As filed with the Securities and Exchange Commission on August 28, 1998
- -------------------------------------------------------------------------------
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 /x/
(File No. 33-41395)
Pre-Effective Amendment No. __ //
Post-Effective Amendment No. 11 /x/
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 /x/
(File No. 811-6340)
Amendment No. 12 /x/
(Check appropriate box or boxes.)
GREAT HALL INVESTMENT FUNDS, INC.
(Exact Name of Registrant as Specified in Charter)
60 South Sixth Street, Minneapolis, Minnesota 55402
(Address of Principal Executive Offices) (Zip Code)
(612) 371-7765
(Registrant's Telephone Number, including Area Code)
J. Scott Spiker
60 South Sixth Street, Minneapolis, Minnesota 55402
(Name and Address of Agent for Service)
Copies to:
Matthew L. Thompson John R. Houston
Faegre & Benson LLP Lindquist & Vennum PLLP
90 South Seventh Street 80 South Eighth Street
Suite 2200 Suite 4200
Minneapolis, Minnesota 55402 Minneapolis, Minnesota 55402
It is proposed that this filing will become effective (check appropriate box):
// Immediately upon filing pursuant to paragraph (b) of Rule 485
// On [date] pursuant to paragraph (b) of Rule 485
// 60 days after filing pursuant to paragraph (a)(1) of Rule 485
// ON [date] pursuant to paragraph (a)(1) of Rule 485
/x/ 75 days after filing pursuant to paragraph (a)(2) of Rule 485
// on [date] pursuant to paragraph (a)(2) of Rule 485
If appropriate, check the following box:
// This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
Approximate date of proposed public offering: As soon as practicable
following the effective date of this registration statement.
The Registrant has registered an indefinite number of shares of common stock
under the Securities Act of 1933 pursuant to Rule 24f-2 under the Investment
Company Act of 1940. The Registrant's most recent Rule 24f-2 Notice was filed
with the Commission on or about September 24, 1997.
<PAGE>
GREAT HALL INVESTMENT FUNDS, INC.
Post-Effective Amendment No. 11 to the
Registration Statement on Form N-1A
Explanatory Note to Registration Statement
Great Hall Investment Funds, Inc. (the "Registrant") currently is
authorized to issue its shares in five series, as follows:
Series A -- Great Hall Prime Money Market Fund ("Prime Fund");
Series B -- Great Hall U.S. Government Money Market Fund
("Government Fund");
Series C -- Great Hall Tax-Free Money Market Fund ("Tax-Free Fund");
Series F -- Great Hall Institutional Prime Money Market Fund
("Institutional Prime Fund"); and
Series G -- Great Hall Institutional Tax-Free Money Market Fund
("Institutional Tax-Free Fund").
Part A consists of two prospectuses -- one prospectus for Prime Fund,
Government Fund and Tax-Free Fund, and a separate prospectus for Institutional
Prime Fund and Institutional Tax-Free Fund. This Post-Effective Amendment
effects the registration of Institutional Tax-Free Fund and its shares (Series
G) and updates the financial statements of Institutional Prime Fund and does
not effect any amendment to the Prospectus of Prime Fund, Government Fund and
Tax-Free Fund; therefore, such prospectus is not included herewith, and only
the prospectus of Institutional Prime Fund and Institutional Tax-Free Fund is
included in this Post-Effective Amendment.
Likewise, Part B consists of two Statements of Additional Information
("SAIs") -- one SAI for Prime Fund, Government Fund and Tax-Free Fund, and a
separate SAI for Institutional Prime Fund and Institutional Tax-Free Fund.
This Post-Effective Amendment does not effect any amendment to the SAI of Prime
Fund, Government Fund and Tax-Free Fund; therefore, such SAI is not included
herewith, and only the SAI of the Institutional Prime Fund and Institutional
Tax-Free Fund is included in this Post-Effective Amendment.
<PAGE>
GREAT HALL INVESTMENT FUNDS, INC.
Post-Effective Amendment No. 11 to the
Registration Statement on Form N-1A
PART A
Prospectus of Great Hall Institutional Prime Money Market Fund and
Great Hall Institutional Tax-Free Money Market Fund
(each a series of Great Hall Investment Funds, Inc.)
<PAGE>
GREAT HALL
INSTITUTIONAL PRIME MONEY MARKET FUND
----------------------------------------------
INSTITUTIONAL TAX-FREE MONEY MARKET FUND [LOGO]
----------------------------------------------
60 South Sixth Street
Minneapolis, Minnesota 55402
(800) 934-6674
Great Hall Institutional Prime Money Market Fund ("Prime Fund") and Great
Hall Institutional Tax-Free Money Market Fund ("Tax-Free Fund") (together, the
"Funds") are diversified series of Great Hall Investment Funds, Inc. ("Great
Hall"), an open-end management investment company which currently offers its
shares of common stock in five series.
Each Fund has its own policies designed to achieve as high a level of
current income obtainable from investments in short-term securities as is
consistent with prudent investment management, the preservation of capital and
the maintenance of liquidity. Prime Fund invests in a variety of high quality
money market instruments. Tax-Free Fund invests in high quality, tax-exempt
municipal obligations. Each Fund seeks to maintain a net asset value of $1.00
per share. However, investments in the Funds are neither insured nor
guaranteed by the U.S. Government, and there is no assurance that the Funds
will be able to maintain a stable net asset value of $1.00 per share.
AS WITH ALL MUTUAL FUNDS, THESE SECURITIES HAVE NOT BEEN APPROVED OR
DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
This Prospectus pertains only to the Funds and does not pertain to any
other series of Great Hall. This Prospectus sets forth concisely the
information about the Funds that a prospective investor should know before
investing. Please read this Prospectus carefully before investing and retain
it for future reference. A Statement of Additional Information containing more
information about the Funds, dated August 28, 1998 (which is incorporated
herein by reference), has been filed with the Securities and Exchange
Commission (the "SEC") and is available upon request and without charge by
calling Great Hall at the number listed above.
Prospectus dated August 28, 1998
<PAGE>
The "Great Hall" name is a trademark of Dain Rauscher Corporation
("DRC"). DRC licenses this trademark in connection with a number of
investment products and services (including the Great Hall Investment Funds,
Inc.) sponsored or distributed by its subsidiaries.
No person is authorized to give any information or to make any
representations not contained in this Prospectus or in the Funds' official
sales literature; and any information or representation not contained herein
must not be relied upon as having been authorized by the Funds. Great Hall is
registered as an open-end management investment company under the Investment
Company Act of 1940 (the "1940 Act"). Such registration does not imply that
the Funds or any of their shares have been guaranteed, sponsored, recommended
or approved by the United States or any state or any agency or officer
thereof.
This Prospectus does not constitute an offer to sell, or a solicitation
of an offer to buy, securities in any state to any person to whom it is not
lawful to make such an offer or solicitation in such state.
FEES AND EXPENSES
The Funds are sold without a sales charge or any deferred sales load,
and there are no redemption fees or exchange fees. The following table
illustrates all anticipated fees and estimated expenses that a shareholder of
a Fund will incur.
Tax-Free
Annual Fund Operating Expenses Prime Fund Fund
(as a percentage of average net assets): ---------- --------
Management Fees............................ 0.25% 0.25%
12b-1 Fees................................. none none
Other Expenses*............................ 0.15% 0.15%
Total Fund Operating Expenses*............. 0.40% 0.40%
_____________________________________
* Insight Investment Management, Inc. ("Insight") voluntarily reimbursed
certain of Prime Fund's operating expenses during its initial fiscal period of
operations ended July 31, 1998 and has voluntarily agreed to reimburse certain
of Tax-Free Fund's operating during its initial fiscal period of operations
ending July 31, 1999. Insight may discontinue or modify its voluntary expense
reimbursement policies in its discretion. Absent such voluntary
reimbursements, Prime Fund would have borne Other Expenses and Total Fund
Operating Expenses of 0.17% and 0.42%, respectively, during the fiscal period
ended July 31, 1998, and Insight estimates that Tax-Free Fund's Other Expenses
and Total Fund Operating Expenses would be approximately 0.30% and 0.55%,
respectively, during the fiscal period ending July 31, 1999.
Example
You would pay the following expenses on a $1,000 investment assuming (1)
a 5% annual return and (2) redemption at the end of each time period.
One Year................................... $ 4 $ 4
Three Years................................ 13 13
Five Years................................. 21 n/a
Ten Years.................................. 49 n/a
The purpose of the above fees and expenses table is to assist the
investor in understanding the various costs and expenses that an investor in a
Fund will bear directly or indirectly. The above
<PAGE>
example should not be considered representative of past or future expenses.
Actual expenses may be greater or less than those shown.
FINANCIAL HIGHLIGHTS
The following table shows certain per share data for a share of capital
stock of Prime Fund outstanding during the indicated period and selected
information for such period for the Fund. This information has been derived
from the Fund's financial statements (which have been audited by KPMG Peat
Marwick LLP, the Funds' independent auditors) included in the Statement of
Additional Information and should be read in conjunction therewith.
