INVESTMENT ADVISER
CITIZENS TRUST COMPANY
(Part of Citizens Bank)
One Citizens Plaza
Providence, Rhode Island 02903
ADMINISTRATOR AND FOUNDER
AQUILA MANAGEMENT CORPORATION
380 Madison Avenue, Suite 2300
New York, New York 10017
BOARD OF TRUSTEES
Lacy B. Herrmann, Chairman
Vernon R. Alden
Paul Y. Clinton
David A. Duffy
Robert L. Krakoff
William J. Nightingale
J. William Weeks
Officers
Lacy B. Herrmann, President
Rose F. Marotta, Chief Financial Officer
Richard F. West, 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.
100 East Broad Street
Columbus, Ohio 43271
TRANSFER AND SHAREHOLDER SERVICING AGENT
ADMINISTRATIVE DATA
MANAGEMENT CORP.
581 Main Street
Woodbridge, New Jersey 07095-1198
INDEPENDENT AUDITORS
KPMG PEAT MARWICK LLP
345 Park Avenue
New York, New York 10154
Further information is contained in the Prospectus,
which must precede or accompany this report.
SEMI-ANNUAL
REPORT
DECEMBER 31, 1996
A TAX-FREE INCOME INVESTMENT
(Logo of Aquila Group of Funds Eagle Head)
(Logo of Narragansett Insured Tax-Free Income Fund)
ONE OF THE
AQUILASM GROUP OF FUNDS
<PAGE>
NARRAGANSETT INSURED TAX-FREE INCOME FUND
SEMI-ANNUAL REPORT
"THE VALUE OF STEADFASTNESS"
February 18, 1997
Dear Investor:
Most of us have heard, at one time or another, the story of the tortoise
and the hare. With respect to your investment in Narragansett Insured
Tax-Free Income Fund, this old adage, detailing the virtue of steadfastness,
speaks volumes. If the finish line you are seeking to cross is one of capital
preservation and double tax-free income, then an investment which performs
much like the tortoise just might "win the race."
THE CALL OF THE STOCK MARKET
As I am sure you will agree, recent years have been banner ones for the
stock market. The spectacular price increases experienced have made the
appeal of investing in equity securities extremely powerful and, at times,
almost irresistible.
If it were possible to know in advance just what and when to buy or sell
in order to maximize profit, then constantly switching your investment
vehicle, trying to capture the latest trend, would be uncomplicated.
Unfortunately, "timing" the market, with any degree of consistency, is
near impossible. We have generally found that, for the average investor,
switching continuously from one security to another in the management of
his/her investment portfolio tends to be a fruitless, often imprudent,
exercise. With the degree of volatility inherent in the equity markets,
missing an upturn or downturn could result in a disastrous loss of invested
principal.
PROUD TO BE A TORTOISE
Our various survey results indicate that a substantial portion of
investors in Narragansett Insured Tax-Free Income Fund are retirees or
pre-retirees who are concerned about capital preservation. Accordingly,
staying on track with your investment in the Fund could well prove to be the
most appropriate course to follow. Although equity investments can be
rewarding for a portion of one's capital, it is still critical to keep
firmly in mind your overall investment goal and not get disproportionately
distracted by the dazzle of other investments.
It is no great secret that municipal bonds, such as those in which the
Fund invests, are generally not exciting investments. Unlike stocks, they do
not experience abrupt, dramatic highs. However, it must be kept in mind that
municipal bonds also do not experience the dumbfounding lows of stocks.
Municipal bond funds just plod along from year to year, much like the
tortoise, producing consistent double tax-free results for shareholders.
While being a tortoise may not be as glamorous as being a hare, this
should not represent a cause for concern. The end result is really what
counts - not how you got there, but that you got there at all.
<PAGE>
CAPITAL PRESERVATION STRATEGIES
Although capital preservation is not guaranteed, the Fund does take some
very deliberate steps to ensure that there will be minimal volatility in
share price over a reasonable time frame.
The Fund's basic philosophy is "don't put all your eggs in one basket."
And, when you choose the eggs for that basket, choose only quality ones.
DIVERSIFICATION is a key stability tool used in the construction of the
Fund's investment portfolio. At year-end 1996, over 115 separate municipal
issues were represented in the Fund's portfolio. Having such a breadth of
participation helps to ensure against any significant loss of principal by
the Fund in the remote event anything ever did go wrong with a particular
issuer. Such diversification also enables the Fund to participate in
financing many different vital public purpose projects in numerous
communities throughout Rhode island, thereby benefitting residents of the
entire state.
We have found from experience that sticking with QUALITY is best in the
long run. Therefore, all investments in the Fund are rated AAA - THE HIGHEST
CREDIT RATING assigned by nationally-known credit rating services. All
municipal securities selected for the Fund's portfolio are carefully analyzed
by the Investment Adviser to ensure that on their own they possess the level
of quality and sound characteristics desired. However, as an extra measure of
protection, management has generally sought, to have the Fund's holdings
insured by specialized insurance companies. This insurance feature provides
an extra measure of protection for your investment - protection against
credit risk. Such insurance coverage, furnished by only top-rated insurance
companies that specialize in insuring municipal securities, provides for
timely payment of principal and interest on the municipal obligations in the
Fund in the event, however remote, a problem ever did occur with any of the
municipal issuers.
Emphasis is also placed on having A SPREAD OF MATURITIES in the Fund's
investment portfolio. As you probably are aware, short term maturities tend
to have very little price fluctuation, but produce a lesser rate of return
than longer maturity securities. Conversely, long-term maturities produce a
higher return level, but have a much higher price volatility factor than
shorter-term issues since they reflect the risks associated with the
unpredictability of future events and the potential interest rate changes
over the extended life of the municipal bond.
