N-CSR/A 1 nitfifformncsr.txt NARRAGANSETT INSURED TAX-FREE INCOME FUND 12/31/03 NCSR 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: 12/31/03 FORM N-CSR ITEM 1. REPORTS TO STOCKHOLDERS. [Logo of the Aquila Group of Funds: an eagle's head] SERVING RHODE ISLAND INVESTORS FOR MORE THAN A DECADE AQUILASM GROUP OF FUNDS NARRAGANSETT INSURED TAX-FREE INCOME FUND 380 Madison Avenue, Suite 2300 * New York, NY 10017 800-437-1020 * 212-697-6666 [Logo of Narragansett Insured Tax-Free Income Fund: rectangle with profile view of a sailboat on top of waves and three seagulls flying above it] SEMI-ANNUAL REPORT NARRAGANSETT INSURED TAX-FREE INCOME FUND STATEMENT OF INVESTMENTS DECEMBER 31, 2003 (UNAUDITED)
RATING FACE MOODY'S, S&P AMOUNT GENERAL OBLIGATION BONDS (44.6%) OR FITCH VALUE ------------- ---------------------------------------------------- ------------ ------------- Coventry, Rhode Island $ 550,000 5.000%, 11/01/16 AMBAC Insured................... Aaa+/AAA+++ $ 597,438 550,000 5.000%, 11/01/17 AMBAC Insured................... Aaa+/AAA+++ 591,937 Cranston, Rhode Island 300,000 5.500%, 06/15/07 MBIA Insured.................... Aaa+/AAA++ 324,000 500,000 5.450%, 11/15/11 FGIC Insured.................... Aaa+/AAA++ 576,875 Cumberland, Rhode Island 250,000 3.750%, 02/01/13 FGIC Insured.................... Aaa+/AAA++ 255,313 250,000 4.000%, 02/01/14 FGIC Insured.................... Aaa+/AAA++ 257,500 250,000 4.000%, 02/01/15 FGIC Insured.................... Aaa+/AAA++ 255,000 500,000 5.000%, 08/01/15 MBIA Insured.................... Aaa+/AAA++ 551,250 250,000 4.000%, 02/01/16 FGIC Insured.................... Aaa+/AAA++ 252,500 250,000 4.100%, 02/01/17 FGIC Insured.................... Aaa+/AAA++ 252,500 250,000 4.150%, 02/01/18 FGIC Insured.................... Aaa+/AAA++ 251,563 1,255,000 5.000%, 10/01/18 MBIA Insured.................... Aaa+/AAA++ 1,336,575 1,040,000 5.200%, 10/01/21 MBIA Insured.................... Aaa+/AAA++ 1,110,200 East Providence, Rhode Island 500,000 5.400%, 05/15/07 MBIA Insured.................... Aaa+/AAA++ 535,000 350,000 3.375%, 05/15/15 MBIA Insured.................... Aaa+/AAA++ 335,125 Lincoln, Rhode Island 400,000 5.100%, 01/15/06 MBIA Insured.................... Aaa+/AAA++ 409,500 250,000 5.750%, 08/01/15 FGIC Insured.................... Aaa+/AAA+++ 272,188 New Shoreham, Rhode Island 245,000 4.000%, 11/15/15 AMBAC Insured................... AAA++/AAA+++ 249,900 255,000 4.250%, 11/15/16 AMBAC Insured................... AAA++/AAA+++ 262,331 270,000 4.250%, 11/15/17 AMBAC Insured................... AAA++/AAA+++ 275,738 910,000 4.800%, 04/15/18 AMBAC Insured................... AAA++/AAA+++ 956,637 285,000 4.500%, 11/15/18 AMBAC Insured................... AAA++/AAA+++ 294,262 1,105,000 5.000%, 04/15/22 AMBAC Insured................... AAA++/AAA+++ 1,149,200 Newport, Rhode Island 250,000 4.900%, 05/15/06 FGIC Insured.................... Aaa+/AAA++ 257,985 500,000 5.000%, 05/15/07 FGIC Insured.................... Aaa+/AAA++ 516,425 150,000 6.550%, 08/15/07 MBIA Insured.................... Aaa+/AAA++ 152,928 500,000 5.100%, 05/15/08 FGIC Insured.................... Aaa+/AAA++ 516,600 Newport, Rhode Island (continued) $ 1,000,000 4.500%, 11/01/15 AMBAC Insured................... Aaa+/AAA+++ $ 1,058,750 1,000,000 4.750%, 11/01/18 AMBAC Insured................... Aaa+/AAA+++ 1,052,500 800,000 5.000%, 11/01/20 AMBAC Insured................... Aaa+/AAA+++ 849,000 North Providence, Rhode Island 500,000 3.500%, 10/15/13 FSA Insured..................... Aaa+/AAA++ 500,625 500,000 3.650%, 10/15/14 FSA Insured..................... Aaa+/AAA++ 501,875 500,000 3.750%, 10/15/15 FSA Insured..................... Aaa+/AAA++ 497,500 400,000 5.700%, 07/01/08 MBIA Insured.................... Aaa+/AAA++ 459,000 500,000 4.700%, 09/15/14 FSA Insured..................... Aaa+/AAA+++ 536,250 Pawtucket, Rhode Island 600,000 4.300%, 09/15/09 AMBAC Insured................... Aaa+/AAA+++ 651,750 795,000 3.500%, 04/15/10, AMBAC Insured.................. Aaa+/AAA+++ 825,806 250,000 4.400%, 09/15/10 AMBAC Insured................... Aaa+/AAA+++ 272,187 825,000 3.500%, 04/15/11 AMBAC Insured................... Aaa+/AAA+++ 846,656 850,000 3.625%, 04/15/12 AMBAC Insured................... Aaa+/AAA+++ 870,187 880,000 3.750%, 04/15/13 AMBAC Insured................... Aaa+/AAA+++ 896,500 910,000 4.000%, 04/15/14 AMBAC Insured................... Aaa+/AAA+++ 935,025 Providence, Rhode Island 700,000 5.500%, 01/15/11 FSA Insured..................... Aaa+/AAA++ 769,125 1,925,000 5.200%, 04/01/11 AMBAC Insured................... Aaa+/AAA+++ 2,160,812 1,000,000 5.000%, 01/15/16 FGIC Insured.................... Aaa+/AAA++ 1,080,000 1,000,000 5.000%, 01/15/17 FGIC Insured.................... Aaa+/AAA++ 1,073,750 1,000,000 5.000%, 01/15/18 FGIC Insured.................... Aaa+/AAA++ 1,067,500 Rhode Island Consolidated Capital Development Loan 1,000,000 5.250%, 11/01/11 Series C MBIA Insured........... Aaa+/AAA++ 1,145,000 1,000,000 5.000%, 06/01/14 Series B FGIC Insured........... Aaa+/AAA++ 1,088,750 1,000,000 5.000%, 09/01/14 Series A FGIC Insured........... Aaa+/AAA++ 1,085,000 2,000,000 5.000%, 08/01/15 Series B FGIC Insured........... Aaa+/AAA++ 2,160,000 1,500,000 4.750%, 09/01/17 Series A FGIC Insured........... Aaa+/AAA++ 1,563,750 South Kingstown, Rhode Island 500,000 5.500%, 06/15/12 FGIC Insured.................... Aaa+/AAA+++ 570,000 State of Rhode Island 1,000,000 5.000%, 07/15/05 FGIC Insured.................... Aaa+/AAA++ 1,055,000 1,000,000 5.125%, 07/15/11 FGIC Insured.................... Aaa+/AAA++ 1,110,000 4,000,000 5.000%, 08/01/14 FGIC Insured.................... Aaa+/AAA++ 4,365,000 State of Rhode Island (continued) $ 1,500,000 5.000%, 09/01/15 FGIC Insured.................... Aaa+/AAA++ $ 1,620,000 2,000,000 5.250%, 11/01/17 FGIC Insured.................... Aaa+/AAA++ 