Period from
August 11, 1997
(inception) through
July 31, 1998
-------------
Net asset value, beginning of period..................... $1.00
Income from investment operations........................ 0.05
Distributions to shareholders from investment income..... (0.05)
Net asset value, end of period........................... $1.00
Total return............................................. 5.3%
Net assets at end of period (000s omitted)............... $213,785
Ratio of expenses to average daily net assets*........... 0.39%**
Ratio of net investment income
to average daily net assets*........................... 5.26%**
* Various fund fees and expenses were voluntarily waived or absorbed by
Insight during the period 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 0.42% and 5.23%, respectively, for the period ended July 31,
1998.
** Adjusted to an annual basis.
<PAGE>
INVESTMENT OBJECTIVES AND POLICIES
The investment objectives of each Fund (set forth on the cover page)
along with the investment policies identified as "fundamental" may not be
changed without the affirmative vote of the majority of the applicable Fund's
outstanding voting shares (as defined in the 1940 Act). All other policies of
a Fund may be changed by the Board of Directors of Great Hall without
shareholder approval. There can be no guarantee that the investment objective
of any Fund will be achieved.
The Funds are designed for investors with substantial cash reserves or
temporary cash balances seeking to maximize current income with a minimum of
capital risk and inconvenience while maintaining liquidity on a day-to-day
basis without penalty. Each of the Funds has adopted procedures that are
designed to maintain a net asset value of $1.00 per share for purposes of
purchases and redemptions. However, there can be no assurance that the Funds
will be able to maintain a $1.00 per share net asset value.
The securities in which the Funds invest may not earn as high a level of
current income as long-term or lower quality securities that generally have
less liquidity, greater market risk and more fluctuation in market value.
Rule 2a-7 Standards
Each Fund is managed in accordance with Rule 2a-7 under the 1940 Act
("Rule 2a-7"), which imposes strict portfolio quality, maturity and
diversification standards on money market funds. Great Hall's Board of
Directors has adopted guidelines designed to ensure compliance with Rule 2a-7
by each Fund, and the Board oversees Insight's day-to-day determinations that
each Fund is in compliance with Rule 2a-7. In certain respects, as described
below, the Funds are managed in accordance with standards that are more strict
than those required by Rule 2a-7.
Quality Standards. Each Fund must invest exclusively in U.S. dollar-
denominated investments that present minimal credit risk and are within Rule
2a-7's definition of "Eligible Securities." Eligible Securities include,
among others, securities that are rated by two Nationally Recognized
Statistical Rating Organizations ("NRSROs") (or if only one NRSRO has rated
such security, then by that one NRSRO) in one of the two highest short-term
rating categories (such as A-1 or A-2 by Standard & Poors Corporation ("S&P")
and/or Prime-1 or Prime-2 by Moody's Investors Service, Inc. ("Moody's")), or
unrated securities that are deemed to be of comparable quality. Prime Fund
invests exclusively in securities with two NRSRO ratings, and Tax-Free Fund's
investments must have at least one NRSRO rating. The Funds currently do not
invest in unrated securities.
Maturity Standards. Each investment by a Fund must mature (or be deemed
by Rule 2a-7 to mature) within 397 days of the time of investment. In
addition, each Fund must maintain a dollar-weighted average portfolio maturity
of 90 days or less.
Diversification Standards. Immediately after the purchase of any
investment by a Fund (other than a U.S. Government security or a security that
is subject to a "guarantee"), the Fund may not have invested more than 5% of
its total assets in securities issued by such issuer, except for certain
temporary investments. Securities subject to guarantees are not subject to
this test. However, immediately after a Fund acquires a security subject to a
guarantee, then with respect to 75% of the Fund's total assets, not more than
10% of the Fund's total assets may be invested in securities either issued or
guaranteed by such guarantor.
<PAGE>
In addition, Rule 2a-7 imposes strict limits on Prime Fund's investments
in "Second Tier Securities," generally requiring that at least 95% of each
such Fund's investments must be in "First Tier Securities." The Funds
currently invest exclusively in First Tier Securities. "First Tier
Securities" are defined generally as Eligible Securities rated by two NRSROs
(or if only one NRSRO has rated such security, then by that one NRSRO) in the
highest short-term rating categories (such as A-1 by S&P and/or Prime-1 by
Moody's), or unrated securities that are deemed to be of comparable quality.
Second Tier Securities are defined as Eligible Securities that do not qualify
as First Tier Securities.
Prime Fund
The Prime Fund seeks to provide, through investment in high quality
money market instruments, as high a level of current income obtainable from
short-term securities as is consistent with prudent investment management, the
preservation of capital and the maintenance of liquidity.
The Prime Fund may invest in obligations issued or guaranteed by the
U.S. Government, its agencies or instrumentalities; corporate debt obligations
rated AA or better by S&P or Aa or better by Moody's; obligations of banks and
savings and loans that are members of the Federal Deposit Insurance
Corporation (the "FDIC"), which obligations may include, but are not limited
to, certificates of deposit, bankers acceptances (bills of exchange used to
finance foreign trade) and letters of credit (commercial paper backed by a
commercial bank or other financial institution); high grade commercial paper
(unsecured indebtedness of business or banking firms); and repurchase
agreements secured by the foregoing. The Prime Fund does not intend to
concentrate its investments in any one industry but reserves the freedom of
action to concentrate in government securities and securities issued or
guaranteed by domestic banks and United States branches of foreign banks that
are subject to the same regulation as United States banks.
The Prime Fund may invest in deposit obligations of banks and savings
and loans that are members of the FDIC. Such obligations are not necessarily
guaranteed by the FDIC. Deposit obligations of domestic banks and savings and
loans are insured by the FDIC up to a maximum of $100,000, which limitation
applies to all funds that the Prime Fund may have on deposit at any one bank
or savings and loan.
The Prime Fund may also invest in U.S. dollar-denominated commercial
paper and other short-term obligations issued by foreign entities and U.S.
dollar-denominated obligations of foreign depository institutions and their
branches and subsidiaries, such as certificates of deposit, bankers'
acceptances, time deposits and deposit notes. Obligations of branches and
subsidiaries of foreign deposit institutions may be the general obligation of
the parent institution or may be limited to the issuing branch or subsidiary
by the terms of the specific obligation or by government regulation. Prime
Fund will not invest more than 25% of its total assets (taken at market value
at the time of each investment) in the obligations specified in this
paragraph.
Obligations of states and their agencies, instrumentalities and
political subdivisions that bear interest generally includable in gross income
for federal income tax purposes (collectively, "taxable municipal securities")
are also permissible investments for the Prime Fund. Certain taxable
municipal securities are not "general obligations" (obligations secured by the
full faith and credit or taxing power of a governmental body) and, in those
cases, are repayable only from such revenues as may be pledged to repay such
securities. The Prime Fund will not invest more than 5% of its total assets
(taken at market value at the time of each investment) in taxable municipal
securities.
<PAGE>
Investments in foreign securities and taxable municipal securities are
subject to the same general credit review and credit quality standards as are
applicable to the securities in which the Prime Fund is permitted to invest.
However, the financial information available on these obligations may be more
limited than what is available for securities that are registered with the SEC
or that otherwise are issued by entities that are required to file reports
under the Securities Exchange Act of 1934, as amended. Foreign securities are
subject to other risks that may include unfavorable political and economic
developments and possible withholding taxes or other governmental restrictions
that might affect the principal or interest on securities owned by the Prime
Fund.
Tax-Free Fund
The Tax-Free Fund seeks to provide, through investment in a
professionally managed portfolio of high quality municipal obligations, as
high a level of current income exempt from federal income taxation obtainable
from short-term securities as is consistent with prudent investment
management, the preservation of capital and the maintenance of liquidity.
The Tax-Free Fund may invest in debt obligations issued by or on behalf
of any state, territory or possession of the United States or the District of
Columbia or their political subdivisions, agencies or instrumentalities and
participation interests therein, the interest on which, in the opinion of
counsel for the issuer, is exempt from federal taxation. Specific types of
obligations that the Tax-Free Fund may purchase include bond anticipation
notes, construction loan notes, revenue anticipation notes and tax
anticipation notes, along with municipal bonds and participation interests
therein, that are Eligible Securities. In addition, the Tax-Free Fund may
purchase other types of tax-exempt municipal obligations, such as commercial
paper and certain variable or floating rate demand securities, including
participation interests therein, that are Eligible Securities.
