<PAGE>
MANAGER AND FOUNDER
AQUILA MANAGEMENT CORPORATION
380 Madison Avenue, Suite 2300
New York, New York 10017
INVESTMENT SUB-ADVISER
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
J. William Weeks
OFFICERS
Diana P. Herrmann, President
Stephen J. Caridi, Senior Vice 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
PFPC INC.
400 Bellevue Parkway
Wilmington, Delaware 19809
INDEPENDENT AUDITORS
KPMG 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, 1999
A TAX-FREE INCOME INVESTMENT
[Logo of Narragansett Tax-Free Income Fund: rectangle with profile view of a
sailboat on top of waves and three flying seagulls above it]
[Logo of the Aquila Group of Funds: an eagle's head]
ONE OF THE
AQUILAsm GROUP OF FUNDS
</PAGE>
<PAGE>
[Logo of Narragansett Tax-Free Income Fund: rectangle with profile view of a
sailboat on top of waves and three flying seagulls above it]
NARRAGANSETT INSURED TAX-FREE INCOME FUND
SEMI-ANNUAL REPORT
"WE TAKE SPECIAL CARE TO ENSURE YOUR SAFETY"
February 15, 2000
Dear Fellow Shareholders:
Every now and then, we come across something that triggers a special point
worth considering. This happened to us on a recent trip on United Airlines. When
a pre-flight announcement was made that stated, "We take special care to ensure
your safety," that remark brought home to us a point that we practice on a
continuous basis with Narragansett Insured Tax-Free Income Fund.
We know from our surveys that most of the shareholders of Narragansett
Insured Tax-Free Income Fund are looking forward to retiring or have already
retired. These are a very special group of people - and we work very hard to
make sure that we are addressing their needs.
Once one is no longer in the work force, it is essential that very careful
attention be paid to whatever financial resources are available to ensure that
these resources are available when needed. It is just as important that these
financial resources produce the kind of return, on a consistent basis, that our
shareholders can count on.
SAFETY
Safety with municipal securities is a very important factor to which
management of your Fund pays considerable attention. Just like the United
Airlines announcement, "we take special care to ensure your safety" with all the
municipal securities in the Fund.
It is important to note that not all municipal securities are alike, even
though they are generally considered the second safest type of investment one
can make - right behind U.S. Government securities - because of the taxing and
revenue raising power that municipalities possess. Indeed, there are nine
separate credit ratings assignable to municipal securities by nationally renown
credit rating services, ranging from the most conservative rating to the most
speculative. The highest rating assigned is AAA.
THE ADDITION OF INSURANCE
Management of the Narragansett Fund has specifically chosen to have the
Fund's investment portfolio be comprised of those securities that are rated AAA.
Moreover, to the maximum extent practicable, securities in the Fund's portfolio
will be insured by prominent nationally recognized insurance companies which
specialize in insuring municipal securities. Such insurance is only provided by
these companies after a thorough examination of the cash flow of any particular
municipal issuer. And, on their own, each of these insurance companies generally
have an AAA credit rating.
What this stringent credit approach taken by the Fund does for investors is
to assure, to the maximum extent possible, that there will be timely payment
when due of interest and principal with each of the municipal securities in the
Fund's investment portfolio. WE REMEMBER RHODE ISLAND'S DEFAULT PROBLEMS OF THE
EARLY 1990'S.
In this way, we feel that "we take special care to ensure your safety."
</PAGE>
<PAGE>
MATURITY OF TAX-FREE MUNICIPAL BONDS
Another factor that we feel is important in building quality for your
investment is the maturity structure of the municipal bonds in the portfolio.
As we have explained to you in the past, longer-term maturity bonds will
usually produce a higher return than short-term bonds. However, such longer
maturity bonds also have a higher degree of volatility of price fluctuations.
Therefore, we have structured the average maturity of Narragansett Insured
Tax-Free Income Fund to be at a somewhat intermediate level - currently 11.9
years. This level is produced by using a "laddered" approach to the selection of
bonds in terms of their maturity. We have a certain number of short-term bonds
and a certain number of long-term bonds, but the overall average of these
maturities run at an intermediate level. In this way, we can capture a
substantial amount of possible income level available from the bonds, without
exposing the portfolio to an undue level of volatility.
Our goal is to maintain a reasonably high level of stability for the share
net asset value of the Fund, while producing the kind of tax-free return that
people want to see from their investment.
This is another strategy that we use in building quality, safety, and
stability into your investment in Narragansett Insured Tax-Free Income Fund.
RELIABILITY OF PAYMENTS
We also recognize that most of our shareholders depend upon the monthly
tax-free income produced by Narragansett Insured Tax-Free Income Fund.
Shareholders want to know that the income from the Fund is there when the time
comes to pay various bills.
The quality character of the portfolio ensures that this is the case.
We want to make sure that, to the best of our ability, the monthly payments
add up to a satisfactory level of income that you can be SURE will be there when
you need it.
