-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, CK7g1Fhqt02mD2JjbgyQG/M/3CSakaIoTXD3F5R5UxI6NG2kWtl47ymjkmDcGpGr YNq5EzCNltNEoY/qwiiplA== 0000888955-03-000007.txt : 20030905 0000888955-03-000007.hdr.sgml : 20030905 20030905122219 ACCESSION NUMBER: 0000888955-03-000007 CONFORMED SUBMISSION TYPE: N-CSR PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20030630 FILED AS OF DATE: 20030905 EFFECTIVENESS DATE: 20030905 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AQUILA NARRAGANSETT INSURED TAX FREE INCOME FUND CENTRAL INDEX KEY: 0000888955 STATE OF INCORPORATION: NY FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: N-CSR SEC ACT: 1940 Act SEC FILE NUMBER: 811-06707 FILM NUMBER: 03883151 BUSINESS ADDRESS: STREET 1: 380 MADISON AVE STREET 2: STE 2300 CITY: NEW YORK STATE: NY ZIP: 10017 BUSINESS PHONE: 2126976666 MAIL ADDRESS: STREET 1: 380 MADISON AVENUE STREET 2: SUITE 2300 CITY: NEW YORK STATE: NY ZIP: 10017 FORMER COMPANY: FORMER CONFORMED NAME: NARRAGANSETT INSURED TAX FREE INCOME FUND DATE OF NAME CHANGE: 19920929 N-CSR 1 nitfifformncsr.txt NARRAGANSETT INSURED TAX-FREE INCOME FUND 6/30/03 ANNUAL REPORT UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM N-CSR CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES Investment Company Act file number 811-06707 Narragansett Insured Tax-Free Income Fund (Exact name of Registrant as specified in charter) 380 Madison Avenue New York, New York 10017 (Address of principal executive offices) (Zip code) Joseph P. DiMaggio 380 Madison Avenue New York, New York 10017 (Name and address of agent for service) Registrant's telephone number, including area code: (212) 697-6666 Date of fiscal year end: 6/30 Date of reporting period: 6/30/03 FORM N-CSR ITEM 1. REPORTS TO STOCKHOLDERS. NARRAGANSETT INSURED TAX-FREE INCOME FUND Annual Report June 30, 2003 [Logo of Narragansett Insured Tax-Free Income Fund: rectangle with profile view of a sailboat on top of waves and three seagulls flying above it] SERVING RHODE ISLAND INVESTORS FOR MORE THAN A DECADE NARRAGANSETT INSURED TAX-FREE INCOME FUND ANNUAL REPORT MANAGEMENT DISCUSSION Narragansett Insured Tax-Free Income Fund (the "Fund") seeks to provide the highest level of double tax free income possible while staying within the self imposed quality restraints. The Fund strives to accomplish this by purchasing only municipal securities rated AAA by nationally renowned credit rating services. As an extra measure of credit protection to shareholders, all securities owned by the Fund are insured to provide for the timely payment of principal and interest when due. A maximum average maturity profile of under 15 years has been and will continue to be maintained for the Fund's portfolio in order to produce a reasonable level of income return with relatively high stability for the Fund's share price. At the June 2003 fiscal year end, the portfolio had an average maturity of 12.3 years. Stock prices continued to climb in June as the Standard & Poor's 500 added 1.3% for the month. This "benchmark" index returned nearly 12% during the first half of 2003, while the NASDAQ Composite posted an astonishing 22% gain as investors appeared to focus on both the technology and biotech sectors. Although we believe the economy still appears sluggish by many measures, shares which are economically sensitive have, in our view, generally fared better than more defensive issues in the stock market. Despite the difficult stock market of the previous three years, we think this year's market run up can be attributed to investors who sought lower quality investments. For example, the stock performance of IBM and Microsoft has been rather tepid, while the shares of numerous unprofitable technology companies have surged. Therefore, the stock market seems to be discounting a fairly robust recovery in the second half of the year 2003. While we have argued for some time that the economy should improve and we agree that technology spending is trending higher, it is entirely possible that the prices of many stocks have gotten ahead of the actual fundamentals. A case may be built that more patient investors may find it an opportune time to accumulate shares in quality companies that have lagged in the market rally, such as those with rising cash flows and dividends. The bond market began to slip during the latter part of June of this year. Intermediate and long-term interest rates, which fell to historic lows early on, ended the month above May levels despite another cut in the Federal Funds' rate. Even the weak June employment data released in early July failed to give bond prices a lift. As with the stock market rally, the retrenchment in interest rates appears to have been a global phenomenon. Given the heavy government-financing calendar in the coming months of this year as well as investors' rediscovered appetite for stocks in addition to our country's dependence on foreign capital, gradual upward pressure on rates could continue. For fixed income investors, this would be a welcome development. Given the current Federal income tax rates and the Rhode Island income tax rate, the 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, 2003 as compared with the Lehman Brothers Quality Intermediate Municipal Bond Index and the Consumer Price Index (a cost of living index). The performance of each of the other classes is not shown in the graph but is included in the table below. It should be noted that the Lehman Index does not include any operating expenses nor sales charges and being nationally oriented, does not reflect state specific bond market performance. [Graphic of a line chart with the following information:]
Lehman Brothers Quality Intermediate Fund's Class A Shares Municipal Bond Index With Sales Charge Without Sales Charge Cost of Living Index 6/93 $10,000 $9,600 $10,000 $10,000 6/94 $10,131 $9,545 $9,943 $10,249 6/95 $10,940 $10,558 $10,998 $10,561 6/96 $11,548 $11,030 $11,490 $10,852 6/97 $12,338 $12,038 $12,540 $11,101 6/98 $13,195 $12,972 $13,514 $11,288 6/99 $13,595 $13,147 $13,696 $11,510 6/00 $14,143 $13,484 $14,046 $11,939 6/01 $15,393 $14,798 $15,415 $12,327 6/02 $16,463 $15,679 $16,333 $12,458 6/03 $17,750 $17,032 $17,743 $12,722
AVERAGE ANNUAL TOTAL RETURN FOR PERIODS ENDED JUNE 30, 2003 ---------------------------------------------- SINCE 1 YEAR 5 YEARS 10 YEARS INCEPTION ------ ------- -------- --------- Class A (9/10/92) With Sales Charge 4.26% 4.73% 5.47% 5.91% Without Sales Charge 8.64 5.60 5.90 6.31 Class C (5/1/96) With CDSC 6.72 4.68 n/a 5.26 Without CDSC 7.72 4.68 n/a 5.26 Class Y (5/1/96) No Sales Charge 8.80 5.73 n/a 6.47 Class I (11/4/98) No Sales Charge 8.52 n/a n/a 5.45 Lehman Index 7.82 6.11 5.90 6.16* (Class A) n/a 6.22** (Class C&Y) n/a 5.63+ (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 classes' income may be subject to federal and state income taxes. Past performance is not predictive of future investment results. * From commencement of operations on September 10, 1992. ** From commencement of operations on May 1, 1996. + From commencement of operations on November 4, 1998. [Logo of KPMG LLP: four solid rectangles with the letters KPMG in front of them] INDEPENDENT AUDITORS' REPORT To the Board of Trustees and Shareholders of Narragansett Insured Tax-Free Income Fund: We have audited the accompanying statement of assets and liabilities of Narragansett Insured Tax-Free Income Fund, including the statement of investments, as of June 30, 2003, 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 five 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. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. 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. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights. Our procedures included confirmation of securities owned as of June 30, 2003, by correspondence with the custodian. As to securities sold but not yet delivered, we performed other appropriate auditing procedures. 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, 2003, 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 five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America. KPMG LLP New York, New York August 8, 2003 NARRAGANSETT INSURED TAX-FREE INCOME FUND STATEMENT OF INVESTMENTS JUNE 30, 2003