The Tax-Free Fund will attempt to invest 100%, and as a fundamental
policy under normal circumstances will invest at least 80%, of the value of
its net assets in securities that generate interest that is exempt from
federal income taxes, including the individual federal alternative minimum
tax. For defensive purposes, the Tax-Free Fund may temporarily invest more
than 20% of the value of its total assets in taxable money market securities
and tax-exempt securities the income on which is an item of tax preference for
purposes of the federal alternative minimum tax when, in the opinion of
Insight, it is advisable to do so in light of prevailing market and economic
conditions for the purpose of preserving liquidity or capital or when Insight
believes that suitable tax-exempt securities are not available. When the Tax-
Free Fund is in such a temporary defensive position, it is not necessarily
pursuing its investment objective of providing income exempt from federal
income taxation. The Tax-Free Fund does not expect that such investments will
be necessary.
CERTAIN INVESTMENT STRATEGIES AND RESTRICTIONS
Repurchase Agreements (applicable to both Funds). Each Fund may invest
in repurchase agreements. A repurchase agreement involves the purchase by a
Fund of securities with the condition that, after a stated period of time, the
original seller (which must be approved by the Board of Directors of Great
Hall and which must be among the 100 largest commercial banks or a primary
reporting dealer that reports to the Federal Reserve Bank of New York) will
repurchase the securities at a mutually agreed upon time and price. Risks
associated with investments in repurchase agreements are described in the
Statement of Additional Information.
<PAGE>
When-Issued Securities (applicable to Tax-Free Fund). The Tax-Free Fund
may purchase securities on a when-issued or delayed delivery basis. Delivery
and payment normally take place within one week of the purchase of notes and
within one month of the purchase of bonds. There is no limit on the amount of
assets that the Tax-Free Fund may invest in when-issued obligations. No
interest accrues to the Tax-Free Fund on when-issued securities prior to the
time such Fund takes delivery and makes payment. Purchase of when-issued
securities involves the risk that yields available in the market when delivery
occurs may be higher than those available when the when-issued order is
placed. The Custodian (as defined below) will maintain on a daily basis cash
or liquid debt securities with a value at least equal to the amount of the
Tax-Free Fund's commitments to purchase when-issued securities. During
periods when interest rates fluctuate substantially and the Tax-Free Fund
remains substantially fully invested at the same time it purchases securities
on a when-issued basis, there will be a greater possibility that the market
value of the Tax-Free Fund's assets will vary from $1.00 per share. However,
under normal circumstances its net asset value or income should not be
affected by its purchase of securities on a when-issued basis.
Municipal Obligations (applicable to Tax-Free Fund). The Tax-Free Fund
may invest in variable or floating rate demand notes from municipal and non-
governmental issuers, including participation interests therein. These
obligations normally have a stated maturity in excess of one year, but permit
the holder to demand payment of principal plus accrued interest upon a
specified number of days notice. The demand feature of variable rate
obligations is frequently supported by a letter of credit or comparable
guarantee provided by the selling institution (generally, banks that are
members of the Federal Reserve Board or insurance companies). A change in the
credit quality of these institutions, therefore, could cause losses to the
Fund and affect its share price. Such obligations will not be purchased
unless accompanied by an opinion of seller's counsel, given at the time of
purchase by the Tax-Free Fund, that the interest payable in connection with
such obligations is exempt from federal income tax. To the extent the
portfolio of the Tax-Free Fund is invested in variable or floating rate
securities, yields can be expected to decline in periods of falling interest
rates more rapidly than if the portfolio of the Fund were invested solely in
fixed rate securities. Conversely, yields, under these circumstances, can be
expected to increase more rapidly in periods of rising interest rates. See
"Investment Policies" in the Statement of Additional Information.
Section 4(2) Commercial Paper. Each Fund may invest without limitation
in commercial paper issued pursuant to Section 4(2) of the Securities Act of
1933 provided that Insight has determined such paper to be liquid in
accordance with guidelines established by Great Hall's Board of Directors.
For additional information, see "Investment Policies-Illiquid Investments:
Liquidity Guidelines" in the Statement of Additional Information.
Fundamental Policies and Restrictions (applicable to both Funds). Each
Fund is subject to certain investment restrictions that are designated as
"fundamental," which means that they may not be changed without the
affirmative vote of a majority of the Fund's outstanding voting securities.
These fundamental restrictions, as well as non-fundamental restrictions (which
may be changed by Great Hall's Board of Directors without a vote of
shareholders) are set forth in detail in the Statement of Additional
Information. The fundamental restrictions include a restriction that each
Fund may invest no more than 25% of its total assets in any one industry,
except for securities issued or guaranteed by the U.S. Government, its
agencies or instrumentalities, and except that: (a) with respect to the Tax-
Free Fund, this restriction does not apply to municipal obligations, and
(b) with respect to both funds, this restriction does not apply to securities
issued or guaranteed by United States banks or United States branches of
foreign banks that are subject to the same regulation as United States banks.
<PAGE>
INVESTMENT MANAGEMENT
Insight, 60 South Sixth Street, Minneapolis, Minnesota 55402, serves as
each Fund's investment adviser. Pursuant to the investment advisory agreement
in effect between the Funds and Insight (the "Advisory Agreement"), Insight
manages the investment and reinvestment of each Fund's assets in accordance
with such Fund's investment objective, policies and limitations, subject to
the general supervision and control of Great Hall's Board of Directors. In
addition, Insight is responsible for the overall management of each Fund's
business affairs, subject to the authority of the Board of Directors of Great
Hall. Under the Advisory Agreement, Insight furnishes office facilities and
clerical and administrative services to the Funds and may also bear certain
promotional expenses, including a portion of the costs of printing and
distributing prospectuses utilized for promotional purposes. Insight also
performs and bears the internal costs of research, statistical analysis and
continuous supervision of the investment portfolios of each Fund. Insight
(formerly Insight Bond Management, Inc.) has been registered with the SEC as
an investment adviser since 1983, and has been a portfolio manager of publicly
offered investment companies since 1986. Insight is a wholly owned subsidiary
of DRC.
Under each Fund's Advisory Agreement, Insight is entitled to receive a
monthly advisory fee equal to .25% per annum of the Fund's average daily net
assets.
Each Fund pays all its expenses that are not expressly assumed by
Insight. These expenses include, among others, the advisory fee, shareholder
and fund accounting services fees and expenses, the fees and expenses of
directors of Great Hall who are not "affiliated persons" of Insight, interest
expense, taxes, brokerage fees and commissions, fees and expenses of
registering and qualifying each Fund and its shares for distribution under
federal and state securities laws, expenses of preparing prospectuses and of
printing and distributing prospectuses annually to existing shareholders,
custodian and portfolio accounting charges, auditing and legal expenses,
insurance expense, association membership dues, and the expense of
shareholders' reports, meetings and proxy solicitations. Each Fund is also
liable for such nonrecurring expenses as may arise, including litigation to
which such Fund may be a party. Each Fund and/or Great Hall may have an
obligation to indemnify its directors and officers with respect to such
litigation.
HOW TO INVEST
You may purchase shares of each Fund through the Funds' distributor,
Dain Rauscher Incorporated (the "Distributor"), at the net asset value next
determined following receipt of an order in federal funds. The Distributor is
a wholly-owned subsidiary of DRC.
The Funds are sold without a sales charge. A minimum investment of $1
million is required. This minimum is waived for investment advisory clients
of Insight.
You may open an account and make your initial investment in a Fund by
contacting your investment executive. See "Shareholder Services." Great Hall
and the Distributor reserve the right to reject in whole or in part any order
to purchase shares of the Funds. The Funds do not issue share certificates.
<PAGE>
HOW TO REDEEM SHARES
You may redeem shares for cash through the Distributor at the net asset
value next computed after receipt of a redemption request in proper form. If
shares have been purchased by check and are being redeemed, the purchase check
must be collected before payment for the redemption can be made. Redemption
will be treated as a sale for federal income tax purposes. See "Taxes."
Under the 1940 Act, the right of redemption may be suspended or the date
of payment postponed for more than seven days at times when the New York Stock
Exchange Inc. (the "NYSE") is closed other than customary weekend or holiday
closings, or when trading on the NYSE is restricted, or under certain
emergency circumstances as determined by the SEC.
NET ASSET VALUE
The net asset value of each Fund is determined as of the primary closing
time of the NYSE (currently 4:00 p.m. New York time), Monday through Friday,
except on: (a) days during which no Fund shares are tendered for redemption
and no order to purchase or sell Fund shares is received by the Fund; or
(b) the following national holidays: New Year's Day, Martin Luther King, Jr.
Day, President's Day, Good Friday, Memorial Day (observed), Independence Day,
Labor Day, Thanksgiving Day and Christmas Day.
The Board of Directors of Great Hall expects that the net asset value
per share for each of the Funds will ordinarily be $1.00. However, there is
no assurance that any Fund will be able to maintain a stable net asset value
of $1.00 per share. The net asset value per share of each Fund is calculated
by subtracting each Fund's liabilities from the value of its assets (based on
the amortized cost method) and dividing the result by the number of
outstanding shares of such Fund. The amortized cost method values each Fund's
portfolio securities at such Fund's acquisition cost as adjusted for
amortization of premium or accretion of discount rather than at their value
based on current market factors.