By creating a blend of maturities, ranging from under one year to over
20 years in length, the Fund attempts to provide you with a satisfactory
level of return without subjecting the share price to excessive swings as
interest rates move up and down. Thus, the current average maturity of the
Fund's portfolio is the relatively intermediate term of 11.7 years.
The Fund's Investment Adviser, Citizens Trust Company, examines the
above elements very carefully when selecting each individual "egg" for your
basket of investments in order to obtain the most appropriate fit. Such
careful attention seeks to provide protection for shareholders' capital and
promote stability.
TAX-FREE RATE OF RETURN
What many investors sometime forget is that while the level of income
from the Fund may seem unimpressive on the surface, it is DOUBLE TAX-FREE* -
free of both regular Federal and State of Rhode Island income taxes. When the
rate of return achieved by the Fund is converted into a taxable equivalent
rate, the outcome is generally quite an eye-opener.
<PAGE>
The following chart shows the average annualized level of double
tax-free income return distributed to shareholders from January 1, 1996 to
December 31, 1996, as measured against the maximum public offering price.**
It additionally illustrates the rate of taxable income return one would have
had to earn in order to equate to the DOUBLE TAX-FREE income return generated by
the Fund.
(Double Tax-Free Distribution Rate Bar Chart)
<TABLE>
<CAPTION>
Tax Bracket Taxable Equivalent Rate Double Tax-Free Distribution Rate
<S> <C> <C>
28% 7.51% 4.99%
31% 8.04% 4.99%
36% 8.83% 4.99%
39.6% 9.49% 4.99%
</TABLE>
No matter which Federal income tax bracket applies, you can readily see
that there is quite a difference between the TAXABLE and the DOUBLE TAX-FREE
return levels.
OUR PLEDGE TO YOU
Management of Narragansett Insured Tax-Free Income Fund values the
confidence you have placed in us. You can be assured that we will steadfastly
strive to help you cross the finish line of your investment goal.
Sincerely,
/s/ Lacy B. Herrmann
Lacy B. Herrmann
President and Chairman
of the Board of Trustees
* Under certain circumstances, a small portion of the Fund's income may be
subject to state and Federal taxes.
** The performance shown represents that of Class A shares. Such performance
data quoted represents past performance and is not indicative of future
results. The investment return and principal value of an investment will
fluctuate so that an investor's shares, when redeemed, may be worth more
or less than their original cost. The Fund's average annual total return
as of 12/31/96 for the past one-year period was 4.28% and since inception
was 6.76%. These returns do not take into consideration the maximum sales
charge of 4% or subsidization or waiver of management fees and certain
expenses. Returns would be less if sales charges, management fees and
expenses were applied. As of 12/31/96, the Fund's 30-day SEC yield was
4.70%.
<PAGE>
NARRAGANSETT INSURED TAX-FREE INCOME FUND
STATEMENT OF INVESTMENTS
DECEMBER 31, 1996 (unaudited)
<TABLE>
<CAPTION>
Rating
Face Moody's/
Amount General Obligation Bonds (56.1%) S&P Value
<C> <S> <C> <C>
$ 300,000 Town of Bristol, Rhode Island,
MBIA Insured
5.000%, 12/01/08 Aaa/AAA $ 294,000
100,000 Town of Bristol, Rhode Island,
MBIA Insured
6.000%, 12/15/11 Aaa/AAA 105,000
100,000 Town of Bristol, Rhode Island,
MBIA Insured
6.000%, 12/15/12 Aaa/AAA 104,500
1,000,000 Town of Bristol, Rhode Island,
MBIA Insured
5.100%, 08/15/07 Aaa/AAA 998,750
405,000 Town of Burrillville, Rhode
Island, AMBAC Insured
5.300%, 07/15/08 Aaa/AAA 415,125
250,000 Town of Burrillville, Rhode
Island, MBIA Insured
5.400%, 10/01/06 Aaa/AAA 261,875
250,000 Town of Burrillville, Rhode
Island, MBIA Insured
5.500%, 10/01/07 Aaa/AAA 261,875
150,000 Town of Burrillville, Rhode
Island, MBIA Insured
5.700%, 10/15/10 Aaa/AAA 155,063
500,000 Central Falls, Rhode Island,
MBIA Insured
4.900%, 11/15/05 Aaa/AAA 501,250
500,000 Central Falls, Rhode Island,
MBIA Insured
5.200%, 11/15/09 Aaa/AAA 499,375
300,000 Cranston, Rhode Island, MBIA
Insured
5.500%, 06/15/07 Aaa/AAA 310,500
1,120,000 Cranston, Rhode Island, MBIA
Insured
5.300%, 07/15/05 Aaa/AAA 1,150,800
345,000 Town of Cumberland, Rhode
Island, MBIA Insured
5.500%, 09/01/06 Aaa/AAA 361,819
500,000 Town of Cumberland, Rhode
Island, MBIA Insured
5.600%, 10/01/08 Aaa/AAA 518,750
400,000 Town of Lincoln, Rhode Island,
MBIA Insured
6.000%, 01/15/06 Aaa/AAA 408,088
400,000 Town of Lincoln, Rhode Island,