2,225,000 2,500,000 5.000%, 09/01/18 MBIA Insured.................... Aaa+/AAA++ 2,678,125 2,000,000 5.000%, 09/01/19 MBIA Insured.................... Aaa+/AAA++ 2,132,500 1,500,000 5.000%, 09/01/20 MBIA Insured.................... Aaa+/AAA++ 1,590,000 Warwick, Rhode Island 500,000 3.375%, 06/15/14 FGIC Insured.................... Aaa+/AAA++ 490,000 665,000 4.250%, 07/15/14 AMBAC Insured................... Aaa+/AAA++ 695,756 195,000 5.600%, 08/01/14 FSA Insured..................... Aaa+/AAA++ 216,206 700,000 4.375%, 07/15/15 AMBAC Insured................... Aaa+/AAA++ 732,375 735,000 4.500%, 07/15/16 AMBAC Insured................... Aaa+/AAA++ 768,075 770,000 4.600%, 07/15/17 AMBAC Insured................... Aaa+/AAA++ 804,650 1,000,000 5.000%, 03/01/18 FGIC Insured.................... Aaa+/AAA++ 1,076,250 810,000 4.700%, 07/15/18 AMBAC Insured................... Aaa+/AAA++ 847,463 1,000,000 5.000%, 01/15/19 FGIC Insured.................... Aaa+/AAA++ 1,062,500 855,000 4.750%, 07/15/19 AMBAC Insured................... Aaa+/AAA++ 891,338 500,000 5.000%, 01/15/20 FGIC Insured.................... Aaa+/AAA++ 528,750 West Warwick, Rhode Island 500,000 4.875%, 03/01/16 AMBAC Insured................... Aaa+/AAA+++ 535,000 670,000 5.000%, 03/01/17 AMBAC Insured................... Aaa+/AAA+++ 717,738 700,000 5.050%, 03/01/18 AMBAC Insured................... Aaa+/AAA+++ 749,875 735,000 5.100%, 03/01/19 AMBAC Insured................... Aaa+/AAA+++ 785,531 Woonsocket, Rhode Island 385,000 5.125%, 03/01/11 MBIA Insured.................... Aaa+/AAA++ 394,471 655,000 4.450%, 12/15/12 FGIC Insured.................... Aaa+/AAA+++ 700,031 685,000 4.550%, 12/15/13 FGIC Insured.................... Aaa+/AAA+++ 729,525 ------------- Total General Obligation Bonds................. 66,814,927 ------------- REVENUE BONDS (55.8%) ---------------------------------------------------- DEVELOPMENT REVENUE BONDS (9.3%) ---------------------------------------------------- Rhode Island Convention Center Authority 500,000 5.000%, 05/15/07 Series 1993 B MBIA Insured...... Aaa+/AAA++ 548,750 2,000,000 5.000%, 05/15/23 Series 1993 C MBIA Insured...... Aaa+/AAA++ 2,032,500 Rhode Island Public Building Authority State Public Projects $ 1,000,000 5.250%, 02/01/09 Series 1998 A AMBAC Insured.................................... Aaa+/AAA++ $ 1,120,000 500,000 5.000%, 12/15/09 Series 1999 A AMBAC Insured.................................... Aaa+/AAA++ 563,750 1,000,000 5.250%, 12/15/14 Series 1998 FSA Insured......... Aaa+/AAA++ 1,117,500 500,000 5.500%, 12/15/14 Series 1996 B MBIA Insured...... Aaa+/AAA++ 558,750 500,000 5.500%, 12/15/15 Series 1996 B MBIA Insured...... Aaa+/AAA++ 558,750 Rhode Island State Economic Development Corp., Airport Revenue 1,000,000 5.000%, 07/01/18 Series B FSA Insured............ Aaa+/AAA++ 1,060,000 Rhode Island State Economic Development Corp., Motor Fuel Tax Revenue (Rhode Island Department of Transportation) 2,000,000 3.875%, 06/15/14 Series A AMBAC Insured.......... Aaa+/AAA++ 2,042,500 1,000,000 4.000%, 06/15/15 Series A AMBAC Insured.......... Aaa+/AAA++ 1,020,000 Rhode Island State Economic Development Corp., University of Rhode Island 750,000 4.800%, 11/01/11Series 1999 FSA Insured.......... Aaa+/NR 821,250 750,000 4.900%, 11/01/12 Series 1999 FSA Insured......... Aaa+/NR 816,563 750,000 4.900%, 11/01/13Series 1999 FSA Insured.......... Aaa+/NR 811,875 750,000 5.000%, 11/01/14 Series 1999 FSA Insured......... Aaa+/NR 818,437 ------------- Total Development Revenue Bonds.................. 13,890,625 ------------- HIGHER EDUCATION REVENUE BONDS (29.2%) ---------------------------------------------------- Providence, Rhode Island Public Building Authority, School Projects 1,395,000 4.000%, 12/15/12 Series 2003 A MBIA Insured...... Aaa+/AAA++ 1,463,006 1,450,000 4.000%, 12/15/13 Series 2003 A MBIA Insured...... Aaa+/AAA++ 1,508,000 1,505,000 4.000%, 12/15/14 Series 2003 A MBIA Insured...... Aaa+/AAA++ 1,550,150 1,570,000 4.000%, 12/15/15 Series 2003 A MBIA Insured...... Aaa+/AAA++ 1,601,400 1,630,000 4.000%, 12/15/16 Series 2003 A MBIA Insured...... Aaa+/AAA++ 1,646,300 Rhode Island Health & Education Building Corp., Brown University $ 2,000,000 5.250%, 09/01/17 Series 1993 MBIA Insured........ Aaa+/AAA+++ $ 2,195,000 1,000,000 5.000%, 09/01/23 Series 1993 MBIA Insured........ Aaa+/AAA++ 1,036,250 Rhode Island Health & Education Building Corp., Bryant College 1,000,000 5.125%, 06/01/19 AMBAC Insured................... Aaa+/AAA++ 1,068,750 230,000 5.000%, 12/01/21 AMBAC Insured................... Aaa+/AAA++ 242,075 Rhode Island Health & Education Building Corp. Higher Educational Facilities 500,000 3.500%, 09/15/13 Series 2003 B MBIA Insured...... Aaa+/AAA++ 500,625 1,010,000 3.625%, 09/15/14 Series 2003 B MBIA Insured...... Aaa+/AAA++ 1,011,263 600,000 3.625%, 09/15/14 Series 2003 C MBIA Insured...... Aaa+/AAA++ 600,750 1,050,000 4.000%, 09/15/15 Series 2003 B MBIA Insured...... Aaa+/AAA++ 1,072,312 500,000 4.000%, 09/15/15 Series 2003 C MBIA Insured...... Aaa+/AAA++ 510,625 1,040,000 4.000%, 09/15/16 Series 2003 B MBIA Insured...... Aaa+/AAA++ 1,050,400 500,000 4.000%, 09/15/16 Series 2003 C MBIA Insured...... Aaa+/AAA++ 505,000 Rhode Island Health & Education Building Corp., Johnson & Wales University 1,360,000 4.000%, 04/01/12 Series 2003 XLCA Insured........ Aaa+/AAA++ 1,422,900 3,210,000 4.000%, 04/01/13 Series 2003 XLCA Insured........ Aaa+/AAA++ 3,342,413 2,000,000 4.000%, 04/01/14 Series 2003 XLCA Insured........ Aaa+/AAA++ 2,060,000 465,000 5.500%, 04/01/15 1999 Series A MBIA Insured...... Aaa+/AAA++ 541,725 900,000 5.500%, 04/01/16 1999 Series A MBIA Insured...... Aaa+/AAA++ 1,051,875 785,000 5.500%, 04/01/17 1999 Series A MBIA Insured...... Aaa+/AAA++ 908,638 2,000,000 5.000%, 04/01/29 1999 Series A MBIA Insured...... Aaa+/AAA++ 2,062,500 Rhode Island Health & Education Building Corp., Rhode Island School of Design 505,000 4.700%, 06/01/18 Series 2001 MBIA Insured........ Aaa+/AAA++ 530,250 280,000 4.750%, 06/01/19 Series 2001 MBIA Insured........ Aaa+/AAA++ 292,950 Rhode Island Health & Education Building Corp., Roger Williams University 500,000 5.125%, 11/15/11 AMBAC Insured................... Aaa+/AAA++ 562,500 1,000,000 5.500%, 11/15/11 Series 1996 S AMBAC Insured..... NR/AAA++ 1,115,000 Rhode Island Health & Education Building Corp., Roger Williams University (continued) $ 1,000,000 5.125%, 11/15/14 Series 1996 S AMBAC Insured..... Aaa+/AAA++ $ 1,105,000 1,000,000 5.000%, 11/15/18 Series 1996 S AMBAC Insured..... Aaa+/AAA++ 1,082,500 Rhode Island Health & Education Facilities Authority Providence College 1,000,000 4.250%, 11/01/14 XLCA Insured.................... Aaa+/AAA++ 1,048,750 2,500,000 4.375%, 11/01/15 XLCA Insured.................... Aaa+/AAA++ 2,618,750 2,500,000 4.500%, 11/01/16 XLCA Insured.................... Aaa+/AAA++ 2,615,625 1,000,000 4.500%, 11/01/17 XLCA Insured.................... Aaa+/AAA++ 1,038,750 Providence, Rhode Island Public Building School & Public Facilities Project 1,500,000 5.250%, 12/15/17 AMBAC Insured................... Aaa+/AAA++ 1,657,500 1,000,000 5.250%, 12/15/19 AMBAC Insured................... Aaa+/AAA++ 1,095,000 ------------- Total Higher Education Revenue Bonds............. 43,714,532 ------------- MORTGAGE REVENUE MULTI-FAMILY BONDS (0.3%) ---------------------------------------------------- Rhode Island Housing & Mortgage Finance Corp., 225,000 5.450%, 07/01/04 Series 1995 A AMBAC Insured.................................... Aaa+/AAA++ 228,438 235,000 5.550%, 07/01/05 Series 1995 A AMBAC Insured.................................... Aaa+/AAA++ 245,281 ------------- Total Mortgage Revenue Multi-Family Bonds........ 473,719 ------------- POLLUTION CONTROL REVENUE BONDS (4.5%) ---------------------------------------------------- Rhode Island Clean Water Finance Agency, Water Pollution Control Bonds 1,800,000 5.000%, 10/01/18 Series 2002 B MBIA Insured...... Aaa+/AAA++ 1,930,500 4,765,000 4.375%, 10/01/21 Series 2002 B MBIA Insured...... Aaa+/AAA++ 4,782,869 ------------- Total Pollution Control Revenue Bonds............ 6,713,369 ------------- WATER AND SEWER REVENUE BONDS (8.6%) ---------------------------------------------------- Bristol County, Rhode Island Water Authority 300,000 5.000%, 12/01/08 Series 1997 A MBIA Insured...... Aaa+/AAA++ 324,375 750,000 5.250%, 07/01/17 Series 1997 A MBIA Insured...... Aaa+/AAA++ 818,437 Kent County, Rhode Island Water Authority Revenue Bonds $ 250,000 5.700%, 07/15/04 Series 1994 A MBIA Insured...... Aaa+/AAA++ $ 256,083 500,000 4.000%, 07/15/12 Series 2002 A MBIA Insured...... Aaa+/AAA++ 525,625 1,055,000 4.150%, 07/15/14 Series 2002 A MBIA Insured...... Aaa+/AAA++ 1,095,881 Rhode Island Clean Water Protection Finance Agency, 1,000,000 5.125%, 10/01/11 Series 1999 C MBIA Insured...... Aaa+/AAA++ 1,121,250 500,000 4.600% , 10/01/13 Series A AMBAC Insured......... Aaa+/AAA++ 528,750 500,000 4.750%, 10/01/14 Series A AMBAC Insured.......... Aaa+/AAA++ 530,625 1,250,000 5.400%, 10/01/15 Series A MBIA Insured........... Aaa+/AAA++ 1,451,563 2,000,000 4.750%, 10/01/18 Series A AMBAC Insured.......... Aaa+/AAA++ 2,070,000 500,000 4.750%, 10/01/20 Series A AMBAC Insured.......... Aaa+/AAA++ 514,375 Rhode Island Water Resources Board Public Drinking Water Protection Revenue Bond 1,500,000 4.000%, 03/01/14 MBIA Insured.................... Aaa+/AAA++ 1,541,250 1,000,000 4.250%, 03/01/15 MBIA Insured.................... Aaa+/AAA++ 1,038,750 Rhode Island Clean Water Protection 200,000 5.300%, 10/01/07 1993 Series 1993 A MBIA Insured..................................... Aaa+/AAA++ 223,000 300,000 5.400%, 10/01/09 1993 Series 1993 A MBIA Insured..................................... Aaa+/AAA++ 343,500 500,000 4.500%, 10/01/11 1993 Series 1993 B AMBAC Insured.................................... Aaa+/AAA++ 535,000 ------------- Total Water and Sewer Revenue Bonds.............. 12,918,464 ------------- OTHER REVENUE BONDS (3.9%) ---------------------------------------------------- Rhode Island State Capital Development Loan 1,500,000 5.400%, 08/01/08 MBIA Insured.................... Aaa+/AAA++ 1,640,625 1,135,000 5.000%, 08/01/11 MBIA Insured.................... Aaa+/AAA++ 1,237,150 State of Rhode Island Certificates of Participation, Howard Center Improvements 400,000 5.250%, 10/01/10 MBIA Insured.................... Aaa+/AAA++ 446,000 200,000 5.375%, 10/01/16 MBIA Insured.................... Aaa+/AAA++ 221,750 State of Rhode Island Depositors Economic Protection Corp. $ 135,000 5.500%, 08/01/06 Series 1992 B MBIA Insured....... Aaa+/AAA++ $ 148,500 300,000 5.800%, 08/01/09 Series 1993 B MBIA Insured...... Aaa+/AAA++ 351,000 500,000 6.000%, 08/01/17 Series 1992 B MBIA Insured....... Aaa+/AAA++ 543,750 1,045,000 5.250%, 08/01/21 Series 1993 B MBIA Insured (Escrowed to Maturity)........................... Aaa+/AAA++ 1,193,912 ------------- Total Other Revenue Bonds........................ 5,782,687 ------------- Total Revenue Bonds............................ 83,493,396 ------------- Total Investments (cost $142,529,372*)... 100.4% 150,308,323 Other assets less liabilities............ (0.4) (580,956) ----- ------------- Net Assets............................... 100.0% $ 149,727,367 ===== =============
