ------------
Net Assets ........................................... 100.0% $196,032,879
===== ============
Percent of
PORTFOLIO DISTRIBUTION BY QUALITY RATING PORTFOLIO+
---------------------------------------- ----------
Aaa of Moody's or AAA of S&P or Fitch ....... 22.2%
Aa of Moody's or AA of S&P or Fitch ......... 30.6
A of Moody's or S&P or Fitch ................ 40.1
Baa of Moody's or BBB of S&P ................ 3.4
Not rated* .................................. 3.7
-----
100.0%
=====
+ Calculated using the highest rating of the three rating services.
* Any security not rated (NR) by any of the approved credit rating
services has been determined by the Investment Sub-Adviser to have
sufficient quality to be ranked in the top four credit ratings if a
credit rating were to be assigned by a rating service.
Note: National Public Finance Guarantee Corporation (National-re) is the
new name for Municipal Bond Investors Assurance Inc.'s U.S. public finance
platform.
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
NR - Not rated
See accompanying notes to financial statements.
NARRAGANSETT INSURED TAX-FREE INCOME FUND
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 2009
ASSETS
Investments at value (cost $189,867,198) ............................................. $ 193,410,037
Cash ................................................................................. 429,344
Interest receivable .................................................................. 2,264,732
Receivable for Fund shares sold ...................................................... 588,636
Other assets ......................................................................... 11,749
-----------------
Total assets ......................................................................... 196,704,498
-----------------
LIABILITIES
Payable for Fund shares redeemed ..................................................... 309,661
Dividends payable .................................................................... 208,350
Management fee payable ............................................................... 29,717
Distribution and service fees payable ................................................ 25,943
Accrued expenses ..................................................................... 97,948
-----------------
Total liabilities .................................................................... 671,619
-----------------
NET ASSETS ............................................................................. $ 196,032,879
=================
Net Assets consist of:
Capital Stock - Authorized 80,000,000 shares, par value $0.01 per share .............. $ 187,728
Additional paid-in capital ........................................................... 193,039,315
Net unrealized appreciation on investments (note 4) .................................. 3,542,839
Accumulated net realized loss on investments ......................................... (755,577)
Accumulated net investment income .................................................... 18,574
-----------------
$ 196,032,879
=================
CLASS A
Net Assets ........................................................................... $ 134,071,032
=================
Capital shares outstanding ........................................................... 12,839,130
=================
Net asset value and redemption price per share ....................................... $ 10.44
=================
Maximum offering price per share (100/96 of $10.44 adjusted to nearest cent) ......... $ 10.88
=================
CLASS C
Net Assets ........................................................................... $ 11,821,705
=================
Capital shares outstanding ........................................................... 1,132,274
=================
Net asset value and offering price per share ......................................... $ 10.44
=================
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) ......................................... $ 10.44*
=================
CLASS I
Net Assets ........................................................................... $ 268,713
=================
Capital shares outstanding ........................................................... 25,745
=================
Net asset value, offering and redemption price per share ............................. $ 10.44
=================
CLASS Y
Net Assets ........................................................................... $ 49,871,429
=================
Capital shares outstanding ........................................................... 4,775,646
=================
Net asset value, offering and redemption price per share ............................. $ 10.44
=================
See accompanying notes to financial statements.
NARRAGANSETT INSURED TAX-FREE INCOME FUND
STATEMENT OF OPERATIONS
YEAR ENDED JUNE 30, 2009
INVESTMENT INCOME:
Interest income ...................................................... $ 7,882,500
Expenses:
Management fee (note 3) .............................................. $ 917,913
Distribution and service fees (note 3) ............................... 296,502
Transfer and shareholder servicing agent fees (note 3) ............... 128,056
Trustees' fees and expenses (note 8) ................................. 124,179
Legal fees (note 3) .................................................. 87,805
Shareholders' reports and proxy statements ........................... 41,535
Fund accounting fees ................................................. 19,788
Custodian fees (note 6) .............................................. 16,707
Auditing and tax fees ................................................ 16,301
Insurance ............................................................ 7,020
Registration fees and dues ........................................... 6,030
Chief compliance officer (note 3) .................................... 4,040
Miscellaneous ........................................................ 40,975
-----------
Total expenses ....................................................... 1,706,851
Management fee waived (note 3) ....................................... (582,932)
Expenses paid indirectly (note 6) .................................... (23,591)
-----------
Net expenses ......................................................... 1,100,328
-----------
Net investment income ................................................ 6,782,172
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain (loss) from securities transactions ................ 132,126
Change in unrealized appreciation on investments ..................... 1,940,606
-----------
Net realized and unrealized gain (loss) on investments ............... 2,072,732
-----------
Net change in net assets resulting from operations ................... $ 8,854,904
===========
See accompanying notes to financial statements.
NARRAGANSETT INSURED TAX-FREE INCOME FUND
STATEMENTS OF CHANGES IN NET ASSETS
YEAR ENDED YEAR ENDED
JUNE 30, 2009 JUNE 30, 2008
------------- -------------
OPERATIONS:
Net investment income ...................................... $ 6,782,172 $ 5,593,555
Net realized gain (loss) from securities transactions ...... 132,126 89,660
Change in unrealized appreciation on investments ........... 1,940,606 146,976
------------- -------------
Change in net assets from operations ....................... 8,854,904 5,830,191
------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS (NOTE 9):
Class A Shares:
Net investment income ...................................... (4,658,407) (3,893,537)
Class C Shares:
Net investment income ...................................... (316,526) (369,761)
Class I Shares:
Net investment income ...................................... (11,043) (25,275)
Class Y Shares:
Net investment income ...................................... (1,876,092) (1,438,715)
------------- -------------
Change in net assets from distributions .................. (6,862,068) (5,727,288)
------------- -------------
CAPITAL SHARE TRANSACTIONS (NOTE 7):
Proceeds from shares sold .................................. 34,987,531 34,062,506
Net asset value of shares issued in connection
with merger (note 10) .................................... 18,325,315 --
Reinvested dividends and distributions ..................... 3,073,562 2,606,015
Cost of shares redeemed .................................... (24,715,396) (22,421,102)
------------- -------------
Change in net assets from capital share transactions ....... 31,671,012 14,247,419
------------- -------------
Change in net assets ..................................... 33,663,848 14,350,322
NET ASSETS:
Beginning of period ........................................ 162,369,031 148,018,709
------------- -------------
End of period* ............................................. $ 196,032,879 $ 162,369,031
============= =============
* Includes undistributed net investment income of: ......... $ 18,574 $ 8,100
============= =============
See accompanying notes to financial statements.