YOUR CONFIDENCE IS APPRECIATED
As always, we again wish to express our appreciation for the confidence you
have shown by your investment in Narragansett Insured Tax-Free Income Fund. We
can assure you that we will continually do our best to merit your continued
level of trust.
Sincerely,
Diana P. Herrmann
President
Lacy B. Herrmann
Chairman, Board of Trustees
</PAGE>
<PAGE>
NARRAGANSETT INSURED TAX-FREE INCOME FUND
STATEMENT OF INVESTMENTS
DECEMBER 31, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
RATING
FACE MOODY'S/
AMOUNT GENERAL OBLIGATION BONDS (46.3%) S&P VALUE
</CAPTION>
<S> <C> <C> <C> <C>
Town of Bristol, Rhode Island, MBIA Insured
$ 1,000,000 5.100%, 08/15/07 Aaa/AAA $ 1,000,000
100,000 6.000%, 12/15/11 Aaa/AAA 103,625
100,000 6.000%, 12/15/12 Aaa/AAA 103,625
Town of Burrillville, Rhode Island, AMBAC Insured
405,000 5.300%, 07/15/08 Aaa/AAA 407,025
Town of Burrillville, Rhode Island, MBIA Insured
250,000 5.400%, 10/15/06 Aaa/AAA 255,937
250,000 5.500%, 10/15/07 Aaa/AAA 255,625
150,000 5.700%, 10/15/10 Aaa/AAA 154,875
Central Falls, Rhode Island, MBIA Insured
500,000 4.900%, 11/15/05 Aaa/AAA 499,375
500,000 5.200%, 11/15/09 Aaa/AAA 497,500
Cranston, Rhode Island
1,120,000 5.300%, 07/15/05, MBIA Insured Aaa/AAA 1,136,800
300,000 5.500%, 06/15/07, MBIA Insured Aaa/AAA 307,500
500,000 5.450%, 11/15/11, FGIC Insured Aaa/AAA 503,750
Town of Cumberland, Rhode Island, MBIA Insured
345,000 5.500%, 09/01/06 Aaa/AAA 359,231
500,000 5.600%, 10/01/08 Aaa/AAA 511,875
500,000 5.000%, 08/01/15 Aaa/AAA 454,375
Town of Lincoln, Rhode Island, MBIA Insured
400,000 5.100%, 01/15/06 Aaa/AAA 402,500
400,000 5.200%, 08/15/06 Aaa/AAA 405,000
1,000,000 5.500%, 08/15/10 Aaa/AAA 1,013,750
100,000 5.625%, 04/15/11 Aaa/AAA 102,125
Town of Lincoln, Rhode Island, FGIC Insured
250,000 5.750%, 08/01/15 Aaa/AAA 250,938
Narragansett, Rhode Island, MBIA Insured
300,000 5.100%, 09/15/06 Aaa/AAA 301,875
1,000,000 5.300%, 09/15/08 Aaa/AAA 1,005,000
Newport, Rhode Island, MBIA Insured
150,000 6.550%, 08/15/07 Aaa/AAA 157,125
</PAGE>
<PAGE>
Newport, Rhode Island, Series B, FGIC Insured
250,000 4.900%, 05/15/06 Aaa/AAA 248,750
500,000 5.000%, 05/15/07 Aaa/AAA 496,875
500,000 5.100%, 05/15/08 Aaa/AAA 496,250
North Providence, Rhode Island, Series A,
MBIA Insured
400,000 5.700%, 07/01/08 Aaa/AAA 414,500
Pawtucket, Rhode Island, MBIA Insured
100,000 6.650%, 09/15/06 Aaa/AAA 105,250
600,000 4.300%, 09/15/09 Aaa/AAA 557,250
250,000 4.400%, 09/15/10 Aaa/AAA 231,562
Pawtucket, Rhode Island, FGIC Insured
310,000 5.625%, 04/15/07 Aaa/AAA 319,688
500,000 5.750%, 04/15/09 Aaa/AAA 516,875
Providence, Rhode Island, MBIA Insured
100,000 5.400%, 08/01/01 Aaa/AAA 101,625
100,000 5.500%, 01/15/04 Aaa/AAA 102,750
100,000 5.900%, 01/15/09 Aaa/AAA 103,375
200,000 5.250%, 01/15/12 Aaa/AAA 194,750
Providence, Rhode Island, FSA Insured
700,000 5.500%, 01/15/11 Aaa/AAA 702,625
Providence, Rhode Island, AMBAC Insured
1,925,000 5.200%, 04/01/11 NR/AAA 1,888,906
East Providence, Rhode Island, MBIA Insured
500,000 5.400%, 05/15/07 Aaa/AAA 509,375
Commonwealth of Puerto Rico, MBIA Insured
100,000 5.750%, 07/01/09 Aaa/AAA 102,625
100,000 6.000%, 07/01/14 Aaa/AAA 103,250
500,000 5.875%, 07/01/18 Aaa/AAA 523,750
Commonwealth of Puerto Rico, AMBAC Insured
500,000 5.850%, 07/01/15 Aaa/AAA 523,125
State of Rhode Island Refunding, Series A,
FGIC Insured
1,000,000 5.000%, 07/15/05 Aaa/AAA 1,006,250
State of Rhode Island Refunding, Series A,
FGIC Insured
1,000,000 5.125%, 07/15/11 Aaa/AAA 972,500
State of Rhode Island Refunding, Series A,