RATING FACE MOODY'S, S&P AMOUNT GENERAL OBLIGATION BONDS (46.5%) OR FITCH VALUE - ----------- --------------------------------------------------- ------------- ------------- Central Falls, Rhode Island $ 500,000 4.900%, 11/15/05 MBIA Insured .................. Aaa+/AAA++ $ 516,980 500,000 5.200%, 11/15/09 MBIA Insured .................. Aaa+/AAA++ 512,195 Coventry Rhode Island 550,000 5.000%, 11/01/16 AMBAC Insured ................. Aaa+/AAA+++ 605,687 550,000 5.000%, 11/01/17 AMBAC Insured ................. Aaa+/AAA+++ 601,562 Cranston, Rhode Island 300,000 5.500%, 06/15/07 MBIA Insured .................. Aaa+/AAA++ 330,375 500,000 5.450%, 11/15/11 FGIC Insured .................. Aaa+/AAA++ 576,875 Cumberland, Rhode Island 345,000 5.500%, 09/01/06 MBIA Insured .................. Aaa+/AAA++ 354,463 250,000 3.750%, 2/01/13 FGIC Insured ................... Aaa+/AAA++ 258,437 250,000 4.000%, 2/01/14 FGIC Insured ................... Aaa+/AAA++ 260,625 250,000 4.000%, 2/01/15 FGIC Insured ................... Aaa+/AAA++ 258,750 500,000 5.000%, 08/01/15 MBIA Insured .................. Aaa+/AAA++ 555,625 250,000 4.000%, 2/01/16 FGIC Insured ................... Aaa+/AAA++ 255,937 250,000 4.100%, 2/01/17 FGIC Insured ................... Aaa+/AAA++ 255,937 250,000 4.150%, 2/01/18 FGIC Insured ................... Aaa+/AAA++ 255,000 1,255,000 5.000%, 10/01/18 MBIA Insured .................. Aaa+/AAA++ 1,363,244 1,040,000 5.200%, 10/01/21 MBIA Insured .................. Aaa+/AAA++ 1,121,900 Lincoln, Rhode Island 400,000 5.100%, 01/15/06 MBIA Insured .................. Aaa+/AAA++ 416,656 400,000 5.200%, 08/15/06 MBIA Insured .................. Aaa+/AAA++ 405,492 1,000,000 5.500%, 08/15/10 MBIA Insured .................. Aaa+/AAA++ 1,014,090 250,000 5.750%, 08/01/15 FGIC Insured .................. Aaa+/AAA+++ 275,000 Newport, Rhode Island 250,000 4.900%, 05/15/06 FGIC Insured .................. Aaa+/AAA++ 262,515 500,000 5.000%, 05/15/07 FGIC Insured .................. Aaa+/AAA++ 526,900 150,000 6.550%, 08/15/07 MBIA Insured .................. Aaa+/AAA++ 150,808 500,000 5.100%, 05/15/08 FGIC Insured .................. Aaa+/AAA++ 527,330 1,000,000 4.500%, 11/01/15 AMBAC Insured ................. Aaa+/AAA+++ 1,071,250 1,000,000 4.750%, 11/01/18 AMBAC Insured ................. Aaa+/AAA+++ 1,065,000 800,000 5.000%, 11/01/20 AMBAC Insured ................. Aaa+/AAA+++ 861,000 New Shoreham Rhode Island $ 245,000 4.000%, 11/15/15 AMBAC Insured ................. AAA++/AAA+++ $ 253,269 255,000 4.250%, 11/15/16 AMBAC Insured ................. AAA++/AAA+++ 266,156 270,000 4.250%, 11/15/17 AMBAC Insured ................. AAA++/AAA+++ 279,450 910,000 4.800%, 04/15/18 AMBAC Insured ................. AAA++/AAA+++ 974,837 285,000 4.500%, 11/15/18 AMBAC Insured ................. AAA++/AAA+++ 298,181 1,105,000 5.000%, 04/15/22 AMBAC Insured ................. AAA++/AAA+++ 1,175,444 North Providence, Rhode Island 400,000 5.700%, 07/01/08 MBIA Insured .................. Aaa+/AAA++ 466,500 500,000 4.700%, 09/15/14 FSA Insured ................... Aaa+/AAA+++ 542,500 Pawtucket, Rhode Island 600,000 4.300%, 09/15/09 AMBAC Insured ................. Aaa+/AAA+++ 660,750 795,000 3.500%, 04/15/10, AMBAC Insured ................ Aaa+/AAA+++ 825,806 250,000 4.400%, 09/15/10 AMBAC Insured ................. Aaa+/AAA+++ 275,000 825,000 3.500%, 04/15/11 AMBAC Insured ................. Aaa+/AAA+++ 848,719 850,000 3.625%, 04/15/12 AMBAC Insured ................. Aaa+/AAA+++ 876,562 880,000 3.750%, 04/15/13 AMBAC Insured ................. Aaa+/AAA+++ 906,400 910,000 4.000%, 04/15/14 AMBAC Insured ................. Aaa+/AAA+++ 944,125 Providence, Rhode Island 700,000 5.500%, 01/15/11 FSA Insured ................... Aaa+/AAA++ 789,250 1,925,000 5.200%, 04/01/11 AMBAC Insured ................. Aaa+/AAA+++ 2,177,656 1,000,000 5.000%, 01/15/16 FGIC Insured .................. Aaa+/AAA++ 1,096,250 1,000,000 5.000%, 01/15/17 FGIC Insured .................. Aaa+/AAA++ 1,090,000 1,000,000 5.000%, 01/15/18 FGIC Insured .................. Aaa+/AAA++ 1,083,750 East Providence, Rhode Island 500,000 5.400%, 05/15/07 MBIA Insured .................. Aaa+/AAA++ 543,125 350,000 3.375%, 05/15/15 MBIA Insured .................. Aaa+/AAA++ 342,125 State of Rhode Island 1,000,000 5.000%, 07/15/05 FGIC Insured .................. Aaa+/AAA++ 1,072,500 1,000,000 5.125%, 07/15/11 FGIC Insured .................. Aaa+/AAA++ 1,112,500 4,000,000 5.000%, 08/01/14 FGIC Insured .................. Aaa+/AAA++ 4,430,000 1,500,000 5.000%, 09/01/15 FGIC Insured .................. Aaa+/AAA++ 1,635,000 2,000,000 5.250%, 11/01/17 FGIC Insured .................. Aaa+/AAA++ 2,230,000 2,500,000 5.000%, 09/01/18 MBIA Insured .................. Aaa+/AAA++ 2,700,000 2,000,000 5.000%, 09/01/19 MBIA Insured .................. Aaa+/AAA++ 2,150,000 1,500,000 5.000%, 09/01/20 MBIA Insured .................. Aaa+/AAA++ 1,601,250 Rhode Island Consolidated Capital Development Loan, Series A $ 1,000,000 5.000%, 09/01/14 FGIC Insured .................. Aaa+/AAA++ $ 1,095,000 1,500,000 4.750%, 09/01/17 FGIC Insured .................. Aaa+/AAA++ 1,582,500 Rhode Island Consolidated Capital Development Loan, Series B 1,000,000 5.000%, 06/01/14 FGIC Insured .................. Aaa+/AAA++ 1,106,250 2,000,000 5.000%, 08/01/15 FGIC Insured .................. Aaa+/AAA++ 2,197,500 State of Rhode Island Consolidated Capital Development Loan, Series C 1,000,000 5.250%, 11/01/11 MBIA Insured .................. Aaa+/AAA++ 1,158,750 South Kingstown, Rhode Island 400,000 4.900%, 11/15/07 AMBAC Insured ................. Aaa+/AAA++ 409,248 500,000 5.500%, 06/15/12 FGIC Insured .................. Aaa+/AAA+++ 575,625 Warwick, Rhode Island 665,000 4.250%, 07/15/14 AMBAC Insured ................. Aaa+/AAA++ 704,069 195,000 5.600%, 08/01/14 FSA Insured ................... Aaa+/AAA++ 219,619 700,000 4.375%, 07/15/15 AMBAC Insured ................. Aaa+/AAA++ 742,875 735,000 4.500%, 07/15/16 AMBAC Insured ................. Aaa+/AAA++ 779,100 770,000 4.600%, 07/15/17 AMBAC Insured ................. Aaa+/AAA++ 816,200 1,000,000 5.000%, 03/01/18 FGIC Insured .................. Aaa+/AAA++ 1,087,500 810,000 4.700%, 07/15/18 AMBAC Insured ................. Aaa+/AAA++ 858,600 1,000,000 5.000%, 01/15/19 FGIC Insured .................. Aaa+/AAA++ 1,076,250 855,000 4.750%, 07/15/19 AMBAC Insured ................. Aaa+/AAA++ 902,025 500,000 5.000%, 01/15/20 FGIC Insured .................. Aaa+/AAA++ 535,625 West Warwick, Rhode Island 500,000 4.875%, 03/01/16 AMBAC Insured ................. Aaa+/AAA+++ 541,875 670,000 5.000%, 03/01/17 AMBAC Insured ................. Aaa+/AAA+++ 729,462 700,000 5.050%, 03/01/18 AMBAC Insured ................. Aaa+/AAA+++ 762,125 735,000 5.100%, 03/01/19 AMBAC Insured ................. Aaa+/AAA+++ 797,475 Woonsocket, Rhode Island 385,000 5.125%, 03/01/11 MBIA Insured .................. Aaa+/AAA++ 393,778 655,000 4.450%, 12/15/12 FGIC Insured .................. Aaa+/AAA+++ 707,400 685,000 4.550%, 12/15/13 FGIC Insured .................. Aaa+/AAA+++ 736,375 -------------- Total General Obligation Bonds .................... 68,821,964 -------------- REVENUE BONDS (49.1%) --------------------------------------------------- HIGHER EDUCATION REVENUE BONDS (23.3%) --------------------------------------------------- Providence Rhode Island Public Building Authority 2003 Series A School Projects $ 1,395,000 4.000%, 12/15/12 MBIA Insured .................. Aaa+/AAA++ $ 1,480,444 1,450,000 4.000%, 12/15/13 MBIA Insured .................. Aaa+/AAA++ 1,522,500 1,505,000 4.000%, 12/15/14 MBIA Insured .................. Aaa+/AAA++ 1,563,319 1,570,000 4.000%, 12/15/15 MBIA Insured .................. Aaa+/AAA++ 1,617,100 1,630,000 4.000%, 12/15/16 MBIA Insured .................. Aaa+/AAA++ 1,662,600 Providence Rhode Island Pub. Bldg. School & Public Facs. Proj. 1,500,000 5.250%, 12/15/17 AMBAC Insured ................. Aaa+/AAA++ 1,655,625 1,000,000 5.250%, 12/15/19 AMBAC Insured ................. Aaa+/AAA++ 1,096,250 Rhode Island Health & Education Building Corp., Board of Governors, 1993 Series A 450,000 5.300%, 09/15/08 MBIA Insured .................. Aaa+/AAA++ 462,456 Rhode Island Health & Education Building Corp., Board of Governors, 1993 Series B 500,000 5.250%, 09/15/23 MBIA Insured .................. Aaa+/AAA++ 512,360 Rhode Island Health & Education Building Corp., Brown University, 1993 Series 2,000,000 5.250%, 09/01/17 MBIA Insured .................. Aaa+/AAA+++ 2,217,500 1,000,000 5.000%, 09/01/23 MBIA Insured .................. Aaa+/AAA++ 1,041,250 Rhode Island Health & Education Building Corp., Johnson & Wales University, 1999 Series A 465,000 5.500%, 04/01/15 MBIA Insured .................. Aaa+/AAA++ 548,700 900,000 5.500%, 04/01/16 MBIA Insured .................. Aaa+/AAA++ 1,065,375 785,000 5.500%, 04/01/17 MBIA Insured .................. Aaa+/AAA++ 924,338 2,000,000 5.000%, 04/01/29 MBIA Insured .................. Aaa+/AAA++ 2,085,000 Rhode Island Health & Education Building Corp., Johnson & Wales University, Series 2003 1,360,000 4.000%, 04/01/12 XLCA Insured .................. Aaa+/AAA++ 1,433,100 3,210,000 4.000%, 04/01/13 XLCA Insured .................. Aaa+/AAA++ 3,358,463 2,000,000 4.000%, 04/01/14 XLCA Insured .................. Aaa+/AAA++ 2,070,000 Rhode Island Health & Education Building Corp., Providence College, 1993 Series 300,000 5.600%, 11/01/09 MBIA Insured .................. Aaa+/AAA++ 310,104 300,000 5.600%, 11/01/10 MBIA Insured .................. Aaa+/AAA++ 310,173 1,500,000 5.600%, 11/01/22 MBIA Insured .................. Aaa+/AAA++ 1,548,615 Rhode Island Health & Education Building Corp., Rhode Island School of Design, 2001 Series $ 505,000 4.700%, 06/01/18 MBIA Insured .................. Aaa+/AAA++ $ 536,563 280,000 4.750%, 06/01/19 MBIA Insured .................. Aaa+/AAA++ 296,450 Rhode Island Health & Education Building Corp., Roger Williams University 500,000 5.125%, 11/15/11 AMBAC Insured ................. Aaa+/AAA++ 562,500 Rhode Island Health & Education Building Corp., Roger Williams University, 1996 Series S 1,000,000 5.500%, 11/15/11 AMBAC Insured ................. NR/AAA++ 1,131,250 1,000,000 5.125%, 11/15/14 AMBAC Insured ................. Aaa+/AAA++ 1,108,750 1,000,000 5.000%, 11/15/18 AMBAC Insured ................. Aaa+/AAA++ 1,090,000 Rhode Island St. Health Education Building, Bryant College 1,000,000 5.125%, 06/01/19 AMBAC Insured ................. Aaa+/AAA++ 1,085,000 230,000 5.000%, 12/01/21 AMBAC Insured ................. Aaa+/AAA++ 244,375 -------------- Total Higher Education Revenue Bonds ........... 