NARRAGANSETT INSURED TAX-FREE INCOME FUND
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2009
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) FAIR VALUE MEASUREMENTS: The Fund adopted Financial Accounting Standards
Board Statement of Financial Accounting Standards No. 157, "Fair Value
Measurements" ("SFAS 157"), effective July 1, 2008. SFAS 157 established a
three-tier hierarchy of inputs to establish classification of fair value
measurements for disclosure purposes. Inputs may be observable or
unobservable. Observable inputs reflect the assumptions market
participants would use in pricing the asset or liability based on market
data obtained from sources independent of the reporting entity.
Unobservable inputs reflect the reporting entity's own assumptions about
the assumptions market participants would use in pricing the asset or
liability based on the best information available in the circumstances.
The Fund's investments are assigned levels based upon the observability.
The three-tier hierarchy inputs is summarized below:
Level 1 - quoted prices in active markets for identical securities
Level 2 - other significant observable inputs (including quoted prices for
similar securities, interest rates, prepayment speeds, credit risk, etc.)
Level 3 - significant unobservable inputs (including the Fund's own
assumptions in determining the fair value of investments)
The inputs or methodology used for valuing securities are not necessarily
an indication of the risk associated with investing in those securities
The following is a summary of the valuation inputs, representing 100% of
the Fund's investments (details of which can be found in the Schedule of
Investments), used to value the Fund's net assets as of June 30, 2009:
VALUATION INPUTS INVESTMENTS IN SECURITIES
---------------- -------------------------
Level 1 - Quoted Prices ..................... $ --
Level 2 - Other Significant Observable Inputs
Municipal Bonds ........................... 193,410,037
Level 3 - Significant Unobservable Inputs ... --
----------------
Total ....................................... $ 193,410,037
================
c) ACCOUNTING PRONOUNCEMENTS: In April 2009, the Financial Accounting
Standards Board ("FASB") issued FASB Staff Position No. 157-4,
"Determining Fair Value When the Volume and Level of Activity for the
Asset or Liability Have Significantly Decreased and Identifying
Transactions That Are Not Orderly" ("FSP 157-4"). FSP 157-4 provides
additional guidance for estimating fair value in accordance with FASB
Statement of Financial Accounting Standards No. 157, "Fair Value
Measurements" ("FAS 157"), when the volume and level of activity for the
asset or
liability have significantly decreased as well as guidance on identifying
circumstances that indicate a transaction is not orderly. FSP 157-4 is
effective for fiscal years and interim periods ending after June 15, 2009.
The adoption of FSP 157-4 did not have an impact on the Fund's financial
statements and the Fund has made the required additional disclosures.
In May 2009, the FASB issued SFAS No. 165, "Subsequent Events" (SFAS No.
165). The Fund adopted SFAS No. 165 which requires an entity to recognize
in the financial statements the effects of all subsequent events that
provide additional evidence about conditions that existed at the date of
the balance sheet. For non-recognized subsequent events that must be
disclosed to keep financial statements from being misleading, an entity is
required to disclose the nature of the event as well as an estimate of its
financial effect, or a statement that such an estimate cannot be made. In
addition, SFAS No. 165 requires an entity to disclose the date through
which subsequent events have been evaluated. The Fund has evaluated
subsequent events through the issuance of its financial statements on
August 28, 2009.
The Fund has adopted the provisions of Statement of Financial Accounting
Standards No. 161, "Disclosures about Derivative Instruments and Hedging
Activities" ("SFAS 161"), effective June 30, 2009. SFAS 161 requires
enhanced disclosures about a fund's derivative and hedging activities,
including how such activities are accounted for and their effect on a
fund's financial position, performance and cash flows. The Fund does not
invest in derivative instruments or engage in hedging activities. As a
result, SFAS 161 did not impact the Fund's financial statements.
d) 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.
e) 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.
The Fund has adopted FASB Interpretation No. 48 "Accounting for
Uncertainty in Income Taxes" ("FIN 48"). Management has reviewed the tax
positions for each of the open tax years (2006-2009) and has determined
that implementation of FIN 48 did not have a material impact on the Fund's
financial statements.
f) 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.
g) USE OF ESTIMATES: The preparation of financial statements in conformity
with accounting principles generally accepted in the United States of
America requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements
and the reported amounts of increases and decreases in net assets from
operations during the reporting period. Actual results could differ from
those estimates.
3. FEES AND RELATED PARTY TRANSACTIONS
a) Management Arrangements:
Aquila Investment Management LLC (the "Manager"), a wholly-owned
subsidiary of Aquila Management Corporation, the Fund's founder and sponsor,
serves as the Manager for the Fund under an Advisory and Administration
Agreement with the Fund. The portfolio management of the Fund has been delegated
to a Sub-Adviser as described below. Under the Advisory and Administration
Agreement, the Manager provides all administrative services to the Fund, other
than those relating to the day-to-day portfolio management. The Manager's
services include providing the office of the Fund and all related services as
well as overseeing the activities of the Sub-Adviser and managing relationships
with all the various support organizations to the Fund such as the shareholder
servicing agent, custodian, legal counsel, fund accounting agent, 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, a division of
RBS Citizens, N.A. (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, 2009, the Fund incurred management fees of
$917,913 of which $582,932 was waived. The Manager contractually undertook to
waive fees and/or reimburse Fund expenses during the period July 1, 2008 through
June 30, 2009 so that total Fund expenses would not exceed 0.83% for Class A
Shares, 1.68% for Class C Shares, 1.05% for Class I Shares or 0.70% for Class Y
Shares. Comparable expense limitations are in place for fiscal 2010.
