NARRAGANSETT INSURED TAX-FREE INCOME FUND
SUB-ADVISORY AGREEMENT
THIS AGREEMENT, made as of _________ __, 2008 by and between AQUILA
INVESTMENT MANAGEMENT LLC, a Delaware limited liability company (the "Manager"),
000 Xxxxxxx Xxxxxx, Xxxxx 0000, Xxx Xxxx, Xxx Xxxx 00000 and CITIZENS INVESTMENT
ADVISORS, (the "Sub-Adviser"), a department of RBS Citizens, N.A., Xxx Xxxxxxxx
Xxxxx, Xxxxxxxxxx, Xxxxx Xxxxxx 00000-0000.
W I T N E S S E T H :
WHEREAS, Narragansett Insured Tax-Free Income Fund (the "Fund") is a
Massachusetts business trust which is registered under the Investment Company
Act of 1940 (the "Act") as an open-end, non-diversified management investment
company;
WHEREAS, the Manager has entered into an Advisory and Administration
Agreement as of the date hereof with the Fund (the "Advisory and Administration
Agreement") pursuant to which the Manager shall act as investment adviser with
respect to the Fund; and
WHEREAS, pursuant to paragraph 2 of the Advisory and Administration
Agreement, the Manager wishes to retain the Sub-Adviser for purposes of
rendering investment advisory services to the Manager in connection with the
Fund upon the terms and conditions hereinafter set forth;
NOW THEREFORE, in consideration of the mutual promises and agreements
herein contained and other good and valuable consideration, the receipt of which
is hereby acknowledged, the parties hereto agree as follows:
1. In General
The Manager hereby appoints the Sub-Adviser to render, to the Manager and
to the Fund, investment research and advisory services as set forth below under
the supervision of the Manager and subject to the approval and direction of the
Board of Trustees of the Fund. The Sub-Adviser shall, all as more fully set
forth herein, act as managerial investment adviser to the Fund with respect to
the investment of the Fund's assets, and supervise and arrange the purchase of
securities for and the sale of securities held in the portfolio of the Fund.
2. Duties and Obligations of the Sub-Adviser With Respect To Investment of the
Assets of the Fund
(a) Subject to the succeeding provisions of this section and subject to the
direction and control of the Manager and the Board of Trustees of the Fund, the
Sub-Adviser shall:
(i) supervise continuously the investment program of the Fund and the
composition of its portfolio;
(ii) determine what securities shall be purchased or sold by the Fund;
(iii) arrange for the purchase and the sale of securities held in the
portfolio of the Fund;
(iv) at its expense provide for pricing of the Fund's portfolio daily using
a pricing service or other source of pricing information satisfactory to
the Fund and, unless otherwise directed by the Board of Trustees, provide
for pricing of the Fund's portfolio at least quarterly using another such
source satisfactory to the Fund; and
(v) consult with the Manager in connection with its duties hereunder.
(b) Any investment program furnished by the Sub-Adviser under this section
shall at all times conform to, and be in accordance with, any requirements
imposed by: (1) the Investment Company Act of 1940 (the "Act") and any rules or
regulations in force thereunder; (2) any other applicable laws, rules and
regulations; (3) the Declaration of Trust and By-Laws of the Fund as amended
from time to time; (4) any policies and determinations of the Board of Trustees
of the Fund; and (5) the fundamental policies of the Fund, as reflected in its
registration statement under the Act or as amended by the shareholders of the
Fund.
(c) The Sub-Adviser shall give to the Manager and to the Fund the benefit
of its best judgment and effort in rendering services hereunder, but the
Sub-Adviser shall not be liable for any loss sustained by reason of the adoption
of any investment policy or the purchase, sale or retention of any security,
whether or not such purchase, sale or retention shall have been based upon (i)
its own investigation and research or (ii) investigation and research made by
any other individual, firm or corporation, if such purchase, sale or retention
shall have been made and such other individual, firm or corporation shall have
been selected in good faith by the Sub-Adviser.
(d) Nothing in this Agreement shall prevent the Sub-Adviser or any
affiliated person (as defined in the Act) of the Sub-Adviser from acting as
investment adviser or manager for any other person, firm or corporation and
shall not in any way limit or restrict the Sub-Adviser or any such affiliated
person from buying, selling or trading any securities for its own or their own
accounts or for the accounts of others for whom it or they may be acting,
provided, however, that the Sub-Adviser expressly represents that, while acting
as Sub-Adviser, it will undertake no activities which, in its judgment, will
adversely affect the performance of its obligations to the Fund under this
Agreement.
(e) In connection with its duties to arrange for the purchase and sale of
the Fund's portfolio securities, the Sub-Adviser shall select such
broker-dealers ("dealers") as shall, in the Sub-Adviser's judgment, implement
the policy of the Fund to achieve "best execution," i.e., prompt, efficient, and
reliable execution of orders at the most favorable net price. The Sub-Adviser
shall cause the Fund to deal directly with the selling or purchasing principal
or market maker without incurring brokerage commissions unless the Sub-Adviser
determines that better price or execution may be obtained by paying such
commissions; the Fund expects that most transactions will be principal
transactions at net prices and that the Fund will incur little or no brokerage
costs. The Fund understands that purchases from underwriters include a
commission or concession paid by the issuer to the underwriter and that
principal transactions placed through dealers include a spread between the bid
and asked prices. In allocating transactions to dealers, the Sub-Adviser is
authorized to consider, in determining whether a particular dealer will provide
best execution, the dealer's reliability, integrity, financial condition and
risk in positioning the securities involved, as well as the difficulty of the
transaction in question, and thus need not pay the lowest spread or commission
available if the Sub-Adviser determines in good faith that the amount of
commission is reasonable in relation to the value of the brokerage and research
services provided by the dealer, viewed either in terms of the particular
transaction or the Sub-Adviser's overall responsibilities. If, on the foregoing
basis, the transaction in question could be allocated to two or more dealers,
the Sub-Adviser is authorized, in making such allocation, to consider whether a
dealer has provided research services, as further discussed below. Such research
may be in written form or through direct contact with individuals and may
include quotations on portfolio securities and information on particular issuers
and industries, as well as on market, economic, or institutional activities. The
Fund recognizes that no dollar value can be placed on such research services or
on execution services and that such research services may or may not be useful
to the Fund and may be used for the benefit of the Sub-Adviser or its other
clients.