DISTRIBUTIONS
All dividends and distributions of each Fund will be reinvested in
additional shares of such Fund (including fractional shares where necessary)
at net asset value.
Each Fund will declare dividends from net investment income daily,
Monday through Friday (except on customary national business holidays or when
the Funds' transfer agent is not open for business) at 3:00 p.m. Central time,
immediately prior to the determination of net asset value. The Funds will
distribute such dividends monthly on the last business day of each month. The
Funds do not expect to realize any net long-term capital gains. If such gains
are realized, however, they will be distributed at least annually and will be
taxable as "long-term" capital gains, regardless of the length of time the
shareholder has held the shares. Each daily dividend is payable on "shares of
record" at the time of its declaration. For this purpose, "shares of record"
means shares purchased for which payment has been received by the Distributor
or the applicable Fund and excludes shares redeemed on the day of the dividend
declaration.
TAXES
Each Fund intends to qualify as a regulated investment company under
Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code"),
during each taxable year. If so qualified, the
<PAGE>
Fund will not be subject to federal income taxes to the extent net investment
income and net capital gainare timely distributed to shareholders.
Prime Fund
All dividends other than capital gain dividends that will be paid to
shareholders will be taxable as ordinary income, even if reinvested in
additional shares. In the case of corporate shareholders, no dividends paid
by the Fund will qualify for the dividends received deduction for
corporations. Capital gain dividends will be taxable as capital gain, even if
reinvested in additional shares.
Under federal law, the income derived from obligations issued by the
U.S. Government and certain of its agencies and instrumentalities is exempt
from state individual income taxes. Most states that tax personal income
permit mutual funds to pass through this tax exemption to shareholders.
Tax-Free Fund
The Tax-Free Fund will distribute substantially all of its investment
income and net capital gain to shareholders. Dividends derived from interest
earned on tax-exempt municipal obligations designated as exempt-interest
dividends by the Fund will not be subject to federal income taxation. Capital
gain dividends will be taxed as capital gains, even if reinvested in
additional shares. Dividends, if any, derived from sources other than tax-
exempt interest and net capital gains will be taxable to shareholders as
ordinary income for federal income tax purposes even if reinvested in
additional shares.
For federal income tax purposes, an alternative minimum tax ("AMT") is
imposed on taxpayers to the extent that such tax exceeds a taxpayer's regular
income tax liability (with certain adjustments). Exempt-interest dividends
attributable to interest income on certain tax-exempt obligations issued after
August 7, 1986 to finance certain private activities are treated as an item of
tax preference that is included in alternative minimum taxable income for
purposes of computing the federal AMT for all taxpayers and the federal
environmental tax on corporations. The Tax-Free Fund may invest in such
obligations, provided that at least 80% of the value of such Fund's net assets
will, during normal market conditions, be invested in tax-exempt obligations
the interest on which is not an item of tax preference for purposes of the
AMT. In addition, all other tax-exempt interest received by a corporation,
including exempt-interest dividends, will be included in adjusted current
earnings for purposes of determining the federal corporate AMT.
The Tax-Free Fund anticipates that substantially all of its dividends
will be exempt from federal income taxes and will notify each shareholder
annually of the tax status of all distributions. Distributions by the Fund
may be subject to state and local taxes. You should consult your tax adviser
regarding the tax status of such distributions in the relevant state and
locality. The Tax-Free Fund will report to its shareholders annually the
percentage and source, on a state-by-state basis, of interest income earned on
municipal obligations held during the preceding year.
SHAREHOLDER SERVICES
Shareholder inquiries may be directed to Insight or your investment
executive. Written inquiries to Insight should be directed to Insight at the
address set forth on the cover of this Prospectus.
<PAGE>
Each of the Funds intends to send to shareholders written notification
of their purchase or redemption transactions on a monthly basis in lieu of
immediate confirmation, within five business days after the end of each month.
If there is no purchase or redemption activity in a shareholder's account, a
quarterly statement will be sent.
PERFORMANCE
From time to time, each Fund may advertise its yield, which reflects the
rate of income the Fund earns on its investments as a percentage of its price
per share. All yield figures are based on historical earnings and are not
intended to indicate future performance.
The current yield of the Funds refers to the income generated over a
seven-day period (which period will be stated in the advertisement). The
income is then annualized. That is, the amount of income generated by the
investment that week is assumed to be generated each week over a 52-week
period and is shown as a percentage of the investment. The effective or
compounded yield of the Funds is calculated similarly, but, when annualized,
the income earned by an investment in a Fund is assumed to be reinvested. The
effective or compounded yield will be slightly higher than the current yield
because of the compounding effect of this assumed reinvestment.
The Tax-Free Fund may advertise its taxable equivalent yield, which will
be calculated by applying the stated income tax rate only to that portion of
the Tax-Free Fund's seven-day yield or effective yield that is exempt from
taxation. The stated income tax rate is subtracted from the number 1 (e.g., 1
minus 36% equals 64%), and the tax-exempt portion of the yield is divided by
the difference. The result is then added to that portion of the Fund's yield,
if any, that is not tax-exempt.
Performance advertising by each Fund may include total return data. The
total return of a Fund refers to its overall change in value, assuming all
dividends and gains distributions are reinvested. Total return is calculated
by finding the average annual compounded rates of return of a hypothetical
investment, over a specified period of time, that would compare the initial
amount to the ending redeemable value of such investment.
A Fund may also use aggregate total return figures for various periods,
representing the cumulative change in value of an investment in such Fund for
the specific period (again reflecting change in Fund share prices and assuming
reinvestment of dividends and distributions). Aggregate total returns may be
shown by means of schedules, charts or graphs, and may indicate subtotals of
the various components of total return (i.e., change in value of initial
investment, income dividends and capital gains distributions).
The Funds' performance from time to time in reports or promotional
literature may be compared to generally accepted indices or analyses such as
those provided by Lipper Analytical Service, Inc., S&P, Dow Jones, CDA
Investment Technologies, Inc., Morningstar and Investment Company Data
Incorporated. Performance ratings reported periodically in national financial
publications also may be used.
<PAGE>
DESCRIPTION OF THE FUNDS
Great Hall was incorporated under the laws of the State of Minnesota in
June 1991 and is registered with the SEC under the 1940 Act as an open-end
management investment company. This registration does not involve supervision
of management or investment policy by an agency of the federal government.
Great Hall is authorized to issue shares representing interests in separate
series. Currently, Great Hall offers its shares in five separate series. Ten
billion shares have been designated for each of the Prime Fund and the Tax-
Free Fund.
Great Hall is not required under Minnesota law to hold annual or
periodically scheduled regular meetings of shareholders, and does not intend
to hold such meetings. The Board of Directors may convene shareholder
meetings when it deems appropriate and is required under Minnesota law to
schedule regular or special meetings in certain circumstances. Additionally,
under Section 16(c) of the 1940 Act, the Board of Directors of Great Hall must
promptly call a meeting of shareholders for the purpose of voting upon the
question of removal of any director when requested in writing to do so by the
record holders of not less than 10% of the outstanding shares.
Under Minnesota law, the Board of Directors has overall responsibility
for managing Great Hall in good faith, in a manner reasonably believed to be
in the best interests of Great Hall, and with the care an ordinarily prudent
person in a like position would exercise in similar circumstances. The
Articles of Incorporation of Great Hall limit the liability of directors to
the fullest extent permitted by law.
CUSTODIAN AND ACCOUNTING SERVICES AGENTS
Norwest Bank Minnesota, N.A., 733 Marquette Avenue, Minneapolis,
Minnesota 55479-0040, serves as the custodian of the Funds. PFPC Inc., 400
Bellevue Parkway, Wilmington, Delaware 19809, serves as the transfer agent of
the Funds. Investors Fiduciary Trust Company, 127 West 10th Street, Kansas
City, Missouri 64105-1716, serves as the fund accounting agent of the Funds.
Pursuant to a Shareholder Account Services Agreement, the Distributor also
performs certain shareholder accounting services for the Funds.
YEAR 2000 INFORMATION
Many existing computer systems, including some used by Insight and the
Distributor, as well as the Funds' custodian, transfer agent and fund
accounting agent in connection with their respective services to the Funds,
have been written in such a way that, without modification, may not properly
process and calculate date-related information and data from and after January
1, 2000. Great Hall has been advised that Insight, the Distributor and the
Funds' custodian, transfer agent and fund accounting agent are in the process
of making required modifications of their programs and systems and that they
believe that they will complete such modifications on a timely basis and will
be able to properly process such information and data after that date. The
costs of these modifications will not directly affect the Funds. However,
failure by any of such service providers to successfully complete the required
modifications in a timely manner could have a material adverse impact on the
Funds and their shareholders.
<PAGE>
TAX EXEMPT VS. TAXABLE INCOME
The table below shows the approximate yields that taxable securities
must earn to equal federally tax-exempt yields under selected federal income
tax brackets. The 39.6% federal rate is the highest rate currently in effect
and currently scheduled to be in effect for individuals in 1998.
