<PAGE>
(Great Hall LOGO) September 13, 1996
To Our Shareholders:
I am pleased to present the July 31, 1996 Annual Report for the Great Hall
Prime, U.S. Government and Tax-Free Money Market Funds. This report contains a
Statement of Assets and Liabilities for each Fund and a detailed schedule of
each Fund's investment portfolio as of July 31, 1996. Also included are
Statements of Operations which show each Fund's earnings and expenses, and
Statements of Changes in Net Assets for the fiscal year.
Money market interest rates made two large moves during our fiscal year.
Interest rates generally declined from August, 1995 until February, 1996. In
February interest rates reversed direction, and generally rose through the rest
of the Funds' fiscal year. The decline in interest rates in the first half of
the year was due to the very slow growth of the economy, which caused the
Federal Reserve to ease monetary policy by lowering short maturity interest
rates. The market pushed interest rates down even further in anticipation of
further rate reductions by the Federal Reserve. Shortly afer the Federal
Reserve's final interest rate reduction in January, economic data showed that
the economy was gaining unexpected strength. Interest rates began to rise as
the market realized that the Federal Reserve would probably not reduce rates
further and may even begin to raise them. As of the end of the fiscal year in
July, the Federal Reserve had not made any move to increase interest rates.
The primary goals of each Fund are to preserve capital and maintain high
liquidity. To meet these goals the Funds' managers employ careful credit
analysis on all investments, and the Funds are managed very conservatively.
Furthermore, none of the Funds uses risky derivatives to boost its yield.
Despite these conservative policies, the Funds' yields have remained
competitive compared to other money market funds. This prudent and successful
strategy has earned the confidence of investors, who have increased the net
asset level of the Funds to an all-time high of $2.9 billion as of July 31,
1996.
Thank you for your confidence in the Great Hall Funds. We pledge to continue
managing these Funds in the careful and diligent manner that you have come to
expect.
Sincerely,
J. Scott Spiker
Chief Executive Officer
Great Hall Investment Funds, Inc.
<PAGE>
STATEMENTS OF ASSETS AND LIABILITIES
July 31, 1996
Prime U.S. Government Tax-Free
Money Money Money
Market Fund Market Fund Market Fund
- -------------------------------------------------------------------------------
Assets:
Investments in securities
at market value (note 2),
including repurchase agreements
of $1,600,000; $30,300,000 and $0
respectively (identified cost
$2,410,132,031; $146,345,066 and
$361,906,132 respectively)..... $2,410,132,031 $146,345,066 $361,906,132
Cash in bank on
demand deposit................. 144,254 95,290 133,230
Organization costs (note 2)...... 8,549 4,578 5,285
Accrued interest receivable...... 6,995,954 698,588 2,630,078
Receivable for investment
securities sold................ 4,996,000 -- --
- -------------------------------------------------------------------------------
Total assets..................... 2,422,276,788 147,143,522 364,674,725
- -------------------------------------------------------------------------------
Liabilities:
Payable for investment
securities purchased........... 14,987,321 300,844 5,262,998
Accrued investment
advisory fee................... 912,523 59,531 155,048
Other accrued expenses........... 921,027 97,993 103,447
- -------------------------------------------------------------------------------
Total liabilities................ 16,820,871 458,368 5,521,493
- -------------------------------------------------------------------------------
Net assets applicable to
outstanding capital stock...... $2,405,455,917 $146,685,154 $359,153,232
- -------------------------------------------------------------------------------
Represented by:
Capital stock -- authorized
100 billion shares of $.01
par value for each Fund,
outstanding 2,405,455,917;
146,685,154 and 359,153,232
shares, respectively........... $24,054,559 $1,466,852 $3,591,532
Additional paid-in capital....... 2,381,401,358 145,218,302 355,561,700
- -------------------------------------------------------------------------------
Total - representing net
assets applicable
to outstanding
capital stock.............. $2,405,455,917 $146,685,154 $359,153,232
- -------------------------------------------------------------------------------
Net asset value per share
of outstanding capital stock... $1.00 $1.00 $1.00
- -------------------------------------------------------------------------------
See accompanying notes to financial statements.
<PAGE>
STATEMENTS OF OPERATIONS
Year ended July 31, 1996
Prime U.S. Government Tax-Free
Money Money Money
Market Fund Market Fund Market Fund
- -------------------------------------------------------------------------------
Income:
Interest...................... $108,008,048 $7,393,057 $13,921,811
- -------------------------------------------------------------------------------
Expenses (note 4):
Investment advisory fee....... 9,571,808 636,499 1,925,659
Custodian, accounting
and transfer agent fees..... 433,000 28,200 35,237
Sub-accounting transfer
agent fees.................. 1,931,006 48,608 87,071
Reports to shareholders....... 620,387 16,849 27,900
Amortization of
organization costs.......... 34,196 18,305 21,142
Directors' fees............... 9,000 9,000 9,000
Audit and legal fees.......... 57,255 17,815 22,898
Registration fees............. 542,559 81,008 105,594
Administrative................ 62,000 4,750 12,500
Other expenses................ 109,764 10,661 25,279
- -------------------------------------------------------------------------------
Total expenses.................. 13,370,975 871,695 2,272,280
- -------------------------------------------------------------------------------
Investment income - net......... 94,637,073 6,521,362 11,649,531
- -------------------------------------------------------------------------------
Net increase in net assets
resulting from operations..... $94,637,073 $6,521,362 $11,649,531
- -------------------------------------------------------------------------------
See accompanying notes to financial statements.
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
Prime U.S. Government Tax-Free
Money Market Fund Money Market Fund Money Market Fund
- ------------------------------------------------------------------------------------------------------------------------------------
Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended
7/31/96 7/31/95 7/31/96 7/31/95 7/31/96 7/31/95
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Operations:
Investment income,
net..................... $94,637,073 $61,075,339 $6,521,362 $4,116,351 $11,649,531 $9,545,242
Net realized gain
on investments.......... -- -- -- -- -- 378,871
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase in net
assets resulting from
operations.............. 94,637,073 61,075,339 6,521,362 4,116,351 11,649,531 9,924,113
- ------------------------------------------------------------------------------------------------------------------------------------
Distributions to
shareholders from:
Investment income
-- net................ (94,637,073) (61,075,339) (6,521,362) (4,116,351) (11,649,531) (9,545,242)
Net realized gains...... -- -- -- -- (378,871) --
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions
to shareholders......... (94,637,073) (61,075,339) (6,521,362) (4,116,351) (12,028,402) (9,545,242)
- ------------------------------------------------------------------------------------------------------------------------------------
Capital share transactions
at net asset value of
$1.00 per share:
Proceeds from
sales.................. 1,205,825,019 913,133,182 174,595,563 209,369,746 358,435,430 361,116,594
Shares issued for
reinvestment of
distributions......... 94,637,073 61,075,339 6,521,362 4,116,351 12,028,402 9,545,242
Payment for shares
redeemed.............. (493,931,322) (405,058,503) (156,680,720) (148,052,036) (374,204,795) (283,045,576)
- ------------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in
net assets from
capital share
transactions............ 806,530,770 569,150,018 24,436,205 65,434,061 (3,740,963) 87,616,260
- ------------------------------------------------------------------------------------------------------------------------------------
Total increase
(decrease) in
net assets................ 806,530,770 569,150,018 24,436,205 65,434,061 (4,119,834) 87,995,131
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets at beginning
of year................... 1,598,925,147 1,029,775,129 122,248,949 56,814,888 363,273,066 275,277,935
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets at end
of year................... $2,405,455,917 $1,598,925,147 $146,685,154 $122,248,949 $359,153,232 $363,273,066
- ------------------------------------------------------------------------------------------------------------------------------------
See accompanying notes to financial statements.
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS
1. Organization
Great Hall Investment Funds, Inc. (the Company) was incorporated on June
24, 1991 and is registered under the Investment Company Act of 1940 (as
amended) as an open-end management investment company and presently
includes a series of five funds including Prime Money Market Fund, U.S.
Government Money Market Fund and Tax-Free Money Market Fund (the funds).
The Company's articles of incorporation permit the board of directors to
create additional funds in the future.
2. Summary of Significant Accounting Policies
The significant accounting policies followed by the funds are as follows:
Investments in Securities
Pursuant to Rule 2a-7 of the Investment Company Act of 1940 (as amended),
securities are valued at amortized cost, which approximates market value,
in order to maintain a constant net asset value of $1 per share.
Security transactions are accounted for on the date the securities are
purchased or sold. Interest income, including amortization of discount and
premium, is accrued daily.
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 revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
Federal Taxes
The funds' policy is to comply with the requirements of the Internal
Revenue Code applicable to regulated investment companies and to distribute
all of its taxable income to shareholders. Therefore, no income tax
provision is required. Each fund is treated as a separate entity for
federal income tax purposes. In addition, on a calendar-year basis, each
fund intends to distribute substantially all of its net investment income
and realized gains, if any, to avoid the payment of any federal excise
taxes.
Distribution to Shareholders
Distribution to shareholders from net investment income are declared daily
and paid monthly through reinvestment in additional shares of the funds at
net asset value or payable in cash.
Organization Costs
Organization expenses were incurred in connection with the start-up and
initial registration of the funds. These costs are being amortized over 60
months on a straight-line basis. If any or all of the shares representing
initial capital of the funds is redeemed by any holder thereof prior to the
end of the amortization period, the proceeds will be reduced by the
unamortized organizational expense balance in the same
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
proportion as the number of shares redeemed bears to the number of initial
shares outstanding immediately preceding the redemption.
Repurchase Agreements
Securities pledged as collateral for repurchase agreements are held by the
funds' custodian bank until maturity of the repurchase agreement.
Procedures for all agreements ensure that the daily market value of the
collateral is in excess of the repurchase agreement in the event of
default.
3. Investment Security Transactions
Cost of purchases and proceeds from sales of securities from August 1, 1995
to July 31, 1996 were as follows:
Purchases Sales Proceeds
---------------------------------------------------------------------------
Prime Money Market Fund............... $12,310,459,655 $11,494,739,421
U.S. Government Money Market Fund..... 3,535,644,980 3,511,099,961
Tax-Free Money Market Fund............ 1,272,059,336 1,268,832,976
4. Fees and Expenses
The Company has entered into an investment advisory and management
agreement with IFG Asset Management Services, Inc. (AMS), under which AMS
manages each fund's assets and furnishes related office facilities,
equipment, research and personnel. The agreement requires each fund to pay
AMS a monthly fee based upon average daily net assets. The fee for the
Prime Money Market Fund is equal to an annual rate of 0.55% of the first
$700 million in net assets and then decreasing in reduced percentages to
0.40% of net assets in excess of $2 billion. The fee for the U.S.
Government Money Market Fund is equal to an annual rate of 0.50% of the
first $100 million in net assets and then decreasing in reduced percentages
to 0.35% of net assets in excess of $300 million. The fee for the Tax-Free
Money Market Fund is equal to an annual rate of 0.50% of net assets.
Each of the three funds has also entered into sub-accounting agreements
with affiliates Dain Bosworth Incorporated (DBI) and Rauscher Pierce
Refsnes, Inc. (RPR) where each firm performs various transfer and dividend
disbursing agent services. The fee, which is paid monthly to DBI and RPR
for providing such service, is equal to an annual rate of $12 per
shareholder account plus certain out-of-pocket expenses.
In addition to the investment advisory and management fee and the
shareholder account servicing fee, each fund is responsible for paying most
other operating expenses including outside directors' fees and expenses,
custodian fees, registration fees, printing and shareholder reports,
transfer agent fees and expense, legal, auditing and accounting services,
organizational costs, insurance interest and other miscellaneous expenses.
Legal fees and expenses of $39,959 for the year ended July 31, 1996 were
paid to a law firm of which the secretary of the funds is a partner.
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
5. Financial Highlights
Per share data for a share of capital stock outstanding throughout each
period and selected information for the period are as follows:
<TABLE>
Prime Money
Market Fund
- -------------------------------------------------------------------------------
- ------------------------------
Period from
Year ended Year ended Year ended Year ended 11/1/91
7/31/96 7/31/95 7/31/94 7/31/93 to 7/31/92
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of period............... $1.00 $1.00 $1.00 $1.00 $1.00
- -------------------------------------------------------------------------------------------------------------
Income from
investment operations............. 0.05 0.05 0.03 0.03 0.03
Distributions to shareholders
from investment income............ (0.05) (0.05) (0.03) (0.03) (0.03)
- -------------------------------------------------------------------------------------------------------------
Net asset value, end of period...... $1.00 $1.00 $1.00 $1.00 $1.00
- -------------------------------------------------------------------------------------------------------------
Total return........................ 5.0% 4.9% 2.8% 2.7% 2.9%
Net assets at end
of period (000s omitted).......... $2,405,456 $1,598,925 $1,029,775 $861,670 $834,743
Ratio of expenses to
average daily net assets**........ 0.70% 0.77% 0.80% 0.78% 0.71%*
Ratio of net investment
income to average
daily net assets**................ 4.93% 4.93% 2.81% 2.68% 3.63%*
- -------------------------------------------------------------------------------------------------------------
</TABLE>
* Adjusted to an annual basis.