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 distribution
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, 2009, distribution fees on Class A
Shares amounted to $186,284, of which the Distributor retained $4,301.
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, 2009 amounted to $82,203. 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, 2009, amounted to $27,401. The total of these payments
with respect to Class C Shares amounted to $109,604, of which the Distributor
retained $25,254.
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, 2009,
these payments were made at the average annual rate of 0.35% of such net assets
amounting to $1,074 of which $614 related to the Plan and $460 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 brokerage and advisory firms ("intermediaries"), the Fund's shares are
sold primarily through the facilities of intermediaries having offices within
Rhode Island, with the bulk of sales commissions inuring to such intermediaries.
For the year ended June 30, 2009, total commissions on sales of Class A Shares
amounted to $234,682, of which the Distributor received $20,530.
c) Other Related Party Transactions:
For the year ended June 30, 2009, the Fund incurred $87,299 of legal fees
allocable to Butzel Long PC, counsel to the Fund, for legal services in
conjunction with the Fund's ongoing operations. The Secretary of the Fund is a
shareholder of that firm.
4. PURCHASES AND SALES OF SECURITIES
During the year ended June 30, 2009, purchases of securities and proceeds
from the sales of securities aggregated $39,548,440 and $11,053,321,
respectively.
At June 30, 2009, the aggregate tax cost for all securities was
$189,849,871. At June 30, 2009, the aggregate gross unrealized appreciation for
all securities in which there is an excess of value over tax cost amounted to
$4,756,699 and aggregate gross unrealized depreciation for all securities in
which there is an excess of tax cost over value amounted to $1,196,533 for a net
unrealized appreciation of $3,560,166.
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, 2009, 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 (see note 11a).
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,
2009, 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, 2009 June 30, 2008
----------------------------- -----------------------------
Shares Amount Shares Amount
------------ ------------ ------------ ------------
CLASS A SHARES:
Proceeds from shares sold ............ 1,706,352 $ 17,704,511 1,685,023 $ 17,703,105
Shares issued in merger .............. 1,856,329 18,325,315 -- --
Reinvested distributions ............. 251,861 2,620,356 206,778 2,169,365
Cost of shares redeemed .............. (1,113,426) (11,518,205) (1,279,281) (13,392,601)
------------ ------------ ------------ ------------
Net change ........................... 2,701,116 27,131,977 (612,520) (6,479,869)
------------ ------------ ------------ ------------
CLASS C SHARES:
Proceeds from shares sold ............ 391,685 4,081,253 242,233 2,541,616
Reinvested distributions ............. 12,753 132,607 12,955 135,823
Cost of shares redeemed .............. (347,338) (3,595,851) (534,010) (5,606,965)
------------ ------------ ------------ ------------
Net change ......................... 57,100 618,009 (278,822) (2,929,526)
------------ ------------ ------------ ------------
CLASS I SHARES:
Proceeds from shares sold ............ -- -- 55 591
Reinvested distributions ............. 1,064 11,043 2,411 25,257
Cost of shares redeemed .............. (27,004) (282,093) (30,490) (319,333)
------------ ------------ ------------ ------------
Net change ......................... (25,940) (271,050) (28,024) (293,485)
------------ ------------ ------------ ------------
CLASS Y SHARES:
Proceeds from shares sold ............ 1,285,732 13,201,767 1,312,969 13,817,194
Reinvested distributions ............. 29,805 309,556 26,297 275,570
Cost of shares redeemed .............. (902,759) (9,319,247) (295,344) (3,102,203)
------------ ------------ ------------ ------------
Net change ......................... 412,778 4,192,076 1,043,922 10,990,561
------------ ------------ ------------ ------------
Total transactions in Fund
shares ............................... 3,145,054 $ 31,671,012 1,349,596 $ 14,247,419
============ ============ ============ ============
8. TRUSTEES' FEES AND EXPENSES
At June 30, 2009 there were 6 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, 2009 was $94,500, 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 meetings (Audit, Nominating,
Shareholder and special meetings) are held, 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, 2009, such meeting-related expenses amounted to $29,679.
9. INCOME TAX INFORMATION AND DISTRIBUTIONS
The Fund declares dividends daily from net investment income and makes
payments monthly. Net realized capital gains, if any, are distributed annually
and are taxable. These distributions are paid in additional shares at the net
asset value per share, in cash, or in a combination of both, at the
shareholder's option.
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 decreased undistributed net investment loss in the
amount of $90,370, decreased additional paid-in capital in the amount of $20,372
and decreased accumulated realized loss in the amount of $69,998 at June 30,
2009. This adjustment had no impact on the Fund's aggregate net assets at June
30, 2009. Further, a small portion of the dividends may, under some
circumstances, be subject to taxes at ordinary income rates.
At June 30, 2009, the Fund had a capital loss carryover of $405,450 of
which $111,495 expires on June 30, 2013, $25,706 expires on June 30, 2014,
$175,218 expires on June 30, 2015 and $93,031 expires on June 30, 2016. The Fund
acquired $118,737 capital loss carryover related to the acquisition of Ocean
State Tax-Exempt Fund. Due to loss limitation tax rules, an additional capital
loss carryover of $350,127 becomes available during the year ending June 30,
2010. This carryover is available to offset future net realized gains on
securities transactions to the extent provided for in the Internal Revenue Code.
To the extent that this loss is used to offset future realized capital gains, it
is probable the gains so offset will not be distributed.
Tax character of distributions:
Year Ended June 30,
------------------------------
2009 2008
------------- -------------
Net tax-exempt income $ 6,771,698 $ 5,598,407
Ordinary income 90,370 128,881
------------- -------------
$ 6,862,068 $ 5,727,288
============= =============
As of June 30, 2009, the components of distributable earnings on a tax
basis were as follows:
Undistributed tax-exempt income $ 209,597
Accumulated net realized loss (405,450)
Unrealized appreciation 3,560,166
Other temporary differences (558,477)
-------------
$ 2,805,836
=============
The difference between book basis and tax basis unrealized appreciation is
atributable primarily to premium/discount adjustments. The difference between
book basis and tax basis undistributed income is due to the timing difference in
recognizing dividends paid.