Taxable Equivalent Yields
-----------------------------------
Federal Tax Brackets
-----------------------------------
Tax-Free Yields 28% 31% 36% 39.6%
--------------- ----- ----- ----- -----
2.0%.......... 2.78 2.90 3.13 3.31
2.5%.......... 3.47 3.62 3.91 4.14
3.0%.......... 4.17 4.35 4.69 4.97
3.5%.......... 4.86 5.07 5.47 5.79
4.0%.......... 5.56 5.80 6.25 6.62
4.5%.......... 6.25 6.52 7.03 7.45
5.0%.......... 6.94 7.25 7.81 8.28
This table does not take into consideration any federal alternative
minimum tax. In addition, the table is based upon yields that are derived
solely from tax-exempt income. To the extent that Tax-Free Fund's actual
yield is derived from taxable income, the Fund's equivalent taxable yield will
be less than set forth in the table. The tax-free yields used in the table
should not be considered as representations of any particular rates of return
and are for purposes of illustration only.
<PAGE>
TABLE OF CONTENTS
Page
----
Fees and Expenses......................................................2
Financial Highlights...................................................3
Investment Objectives and Policies.....................................4
Certain Investment Strategies and Restrictions.........................6
Investment Management..................................................8
How To Invest..........................................................8
How To Redeem Shares...................................................9
Net Asset Value........................................................9
Distributions..........................................................9
Taxes..................................................................9
Shareholder Services...................................................10
Performance............................................................11
Description of the Funds...............................................12
Custodian and Accounting Services Agents...............................12
Year 2000 Information..................................................12
Tax Exempt vs. Taxable Income..........................................13
<PAGE>
GREAT HALL INVESTMENT FUNDS, INC.
Post-Effective Amendment No. 11 to the
Registration Statement on Form N-1A
PART B
STATEMENT OF ADDITIONAL INFORMATION
OF
GREAT HALL INSTITUTIONAL PRIME MONEY MARKET FUND
AND
GREAT HALL INSTITUTIONAL TAX-FREE MONEY MARKET FUND
(each a series of Great Hall Investment Funds, Inc.)
<PAGE>
GREAT HALL
INSTITUTIONAL PRIME MONEY MARKET FUND
-------------------------------------
INSTITUTIONAL TAX-FREE MONEY MARKET FUND
----------------------------------------
60 South Sixth Street
Minneapolis, Minnesota 55402
(800) 934-6674
-----------------------------------
STATEMENT OF ADDITIONAL INFORMATION
dated August 28, 1998
-----------------------------------
Great Hall Institutional Prime Money Market Fund ("Prime Fund") and
Great Hall Institutional Tax-Free Money Market Fund ("Tax-Free Fund")
(together, the "Funds") are diversified series of Great Hall Investment Funds,
Inc. ("Great Hall"), an open-end management investment company which currently
offers its shares of common stock in five series. This Statement of
Additional Information relates only to the Funds and does not relate to any
other series of Great Hall.
This Statement of Additional Information is not a prospectus and should
be read in conjunction with the Prospectus of the Funds, dated August 28,
1998,which has been filed with the Securities and Exchange Commission (the
"SEC"). To obtain a copy of the Prospectus, please call Great Hall or your
investment executive.
TABLE OF CONTENTS
-----------------
Page
------
Investment Policies...................................... B-2
Investment Restrictions.................................. B-8
Taxes.................................................... B-9
Portfolio Transactions................................... B-10
Management and Distribution Agreements................... B-11
Determination of Net Asset Value......................... B-12
Calculation of Performance Data.......................... B-13
Directors and Officers................................... B-14
General Information...................................... B-16
Counsel and Auditors..................................... B-17
Financial and Other Information.......................... B-17
Appendix--Ratings of Investments......................... A-1
Financial Statements..................................... F-1
No person has been authorized to give any information or to make any
representations other than those contained in this Statement of Additional
Information or the Prospectus dated August 28, 1998, and, if given or made,
such information or representations may not be relied upon as having been
authorized by Great Hall or the Distributor (as defined herein). This
Statement of Additional Information does not constitute an offer to sell, or a
solicitation of an offer to buy, securities in any state or jurisdiction in
which such offering or solicitation may not lawfully be made. The delivery of
this Statement of Additional Information at any time shall not imply that
there has been no change in the affairs of any of the Funds since the date
hereof.
<PAGE>
INVESTMENT POLICIES
The following information supplements that set forth under "Investment
Objectives and Policies" and "Certain Investment Strategies" in the Prospectus
and does not, standing alone, present a complete explanation of the matters
disclosed. You must also refer to the Prospectus to obtain information on the
matters disclosed below.
Both Funds
Government Securities. Each Fund may invest without limitation in
obligations of the United States Government or agencies or instrumentalities
of the United States Government ("Government Obligations"). Government
Obligations are backed in a variety of ways by the U.S. Government or its
agencies or instrumentalities. Some Government Obligations, such as U.S.
Treasury bills, notes and bonds and securities issued by the Government
National Mortgage Association ("GNMA"), are backed by the full faith and
credit of the United States Treasury. Others, such as those of the Federal
Home Loan Banks, are backed by the right of the issuer to borrow from the U.S.
Treasury. Still other Government Obligations, such as those issued by the
Federal National Mortgage Association ("FNMA"), the Federal Home Loan Mortgage
Corporation ("FHLMC") and the Student Loan Marketing Association, are backed
only by the credit of the agency or instrumentality issuing the obligations
and, in certain instances, by the discretionary authority of the U.S.
Government to purchase certain obligations of the agency or instrumentality.
In none of these cases, however, does the United States Government guarantee
the value or yield of the Government Obligations themselves or the net asset
value of any Fund's shares.
Repurchase Agreements. Each Fund may enter into repurchase agreements
with respect to any of the securities in which the Fund may invest directly.
A repurchase agreement is an agreement under which a Fund will purchase a
security subject to resale to a bank or dealer at an agreed-upon price and
date. The transaction requires the collateralization of the seller's
obligation by the transfer to the Fund's custodian of eligible securities with
an initial market value, including accrued interest, equal to at least the
dollar amount invested by the Fund in each agreement, and with the value of
the underlying securities marked to market daily to maintain at least 100%
collateralization of the repurchase price (including accrued interest). A
default by the seller might cause the Fund to experience a loss or delay in
the liquidation of the collateral securing the repurchase obligation and might
also cause the Fund to incur disposition costs in liquidating the collateral.
However, each Fund intends to enter into repurchase agreements only with
primary dealers that report to the Federal Reserve Bank of New York or with
the 100 largest U.S. commercial banks (as measured by domestic deposits).
Additionally, each Fund intends to follow the collateral custody, protection
and perfection guidelines recommended by the Comptroller of the Currency for
the use of national banks in their direct repurchase agreement activities. As
a non-fundamental policy, no Fund will invest more than 10% of its net assets
in repurchase agreements maturing in more than seven days and other illiquid
investments.
Illiquid Investments; Liquidity Guidelines. Each Fund is permitted to
invest up to 10% of its assets in all forms of "illiquid" investments and may
invest without limitation in "restricted" securities which Insight Investment
Management, Inc., each Fund's investment adviser ("Insight"), pursuant to
liquidity standards established by Great Hall's Board of Directors, has
determined are liquid. An investment is generally deemed to be "illiquid" if
it cannot be disposed of within seven days in the ordinary course of business
at approximately the amount at which the investment company is valuing the
investment. "Restricted securities" are securities which were originally sold
in private placements or to foreign purchasers pursuant to Regulation S and
which have not been registered under the Securities Act of 1933 (the "1933
Act"). Such securities generally have been considered illiquid by the staff
of the SEC, since such securities may be resold only subject to statutory
restrictions and delays or if registered under the 1933 Act. However, the SEC
has acknowledged that a market exists for certain restricted securities (for
example, securities qualifying for resale to certain "qualified institutional
buyers" pursuant to Rule 144A under the 1933 Act). Additionally, Insight
believes that a similar market exists for commercial paper issued pursuant to
the private placement exemption of Section 4(2) of the 1933 Act. Each Fund
may invest without limitation in these forms of restricted securities if such
securities are deemed by Insight to be liquid in accordance with liquidity
guidelines established by Great Hall's Board of Directors. Under these
guidelines, Insight must consider (a) the frequency of trades and quotes for
the security, (b) the number of dealers willing to purchase or sell the
security and the number
<PAGE>
of other potential purchasers, (c) dealer undertakings to make a market in the
security, and (d) the nature of the security and the nature of the marketplace
trades (for example, the time needed to dispose of the security, the method of
soliciting offers and the mechanics of transfer). Investing in restricted
securities could have the effect of increasing the level of each Fund's
illiquidity to the extent that qualified purchasers of the securities become,
for a time, uninterested in purchasing these securities.