** Various fund fees and expenses were voluntarily waived or absorbed by AMS
for the Prime Money Market Fund during the periods prior to 1995. Had the
Fund paid all expenses, the ratio of expenses and net investment income to
average daily net assets would have been 0.81%/2.80% for the year ended
July 31, 1994, 0.82%/2.64% for the year ended July 31, 1993, and
0.79%/3.55% for the period ended July 31, 1992.
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
5. Financial Highlights (continued)
<TABLE>
U.S. Government
Money Market Fund
- -------------------------------------------------------------------------------
- ------------------------------
Period from
Year ended Year ended Year ended Year ended 11/1/91
7/31/96 7/31/95 7/31/94 7/31/93 to 7/31/92
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of period............... $1.00 $1.00 $1.00 $1.00 $1.00
- -------------------------------------------------------------------------------------------------------------
Income from
investment operations............. 0.05 0.05 0.03 0.03 0.03
Distributions to shareholders
from investment income............ (0.05) (0.05) (0.03) (0.03) (0.03)
- -------------------------------------------------------------------------------------------------------------
Net asset value, end of period...... $1.00 $1.00 $1.00 $1.00 $1.00
- -------------------------------------------------------------------------------------------------------------
Total return........................ 4.9% 4.8% 2.7% 2.6% 2.6%
Net assets at end
of period (000s omitted).......... $146,685 $122,249 $56,815 $66,558 $60,834
Ratio of expenses to
average daily net assets**........ 0.65% 0.73% 0.78% 0.79% 0.76%*
Ratio of net investment
income to average
daily net assets**................ 4.87% 4.94% 2.73% 2.57% 3.47%*
- -------------------------------------------------------------------------------------------------------------
</TABLE>
* Adjusted to an annual basis.
** Various fund fees and expenses were voluntarily waived or absorbed by AMS
for the U.S. Government Money Market Fund during the period ended July 31,
1992. Had the Fund paid all expenses, the ratio of expenses and net
investment income to average daily net assets would have been 0.79%/3.44%
for the period.
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
5. Financial Highlights (continued)
<TABLE>
Tax-Free Money
Market Fund
- -------------------------------------------------------------------------------
- ------------------------------
Period from
Year ended Year ended Year ended Year ended 11/1/91
7/31/96 7/31/95 7/31/94 7/31/93 to 7/31/92
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of period............... $1.00 $1.00 $1.00 $1.00 $1.00
- -------------------------------------------------------------------------------------------------------------
Income from
investment operations............. 0.03 0.03 0.02 0.02 0.02
Distributions to shareholders
from investment income............ (0.03) (0.03) (0.02) (0.02) (0.02)
- -------------------------------------------------------------------------------------------------------------
Net asset value, end of period...... $1.00 $1.00 $1.00 $1.00 $1.00
- -------------------------------------------------------------------------------------------------------------
Total return........................ 3.0% 3.1% 2.0% 2.1% 2.2%
Net assets at end
of period (000s omitted).......... $359,153 $363,273 $275,278 $209,469 $187,205
Ratio of expenses to
average daily net assets**........ 0.59% 0.60% 0.65% 0.67% 0.62%*
Ratio of net investment
income to average
daily net assets**................ 3.03% 3.14% 1.98% 2.09% 2.81%*
- -------------------------------------------------------------------------------------------------------------
</TABLE>
* Adjusted to an annual basis.
** Various fund fees and expenses were voluntarily waived or absorbed by AMS
for the Tax-Free Money Market Fund during the period ended July 31, 1992.
Had the Fund paid all expenses, the ratio of expenses and net investment
income to average daily net assets would have been 0.65%/2.78% for the
period.
<PAGE>
PRIME MONEY MARKET FUND
Investments in Securities
July 31, 1996
Principal Market
Name of Issuer Amount Value (a)
- -------------------------------------------------------------------------------
(Percentages of each investment category relate to total net assets.)
Commercial Paper & Other Corporate Obligations (93.35%):
- -------------------------------------------------------------------------------
Agricultural Products (2.08%)
Cargill Inc., 5.24%-5.49%, 9/24/96-10/7/96 $20,400,000 $20,223,154
Cargill Financial Services, Inc.,
4.85%-5.63%, 8/13/96-3/4/97 30,000,000 (d) 29,617,340
-----------
49,840,494
-----------
Banks - Domestic (12.82%)
Bank of America, 5.40%-5.46%, 9/5/96-10/15/96 34,000,000 33,783,847
Bank of New York, 5.32%-5.37%, 8/2/96-10/2/96 40,000,000 39,992,913
Bankers Trust Company,
5.47%-5.49%, 10/9/96-12/2/96 29,500,000 29,066,873
Boatman's National Bank, 5.50%, 6/17/97 10,000,000 (e) 10,000,000
Comerica Bank, 5.78%, 9/3/96 10,000,000 9,991,450
Fifth Third Bank, 5.40%-5.43%, 8/20/96-9/20/96 35,000,000 35,000,000
First Bank, N.A., 5.35%, 8/5/96 10,000,000 10,000,000
First Chicago, 5.50%-6.05%, 10/4/96-6/13/97 22,000,000 22,005,921
National Bank of Detroit, 5.43%, 10/16/96 14,000,000 14,000,000
Nations Bank, N.A., 5.38%-5.47%, 8/6/96-9/12/96 30,000,000 30,000,000
Norwest Corporation,
5.28%-5.44%, 8/16/96-9/26/96 43,000,000 42,826,780
Wachovia Bank, North Carolina,
5.24%-5.76%, 8/12/96-4/14/97 11,900,000 11,897,288
Wachovia Bank of Georgia, N.A.,
5.36%-5.40%, 9/27/96-10/29/96 20,000,000 19,781,633
-----------
308,346,705
-----------
Banks - Other (14.88%)
ABN - AMRO, 5.02%-5.43%, 8/20/96-11/8/96 22,000,000 22,001,525
Accor S.A., 5.30%-5.50%, 8/1/96-10/16/96,
LOC Banque Nationale De Paris 50,000,000 49,810,317
Bank of Nova Scotia, 5.62%, 12/23/96 20,000,000 19,996,183
Commed Fuel Co., Inc.
5.33%, 8/14/96, LOC Credit Suisse 10,659,000 10,638,484
5.38%, 8/23/96, LOC Canadian
Imperial Bank of Commerce 10,000,000 9,967,122
Deutsche Bank, 4.82%-5.42%, 8/7/96-11/13/96 22,000,000 21,859,596
National Westminster Bank,
5.43%-5.47%, 9/9/96-10/15/96 35,000,000 35,002,516
See accompanying notes to investments in securities.
<PAGE>
PRIME MONEY MARKET FUND
Investments in Securities (continued)
Principal Market
Name of Issuer Amount Value (a)
- -------------------------------------------------------------------------------
Commercial Paper & Other Corporate Obligations (continued):
- -------------------------------------------------------------------------------
Banks - Other (continued)
Pemex Capital, Inc.
5.41%, 9/26/96, LOC Credit Suisse $7,872,000 $7,805,753
5.32%-5.40, 9/5/96-10/1/96, LOC Swiss Bank 32,000,000 31,785,783
Rabobank Nederland, 5.73%, 12/2/96 10,000,000 9,994,118
Royal Bank of Canada, 5.61%, 11/29/96 9,900,000 9,899,559
Sinochem American, Inc.,
5.28%-5.44%, 8/5/96-10/25/96,
LOC Credit Suisse 25,000,000 24,862,756
Societe Generale, 5.44%-6.12%, 9/5/96-6/10/97 32,000,000 31,995,075
Southwest Student Services Corp.,
5.39%, 8/5/96, LOC Dresner Bank 17,083,000 17,072,769
Toronto Dominion Holdings, Inc.,
5.00%-5.46%, 9/3/96-11/1/96 35,600,000 35,236,699
UBS Finance Inc., 5.68%, 8/1/96 20,000,000 20,000,000
-----------
357,928,255
-----------
Business Machines (1.48%)
Pitney Bowes Credit Corporation,
5.27%-5.35%, 8/27/96-9/27/96 35,777,000 35,521,693
-----------
Chemicals (1.73%)
Dupont (E.I.) deNemours & Co., 5.39%, 10/16/96 20,000,000 (d) 19,772,422
Monsanto Company, 5.30%-5.40%, 8/16/96-10/21/96 22,000,000 21,782,408
-----------
41,554,830
-----------
Conglomerates (3.48%)
American Brands, 5.28%-5.47%, 8/9/96-11/18/96 29,000,000 28,723,943
Pacific Dunlop Holdings, Inc.,
5.31%-5.52%, 8/30/96-11/27/ 46,000,000 (d) 45,379,664
Phillip Morris Companies, Inc.,
5.74%-5.91%, 9/24/96-3/15/97 9,618,000 9,695,388
-----------
83,798,995
-----------
Drugs & Cosmetics (2.71%)
Eli Lilly & Company,
4.83%-5.35%, 8/22/96-12/20/96 15,500,000 15,460,087
Warner-Lambert Company,
4.82%-5.37%, 8/20/96-9/3/96 50,000,000 (d) 49,820,722
-----------
65,280,809
-----------
Financial - Auto (1.66%)
Ford Motor Credit Corporation,
5.43%-6.04%, 9/10/96-12/1/96 40,120,000 (e) 39,883,298
-----------
See accompanying notes to investments in securities.
<PAGE>
PRIME MONEY MARKET FUND
Investments in Securities (continued)
Principal Market
Name of Issuer Amount Value (a)
- -------------------------------------------------------------------------------
Commercial Paper & Other Corporate Obligations (continued):
- -------------------------------------------------------------------------------
Financial - Diversified Business (15.68%)
American General Finance Corporation,
5.29%-5.85%, 8/22/96-4/1/97 $49,200,000 $48,826,497
Associates Corporation of North America,
5.28%-5.44%, 8/29/96-1/15/97 39,800,000 39,558,521
Avco Financial Services,
5.28%-5.49%, 8/14/96-11/15/96 47,150,000 46,851,433
Beneficial Corporation,
5.41%-6.28%, 10/21/96-7/18/97 28,615,000 28,348,401
CIT Group Holdings,
5.31%-5.45%, 8/15/96-9/20/96 25,000,000 (e) 24,930,702
General Electric Capital Corporation,
5.05%-5.38%, 8/1/96-12/15/07 39,635,000 (b) 39,585,696
Household Finance Company,
5.04%-5.96%, 8/15/96-3/15/97 41,000,000 (e) 40,907,905
Merrill Lynch & Co.,
5.50%-5.90%, 9/19/96-6/16/97 42,245,000 (e) 42,160,345
Morgan Stanley & Company,
5.37%-6.04%, 8/19/96-3/10/97 37,340,000 (e) 37,310,571
Norwest Financial Inc., 5.33%, 11/15/96 250,000 251,226
Transamerica Finance Corporation,
5.37%-5.40%, 8/28/96-10/3/96 28,600,000 28,403,958
-----------
377,135,255
-----------
Financial - Diversified Business, Asset-Backed (15.79%)
Asset Securitization Coop. Corporation,
5.41%-5.50%, 9/25/96-10/11/96 50,185,000 (d) 49,675,849
Barton Capital Corporation,
5.35%-5.42%, 8/2/96-8/21/96 49,767,000 (d) 49,680,795
Falcon Asset Securitization,
5.28%-5.45%, 8/26/96-10/25/96 42,150,000 (d) 41,693,312
Fleet Funding Corporation,
5.32%-5.37%, 8/13/96-9/6/96 35,000,000 (d) 34,893,100
Preferred Receivables Funding Corp.,
5.28%-5.50%, 8/21/96-10/24/96 49,625,000 49,292,919
Receivables Capital Corporation,
5.35%-5.38%, 8/9/96-9/6/96 49,092,000 (d) 48,942,547
Redwood Receivables Corporation,
5.36%-5.68%, 8/2/96-9/4/96 48,500,000 48,400,295
Triple A One Funding,
5.35%-5.45%, 8/15/96-9/16/96 33,200,000 (d) 33,059,518
Windmill Funding Corporation,
5.40%, 8/8/96-9/4/96 24,284,000 (d) 24,217,258
-----------
379,855,593
-----------
Food & Beverage (4.30%)
Anheuser Busch Companies, 4.75%, 10/28/96 14,000,000 13,837,444
CPC International, 5.27%-5.39%, 8/6/96-9/27/96 48,075,000 (d) 47,834,127
PepsiCo Incorporated,
5.60%-5.96%, 11/15/96-5/15/97 2,000,000 2,010,723
Sara Lee Corporation,
5.36%, 9/26/96 40,000,000 39,666,800
-----------
103,349,094
-----------
See accompanying notes to investments in securities.