10. TRANSFER OF NET ASSETS TRANSACTION
On October 17, 2008, the Fund acquired the assets and liabilities of Ocean
State Tax-Exempt Fund ("Ocean State"), pursuant to an agreement and plan of
reorganization approved by the shareholders of Ocean State. Total shares issued
by the Fund and total net assets of Ocean State and the Fund on the date of the
transfer were as follows:
Shares Issued by Total Nets Assets Total Net Assets
Acquired Fund the Fund of Ocean State of the Fund
- --------------------------------------------------------------------------------
Ocean State 1,856,329 $18,325,315 $176,365,957
The total net assets of the Ocean State portfolio before acquisition
included unrealized appreciation of $133,026 and accumulated net realized loss
of $468,864. Total net assets of the Fund immediately after the transfer were
$194,691,272. The transaction was structured to qualify as a tax-free
reorganization under the Internal Revenue Code of 1986, as amended.
11. RECENT DEVELOPMENTS
a) INSURERS: Since December 2007, municipal bond insurance companies have
been under review by the three major rating agencies: Standard & Poor's,
Moody's and Fitch. The ratings of most of the insurance companies have now
either been downgraded and/or have a negative outlook. The financial
markets continue to assess the severity of the losses caused by the
subprime credit crisis and its impact on municipal bond insurance
companies and the prices of insured municipal bonds.
b) SUB-ADVISER DEVELOPMENT: The Sub-Adviser of the Fund, is a department of
Citizens Bank, a division of RBS Citizens, N.A., a bank subsidiary of
Citizens Financial Group, Inc. ("CFG"). CFG is a wholly-owned subsidiary
of The Royal Bank of Scotland Group, PLC ("RBSG").
In December, 2008, the Treasury ( "HMT") of the United Kingdom ( "U.K.")
acquired a controlling interest in RBSG. The investment is managed on a
commercial basis by an arms-length company, UK Financial Investment
Limited, which is wholly owned by HMT. This transaction resulted in the
termination of the then existing sub-advisory agreement. A new
sub-advisory agreement with substantially the same terms was approved by
the shareholders of the Fund on April 21, 2009, and is currently in
effect.
NARRAGANSETT INSURED TAX-FREE INCOME FUND
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
Class A
-----------------------------------------------------------------------
Year Ended June 30,
-----------------------------------------------------------------------
2009 2008 2007 2006 2005
--------- --------- --------- --------- ---------
Net asset value, beginning of period ......... $ 10.39 $ 10.37 $ 10.34 $ 10.79 $ 10.49
--------- --------- --------- --------- ---------
Income (loss) from investment operations:
Net investment income+ ..................... 0.38++ 0.38++ 0.38+ 0.38+ 0.40+
Net gain (loss) on securities
(both realized and unrealized) ........... 0.06 0.03 0.04 (0.44) 0.31
--------- --------- --------- --------- ---------
Total from investment operations ........... 0.44 0.41 0.42 (0.06) 0.71
--------- --------- --------- --------- ---------
Less distributions (note 9):
Dividends from net investment income ....... (0.39) (0.39) (0.39) (0.39) (0.41)
--------- --------- --------- --------- ---------
Net asset value, end of period ............... $ 10.44 $ 10.39 $ 10.37 $ 10.34 $ 10.79
========= ========= ========= ========= =========
Total return (not reflecting sales charge) ... 4.30% 4.00% 4.10% (0.56)% 6.81%
Ratios/supplemental data
Net assets, end of period (in thousands) ... $ 134,071 $ 105,330 $ 98,749 $ 103,222 $ 105,910
Ratio of expenses to average net assets .... 0.60% 0.64% 0.68% 0.67% 0.58%
Ratio of net investment income to
average net assets ....................... 3.68% 3.63% 3.63% 3.61% 3.68%
Portfolio turnover rate .................... 6.17% 2.87% 2.37% 7.25% 2.20%
The expense and net investment income ratios without the effect of the waiver of a portion of the management fee were (note 3):
Ratio of expenses to average net assets .... 0.90% 0.97% 1.03% 1.03% 0.96%
Ratio of net investment income to
average net assets ....................... 3.38% 3.29% 3.28% 3.25% 3.31%
The expense ratios after giving effect to the waiver and expense offset for uninvested cash balances were:
Ratio of expenses to average net assets .... 0.59% 0.63% 0.68% 0.67% 0.57%
Class C
-----------------------------------------------------------------------
Year Ended June 30,
-----------------------------------------------------------------------
2009 2008 2007 2006 2005
--------- --------- --------- --------- ---------
Net asset value, beginning of period ......... $ 10.39 $ 10.37 $ 10.34 $ 10.79 $ 10.48
--------- --------- --------- --------- ---------
Income (loss) from investment operations:
Net investment income+ ..................... 0.29++ 0.29++ 0.30+ 0.29+ 0.31+
Net gain (loss) on securities
(both realized and unrealized) ........... 0.06 0.03 0.03 (0.44) 0.31
--------- --------- --------- --------- ---------
Total from investment operations ........... 0.35 0.32 0.33 (0.15) 0.62
--------- --------- --------- --------- ---------
Less distributions (note 9):
Dividends from net investment income ....... (0.30) (0.30) (0.30) (0.30) (0.31)
--------- --------- --------- --------- ---------
Net asset value, end of period ............... $ 10.44 $ 10.39 $ 10.37 $ 10.34 $ 10.79
========= ========= ========= ========= =========
Total return (not reflecting sales charge) ... 3.42% 3.12% 3.22% (1.40)% 6.01%
Ratios/supplemental data
Net assets, end of period (in thousands) ... $ 11,822 $ 11,169 $ 14,034 $ 16,602 $ 19,031
Ratio of expenses to average net assets .... 1.45% 1.51% 1.53% 1.52% 1.43%
Ratio of net investment income to
average net assets ....................... 2.82% 2.76% 2.78% 2.76% 2.83%
Portfolio turnover rate .................... 6.17% 2.87% 2.37% 7.25% 2.20%
The expense and net investment income ratios without the effect of the waiver of a portion of the management fee were (note 3):
Ratio of expenses to average net assets .... 1.75% 1.82% 1.88% 1.88% 1.81%
Ratio of net investment income to
average net assets ....................... 2.52% 2.45% 2.43% 2.40% 2.45%
The expense ratios after giving effect to the waiver and expense offset for uninvested cash balances were:
Ratio of expenses to average net assets .... 1.44% 1.48% 1.53% 1.52% 1.42%
- ----------
+ Per share amounts have been calculated using the monthly average shares
method.