FGIC Insured
</PAGE>
<PAGE>
1,500,000 5.000%, 09/01/15 Aaa/AAA 1,363,125
Rhode Island Consolidated Capital Development
Loan, 1991 Series B, AMBAC Insured
300,000 6.250%, 05/15/07 Aaa/AAA 307,485
Rhode Island Consolidated Capital Development
Loan, 1991 Series B, MBIA Insured
380,000 6.250%, 05/15/09 Aaa/AAA 390,488
100,000 6.250%, 05/15/10 Aaa/AAA 102,760
Rhode Island Consolidated Capital Development
Loan, 1992 Series A, FGIC Insured
1,050,000 5.500%, 08/01/07 Aaa/AAA 1,077,562
Rhode Island Consolidated Capital Development
Loan, 1993 Series A, AMBAC Insured
1,000,000 4.800%, 06/15/02 Aaa/AAA 1,005,000
Rhode Island Consolidated Capital Development
Loan, 1993 Series A, FGIC Insured
1,000,000 5.100%, 11/01/13 Aaa/AAA 946,250
Town of Scituate, Rhode Island, MBIA Insured
375,000 5.500%, 04/01/09 Aaa/AAA 379,688
South Kingstown, Rhode Island, MBIA Insured
390,000 5.000%, 03/15/08 Aaa/AAA 384,637
390,000 5.050%, 03/15/09 Aaa/AAA 384,150
170,000 5.200%, 06/01/09 Aaa/AAA 169,150
170,000 5.250%, 06/01/10 Aaa/AAA 169,363
100,000 6.300%, 12/15/11 Aaa/AAA 105,125
South Kingstown, Rhode Island, AMBAC Insured
400,000 4.900%, 11/15/07 Aaa/AAA 395,000
Warwick, Rhode Island, MBIA Insured
150,000 6.100%, 11/15/01 Aaa/AAA 154,687
</PAGE>
<PAGE>
Warwick, Rhode Island, FSA Insured
195,000 5.600%, 08/01/14 Aaa/AAA 194,756
1,000,000 5.000%, 03/01/18 Aaa/AAA 883,750
West Warwick, Rhode Island, MBIA Insured
500,000 5.800%, 01/01/04 Aaa/AAA 518,750
500,000 5.900%, 01/01/05 Aaa/AAA 517,500
Woonsocket, Rhode Island, MBIA Insured
385,000 5.125%, 03/01/11 Aaa/AAA 375,856
655,000 4.450%, 12/15/12 Aaa/AAA 587,863
685,000 4.550%, 12/15/13 Aaa/AAA 619,069
Total General Obligation Bonds 31,443,351
REVENUE BONDS (54.7%)
HIGHER EDUCATION REVENUE BONDS (14.6%)
Rhode Island Health & Education Building Corp.,
Bryant College, MBIA Insured
100,000 6.300%, 06/01/03 Aaa/AAA 105,000
Rhode Island Health & Education Building Corp.,
Bryant College, 1992 2nd Series, MBIA Insured
50,000 5.550%, 06/01/03 Aaa/AAA 51,437
100,000 5.800%, 06/01/05 Aaa/AAA 104,000
Rhode Island Health & Education Building Corp.,
Johnson & Wales University, 1993 Series A,
AMBAC Insured
100,000 5.200%, 04/01/04 NR/AAA 101,000
500,000 5.250%, 04/01/16 NR/AAA 460,625
Rhode Island Health & Education Building Corp.,
Johnson & Wales University, 1992 Series A,
AMBAC Insured
200,000 5.875%, 04/01/05 NR/AAA 207,500
150,000 5.750%, 04/01/12 NR/AAA 152,813
150,000 6.375%, 04/01/12 NR/AAA 157,687
Rhode Island Health & Education Building Corp.,
Johnson & Wales University, 1999 Series A,
MBIA Insured
465,000 5.500%, 04/01/15 Aaa/AAA 450,469
600,000 5.500%, 04/01/16 Aaa/AAA 579,000
</PAGE>
<PAGE>
Rhode Island Health & Education Building Corp.,
Providence College, 1993 Series, MBIA Insured
500,000 5.125%, 11/15/11 Aaa/AAA 484,375
300,000 5.600%, 11/01/09 Aaa/AAA 304,125
300,000 5.600%, 11/01/10 Aaa/AAA 302,625
1,500,000 5.600%, 11/01/22 Aaa/AAA 1,406,250
Rhode Island Health & Education Building Corp.,
Rhode Island School of Design, 1992 Series,
MBIA Insured
200,000 5.800%, 06/01/05 Aaa/AAA 208,750
Rhode Island Health & Education Building Corp.,
Brown University, 1993 Series, MBIA Insured
500,000 5.400%, 09/01/18 Aaa/AAA 463,750
500,000 5.375%, 09/01/23 Aaa/AAA 453,750
Rhode Island Health & Education Building Corp.,
Brown University, MBIA Insured
1,000,000 5.000%, 09/01/23 Aaa/AAA 845,000
Rhode Island Health & Education Building Corp.,
Roger Williams University, 1996 Series S,
AMBAC Insured
1,000,000 5.500%, 11/15/11 NR/AAA 1,000,000