<PAGE>
PRIME MONEY MARKET FUND
Investments in Securities (continued)
Principal Market
Name of Issuer Amount Value (a)
- -------------------------------------------------------------------------------
Commercial Paper & Other Corporate Obligations (continued):
- -------------------------------------------------------------------------------
Forest & Paper Products (0.76%)
Kimberly-Clark, 5.37%, 9/25/96 $18,500,000 $18,348,223
-----------
Household Products (0.41%)
Gillette Company, 5.85%, 8/15/96 1,750,000 1,749,332
Proctor & Gamble, 5.35%, 8/22/96 8,100,000 8,074,721
-----------
9,824,053
-----------
Municipals (3.86%)
Bedford County Virginia Industrial Development Authority
5.60%, 12/1/25,
LOC Canadian Imperial Bank of Canada 15,000,000 (b) 15,000,000
5.60%, 12/1/25, LOC Societe Generale 8,000,000 (b) 8,000,000
Metrocrest Hospital Authority,
5.47%, 8/1/96, LOC Bank of New York 10,000,000 10,000,000
New York City, New York G.O.
5.34%-5.35%, 8/15/22,
Financial Guaranty Insurance Corp. Insured 25,430,000 (b) 25,430,000
Oakland Alameda County Stadium, CA
5.52%, 9/4/96,
LOC Canadian Imperial Bank of Commerce 9,900,000 9,900,000
Siouxland Regional Cancer Center, IA
5.74%,12/1/14,
Municipal Bond Insurance Association Insured 4,500,000 (b) 4,500,000
West Baton Rouge, LA,
Ind. Dev. (Dow Chemical Co.)
5.39%-5.55%, 11/1/25 20,000,000 (b) 20,000,000
-----------
92,830,000
-----------
Oil Services (2.41%)
Mobil Corporation, 5.55%, 12/17/96 2,500,000 2,508,540
Mobil Australia Finance Company,
5.29%-5.40%, 8/2/96-9/26/96 47,500,000 (d) 47,229,164
Texaco Capital Corp., 5.73% 11/15/96 8,170,000 8,244,030
-----------
57,981,734
-----------
Printing & Publishing (1.96%)
Becton Dickenson & Co., 5.35%, 10/10/96 10,000,000 9,895,972
Pearson Inc., 5.38%-5.40%, 8/2/96-9/23/96 37,509,000 37,320,011
-----------
47,215,983
-----------
See accompanying notes to investments in securities.
<PAGE>
PRIME MONEY MARKET FUND
Investments in Securities (continued)
Principal Market
Name of Issuer Amount Value (a)
- -------------------------------------------------------------------------------
Commercial Paper & Other Corporate Obligations (continued):
- -------------------------------------------------------------------------------
Restaurants & Lodging (0.08%)
McDonalds Corporation, 5.81%, 2/18/97 $2,000,000 $2,032,398
-----------
Retail Stores (0.99%)
J.C. Penney Funding, Inc.,
5.29%-5.36%, 9/6/96-10/4/96 24,000,000 23,856,084
-----------
Utilities - Electric (4.17%)
Baltimore Gas & Electric Company,
5.38%-5.48%, 8/27/96-10/3/96 33,000,000 32,769,097
Carolina Power & Light,
5.25%-5.70%, 10/1/96-12/27/96 19,750,000 19,591,878
Northern States Power,
5.30%-5.40%, 8/7/96-10/15/96 48,200,000 47,935,308
-----------
100,296,283
-----------
Utilities - Telephone (2.10%)
Ameritech Corporation, 5.35%, 8/13/96 10,000,000 9,982,167
Southwestern Bell Capital Corporation,
5.27%-5.85%, 8/14/96-10/28/96 40,900,000 40,634,252
-----------
50,616,419
- -------------------------------------------------------------------------------
Total Commercial Paper & Other
Corporate Obligations (cost: $2,245,496,198) $2,245,496,198
- -------------------------------------------------------------------------------
Government & Agencies Securities (6.78%):
- -------------------------------------------------------------------------------
Downey Savings & Loan Assoc.,
5.54%, 1/9/97, LOC Fed. Home Loan Bank 15,000,000 14,628,358
Federal Farm Credit,
5.38%-5.58%, 12/2/96-8/1/97 25,000,000 (e) 24,987,657
Federal Home Loan Mortgage Corp.,
5.73%-5.84%, 3/20/97-5/22/97 9,500,000 9,475,855
Federal National Mortgage Association,
5.30%-5.81%, 9/27/96-8/1/97 63,000,000 (e) 62,980,069
Fidelity Federal Bank,
5.20%, 9/27/96, LOC Federal Home Loan Bank 9,819,000 9,738,157
New Hampshire Higher Education Loan Corp.,
5.36%, 8/30/96,
LOC Student Loan Marketing Association 15,000,000 14,935,233
Private Export Funding Corp.,
5.16%-5.78%, 1/31/97-4/30/97 8,000,000 8,121,172
Secondary Market Services, 5.37%, 9/17/96,
LOC Student Loan Marketing Association 16,006,000 15,893,785
Student Loan Marketing Association,
5.97%, 11/27/96 2,275,000 (e) 2,275,547
- -------------------------------------------------------------------------------
Total Government & Agencies Securities (cost: $163,035,833) $163,035,833
- -------------------------------------------------------------------------------
See accompanying notes to investments in securities.
<PAGE>
PRIME MONEY MARKET FUND
Investments in Securities (continued)
Principal Market
Name of Issuer Amount Value (a)
- -------------------------------------------------------------------------------
Repurchase Agreement (0.07%):
- -------------------------------------------------------------------------------
First Chicago, 5.58%, acquired 7/31/96
and due 8/1/96 with accrued interest of
$248 (collateralized by $1,633,500 U.S.
Treasury Bill, 5.12%, 10/10/96)
(cost: $1,600,000) 1,600,000 1,600,000
- -------------------------------------------------------------------------------
Total Investment in Securities (cost: $2,410,132,031) (c) $2,410,132,031
- -------------------------------------------------------------------------------
Notes to Investments in Securities:
(a) Securities are valued in accordance with procedures described in note 2 to
the financial statements.
(b) All or a portion consists of securities with interest rates that vary to
reflect current market conditions; rate shown is the effective rate on
July 31, 1996. The maturity date shown represents final maturity.
However, for purposes of Rule 2a-7, maturity is the next interest rate
reset date at which time the security can be put back to the issuer.
(c) Also represents cost for federal income tax purposes.
(d) All or a portion consists of commercial paper sold within terms of a
private placement memorandum, exempt from registration under section 4(2)
of the Securities Act of 1933, as amended, and may be sold only to dealers
in that program or other "accredited investors." These securities have
been determined to be liquid under guidelines established by the Board of
Directors.
(e) All or a portion consists of short-term securities with interest rates
that reset at set intervals at rates that are based on specific market
indicies. Rate shown is the effective rate on July 31, 1996.
<PAGE>
U.S.GOVERNMENT MONEY MARKET FUND
Investments in Securities
July 31, 1996
Principal Market
Name of Issuer Amount Value (a)
- -------------------------------------------------------------------------------
(Percentages of each investment category relate to total net assets.)
Government & Agencies Securities (79.11%):
- -------------------------------------------------------------------------------
Federal Home Loan Mortgage Corporation Notes (26.74%)
5.21%-5.35%, 8/1/96-10/16/96 $39,380,000 $39,216,877
Federal National Mortgage Association Notes (20.89%)
5.23%-5.81%, 8/8/96-8/1/97 30,760,000 (c) 30,649,588
Federal Home Loan Bank Notes (8.01%)
5.25%-5.98%, 8/8/96-6/2/97 11,765,000 11,742,949
Federal Farm Credit Bank Notes (13.63%)
5.33%-5.69%, 8/12/96-4/1/97 20,000,000 (c) 19,993,074
Student Loan Marketing Association Notes (2.32%)
5.82%-6.11%, 8/22/96-2/14/97 3,400,000 (c) 3,400,849
Tennessee Valley Authority (2.04%)
5.23%, 8/16/96 3,000,000 2,993,462
U.S. Treasury Notes (5.49%)
5.44%-5.71%, 11/30/96-4/30/97 8,000,000 8,048,267
- -------------------------------------------------------------------------------
Total Government & Agencies Securities (cost: $116,045,066) $116,045,066
- -------------------------------------------------------------------------------
Repurchase Agreement (20.66%)
- -------------------------------------------------------------------------------
First Chicago, 5.58%, acquired 7/31/96
and due 8/01/96 with accrued interest
of $4,697 (collateralized by $30,927,600
U.S. Treasury Bill, 5.12%, 10/10/96)
(cost: $30,300,000) 30,300,000 30,300,000
- -------------------------------------------------------------------------------
Total Investment in Securities (cost: $146,345,066) (b) $146,345,066
- -------------------------------------------------------------------------------
Notes to Investments in Securities:
(a) Securities are valued in accordance with procedures described in note 2 to
the financial statements.
(b) Also represents cost for federal income tax purposes.
(c) All or a portion of the balance consists of securities with interest rates
that reset at set intervals at rates that are based on specific market
indicies. Rate shown is the effective rate on July 31, 1996.
<PAGE>
TAX-FREE MONEY MARKET FUND
Investments in Securities
July 31, 1996
Principal Market
Name of Issuer Amount Value (a)
- -------------------------------------------------------------------------------
(Percentages of each investment category relate to total net assets.)
Alabama (0.28%)
Baldwin County Board of Education School Warrants
Series C, 3.92%, 6/1/97, FSA Insured $1,000,000 $1,009,300
-----------
Alaska (0.44%)
Anchorage G.O. School Refunding,
3.80%, 10/1/96, FGIC Insured 1,585,000 1,584,728
-----------
Arizona (0.23%)
State Board of Regents Refunding Rev.
Series 1992, 3.80%, 6/1/97, FGIC Insured 800,000 809,022
-----------
California (2.83%)
Anaheim HFA (Harbor Cliff Project),
2.90%, 7/1/06, LOC Bank of America 1,100,000 (b) 1,100,000
State School Cash Reserve Program Authority
1995 Pool Bond Series A, 4.02%, 7/2/97 9,000,000 9,067,005
-----------
10,167,005
-----------
Colorado (5.32%)
Adams County Family Housing Revenue
(Hunters Cove Project) Series 1985A,
3.80%, 1/15/14, LOC GECC 7,500,000 (b) 7,500,000
Eagle County Revenue Bonds Series 1995,
3.70%, 10/1/35, LOC Nationsbank Texas N.A. 6,000,000 (b) 6,000,000
Health Facilities Authority Revenue
(Sisters of Charity Health) 3.60%, 5/15/25,
LOC Toronto Dominion Bank 5,600,000 (b) 5,600,000
-----------
19,100,000
-----------
District of Columbia (0.33%)
Washington D.C. G.O. Series A-4,
3.75%, 10/1/07, LOC Toronto Dominion Bank 1,200,000 (b) 1,200,000
-----------
Florida (5.31%)
City of Orlando, 3.70%, 8/20/96 2,100,000 2,100,000
City of Orlando, 3.55%, 9/24/96 400,000 7,400,000
Dade County School Board Certificates of
Participation Series A, 3.70%,
5/1/97, AMBAC Insured 1,685,000 1,685,000
See accompanying notes to investments in securities.
<PAGE>
TAX-FREE MONEY MARKET FUND
Investments in Securities (continued)
Principal Market
Name of Issuer Amount Value (a)
- -------------------------------------------------------------------------------
Florida (continued)
Housing Finance Authority MFHR Bonds
(Oaks-Orange Park), 3.65%, 7/1/07,
LOC Chemical Bank $2,585,000 (b) $2,585,000
Jacksonville Electric Authority, 3.65%,
8/21/96, LOC Credit Suisse 2,800,000 2,800,000
Palm Bay, 3.60%, 3/1/97, MBIA Insured 1,065,000 1,064,379
State Municipal Power Agency Revenue Refund,
3.55%, 10/1/96 1,400,000 1,436,212
-----------
19,070,591
-----------
Georgia (1.87%)
Clayton County MFHR Series 1990
(Kings Arena Apartment), 3.60%,
1/1/21, FSA Insured 2,215,000 (b) 2,215,000
Cobb County Marietta Water Authority
Revenue Bonds, 3.60%, 11/1/96 1,000,000 1,005,000
Gwinnett County Water and Sewer Authority,
3.36%, 8/1/96 2,250,000 638,123
State of Georgia G.O., 3.82%, 5/1/97 2,750,000 2,868,854
-----------
6,726,977
-----------
Hawaii (2.26%)
Honolulu City & County
3.50%, 9/24/96 5,100,000 5,100,000
3.65%, 8/21/96 3,000,000 3,000,000
-----------
8,100,000
-----------
Idaho (0.36%)
State Health Facilities Authority Revenue
(St. Luke's Regional Medical Center), 3.65%,
5/1/22, LOC Credit Suisse 1,280,000 (b) 1,280,000
-----------
Illinois (14.40%)
City of Springfield Community Improvement
Revenue Bonds Series 1985, (Realing
Restoration Project), 3.90%, 12/1/15 3,400,000 (b) 3,400,000
City of Springfield MFHR
(OT Center Limited Project), 3.80%, 12/1/15 7,700,000 (b) 7,700,000
Development Finance Authority
(A.E. Stanley Manufacturing), 3.55%, 12/1/05,
LOC Union Bank of Switzerland 1,600,000 (b) 1,600,000
Development Finance Authority Series 1995
(Latin School of Chicago),
3.75%, 6/1/30, LOC Bank of America 13,900,000 (b) 13,900,000
Education Facilities Authority Demand
Revenue Bonds, 3.55%, 12/1/25,
LOC First National Bank of Chicago 300,000 (b) 300,000
See accompanying notes to investments in securities.