(f) The Sub-Adviser agrees to maintain, and to preserve for the periods
prescribed, such books and records with respect to the portfolio transactions of
the Fund as are required by applicable law and regulation, and agrees that all
records which it maintains for the Fund on behalf of the Manager shall be the
property of the Fund and shall be surrendered promptly to the Fund or the
Manager upon request.
(g) The Sub-Adviser agrees to furnish to the Manager and to the Board of
Trustees of the Fund such periodic and special reports as each may reasonably
request.
(h) It is agreed that the Sub-Adviser shall have no responsibility or
liability for the accuracy or completeness of the Fund's Registration Statement
under the Act and the Securities Act of 1933, except for information supplied by
the Sub-Adviser for inclusion therein. The Sub-Adviser shall promptly inform the
Fund as to any information concerning the Sub-Adviser appropriate for inclusion
in such Registration Statement, or as to any transaction or proposed transaction
which might result in an assignment (as defined in the Act) of this Agreement.
(i) The Sub-Adviser shall not be liable for any error in judgment or for
any loss suffered by the Fund or its security holders in connection with the
matters to which this Agreement relates, except a loss resulting from wilful
misfeasance, bad faith or gross negligence on its part in the performance of its
duties or from reckless disregard by it of its obligations and duties under this
Agreement. Nothing in this Agreement shall, or shall be construed to, waive or
limit any rights which the Fund may have under federal and state securities laws
which may impose liability under certain circumstances on persons who act in
good faith.
(j) To the extent that the Manager is indemnified under the Fund's
Declaration of Trust with respect to the services provided hereunder by the
Sub-Adviser, the Manager agrees to provide the Sub-Adviser the benefits of such
indemnification.
3. Allocation of Expenses
The Sub-Adviser shall bear all of the expenses it incurs in fulfilling its
obligations under this Agreement. In particular, but without limiting the
generality of the foregoing: the Sub-Adviser shall furnish, at the Sub-Adviser's
expense, all office space, facilities, equipment and clerical personnel
necessary for carrying out its duties under this Agreement. The Sub-Adviser
shall supply, or cause to be supplied, to any investment adviser, administrator
or principal underwriter of the Fund all necessary financial information in
connection with such adviser's, administrator's or principal underwriter's
duties under any agreement between such adviser, administrator or principal
underwriter and the Fund. The Sub-Adviser will also pay all compensation of the
Fund's officers, employees, and Trustees, if any, who are affiliated persons of
the Sub-Adviser.
4. Compensation of the Sub-Adviser
The Manager agrees to pay the Sub-Adviser, and the Sub-Adviser agrees to
accept as full compensation for all services rendered by the Sub-Adviser as
such, a management fee payable monthly and computed on the net asset value of
the Fund as of the close of business each business day at the annual rate of
0.23 of 1% of such net asset value.
5. Duration and Termination
(a) This Agreement shall become effective on the day it is approved by the
shareholders of the Fund and shall, unless terminated as hereinafter provided,
continue in effect until the December 31 next preceding the first anniversary of
the effective date of this Agreement, and from year to year thereafter, but only
so long as such continuance is specifically approved at least annually (1) by a
vote of the Fund's Board of Trustees, including a vote of a majority of the
Trustees who are not parties to this Agreement or "interested persons" (as
defined in the Act) of any such party, with votes cast in person at a meeting
called for the purpose of voting on such approval, or (2) by a vote of the
holders of a "majority" (as so defined) of the outstanding voting securities of
the Fund and by such a vote of the Trustees.
(b) This Agreement may be terminated by the Sub-Adviser at any time without
penalty upon giving the Manager and the Fund sixty days' written notice (which
notice may be waived). This Agreement may be terminated by the Manager or the
Fund at any time without penalty upon giving the Sub-Adviser sixty days' written
notice (which notice may be waived by the Sub-Adviser), provided that such
termination by the Fund shall be directed or approved by a vote of a majority of
its Trustees in office at the time or by a vote of the holders of a majority (as
defined in the Act) of the voting securities of the Fund outstanding and
entitled to vote. This Agreement shall automatically terminate in the event of
its assignment (as defined in the Act) or the termination of the Advisory and
Administration Agreement.
6. Notices of Meetings
The Manager agrees that notice of each meeting of the Board of Trustees of
the Fund will be sent to the Sub-Adviser and that Sub-Adviser will make
appropriate arrangements for the attendance (as persons present by invitation)
of such person or persons as the Sub-Adviser may designate.
IN WITNESS WHEREOF, the parties hereto have caused the foregoing instrument
to be executed by their duly authorized officers and their seals to be hereunto
affixed, all as of the day and year first above written.
ATTEST: AQUILA INVESTMENT MANAGEMENT LLC
______________________ By:___________________________________
ATTEST: CITIZENS INVESTMENT ADVISORS
______________________ By:___________________________________