Rhode Island Health & Education Building Corp.,
Roger Williams University, 1996 Series S,
AMBAC Insured
1,000,000 5.000%, 11/15/18 Aaa/AAA 870,000
Rhode Island Health & Education Building Corp. -
Board of Governors, 1993 Series A, MBIA Insured
450,000 5.300%, 09/15/08 Aaa/AAA 450,000
500,000 5.250%, 09/15/23 Aaa/AAA 440,000
Rhode Island Health & Education Building Corp.,
Salve Regina, 1993 Series, AMBAC Insured
150,000 5.300%, 03/15/00 NR/AAA 150,378
150,000 6.100%, 03/15/06 NR/AAA 157,125
9,905,659
</PAGE>
<PAGE>
HOSPITAL REVENUE BONDS (2.7%)
Rhode Island Health & Education Building Corporation,
Women & Infants Hospital, 1992 Series, FSA Insured
100,000 6.150%, 09/01/05 Aaa/AAA 104,500
400,000 6.350%, 09/01/07 Aaa/AAA 419,000
300,000 6.550%, 09/01/13 Aaa/AAA 315,750
Rhode Island Health & Education Building Corporation,
Kent County Memorial Hospital, 1992 Series,
MBIA Insured
150,000 6.000%, 07/01/06 Aaa/AAA 154,313
Rhode Island Health & Education Building
Corporation - Hospital Fing Lifespan Obligation
Group, MBIA Insured
1,000,000 5.250%, 05/15/26 Aaa/AAA 872,500
1,866,063
MORTGAGE REVENUE-MULTI FAMILY BONDS (0.9%)
Rhode Island Housing & Mortgage Finance Corp,
1995 Series A, AMBAC Insured
300,000 5.450%, 07/01/04 Aaa/AAA 304,875
300,000 5.550%, 07/01/05 Aaa/AAA 306,000
610,875
WATER AND SEWER REVENUE BONDS (3.9%)
Kent County Water Authority Revenue Bonds, 1994
Series A, MBIA Insured
250,000 5.700%, 07/15/04 Aaa/AAA 259,375
Bristol County Rhode Island Water Authority,
1997 Series A, MBIA Insured
750,000 5.250%, 07/01/17 Aaa/AAA 685,312
Bristol County Rhode Island, MBIA Insured
300,000 5.000%, 12/01/08 Aaa/AAA 295,875
Rhode Island Clean Water Protection Finance
Agency, Series A, AMBAC Insured
500,000 4.750%, 10/01/20 Aaa/AAA 413,750
Rhode Island Clean Water Protection Finance
Agency, Series 1999C, MBIA Insured
1,000,000 5.125%, 10/01/11 Aaa/AAA 967,500
2,621,812
<\PAGE>
<PAGE>
UTILITY REVENUE BONDS (.1%)
Puerto Rico Electric Power Authority, Series Q,
FSA Insured
100,000 5.750%, 07/01/07 Aaa/AAA 103,125
DEVELOPMENT REVENUE BONDS (21.6%)
Rhode Island Convention Center Authority, 1991
Series A, MBIA Insured (Escrowed to Maturity)
100,000 6.100%, 05/15/01 Aaa/AAA 104,000
150,000 6.300%, 05/15/01 Aaa/AAA 156,375
100,000 6.375%, 05/15/01 Aaa/AAA 104,375
Rhode Island Convention Center Authority, 1993
Series B, MBIA Insured
500,000 5.000%, 05/15/07 Aaa/AAA 495,625
Rhode Island Convention Center Authority, 1993
Series A, AMBAC Insured
500,000 5.400%, 05/15/08 Aaa/AAA 506,875
300,000 5.500%, 05/15/13 Aaa/AAA 300,000
2,500,000 5.000%, 05/15/20 Aaa/AAA 2,159,375
1,200,000 5.000%, 05/15/23 Aaa/AAA 1,020,000
Rhode Island Public Building Authority State Public
Projects, 1990 Series A, AMBAC Insured
(Escrowed to Maturity)
710,000 6.000%, 02/01/01 Aaa/AAA 721,218
300,000 6.600%, 02/01/01 Aaa/AAA 312,327
Rhode Island Public Building Authority State Public
Projects, 1993 Series A, AMBAC Insured
500,000 5.100%, 02/01/05 Aaa/AAA 503,750
1,000,000 5.250%, 02/01/10 Aaa/AAA 992,500
Rhode Island Public Building Authority State Public
Projects, 1990 Series A, AMBAC Insured
785,000 6.000%, 02/01/11 Aaa/AAA 796,995
</PAGE>
<PAGE>
Rhode Island Public Building Authority State Public
Projects, 1989 Series A, AMBAC Insured
370,000 7.000%, 02/01/00 (Escrowed to Maturity) Aaa/AAA 378,147
1,000,000 5.250%, 02/01/09 Aaa/AAA 993,750
Rhode Island Public Building Authority State Public
Projects, 1996 School Series B, MBIA Insured
500,000 5.500%, 12/15/14 Aaa/AAA 486,250
1,000,000 5.250%, 12/15/14 Aaa/AAA 941,250