<PAGE>
TAX-FREE MONEY MARKET FUND
Investments in Securities (continued)
Principal Market
Name of Issuer Amount Value (a)
- -------------------------------------------------------------------------------
Illinois (continued)
Health Facilities Authority Demand Revenue Bonds
Palos Community Hosp., 3.55%,
12/1/15, LOC ABN-AMRO Bank $700,000 (b) $700,000
Series 1985B, 3.65%, 11/1/15,
LOC First National Bank of Chicago 7,400,000 (b) 7,400,000
Series 1985B, 3.70%, 1/1/16,
LOC First National Bank of Chicago 1,500,000 (b) 1,500,000
Joliet Regional Port District
IDR Bonds 3.85%, 7/15/03 9,735,000 (b) 9,735,000
Housing Finance Authority
(Elmhurst Memorial Hospital), 3.75%, 1/1/20 2,200,000 (b) 2,200,000
State Toll Highway Authority Revenue Bonds
Series 1993B, 3.55%, 1/1/10, MBIA Insured 3,300,000 (b) 3,300,000
-----------
51,735,000
-----------
Indiana (1.84%)
State Health Facilities Financing Authority
(Capital Access Designated Pool Program),
3.60%, 12/1/02, LOC Comerica Bank 1,800,000 (b) 1,800,000
State Hospital Equipment Finance Authority
Revenue Series 1985A, 3.60%,
12/1/15, MBIA Insured 4,800,000 (b) 4,800,000
-----------
6,600,000
-----------
Iowa (6.69%)
Cedar Rapids Hospital Facilities Revenue
(St. Luke's Methodist Hospital),
3.75%, 8/15/96, FGIC Insured 1,000,000 1,000,297
Des Moines HFA (Small Business Loan Program),
3.75%, 5/1/97, LOC Federal Home Loan Bank 6,635,000 (b) 6,635,000
Le Claire Electric Revenue
Series 1986, 3.80%, 9/1/26 4,795,000 (b) 4,796,235
Series 1986B, 4.10%, 9/1/26 245,000 (b) 245,026
Mount Vernon Private College Project
(Cornell) Series 1985, 3.70%, 10/1/15,
LOC First Bank Minneapolis, NA 3,300,000 (b) 3,300,000
Polk County Hospital Revenue Bonds,
3.60%, 12/1/05, MBIA Insured 6,040,000 (b) 6,040,000
State School Corporation
(Iowa Cash Anticipation Program)
Series 1996A, 3.90%, 6/27/97,
Capital Guaranty Insured 1,000,000 1,007,389
Series 1995-1996B, 3.40%, 1/30/97,
Capital Guaranty Insured 1,000,000 1,004,095
-----------
24,028,042
-----------
See accompanying notes to investments in securities.
<PAGE>
TAX-FREE MONEY MARKET FUND
Investments in Securities (continued)
Principal Market
Name of Issuer Amount Value (a)
- -------------------------------------------------------------------------------
Kansas (1.67%)
City of Burlington (Kansas City P&L)
3.50%, 9/10/96, LOC Societe Generale $4,000,000 $4,000,000
City of Burlington, 3.35%, 9/4/96,
LOC Societe Generale 2,000,000 2,000,000
-----------
6,000,000
-----------
Louisiana (1.70%)
Rapides Parish PCR
(Central Louisiana Electric Co. Project),
3.45%, 7/1/18, LOC Swiss Bank 1,000,000 (b) 1,000,000
State Public Facilities Authority,
3.40%, 9/9/96 3,000,000 3,000,000
West Baton Rouge Industrial District #3,
3.70%, 8/14/96 2,100,000 2,100,000
-----------
6,100,000
-----------
Maryland (3.65%)
Anne Arundel County
(Baltimore Gas & Electric), 3.40%, 9/5/96 9,000,000 9,000,000
Montgomery County Housing Opportunity,
3.75%, 11/1/07, LOC GECC 2,000,000 (b) 2,000,000
Montgomery County Public Improvement
Series A-1, 3.95%, 7/1/07 2,100,000 (b) 2,100,000
-----------
13,100,000
-----------
Michigan (1.53%)
State Storage Authority Series I,
3.45%, 8/15/96, LOC CIBC 5,500,000 (b) 5,500,000
-----------
Minnesota (4.26%)
Duluth G.O. Series 1995B, 4.50%, 9/30/96 5,000,000 5,004,304
St. Paul Housing & Redevelopment Auth.,
3.80%, 9/1/96, AMBAC Insured 2,000,000 1,999,584
State Housing Finance Agency SFMR
Series 1986A, 3.55%, 8/1/11 3,545,000 (b) 3,545,000
State of Minnesota G.O. Refunding,
3.45%, 8/1/04 1,450,000 (b) 1,450,000
State of Minnesota G.O. Series 1986,
3.45%, 8/1/99 1,000,000 (b) 1,000,000
State Tax & Aid Anticipation Borrowing
(School District Credit Enhancement Program),
3.95%, 8/19/97 2,300,000 (e) 2,312,167
-----------
15,311,055
-----------
Missouri (1.30%)
Kansas City Municipal Assistance Corp.
Revenue Capital Appreciation Series A,
Zero Coupon, 4.00%, 10/15/96, AMBAC Insured 985,000 977,161
See accompanying notes to investments in securities.
<PAGE>
TAX-FREE MONEY MARKET FUND
Investments in Securities (continued)
Principal Market
Name of Issuer Amount Value (a)
- -------------------------------------------------------------------------------
Missouri (continued)
State Environmental Improvement & Energy
Resource Authority PCR
(Monsanto Corporation), 3.60%, 2/1/09 $1,800,000 (b) $1,800,000
State Health and Education Facilities
Authority Revenue (Jewish Hospital
of St. Louis), 3.78%, 7/1/15 1,820,000 (b) 1,884,574
-----------
4,661,735
-----------
Montana (2.62%)
State Health Facilities Authority Revenue Bonds
Series A, 3.60%, 12/1/15, FGIC Insured 9,398,000 (b) 9,398,000
-----------
Nebraska (2.28%)
City of Lincoln, 3.60%, 10/9/96 3,300,000 3,300,000
Investment Finance Authority Hospital Revenue
Bonds 3.60%, 12/1/15, FGIC Insured 4,900,000 (b) 4,900,000
-----------
8,200,000
-----------
Nevada (1.85%)
Clark County Airport System Refunding Revenue Notes
Series 1993A, 3.55%, 7/1/12, MBIA Insured 5,140,000 (b) 5,140,000
Sparks G.O., 3.75%, 9/1/96, FGIC Insured 1,490,000 1,489,994
-----------
6,629,994
-----------
New Jersey (0.33%)
Economic Development Authority,
3.82%, 12/1/04, LOC Credit Suisse 1,200,000 (b) 1,200,000
-----------
New Mexico (1.25%)
City of Albuquerque Revenue Bonds, 3.65%, 7/1/22,
LOC Canadian Imperial Bank of Commerce 4,500,000 (b) 4,500,000
-----------
New York (0.61%)
New York City G.O., 3.70%, 10/1/20, FGIC Insured 400,000 (b) 400,000
New York City Water Finance Authority,
3.70%, 6/15/25, FGIC Insured 1,800,000 (b) 1,800,000
-----------
2,200,000
-----------
See accompanying notes to investments in securities.
<PAGE>
TAX-FREE MONEY MARKET FUND
Investments in Securities (continued)
Principal Market
Name of Issuer Amount Value (a)
- -------------------------------------------------------------------------------
North Carolina (0.42%)
Education Facilities Finance Agency Rev.
(Bowman Gray School of Medicine),
3.60%, 9/1/20, LOC Wachovia Bank $1,500,000 (b) $1,500,000
-----------
North Dakota (1.44%)
State Housing Finance Agency SFMR,
3.80%, 1/1/16 5,160,000 (b) 5,160,000
-----------
Ohio (0.51%)
Columbus G.O. Series D, 3.85%, 9/15/96 1,815,000 1,815,000
-----------
Oklahoma (0.28%)
Garfield County Industrial Auth. PCR
(OK Gas & Electric), 3.60%, 1/1/25 1,000,000 (b) 1,000,000
-----------
Pennsylvania (9.01%)
Beaver County IDA Pollution Control Revenue Bonds
Series 1995, 3.50%, 10/1/29, LOC Swiss Bank 7,900,000 (b) 7,900,000
Lehigh County IDA (Allegheny Electric Coop.)
Series 1985, 3.40%, 12/1/15,
LOC Rabobank Nederland 3,000,000 (b) 3,000,000
Philadelphia IDA Series 1986
(Charter Hospital Project), 3.70%, 1/1/01,
LOC Bankers Trust Co. 6,175,000 (b) 6,175,000
Quakertown Hospital Authority,
3.55%, 7/1/05, LOC PNC Bank 15,300,000 (b) 15,300,000
-----------
32,375,000
-----------
South Carolina (0.64%)
Florence County Hospital Revenue
(McLeod Regional Medical Center) Series 1985A,
3.70%, 11/1/15, FGIC Insured 2,300,000 (b) 2,300,000
-----------
Tennesee (3.46%)
Clarksville Public Building Authority Revenue
Series 1990, 3.55%, 7/1/13, MBIA Insured 3,042,000 (b) 3,042,000
State of Tennessee G.O. Series A, 5.00%, 5/1/97 5,660,000 5,709,211
Stewart County Bond Anticipation Notes G.O.,
3.63%, 2/15/97 3,650,000 3,672,356
-----------
12,423,567
-----------
See accompanying notes to investments in securities.
<PAGE>
TAX-FREE MONEY MARKET FUND
Investments in Securities (continued)
Principal Market
Name of Issuer Amount Value (a)
- -------------------------------------------------------------------------------
Texas (7.20%)
Brownsville Utility System Revenue Priority Refunding
Series B, 3.45%, 9/1/96, FGIC Insured $1,000,000 $1,023,296
First Colony Municipal Utility District
#4 Refunding, 4.00%, 4/1/97 325,000 316,530
Houston Series E, 3.70%, 4/1/97 1,500,000 1,499,493
Houston Water and Sewer System Revenue,
3.60%, 12/1/96 2,330,000 2,402,768
Lone Star Airport Revenue Improvement Authority
Series 1984B-4, 3.65%, 12/1/04,
LOC Royal Bank of Nova Scotia 1,900,000 (b) 1,900,000
North Texas Municipal Water District,
3.55%, 9/1/96 1,000,000 1,005,948
Nueces River Authority PCR Series 1985,
3.80%, 12/01/99, LOC Bank of Nova Scotia 1,400,000 (b) 1,400,000
Pine Tree Independent School District Refunding,
3.85%, 2/15/97 620,000 607,464
State Tax Revenue Anticipation Notes Series 1995A,
4.04%, 8/30/96 15,700,000 15,721,352
-----------
25,876,851
-----------
Utah (3.12%)
State Board of Regents Student Loan Revenue Bonds
Series B, 3.55%, 11/1/00, AMBAC Insured 11,200,000 (b) 11,200,000
-----------
Washington (6.39%)
Port of Anacortes, 3.20%, 8/1/96 10,500,000 10,500,000
Port of Seattle Industrial Development Corporation
Series 1984, (Alaska Airlines Project),
3.65%, 12/1/09, LOC Bank of New York 9,420,000 (b) 9,420,000
State G.O. Refunding Series R 1994A,
3.45%, 8/1/96 1,975,000 1,975,000
State Health Care Facilities Authority Revenue
Series A, 3.70%, 1/1/18 700,000 (b) 700,000
State Health Care Facilities Authority Revenue
(Fred Hutchinson Cancer Center), 3.65%,
1/1/18, LOC Morgan Guaranty Trust 340,000 (b) 340,000
-----------
22,935,000
-----------
Wisconsin (1.00%)
Health Facilities Authority,
3.50%, 1/1/16, LOC Toronto Dominion Bank 2,600,000 (b) 2,600,000
Milwaukee Area Technical College
Series B., 3.85%, 6/1/97 1,000,000 1,009,265
-----------
3,609,265
-----------
See accompanying notes to investments in securities.