* See note 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 XLCA - XL Capital Assurance Inc. See accompanying notes to financial statements. NARRAGANSETT INSURED TAX-FREE INCOME FUND STATEMENT OF ASSETS AND LIABILITIES DECEMBER 31, 2003 (UNAUDITED) ASSETS Investments at value (cost $142,529,372) ....................................................... $ 150,308,323 Receivable for Fund shares sold ................................................................ 508,672 Interest receivable ............................................................................ 1,737,037 Receivable for investment securities sold ...................................................... 25,000 Other assets ................................................................................... 6,082 ------------- Total assets ................................................................................... 152,585,114 ------------- LIABILITIES Cash overdraft ................................................................................. 2,045,712 Payable for Fund shares redeemed ............................................................... 547,370 Dividends payable .............................................................................. 178,377 Distribution fees payable ...................................................................... 68,801 Management fee payable ......................................................................... 14,568 Accrued expenses ............................................................................... 2,919 ------------- Total liabilities .............................................................................. 2,857,747 ------------- NET ASSETS ........................................................................................ $ 149,727,367 ============= Net Assets consist of: Capital Stock - Authorized 80,000,000 shares, par value $.01 per share ......................... $ 138,066 Additional paid-in capital ..................................................................... 142,579,867 Net unrealized appreciation on investments (note 4) ............................................ 7,778,951 Accumulated net realized loss on investments ................................................... (607,658) Distributions in excess of net investment income ............................................... (161,859) ------------- $ 149,727,367 ============= CLASS A Net Assets ..................................................................................... $ 105,987,921 ============= Capital shares outstanding ..................................................................... 9,773,250 ============= Net asset value and redemption price per share ................................................. $ 10.84 ============= Offering price per share (100/96 of $10.84 adjusted to nearest cent) ........................... $ 11.29 ============= CLASS C Net Assets ..................................................................................... $ 22,471,679 ============= Capital shares outstanding ..................................................................... 2,072,339 ============= Net asset value and offering price per share ................................................... $ 10.84 ============= 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) .................................................. $ 10.84* ============= CLASS I Net Assets ..................................................................................... $ 691,491 ============= Capital shares outstanding ..................................................................... 63,803 ============= Net asset value, offering and redemption price per share ....................................... $ 10.84 ============= CLASS Y Net Assets ..................................................................................... $ 20,576,276 ============= Capital shares outstanding ..................................................................... 1,897,209 ============= Net asset value, offering and redemption price per share ....................................... $ 10.85 =============
See accompanying notes to financial statements. NARRAGANSETT INSURED TAX-FREE INCOME FUND STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED DECEMBER 31, 2003 (UNAUDITED) Investment Income: Interest income ................................................... $3,215,209 Expenses: Management fee (note 3) ........................................... $ 370,098 Distribution and service fees (note 3) ............................ 191,054 Trustees' fees and expenses (note 8) .............................. 49,406 Fund accounting fees .............................................. 28,822 Transfer and shareholder servicing agent fees ..................... 26,952 Shareholders' reports and proxy statements ........................ 24,016 Legal fees ........................................................ 20,996 Auditing and tax fees ............................................. 11,234 Custodian fees .................................................... 10,268 Registration fees and dues ........................................ 4,914 Miscellaneous ..................................................... 14,996 ----------- Total Expenses .................................................... 752,756 Management fee waived (note 3) .................................... (288,026) Expenses paid indirectly (note 6) ................................. (8,144) ----------- Net expenses ...................................................... 456,586 ---------- Net investment income ............................................. 2,758,623 Realized and Unrealized Gain (Loss) on Investments: Net realized gain (loss) from securities transactions ............. 91,730 Change in unrealized appreciation on investments .................. (1,005,047) ----------- Net realized and unrealized gain (loss) on investments ............ (913,317) ---------- Net change in net assets resulting from operations ................ $1,845,306 ==========
See accompanying notes to financial statements. NARRAGANSETT INSURED TAX-FREE INCOME FUND STATEMENTS OF CHANGES IN NET ASSETS