MBIA Insured
5.100%, 01/15/06 Aaa/AAA 406,000
400,000 Town of Lincoln, Rhode Island,
MBIA Insured
5.200%, 08/15/06 Aaa/AAA 409,000
850,000 Town of Lincoln, Rhode Island,
MBIA Insured
5.500%, 08/15/10 Aaa/AAA 865,937
100,000 Town of Lincoln, Rhode Island,
AMBAC Insured
5.625%, 04/15/11 Aaa/AAA 102,125
250,000 Town of Lincoln, Rhode Island,
MBIA Insured
5.750%, 08/01/15 Aaa/AAA 255,625
300,000 Narragansett, Rhode Island,
MBIA Insured
5.100%, 09/15/06 Aaa/AAA 304,500
1,000,000 Narragansett, Rhode Island,
MBIA Insured
5.300%, 09/15/08 Aaa/AAA 1,013,750
150,000 Newport, Rhode Island, MBIA
Insured
6.550%, 08/15/07 Aaa/AAA 165,000
<PAGE>
250,000 Newport, Rhode Island, Series
B, FGIC Insured
4.900%, 05/15/06 Aaa/AAA $ 248,125
500,000 Newport, Rhode Island, Series B,
FGIC Insured
5.000%, 05/15/07 Aaa/AAA 497,500
500,000 Newport, Rhode Island, Series B,
FGIC Insured
5.100%, 05/15/08 Aaa/AAA 497,500
100,000 Pawtucket, Rhode Island, MBIA
Insured
6.650%, 09/15/06 Aaa/AAA 109,875
310,000 Pawtucket, Rhode Island, FGIC
Insured
5.625%, 04/15/07 Aaa/AAA 324,725
500,000 Pawtucket, Rhode Island, FGIC
Insured
5.750%, 04/15/09 Aaa/AAA 521,250
25,000 Providence, Rhode Island, MBIA
Insured
6.600%, 01/15/01 Aaa/AAA 27,031
100,000 Providence, Rhode Island, MBIA
Insured
5.500%, 01/15/04 Aaa/AAA 104,375
100,000 Providence, Rhode Island, MBIA
Insured
5.900%, 01/15/09 Aaa/AAA 105,750
200,000 Providence, Rhode Island, MBIA
Insured
5.250%, 01/15/12 Aaa/AAA 195,000
100,000 Providence, Rhode Island,
Series A, MBIA Insured
5.400%, 08/01/01 Aaa/AAA 104,250
90,000 Providence, Rhode Island,
Series A, MBIA Insured
5.700%, 08/01/04 Aaa/AAA 94,838
500,000 East Providence, Rhode Island,
MBIA Insured
5.400%, 05/15/07 Aaa/AAA 519,375
100,000 Commonwealth of Puerto Rico,
Series A, MBIA Insured
5.750%, 07/01/09 Aaa/AAA 103,875
50,000 Commonwealth of Puerto Rico,
Series A, FSA Insured
6.000%, 07/01/14 Aaa/AAA 52,062
100,000 Commonwealth of Puerto Rico,
MBIA Insured
6.000%, 07/01/14 Aaa/AAA 104,125
500,000 Commonwealth of Puerto Rico,
AMBAC Insured
5.850%, 07/01/15 Aaa/AAA 511,250
500,000 Commonwealth of Puerto Rico,
AMBAC Insured
5.875%, 07/01/18 Aaa/AAA 512,500
50,000 State of Rhode Island Refunding
Series A, FGIC Insured
6.000%, 06/15/02 Aaa/AAA 53,564
300,000 Rhode Island Consolidated
Capital Development
Loan 1991 Series B, AMBAC
Insured 6.250%, 05/15/07 Aaa/AAA 321,750
380,000 Rhode Island Consolidated
Capital Development Loan
1991 Series B, MBIA Insured
6.250%, 05/15/09 Aaa/AAA 409,450
100,000 Rhode Island Consolidated
Capital Development Loan
1991 Series B, MBIA Insured
6.250%, 05/15/10 Aaa/AAA 106,750
1,050,000 Rhode Island Consolidated
Capital Development Loan
1992 Series A, FGIC Insured
5.500%, 08/01/07 Aaa/AAA 1,089,375
<PAGE>
25,000 Rhode Island Consolidated
Capital Development Loan
1992 Series A, FGIC Insured
5.500%, 08/01/08 Aaa/AAA $ 25,844
1,000,000 Rhode Island Consolidated
Capital Development Loan
1993, AMBAC Insured
4.800%, 06/15/02 Aaa/AAA 1,013,750
1,000,000 Rhode Island Consolidated
Capital Development Loan
1993 Series A, FGIC Insured
5.100%, 11/01/13 Aaa/AAA 953,750
375,000 Town Of Scituate, Rhode Island,
MBIA Insured
5.500%, 04/01/09 Aaa/AAA 386,719
390,000 South Kingstown, Rhode Island,
MBIA Insured
5.000%, 03/15/08 Aaa/AAA 387,075
390,000 South Kingstown, Rhode Island,
MBIA Insured
5.050%, 03/15/09 Aaa/AAA 386,587
125,000 South Kingstown, Rhode Island,
MBIA Insured
5.125%, 06/01/08 Aaa/AAA 125,156
170,000 South Kingstown, Rhode Island,
MBIA Insured
5.200%, 06/01/09 Aaa/AAA 170,000
170,000 South Kingstown, Rhode Island,
MBIA Insured
5.250%, 06/01/10 Aaa/AAA 169,363
100,000 South Kingstown, Rhode Island,
MBIA Insured
6.300%, 12/15/11 Aaa/AAA 107,875
400,000 South Kingstown, Rhode Island,
AMBAC Insured
4.900%, 11/15/07 Aaa/AAA 395,500
150,000 Warwick, Rhode Island, MBIA
Insured
6.100%, 11/15/01 Aaa/AAA 160,312
50,000 Warwick, Rhode Island, FGIC
Insured
7.000%, 11/15/02 Aaa/AAA 54,438
195,000 Warwick, Rhode Island, FGIC
Insured
5.600%, 08/01/14 Aaa/AAA 197,925
500,000 West Warwick, Rhode Island,
MBIA Insured
5.800%, 01/01/04 Aaa/AAA 530,000
500,000 West Warwick, Rhode Island,
MBIA Insured
5.900%, 01/01/05 Aaa/AAA 530,000
385,000 Woonsocket, Rhode Island, MBIA
Insured
5.125%, 03/01/11 Aaa/AAA 376,819
Total General Obligation Bonds 22,454,115
REVENUE BONDS (42.8%)
Higher Education Revenue Bonds
(13.4%)
25,000 Rhode Island Health & Education
Building Corp - Higher
Education, Various Purpose
Series 1990 B, FSA Insured
7.250%, 09/15/06 Aaa/AAA 27,375