<PAGE>
TAX-FREE MONEY MARKET FUND
Investments in Securities (continued)
Principal Market
Name of Issuer Amount Value (a)
- -------------------------------------------------------------------------------
Wyoming (2.09%)
Gillette, Campbell County,
3.40%, 9/3/96, LOC Deutsche Bank $2,800,000 $2,800,000
Platte County PCR Series 1984A,
3.70%, 07/1/14, LOC Societe Generale 700,000 (b) 700,000
Sweetwater County PCR (Pacificorp Project)
3.55%, 1/1/17, LOC Union Bank of Switzerland 4,000,000 (b) 4,000,000
-----------
7,500,000
- -------------------------------------------------------------------------------
Total Investments in Securities (cost: $361,906,132) (d) $361,906,132
- -------------------------------------------------------------------------------
Notes to Investments in Securities:
(a) Securities are valued in accordance with procedures described in note 2 to
the financial statements.
(b) Interest rate varies to reflect current market conditions; rate shown is
the effective rate on July 31, 1996. The maturity date shown represents
final maturity. However, for purposes of Rule 2a-7, maturity is the next
interest rate reset date at which time the security can be put back to the
issuer.
(c) Portfolio abbreviations: IDA - Industrial Development Authority
IDR - Industrial Development Revenue
HFA - Housing Finance Authority
MFHR - Multi-Family Housing Revenue
PCR - Pollution Control Revenue
SFMR - Single Family Mortgage Revenue
LOC - Letter of Credit
G.O. - General Obligation
GECC - General Electric Capital Corporation
AMBAC - American Municipal Bond Association
Corporation
FGIC - Financial Guaranty Insurance Corporation
MBIA - Municipal Bond Insurance Association
CIBC - Canadian Imperial Bank of Commerce
FSA - Financial Security Assurance Corporation
(d) Also represents cost for federal income tax purposes.
(e) On July 31, 1996, the cost of securities purchased on a when-issued basis
was $2,312,167.
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders
Great Hall Investment Funds, Inc.
We have audited the accompanying statements of assets and liabilities,
including the schedules of investments in securities, of Prime Money Market
Fund, U.S. Government Money Market Fund and Tax-Free Money Market Fund (funds
within Great Hall Investment Funds, Inc.) as of July 31, 1996 and the related
statements of operations for the year then ended and the statements of changes
in net assets for each of the years in the two-year period ended July 31, 1996
and the financial highlights for each of the years in the four-year period
ended July 31, 1996 and for the period from November 1, 1991 (commencement of
operations) to July 31, 1992. These financial statements and the financial
highlights are the responsibility of the Funds' management. Our responsibility
is to express an opinion on these financial statements and the financial
highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and the
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Investment securities held in custody are confirmed
to us by the custodian. As to securities purchased and sold but not received
or delivered, we request confirmations from brokers, and where replies are not
received, we carry out other appropriate auditing procedures. An audit also
includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and the financial highlights referred
to above present fairly, in all material respects, the financial position of
Prime Money Market Fund, U.S. Government Money Market Fund and Tax-Free Money
Market Fund at July 31, 1996, and the results of their operations for the year
then ended and the changes in their net assets for each of the years in the
two-year period ended July 31, 1996, and the financial highlights for each of
the years in the four-year period ended July 31, 1996 and for the period from
November 1, 1991 to July 31, 1992, in conformity with generally accepted
accounting principles.
KPMG Peat Marwick LLP
Minneapolis, Minnesota
September 3, 1996
<PAGE>
FEDERAL TAX INFORMATION
Information for federal income tax purposes is presented as an aid for
shareholders in reporting the distributions shown below:
Distributions paid during the fiscal year ended July 31, 1996:
Prime Money U.S. Government Tax-Free Money
Market Fund Money Market Fund Market Fund
Payable Date Per Share Per Share Per Share
- -------------------------------------------------------------------------------
August 31........ $0.00439 $0.00436 $0.00268
September 29..... 0.00437 0.00430 0.00272
October 31....... 0.00423 0.00417 0.00258
November 30...... 0.00422 0.00417 0.00265
December 29...... 0.00449 0.00443 0.00295
January 31....... 0.00411 0.00403 0.00239
February 29...... 0.00384 0.00377 0.00223
March 29......... 0.00399 0.00392 0.00234
April 30......... 0.00387 0.00380 0.00242
May 31........... 0.00427 0.00419 0.00286
June 28.......... 0.00364 0.00363 0.00222
July 31.......... 0.00409 0.00405 0.00227
-------- -------- --------
$0.04951 $0.04882 $0.03031
-------- -------- --------
Source of Distributions
During the period ending July 31, 1996, 96.9% of the Tax-Free Money Market Fund
distributions were derived from interest on municipal securities and qualify as
exempt interest dividends for federal tax purposes. The December 29, 1995
dividend of 0.00295 for the Tax-Free Money Market Fund includes a 0.000999 per
share short-term gain distribution, which is taxable as ordinary dividend
income.
Federal Taxation
Exempt interest dividends are exempt from federal income taxes and should not
be included in shareholders's gross income but need to be reported on the
income tax return for information purposes. Each shareholder should consult a
tax adviser about reporting this income for state and local tax purposes. By
early February 1997, the Fund will provide the shareholder with information
regarding the percentage of distributions exempt from federal income taxes and
a breakdown setting forth states from which income was earned.
Income distributions for the Prime Money Market Fund and U.S. Government Money
Market Fund are taxable as ordinary dividend income and none qualify for the
corporate dividends received deduction. Each shareholder should consult a tax
adviser about reporting this income for state and local tax purposes. By early
February 1997, each shareholder will receive a breakdown of income earned by
investment category on a calendar-year basis.
<PAGE>
(This Page Intentionally Left Blank)
(Great Hall LOGO) September 13, 1996
To Our Shareholders:
On August 27 the Great Hall Board of Directors approved the sale of the
Great Hall National and Minnesota Insured Tax-Exempt Funds to Voyageur Fund
Managers, Inc. If approved by the majority of shareholders, your shares will
be exchanged for shares of equal value of the Voyageur National High Yield
Municipal Fund or the Voyageur Minnesota Insured Fund in early November. We
believe this sale is in your best interests for the following reasons: (1) the
strategy of Great Hall's distributor to promote predominantly externally
managed mutual funds, could in the long term cause the Great Hall Fund's size
to decrease and thereby make it difficult to provide competitive investment
returns; (2) Voyageur has a strong reputation in the tax-exempt mutual fund
industry and offers a good fit for the funds; (3) the investment objectives of
the Great Hall Funds and Voyageur Funds are similar. You will receive proxy
materials in early October, giving you much more information on the exchange of
your shares and allowing you an opportunity to vote on the transaction. Until
that time, please call either us or your investment executive with questions.
During the past year, the Great Hall National Tax-Exempt Fund's total
return equaled 7.78% (or 2.93% allowing for a one time, up-front sales charge).
During the same period, the total return of the Great Hall Minnesota Insured
Tax-Exempt Fund was 5.90% (or 1.13% allowing for a one time, up-front sales
charge). The table below shows total return for one year, five years, ten
years (if applicable), and since the Funds' inception:
Excluding Allowing Lehmen Brothers
National Fund Sales Charge Sales Charge Municipal Bond Index
One Year............ 7.78% 2.93% 6.60%
Five Year........... 8.19% 7.20% 7.72%
Since Inception*.... 8.01% 7.51% 7.88%
* The Fund commenced operations on September 22, 1986.
Excluding Allowing Lehmen Brothers
Minnesota Fund Sales Charge Sales Charge Municipal Bond Index
One Year............ 5.90% 1.13% 6.60%
Five Year........... 6.62% 5.64% 7.72%
Ten Year............ 7.22% 6.72% 8.24%
Since Inception*.... 6.94% 6.46% 8.02%
* The Fund commenced operations on March 5, 1986.
The Bond Market
The bond market made two large moves during the fiscal year. Interest
rates declined and bond prices rose during the first half of the fiscal year,
continuing the trend which began in November, 1994. The economy was showing
only very slow growth during this time, and the Federal Reserve responded by
reducing short-term interest rates. Interest rates on longer maturity bonds
also declined significantly, and the bond market expected further interest rate
decreases by the Federal Reserve. Shortly after the Federal Reserve's final
interest rate reduction in January, 1996, economic data showed that the economy
was gaining unexpected strength. Interest rates began to rise and bond prices
declined as the market realized that the Federal Reserve would probably not
reduce rates further and may even begin to raise them. The net effect of these
two price moves was that interest rates and prices of tax-exempt bonds ended
the fiscal year quite close to where they began the year.
The prices of tax-exempt bonds performed better than did prices of taxable
bonds during the fiscal year. During most of 1995, yields on tax-exempt bonds
were unusually attractive compared to yields on taxable bonds, primarily due to
fears of federal tax law changes such as the "flat tax." Most investors now
seem to believe that any major changes in tax law that would hurt tax-exempt
bonds is unlikely, so the relationship between taxable and tax-exempt interest
rates has returned to more normal levels.
Great Hall National Tax-Exempt Fund
The managers of the Great Hall National Tax-Exempt Fund have continued to
position the Fund to limit its price volatility in all market conditions. The
key strategies used are to keep the average maturity relatively short and the
average bond coupon relatively high. The Fund outperformed the Lehman Brothers
Municipal Bond Index for the year (excluding sales charge), primarily because
of the higher income return on the National Fund. The Fund's total return
(excluding sales charge) has also outperformed the Index for the five-year and
since-inception periods.
The primary objective of the Fund is to provide a high level of tax-exempt
income by investing in medium- and lower-grade municipal securities, including
bonds that do not have a credit rating, which the managers deem credit-worthy
through careful analysis. Many of the non-rated bonds are full faith and
credit general obligation or utility service revenue bonds, which the managers
believe are the safest types of municipal bonds. The Fund has not experienced
any default losses in the last five years. The yields available on non-rated
bonds are generally higher than on rated bonds, and these higher yields have
been the primary reason for the Fund achieving greater total returns than most
tax-exempt funds over the past five years.
The Fund's secondary objective is to limit the price volatility of its
investment portfolio caused by changes in the general level of interest rates.
As previously stated, the Fund continues to be conservatively positioned
through the use of shorter than average maturities and higher than average
coupons.
The Fund continues to be essentially fully invested, minimizing the use of
low yielding cash equivalent investments.
Great Hall Minnesota Insured Tax-Exempt Fund
The Great Hall Minnesota Insured Tax-Exempt Fund invests in bonds that are
exempt from both federal and Minnesota state income taxes, and all of the bonds
in its portfolio (excluding short-term cash equivalents) are insured as to
timely payment of principal and interest by insurance companies rated AAA. The
Fund underperformed the Lehmen Brothers Municipal Bond Index for the year, 5
year, 10 year and since inception periods (excluding sales charge). There are
three reasons for this: (1) a mutual fund has annual expenses which are
deducted from the return numbers, while the index contains municipal bond
returns without any attendant expenses; (2) the index contains both insured and
uninsured bonds, and the Fund only invests in very high quality insured bonds;
(3) Minnesota municipal bond returns are generally lower than those in most
other states due to their exemption from the high Minnesota income tax, while
the index is a composite of all states.
The Fund continues to be essentially fully invested, minimizing the use of
low yielding cash equivalent investments.
On behalf of all the employees at IFG Asset Management Services, Inc., we
want to thank you for your investment and your past support of our Funds.
Sincerely,
J. Scott Spiker Raye C. Kanzenbach
Chief Executive Officer Vice President/Senior Portfolio Manager
Great Hall Investment Funds, Inc. Great Hall Investment Funds, Inc.
<PAGE>
For electronic filing purposes, the following is a representation of the
graphic chart shown in the printed copy.
Suppose you had invested $10,000 at the inception of the respective fund /
Dollar value of investment at Fund fiscal year-ends.