SIX MONTHS ENDED DECEMBER 31, 2003 YEAR ENDED (UNAUDITED) JUNE 30, 2003 ----------------- ------------- OPERATIONS: Net investment income ....................................................... $ 2,758,623 $ 5,028,971 Net realized gain (loss) from securities transactions ....................... 91,730 286,562 Change in unrealized appreciation on investments ............................ (1,005,047) 5,341,554 ------------- ------------- Change in net assets from operations ..................................... 1,845,306 10,657,087 ------------- ------------- DISTRIBUTIONS TO SHAREHOLDERS (NOTE 9): Class A Shares: Net investment income ....................................................... (2,079,685) (3,889,489) Class C Shares: Net investment income ....................................................... (342,684) (607,348) Class I Shares: Net investment income ....................................................... (10,421) (16,746) Class Y Shares: Net investment income ....................................................... (390,128) (637,034) ------------- ------------- Change in net assets from distributions .................................. (2,822,918) (5,150,617) ------------- ------------- CAPITAL SHARE TRANSACTIONS (NOTE 7): Proceeds from shares sold ................................................... 16,340,426 44,058,438 Reinvested dividends and distributions ...................................... 1,778,882 3,417,773 Cost of shares redeemed ..................................................... (15,448,549) (19,044,516) ------------- ------------- Change in net assets from capital share transactions ........................ 2,670,759 28,431,695 ------------- ------------- Change in net assets ..................................................... 1,693,147 33,938,165 NET ASSETS: Beginning of period ......................................................... 148,034,220 114,096,055 ------------- ------------- End of period* .............................................................. $ 149,727,367 $ 148,034,220 ============= ============= * Includes distributions in excess of net investment income of: ............. $ (161,859) $ (97,564) ============= =============
See accompanying notes to financial statements. NARRAGANSETT INSURED TAX-FREE INCOME FUND NOTES TO FINANCIAL STATEMENTS (UNAUDITED) 1. ORGANIZATION Narragansett Insured Tax-Free Income Fund (the "Fund"), a non-diversified, open-end investment company, was organized on January 22, 1992 as a Massachusetts business trust and commenced operations on September 10, 1992. The Fund is authorized to issue 80,000,000 shares and, since its inception to May 1, 1996, offered only one class of shares. On that date, the Fund began offering two additional classes of shares, Class C and Class Y shares. All shares outstanding prior to that date were designated as Class A shares and are sold with a front-payment sales charge and bear an annual distribution fee. Class C shares are sold with a level-payment sales charge with no payment at time of purchase but level service and distribution fees from date of purchase through a period of six years thereafter. A contingent deferred sales charge of 1% is assessed to any Class C shareholder who redeems shares of this Class within one year from the date of purchase. Class C Shares, together with a pro-rata portion of all Class C Shares acquired through reinvestment of dividends and other distributions paid in additional Class C Shares, automatically convert to Class A Shares after 6 years. The Class Y shares are only offered to institutions acting for an investor in a fiduciary, advisory, agency, custodian or similar capacity and are not offered directly to retail investors. Class Y shares are sold at net asset value without any sales charge, redemption fees, contingent deferred sales charge or distribution or service fees. On October 31, 1997, the Fund established Class I shares, which are offered and sold only through financial intermediaries and are not offered directly to retail investors. Class I Shares are sold at net asset value without any sales charge, redemption fees, or contingent deferred sales charge. Class I Shares carry a distribution fee and a service fee. All classes of shares represent interests in the same portfolio of investments and are identical as to rights and privileges and differ with respect to the effect of sales charges, the distribution and/or service fees borne by each class, expenses specific to each class, voting rights on matters affecting a single class and the exchange privileges of each class. 2. SIGNIFICANT ACCOUNTING POLICIES The following is a summary of significant accounting policies followed by the Fund in the preparation of its financial statements. The policies are in conformity with accounting principles generally accepted in the United States of America for investment companies. a) PORTFOLIO VALUATION: Municipal securities which have remaining maturities of more than 60 days are valued each business day based upon information provided by a nationally prominent independent pricing service and periodically verified through other pricing services; in the case of securities for which market quotations are readily available, securities are valued 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. 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. Refer to Note 10 for Subsequent Event footnote. 