34,540,160 -------------- MORTGAGE REVENUE MULTI-FAMILY BONDS (0.3%) --------------------------------------------------- Rhode Island Housing & Mortgage Finance Corp., 1995 Series A 240,000 5.450%, 07/01/04 AMBAC Insured ................. Aaa+/AAA++ 247,534 245,000 5.550%, 07/01/05 AMBAC Insured ................. Aaa+/AAA++ 258,781 -------------- Total Mortgage Revenue Bonds ................... 506,315 -------------- WATER AND SEWER REVENUE BONDS (12.6%) --------------------------------------------------- Bristol County Rhode Island Water Authority, 1997 Series A 300,000 5.000%, 12/01/08 MBIA Insured .................. Aaa+/AAA++ 328,875 750,000 5.250%, 07/01/17 MBIA Insured .................. Aaa+/AAA++ 828,750 Kent County Water Authority Revenue Bonds, 1994 Series A 250,000 5.700%, 07/15/04 MBIA Insured .................. Aaa+/AAA++ 262,260 Kent County Water Authority Revenue Bonds, 2002 Series A 500,000 4.000%, 07/15/12 MBIA Insured .................. Aaa+/AAA++ 532,500 1,055,000 4.150%, 07/15/14 MBIA Insured .................. Aaa+/AAA++ 1,107,750 Rhode Island Clean Water Finance Agency, Water Pollution Control Bonds Issue B $ 1,800,000 5.000%, 10/01/18 MBIA Insured .................. Aaa+/AAA++ $ 1,959,750 Rhode Island Clean Water Finance Agency, Water Pollution Control Bonds Series 2002 B 4,765,000 4.375%, 10/01/21 MBIA Insured .................. Aaa+/AAA++ 4,806,694 Rhode Island Clean Water Protection Finance Agency, Series 1999C 1,000,000 5.125%, 10/01/11 MBIA Insured .................. Aaa+/AAA++ 1,123,750 Rhode Island Clean Water Protection Finance Agency, Series A 500,000 4.600%, 10/01/13 AMBAC Insured ................ Aaa+/AAA++ 534,375 500,000 4.750%, 10/01/14 AMBAC Insured ................. Aaa+/AAA++ 540,625 1,250,000 5.400%, 10/01/15 MBIA Insured .................. Aaa+/AAA++ 1,468,750 2,000,000 4.750%, 10/01/18 AMBAC Insured ................. Aaa+/AAA++ 2,095,000 500,000 4.750%, 10/01/20 AMBAC Insured ................. Aaa+/AAA++ 518,750 Rhode Island Water Resources Board Public Drinking Water Protection Revenue Bond 1,500,000 4.000%, 03/01/14 MBIA Insured .................. Aaa+/AAA++ 1,561,875 1,000,000 4.250%, 03/01/15 MBIA Insured .................. Aaa+/AAA++ 1,051,250 -------------- Total Water and Sewer Revenue Bonds ............ 18,720,954 -------------- DEVELOPMENT REVENUE BONDS (8.1%) --------------------------------------------------- Rhode Island Convention Center Authority, 1993 Series A 1,000,000 5.000%, 05/15/20 MBIA Insured-Series B ......... Aaa+/AAA++ 1,005,820 2,000,000 5.000%, 05/15/23 MBIA Insured-Series C ......... Aaa+/AAA++ 2,061,500 Rhode Island Convention Center Authority, 1993 Series B 500,000 5.000%, 05/15/07 MBIA Insured .................. Aaa+/AAA++ 558,750 Rhode Island Public Building Authority State Public Projects, 1989 Series A 1,000,000 5.250%, 02/01/09 AMBAC Insured (Escrowed to Maturity) ......................... Aaa+/AAA++ 1,130,000 Rhode Island Public Building Authority State Public Projects, 1996 School Series B $ 500,000 5.500%, 12/15/14 MBIA Insured .................. Aaa+/AAA++ $ 566,875 1,000,000 5.250%, 12/15/14 FSA Insured-1998 Series ....... Aaa+/AAA++ 1,121,250 500,000 5.500%, 12/15/15 MBIA Insured .................. Aaa+/AAA++ 566,875 Rhode Island Public Building Authority State Public Projects, 1999 Series A 500,000 5.000%, 12/15/09 AMBAC Insured ................. Aaa+/AAA++ 573,125 Rhode Island State Economic Development Corp., Airport Revenue, Series B 1,000,000 5.000%, 07/01/18 FSA Insured ................... Aaa+/AAA++ 1,071,250 Rhode Island State Economic Development Corp., University of Rhode Island Series, 750,000 4.800%, 11/01/11 FSA Insured ................... Aaa+/NR 829,688 750,000 4.900%, 11/01/12 FSA Insured ................... Aaa+/NR 827,813 750,000 4.900%, 11/01/13 FSA Insured ................... Aaa+/NR 824,063 750,000 5.000%, 11/01/14 FSA Insured ................... Aaa+/NR 821,250 -------------- Total Development Revenue Bonds ................ 11,958,259 -------------- POLLUTION CONTROL REVENUE BONDS (0.8%) --------------------------------------------------- Rhode Island Clean Water Protection, 1993 Series A, 200,000 5.300%, 10/01/07 MBIA Insured .................. Aaa+/AAA++ 227,500 300,000 5.400%, 10/01/09 MBIA Insured .................. Aaa+/AAA++ 349,500 Rhode Island Clean Water Protection, 1993 Series B, 500,000 4.500%, 10/01/11 AMBAC Insured ................. Aaa+/AAA++ 540,000 -------------- Total Pollution Control Revenue Bonds .......... 1,117,000 -------------- OTHER REVENUE BONDS (4.0%) State of Rhode Island Depositors Economic Protection Corp., 1992 Series B 135,000 5.500%, 08/01/06 MBIA Insured .................. Aaa+/AAA++ 151,031 500,000 6.000%, 08/01/17 MBIA Insured .................. Aaa+/AAA++ 551,250 State of Rhode Island Depositors Economic Protection Corp., 1993 Series B 300,000 5.800%, 08/01/09 MBIA Insured .................. Aaa+/AAA++ 356,250 1,045,000 5.250%, 08/01/21 MBIA Insured (Escrowed to Maturity) ......................... Aaa+/AAA++ 1,206,975 Rhode Island State Capital Development Loan $ 1,500,000 5.400%, 08/01/08 MBIA Insured .................. Aaa+/AAA++ $ 1,689,375 1,135,000 5.000%, 08/01/11 MBIA Insured .................. Aaa+/AAA++ 1,238,569 State of Rhode Island Certificates of Participation, Howard Center Improvements 400,000 5.250%, 10/01/10 MBIA Insured .................. Aaa+/AAA++ 447,500 200,000 5.375%, 10/01/16 MBIA Insured .................. Aaa+/AAA++ 224,000 -------------- Total Other Revenue Bonds ...................... 5,864,950 -------------- Total Revenue Bonds .......................... 72,707,638 -------------- Total Investments (cost $132,745,604*) ..... 95.6% 141,529,602 Other assets less liabilities .............. 4.4 6,504,618 ------ -------------- Net Assets ................................. 100.0% $ 148,034,220 ====== ==============
* See notes 2f and 4. Rating Services: + Moody's Investors Service ++ Standard & Poor's +++ Fitch NR- Not rated by two of the ratings services. PORTFOLIO ABBREVIATIONS: ------------------------ AMBAC - American Municipal Bond Assurance Corp. FGIC - Financial Guaranty Insurance Co. FSA - Financial Security Assurance MBIA - Municipal Bond Investors Assurance Corp. XLCA - XL Capital Assurance Inc. See accompanying notes to financial statements. NARRAGANSETT INSURED TAX-FREE INCOME FUND STATEMENT OF ASSETS AND LIABILITIES JUNE 30, 2003 ASSETS Investments at value (cost $132,745,604) ................................................ $ 141,529,602 Receivable for Fund shares sold ......................................................... 5,567,792 Interest receivable ..................................................................... 1,688,173 Receivable for investment securities sold ............................................... 85,000 Other assets ............................................................................ 6,133 ------------- Total assets ............................................................................ 148,876,700 ------------- LIABILITIES Cash overdraft .......................................................................... 363,726 Payable for Fund shares redeemed ........................................................ 248,761 Dividends payable ....................................................................... 119,080 Distribution fees payable ............................................................... 63,119 Management fee payable .................................................................. 13,071 Accrued expenses ........................................................................ 34,723 ------------- Total liabilities ....................................................................... 842,480 ------------- NET ASSETS ................................................................................. $ 148,034,220 ============= Net Assets consist of: Capital Stock - Authorized 80,000,000 shares, par value $.01 per share .................. $ 135,595 Additional paid-in capital .............................................................. 139,911,579 Net unrealized appreciation on investments (note 4) ..................................... 8,783,998 Accumulated net realized loss on investments ............................................ (699,388) Distributions in excess of net investment income ........................................ (97,564) ------------- $ 148,034,220 ============= CLASS A Net Assets .............................................................................. $ 106,886,704 ============= Capital shares outstanding .............................................................. 9,790,410 ============= Net asset value and redemption price per share .......................................... $ 10.92 ------------- Offering price per share (100/96 of $10.92 adjusted to nearest cent) .................... $ 11.38 ============= CLASS C Net Assets .............................................................................. $ 22,506,244 ============= Capital shares outstanding .............................................................. 2,061,725 ============= Net asset value and offering price per share ............................................ $ 10.92 ============= 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) .......................................... $ 10.92* ============= CLASS I Net Assets .............................................................................. $ 448,569 ============= Capital shares outstanding .............................................................. 41,115 ============= Net asset value, offering and redemption price per share ................................ $ 10.91 ============= CLASS Y Net Assets .............................................................................. $ 18,192,703 ============= Capital shares outstanding .............................................................. 1,666,271 ============= Net asset value, offering and redemption price per share ................................ $ 10.92 =============