500,000 5.500%, 12/15/15 Aaa/AAA 481,250
Rhode Island Public Building Authority State Public
Projects, 1999 Series A, AMBAC Insured
500,000 5.000%, 12/15/09 Aaa/AAA 489,375
Rhode Island State Economic Development Corp.,
University of Rhode Island Series, FSA Insured
750,000 4.800%, 11/01/11 Aaa/NR 701,250
750,000 4.900%, 11/01/12 Aaa/NR 695,625
750,000 4.900%, 11/01/13 Aaa/NR 679,688
750,000 5.000%, 11/01/14 Aaa/NR 681,562
14,701,562
POLLUTION CONTROL REVENUE BONDS (3.2%)
Rhode Island Clean Water Protection, 1993 Series A,
MBIA Insured
200,000 5.300%, 10/01/07 Aaa/AAA 202,000
300,000 5.400%, 10/01/09 Aaa/AAA 302,625
1,250,000 5.400%, 10/01/15 Aaa/AAA 1,201,563
Rhode Island Clean Water Protection, 1993 Series B,
MBIA Insured,
500,000 4.500, 10/01/11 Aaa/AAA 451,250
2,157,438
</PAGE>
<PAGE>
OTHER REVENUE BONDS (7.7%)
State of Rhode Island Depositors Economic
Protection Corp., 1992 Series A, FSA Insured
210,000 6.000%, 08/01/01 Aaa/AAA 215,250
State of Rhode Island Depositors Economic
Protection Corp., 1992 Series B, MBIA Insured
135,000 5.500%, 08/01/06 Aaa/AAA 138,544
500,000 6.000%, 08/01/17 Aaa/AAA 513,750
State of Rhode Island Depositors Economic
Protection Corp., MBIA Insured
300,000 5.800%, 08/01/09 Aaa/AAA 313,125
1,045,000 5.250%, 02/01/11 (Escrowed to Maturity) Aaa/AAA 1,033,244
1,000,000 5.000%, 07/01/18 Aaa/AAA 877,500
Rhode Island State and Local Facilities,
MBIA Insured
1,500,000 5.400%, 08/01/08 Aaa/AAA 1,531,875
State of Rhode Island Certificates of Participation,
Howard Center Improvements, MBIA Insured
400,000 5.250%, 10/01/10 Aaa/AAA 395,500
200,000 5.375%, 10/01/16 Aaa/AAA 189,250
5,208,038
Total Revenue Bonds 37,174,572
Total Investments (cost $70,839,824*) 101.0% 68,617,923
Liabilities in excess of other assets (1.0) (686,102)
Net Assets 100.0% $ 67,931,821
</TABLE>
(*)Cost for Federal tax purposes is identical.
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>
<PAGE>
NARRAGANSETT INSURED TAX-FREE INCOME FUND
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1999 (UNAUDITED)
<TABLE>
<S> <C> <C> <C>
ASSETS
Investments at value (cost $70,839,824) $ 68,617,923
Interest receivable 1,033,533
Receivable for Fund shares sold 27,605
Due from Manager for reimbursement of expenses (note 3) 10,468
Total assets 69,689,529
LIABILITIES
Cash overdraft 1,085,882
Payable for Fund shares redeemed 549,913
Dividends payable 85,430
Distribution fees payable 34,930
Management fee payable 932
Accrued expenses 621
Total liabilities 1,757,708
NET ASSETS $ 67,931,821
Net Assets consist of:
Capital Stock - Authorized 80,000,000 shares, par value $.01 per share $ 69,631
Additional paid-in capital 70,970,593
Net unrealized depreciation on investments (2,221,901)
Accumulated net realized loss on investments (783,592)
Distributions in excess of net investment income (102,910)
$ 67,931,821
CLASS A
Net Assets $ 61,219,264
Capital shares outstanding 6,275,082
Net asset value and redemption price per share $ 9.76
Offering price per share (100/96 of $9.76 adjusted to nearest cent) $ 10.17
CLASS C
Net Assets $ 4,263,671
Capital shares outstanding 437,076
Net asset value and offering price per share $ 9.75
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) $ 9.75*
CLASS I
Net Assets $ 74,030
Capital shares outstanding 7,590
Net asset value, offering and redemption price per share $ 9.75
CLASS Y
Net Assets $ 2,374,856
Capital shares outstanding 243,390
Net asset value, offering and redemption price per share $ 9.76
</TABLE>
See accompanying notes to financial statements.