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 December 31, 2003, the Fund incurred management fees of $370,098 of which $288,026 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 six months ended December 31, 2003, distribution fees on Class A Shares amounted to $79,575, of which the Distributor retained $1,697. Under another part of the Plan, the Fund is authorized to make payments with respect to Class C Shares to Qualified Recipients which have rendered assistance in the distribution and/or retention of the Fund's Class C shares or servicing of shareholder accounts. These payments are made at the annual rate of 0.75% of the Fund's average net assets represented by Class C Shares and for the six months ended December 31, 2003 amounted to $83,509. In addition, under a Shareholder Services Plan, the Fund is authorized to make service fee payments with respect to Class C Shares to Qualified Recipients for providing personal services and/or maintenance of shareholder accounts. These payments are made at the annual rate of 0.25% of the Fund's average net assets represented by Class C Shares and for the six months ended December 31, 2003, amounted to $27,836. The total of these payments with respect to Class C Shares amounted to $111,345, of which the Distributor retained $18,943. Under another part of the Plan, the Fund is authorized to make payments with respect to Class I Shares to Qualified Recipients. Class I payments, under the Plan, may not exceed, for any fiscal year of the Fund a rate (currently 0.05%) set from time to time by the Board of Trustees of not more than 0.25% of the average annual net assets represented by the Class I Shares. In addition, the Fund has a Shareholder Services Plan under which it may pay service fees (currently 0.15%) of not more than 0.25% of the average annual net assets of the Fund represented by Class I Shares. That is, the total payments under both plans will not exceed 0.50% of such net assets. For the six months ended December 31, 2003, these payments were made at the average annual rate of 0.20% of such net assets amounting to $534 of which $134 related to the Plan and $400 related to the Shareholder Services Plan. Specific details about the Plans are more fully defined in the Fund's Prospectus and Statement of Additional Information. Under a Distribution Agreement, the Distributor serves as the exclusive distributor of the Fund's shares. Through agreements between the Distributor and various broker-dealer firms ("dealers"), the Fund's shares are sold primarily through the facilities of these dealers having offices within Rhode Island, with the bulk of sales commissions inuring to such dealers. For the six months ended December 31, 2003, total commissions on sales of Class A Shares amounted to $203,213, of which the Distributor received $16,892. C) OTHER RELATED PARTY TRANSACTIONS: For the six months ended December 31, 2003, the Fund incurred $20,463 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 six months ended December 31, 2003, purchases of securities and proceeds from the sales of securities aggregated $17,106,430 and $7,343,900, respectively. At December 31, 2003, the aggregate tax cost for all securities was $142,503,673. At December 31, 2003, the aggregate gross unrealized appreciation for all securities in which there is an excess of market value over tax cost amounted to $7,818,889 and aggregate gross unrealized depreciation for all securities in which there is an excess of tax cost over market value amounted to $14,239, for a net unrealized appreciation of $7,804,650. 5. PORTFOLIO ORIENTATION Since the Fund invests principally and may invest entirely in double tax-free municipal obligations of issuers within Rhode Island, it is subject to possible risks associated with economic, political, or legal developments or industrial or regional matters specifically affecting Rhode Island and whatever effects these may have upon Rhode Island issuers' ability to meet their obligations. However, to mitigate against such risks, the Fund has chosen to have at least 80% and possibly the entire number of issues in the portfolio insured as to timely payment of principal and interest when due by nationally prominent municipal bond insurance companies. At December 31, 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 December 31, 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:
SIX MONTHS ENDED DECEMBER 31, 2003 YEAR ENDED (UNAUDITED) JUNE 30, 2003 ------------------------------ ------------------------------- SHARES AMOUNT SHARES AMOUNT ------ ------ ------ ------ CLASS A SHARES: Proceeds from shares sold ........... 884,622 $ 9,500,210 2,511,973 $ 26,990,482 Reinvested distributions ............ 124,783 1,330,954 239,993 2,564,785 Cost of shares redeemed ............. (1,026,565) (10,980,717) (1,208,692) (13,117,881) ------------ ------------ ------------ ------------ Net change ....................... (17,160) (149,553) 1,543,274 16,437,386 ------------ ------------ ------------ ------------ CLASS C SHARES: Proceeds from shares sold ........... 341,259 3,629,061 851,696 9,125,462 Reinvested distributions ............ 19,448 207,610 32,560 348,204 Cost of shares redeemed ............. (350,093) (3,719,136) (312,631) (3,355,269) ------------ ------------ ------------ ------------ Net change ....................... 10,614 117,535 571,625 6,118,397 ------------ ------------ ------------ ------------ CLASS I SHARES: Proceeds from shares sold ........... 22,595 241,000 4,279 45,721 Reinvested distributions ............ 93 1,002 52 560 Cost of shares redeemed ............. -- -- (53) (592) ------------ ------------ ------------ ------------ Net change ....................... 22,688 242,002 4,278 45,689 ------------ ------------ ------------ ------------ CLASS Y SHARES: Proceeds from shares sold ........... 278,389 2,970,155 741,749 7,896,773 Reinvested distributions ............ 22,493 239,316 47,085 504,224 Cost of shares redeemed ............. (69,944) (748,696) (242,048) (2,570,774) ------------ ------------ ------------ ------------ Net change ....................... 230,938 2,460,775 546,786 5,830,223 ------------ ------------ ------------ ------------ Total transactions in Fund shares .............................. 247,080 $ 2,670,759 2,665,963 $ 28,431,695 ============ ============ ============ ============