Great Hall Institutional Prime Money Market Fund
Prime Fund invests in high quality, domestic money market instruments,
including but not limited to marketable obligations issued or guaranteed by
the U.S. Government, its agencies or instrumentalities (described below);
corporate debt obligations that are rated AA or better by Standard & Poor's
Corporation ("S&P"), or Aa or better by Moody's Investors Service, Inc.
("Moody's"); obligations of banks and savings and loans that are members of
the Federal Deposit Insurance Corporation (the "FDIC"), which obligations may
include, but are not limited to, certificates of deposit, bankers' acceptances
and documented discount notes and letters of credit; high-grade commercial
paper guaranteed or issued by domestic corporations; and instruments
(including repurchase agreements) secured by such obligations.
Investments in obligations of banks and savings and loans are limited
to: (a) certificates of deposit issued by banks with assets in excess of
$500,000,000 or branches of such banks; (b) certificates of deposit or other
deposit obligations of savings and loans with assets in excess of
$500,000,000; and (c) bankers' acceptances, letters of credit or other
obligations guaranteed by banks meeting the above criteria. Bankers'
acceptances are short-term credit instruments used to finance the import,
export, transfer or storage of goods. They are termed "accepted" when a bank
guarantees their payment at maturity. Obligations issued or guaranteed by
FDIC member institutions are not necessarily guaranteed by the FDIC. Deposit
obligations of domestic banks and savings and loans are only insured by the
FDIC up to a maximum of $100,000, which limitation applies to all funds that
Prime Fund may have on deposit at any one bank or savings and loan. Bankers'
acceptances and letters of credit are not so insured. Deposit obligations of
foreign banks or foreign branches of domestic banks also are not covered by
FDIC insurance; in addition, such investments may involve other risks
different from risks associated with investments in deposit obligations of
domestic banks, such as future political and economic developments and the
possible imposition of governmental restrictions.
Permissible commercial paper investments generally consist of
obligations rated Prime-1 or A-1, or their subsequent equivalents, by Moody's
or S&P, or unrated commercial paper issued by companies with an unsecured debt
issue outstanding that is rated Aa or better by Moody's or AA or better by
S&P. Commercial paper constitutes unsecured indebtedness of business or
banking firms issued to finance their short-term financial needs. Prime Fund
may also purchase corporate debt obligations maturing within 397 days from the
date of acquisition with a minimum rating of Aa or AA.
Great Hall Institutional Tax-Free Money Market Fund
Tax-Free Fund invests in debt obligations issued by or on behalf of any
state, territory or possession of the United States or the District of
Columbia or their political subdivisions, agencies or instrumentalities, and
participation interests therein, the interest on which is, in the opinion of
counsel for the issuer, wholly exempt from federal income taxation.
The types of obligations that Tax-Free Fund may purchase include bond
anticipation notes, construction loan notes, revenue anticipation notes and
tax anticipation notes that are Eligible Securities. Tax-Free Fund may also
invest in municipal bonds and participation interests therein, including
industrial development revenue bonds and pollution control revenue bonds, and
other types of tax-exempt municipal obligations, such as short-term discount
notes, all of which must be Eligible Securities.
Securities purchased by Tax-Free Fund mature within 397 days from the
date of purchase or carry variable or floating rates that are adjusted at
least every 397 days and have demand features and quality characteristics that
<PAGE>
under applicable law and interpretations of such law permit the securities to
be treated as if they mature in 397 days or less from the date of purchase.
Bond anticipation notes are issued in anticipation of a later issuance
of bonds and are usually payable from the proceeds of the sale of the bonds
anticipated or of renewal notes. Construction loan notes, issued to provide
construction financing for specific projects, are often redeemed after the
projects are completed and accepted with funds obtained from the Federal
Housing Administration under "Fannie Mae" (Federal National Mortgage
Association) or "Ginnie Mae" (Government National Mortgage Association).
Revenue anticipation notes are issued by governmental entities in anticipation
of revenues to be received later in the then current fiscal year. Tax
anticipation notes are issued by state and local governments in anticipation
of collection of taxes to finance the current operations of such governments.
These notes are generally repayable only from tax collections and often only
from the proceeds of the specific tax levy whose collection they anticipate.
Municipal bonds are usually issued to obtain funds for various public
purposes, to refund outstanding obligations, to meet general operating
expenses or to obtain funds to lend to other public institutions and
facilities. They are generally classified as either "general obligation" or
"revenue" bonds and frequently have maturities in excess of 397 days at the
time of issuance, although a number of such issues now have variable or
floating interest rates and demand features that may permit Tax-Free Fund to
treat them as having maturities of less than 397 days. There are many
variations in the terms of, and the underlying security for, the various types
of municipal bonds. General obligation bonds are issued by states, counties,
regional districts, cities, towns and school districts for a variety of
purposes including mass transportation, highway, bridge, school, road, and
water and sewer system construction, repair or improvement. Payment of these
bonds is secured by a pledge of the issuer's full faith and credit and taxing
(usually property tax) power.
Revenue bonds are payable solely from the revenues generated from the
operations of the facility or facilities being financed or from other non-tax
sources. These bonds are often secured by debt service revenue funds, rent
subsidies and/or mortgage collateral to finance the construction of housing,
highways, bridges, tunnels, hospitals, university and college buildings, port
and airport facilities, and electric, water, gas and sewer systems.
Industrial development revenue bonds and pollution control revenue bonds are
usually issued by local government bodies or their authorities to provide
funding for commercial or industrial facilities, privately operated housing,
sports facilities, health care facilities, convention and trade show
facilities, port facilities and facilities for controlling or eliminating air
and water pollution. Payment of principal and interest on such bonds is not
secured by the taxing power of the governmental body. Rather, payment is
dependent solely upon the ability of the users of the facilities financed by
the bonds to meet their financial obligations and the pledge, if any, of real
and personal property financed as security for payment.
Although Tax-Free Fund may invest more than 25% of its net assets in:
(a) municipal obligations whose issuers are in the same state; (b) municipal
obligations the interest upon which is paid solely from revenues of similar
projects; and (c) industrial development and pollution control revenue bonds
that are not variable or floating rate demand municipal obligations, it does
not presently intend to do so on a regular basis. The identification of the
issuer of a tax-exempt security for purposes of the 1940 Act depends on the
terms and conditions of the security. When the assets and revenues of an
agency, authority, instrumentality or other political subdivision are separate
from those of the government creating the subdivision and the security is
backed only by the assets and revenues of the subdivision, such subdivision
would be deemed to be the sole issuer. Similarly, in the case of an
industrial development bond, if that bond is backed by the assets and revenues
of the non-governmental user, then such non-governmental user would be deemed
to be the sole issuer. Generally, the District of Columbia, each state, each
of its political subdivisions, agencies, instrumentalities and authorities,
and each multi-state agency of which a state is a member, is a separate
"issuer" as that term is used in the Prospectus and this Statement of
Additional Information with respect to Tax-Free Fund, and the non-governmental
user of facilities financed by industrial development or pollution control
revenue bonds is also considered to be an issuer.
Legislation to restrict or eliminate the federal income tax exemption
for interest on certain municipal obligations that may be purchased by Tax-
Free Fund has been introduced in Congress; other such legislation also may be
introduced in the future by Congress or by state legislatures. If enacted,
any such legislation could
<PAGE>
adversely affect the availability of municipal obligations for Tax-Free Fund's
portfolio. Upon the effectiveness of any such legislation that materially
affects the Tax-Free Fund's ability to achieve its investment objective, the
Board of Directors of Great Hall will reevaluate the Fund's investment
objective and submit to its shareholders for approval necessary changes in its
objectives and policies.
Variable and Floating Rate Demand Municipal Obligations. Variable and
floating rate demand municipal obligations are tax-exempt obligations that
provide for a periodic adjustment in the interest rate paid on the obligations
and permit the holder to demand payment of the unpaid principal balance plus
accrued interest upon a specified number of days' notice either from the
issuer or by drawing on a bank letter of credit or comparable guarantee issued
with respect to such obligations. The issuer of such an obligation may have a
corresponding right to prepay in its discretion the outstanding principal of
the obligation plus accrued interest upon notice comparable to that required
for the holder to demand payment.
The variable or floating rate demand municipal obligations in which Tax-
Free Fund may invest are payable on demand at any time on no more than 30
days' notice or at specified intervals not exceeding 397 days and upon no more
than 30 days' notice. The terms of such obligations must provide that
interest rates are adjustable at intervals ranging from weekly up to annually.
The adjustments are based upon the prime rate of a bank or other appropriate
interest rate adjustment index as provided in the respective obligations.
Such obligations are subject to the quality characteristics for municipal
obligations set forth above and described in the Prospectus. Tax-Free Fund
may invest, without limitation, in such obligations.