</PAGE>
<PAGE>
NARRAGANSETT INSURED TAX-FREE INCOME FUND
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED DECEMBER 31, 1999 (UNAUDITED)
<TABLE>
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Interest income $ 1,946,886
Expenses:
Management fee (note 3) $ 185,973
Distribution and service fees (note 3) 71,082
Trustees' fees and expenses 20,000
Legal fees 19,000
Transfer and shareholder servicing agent fees 14,000
Shareholders' reports and proxy statements 13,000
Audit and accounting fees 8,000
Custodian fees 7,200
Registration fees and dues 5,000
Insurance 1,700
Miscellaneous 9,070
354,025
Management fee waived (note 3) (148,778)
Reimbursement of expenses by Manager (note 3) (42,502)
Expenses paid indirectly (note 7) (7,200)
Net expenses 155,545
Net investment income 1,791,341
REALIZED AND UNREALIZED LOSS ON INVESTMENTS:
Net realized loss from securities transactions (783,592)
Change in unrealized depreciation on investments (2,126,570)
Net realized and unrealized loss on investments (2,910,162)
Net decrease in net assets resulting from operations $ (1,118,821)
</TABLE>
See accompanying notes to financial statements.
</PAGE>
<PAGE>
NARRAGANSETT INSURED TAX-FREE INCOME FUND
STATEMENTS OF CHANGES IN NET ASSETS
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
DECEMBER 31,1999 JUNE 30, 1999
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income $ 1,791,341 $ 2,966,068
Net realized loss from securities transactions (783,592) 17,917
Change in unrealized depreciation on investments (2,126,570) (2,366,788)
Change in net assets from operations (1,118,821) 617,197
DISTRIBUTIONS TO SHAREHOLDERS (NOTE 6):
Class A Shares:
Net investment income (1,644,403) (2,805,557)
Net realized gain on investments - -
Class C Shares:
Net investment income (88,343) (129,420)
Net realized gain on investments - -
Class I Shares:
Net investment income (1,880) (2,402)
Net realized gain on investments - -
Class Y Shares:
Net investment income (100,508) (77,910)
Net realized gain on investments - -
Change in net assets from distributions (1,835,134) (3,015,289)
CAPITAL SHARE TRANSACTIONS (NOTE 8):
Proceeds from shares sold 5,822,282 27,352,127
Reinvested dividends and distributions 1,177,555 1,940,859
Cost of shares redeemed (11,264,166) (6,545,680)
Change in net assets from capital share transactions (4,264,329) 22,747,306
Change in net assets (7,218,284) 20,349,214
NET ASSETS:
Beginning of period 75,150,105 54,800,891
End of period $ 67,931,821 $ 75,150,105
</TABLE>
See accompanying notes to financial statements.
</PAGE>
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 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 of 1% 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
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 may 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 generally accepted accounting principles for investment
companies.
a) PORTFOLIO VALUATION: Municipal securities which have remaining maturities
of more than 60 days are valued at fair value each business day based upon
information provided by a nationally prominent independent pricing service
and periodically verified through other pricing services; in the case of
securities for which market quotations are readily available, securities
are valued at the mean of bid and asked quotations and in the case of other
securities, at fair value determined under procedures established by and
under the general supervision of the Board of Trustees. Securities which
mature in 60 days or less are valued at amortized cost if their term to
maturity at purchase 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.
</PAGE>
<PAGE>
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 discount. Market discount is
recognized upon disposition of the security.
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 generally accepted accounting principles 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. 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, auditors and distributor and additionally maintaining the Fund's
accounting books and records. 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 of 1% on the Fund's net assets.
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 of 1% on the Fund"s
net assets.
</PAGE>
<PAGE>
For the six months ended December 31, 1999, the Fund incurred fees for
advisory and administrative services of $185,973 of which $148,778 was
voluntarily waived. Additionally, the Manager voluntarily agreed to reimburse
the Fund for other expenses during this period in the amount of $42,502. Of this
amount, $32,034 was paid prior to December 31, 1999 and the balance of $10,468
was paid in early January 2000.
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 service
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, 1999, service fees on Class A
Shares amounted to $49,594, of which the Distributor received $1,056.
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, 1999, amounted to $16,102. 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, 1999, amounted to $5,367. The total of
these payments with respect to Class C Shares amounted to $21,469, of which the
Distributor received $13,233.
Under another part of the Plan, the Fund is authorized to make payments
with respect to Class I Shares to Qualified Recipients. Class I Permitted
Payments may not exceed, for any fiscal year of the Fund, a rate set from time
to time by the Board of Trustees (currently 0.10 of 1%) but not more than 0.25
of 1% 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
services fees. These fees may not exceed an amount equal to the difference
between (i) 0.25 of 1% of the average annual net assets of the Fund represented
by Class I Shares and (ii) the amount paid under the Fund's Distribution Plan
with respect to the assets represented by the Class I Shares. That is, the total
payments under both plans will not exceed 0.25 of 1% of such net assets. For the
six months ended December 31, 1999, these payments were made at the average
annual rate of 0.05% of such net assets and amounted to $19.