See accompanying notes to financial statements. NARRAGANSETT INSURED TAX-FREE INCOME FUND STATEMENT OF OPERATIONS FOR THE YEAR ENDED JUNE 30, 2003 INVESTMENT INCOME: Interest income ........................................... $ 5,785,814 Expenses: Management fee (note 3) ................................... $ 648,033 Distribution and service fees (note 3) .................... 331,670 Trustees' fees and expenses (note 8) ...................... 83,518 Legal fees ................................................ 53,428 Transfer and shareholder servicing agent fees ............. 47,128 Shareholders' reports and proxy statements ................ 37,823 Fund accounting fees ...................................... 29,630 Auditing fees ............................................. 24,145 Custodian fees ............................................ 16,013 Registration fees and dues ................................ 8,944 Miscellaneous ............................................. 29,243 ----------- Total Expenses ............................................ 1,309,575 Management fee waived (note 3) ............................ (516,239) Expenses paid indirectly (note 6) ......................... (36,493) ----------- Net expenses .............................................. 756,843 ----------- Net investment income ..................................... 5,028,971 REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS: Net realized gain (loss) from securities transactions ..... 286,562 Change in unrealized appreciation on investments .......... 5,341,554 ----------- Net realized and unrealized gain (loss) on investments .... 5,628,116 ----------- Net change in net assets resulting from operations ........ $10,657,087 ===========
See accompanying notes to financial statements. NARRAGANSETT INSURED TAX-FREE INCOME FUND STATEMENTS OF CHANGES IN NET ASSETS
YEAR ENDED YEAR ENDED JUNE 30, 2003 JUNE 30, 2002 ------------- ------------- OPERATIONS: Net investment income ............................................... $ 5,028,971 $ 3,983,638 Net realized gain (loss) from securities transactions ............... 286,562 77,291 Change in unrealized appreciation on investments .................... 5,341,554 1,510,851 ------------- ------------- Change in net assets from operations ............................. 10,657,087 5,571,780 ------------- ------------- DISTRIBUTIONS TO SHAREHOLDERS (NOTE 9): Class A Shares: Net investment income ............................................... (3,889,489) (3,331,831) Class C Shares: Net investment income ............................................... (607,348) (380,858) Class I Shares: Net investment income ............................................... (16,746) (8,912) Class Y Shares: Net investment income ............................................... (637,034) (324,361) ------------- ------------- Change in net assets from distributions .......................... (5,150,617) (4,045,962) ------------- ------------- CAPITAL SHARE TRANSACTIONS (NOTE 7): Proceeds from shares sold ........................................... 44,058,438 39,727,773 Reinvested dividends and distributions .............................. 3,417,773 2,595,440 Cost of shares redeemed ............................................. (19,044,516) (7,869,632) ------------- ------------- Change in net assets from capital share transactions ................ 28,431,695 34,453,581 ------------- ------------- Change in net assets ............................................. 33,938,165 35,979,399 NET ASSETS: Beginning of period ................................................. 114,096,055 78,116,656 ------------- ------------- End of period* ...................................................... $ 148,034,220 $ 114,096,055 ============= ============= * Includes distributions in excess of net investment income of: $ (97,564) $ (62,147) ============= =============
See accompanying notes to financial statements. NARRAGANSETT INSURED TAX-FREE INCOME FUND NOTES TO FINANCIAL STATEMENTS 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 at fair value each business day based upon information provided by a nationally prominent independent pricing service and periodically verified through other pricing services; in the case of securities for which market quotations are readily available, securities are valued at the mean of bid and asked quotations and in the case of other securities, at fair value determined under procedures established by and under the general supervision of the Board of Trustees. Securities which mature in 60 days or less are valued at amortized cost if their term to maturity at purchase is 60 days or less, or by amortizing their unrealized appreciation or depreciation on the 61st day prior to maturity, if their term to maturity at purchase exceeds 60 days. b) SECURITIES TRANSACTIONS AND RELATED INVESTMENT INCOME: Securities transactions are recorded on the trade date. Realized gains and losses from securities transactions are reported on the identified cost basis. Interest income is recorded on the accrual basis and is adjusted for amortization of premium and accretion of original issue and market discount. c) FEDERAL INCOME TAXES: It is the policy of the Fund to qualify as a regulated investment company by complying with the provisions of the Internal Revenue Code applicable to certain investment companies. The Fund intends to make distributions of income and securities profits sufficient to relieve it from all, or substantially all, Federal income and excise taxes. d) ALLOCATION OF EXPENSES: Expenses, other than class-specific expenses, are allocated daily to each class of shares based on the relative net assets of each class. Class-specific expenses, which include distribution and service fees and any other items that are specifically attributed to a particular class, are charged directly to such class. e) USE OF ESTIMATES: The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of increases and decreases in net assets from operations during the reporting period. Actual results could differ from those estimates. f) NEW ACCOUNTING PRONOUNCEMENT: In November 2000, the AICPA issued a revised audit and accounting guide, AUDITS OF INVESTMENT COMPANIES, which is effective for fiscal years beginning after December 15, 2000. The revised Guide requires the Fund to amortize premium and all discounts on all fixed-income securities. The Fund's offices determined to adopt this requirement effective July 1, 2001. This change does not affect the Fund's net asset value, but does change the classification of certain amounts in the statement of operations. The Fund recorded an adjustment to increase the cost of securities and increase accumulated undistributed net investment income by $25,252 to reflect the cumulative effect of this change up to the date of adoption. 3. FEES AND RELATED PARTY TRANSACTIONS A) MANAGEMENT ARRANGEMENTS: Aquila Management Corporation (the "Manager"), the Fund's founder and sponsor, serves as the Manager for the Fund under an Advisory and Administration Agreement with the Fund. The portfolio management of the Fund has been delegated to a Sub-Adviser as described below. Under the Advisory and Administration Agreement, the Manager provides all administrative services to the Fund, other than those relating to the day-to-day portfolio management. The Manager's services include providing the office of the Fund and all related services as well as overseeing the activities of the Sub-Adviser and all the various support organizations to the Fund such as the shareholder servicing agent, custodian, legal counsel, fund accounting agent, auditors and distributor. For its services, the Manager is entitled to receive a fee which is payable monthly and computed as of the close of business each day at the annual rate of 0.50% on the Fund's net assets. Citizens Investment Advisors, a department of Citizens Bank of Rhode Island (the "Sub-Adviser") serves as the Investment Sub-Adviser for the Fund under a Sub-Advisory Agreement between the Manager and the Sub-Adviser. Under this agreement, the Sub-Adviser continuously provides, subject to oversight of the Manager and the Board of Trustees of the Fund, the investment program of the Fund and the composition of its portfolio, arranges for the purchases and sales of portfolio securities, and provides for daily pricing of the Fund's portfolio. For its services, the Sub-Adviser is entitled to receive a fee from the Manager which is payable monthly and computed as of the close of business each day at the annual rate of 0.23% on the Fund's average net assets. For the year ended June 30, 2003, the Fund incurred management fees of $648,033 of which $516,239 was voluntarily waived. Specific details as to the nature and extent of the services provided by the Manager and the Sub-Adviser are more fully defined in the Fund's Prospectus and Statement of Additional Information. B) DISTRIBUTION AND SERVICE FEES: The Fund has adopted a Distribution Plan (the "Plan") pursuant to Rule 12b-1 (the "Rule") under the Investment Company Act of 1940. Under one part of the Plan, with respect to Class A Shares, the Fund is authorized to make distribution fee payments to broker-dealers or others ("Qualified Recipients") selected by Aquila Distributors, Inc., ("the Distributor"), including, but not limited to, any principal underwriter of the Fund, with which the Distributor has entered into written agreements contemplated by the Rule and which have rendered assistance in the distribution and/or retention of the Fund's shares or servicing of shareholder accounts. The Fund makes payment of this service fee at the annual rate of 0.15% of the Fund's average net assets represented by Class A Shares. For the year ended June 30, 2003, service fees on Class A Shares amounted to $142,960, of which the Distributor retained $2,971. 