100,000 Rhode Island Health & Education
Building Corp - Bryant College,
MBIA Insured 6.300%, 06/01/03 Aaa/AAA 108,125
<PAGE>
50,000 Rhode Island Health & Education
Building Corp - Bryant College,
MBIA Insured
5.550%, 06/01/03 Aaa/AAA $ 52,125
100,000 Rhode Island Health & Education
Building Corp - Bryant College,
MBIA Insured
5.800%, 06/01/05 Aaa/AAA 105,125
100,000 Rhode Island Health & Education
Building Corp - Johnson &
Wales Series 1993, Connie
Lee Insured
5.200%, 04/01/04 NR/AAA 101,375
200,000 Rhode Island Health & Education
Building Corp - Johnson &
Wales Series 1992A, Connie
Lee Insured
5.875%, 04/01/05 NR/AAA 211,500
150,000 Rhode Island Health & Education
Building Corp - Johnson &
Wales Series 1993, Connie Lee
Insured
5.750%, 04/01/12 NR/AAA 151,312
500,000 Rhode Island Health & Education
Building Corp - Johnson &
Wales Series 1993, Connie Lee
Insured
5.250%, 04/01/16 NR/AAA 476,250
150,000 Rhode Island Health & Education
Building Corp - Johnson &
Wales Connie Lee Insured
6.375%, 04/01/12 NR/AAA 161,250
300,000 Rhode Island Health & Education
Building Corp - Providence
Series 1993, MBIA Insured
5.600%, 11/01/09 Aaa/AAA 304,500
300,000 Rhode Island Health & Education
Building Corp - Providence
Series 1993, MBIA Insured
5.600%, 11/01/10 Aaa/AAA 302,625
200,000 Rhode Island Health & Education
Building Corp - School of
Design Series 1992, MBIA
Insured
5.800%, 06/01/05 Aaa/AAA 214,500
500,000 Rhode Island Health & Education
Building Corp - Brown
University Series 1993, MBIA
Insured
5.400%, 09/01/18 Aaa/AAA 483,750
500,000 Rhode Island Health & Education
Building Corp - Brown
University Series 1993, MBIA
Insured
5.375%, 09/01/23 Aaa/AAA 476,875
1,000,000 Rhode Island Health & Education
Building Corp - Board of
Governors Series 1993B, MBIA
Insured
5.500%, 11/15/11 Aaa/AAA 997,500
55,000 Rhode Island Health & Education
Building Corp - Board of
Governors Series 1993A, MBIA
Insured
5.500%, 09/15/13 Aaa/AAA 54,381
245,000 Rhode Island Health & Education
Building Corp - Board of
Governors Series 1993B, MBIA
Insured
5.500%, 09/15/13 Aaa/AAA 242,244
140,000 Rhode Island Health & Education
Building Corp - Board of
Governors Series 1993A, MBIA
Insured
5.250%, 09/15/23 Aaa/AAA 131,250
450,000 Rhode Island Health & Education
Building Corp - Board of
Governors Series 1993A, MBIA
Insured
5.300%, 09/15/08 Aaa/AAA 451,125
150,000 Rhode Island Health & Education
Building Corp - Salve Regina
Series 1993, Connie Lee
Insured
5.300%, 03/15/00 NR/AAA 153,000
150,000 Rhode Island Health & Education
Building Corp - Salve Regina
Series 1993, Connie Lee Insured
6.100%, 03/15/06 NR/AAA 161,062
5,367,249
<PAGE>
Hospital Revenue Bonds (2.6%)
100,000 Rhode Island Health & Education
Building Corporation - Women
& Infants Hospital Series
1992, FSA Insured
6.150%, 09/01/05 Aaa/AAA $ 107,000
400,000 Rhode Island Health & Education
Building Corporation - Women
& Infants Hospital Series
1992, FSA Insured
6.350%, 09/01/07 Aaa/AAA 430,500
300,000 Rhode Island Health & Education
Building Corporation - Women
& Infants Hospital, FSA
Insured
6.550%, 09/01/13 Aaa/AAA 324,375
150,000 Rhode Island Health & Education
Building Corp - Kent County
Memorial Hospital Series 1992,
MBIA Insured
6.000%, 07/01/06 Aaa/AAA 158,062
1,019,937
Mortgage Revenue-Multi Family
(1.5%)
300,000 Rhode Island Housing &
Mortgage Finance Corp, 1995
Series A, AMBAC Insured,
5.550%, 07/01/05 Aaa/AAA 309,750
300,000 Rhode Island Housing &
Mortgage Finance Corp, 1995
Series A, AMBAC Insured,
5.450%, 07/01/04 Aaa/AAA 308,625
618,375
Water and Sewer Revenue Bonds
(.9%)
250,000 Kent County Water Authority
Revenue Bonds, 1994 Series
A, MBIA Insured,
5.700%, 07/15/04 Aaa/AAA 262,812
100,000 Puerto Rico Commonwealth
Aqueduct & Sewer Authority,
(Escrowed to Maturity),
5.900%, 07/01/06 Aaa/AAA 102,375
365,187
Utility Revenue Bonds (.4%)
100,000 Puerto Rico Electric Power
Authority, Series Q, FSA
Insured
5.750%, 07/01/07 Aaa/AAA 104,625
50,000 Puerto Rico Electric Power
Authority, Series O, FSA
Insured
6.000%, 07/01/10 Aaa/AAA 51,500
156,125
Development Revenue Bonds
(18.3%)
100,000 Rhode Island Convention Center
Authority, Series A, MBIA
Insured
6.100%, 05/15/02 Aaa/AAA 107,875
150,000 Rhode Island Convention Center
Authority, Series A, MBIA
Insured
6.300%, 05/15/04 Aaa/AAA 163,125
<PAGE>
100,000 Rhode Island Convention Center
Authority,
Series A, MBIA Insured
6.375%, 05/15/23 Aaa/AAA $ 109,000
500,000 Rhode Island Convention Center
Authority,
Series B, MBIA Insured
5.000%, 05/15/07 Aaa/AAA 496,250
500,000 Rhode Island Convention Center