</PAGE>
<PAGE>
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, 1999, the Distributor received commissions of $16,008 on sales of
Class A shares.
4. PURCHASES AND SALES OF SECURITIES
During the six months ended December 31, 1999, purchases of securities and
proceeds from the sales of securities aggregated $5,578,378 and $7,823,805,
respectively.
At December 31, 1999, aggregate gross unrealized appreciation for all
securities in which there is an excess of market value over tax cost amounted to
$504,704 and aggregate gross unrealized depreciation for all securities in which
there is an excess of tax cost over market value amounted to $2,726,605, for a
net unrealized depreciation of $2,221,901.
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 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. At December 31, 1999, 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.
</PAGE>
<PAGE>
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, 1999, the Fund had 2.0% of its net assets invested in five Puerto Rico
municipal issues, all of which are rated AAA and insured or collateralized by
U.S. Treasury securities.
6. 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 ne t realized securities gains.
Further, a small portion of the dividends may, under some circumstances, be
subject to taxes at ordinary income and/or capital gain rates. For certain
shareholders, some dividend income may, under some circumstances, be subject to
the alternative minimum tax.
7. 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.
</PAGE>
<PAGE>
8. CAPITAL SHARE TRANSACTIONS
Transactions in Capital Shares of the Fund were as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
DECEMBER 31, 1999 JUNE 30, 1999
SHARES AMOUNT SHARES AMOUNT
</CAPTION>
<S> <C> <C> <C> <C> <C> <C>
CLASS A SHARES:
Proceeds from shares sold 517,585 $ 5,163,928 2,012,032 $ 21,120,498
Reinvested distributions 103,969 1,031,408 168,469 1,766,917
Cost of shares redeemed (904,958) (8,958,502) (588,072) (6,175,657)
Net change (283,404) (2,763,166) 1,592,429 16,711,758
CLASS C SHARES:
Proceeds from shares sold 34,944 350,502 172,113 1,808,558
Reinvested distributions 7,534 74,714 10,573 110,784
Cost of shares redeemed (20,229) (201,000) (33,179) (348,670)
Net change 22,249 224,216 149,507 1,570,672
CLASS I SHARES*:
Proceeds from shares sold - - 7,590 80,000
Reinvested distributions - - - -
Cost of shares redeemed - - - -
Net change - - 7,590 80,000
CLASS Y SHARES:
Proceeds from shares sold 31,228 307,852 412,735 4,343,071
Reinvested distributions 7,173 71,433 6,063 63,158
Cost of shares redeemed (213,375) (2,104,664) (2,035) (21,353)
Net change (174,974) (1,725,379) 416,763 4,384,876
Total transactions in Fund
shares (436,129) $ (4,264,329) 2,166,289 $ 22,747,306
</TABLE>
* For the period November 4, 1998 to June 30, 1999.
</PAGE>
<PAGE>
NARRAGANSETT INSURED TAX-FREE INCOME FUND
FINANCIAL HIGHLIGHTS
(UNAUDITED)
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
CLASS A(1) CLASS I(2)
SIX MONTHS SIX MONTHS PERIOD(3)
ENDED YEAR ENDED JUNE 30, ENDED ENDED
12/31/99 1999 1998 1997 1996 1995 12/31/99 6/30/99
</CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $10.16 $10.47 $10.18 $9.93 $9.80 $9.44 $10.15 $10.54
Income from Investment Operations:
Net investment income 0.24 0.49 0.50 0.51 0.52 0.54 0.26 0.31
Net gain (loss) on securities
(both realized and unrealized) (0.39) (0.30) 0.30 0.26 0.13 0.36 (0.41) (0.38)
Total from Investment Operations (0.15) 0.19 0.80 0.77 0.65 0.90 (0.15) (0.07)
Less Distributions (note 6):
Dividends from net investment income (0.25) (0.50) (0.51) (0.52) (0.52) (0.54) (0.25) (0.32)
Distributions from capital gains - - - - - - - -
Total Distributions (0.25) (0.50) (0.51) (0.52) (0.52) (0.54) (0.25) (0.32)
Net Asset Value, End of Period $9.76 $10.16 $10.47 $10.18 $9.93 $9.80 $9.75 $10.15
Total Return (not reflecting sales charge)(%) (1.50)+ 1.74 8.02 7.95 6.72 9.82 (1.52)+ (0.75)+
Ratios/Supplemental Data
Net Assets, End of Period ($ thousands) 61,219 66,611 52,006 42,540 37,988 34,373 74 77
Ratio of Expenses to Average Net Assets (%) 0.40* 0.39 0.28 0.23 0.15 0.07 0.41* 0.49*
Ratio of Net Investment Income to
Average Net Assets (%) 4.84* 4.61 4.83 5.02 5.18 5.62 4.81* 4.54*
Portfolio Turnover Rate (%) 7.60+ 1.36 0.02 5.29 0 0 7.60+ 1.36
The expense and net investment income ratios without the effect of the
voluntary waiver of a portion of the management fee and the voluntary expense
reimbursement were:
Ratio of Expenses to Average Net Assets (%) 0.89* 0.91 1.12 1.23 1.16 1.18 0.91* 0.87*
Ratio of Net Investment Income to Average
Net Assets (%) 4.34* 4.09 3.99 4.05 4.17 4.51 4.32* 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 (%) 0.38* 0.35 0.27 0.21 0.14 0.06 0.39* 0.46*
</TABLE>
(1) Designated as Class A Shares on May 1, 1996.