++ Per share amounts have been calculated using the daily 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,
-----------------------------------------------------------------------
2009 2008 2007 2006 2005
--------- --------- --------- --------- ---------
Net asset value, beginning of period ......... $ 10.39 $ 10.37 $ 10.34 $ 10.79 $ 10.48
--------- --------- --------- --------- ---------
Income from investment operations:
Net investment income ...................... 0.37++ 0.37++ 0.38+ 0.37+ 0.39+
Net gain (loss) on securities (both
realized and unrealized) ................. 0.06 0.03 0.03 (0.44) 0.32
--------- --------- --------- --------- ---------
Total from investment operations ........... 0.43 0.40 0.41 (0.07) 0.71
--------- --------- --------- --------- ---------
Less distributions (note 9):
Dividends from net investment income ....... (0.38) (0.38) (0.38) (0.38) (0.40)
--------- --------- --------- --------- ---------
Net asset value, end of period ............... $ 10.44 $ 10.39 $ 10.37 $ 10.34 $ 10.79
========= ========= ========= ========= =========
Total return (not reflecting sales charge) ... 4.17% 3.84% 3.96% (0.67)% 6.89%
Ratios/supplemental data
Net assets, end of period (in thousands) ... $ 269 $ 537 $ 826 $ 761 $ 1,098
Ratio of expenses to average net assets .... 0.74% 0.81% 0.81% 0.79% 0.58%
Ratio of net investment income to
average net assets ....................... 3.54% 3.47% 3.50% 3.48% 3.68%
Portfolio turnover rate .................... 6.17% 2.87% 2.37% 7.25% 2.20%
The expense and net investment income ratios without the effect of the waiver of a portion of the management fee were (note 3):
Ratio of expenses to average net assets .... 1.04% 1.12% 1.15% 1.15% 0.96%
Ratio of net investment income to
average net assets ....................... 3.24% 3.16% 3.15% 3.12% 3.30%
The expense ratios after giving effect to the waiver and expense offset for uninvested cash balances were:
Ratio of expenses to average net assets .... 0.73% 0.77% 0.80% 0.79% 0.57%
Class Y
-----------------------------------------------------------------------
Year Ended June 30,
-----------------------------------------------------------------------
2009 2008 2007 2006 2005
--------- --------- --------- --------- ---------
Net asset value, beginning of period ......... $ 10.39 $ 10.37 $ 10.34 $ 10.79 $ 10.49
--------- --------- --------- --------- ---------
Income from investment operations:
Net investment income ...................... 0.40++ 0.40++ 0.40+ 0.40+ 0.41+
Net gain (loss) on securities (both
realized and unrealized) ................. 0.05 0.03 0.04 (0.44) 0.31
--------- --------- --------- --------- ---------
Total from investment operations ........... 0.45 0.43 0.44 (0.04) 0.72
--------- --------- --------- --------- ---------
Less distributions (note 9):
Dividends from net investment income ....... (0.40) (0.41) (0.41) (0.41) (0.42)
--------- --------- --------- --------- ---------
Net asset value, end of period ............... $ 10.44 $ 10.39 $ 10.37 $ 10.34 $ 10.79
========= ========= ========= ========= =========
Total return (not reflecting sales charge) ... 4.46% 4.16% 4.25% (0.40)% 6.98%
Ratios/supplemental data
Net assets, end of period (in thousands) ... $ 49,871 $ 45,332 $ 34,409 $ 32,239 $ 27,998
Ratio of expenses to average net assets .... 0.45% 0.51% 0.53% 0.52% 0.43%
Ratio of net investment income to
average net assets ....................... 3.83% 3.75% 3.77% 3.76% 3.83%
Portfolio turnover rate .................... 6.17% 2.87% 2.37% 7.25% 2.20%
The expense and net investment income ratios without the effect of the waiver of a portion of the management fee were (note 3):
Ratio of expenses to average net assets .... 0.75% 0.82% 0.87% 0.88% 0.81%
Ratio of net investment income to
average net assets ....................... 3.53% 3.44% 3.43% 3.39% 3.45%
The expense ratios after giving effect to the waiver and expense offset for uninvested cash balances were:
Ratio of expenses to average net assets .... 0.44% 0.47% 0.52% 0.52% 0.42%
- ----------
+ Per share amounts have been calculated using the monthly average shares
method.
++ Per share amounts have been calculated using the daily average shares
method.
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
ANALYSIS OF EXPENSES (UNAUDITED)
As a shareholder of the Fund, you may incur two types of costs: (1)
transaction costs, including front-end sales charges with respect to Class A
shares or contingent deferred sales charges ("CDSC") with respect to Class C
shares; and (2) ongoing costs, including management fees; distribution and/or
service (12b-1) fees; and other Fund expenses. The 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,
2009 and held for the six months ended June 30, 2009.
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, 2009
ACTUAL
TOTAL RETURN BEGINNING ENDING EXPENSES
WITHOUT ACCOUNT ACCOUNT PAID DURING
SALES CHARGES(1) VALUE VALUE THE PERIOD(2)
- --------------------------------------------------------------------------------
Class A 3.47% $1,000.00 $1,034.70 $2.86
- --------------------------------------------------------------------------------
Class C 3.03% $1,000.00 $1,030.30 $7.13
- --------------------------------------------------------------------------------
Class I 3.52% $1,000.00 $1,035.20 $3.40
- --------------------------------------------------------------------------------
Class Y 3.55% $1,000.00 $1,035.50 $2.11
- --------------------------------------------------------------------------------
(1) ASSUMES REINVESTMENT OF ALL DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS, IF
ANY, AT NET ASSET VALUE AND DOES NOT REFLECT THE DEDUCTION OF THE
APPLICABLE SALES CHARGES WITH RESPECT TO CLASS A SHARES OR THE APPLICABLE
CONTINGENT DEFERRED SALES CHARGES ("CDSC") WITH RESPECT TO CLASS C SHARES.