GREAT HALL NATIONAL TAX-EXEMPT FUND
Average Annual Total Return *
1 Year 5 Year Since Inception (9/86)
2.93% 7.20% 7.51%
Great Hall National Great Hall National
Lehmen Brothers Tax-Exempt Fund Tax-Exempt Fund
Municipal Index (excl. sales charge) (excl. sales charge)
10,000 10,000 9,550
7/31/87 10,413 10,366 9,899
7/31/88 11,142 11,128 10,627
7/31/89 12,497 12,525 11,961
7/31/90 13,362 13,362 12,761
7/31/91 14,530 14,399 13,751
7/31/92 16,528 16,391 15,654
7/31/93 17,987 17,941 17,134
7/31/94 18,330 18,477 17,645
7/31/95 19,774 19,801 18,910
7/31/96 21,078 21,341 20,381
GREAT HALL MINNESOTA INSURED TAX-EXEMPT FUND
Average Annual Total Return *
1 Year 5 Year 10 Year Since Inception (3/86)
1.13% 5.64% 6.72% 6.46%
Great Hall MN Insured Great Hall MN Insured
Lehmen Brothers Tax-Exempt Fund Tax-Exempt Fund
Municipal Index (excl. sales charge) (excl. sales charge)
10,000 10,000 9,550
7/31/86 9,991 9,908 9,462
7/31/87 10,897 10,396 9,928
7/31/88 11,660 11,144 10,643
7/31/89 13,078 12,558 11,993
7/31/90 13,984 13,331 12,731
7/31/91 15,206 14,434 13,784
7/31/92 17,297 16,225 15,495
7/31/93 18,824 17,515 16,727
7/31/94 19,183 17,552 16,763
7/31/95 20,694 18,781 17,936
7/31/96 22,059 19,889 18,994
* Average annual total returns include the maximum 4.50% sales charge.
The charts above illustrate the performance of the Great Hall National
Tax-Exempt Fund and the Great Hall Minnesota Insured Tax-Exempt Fund in
comparison with the Lehman Brothers Municipal Index. The Index consists of
an average total return of securities covered by the index, assuming no
operating expenses, transaction fees or sales loads. How well a fund
parallels the index can give an investor a feel for return and volatility
comparisons. If the index were purchased as a portfolio, some level of
transaction costs would apply. Performance quoted represents past
performance and is not indicative of future results.
<PAGE>
STATEMENTS OF ASSETS AND LIABILITIES
July 31, 1996
Minnesota
National Insured
Tax-Exempt Tax-Exempt
Fund Fund
- -------------------------------------------------------------------------------
Assets:
Investments in securities at market value
(note 2), identified cost $61,649,826
and $24,740,347, respectively................ $62,573,028 $24,947,290
Cash in bank on demand deposit................. 14,729 194,058
Receivable for fund shares sold................ 38,955 530
Accrued interest receivable.................... 1,085,832 465,137
- -------------------------------------------------------------------------------
Total assets................................... 63,712,544 25,607,015
- -------------------------------------------------------------------------------
Liabilities:
Cash portion of dividends
payable to shareholders...................... 173,149 28,923
Accrued investment advisory fee................ 26,767 8,177
Accrued distribution fee....................... 21,010 8,348
Other accrued expenses......................... 31,923 39,775
- -------------------------------------------------------------------------------
Total liabilities.............................. 252,849 85,223
- -------------------------------------------------------------------------------
Net assets applicable to
outstanding capital stock.................... $63,459,695 $25,521,792
- -------------------------------------------------------------------------------
Represented by:
Capital stock -- authorized 10 billion
shares of $.01 par value for each
Fund, outstanding 6,230,204 and
2,551,359 shares, respectively............... $62,302 $25,514
Additional paid-in capital..................... 62,499,665 25,903,108
Accumulated net realized losses
on investments (note 2)...................... (25,474) (613,773)
Unrealized appreciation of investments......... 923,202 206,943
- -------------------------------------------------------------------------------
Total -- representing net assets
applicable to outstanding capital stock.... $63,459,695 $25,521,792
- -------------------------------------------------------------------------------
Net asset value per share
of outstanding capital stock................. $10.19 $10.00
- -------------------------------------------------------------------------------
See accompanying notes to investments in securities.
<PAGE>
STATEMENTS OF OPERATIONS
For the Year Ended July 31, 1996
Minnesota
National Insured
Tax-Exempt Tax-Exempt
Fund Fund
- -------------------------------------------------------------------------------
Income:
Interest..................................... $4,486,670 $1,536,534
- -------------------------------------------------------------------------------
Expenses (note 5):
Investment advisory fee...................... 322,677 135,544
Distribution fee............................. 193,606 81,326
Custodian, accounting and
transfer agent fees......................... 49,444 28,884
Reports to shareholders...................... 15,409 11,780
Directors' fees.............................. 7,500 7,500
Audit and legal fees......................... 22,080 30,553
Registration fees............................ 4,454 1,350
Insurance fees............................... 1,750 7,050
Other expenses............................... 5,000 6,627
- -------------------------------------------------------------------------------
Total expenses................................. 621,920 310,614
Less expenses voluntarily waived or
absorbed by Advisor and Distributor........... (73,210) (88,781)
- -------------------------------------------------------------------------------
Total net expenses............................. 548,710 221,833
- -------------------------------------------------------------------------------
Investment income -- net....................... 3,937,960 1,314,701
- -------------------------------------------------------------------------------
Realized and unrealized gains on investments:
Net realized gain on investments (note 3).... 211,120 2,735
Net change in unrealized appreciation or
depreciation of investments................. 691,939 263,752
- -------------------------------------------------------------------------------
Net gain on investments........................ 903,059 266,487
- -------------------------------------------------------------------------------
Net increase in net
assets resulting from operations.............. $4,841,019 $1,581,188
- -------------------------------------------------------------------------------
See accompanying notes to financial statements.
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
National Minnesota Insured
Tax-Exempt Fund Tax-Exempt Fund
- -------------------------------------------------------------------------------
Year Year Year Year
Ended Ended Ended Ended
7/31/96 7/31/95 7/31/96 7/3195
- -------------------------------------------------------------------------------
Operations:
Investment income
-- net.................. $3,937,960 $4,417,173 $1,314,701 $1,571,421
Net realized gain (loss)
on investments.......... 211,120 868,133 2,735 (616,795)
Net change in unrealized
appreciation or depreciation
of investments.......... 691,939 (592,387) 263,752 728,206
- -------------------------------------------------------------------------------
Net increase in net
assets resulting from
operations.............. 4,841,019 4,692,919 1,581,188 1,682,832
- -------------------------------------------------------------------------------
Distributions to shareholders from:
Investment income - net.. (3,937,960) (4,417,173) (1,314,701) (1,571,421)
Accumulated net
realized gains.......... (779,384) (308,935) -- (293,106)
Excess distribution of
accumulated net
realized gains......... (25,474) -- -- --
- -------------------------------------------------------------------------------
Total distributions
to shareholders......... (4,742,818) (4,726,108) (1,314,701) (1,864,527)
- -------------------------------------------------------------------------------
Capital share transactions (note 4):
Proceeds from sales
(note 5)................ 2,593,882 3,529,401 1,355,953 633,943
Shares issued for reinvest-
ment of distributions... 2,523,625 2,501,190 865,127 1,145,781
Payment for shares
redeemed................ (8,113,265) (11,812,598) (5,600,510) (10,071,324)
- -------------------------------------------------------------------------------
Decrease in net assets
from capital share
transactions............ (2,995,758) (5,782,007) (3,379,430) (8,291,600)
- -------------------------------------------------------------------------------
Total decrease
in net assets............. (2,897,557) (5,815,196) (3,112,943) (8,473,295)
- -------------------------------------------------------------------------------
Net assets at
beginning of year......... 66,357,252 72,172,448 28,634,735 37,108,030
- -------------------------------------------------------------------------------
Net assets at
end of year............... $63,459,695 $66,357,252 $25,521,792 $28,634,735
- -------------------------------------------------------------------------------
See accompanying notes to financial statements.
<PAGE>
NOTES TO FINANCIAL STATEMENTS
1. Organization
Great Hall Investment Funds, Inc. (the Company) was incorporated on June
24, 1991 and is registered under the Investment Company Act of 1940 (as
amended) as an open-end management investment company and presently
includes a series of five funds, including National Tax-Exempt Fund and
Minnesota Insured Tax-Exempt Fund (the funds), which are classified as non-
diversified funds. The Company's articles of incorporation permit the
board of directors to create additional funds in the future.
2. Summary of Significant Accounting Policies
The significant accounting policies followed by the funds are as follows:
Investments in Securities
The values of fixed-income securities are provided by an independent
pricing service. When market quotations are not readily available,
securities are valued at fair value as determined in good faith by the
Board of Directors. Short-term securities are valued at amortized cost
which approximates market value.
Security transactions are accounted for on the date the securities are
purchased or sold. Realized gains and losses are calculated on the
identified cost basis. Interest income, including amortization of premium
and original issue discount, is accrued daily and is computed on a level
yield basis. For the Minnesota Insured Tax-Exempt Fund, portfolio
insurance expense is recognized over the premium period, and the cost of
secondary market insurance, if any, is capitalized to the cost basis of the
underlying security. For the year ended July 31, 1996 portfolio insurance
expense was $4,709.
The Minnesota Insured Tax-Exempt Fund concentrates its investments in a
single state and, therefore, may have more risk related to the economic
conditions of the respective state than a fund that has broader
geographical diversification.
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 revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
Securities Purchased on a When-Issued Basis
Delivery and payment for securities which have been purchased on a forward
commitment or when-issued basis can take place a month or more after the
transaction date. During this period, such securities are subject to
market fluctuations and the fund maintains, in a segregated account with
its custodian, assets with a market value equal to the amount of its
purchase commitments.
Federal Taxes
The funds' policy is to comply with the requirements of the Internal
Revenue Code applicable to regulated investment companies and to distribute
all of its taxable income to shareholders. Therefore, no income tax
provision is required. Each fund within the Company will be treated as a
separate entity for federal income tax purposes. In addition, on a
calendar basis, each fund intends to distribute substantially all of its
taxable net investment income and realized gains, if any, to avoid the
payment of any federal excise taxes.
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
2. Summary of Significant Accounting Policies (continued)
Net investment income and net realized gains (losses) may differ for
financial statement and tax purposes. The character of distributions made
during the year from net investment income or net realized gains may differ
from their ultimate characterization for federal income tax purposes.
Also, due to the timing of dividend distributions, the fiscal year in which
amounts are distributed may differ from the year that the income or the
realized gains (losses) were recorded by the funds.
For federal income tax purposes, capital loss carryovers were $614,060 for
the Minnesota Insured Tax-Exempt Fund at July 31, 1996, which if not offset
by subsequent capital gains, will expire in 2003 and 2004. It is unlikely
the Board of Directors will authorize a distribution of any net realized
capital gains until the available capital loss carryovers have been offset
or expired.
Distributions to Shareholders
Distributions to shareholders from net investment income are declared daily
and payable monthly in cash or reinvested in additional shares.
Distributions from net realized gains, if any, will be made on an annual
basis for the funds.
3. Investment Security Transactions
For the year ended July 31, 1996, purchases of securities and proceeds from
sales, other than temporary investments in short-term securities,
aggregated $0 and $7,012,734 for National Tax-Exempt Fund and $0 and
$3,286,740 for Minnesota Insured Tax-Exempt Fund.
4. Capital Share Transactions
Transactions in shares of each Fund for the years ended July 31, 1996 and
1995 are as follows:
Minnesota
National Insured
Tax-Exempt Tax-Exempt
Fund Fund
---------------------------------------------------------------------------
1996:
Sold............................ 253,498 134,641
Issued for
reinvested distributions...... 245,537 85,990
Redeemed........................ (790,794) (559,230)
---------------------------------------------------------------------------
Decrease........................ (291,759) (338,599)
---------------------------------------------------------------------------
1995:
Sold............................ 354,203 64,766
Issued for
reinvested distributions...... 250,761 120,193
Redeemed........................ (1,182,858) (1,060,778)
---------------------------------------------------------------------------
Decrease........................ (577,894) (875,819)
---------------------------------------------------------------------------
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
5. Fees and Expenses
The funds have entered into an investment advisory and management agreement
with IFG Asset Management Services, Inc. (AMS), under which AMS manages
each fund's assets and furnishes related office facilities, equipment,
research and personnel. The agreement requires each fund to pay AMS a
monthly fee based on average daily net assets. The fee for each fund is
equal to an annual rate of 0.50% of average daily net assets.
Each fund also pays affiliates Dain Bosworth Incorporated (DBI) and
Rauscher Pierce Refsnes, Inc. (RPR) a monthly fee for expenses incurred in
the distribution and promotion of the funds' shares. The monthly fee is
limited to a maximum of 1/12 of 0.30% of average daily net assets for each
fund. However, DBI and RPR voluntarily limited the reimbursement fee to
0.187% of average daily net assets for the year ended July 31, 1996 for
both the National and Minnesota Insured Tax-Exempt Funds. Total
distribution fees waived for the year ended July 31, 1996 were $73,210 and
$30,531 for National Tax-Exempt Fund and Minnesota Insured Tax-Exempt Fund,
respectively.
In addition to the investment advisory fee and the distribution fee, each
fund is responsible for paying most other operating expenses including
outside directors' fees and expenses, custodian fees, registration fees,
printing and shareholder reports, transfer agent fees and expenses, legal,
auditing and accounting services, organization costs, insurance, interest
and other miscellaneous expenses. For the year ended July 31, 1996, total
fees and expenses including the distribution fee were further voluntarily
limited to an annual rate of 0.85% and 0.82% of average daily net assets
for National Tax-Exempt Fund and Minnesota Insured Tax-Exempt Fund,
respectively.