(2) New Class of Shares established on October 31, 1997.
(3) From November 4, 1998 to June 30, 1999.
+ Not annualized.
* Annualized.
See accompanying notes to financial statements.
</PAGE>
<PAGE>
NARRAGANSETT INSURED TAX-FREE INCOME FUND
FINANCIAL HIGHLIGHTS (CONTINUED)
(UNAUDITED)
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
CLASS C(1) CLASS Y(1)
SIX MONTHS PERIOD(2) SIX MONTHS PERIOD(2)
ENDED YEAR ENDED JUNE 30, ENDED ENDED YEAR ENDED JUNE 30, ENDED
12/31/99 1999 1998 1997 6/30/96 12/31/99 1999 1998 1997 6/30/96
</CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $10.16 $10.47 $10.18 $9.93 $9.94 $10.16 $10.47 $10.19 $9.93 $9.94
Income from Investment Operations:
Net investment income 0.20 0.38 0.40 0.41 0.07 0.26 0.49 0.59 0.56 0.09
Net gain (loss) on securities (both
realized and unrealized) (0.40) (0.29) 0.30 0.26 (0.01) (0.40) (0.30) 0.29 0.26 (0.01)
Total from Investment Operations (0.20) 0.09 0.70 0.67 0.06 (0.14) 0.19 0.88 0.82 0.08
Less Distributions (note 6):
Dividends from net investment income (0.21) (0.40) (0.41) (0.42) (0.07) (0.26) (0.50) (0.60) (0.56) (0.09)
Distributions from capital gains - - - - - - - - - -
Total Distributions (0.21) (0.40) (0.41) (0.42) (0.07) (0.26) (0.50) (0.60) (0.56) (0.09)
Net Asset Value, End of Period $9.75 $10.16 $10.47 $10.18 $9.93 $9.76 $10.16 $10.47 $10.19 $9.93
Total Return (not reflecting sales charge) (%) (2.02)+ 0.76 6.94 6.89 0.60+ (1.43)+ 1.79 8.80 8.48 0.80+
Ratios/Supplemental Data
Net Assets, End of Period ($ thousands) 4,264 4,213 2,778 485 0.1 2,375 4,250 17 0.1 0.1
Ratio of Expenses to Average Net
Assets (%) 1.25* 1.35 1.29 1.08 0.20+ 0.25* 0.33 0.28 0.08 0.14+
Ratio of Net Investment Income to
Average Net Assets (%) 3.98* 3.65 3.77 4.20 0.70+ 5.03* 4.65 4.66 5.20 0.89+
Portfolio Turnover Rate (%) 7.60+ 1.36 0.02 5.29 0 7.60+ 1.36 0.02 5.29 0
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 (%) 1.74* 1.75 1.93 2.08 0.32+ 0.74* 0.70 0.83 1.08 0.15+
Ratio of Net Investment Income to Average
Net Assets (%) 3.48* 3.25 3.11 3.20 0.58+ 4.53* 4.29 4.11 4.20 0.88+
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 (%) 1.23* 1.32 1.28 1.06 0.20+ 0.23* 0.30 0.27 0.06 0.14+
</TABLE>
(1) New Class of Shares established on May 1, 1996.
(2) From May 1, 1996 to June 30, 1996.
+ Not annualized.
* Annualized.
See accompanying notes to financial statements.
</PAGE>
<PAGE>
SHAREHOLDER MEETING RESULTS (UNAUDITED)
The Annual Meeting of Shareholders of Narragansett Insured Tax-Free Income Fund
(the "Fund") was held on October 1, 1999. The holders of shares representing 83%
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 for each matter are presented
below).
1. To elect Trustees.
Number of Votes:
TRUSTEE FOR WITHHELD
Lacy B. Herrmann 62,263,543.54 331,043.28
Vernon R. Alden 62,226,632.26 367,954.56
Paul Y. Clinton 62,263,543.54 331,043.28
David A. Duffy 62,263,543.54 331,043.28
William J. Nightingale 62,226,632.26 367,954.16
J. William Weeks 62,226,632.26 367,954.16
2. To ratify the selection of KPMG LLP as the Fund's independent auditors.
Number of Votes:
FOR AGAINST ABSTAIN
62,132,824.98 88,849.20 372,902.48
</PAGE>