TOTAL RETURN IS NOT ANNUALIZED, AS IT MAY NOT BE REPRESENTATIVE OF THE
TOTAL RETURN FOR THE YEAR.
(2) EXPENSES ARE EQUAL TO THE ANNUALIZED EXPENSE RATIO OF 0.57%, 1.42%, 0.67%
AND 0.42% FOR THE FUND'S CLASS A, C, I AND Y SHARES, RESPECTIVELY,
MULTIPLIED BY THE AVERAGE ACCOUNT VALUE OVER THE PERIOD, MULTIPLIED BY
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, 2009
HYPOTHETICAL
ANNUALIZED BEGINNING ENDING EXPENSES
TOTAL ACCOUNT ACCOUNT PAID DURING
RETURN VALUE VALUE THE PERIOD(1)
- --------------------------------------------------------------------------------
Class A 5.00% $1,000.00 $1,021.98 $2.85
- --------------------------------------------------------------------------------
Class C 5.00% $1,000.00 $1,017.77 $7.08
- --------------------------------------------------------------------------------
Class I 5.00% $1,000.00 $1,021.45 $3.38
- --------------------------------------------------------------------------------
Class Y 5.00% $1,000.00 $1,022.72 $2.09
- --------------------------------------------------------------------------------
(1) EXPENSES ARE EQUAL TO THE ANNUALIZED EXPENSE RATIO OF 0.57%, 1.42%, 0.67%
AND 0.42% FOR THE TRUST'S CLASS A, C, I AND Y SHARES, RESPECTIVELY,
MULTIPLIED BY THE AVERAGE ACCOUNT VALUE OVER THE PERIOD, MULTIPLIED BY
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
produce is automatically sent to you and all other shareholders. Specifically,
you are routinely sent your Fund's entire list of portfolio securities twice a
year in the semi-annual and annual reports you receive. Additionally, under Fund
policies, the Manager publicly discloses the complete schedule of the Fund's
portfolio holdings, as of each calendar quarter, generally by the 15th day after
the end of each calendar quarter. Such information remains accessible until the
next schedule is made publicly available. You may obtain a copy of the Fund's
portfolio holding schedule for the most recently completed period by visiting
the Fund's website at www.aquilafunds.com. The Fund also discloses its five
largest holdings by value as of the close of the last business day of each
calendar month in a posting to its website on the 5th business day following the
month end. This information remains on the website until the next such posting.
Whenever you wish to see a listing of your Fund's portfolio other than in your
shareholder reports, please check our website (www.aquilafunds.com) or call us
at 1-800-437-1020.
The Fund additionally files a complete list of its portfolio holdings with
the SEC for the first and third quarters of each fiscal year on Form N-Q. Forms
N-Q are available free of charge on the SEC website at http://www.sec.gov. You
may also review or, for a fee, copy the forms at the SEC's Public Reference Room
in Washington, D.C. or by calling 1-800-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, 2009 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, 2009, $6,771,698 of dividends paid by
Narragansett Insured Tax-Free Income Fund, constituting 98.68% of total
dividends paid during the fiscal year ended June 30, 2009, were exempt-interest
dividends and the balance was ordinary dividend income.
Prior to January 31, 2009, shareholders were mailed the appropriate tax
form(s) which contained information on the status of distributions paid for the
2008 CALENDAR YEAR.
Prior to January 31, 2010, shareholders will be mailed the appropriate tax
form(s) which will contain information on the status of distributions paid for
the 2009 CALENDAR YEAR.
- --------------------------------------------------------------------------------
ADDITIONAL INFORMATION (UNAUDITED)
TRUSTEES AND OFFICERS(1)
NUMBER OF OTHER DIRECTORSHIPS
POSITIONS PORTFOLIOS HELD BY TRUSTEE (THE
HELD WITH IN FUND POSITION HELD IS A
NAME, FUND AND PRINCIPAL COMPLEX DIRECTORSHIP UNLESS
ADDRESS(2) LENGTH OF OCCUPATION(S) OVERSEEN INDICATED
AND DATE OF BIRTH SERVICE(3) DURING PAST 5 YEARS BY TRUSTEE OTHERWISE.)
- ----------------- ---------- ------------------- ---------- -----------
INTERESTED TRUSTEE(4)
Diana P. Herrmann Trustee since Vice Chair and Chief Executive Officer of 12 ICI Mutual Insurance
New York, NY 2005 and Aquila Management Corporation, Founder of Company
(02/25/58) President the Aquila Group of Funds(5) and parent of
since 1998 Aquila Investment Management LLC, Manager
since 2004, President since 1997, Chief
Operating Officer, 1997-2008, 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, President and Manager of
the Manager since 2003, and Chief Operating
Officer of the Manager, 2003-2008; Chair,
Vice Chair, President, Executive Vice
President or Senior Vice President of funds
in the Aquila Group of Funds since 1986;
Director of the Distributor since 1997;
Governor, Investment Company Institute (a
trade organization for the U.S. mutual fund
industry dedicated to protecting shareholder
interests and educating the public about
investing) and head of its Small Funds
Committee 2004-2009; active in charitable
and volunteer organizations.
John J. Partridge Trustee Founding Partner, Partridge Snow & Hahn LLP, 4 None
Providence, RI since 2008 a law firm, Providence, Rhode Island, since
(05/05/40) 1988, Senior Counsel, since January 1, 2007;
Assistant Secretary - Advisor to the Board,
Narragansett Insured Tax-Free Income Fund,
2005-2008, Trustee 2002-2005; director or
trustee of various educational, civic and
charitable organizations, including Ocean
State Charities Trust, Memorial Hospital of
Rhode Island, and The Pawtucket Foundation.