8. TRUSTEES' FEES AND EXPENSES During the previous 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 previous 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. 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. Tax character of distributions paid by the Fund: 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 =========== 10. SUBSEQUENT EVENT Effective January 1, 2004, Aquila Management Corporation, founder of the Fund, assigned its Advisory and Administration Agreement and Sub-Advisory Agreement to its wholly-owned subsidiary, Aquila Investment Management LLC, which will continue the management of the Fund. The transfer was made for reasons of corporate and tax planning and will have no effect on the management of the Fund or the fees being paid. These changes will not affect the sub-advisory arrangements with the Fund's Sub-Adviser, Citizens Investment Advisors, a department of Citizens Bank of Rhode Island, which provides the Fund with local advisory services. NARRAGANSETT INSURED TAX-FREE INCOME FUND FINANCIAL HIGHLIGHTS FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
CLASS A ------------------------------------------------------------------- SIX MONTHS ENDED YEAR ENDED JUNE 30, 12/31/03 -------------------------------------------------- (UNAUDITED) 2003 2002 2001 2000 1999 ----------- ------ ------ ------ ------ ------ Net asset value, beginning of period ........... $10.92 $10.47 $10.32 $9.91 $10.16 $10.47 ------ ------ ------ ------ ------ ------ Income (loss) from investment operations: Net investment income + ..................... 0.21 0.42 0.45 0.47 0.49 0.49 Net gain (loss) on securities (both realized and unrealized) ........... (0.08) 0.47 0.16 0.44 (0.24) (0.30) ------ ------ ------ ------ ------ ------ Total from investment operations ............ 0.13 0.89 0.61 0.91 0.25 0.19 ------ ------ ------ ------ ------ ------ Less distributions (note 9): Dividends from net investment income ........ (0.21) (0.44) (0.46) (0.50) (0.50) (0.50) ------ ------ ------ ------ ------ ------ Net asset value, end of period ................. $10.84 $10.92 $10.47 $10.32 $9.91 $10.16 ====== ====== ====== ====== ====== ====== Total return (not reflecting sales charge) ..... 1.24%++ 8.64% 6.07% 9.19% 2.58% 1.74% Ratios/supplemental data Net assets, end of period (in thousands) .... $105,988 $106,887 $86,378 $67,669* $59,899 $66,611 Ratio of expenses to average net assets ..... 0.52%* 0.51% 0.49% 0.41% 0.41% 0.39% Ratio of net investment income to average net assets ....................... 3.82%* 3.96% 4.34% 4.65% 4.89% 4.61% Portfolio turnover rate ..................... 5.07%++ 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 ..... 0.90%* 0.88% 0.88% 0.95% 0.95% 0.91% Ratio of net investment income to average net assets ....................... 3.44%* 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 ..... 0.51%* 0.48% 0.46% 0.40% 0.38% 0.35%
CLASS I ---------------------------------------------------------------------- SIX MONTHS ENDED YEAR ENDED JUNE 30, PERIOD 12/31/03 --------------------------------------- ENDED (UNAUDITED) 2003 2002 2001 2000 6/30/99(1) ----------- ------ ------ ------ ------ ---------- Net asset value, beginning of period ........... $10.91 $10.47 $10.32 $9.90 $10.15 $10.54 ------ ------ ------ ------ ------ ------ Income (loss) from investment operations: Net investment income + ..................... 0.20 0.42 0.44 0.47 0.48 0.31 Net gain (loss) on securities (both realized and unrealized) ........... (0.07) 0.46 0.17 0.43 (0.23) (0.38) ------ ------ ------ ------ ------ ------ Total from investment operations ............ 0.13 0.88 0.61 0.90 0.25 (0.07) ------ ------ ------ ------ ------ ------ Less distributions (note 9): Dividends from net investment income ........ (0.20) (0.44) (0.46) (0.48) (0.50) (0.32) ------ ------ ------ ------ ------ ------ Net asset value, end of period ................. $10.84 $10.91 $10.47 $10.32 $ 9.90 $10.15 ====== ====== ====== ====== ====== ====== Total return (not reflecting sales charge) ..... 1.33%++ 8.52% 6.05% 9.29% 2.56% (0.75)%++ Ratios/supplemental data Net assets, end of period (in thousands) .... $691 $449 $386 $93 $75 $77 Ratio of expenses to average net assets ..... 0.53%* 0.52% 0.50% 0.41% 0.43% 0.49%* Ratio of net investment income to average net assets ....................... 3.81%* 3.95% 4.32% 4.65% 4.87% 4.54%* Portfolio turnover rate ..................... 5.07%++ 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 ..... 0.91%* 0.89% 0.89% 0.96% 0.97% 0.87%* Ratio of net investment income to average net assets ....................... 3.43%* 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 ..... 0.52%* 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 ------------------------------------------------------------------ SIX MONTHS ENDED YEAR ENDED JUNE 30, 12/31/03 -------------------------------------------------- (UNAUDITED) 2003 2002 2001 2000 1999 ----------- ------ ------ ------ ------ ------ Net asset value, beginning of period ............ $10.92 $10.47 $10.32 $9.91 $10.16 $10.47 ------ ------ ------ ------ ------ ------ Income from investment operations: Net investment income+ ....................... 0.16 0.33 0.36 0.38 0.40 0.38 Net gain (loss) on securities (both realized and unrealized) .................. (0.07) 0.47 0.16 0.43 (0.24) (0.29) ------ ------ ------ ------ ------ ------ Total from investment operations ............. 0.09 0.80 0.52 0.81 0.16 0.09 ------ ------ ------ ------ ------ ------ Less distributions (note 9): Dividends from net investment income ......... (0.17) (0.35) (0.37) (0.40) (0.41) (0.40) ------ ------ ------ ------ ------ ------ Net asset value, end of period .................. $10.84 $10.92 $10.47 $10.32 $9.91 $10.16 ====== ====== ====== ====== ====== ====== Total return (not reflecting sales charge) ...... 0.81%++ 7.72% 5.16% 8.27% 1.71% 0.76% Ratios/supplemental data Net assets, end of period (in thousands) ..... $22,472 $22,506 $15,606 $7,023 $4,681 $4,213 Ratio of expenses to average net assets ...... 1.37%* 1.35% 1.34% 1.26% 1.26% 1.35% Ratio of net investment income to average net assets ........................ 2.98%* 3.10% 3.46% 3.78% 4.04% 3.65% Portfolio turnover rate ...................... 5.07%++ 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 ...... 1.75%* 1.72% 1.72% 1.80% 1.80% 1.75% Ratio of net investment income to average net assets ........................ 2.60%* 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 ...... 1.36%* 1.33% 1.31% 1.25% 1.23% 1.32%