Authority,
Series A, AMBAC Insured
5.400%, 05/15/08 Aaa/AAA 508,125
300,000 Rhode Island Convention Center
Authority,
Series A, AMBAC Insured
5.500%, 05/15/13 Aaa/AAA 295,875
300,000 Rhode Island Public Building
Authority State Public
Projects, 1990A, AMBAC Insured
( Escrowed to Maturity)
6.600%, 02/01/02 Aaa/AAA 328,125
500,000 Rhode Island Public Building
Authority State Public
Projects, Series 1993A,
AMBAC Insured
5.100%, 02/01/05 Aaa/AAA 505,625
1,000,000 Rhode Island Public Building
Authority State Public
Projects, Series 1993A,
AMBAC Insured
5.250%, 02/01/10 Aaa/AAA 983,750
785,000 Rhode Island Public Building
Authority State Public
Projects, Series 1990A,
AMBAC Insured
6.000%, 02/01/11 Aaa/AAA 809,531
710,000 Rhode Island Public Building
Authority State Public
Projects, Series 1990A,
AMBAC Insured
(Escrowed to Maturity)
6.000%, 02/01/11 Aaa/AAA 749,050
370,000 Rhode Island Public Building
Authority State Public
Projects, Series 1989A,
AMBAC Insured
(Escrowed to Maturity)
7.000%, 02/01/07 Aaa/AAA 404,225
35,000 Rhode Island Public Building
Authority State Public
Projects, Series 1989A,
AMBAC Insured
(Escrowed to Maturity)
6.750%, 02/01/10 Aaa/AAA 38,019
250,000 Rhode Island Public Building
Authority State Public
Projects, Series A,
MBIA Insured
5.250%, 08/01/06 Aaa/AAA 250,452
600,000 Rhode Island Public Building
Authority State Public
Projects, Series A,
MBIA Insured
5.250%, 08/01/07 Aaa/AAA 600,468
500,000 Rhode Island Public Building
Authority State Public
Projects, Series A,
MBIA Insured
5.550%, 12/15/14 Aaa/AAA 496,875
500,000 Rhode Island Public Building
Authority State Public
Projects, Series A,
MBIA Insured
5.550%, 12/15/15 Aaa/AAA 490,625
7,336,995
<PAGE>
Pollution Control Revenue
Bonds (1.3%)
200,000 Rhode Island Clean Water
Protection, Series A 1993,
MBIA Insured
5.300%, 10/01/07 Aaa/AAA $ 206,000
300,000 Rhode Island Clean Water
Protection, Series A 1993,
MBIA Insured
5.400%, 10/01/09 Aaa/AAA 303,375
509,375
Other Revenue Bonds (4.4%)
210,000 State of Rhode Island
Depositors Economic
Protection Corp Series A,
FSA Insured
6.000%, 08/01/01 Aaa/AAA 222,600
135,000 State of Rhode Island
Depositors Economic
Protection Corp Series B,
MBIA Insured
5.500%, 08/01/06 Aaa/AAA 139,894
355,000 State of Rhode Island
Depositors Economic
Protection Corp Series A,
MBIA Insured
5.625%, 08/01/09 Aaa/AAA 369,200
500,000 State of Rhode Island
Depositors Economic
Protection Corp Series A,
MBIA Insured
6.000%, 08/01/14 Aaa/AAA 518,750
500,000 State of Rhode Island
Depositors Economic
Protection Corp Series B,
MBIA Insured
5.250%, 08/01/21 Aaa/AAA 497,500
1,747,944
Total Revenue Bonds 17,121,187
Total Investments - 98.9%
(Cost $38,858,584 *) 39,575,302
Other assets in excess of
liabilities - 1.1% 428,572
Net Assets - 100% $ 40,003,874
<FN>
(*) Cost for Federal income tax purposes is identical.
</FN>
</TABLE>
PORTFOLIO ABBREVIATIONS:
AMBAC - American Municipal Bond Assurance Corp.
FGIC - Financial Guaranty Insurance Co.
FSA - Financial Security Assurance
MBIA - Municipal Bond Investors Assurance Corp.
See accompanying notes to financial statements.
<PAGE>
NARRAGANSETT INSURED TAX-FREE INCOME FUND
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1996 (unaudited)
<TABLE>
<S> <C>
ASSETS
Investments at value (identified cost - $38,858,584) $ 39,575,302
Receivable for Fund shares sold 65,405
Interest receivable 635,299
Due from Administrator for reimbursement of expenses 89,203
Other assets 10,115
Total assets 40,375,324
LIABILITIES
Cash overdraft 323,111
Dividends payable 22,575
Accrued expenses 4,356
Distribution fees payable 14,113
Adviser and Administrator fees payable 7,295
Total liabilities 371,450
NET ASSETS $ 40,003,874
Net Assets consist of:
Capital Stock - Authorized 80,000,000 shares, par
value $.01 per share $ 39,461
Additional paid-in capital 39,249,643
Accumulated net loss on investments (1,948)
Net unrealized appreciation on investments 716,718
$ 40,003,874
CLASS A
Net Assets $ 39,808,971
Capital shares outstanding 3,926,827
Net asset value and redemption price per share $ 10.14
Offering price per share (100/96 of $10.14 adjusted to
nearest cent) $ 10.56
CLASS C
Net Assets $ 194,799
Capital shares outstanding 19,219
Net asset value and offering price per share $ 10.14
Redemption price per share (* varies by length of
time shares are held) $ *
CLASS Y
Net Assets $ 104
Capital shares outstanding 10
Net asset value, offering and redemption price per share $ 10.14
</TABLE>
See accompanying notes to financial statements.