The principal and accrued interest payable to Tax-Free Fund on demand
will be supported by an irrevocable letter of credit or comparable guarantee
of a financial institution (generally a commercial bank) whose short-term
taxable debt meets the quality criteria for investment by Tax-Free Fund in
municipal obligations, except in cases where the security itself meets the
credit criteria of the Fund without such letter of credit or comparable
guarantee. Thus, although the underlying variable or floating rate demand
obligation may be unrated, Tax-Free Fund in such cases will have at all times
an alternate credit source to draw upon for payment with respect to such
security.
Tax-Free Fund may also purchase participation interests in variable or
floating rate obligations. Such participation interests will have, as part of
the participation agreement between the Fund and the selling financial
institution, a demand feature that permits Tax-Free Fund to demand payment
from the seller of the principal amount of the Fund's participation plus
accrued interest thereon. This demand feature always will be supported by a
letter of credit or comparable guarantee provided by the selling financial
institution. Such financial institution will retain a service fee, a letter
of credit fee and a fee for issuing commitments to purchase on demand in an
amount equal to the excess of the interest paid on the variable or floating
rate obligation in which Tax-Free Fund has a participation interest over the
negotiated yield at which the participation interest was purchased.
Accordingly, Tax-Free Fund will purchase such participation interests only
when the yield to the Fund, net of such fees, is equal to or greater than the
yield then available on other variable rate demand securities or short-term,
fixed rate, tax-exempt securities of comparable quality and where the fees are
reasonable in relation to the services provided by the financial institution
and the security and liquidity provided by the letter of credit or guarantee
While variable and floating rate demand municipal obligations are
expected to have maturities in excess of 397 days, Great Hall currently
expects that Tax-Free Fund will exercise its right to demand payment of
principal and accrued interest on such an obligation if it no longer meets the
Fund's quality standards, unless, of course, the obligation can be sold for a
greater amount in the market.
Stand-By Commitments. Consistent with the requirement of Rule 2a-7,
Tax-Free Fund may also acquire "stand-by commitments" with respect to
obligations held in its portfolio. Under a "stand-by commitment," a dealer
agrees to purchase, at Tax-Free Fund's option, specified obligations at a
specified price. "Stand-by commitments" are the equivalent of a "put" option
acquired by Tax-Free Fund with respect to particular obligations held in its
portfolio.
<PAGE>
The amount payable to Tax-Free Fund upon its exercise of a "stand-by
commitment" will normally be: (a) Tax-Free Fund's acquisition cost of the
obligation (excluding any accrued interest that Tax-Free Fund paid on its
acquisition), less any amortized market premium or plus any amortized market
or original issue discount during the period Tax-Free Fund owned the
obligation; plus (b) all interest accrued on the obligations since the last
interest payment date during the period such obligation is owned by Tax-Free
Fund. "Stand-by commitments" may be acquired when the remaining maturity of
the underlying obligation is greater than 60 days, but will be exercisable by
Tax-Free Fund only during the 60 day period before the maturity of such
obligation. Absent unusual circumstances, Tax-Free Fund will value the
underlying obligation on an amortized cost basis. Accordingly, the amount
payable by a dealer during the time a "stand-by commitment" is exercisable is
substantially the same as the value of the underlying obligation. Tax-Free
Fund's right to exercise "stand-by commitments" must be unconditional and
unqualified. A "stand-by commitment" is not transferable by Tax-Free Fund,
although it may sell the underlying obligation to a third party at any time.
Tax-Free Fund expects that "stand-by commitments" will generally be
available without the payment of any direct or indirect consideration.
However, if necessary and advisable, it may pay for "stand-by commitments"
either separately in cash or by paying a higher price for obligations that are
acquired subject to such a commitment (thus reducing the yield to maturity
otherwise available for the same securities). The total amount paid in either
manner for outstanding "stand-by commitments" held in Tax-Free Fund's
portfolio may not exceed 1/2 of 1% of the value of Tax-Free Fund's total
assets calculated immediately after each "stand-by commitment" is acquired.
Tax-Free Fund intends to enter into "stand-by commitments" only with
dealers, banks and broker-dealers that, in the opinion of Insight, present
minimum credit risks. Tax-Free Fund's reliance upon the credit of these
dealers, banks and broker-dealers is secured by the value of the underlying
obligations that are subject to the commitment. However, the failure of a
party to honor a "stand-by commitment" could have an adverse impact on the
liquidity of Tax-Free Fund during periods of rising interest rates.
Tax-Free Fund intends to acquire "stand-by commitments" solely to
facilitate portfolio liquidity and does not intend to exercise its rights
thereunder for trading purposes. The acquisition of a "stand-by commitment"
will not affect the valuation or maturity of the underlying obligation, which
will continue to be valued in accordance with the amortized cost method.
"Stand-by commitments" will be valued at zero in determining net asset value.
Where Tax-Free Fund pays directly or indirectly for a "stand-by commitment,"
its cost will be reflected as unrealized depreciation for the period during
which the commitment is held. "Stand-by commitments" will not affect the
average weighted maturity of Tax-Free Fund's portfolio.
"When-lssued" Obligations. Tax-Free Fund may make commitments to
purchase municipal obligations on a "when-issued" basis, i.e., delivery and
payment for the obligations normally takes place at a date after the
commitment to purchase although the payment obligation and the coupon rate
have been established before the time the Fund enters into the commitment.
The settlement date usually occurs within one week of the purchase of notes
and within one month of the purchase of bonds. Great Hall intends that Tax-
Free Fund will make commitments to purchase obligations with the intention of
actually acquiring them, but may sell the obligations before settlement date
if such action is advisable or necessary as a matter of investment strategy.
At the time the Fund makes a commitment to purchase an obligation, it will
record the transaction and reflect the value of the obligation in determining
its net asset value. The Custodian will maintain on a daily basis a separate
account for the Fund consisting of cash or liquid debt securities with a value
at least equal to the amount of the Fund's commitments to purchase "when-
issued" obligations.
Obligations purchased on a "when-issued" basis or held in Tax-Free
Fund's portfolio are subject to changes in market value based not only upon
the public's perception of the creditworthiness of the issuer but also upon
changes in the level of interest rates. In the absence of a change in credit
characteristics, which, of course, will cause changes in value, the value of
portfolio investments can be expected to decline in periods of rising interest
rates and to increase in periods of declining interest rates. Therefore, if
to achieve higher interest income Tax-Free Fund remains substantially fully
invested at the same time that it has purchased obligations on a "when-issued"
basis, there will be a greater possibility that the market value of Tax-Free
Fund's assets will vary from $1.00 per
<PAGE>
share. See "Net Asset Value." However, Tax-Free Fund does not believe that
under normal circumstances its net asset value or income will be affected by
its purchase of obligations on a "when-issued" basis.
When payment is made for "when-issued" securities, Tax-Free Fund will
meet its obligations from its then available cash flow, sale of securities
held in the separate account, sale of other securities or, although it would
normally not expect to do so, from sale of the "when-issued" securities
themselves (which may have a market value greater or less than the Fund's
obligation). Sale of securities to meet such obligations would involve a
greater potential for the realization of capital gains, which could cause Tax-
Free Fund to realize income not exempt from federal income taxation.
State and Municipal Lease Obligations. Tax-Free Fund is permitted to
invest in state and municipal lease obligations ("municipal leases").
Traditionally, municipal leases have been viewed by the SEC staff as illiquid
investments. However, subject to Board standards similar to the standards
applicable to restricted securities (as discussed in the Prospectus), Insight
may treat certain municipal leases as liquid investments and not subject to
the policy limiting investments in illiquid investments.
Municipal leases are issued by state and local governments or
authorities to finance the acquisition of equipment and facilities. Municipal
leases may take the form of a lease, an installment purchase or conditional
sale contract or a participation certificate in such a lease or contract.
Municipal leases frequently have the special risks described below which are
not associated with general obligation or revenue bonds issued by public
bodies. In determining municipal leases in which the Fund will invest,
Insight will evaluate the credit rating of the lessee and the terms of the
lease. Additionally, Insight may require that certain municipal leases be
secured by a letter of credit or put arrangement with an independent financial
institution.
The constitution and statutes of many states contain requirements with
which the state and municipalities must comply whenever incurring debt. These
requirements may include approving voter referendums, debt limits, interest
rate limits and public sale requirements. Municipal leases have evolved as a
means for public bodies to acquire property and equipment without needing to
comply with all of the constitutional and statutory requirements for the
issuance of debt. The debt-issuance limitations may be inapplicable for one
or more of the following reasons: (a) the inclusion in many municipal leases
of a "nonappropriation clause" that provides that the public body has no
obligation to make future payments under the lease or contract unless money is
appropriated for such purpose by the appropriate legislative body on a yearly
or other periodic basis; (b) the exclusion of a municipal lease from the
definition of indebtedness under relevant state law; or (c) the provision in
the municipal lease for termination at the option of the public body at the
end of each fiscal year for any reason or, in some cases, automatically if not
affirmatively renewed.