CLASS Y ------------------------------------------------------------------ SIX MONTHS ENDED YEAR ENDED JUNE 30, 12/31/03 -------------------------------------------------- (UNAUDITED) 2003 2002 2001 2000 1999 ----------- ------ ------ ------ ------ ------ Net asset value, beginning of period ............ $10.92 $10.47 $10.32 $9.91 $10.16 $10.47 ------ ------ ------ ------ ------ ------ Income from investment operations: Net investment income+ ....................... 0.21 0.45 0.46 0.48 0.50 0.49 Net gain (loss) on securities (both realized and unrealized) .................. (0.06) 0.45 0.17 0.44 (0.24) (0.30) ------ ------ ------ ------ ------ ------ Total from investment operations ............. 0.15 0.90 0.63 0.92 0.26 0.19 ------ ------ ------ ------ ------ ------ Less distributions (note 9): Dividends from net investment income ......... (0.22) (0.45) (0.48) (0.51) (0.51) (0.50) ------ ------ ------ ------ ------ ------ Net asset value, end of period .................. $10.85 $10.92 $10.47 $10.32 $ 9.91 $10.16 ====== ====== ====== ====== ====== ====== Total return (not reflecting sales charge) ...... 1.41%++ 8.80% 6.22% 9.35% 2.73% 1.79% Ratios/supplemental data Net assets, end of period (in thousands) ..... $20,576 $18,193 $11,726 $3,332 $2,277 $4,250 Ratio of expenses to average net assets ...... 0.37%* 0.36% 0.34% 0.26% 0.26% 0.33% Ratio of net investment income to average net assets ........................ 3.98%* 4.10% 4.47% 4.79% 5.07% 4.65% Portfolio turnover rate ...................... 5.07%++ 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 ...... 0.75%* 0.73% 0.73% 0.80% 0.79% 0.70% Ratio of net investment income to average net assets ........................ 3.60%* 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 ...... 0.36%* 0.33% 0.31% 0.26% 0.23% 0.30%
---------- + Per share amounts have been calculated using the monthly average shares method. ++ Not annualized. * Annualized. See accompanying notes to financial statements. SHAREHOLDER MEETING RESULTS (UNAUDITED) The Annual Meeting of Shareholders of Narragansett Insured Tax-Free Income Fund (the "Fund") was held on September 4, 2003. The holders of shares representing approximately 87% of the total net asset value of the shares entitled to vote were present in person or by proxy. At the meeting, the following matters were voted upon and approved by the shareholders (the resulting votes are presented below). 1. To elect Trustees. Number of Votes: TRUSTEE FOR WITHHELD ------- --- -------- Lacy B. Herrmann 10,198,323 1,198,818 Vernon R. Alden 10,196,418 1,200,723 Paul Y. Clinton 10,198,323 1,198,818 David A. Duffy 10,198,898 1,198,243 Willliam J. Nightingale 10,195,843 1,201,298 John J. Partridge 10,195,843 1,201,298 Cornelius T. Ryan 10,198,898 1,198,243 J. William Weeks 10,198,898 1,198,243 2. To ratify the selection of KPMG LLP as the Fund's independent auditors. Number of Votes: FOR AGAINST ABSTAIN --- ------- ------- 11,340,212 7,961 48,967 INFORMATION AVAILABLE (UNAUDITED) Much of the information that the funds in the Aquila(sm) Group of Funds produce is automatically sent to you and all other shareholders. Specifically, you are routinely sent the entire list of portfolio of securities of your fund twice a year in the semi-annual and annual reports you receive. You should know, however, that we prepare, and have available, portfolio listings at the end of each quarter. Whenever you may be interested in seeing a listing of your trust's portfolio other than in your shareholder reports, please check our website (www.aquilafunds.com) or call us at 1-800-437-1020. FOUNDER AQUILA MANAGEMENT CORPORATION MANAGER AQUILA INVESTMENT MANAGEMENT LLC 380 Madison Avenue, Suite 2300 New York, New York 10017 INVESTMENT SUB-ADVISER CITIZENS INVESTMENT ADVISORS, A DEPARTMENT OF CITIZENS BANK OF RHODE ISLAND One Citizens Plaza Providence, Rhode Island 02903 BOARD OF TRUSTEES Lacy B. Herrmann, Chairman Vernon R. Alden Paul Y. Clinton David A. Duffy William J. Nightingale John J. Partridge Cornelius T. Ryan J. William Weeks OFFICERS Diana P. Herrmann, Vice Chair and President Stephen J. Caridi, Senior Vice President Joseph P. DiMaggio, Chief Financial Officer and Treasurer Edward M.W. Hines, Secretary DISTRIBUTOR AQUILA DISTRIBUTORS, INC. 380 Madison Avenue, Suite 2300 New York, New York 10017 CUSTODIAN BANK ONE TRUST COMPANY, N.A. 1111 Polaris Parkway Columbus, Ohio 43240 TRANSFER AND SHAREHOLDER SERVICING AGENT PFPC INC. 760 Moore Road King of Prussia, Pennsylvania 19406 INDEPENDENT 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. SEMI-ANNUAL REPORT DECEMBER 31, 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 AQUILASM 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 March 8, 2004 By: /s/ Diana P. Herrmann --------------------------------- Vice Chair and President March 8, 2004 By: /s/ Joseph P. DiMaggio ----------------------------------- Chief Financial Officer March 8, 2004 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 March 8, 2004 By: /s/ Diana P. Herrmann --------------------------------- Diana P. Herrmann President March 8, 2004 By: /s/ Joseph P. DiMaggio ----------------------------------- Joseph P. DiMaggio Chief Financial Officer March 8, 2004 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.