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, 2003 amounted to $141,378. 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, 2003, amounted to $47,126. The total of these payments with respect to Class C Shares amounted to $188,504, of which the Distributor retained $30,771. Under another part of the Plan, the Fund is authorized to make payments with respect to Class I Shares to Qualified Recipients. Class I payments, under the Plan, may not exceed, for any fiscal year of the Fund a rate (currently 0.05%) set from time to time by the Board of Trustees of not more than 0.25% of the average annual net assets represented by the Class I Shares. In addition, the Fund has a Shareholder Services Plan under which it may pay service fees (currently 0.15%) of not more than 0.25% of the average annual net assets of the Fund represented by Class I Shares. That is, the total payments under both plans will not exceed 0.50% of such net assets. For the year ended June 30, 2003, these payments were made at the average annual rate of 0.20% of such net assets amounting to $823 of which $206 related to the Plan and $617 related to the Shareholder Services Plan. Specific details about the Plans are more fully defined in the Fund's Prospectus and Statement of Additional Information. Under a Distribution Agreement, the Distributor serves as the exclusive distributor of the Fund's shares. Through agreements between the Distributor and various broker-dealer firms ("dealers"), the Fund's shares are sold primarily through the facilities of these dealers having offices within Rhode Island, with the bulk of sales commissions inuring to such dealers. For the year ended June 30, 2003, total commissions on sales of Class A Shares amounted to $548,211, of which the Distributor received $34,003. C) OTHER RELATED PARTY TRANSACTIONS: For the year ended June 30, 2003, the Fund incurred $52,981 of legal fees allocable to Hollyer Brady Smith & Hines LLP, counsel to the Fund for legal fees in conjunction with the Fund's ongoing operations. The Secretary of the Fund is a partner of Hollyer Brady Smith & Hines LLP. 4. PURCHASES AND SALES OF SECURITIES During the year ended June 30, 2003, purchases of securities and proceeds from the sales of securities aggregated $40,432,012 and $14,866,271, respectively. At June 30, 2003, the aggregate tax cost for all securities was $132,724,088. At June 30, 2003, the aggregate gross unrealized appreciation for all securities in which there is an excess of market value over tax cost amounted to $8,818,924 and aggregate gross unrealized depreciation for all securities in which there is an excess of tax cost over market value amounted to $13,409, for a net unrealized appreciation of $8,805,515. 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, 2003, all of the securities in the Fund were insured. While such insurance protects against credit risks with portfolio securities, it does not insure against market risk of fluctuations in the Fund's share price and income return. The Fund is also permitted to invest in U.S. territorial municipal obligations meeting comparable quality standards and providing income which is exempt from both regular Federal and Rhode Island income taxes. The general policy of the Fund is to invest in such securities only when comparable securities of Rhode Island issuers are not available in the market. At June 30, 2003, the Fund had all of its net assets invested in Rhode Island municipal issues. 6. EXPENSES The Fund has negotiated an expense offset arrangement with its custodian wherein it receives credit toward the reduction of custodian fees and other Fund expenses whenever there are uninvested cash balances. The Statement of Operations reflects the total expenses before any offset, the amount of offset and the net expenses. It is the general intention of the Fund to invest, to the extent practicable, some or all of cash balances in income-producing assets rather than leave cash on deposit. 7. CAPITAL SHARE TRANSACTIONS Transactions in Capital Shares of the Fund were as follows:
Year Ended Year Ended June 30, 2003 June 30, 2002 ---------------------------- ----------------------------- Shares Amount Shares Amount ------ ------ ------ ------ CLASS A SHARES: Proceeds from shares sold ............. 2,511,973 $ 26,990,482 2,015,970 $ 20,944,728 Reinvested distributions .............. 239,993 2,564,785 205,510 2,134,035 Cost of shares redeemed ............... (1,208,692) (13,117,881) (532,239) (5,535,714) ---------- ------------ ---------- ------------ Net change ........................ 1,543,274 16,437,386 1,689,241 17,543,049 ---------- ------------ ---------- ------------ CLASS C SHARES: Proceeds from shares sold ............. 851,696 9,125,462 922,383 9,563,352 Reinvested distributions .............. 32,560 348,204 23,115 239,961 Cost of shares redeemed ............... (312,631) (3,355,269) (135,993) (1,404,609) ---------- ------------ ---------- ------------ Net change ........................ 571,625 6,118,397 809,505 8,398,704 ---------- ------------ ---------- ------------ CLASS I SHARES: Proceeds from shares sold ............. 4,279 45,721 27,795 285,279 Reinvested distributions .............. 52 560 -- -- Cost of shares redeemed ............... (53) (592) -- -- ---------- ------------ ---------- ------------ Net change ........................ 4,278 45,689 27,795 285,279 ---------- ------------ ---------- ------------ CLASS Y SHARES: Proceeds from shares sold ............. 741,749 7,896,773 865,062 8,934,414 Reinvested distributions .............. 47,085 504,224 21,362 221,444 Cost of shares redeemed ............... (242,048) (2,570,774) (89,778) (929,309) ---------- ------------ ---------- ------------ Net change ........................ 546,786 5,830,223 796,646 8,226,549 ---------- ------------ ---------- ------------ Total transactions in Fund shares ................................ 2,665,963 $ 28,431,695 3,323,187 $ 34,453,581 ========== ============ ========== ============
8. TRUSTEES' FEES AND EXPENSES During the fiscal year ended June 30, 2003, there were eight Trustees, one of which is affiliated with the Manager and is not paid any trustee fees. Each Trustee's fees paid during the year were at the annual rate of $6,500 for carrying out their responsibilities and attendance at regularly scheduled Board Meetings. If additional or special meetings are scheduled for the Fund, separate meeting fees are paid for each such meeting to those Trustees in attendance. The Fund also reimburses Trustees for expenses such as travel, accomodations, and meals incurred in connection with attendance at regularly scheduled or special Board Meetings and at the Annual Meeting and outreach meetings of Shareholders. For the fiscal year ended June 30, 2003, such reimbursements averaged approximately $4,002 per Trustee. 9. DISTRIBUTIONS The Fund declares dividends daily from net investment income and makes payments monthly in additional shares at the net asset value per share, in cash, or in a combination of both, at the shareholder's option. Net realized capital gains, if any, are distributed annually and are taxable. The Fund intends to maintain, to the maximum extent possible, the tax-exempt status of interest payments received from portfolio municipal securities in order to allow dividends paid to shareholders from net investment income to be exempt from regular Federal and State of Rhode Island income taxes. However, due to differences between financial statement reporting and Federal income tax reporting requirements, distributions made by the Fund may not be the same as the Fund's net investment income, and/or net realized securities gains. In this regard, the Fund credited distributions in excess of net investment income in the amount of $86,229 and debited additional paid in capital in the amount of $86,229 at June 30, 2003. This adjustment had no impact on the Fund's aggregate net assests at June 30, 2003. Further, a small portion of the dividends may, under some circumstances, be subject to taxes at ordinary income and/or capital gain rates. For certain shareholders, some dividend income may, under some circumstances, be subject to the alternative minimum tax. At June 30, 2003, the Fund had a capital loss carryover of $699,388 which expires on June 30, 2009. This carryover is available to offset future net realized gains on securities transactions to the extent provided for in the Internal Revenue Code. To the extent that this loss is used to offset future realized capital gains, it is probable the gains so offset will not be distributed. The tax character of distributions during the fiscal years ended June 30, 2003 and 2002 is as follows: Distributions from Year Ended June 30, 2003 2002 ---------- ---------- Net tax-exempt income $5,052,703 $4,014,083 Ordinary income 97,914 31,879 ---------- ---------- $5,150,617 $4,045,962 ========== ========== As of June 30, 2003, the components of distributable earnings on a tax basis were as follows: Accumulated net realized loss $ (699,388) Unrealized appreciation 8,805,515 ---------- $8,106,127 ========== NARRAGANSETT INSURED TAX-FREE INCOME FUND FINANCIAL HIGHLIGHTS FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