Sales charges paid to affiliated brokers for distributing the funds' shares
were $77,063 for National Tax-Exempt Fund and $35,476 for Minnesota Insured
Tax-Exempt Fund for the year ended July 31, 1996.
Legal fees and expenses of $1,486 for the year ended July 31, 1996 were
paid to a law firm of which the secretary of the funds is a partner.
6. Subsequent Event
Subject to shareholder approval, the Board of Directors of the National
Tax-Exempt and the Minnesota Insured Tax-Exempt Funds approved a plan to
reorganize on August 27, 1996. Under the proposed plan of reorganization,
the assets of these funds will be transferred and merged on a tax-free
basis into two open-end management investment companies managed by Voyageur
Fund Managers, Inc. It is anticipated that the reorganization, if
approved, would occur on or around November 8, 1996.
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
7. Financial Highlights
Per share data for a share of capital stock outstanding throughout each
period and selected information for the period is as follows:
<TABLE>
National Tax-Exempt Fund
- ------------------------------------------------------------------------------------------------------------
Year ended
July 31,
1996 1995 1994 1993 1992
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of year................... $10.17 $10.17 $10.50 $10.22 $9.65
- ------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income.............. 0.625 0.648 0.624 0.652 0.703
Realized and unrealized gains
(losses) on investments, net...... 0.148 0.045 (0.31) 0.280 0.570
- ------------------------------------------------------------------------------------------------------------
Total from investment operations..... 0.773 0.693 0.311 0.932 1.273
- ------------------------------------------------------------------------------------------------------------
Distributions to shareholders:
From investment income............. (0.625) (0.648) (0.624) (0.652) (0.703)
From accumulated
net realized gains................ (0.128) (0.045) (0.017) -- --
- ------------------------------------------------------------------------------------------------------------
Total distributions to shareholders.. (0.753) (0.693) (0.641) (0.652) (0.703)
- ------------------------------------------------------------------------------------------------------------
Net asset value, end of year......... $10.19 $10.17 $10.17 $10.50 $10.22
- ------------------------------------------------------------------------------------------------------------
Total return**....................... 7.78% 7.16% 2.99% 9.45% 13.84%
Net assets at end
of year (000s omitted).............. $63,460 $66,357 72,172 $58,048 $43,166
Ratio of expenses to average
daily net assets*................... 0.85% 0.79% 0.91% 1.01% 0.84%
Ratio of net investment income
to average daily net assets*........ 6.10% 6.45% 5.98% 6.32% 7.15%
Portfolio turnover rate
(excluding short-term securities) 0% 8.45% 27.88% 16.36% 14.50%
- ------------------------------------------------------------------------------------------------------------
</TABLE>
* Various fund fees and expenses were voluntarily waived or absorbed during
the periods referred to above. Had the fund paid all expenses, the ratios
of expenses and net investment income to average daily net assets would
have been as follows: 0.96%/5.99% for the year ended July 31, 1996,
0.90%/6.34% in 1995, 1.01%/5.88% in 1994, 1.24%/6.09% in 1993, and
1.14%/6.85% in 1992.
** Total return does not reflect payments of a sales charge.
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
7. Financial Highlights (continued)
<TABLE>
Minnesota Insured Tax-Exempt Fund
- ------------------------------------------------------------------------------------------------------------
Year ended
July 31,
1996 1995 1994 1993 1992
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of year.................... $9.91 $9.85 $10.52 $10.29 $9.74
- ------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income............... 0.486 0.494 0.502 0.560 0.604
Realized and unrealized gains
(losses) on investments, net....... 0.090 0.157 (0.465) 0.230 0.550
- ------------------------------------------------------------------------------------------------------------
Total from investment operations...... 0.576 0.651 0.037 0.790 1.154
- ------------------------------------------------------------------------------------------------------------
Distributions to shareholders:
From investment income.............. (0.486) (0.494) (0.502) (0.560) (0.604)
From accumulated
net realized gains................. -- (0.097) (0.205) -- --
- ------------------------------------------------------------------------------------------------------------
Total distributions to shareholders... (0.486) (0.591) (0.707) (0.560) (0.604)
- ------------------------------------------------------------------------------------------------------------
Net asset value, end of year.......... $10.00 $9.91 $9.85 $10.52 $10.29
- ------------------------------------------------------------------------------------------------------------
Total return**........................ 5.90% 7.00% 0.21% 7.95% 12.41%
Net assets at end
of year (000s omitted)............... $25,522 $28,635 $37,108 $29,899 $23,009
Ratio of expenses to
average daily net assets*............ 0.82% 0.81% 0.80% 0.76% 0.61%
Ratio of net investment income
to average daily net assets*......... 4.85% 5.12% 4.86% 5.44% 6.11%
Portfolio turnover rate (excluding
short-term securities)............... 0% 3.44% 42.40% 20.12% 5.60%
- ------------------------------------------------------------------------------------------------------------
</TABLE>
* Various fund fees and expenses were voluntarily waived or absorbed during
the periods referred to above. Had the fund paid all expenses, the ratios
of expenses and net investment income to average daily net assets would
have been as follows: 1.15%/4.52% for the year ended July 31, 1996,
1.16%/4.77% in 1995, 1.00%/4.66% in 1994, 1.15%/5.05% in 1993, and
1.16%/5.56% in 1992.
** Total return does not reflect payments of a sales charge.
<PAGE>
NATIONAL TAX-EXEMPT FUND
Investments in Securities
July 31, 1996
Principal Market
Name of Issuer (c) Amount Value (a)
- -------------------------------------------------------------------------------
(Percentages of each investment category relate to total net assets.)
Municipal Bonds (93.40%):
- -------------------------------------------------------------------------------
Alabama (7.92%)
Etowah County Refunding Warrants,
8.50%, 11/01/10 $800,000 $863,221
Orange Beach General Obligation,
6.25%, 10/01/13 1,500,000 1,468,963
Moundville Industrial Development,
6.75%, 12/01/11 1,500,000 1,501,234
Upper Bear Creek Water & Sewer, 6.25%, 08/01/15 1,250,000 1,190,046
-----------
5,023,464
-----------
Arizona (0.83%)
Prescott Valley Improvement District,
7.90%, 01/01/12 500,000 526,590
-----------
Colorado (8.30%)
Arapahoe Water & Sanitation District,
9.13%, 10/01/98-12/01/08 500,000 540,639
Arapahoe Water & Sanitation District,
9.25%, 12/01/13 210,000 235,522
Colorado Technical Center Metropolitan District,
9.75%, 06/01/09 595,000 633,450
Mesa County Single Family Mortgage,
8.88%, 12/01/10 215,000 223,252
Mountain Village Metropolitan District,
8.10%, 12/01/11 1,000,000 1,092,868
Panorama Metropolitan District,
9.00%, 12/01/09 750,000 787,446
Piney Creek Metropolitan District,
8.50%, 12/01/14 600,000 611,663
Westminster Shaw Heights Basin Special,
7.50%, 12/01/07 350,000 353,913
Winter Park West Water & Sanitation District,
9.25%, 12/01/06 250,000 259,803
Winter Park West Water & Sanitation District,
9.75%, 12/01/05 525,000 534,691
-----------
5,273,247
-----------
Florida (1.01%)
Sarasota County Industrial Development,
8.75%, 05/01/11 640,000 646,047
-----------
Illinois (13.41%)
Bedford Park Revenue Refunding, 8.00%, 12/01/10 1,200,000 1,451,892
Illinois Development Finance Authority,
7.00%, 03/01/06 400,000 380,449
Illinois Development Finance Authority,
7.20%, 03/01/07-03/01/08 800,000 767,038
Illinois Development Finance Authority,
7.38%, 11/15/11 1,100,000 1,173,743
Illinois Health Facilities Authority,
8.10%, 11/15/14 1,000,000 1,043,770
Niles Park District Series A, 6.65%, 12/01/14 860,000 880,305
See accompanying notes to investments in securities.
<PAGE>
NATIONAL TAX-EXEMPT FUND
Investments in Securities (continued)
Principal Market
Name of Issuer (c) Amount Value (a)
- -------------------------------------------------------------------------------
Municipal Bonds (continued):
- -------------------------------------------------------------------------------
Illinois (continued)
Romeoville Series A Utilities, 7.80%, 01/01/11 $1,000,000 $1,029,276
Streamwood Special Service Area #3,
8.38%, 01/01/09 1,000,000 1,030,211
West Chicago Tax Increment Revenue,
7.38%, 12/01/12 720,000 753,489
-----------
8,510,173
-----------
Indiana (2.83%)
Indianapolis Economic Development,
7.25%, 10/01/10 700,000 732,775
Fishers Economic Development Revenue,
8.38%, 09/01/14 1,000,000 1,060,538
-----------
1,793,313
-----------
Kansas (0.21%)
Johnson City First Mortgage Revenue,
7.40%, 10/01/08 125,000 130,807
-----------
Maine (1.62%)
Yarmouth Pollution Control Revenue,
6.75%, 06/01/02 1,025,000 1,027,319
-----------
Michigan (3.28%)
Troy Economic Development Corporation,
6.75%, 10/01/12 1,500,000 1,554,018
Bad Axe Water Supply & Sewer Disposal,
8.25%, 12/01/07 500,000 525,429
-----------
2,079,447
-----------
Minnesota (2.91%)
Fergus Falls Health Care Facilities,
6.50%, 09/01/18 750,000 755,053
Alexandria Health Care Facilities,
8.75%, 08/01/21 500,000 550,363
Spring Park Health Care Facilities,
8.25%, 08/01/11 500,000 544,334
-----------
1,849,750
-----------
Missouri (8.61%)
Saint Louis County Industrial Development,
7.50%, 06/01/16 1,500,000 1,431,505
Clarence Cannon Wholesale Water Commission,
5.75%, 05/15/13 1,500,000 1,421,049
Franklin County Public Water Supply District,
7.38%, 12/01/18 1,255,000 1,309,833
Marion County Nursing Home, 7.00%, 08/01/13 1,050,000 1,072,455
Platte City Waterworks & Sewer,
7.75%, 04/01/08-04/01/09 220,000 232,010
-----------
5,466,852
-----------
See accompanying notes to investments in securities.
<PAGE>
NATIONAL TAX-EXEMPT FUND
Investments in Securities (continued)
Principal Market
Name of Issuer (c) Amount Value (a)
- -------------------------------------------------------------------------------
Municipal Bonds (continued):
- -------------------------------------------------------------------------------
Nebraska (2.77%)
Douglas County Zoo Facility, 6.00%, 06/01/03 $1,750,000 $1,755,462
-----------
New Mexico (1.17%)
Rio Grande Natural Gas Association,
6.13%, 07/01/13 750,000 742,945
-----------
North Carolina (2.11%)
Eastern Municipal Power Agency, 5.50%, 01/01/21 1,500,000 1,339,356
-----------
Oklahoma (8.73%)
Chelsea Gas Authority, 7.30%, 07/01/19 700,000 701,486
Chelsea Gas Authority, 7.25%, 07/01/13 600,000 611,404
Shattuck Hospital Authority,
6.50%, 01/01/98-07/01/02 390,000 379,452
Clinton Public Works Authority, 6.25%, 01/01/14 1,000,000 985,348
Oklahoma City Public Property Authority,
8.30%, 10/01/16 1,000,000 1,083,904
Anadarko Public Works Authority, 7.00%, 10/01/12 1,000,000 1,026,436
Heavener Utilities Authority, 6.50%, 10/01/09 750,000 751,228
-----------
5,539,258
-----------
Pennsylvania (14.37%)
Adamstown Borough Authority Sewer, 9.00%, 10/01/17 500,000 529,056
Adamstown Borough Authority Sewer, 6.25%, 10/01/17 905,000 887,227
Butler General Obligation, 6.88%, 03/01/23 950,000 18,466
Chester General Obligation, 9.50%, 12/01/97 70,000 70,547
Easton Area Joint Sewer Authority,
6.20%, 04/01/09 1,000,000 983,562
Elizabeth Borough Municipal Authority Sewer,
7.15%, 01/01/21 500,000 510,895
Hopewell Township Beaver County Sewer,
6.00%, 11/01/13 1,215,000 1,132,158
Lehigh County General Purpose, 8.75%, 11/01/14 750,000 703,324
Neville Township General Obligation,
5.90%, 11/01/12 500,000 463,962
Neville Township General Obligation,
6.00%, 11/01/18 615,000 559,565
New Kensington Municipal Sewer, 7.50%, 10/01/11 1,000,000 1,024,263
State Higher Educational Facilities
Authority Revenue, 6.75%, 05/01/12 1,300,000 1,338,723
-----------
9,121,748
-----------
See accompanying notes to investments in securities.