<PAGE>
NARRAGANSETT INSURED TAX-FREE INCOME FUND
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED DECEMBER 31, 1996 (unaudited)
<TABLE>
<S) <C> <C>
Investment Income:
Interest income $ 1,032,694
Expenses:
Investment Adviser fees (note B) $ 45,127
Administrator fees (note B) 52,852
Distribution fees (note B) 29,759
Transfer and shareholder servicing agent fees 19,000
Shareholders' reports and proxy statements 18,000
Legal fees 15,000
Trustees' fees and expenses 12,000
Audit and accounting fees 10,000
Custodian fees (note F) 5,157
Registration fees and dues 4,000
Insurance 400
Miscellaneous 18,899
230,194
Investment Adviser fees waived (note B) (35,236)
Administrator fees waived (note B) (41,103)
Reimbursement of expenses by Administrator
(note B) (108,223)
Expenses paid indirectly (note F) (3,739)
Net expenses 41,893
Net investment income 990,801
Realized and unrealized gain (loss) on
investments:
Net realized loss from securities transactions (1,948)
Change in unrealized depreciation on investments 892,116
Net realized and unrealized gain on investments 890,168
Net increase in net assets resulting from
operations $ 1,880,969
</TABLE>
See accompanying notes to financial statements.
<PAGE>
NARRAGANSETT INSURED TAX-FREE INCOME FUND
STATEMENTS OF CHANGES IN NET ASSETS
(unaudited)
<TABLE>
<CAPTION>
Six Months Ended Year Ended
December 31, 1996 June 30, 1996
<S> <C> <C>
OPERATIONS:
Net investment income $ 990,801 $ 1,912,631
Net realized loss from securities
transactions (1,948) -
Change in unrealized appreciation
on investments 892,116 375,457
Change in net assets from operations 1,880,969 2,288,088
DISTRIBUTIONS TO SHAREHOLDERS (note E):
Class A Shares:
Net investment income (972,753) (1,912,631)
Distributions in excess of net
investment income (30,635) -
Net realized gain on investments - -
Class C Shares:
Net investment income (2,189) -
Distributions in excess of net
investment income (336) -
Net realized gain on investments - -
Class Y Shares:
Net investment income (2) -
Distributions in excess of net
investment income - -
Net realized gain on investments - -
Change in net assets from
distributions (1,005,915) (1,912,631)
CAPITAL SHARE TRANSACTIONS (note G):
Proceeds from shares sold 3,410,631 6,562,446
Reinvested dividends and distributions 510,045 917,354
Cost of shares redeemed (2,780,105) (4,239,774)
Change in net assets from capital
share transactions 1,140,571 3,240,026
Change in net assets 2,015,625 3,615,483
NET ASSETS:
Beginning of period 37,988,249 34,372,766
End of period $ 40,003,874 $ 37,988,249
</TABLE>
See accompanying notes to financial statements.
<PAGE>
NARRAGANSETT INSURED TAX-FREE INCOME FUND
NOTES TO FINANCIAL STATEMENTS
(unaudited)
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
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, as was the case since inception, are sold with a front-payment
sales charge and bear an annual service 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 is assessed to any Class
C shareholder who redeems shares of this Class within one year from the date
of purchase. The Class Y shares are only offered to institutions acting for
an investor in a fiduciary, advisory, agency, custodian or similar capacity.
They are not available to individual 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. All classes of shares
represent interests in the same portfolio of investments in the Fund and are
identical as to rights and privileges. They differ only with respect to the
effect of sales charges, the distribution and/or service fees borne by the
respective class, expenses specific to each class, voting rights on matters
affecting a single class and the exchange privileges of each class.
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 generally accepted accounting principles for investment
companies.
(1) 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 was 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 exceeded 60 days.
In Fiscal 1997, the Fund began amortizing bond premium using
the constant yield method. Accordingly, net unrealized appreciation and
additional paid-in capital have been adjusted by equal amounts at the
beginning of the year. This change had no effect on the Fund's net asset
value or distribution policy and conforms to the amortization policy followed
by the Fund for Federal tax purposes.
(2) 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
discount. Market discount is recognized upon disposition of the security.
<PAGE>
(3) 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.
(4) 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.
(5) USE OF ESTIMATES: The preparation of financial statements in
conformity with generally accepted accounting
principles requires management to make estimates and assumptions that affect
the reported amounts of 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.
NOTE B - MANAGEMENT ARRANGEMENTS AND FEES AND OTHER TRANSACTIONS WITH
AFFILIATES:
Management affairs of the Fund are conducted through two separate
management arrangements.
Citizens Trust Company (the "Adviser"), part of Citizens Bank, serves as
Investment Adviser to the Fund. In this role, under an Investment Advisory
Agreement, the Adviser supervises the Fund's investments and provides various
services to the Fund for which it 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 0.23 of 1% of the net assets of the Fund.
The Fund also has an Administration Agreement with Aquila Management
Corporation (the "Administrator"), the Fund's founder and sponsor. Under this
Agreement, the Administrator provides all administrative services, other than
those relating to the management of the Fund's investments. These include
providing the office of the Fund and all related services as well as
overseeing the activities of all the various support organizations to the
Fund such as the shareholder servicing agent, custodian, legal counsel,
auditors and distributor and additionally maintaining the Fund's accounting
books and records. For its services, the Administrator 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 0.27 of 1% of the net assets of the Fund.