Class A ----------------------------------------------------------------- Year Ended June 30, ---------------------------------------------------------------- 2003 2002 2001 2000 1999 ------- ------- ------- ------- ------- Net asset value, beginning of period .......... $10.47 $10.32 $9.91 $10.16 $10.47 ------- ------- ------- ------- ------- Income (loss) from investment operations: Net investment income+ ..................... 0.42 0.45 0.47 0.49 0.49 Net gain (loss) on securities (both realized and unrealized) .......... 0.47 0.16 0.44 (0.24) (0.30) ------- ------- ------- ------- ------- Total from investment operations ........... 0.89 0.61 0.91 0.25 0.19 ------- ------- ------- ------- ------- Less distributions (note 9): Dividends from net investment income ....... (0.44) (0.46) (0.50) (0.50) (0.50) ------- ------- ------- ------- ------- Net asset value, end of period ................ $10.92 $10.47 $10.32 $9.91 $10.16 ======= ======= ======= ======= ======= Total return (not reflecting sales charge) .... 8.64% 6.07% 9.19% 2.58% 1.74% Ratios/supplemental data Net assets, end of period (in thousands) ... $106,887 $86,378 $67,669 $59,899 $66,611 Ratio of expenses to average net assets .... 0.51% 0.49% 0.41% 0.41% 0.39% Ratio of net investment income to average net assets ..................... 3.96% 4.34% 4.65% 4.89% 4.61% Portfolio turnover rate .................... 11.74% 6.02% 3.08% 8.66% 1.36% The expense and net investment income ratios without the effect of the voluntary waiver of a portion of the management fee and the voluntary expense reimbursement were: Ratio of expenses to average net assets .... 0.88% 0.88% 0.95% 0.95% 0.91% Ratio of net investment income to average net assets ...................... 3.59% 3.95% 4.11% 4.36% 4.09% The expense ratios after giving effect to the waiver, reimbursement and expense offset for uninvested cash balances were: Ratio of expenses to average net assets .... 0.48% 0.46% 0.40% 0.38% 0.35%
Class I ------------------------------------------------- Year Ended June 30, Period -------------------------------------- Ended 2003 2002 2001 2000 6/30/99(1) ------ ------ ------ ------ ---------- Net asset value, beginning of period .......... $10.47 $10.32 $ 9.90 $10.15 $10.54 ------ ------ ------ ------ ------ Income (loss) from investment operations: Net investment income+ ..................... 0.42 0.44 0.47 0.48 0.31 Net gain (loss) on securities (both realized and unrealized) .......... 0.46 0.17 0.43 (0.23) (0.38) ------ ------ ------ ------ ------ Total from investment operations ........... 0.88 0.61 0.90 0.25 (0.07) ------ ------ ------ ------ ------ Less distributions (note 9): Dividends from net investment income ....... (0.44) (0.46) (0.48) (0.50) (0.32) ------ ------ ------ ------ ------ Net asset value, end of period ................ $10.91 $10.47 $10.32 $ 9.90 $10.15 ====== ====== ====== ====== ====== Total return (not reflecting sales charge) .... 8.52% 6.05% 9.29% 2.56% (0.75)%++ Ratios/supplemental data Net assets, end of period (in thousands).... $449 $386 $93 $75 $77 Ratio of expenses to average net assets .... 0.52% 0.50% 0.41% 0.43% 0.49%* Ratio of net investment income to average net assets ...................... 3.95% 4.32% 4.65% 4.87% 4.54%* Portfolio turnover rate .................... 11.74% 6.02% 3.08% 8.66% 1.36%++ The expense and net investment income ratios without the effect of the voluntary waiver of a portion of the management fee and the voluntary expense reimbursement were: Ratio of expenses to average net assets .... 0.89% 0.89% 0.96% 0.97% 0.87%* Ratio of net investment income to average net assets ...................... 3.58% 3.93% 4.10% 4.34% 4.16%* The expense ratios after giving effect to the waiver, reimbursement and expense offset for uninvested cash balances were: Ratio of expenses to average net assets .... 0.49% 0.48% 0.41% 0.40% 0.46%*
- -------------- (1) For the period November 4, 1998 (commencement of operations) through June 30, 1999. + Per share amounts have been calculated using the monthly average shares method. ++ Not annualized. * Annualized. See accompanying notes to financial statements. NARRAGANSETT INSURED TAX-FREE INCOME FUND FINANCIAL HIGHLIGHTS (CONTINUED) FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
Class C -------------------------------------------------------------- Year Ended June 30, -------------------------------------------------------------- 2003 2002 2001 2000 1999 ------ ------ ------ ------ ------ Net asset value, beginning of period .......... $10.47 $10.32 $9.91 $10.16 $10.47 ------ ------ ------ ------ ------ Income from investment operations: Net investment income + .................... 0.33 0.36 0.38 0.40 0.38 Net gain (loss) on securities (both realized and unrealized) .............. 0.47 0.16 0.43 (0.24) (0.29) ------ ------ ------ ------ ------ Total from investment operations ........... 0.80 0.52 0.81 0.16 0.09 ------ ------ ------ ------ ------ Less distributions (note 9): Dividends from net investment income ....... (0.35) (0.37) (0.40) (0.41) (0.40) ------ ------ ------ ------ ------ Net asset value, end of period ................ $10.92 $10.47 $10.32 $9.91 $10.16 ====== ====== ====== ====== ====== Total return (not reflecting sales charge) .... 7.72% 5.16% 8.27% 1.71% 0.76% Ratios/supplemental data Net assets, end of period (in thousands).... $22,506 $15,606 $7,023 $4,681 $4,213 Ratio of expenses to average net assets .... 1.35% 1.34% 1.26% 1.26% 1.35% Ratio of net investment income to average net assets ...................... 3.10% 3.46% 3.78% 4.04% 3.65% Portfolio turnover rate .................... 11.74% 6.02% 3.08%+ 8.66% 1.36% The expense and net investment income ratios without the effect of the voluntary waiver of a portion of the management fee and the voluntary expense reimbursement were: Ratio of expenses to average net assets .... 1.72% 1.72% 1.80% 1.80% 1.75% Ratio of net investment income to average net assets ...................... 2.73% 3.07% 3.24% 3.50% 3.25% The expense ratios after giving effect to the waiver, reimbursement and expense offset for uninvested cash balances were: Ratio of expenses to average net assets .... 1.33% 1.31% 1.25% 1.23% 1.32%
Class Y ------------------------------------------------------------- Year Ended June 30, ------------------------------------------------------------- 2003 2002 2001 2000 1999 ------- ------ ------ ------ ------ Net asset value, beginning of period .......... $10.47 $10.32 $9.91 $10.16 $10.47 ------ ------ ------ ------ ------ Income from investment operations: Net investment income + .................... 0.45 0.46 0.48 0.50 0.49 Net gain (loss) on securities (both realized and unrealized) .............. 0.45 0.17 0.44 (0.24) (0.30) ------ ------ ------ ------ ------ Total from investment operations ........... 0.90 0.63 0.92 0.26 0.19 ------ ------ ------ ------ ------ Less distributions (note 9): Dividends from net investment income ....... (0.45) (0.48) (0.51) (0.51) (0.50) ------ ------ ------ ------ ------ Net asset value, end of period ................ $10.92 $10.47 $10.32 $9.91 $10.16 ====== ====== ====== ====== ====== Total return (not reflecting sales charge) .... 8.80% 6.22% 9.35% 2.73% 1.79% Ratios/supplemental data Net assets, end of period (in thousands).... $18,193 $11,726 $3,332 $2,277 $4,250 Ratio of expenses to average net assets .... 0.36% 0.34% 0.26% 0.26% 0.33% Ratio of net investment income to average net assets ...................... 4.10% 4.47% 4.79% 5.07% 4.65% Portfolio turnover rate .................... 11.74% 6.02% 3.08%+ 8.66% 1.36% The expense and net investment income ratios without the effect of the voluntary waiver of a portion of the management fee and the voluntary expense reimbursement were: Ratio of expenses to average net assets .... 0.73% 0.73% 0.80% 0.79% 0.70% Ratio of net investment income to average net assets ...................... 3.73% 4.08% 4.24% 4.54% 4.29% The expense ratios after giving effect to the waiver, reimbursement and expense offset for uninvested cash balances were: Ratio of expenses to average net assets .... 0.33% 0.31% 0.26% 0.23% 0.30%