<PAGE>
NATIONAL TAX-EXEMPT FUND
Investments in Securities (continued)
Principal Market
Name of Issuer (c) Amount Value (a)
- -------------------------------------------------------------------------------
Municipal Bonds (continued):
- -------------------------------------------------------------------------------
South Dakota (4.22%)
Health & Educational Facilities,
7.25%, 09/01/13 $1,125,000 $1,009,565
Health & Educational Facilities,
7.00%, 04/01/10 1,000,000 1,006,838
Lease Revenue Community, 8.88%, 10/01/18 590,000 663,933
-----------
2,680,336
-----------
Tennessee (1.63%)
Newbern Individual Development, 7.90%, 3/01/00 1,000,000 1,031,819
-----------
Texas (3.23%)
Denton County Health Facilities, 7.50%, 08/15/15 1,000,000 1,018,991
Wharton Housing Development Corp.,
8.00%, 02/01/03-02/01/10 1,025,000 1,029,622
-----------
2,048,613
-----------
Washington (1.35%)
State Housing Finance Commission,
8.25%, 07/01/02-07/01/12 845,000 855,911
-----------
Wisconsin (0.98%)
La Crosse Nursing Home Facilities, 9.25%, 07/01/17 600,000 620,176
-----------
West Virginia (1.24%)
Ohio County Building Commission, 9.63%, 01/01/13 775,000 787,458
-----------
Wyoming (0.67%)
Green River Sweetwater County, 8.50%, 12/01/07 400,000 422,937
- -------------------------------------------------------------------------------
Total Municipal Securities (cost: $58,349,826) $59,273,028
- -------------------------------------------------------------------------------
See accompanying notes to investments in securities.
<PAGE>
NATIONAL TAX-EXEMPT FUND
Investments in Securities (continued)
Principal Market
Name of Issuer (c) Amount Value (a)
- -------------------------------------------------------------------------------
Short-term Securities (5.20%):
- -------------------------------------------------------------------------------
Joliet, IL Regional Port District Industrial
Building Revenue Bonds, 3.85%, 07/15/03,
Gauranteed - Dow Chemical $400,000 (b) $400,000
Lone Star Texas Airport Revenue Improvement
Authority, 3.65%, 12/01/14
LOC Royal Bank of Canada 300,000 (b) 300,000
New York City Water Finance Authority,
3.65%, 06/15/22 1,000,000 (b) 1,000,000
New York City, New York G.O., 3.65%, 08/15/18 700,000 (b) 700,000
New York City, New York G.O., 3.70%,
10/01/21-10/01/22 900,000 (b) 900,000
- -------------------------------------------------------------------------------
Total Short-Term Securities (cost: $3,300,000) $3,300,000
- -------------------------------------------------------------------------------
Investments in Securities (cost: $61,649,826) (d) $62,573,028
- -------------------------------------------------------------------------------
Notes to Investments in Securities:
(a) Securities are valued in accordance with procedures described in note 2 to
the financial statements.
(b) Maturity date shown represents final maturity. However, the security can
be put back to the issuer on the next interest rate reset date. Interest
rate shown is effective rate on July 31, 1996.
(c) Investments in bonds, by rating category as a percentage of total bonds,
are as follows:
(Unaudited)
Rating 7/31/96
---------- ----------
AAA 4%
AA 0
A 8
BBB and below 15
Non-rated 73
----------
Total 100%
(d) At July 31, 1996, also represents the cost of securities for federal
income tax purposes. The approximate aggregate gross unrealized
appreciation and depreciation of investments in securities based on this
cost were:
Gross unrealized appreciation $1,624,259
Gross unrealized depreciation (701,057)
-----------
Net unrealized appreciation $923,202
-----------
<PAGE>
MINNESOTA INSURED TAX-EXEMPT FUND
Investments in Securities
July 31, 1996
Principal Market
Name of Issuer (c) Amount Value (a)
- -------------------------------------------------------------------------------
(Percentages of each investment category relate to total net assets.)
Municipal Bonds (95.40%):
- -------------------------------------------------------------------------------
Anoka Hennepin Independent School #11,
5.00%, 02/01/09 (FGIC) $1,030,000 $993,807
Anoka Hennepin Independent School #11,
5.10%, 02/01/11 (FGIC) 1,000,000 956,537
Becker Wastewater Treatment Facility,
5.95%, 02/01/14 (MBIA) 500,000 509,373
Cass Lake Independent School District #115,
5.00%, 02/01/16 (FSA) 545,000 504,062
Dover & Eyota Independent School District #533,
5.25%, 02/01/14 (AMBAC) 1,000,000 956,977
Duluth Economic Development Authority,
6.00%, 02/15/20 (Connie Lee) 1,300,000 1,309,448
Duluth Independent School District #709,
5.20%, 02/01/11 (MBIA) 1,000,000 966,415
Lakeville Independent School District #194,
5.40%, 02/01/13 (FGIC) 1,100,000 1,077,666
Marshall Utility Revenue,
5.25%, 01/01/10-01/01/11 (CGIC) 625,000 607,356
Mpls. & St. Paul Housing & Redevelopment,
5.00%, 11/15/13 (AMBAC) 1,050,000 965,429
Mpls. & St. Paul Housing & Redevelopment,
7.40%, 08/15/05 (MBIA) 600,000 669,367
Minneapolis Tax Increment Revenue Refunding,
7.00%, 03/01/03 (MBIA) 1,140,000 1,183,380
Minnetonka Multifamily Revenue Housing,
7.50%, 12/01/17-12/01/27 (MBIA) 900,000 (e) 929,592
Mora General Obligation, 5.13%, 02/01/11 (AMBAC) 750,000 718,885
Mora Series A Waste Water Facilities,
6.85%, 02/01/10-02/01/11 (AMBAC) 510,000 546,879
Northern Minnesota Municipal Power Agency,
5.90%, 01/01/08 (AMBAC) 700,000 738,390
Northern Minnesota Municipal Power Agency,
6.13%, 01/01/20 (AMBAC) 500,000 513,519
Perham Independent School District #549,
5.25%, 02/01/10 (CGIC) 265,000 261,474
Perham Independent School District #549,
5.30%, 02/01/11 (CGIC) 295,000 288,581
Robbinsdale Hospital Revenue Series B,
5.30%, 05/15/06-05/15/07 (AMBAC) 1,185,000 1,194,676
Robbinsdale Hospital Revenue Series A,
5.45%, 05/15/13 (AMBAC) 1,000,000 974,172
Robbinsdale Hospital Revenue Series A,
5.30%, 05/15/07 (AMBAC) 150,000 150,968
St. Cloud Hospital Facilities Revenue Refunding,
6.75%, 07/01/11 (AMBAC) 400,000 442,158
St. Cloud Nursing Home Revenue Bonds,
5.35%, 10/01/16 (AMBAC) 145,000 136,960
St. Louis Park Multifamily Rent Housing Revenue,
7.38%, 12/01/28 (MBIA) 300,000 (e) 314,266
St. Paul Sewer Revenue, 5.60%, 12/01/08 (AMBAC) 2,000,000 2,036,154
Shakopee Public Utilities Commission,
5.60%, 08/01/18 (AMBAC) 750,000 727,865
Southern Minnesota Municipal Power Agency,
5.75%, 01/01/18 (MBIA) 1,000,000 991,436
State Housing Finance Agency,
8.50%, 02/01/17 (MBIA) 65,000 (e) 68,019
State Housing Finance Agency,
7.25%, 07/01/06 (MBIA) 165,000 (e) 169,554
State Housing Finance Agency,
8.38%, 02/01/15 (MBIA) 80,000 (e) 82,364
See accompanying notes to investments in securities.
<PAGE>
MINNESOTA INSURED TAX-EXEMPT FUND
Investments in Securities (continued)
Principal Market
Name of Issuer (c) Amount Value (a)
- -------------------------------------------------------------------------------
Municipal Bonds (continued):
- -------------------------------------------------------------------------------
Waconia Independent School District #110,
5.15%, 02/01/08 (CGIC) $600,000 $595,379
Warroad Independent School District #690,
6.85%, 02/01/13 (AMBAC) 500,000 536,155
Western Minnesota Municipal Power Agency,
6.88%, 01/01/09 (MBIA) 300,000 308,537
Wright County Refunding, 5.70%, 12/01/09 (CGIC) 900,000 921,490
- -------------------------------------------------------------------------------
Total Municipal Bonds (cost: $24,140,347) $24,347,290
- -------------------------------------------------------------------------------
Short-term Securities (2.35%):
Lone Star, Texas Airport Improvement
Authority Revenue, 3.65%, 12/01/14
LOC Royal Bank of Canada 600,000 (b) 600,000
- -------------------------------------------------------------------------------
Total Short-Term Securities (cost: $600,000) $600,000
- -------------------------------------------------------------------------------
Total Investments in Securities (cost: $24,740,347) (d) $24,947,290
- -------------------------------------------------------------------------------
Notes to Investments in Securities:
(a) Securities are valued in accordance with procedures described in note 2 to
the financial statements.
(b) Maturity date shown represents final maturity. However, the security can
be put back to the issuer on the next interest rate reset date. Interest
rate shown is effective rate on July 31, 1996.
(c) The following abbreviations are used in portfolio descriptions to identify
the insurer of the issuer:
AMBAC - American Municipal Bond Association Corporation
CGIC - Capital Guaranty Insurance Corporation
FGIC - Financial Guaranty Insurance Corporation
FSA - Financial Security Assurance Corporation
MBIA - Municipal Bond Insurance Association
(d) At July 31, 1996, also represents the cost of securities for federal
income tax purposes. The approximate aggregate gross unrealized
appreciation and depreciation of investments in securities based on this
cost were:
Gross unrealized appreciation $524,990
Gross unrealized depreciation (318,047)
---------
Net unrealized appreciation $206,943
---------
(e) Identifies issue covered under portfolio insurance policy purchased by the
Fund.
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders
Great Hall Investment Funds, Inc.
We have audited the accompanying statements of assets and liabilities,
including the schedules of investments in securities, of National Tax-Exempt
Fund and Minnesota Insured Tax-Exempt Fund (funds within Great Hall Investment
Funds, Inc.) as of July 31, 1996 and the related statements of operations for
the year then ended and the statements of changes in net assets for each of the
years in the two-year period ended July 31, 1996 and the financial highlights
for each of the years in the five-year period ended July 31, 1996. These
financial statements and the financial highlights are the responsibility of the
Funds' management. Our responsibility is to express an opinion on these
financial statements and the financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and the
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Investment securities held in custody are confirmed
to us by the custodian. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and the financial highlights referred
to above present fairly, in all material respects, the financial position of
National Tax-Exempt Fund and Minnesota Tax-Exempt Fund at July 31, 1996, and
the results of their operations for the year then ended and the changes in
their net assets for each of the years in the two-year period ended July 31,
1996, and the financial highlights for each of the years in the five-year
period ended July 31, 1996, in conformity with generally accepted accounting
principles.
KPMG Peat Marwick LLP
Minneapolis, Minnesota
September 3, 1996
<PAGE>
FEDERAL TAX INFORMATION
Distributions paid during the fiscal year ended July 31, 1996 are as follows:
Income distributions -- Exempt-interest dividends:
National Minnesota Insured
Tax-Exempt Fund Tax-Exempt Fund
- -------------------------------------------------------------------------------
Payable Date Per Share Per Share
- -------------------------------------------------------------------------------
August 31..................... $0.055 $0.041
September 29.................. 0.051 0.039
October 31.................... 0.056 0.042
November 30................... 0.052 0.040
December 29................... 0.050 0.039
January 31.................... 0.056 0.044
February 29................... 0.048 0.038
March 29...................... 0.049 0.038
April 30...................... 0.054 0.043
May 31........................ 0.052 0.041
June 28....................... 0.047 0.037
July 31....................... 0.055 0.044
------ ------
$0.625 $0.486
------ ------
Capital gain distributions -- Taxable as long-term capital gain:
National Minnesota Insured
Tax-Exempt Fund Tax-Exempt Fund
- -------------------------------------------------------------------------------
Payable Date Per Share Per Share
- -------------------------------------------------------------------------------
December 27................... $0.128 --
Taxation
Exempt interest dividends are exempt from federal income taxes and should not
be included in shareholder's gross income, but need to be reported on the
income tax return for informational purposes. Each shareholder should consult
a tax adviser about reporting this income for state and local tax purposes. By
early February 1997, the funds provide the shareholder with information
regarding the percentage of distributions exempt from federal income taxes and
a breakdown setting forth states from which income was earned.
(LOGO)
This report is signed on behalf of the registrant (or depositor or trustee) in
the City of Minneapolis and State of Minnesota on the eighteenth day of
September, 1996.
Great Hall Investment Funds, Inc.
Witness: Julie K. Getchell By: J. Scott Spiker
-------------------- -----------------------
Julie K. Getchell J. Scott Spiker
Chief Operating Officer Chief Executive Officer