Specific details as to the nature and extent of the services provided by
the Adviser and the Administrator are more fully defined in the Fund's
Prospectus and Statement of Additional Information.
The Adviser and the Administrator each agrees that the above fees shall
be reduced, but not below zero, by an amount equal to its pro-rata portion
(determined on the basis of the respective fees computed as described above)
of the amount, if any, by which the total expenses of the Fund in any fiscal
year, exclusive of taxes, interest and brokerage fees, shall exceed the
lesser of (i) 2.5% of the first $30 million of average annual net assets of
the Fund plus 2% of the next $70 million of such assets and 1.5% of its
average annual net assets in excess of $100 million, or (ii) 25% of the Fund's
<PAGE>
total annual investment income. No such reduction in fees was required during
the six months ended December 31, 1996.
For the six months ended December 31, 1996, the Fund incurred fees under
the Advisory Agreement and Administration Agreement of $45,127 and $52,852,
respectively, of which amounts the Adviser and Administrator waived $35,236
and $41,103, respectively. Additionally, the Administrator voluntarily agreed
to reimburse the Fund for other expenses during this period in the amount of
$108,223.
Under a Distribution Agreement, Aquila Distributors, Inc. (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,
1996, the Distributor received sales commissions in the amount of $1,948.
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
service fee payments to broker-dealers or others ("Qualified Recipients")
selected by 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, 1996, service fees on Class A
Shares amounted to $29,167, of which the Distributor received $588.
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 net assets represented by Class C Shares and for
the six months ended December 31, 1996, amounted to $444, of which the
Distributor received $444.
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
net assets represented by Class C Shares and for the six months ended
December 31, 1996, amounted to $148, of which the Distributor received $148.
Specific details about the Plans are more fully defined in the Fund's
Prospectus and Statement of Additional Information.
NOTE C - PURCHASES AND SALES OF SECURITIES:
During the six months ended December 31, 1996, purchases of securities
and proceeds from the sales of securities aggregated $3,149,389 and to
$1,686,216, respectively.
At December 31, 1996, aggregate gross unrealized appreciation for all
securities in which there is an excess of market value over tax cost amounted
to $865,826 and aggregate gross unrealized depreciation for all securities in
which there is an excess of tax cost over market value amounted to $149,108,
for a net unrealized appreciation of $716,718.
<PAGE>
NOTE D - 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 65% 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.
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, 1996, the Fund had 3.9% of its total net assets
invested in eight Puerto Rico municipal issues, all of which are rated AAA
and insured or collateralized by U.S. Treasury securities.
At December 31, 1996, 99.2% of the securities in the Fund were insured.
The balance were collateralized by U.S. Treasury securities. 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.
NOTE E - DISTRIBUTIONS:
The Fund declares dividends daily from net investment income and makes
payments monthly in additional shares at the net asset value per share or in
cash, at the shareholder's option. Net realized capital gains, if any, are
distributed annually.
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 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. Further, a small portion of the dividends may, under some
circumstances, be subject to ordinary income taxes. For certain shareholders,
some dividend income may, under some circumstances, be subject to the
alternative minimum tax. Also, annual capital gains distributions, if any,
are taxable.
NOTE F - CUSTODIAN FEES:
The Fund has negotiated an expense offset agreement with its custodian
wherein it receives credit toward the reduction of custodian fees whenever
there are uninvested cash balances. During the six months ended December 31,
1996, the Fund's custodian fees amounted to $5,157, of which $3,739 was
offset by such credits. 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 with the custodian.
<PAGE>
NOTE G - CAPITAL SHARE TRANSACTIONS:
Transactions in Capital Shares of the Fund were as follows:
<TABLE>
<CAPTION>
Six Months Ended Year Ended
December 31, 1996 June 30, 1996
Shares Amount Shares Amount
<S> <C> <C> <C> <C>
CLASS A SHARES:
Proceeds from shares sold 326,920 $ 3,211,655 659,760 $ 6,562,246
Reinvested dividends and
distributions 50,634 509,082 91,389 917,354
Cost of shares redeemed (276,565) (2,773,011) (431,888) (4,239,774)
Net change 100,989 $ 947,726 319,261 $ 3,239,826
<CAPTION>
Year Ended
June 30, 1996*
Shares Amount
<S> <C> <C> <C> <C>
CLASS C SHARES:
Proceeds from shares sold 19,815 $ 198,976 10 $ 100
Reinvested dividends and
distributions 95 961 - -
Cost of shares redeemed (701) (7,094) - -
Net change 19,209 $ 192,843 10 $ 100
<CAPTION>
Year Ended
June 30, 1996*
Shares Amount
<S> <C> <C> <C> <C>
CLASS Y SHARES:
Proceeds from shares sold - - 10 $ 100
Reinvested dividends and - 2 - -
distributions
Cost of shares redeemed - - - -
Net change - 2 10 $ 100
<S> <C> <C> <C> <C>
Total transactions in
Fund shares 120,198 $ 1,140,571 319,281 $ 3,240,026
<FN>
* From May 1, 1996 (date of inception) through June 30, 1996.