- ---------- + Per share amounts have been calculated using the monthly average shares method. See accompanying notes to financial statements. ADDITIONAL INFORMATION (UNAUDITED) TRUSTEES(1) AND OFFICERS
NUMBER OF POSITIONS PORTFOLIOS OTHER DIRECTORSHIPS HELD WITH IN FUND HELD BY TRUSTEE NAME, FUND AND PRINCIPAL COMPLEX (THE POSITION HELD IS ADDRESS(2) LENGTH OF OCCUPATION(S) OVERSEEN A DIRECTORSHIP UNLESS AND DATE OF BIRTH SERVICE(3) DURING PAST 5 YEARS BY TRUSTEE INDICATED OTHERWISE.) - ----------------- ---------- ------------------- ---------- --------------------- INTERESTED TRUSTEES(4) Lacy B. Herrmann Chairman Founder and Chairman of the Board, 12 Director or trustee, OCC New York, NY of the Board Aquila Management Corporation, the Cash Reserves, Inc., OCC (05/12/29) of Trustees sponsoring organization and Manager or Accumulation Trust, since 1992 Administrator and/or Adviser or Oppenheimer Quest Value Sub-Adviser to each fund of the Aquila(sm) Funds Group, Oppenheimer Group of Funds(5) and Founder, Chairman Small Cap Value Fund, of the Board of Trustees and (currently Oppenheimer Midcap Fund, or until 1998) President of each since and Oppenheimer its establishment, beginning in 1984; Rochester Group of Director of the Distributor since 1981 Funds. and formerly Vice President or Secretary, 1981-1998; President and a Director, STCM Management Company, Inc., sponsor and investment adviser to Capital Cash Management Trust since 1973; Trustee Emeritus, Brown University and active in university, school and charitable organizations. David A. Duffy Trustee since Chairman, formerly President, Duffy & 1 Citizens Bank of Rhode North Kingstown, RI 1995 Shanley, Inc., a marketing Island since 1999. (08/07/39) communications firm, since 1973; Transition Chairman for Gov. Donald Carcieri (R.I.); immediate past National Chairman, National Conference for Community and Justice (NCCJ); Chairman, Providence College President's Council; officer or director of numerous civic and non-profit organizations. John J. Partridge Trustee since Founding Partner, Partridge, Snow & 1 None Providence, RI 2002 Hahn, LLP, a law firm, Providence, Rhode (05/05/40) Island, since 1988; director of various educational, civic and charitable organizations, including Greater Providence Chamber of Commerce and Memorial Hospital of Rhode Island. NON-INTERESTED TRUSTEES Vernon R. Alden Trustee since Retired; General Independent Partner, 1 Sonesta International Boston, MA 1992 Merrill Lynch-Lee Funds; former director Hotels Corporation. (04/07/23) or trustee of various Fortune 500 companies, as well as various open-end investment companies, formerly President of Ohio University and Associate Dean of the Harvard University Graduate School of Business Administration; member of several Japan-related advisory councils; Honorary Consul General of the Royal Kingdom of Thailand; trustee of various cultural, educational and civic organizations. Paul Y. Clinton Trustee since Principal, Clinton Management 2 Director or trustee, OCC Osterville, MA 1996 Associates, a financial and venture Cash Reserves, Inc., OCC Naples, FL capital consulting firm. Accumulation Trust, (02/14/31) Oppenheimer Quest Value Funds Group, Oppenheimer Small Cap Value Fund, Oppenheimer Midcap Fund, and Oppenheimer Rochester Group of Funds. William J. Nightingale Trustee since Retired; formerly Chairman, founder 2 Ring's End, Inc. Rowayton, CT 1992 (1975) and Senior Advisor until 2000 (09/16/29) of Nightingale & Associates, L.L.C., a general management consulting firm focusing on interim management, divestitures, turnaround of troubled companies, corporate restructuring and financial advisory services. Cornelius T. Ryan Trustee since Founder and General Partner, Oxford 3 Director of Neuberger & Westport, CT and 2002 Ventures Partners, a group of Berman Equity Funds. Sun Valley, ID investment venture capital (11/14/31) partnerships, since 1981 and Founder and General Partner, Oxford Bioscience Partners, a group of venture capital partnerships focused on life sciences, genomics, healthcare information technology and medical devices, since 1991. J. William Weeks Trustee since Retired; limited partner and 3 None Palm Beach, FL 1995 investor in various real estate (06/22/27) partnerships since 1988; formerly Senior Vice President or Vice President of the Aquila Bond Funds; and Vice President of the Distributor. OFFICERS Diana P. Herrmann President since President and Chief Operating N/A N/A New York, NY 1998 Officer of the Manager since 1997, a (02/25/58) Director since 1984, Secretary since 1986 and previously its Executive Vice President, Senior Vice President or Vice President, 1986-1997; President, Senior Vice President or Executive Vice President of funds in the Aquila(sm) Group of Funds since 1986; Director of the Distributor since 1997; trustee, Reserve Money-Market Funds, 1999-2000 and Reserve Private Equity Series, 1998-2000; active in mutual fund and trade organizations and in charitable and volunteer organizations. Stephen J. Caridi Senior Vice Vice President of the Distributor N/A N/A New York, NY President since since 1995; Vice President, Hawaiian (05/06/61) 1998 Tax-Free Trust since 1998; Senior Vice President, Narragansett Insured Tax-Free Income Fund since 1998, Vice President 1996-1997; Assistant Vice President, Tax-Free Fund For Utah since 1993 Joseph P. DiMaggio Chief Financial Chief Financial Officer of the N/A N/A New York, NY Officer since Aquila(sm) Group of Funds since 2003 (11/06/56) 2003 and and Treasurer since 2000; Treasurer since Controller, Van Eck Global Funds, 2000 1993-2000. Edward M. W. Hines Secretary since Partner, Hollyer Brady Smith & Hines N/A N/A New York, NY 1982 LLP, legal counsel to the Fund, (12/16/39) since 1989; Secretary of the Aquila(sm) Group of Funds. Robert W. Anderson Assistant Compliance Officer of the Manager N/A N/A New York, NY Secretary since since 1998 and Assistant Secretary (08/23/40) 2000 of the Aquila(sm) Group of Funds since 2000; trustee, Alpha Strategies Fund since July, 2002; Consultant, The Wadsworth Group, 1995-1998. John M. Herndon Assistant Assistant Secretary of the Aquila(sm) N/A N/A New York, NY Secretary since Group of Funds since 1995 and Vice (12/17/39) 1995 President of the four Aquila Money-Market Funds since 1990; Vice President of the Manager since 1990. Lori A. Vindigni Assistant Assistant Treasurer of the Aquila(sm) N/A N/A New York, NY Treasurer since Group of Funds since 2000; Assistant (11/02/66) 2000 Vice President of the Manager since 1998; Fund Accountant for the Aquila(sm) 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). (2) The mailing address of each Trustee and officer is c/o Narragansett Insured Tax-Free Income Fund, 380 Madison Avenue, New York, NY 10017. (3) Each Trustee holds office until the next annual meeting of shareholders or until his or her successor is elected and qualifies. The term of office of each officer is one year. (4) Mr. Herrmann is an interested person of the Fund, as that term is defined in the 1940 Act, as an officer of the Fund, as a director, officer and shareholder of the Manager and as a shareholder and director of the Distributor. Mr. Duffy is an interested person as a director of the Sub-Adviser. Mr. Partridge is an interested person of the Fund as a partner 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, Pacific Capital Tax-Free Cash Assets Trust and Capital Cash Management Trust, each of which is a money-market fund, are called the "Aquila Money-Market Funds"; Hawaiian Tax-Free Trust, Tax-Free Trust of Arizona, Tax-Free Trust of Oregon, Tax-Free Fund of Colorado, Churchill Tax-Free Fund of Kentucky, Narragansett Insured Tax-Free Income Fund and Tax-Free Fund For Utah, each of which is a tax-free municipal bond fund, are called the "Aquila Bond Funds"; Aquila Rocky Mountain Equity Fund is an equity fund; considered together, these 12 funds are called the "Aquila(sm) Group of Funds." PRIVACY NOTICE (UNAUDITED) OUR PRIVACY POLICY. In providing services to you as an individual who owns or is considering investing in shares of a fund of the Aquila(SM) Group of Funds, we collect certain nonpublic personal information about you. Our policy is to keep this information strictly safeguarded and confidential, and to use or disclose it only as necessary to provide services to you or as otherwise permitted by law. Our privacy policy applies equally to former shareholders and persons who inquire about a fund. INFORMATION WE COLLECT. "Nonpublic personal information" is personally identifiable financial information about you as an individual or your family. The kinds of nonpublic 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 nonpublic personal information about you to companies that provide necessary services to your fund, such as the fund's transfer agent, distributor, investment adviser or sub-adviser and to our affiliates, as permitted or required by law, or as authorized by you. We also may disclose this information to another fund of the Aquila(SM) Group of Funds or its distributor, or to the broker-dealer that holds your fund shares, under agreements that permit them to use the information only to provide you information about your fund, other funds in the Aquila(SM) Group of Funds or new services we are offering which may be of interest to you. Any other use is strictly prohibited. We do not sell information about you or any of our fund shareholders to