NUMBER OF OTHER DIRECTORSHIPS
POSITIONS PORTFOLIOS HELD BY TRUSTEE (THE
HELD WITH IN FUND POSITION HELD IS A
NAME, FUND AND PRINCIPAL COMPLEX DIRECTORSHIP UNLESS
ADDRESS(2) LENGTH OF OCCUPATION(S) OVERSEEN INDICATED
AND DATE OF BIRTH SERVICE(3) DURING PAST 5 YEARS BY TRUSTEE OTHERWISE.)
- ----------------- ---------- ------------------- ---------- -----------
David A. Duffy Chair of the Chairman, Rhode Island Convention Center 2 Delta Dental of Rhode
North Kingstown, RI Board Authority since 2003; director (advisory Island
(08/07/39) since 2009 board) of Citizens Bank of Rhode Island and
and Trustee Connecticut since 1999; retired Founder,
since 1995 formerly President, Duffy & Shanley, Inc., a
marketing communications firm, 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
including Rhode Island Hospital.
Thomas A. Christopher Trustee Vice President of Robinson, Hughes & 4 None
Danville, KY since 2009 Christopher, C.P.A.s, P.S.C., since 1977;
(12/19/47) President, A Good Place for Fun, Inc., a
sports facility, since 1987; currently or
formerly active with various professional
and community organizations.
James R. Ramsey Trustee President, University of Louisville since 2 Community Bank and
Louisville, KY since 2004 November 2002; Professor of Economics, Trust, Pikeville, KY and
(11/14/48) University of Louisville, 1999-present; Texas Roadhouse Inc.
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 OTHER DIRECTORSHIPS
POSITIONS PORTFOLIOS HELD BY TRUSTEE (THE
HELD WITH IN FUND POSITION HELD IS A
NAME, FUND AND PRINCIPAL COMPLEX DIRECTORSHIP UNLESS
ADDRESS(2) LENGTH OF OCCUPATION(S) OVERSEEN INDICATED
AND DATE OF BIRTH SERVICE(3) DURING PAST 5 YEARS BY TRUSTEE OTHERWISE.)
- ----------------- ---------- ------------------- ---------- -----------
Laureen L. White Trustee President, Greater Providence Chamber of 1 None
North Kingstown, RI since 2005 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, Aquila N/A N/A
New York, NY Chairman Management Corporation, the sponsoring
(05/12/29) Emeritus organization and parent of the Manager or
since 2005; Administrator and/or Adviser or Sub-Adviser
Chairman of to each fund of the Aquila Group of Funds;
the Board Chairman of the Manager or Administrator
of Trustees, and/or Adviser or Sub-Adviser to each since
1992-2005 2004; Founder and Chairman Emeritus of each
fund in the Aquila Group of Funds;
previously Chairman and a Trustee of each
fund in the Aquila Group of Funds since its
establishment until 2004 or 2005; Director
of the Distributor since 1981 and formerly
Vice President or Secretary, 1981-1998;
Director or trustee, Premier VIT, 1994 -
2009; Director or trustee of Oppenheimer
Quest Value Funds Group, Oppenheimer Small
Cap Value Fund, Oppenheimer Midcap Fund,
1987 - 2009, and Oppenheimer Rochester Group
of Funds, 1995 - 2009; Trustee Emeritus,
Brown University and the Hopkins School;
active in university, school and charitable
organizations.
NUMBER OF OTHER DIRECTORSHIPS
POSITIONS PORTFOLIOS HELD BY TRUSTEE (THE
HELD WITH IN FUND POSITION HELD IS A
NAME, FUND AND PRINCIPAL COMPLEX DIRECTORSHIP UNLESS
ADDRESS(2) LENGTH OF OCCUPATION(S) OVERSEEN INDICATED
AND DATE OF BIRTH SERVICE(3) DURING PAST 5 YEARS BY TRUSTEE OTHERWISE.)
- ----------------- ---------- ------------------- ---------- -----------
Vernon R. Alden Trustee Retired; former director or trustee of N/A N/A
Boston, MA Emeritus various Fortune 500 companies, including
(04/07/23) since 2006 Colgate-Palmolive and McGraw Hill; formerly
President of Ohio University and Associate
Dean of the Harvard University Graduate
School of Business Administration; Trustee,
Narragansett Insured Tax-Free Income Fund,
1992-2006 and Tax-Free Trust of Oregon,
1988-2001; Trustee Emeritus, Tax-Free Trust
of Oregon since 2006; member of several
Japan-related advisory councils, including
Chairman of the Japan Society of Boston;
trustee of various cultural, educational and
civic organizations.
William J. Nightingale Trustee Retired; formerly Chairman, founder (1975) N/A N/A
Rowayton, CT Emeritus and Senior Advisor until 2000 of Nightingale
(09/16/29) since 2009 & Associates, L.L.C., a general management
consulting firm focusing on interim
management, divestitures, turnaround of
troubled companies, corporate restructuring
and financial advisory services; Trustee of
Churchill Tax-Free Fund of
Kentucky,1993-2007; Trustee of Narragansett
Insured Tax-Free Income Fund, 1991-2009, and
Chair of the Board, 2005-2009.
OFFICERS
Charles E. Childs, III Executive Vice Executive Vice President of all funds in the N/A N/A
New York, NY President Aquila Group of Funds and the Manager and
(04/01/57) since 2003 the Manager's parent since 2003; Executive
Vice President and Chief Operating Officer
of the Manager and the Manager's parent
since 2008; formerly Senior Vice President,
corporate development, Vice President,
Assistant Vice President and Associate of
the Manager's parent since 1987; Senior Vice
President, Vice President or Assistant Vice
President of the Aquila Money-Market Funds,
1988-2003.