</FN>
</TABLE>
<PAGE>
NARRAGANSETT INSURED TAX-FREE INCOME FUND
FINANCIAL HIGHLIGHTS
(unaudited)
For a share outstanding throughout each period
<TABLE>
<CAPTION>
Class A(1)
Year Ended June 30
Six Months Period
Ended Ended
Dec. 31, 1996 1996 1995 1994 June 30, 1996
<S> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period $9.93 $9.80 $9.44 $10.07 $9.60
Income from Investment
Operations:
Net investment income 0.26 0.52 0.54 0.53 0.39
Net gain (loss) on
securities (both
realized and
unrealized) 0.21 0.13 0.36 (0.63) 0.47
Total from Investment
Operations 0.47 0.65 0.90 (0.10) 0.86
Less Distributions:
Dividends from net
investment income (0.26) (0.52) (0.54) (0.53) (0.39)
Distributions from
capital gains - - - - -
Total Distributions (0.26) (0.52) (0.54) (0.53) (0.39)
Net Asset Value, End
of Period $10.14 $9.93 $9.80 $9.44 $10.07
Total Return (not
reflecting sales
charge)(%) 4.82# 6.72 9.82 (1.11) 9.18#
Ratios/Supplemental
Data
Net Assets, End of
Period ($
thousands) 39,809 37,988 34,373 31,660 15,249
Ratio of Expenses to
Average Net Assets
(%) 0.21* 0.14 0.06 0.02 0*
Ratio of Net
Investment Income
to Average Net
Assets (%) 5.12* 5.19 5.63 5.30 5.28*
Portfolio Turnover
Rate (%) 0.63 0 0 0 2.56#
<CAPTION>
Net investment income per share and the ratios of income and expenses to
average net assets without the Adviser's and Administrator's voluntary waiver
of fees, the Administrator's voluntary expense reimbursement and the expense
offset in custodian fees for uninvested cash balances would have been:
<S> <C> <C> <C> <C> <C>
Net Investment
Income ($) 0.21 0.42 0.43 0.40 0.20
Ratio of Expenses to
Average Net Assets
(%) 1.17* 1.17 1.19 1.32 2.56*
Ratio of Net
Investment Income
to Average Net
Assets (%) 4.15* 4.16 4.50 4.00 2.72*
<FN>
(1) Designated as Class A Shares on May 1, 1996.
</FN>
<FN>
(2) From September 10, 1992 (commencement of operations) to June 30, 1993.
</FN>
<FN>
# Not annualized
</FN>
<FN>
* Annualized.
</FN>
</TABLE>
<PAGE>
For a share outstanding throughout each period
<TABLE>
<CAPTION>
Class C(1) Class Y(1)
Six Months Period(2) Six Months Period(2)
Ended Ended Ended Ended
Dec. 31, June 30, Dec. 31, June 30,
1996 1996 1996 1996
<S> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period $9.93 $9.94 $9.93 $9.94
Income from Investment
Operations:
Net investment income 0.21 0.07 0.25 0.09
Net gain (loss) on
securities (both
realized and
unrealized) 0.21 (0.01) 0.21 (0.01)
Total from Investment
Operations 0.42 0.06 0.46 0.08
Less Distributions:
Dividends from net
investment income (0.21) (0.07) (0.25) (0.09)
Distributions from
capital gains - - - -
Total Distributions (0.21) (0.07) (0.25) (0.09)
Net Asset Value, End
of Period $10.14 $9.93 $10.14 9.93
Total Return (not
reflecting sales
charge) (%) 4.29# 0.60# 4.64# 0.80#
Ratios/Supplemental Data
Net Assets, End of
Period ($ thousands) 195 0.1 0.1 0.1
Ratio of Expenses to
Average Net Assets (%) 1.05* 0.20# 0.21* 0.14#
Ratio of Net Investment
Income to Average Net
Assets (%) 4.28* 0.72# 5.12* 0.89#
Portfolio Turnover
Rate (%) 0.63 0 0.63 0
<CAPTION>
Net investment income per share and the ratios of income and expenses to
average net assets without the Adviser's and Administrator's voluntary waiver
of fees, the Administrator's voluntary expense reimbursement and the expense
offset in custodian fees for uninvested cash balances would have been:
<S> <C> <C> <C> <C>
Net Investment Income
($) 0.16 0.06 0.21 0.08
Ratio of Expenses to
Average Net Assets (%) 2.02* 0.32# 1.02* 0.15#
Ratio of Net Investment
Income to Average Net
Assets (%) 3.31* 0.61# 4.30* 0.77#
<FN>
(1) New Class of Shares established on May 1, 1996.
</FN>
<FN>
(2) From May 1, 1996 to June 30, 1996.
</FN>
<FN>
# Not annualized
</FN>
<FN>
* Annualized.
</FN>
</TABLE>
See accompanying notes to finacial statements.
<PAGE>
REPORT ON THE ANNUAL AND SPECIAL MEETINGS OF SHAREHOLDERS (UNAUDITED)
The Annual Meeting of Shareholders of Narragansett Insured
Tax-Free Income Fund (the "Fund") was held on October 7, 1996.* At the
meeting, the following matters were submitted to a shareholder vote and
approved:
(i) the election of Lacy B. Herrmann, Vernon R. Alden, Paul Y.
Clinton, David A. Duffy, Robert L. Krakoff, William J. Nightingale,
and J. William Weeks as Trustees to hold office until the next annual
meeting of the Fund's shareholders or until his or her successor is
duly elected (each Trustee received at least 21,598,216.25 affirmative
votes (96.77%); no more than 721,902.35 votes (3.23%) were withheld
for any Trustee), and
(ii) the ratification of the selection of KPMG Peat Marwick LLP as
the Fund's independent auditors for the fiscal year ending June 30,
1997 (votes for: 21,678,204.30 (97.12%); votes against: 265,227.20
(1.19%); abstentions: 376,687.10 (1.69%); broker non-votes: 0
(0.00%)).
_______________________________
* On the record date for this meeting, the holders of 3,817,441 Class A
Shares, 10 Class C Shares, and 10 Class Y Shares were outstanding and
entitled to vote representing a total net asset value of $37,983,736.95. The
holders of shares entitled to vote representing a total net asset value of
$22,320,118.60 (58.76%) were present in person or by proxy at the meeting.