anyone. HOW WE SAFEGUARD YOUR INFORMATION. We restrict access to nonpublic 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 nonpublic personal information we have about you. If you have any questions regarding our Privacy Policy, please contact us at 1-800-437-1020. FEDERAL TAX STATUS OF DISTRIBUTIONS (UNAUDITED) This information is presented in order to comply with a requirement of the Internal Revenue Code AND NO CURRENT ACTION ON THE PART OF SHAREHOLDERS IS REQUIRED. For the fiscal year ended June 30, 2003, $5,023,493 of dividends paid by Narragansett Insured Tax-Free Income Fund, constituting 98.09% of total dividends paid during the fiscal year ended June 30, 2003, were exempt-interest dividends and the balance was ordinary dividend income. Prior to January 31, 2003, shareholders were mailed IRS Form 1099-DIV which contained information on the status of distributions paid for the 2002 CALENDAR YEAR. Prior to January 31, 2004, shareholders will be mailed IRS Form 1099-DIV which will contain information on the status of distributions paid for the 2003 CALENDAR YEAR. MANAGER AND FOUNDER AQUILA MANAGEMENT CORPORATION 380 Madison Avenue, Suite 2300 New York, New York 10017 INVESTMENT SUB-ADVISER CITIZENS INVESTMENT ADVISORS, A DEPARTMENT OF CITIZENS BANK OF RHODE ISLAND One Citizens Plaza Providence, Rhode Island 02903 BOARD OF TRUSTEES Lacy B. Herrmann, Chairman Vernon R. Alden Paul Y. Clinton David A. Duffy William J. Nightingale John J. Partridge Cornelius T. Ryan J. William Weeks OFFICERS Diana P. Herrmann, President Stephen J. Caridi, Senior Vice President Joseph P. DiMaggio, Chief Financial Officer and Treasurer Edward M.W. Hines, Secretary DISTRIBUTOR AQUILA DISTRIBUTORS, INC. 380 Madison Avenue, Suite 2300 New York, New York 10017 CUSTODIAN BANK ONE TRUST COMPANY, N.A. 1111 Polaris Parkway Columbus, Ohio 43240 TRANSFER AND SHAREHOLDER SERVICING AGENT PFPC INC. 400 Bellevue Parkway Wilmington, Delaware 19809 INDEPENDENT AUDITORS KPMG LLP 757 Third Avenue New York, New York 10017 Further information is contained in the Prospectus, which must precede or accompany this report. ANNUAL REPORT JUNE 30, 2003 A TAX-FREE INCOME INVESTMENT [Logo of Narragansett Insured Tax-Free Income Fund: rectangle with profile view of a sailboat on top of waves and three seagulls flying above it] [Logo of the Aquila Group of Funds: an eagle's head] ONE OF THE AQUILA(SM) GROUP OF FUNDS ITEM 2. CODE OF ETHICS. Not applicable. ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT. Not applicable. ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES. Not applicable. ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS. Not applicable. ITEM 6. [RESERVED] ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES. 905: Not applicable. ITEM 8. [RESERVED] ITEM 9. CONTROLS AND PROCEDURES. (a) Based on their evaluation of the registrant's disclosure controls and procedures (as defined in Rule 30a-2(c) under the Investment Company Act of 1940) as of a date within 90 days of the fling of this report, the registrant's chief financial and executive officers have concluded that the disclosure controls and procedures of the registrant are appropriately designed to ensure that information required to be disclosed in the registrant's reports that are filed under the Securities Exchange Act of 1934 are accumulated and communicated to registrant's management, including its principal executive officer(s) and principal financial officer(s), to allow timely decisions regarding required disclosure and is recorded, processed, summarized and reported, within the time periods specified in the rules and forms adopted by the Securities and Exchange Commission. (b) There have been no significant changes in registrant's internal controls or in other factors that could significantly affect registrant's internal controls subsequent to the date of the most recent evaluation, including no significant deficiencies or material weaknesses that required corrective action. ITEM 10. EXHIBITS. (a)(1) Not applicable. (a)(2) Certifications of principal executive officer and principal financial officer as required by Rule 30a-2(a) under the Investment Company Act of 1940. (b) Certifications of principal executive officer and principal financial officer as required by Rule 30a-2(b) under the Investment Company Act of 1940. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. NARRAGANSETT INSURED TAX-FREE INCOME FUND By: /s/ Lacy B. Herrmann - --------------------------------- Chairman of the Board September 8, 2003 By: /s/ Diana P. Herrmann - --------------------------------- President September 8, 2003 By: /s/ Joseph P. DiMaggio - ----------------------------------- Chief Financial Officer September 8, 2003 Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. By: /s/ Lacy B. Herrmann - --------------------------------- Lacy B. Herrmann Chairman of the Board September 8, 2003 By: /s/ Diana P. Herrmann - --------------------------------- Diana P. Herrmann President September 8, 2003 By: /s/ Joseph P. DiMaggio - ----------------------------------- Joseph P. DiMaggio Chief Financial Officer September 8, 2003 NARRAGANSETT INSURED TAX-FREE INCOME FUND EXHIBIT INDEX (a) (2) Certifications of principal executive officer and principal financial officer as required by Rule 30a-2(a) under the Investment Company Act of 1940. (b) Certification of chief executive officer and chief financial officer as required by Rule 30a-2(b) of the Investment Company Act of 1940. EX-99.CERT 2 nitfif306cert.txt 302 CERTIFICATIONS EX-99.CERT CERTIFICATIONS I, Lacy B. Herrmann, certify that: 1. I have reviewed this report on Form N-CSR of Narragansett Insured Tax-Free Income Fund; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-2(c) under the Investment Company Act of 1940) for the registrant and have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this report ("Evaluation Date"); and c) presented in this report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize, and report financial data and have identified for the registrant's auditors any material weakness in internal controls; and (b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: September 8, 2003 /s/ Lacy B. Herrmann - ---------------------- Title: Chairman of the Board I, Diana P. Herrmann, certify that: 1. I have reviewed this report on Form N-CSR of Narragansett Insured Tax-Free Income Fund; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 2. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-2(c) under the Investment Company Act of 1940) for the registrant and have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this report ("Evaluation Date"); and c) presented in this report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize, and report financial data and have identified for the registrant's auditors any material weakness in internal controls; and (b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: September 8, 2003 /s/ Diana P. Herrmann - ---------------------- Title: President I, Joseph P. DiMaggio, certify that: 1. I have reviewed this report on Form N-CSR of Narragansett Insured Tax-Free Income Fund; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 2. Based on my knowledge, the financial statements, other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-2(c) under the Investment Company Act of 1940) for the registrant and have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this report ("Evaluation Date"); and c) presented in this report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize, and report financial data and have identified for the registrant's auditors any material weakness in internal controls; and (b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: September 8, 2003 /s/ Joseph P. DiMaggio - ------------------------ Title: Chief Financial Officer EX-99.906CERT 3 nitfif906cert.txt 906 CERTIFICATIONS CERTIFICATION Pursuant To Section 906 of the Sarbanes-Oxley Act of 2002 (subsections and (b) of section 1350, chapter 63 of title 18,United States Code), each of the undersigned officers of Narragansett Insured Tax-Free Income Fund, do hereby certify to such officer's knowledge, that: The semi-annual report on Form N-CSR of Narragansett Insured Tax-Free Income Fund for the period ended June 30, 2003 (the "Form N-CSR") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and information contained in the Form N-CSR fairly presents, in all material respects, the financial condition and results of operations of Narragansett Insured Tax-Free Income Fund. Dated: September 8, 2003 /s/ Lacy B. Herrmann --------------------- Lacy B. Herrmann Chairman of the Board Narragansett Insured Tax-Free Income Fund Dated: September 8, 2003 /s/ Diana P. Herrmann ---------------------- President Narragansett Insured Tax-Free Income Fund Dated: September 8, 2003 /s/ Joseph P. DiMaggio ----------------------- Chief Financial Officer Narragansett Insured Tax-Free Income Fund A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to Narragansett Insured Tax-Free Income Fund and will be retained by Narragansett Insured Tax-Free Income Fund and furnished to the Securities and Exchange Commission or its staff upon request. This certification is being furnished solely pursuant to 18 U.S.C. ss. 1350 and is not being filed as part of the Report or as a separate disclosure document. -----END PRIVACY-ENHANCED MESSAGE-----