NUMBER OF OTHER DIRECTORSHIPS
POSITIONS PORTFOLIOS HELD BY TRUSTEE (THE
HELD WITH IN FUND POSITION HELD IS A
NAME, FUND AND PRINCIPAL COMPLEX DIRECTORSHIP UNLESS
ADDRESS(2) LENGTH OF OCCUPATION(S) OVERSEEN INDICATED
AND DATE OF BIRTH SERVICE(3) DURING PAST 5 YEARS BY TRUSTEE OTHERWISE.)
- ----------------- ---------- ------------------- ---------- -----------
Maryann Bruce Senior Vice President, Aquila Distributors, Inc., since N/A N/A
Cornelius, NC President 2008; Senior Vice President of each of the
(04/01/60) since 2009 equity and bond funds in the Aquila Group of
Funds since 2009; Executive Managing
Director, Evergreen Investments, 2004-2007,
President, Evergreen Investment Services,
Inc., 1999-2007; President and CEO, Allstate
Financial Distributors, Inc., 1998-1999;
Senior Vice President and Director Financial
Institution Division, OppenheimerFunds,
Inc., 1990-1998, Regional Vice President,
1987-1990; Vice President and Mutual Fund
Marketing Manager, J.C. Bradford & Company,
1982-1987.
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 Chief Compliance Officer of the Fund and N/A N/A
New York, NY Compliance each of the other funds in the Aquila Group
(08/23/40) Officer of Funds, the Manager and the Distributor
since 2004 since 2004, Compliance Officer of the
and Assistant Manager or its predecessor and current
Secretary parent 1998-2004; Assistant Secretary of the
since 2000 Aquila Group of Funds since 2000.
Joseph P. DiMaggio Chief Chief Financial Officer of each fund in the N/A N/A
New York, NY Financial Aquila Group of Funds since 2003 and
(11/06/56) Officer Treasurer since 2000.
since 2003
and Treasurer
since 2000
NUMBER OF OTHER DIRECTORSHIPS
POSITIONS PORTFOLIOS HELD BY TRUSTEE (THE
HELD WITH IN FUND POSITION HELD IS A
NAME, FUND AND PRINCIPAL COMPLEX DIRECTORSHIP UNLESS
ADDRESS(2) LENGTH OF OCCUPATION(S) OVERSEEN INDICATED
AND DATE OF BIRTH SERVICE(3) DURING PAST 5 YEARS BY TRUSTEE OTHERWISE.)
- ----------------- ---------- ------------------- ---------- -----------
Edward M. W. Hines Secretary Shareholder of Butzel Long, a professional N/A N/A
New York, NY since 1992 corporation, counsel to the Fund, since
(12/16/39) 2007; Partner of Hollyer Brady Barrett &
Hines LLP, its predecessor as counsel,
1989-2007; Secretary of each fund in the
Aquila Group of Funds.
John M. Herndon Assistant Assistant Secretary of each fund in the N/A N/A
New York, NY Secretary Aquila Group of Funds since 1995 and Vice
(12/17/39) since 1995 President 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 Assistant Treasurer of each fund in the N/A N/A
New York, NY Treasurer Aquila Group of Funds since 2000; Assistant
(11/02/66) since 2000 Vice President of the Manager or its
predecessor and current parent since 1998;
Fund Accountant for the Aquila Group of
Funds, 1995-1998.
- ----------
(1) The Fund's Statement of Additional Information includes additional
information about the Trustees and is available, without charge, upon request by
calling 800-437-1020 (toll-free) or by visiting www.aquilafunds.com or the EDGAR
Database at the SEC's internet site at www.sec.gov.
(2) The mailing address of each Trustee and officer is c/o Narragansett Insured
Tax-Free Income Fund, 380 Madison Avenue, New York, NY 10017.
(3) Each Trustee holds office until the next annual meeting of shareholders or
until his or her successor is elected and qualifies. The term of office of each
officer is one year.
(4) Ms. Herrmann is an interested person of the Fund as an officer of the Fund,
as a director, officer and shareholder of the Manager's corporate parent, as an
officer and Manager of the Manager, and as a shareholder and director of the
Distributor. Ms. Herrmann is the daughter of Lacy B. Herrmann, the Founder and
Chairman Emeritus of the Fund. Mr. Partridge is an interested person of the Fund
as a senior counsel of the law firm that performs legal services for the
Sub-Adviser.
(5) In this material Pacific Capital Cash Assets Trust, Pacific Capital U.S.
Government Securities Cash Assets Trust and Pacific Capital Tax-Free Cash Assets
Trust, each of which is a money-market fund, are called the "Aquila Money-Market
Funds"; Hawaiian Tax-Free Trust, Tax-Free Trust of Arizona, Tax-Free Trust of
Oregon, Tax-Free Fund of Colorado, Churchill Tax-Free Fund of Kentucky,
Narragansett Insured Tax-Free Income Fund and Tax-Free Fund For Utah, each of
which is a tax-free municipal bond fund, are called the "Aquila Municipal Bond
Funds"; Aquila Rocky Mountain Equity Fund is an equity fund; and 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."
(6) A Trustee Emeritus may attend Board meetings but has no voting power.
- --------------------------------------------------------------------------------
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, if any, 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 (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 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
(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 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.
- --------------------------------------------------------------------------------
(THIS PAGE INTENTIONALLY LEFT BLANK)
(THIS PAGE INTENTIONALLY LEFT BLANK)
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 RBS CITIZENS, N. A.
One Citizens Plaza
Providence, Rhode Island 02903
BOARD OF TRUSTEES
David A. Duffy, Chair
Thomas A. Christopher
Diana P. Herrmann
John J. Partridge
James R. Ramsey
Laureen L. White
OFFICERS
Diana P. Herrmann, President
Maryann Bruce, Senior Vice 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
PNC Global Investment Servicing
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, 2009 (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
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 $14,000 in 2008 and $14,700 in 2009.
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 $3,100 in 2008 and 2009, 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 8, 2009
By: /s/ Joseph P. DiMaggio
- -------------------------------------
Chief Financial Officer and Treasurer
September 8, 2009
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 8, 2009
By: /s/ Joseph P. DiMaggio
- -------------------------------------
Joseph P. DiMaggio
Chief Financial Officer and Treasurer
September 8, 2009
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)(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.