If a municipal lease is terminated by the public body for
nonappropriation or other reason not constituting a default under the lease,
the rights of the lessor or holder of a participation interest therein are
limited to repossession of the leased property without any recourse to the
general credit of the public body. The disposition of the leased property by
the lessor in the event of termination of the lease might, in many cases,
prove difficult or result in a loss.
Municipal leases represent a relatively new type of financing that has
not yet developed the depth of marketability associated with more conventional
municipal obligations. Therefore, as mentioned above, municipal leases held
by Tax-Free Fund will be treated as illiquid unless they are determined to be
liquid pursuant to the aforementioned liquidity guidelines. Additionally, the
lack of an established trading market for municipal leases may make the
determination of fair market value more difficult.
<PAGE>
INVESTMENT RESTRICTIONS
Fundamental Investment Restrictions. In addition to the Funds'
investment objectives and those policies identified as fundamental in the
Prospectus, each of the Funds has adopted the following fundamental investment
restrictions, which may not be changed without approval of shareholders owning
a majority of such Fund's outstanding shares, which as used in the Prospectus
and this Statement of Additional Information means the lesser of: (a) 67% or
more of such Fund's shares present at a shareholders' meeting if more than 50%
of such Fund's shares are represented at the meeting in person or by proxy; or
(b) more than 50% of such Fund's outstanding shares. Neither of the Funds
may:
(1) borrow money or issue senior securities (as defined the Investment
Company Act of 1940, as amended), except for temporary or emergency non-
investment purposes such as to accommodate abnormally heavy redemption
requests, and then only in an amount not exceeding 5% of the value of its
total assets at the time of borrowing;
(2) underwrite securities issued by other persons, except insofar as a
Fund may be deemed an underwriter under the Securities Act of 1933, as
amended, in selling portfolio securities;
(3) invest more than 25% of its total assets in any one industry,
except that (i) with respect to Tax-Free Fund, this restriction shall not
apply to municipal obligations; (ii) with respect to Prime Fund and Tax-Free
Fund this restriction shall not apply to securities issued or guaranteed by
United States banks or United States branches of foreign banks that are
subject to the same regulation as United States banks; and (iii) this
restriction shall not apply to securities issued or guaranteed by the U.S.
Government, its agencies or instrumentalities;
(4) purchase or sell real estate or real estate mortgage loans
(although a Fund may invest in obligations secured by interests in real
estate), commodities, commodity contracts (including futures contracts), real
estate partnership interests and oil, gas and mineral leases; or
(5) make loans, other than by entering into repurchase agreements and
through the purchase of other permitted investments in accordance with its
investment objective and policies.
If the issuer of a security is within a given industry and the security
is guaranteed by an entity within a different industry, the industry of the
guarantor rather than that of the issuer shall be deemed to be the industry
for purposes of applying the test in investment restriction number 3 above.
Non-Fundamental Investment Restrictions. In addition, each Fund has
adopted certain non-fundamental investment restrictions, which may be changed
by the Board of Directors of Great Hall without approval by such Fund's
shareholders. As non-fundamental policies, neither Fund may:
(1) invest in companies for the purpose of exercising control or
management;
(2) invest in securities issued by other investment companies in
excess of limits imposed by applicable law;
(3) invest more than 10% of its net assets in illiquid investments,
including but not limited to repurchase agreements maturing in more than seven
days;
(4) pledge, mortgage or hypothecate its assets, except that to secure
permitted borrowings; or
(5) sell securities short or purchase any securities on margin, except
for such short-term credits as are necessary for clearance of portfolio
transactions.
<PAGE>
Percentage Restrictions. If a fundamental or a non-fundamental
percentage restriction or limitation is adhered to at the time of investment,
a later increase or decrease in such percentage resulting from a change in
values or net assets will not be considered a violation thereof.
TAXES
Taxation of the Funds-In General
Each Fund intends to qualify as a "regulated investment company" under
Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code").
To so qualify, a Fund must, among other things; (a) derive in each taxable
year at least 90% of its gross income from dividends, interest, payments with
respect to securities loans, gains from the sale or other disposition of
stock, securities or foreign currencies, or other income derived with respect
to its business of investing in such stock, securities or currencies (the "90%
test"); and (b) satisfy certain diversification requirements at the close of
each quarter of such Fund's taxable year. Furthermore, in order to be
entitled to pay exempt-interest dividends to shareholders, Tax-Free Fund must
satisfy the requirement that, at the close of each quarter of its taxable
year, at least 50% of the value of its total assets consists of obligations
the interest on which is exempt from federal income tax ("tax-exempt
obligations").
As a regulated investment company, a Fund will not be liable for federal
income taxes on the part of its taxable net investment income and net capital
gains, if any, that it distributes to shareholders if at least 90% of its net
investment income (including tax-exempt income net of any disallowed
deductions relating thereto) and net short-term capital gain for the taxable
year is distributed. However, if for any taxable year a Fund does not satisfy
the requirements of Subchapter M of the Code, all of its taxable income will
be subject to tax at regular corporate rates without any deduction for
distributions to shareholders, and such distributions will be taxable to
shareholders as ordinary income to the extent of such Fund's current or
accumulated earnings and profits.
Each Fund will be liable for a nondeductible 4% excise tax on amounts
not distributed on a timely basis in accordance with a calendar year
distribution requirement. To avoid the tax, during each calendar year a Fund
must distribute: (a) at least 98% of its ordinary income (not taking into
account any capital gains or losses) for the calendar year; (b) at least 98%
of its capital gain net income for the twelve-month period ending on
October 31 (or December 31, if such Fund so elects); and (c) any portion (not
taxed to such Fund) of the respective balances from the prior year. Each Fund
intends to make sufficient distributions to avoid this 4% excise tax.
If Tax-Free Fund disposes of a tax-exempt obligation at a market
discount, it must recognize any gain it realizes on the disposition as
ordinary income (and not as capital gain) to the extent of the accrued market
discount.
If a shareholder receives an exempt-interest dividend with respect to
any share and sells or exchanges such share after holding it for six months or
less, any loss on the sale or exchange of such share will be disallowed to the
extent of the amount of such exempt-interest dividend. In certain limited
instances, the portion of Social Security benefits received by shareholders
that are subject to federal income tax may be affected by the amount of tax-
exempt interest income, including exempt-interest dividends, received by
shareholders of the Fund.
Distributions of exempt-interest dividends by Tax-Free Fund may be
subject to state and local taxes even though a substantial portion of such
distributions may be derived from interest on tax-exempt obligations that, if
realized by the shareholder directly, would be exempt from such taxes. Tax-
Free Fund will report to its shareholders annually after the close of its
taxable year the percentage and source, on a state-by-state basis, of interest
income earned on tax-exempt obligations held by such Fund during the preceding
year. Shareholders of Tax-Free Fund are advised to consult their tax advisers
concerning the application of state and local taxes.
Under the Code, investors will not be allowed to deduct interest on
indebtedness incurred or continued to purchase or carry shares of an
investment company paying exempt-interest dividends to the extent such
interest expenses relate to exempt-interest dividends received by the
shareholder. State laws may also restrict the
<PAGE>
deductibility of interest on indebtedness incurred or continued to purchase or
carry shares of a Fund. Indebtedness may be allocated to shares of a Fund even
though not directly traceable to the purchase of such shares.
Tax-Free Fund may acquire variable and floating rate demand municipal
obligations and "stand-by commitments" or "puts" from banks and municipal
securities dealers. See "Great Hall Institutional Tax-Free Money Market Fund
- - Variable and Floating Rate Demand Municipal Obligations" and "Stand-By
Commitments" in this Statement of Additional Information. With respect to
each such acquisition, an opinion of issuer's counsel will be issued that Tax-
Free Fund will be treated for federal income tax purposes as the owner of the
municipal obligations acquired subject to such demand features or to such
stand-by commitments; the interest on such municipal obligations will be tax-
exempt to Tax-Free Fund; and the purchase prices of municipal obligations
subject to stand-by commitments must be allocated between such securities and
stand-by commitments based upon their relative fair market values.
A Fund, or a shareholder's broker with respect to a Fund, is required to
withhold federal income tax at a rate of 31% of the dividends, capital gains
distributions and proceeds of redemptions if a shareholder fails to furnish
such Fund with a correct taxpayer identification number ("TIN") or to certify
that the shareholder is exempt from such withholding or if the Internal
Revenue Service notifies such Fund or broker that the shareholder has provided
such Fund with an incorrect TIN or failed to properly report dividend or
interest income for federal income tax purposes. Any such withheld amount
will be fully creditable on each shareholder's individual federal income tax
return. An individual's TIN is his or her social security number.
The foregoing is only a summary of some of the important federal tax
considerations generally affecting the Funds and their shareholders. No
attempt is made to present a detailed explanation of the federal or state
income tax treatment of the Funds or their shareholders, and this discussion
is not intended as a substitute for careful tax planning.
Each investor is advised to consult his or her tax adviser regarding
specific questions as to federal, state, local and foreign taxation.
PORTFOLIO TRANSACTIONS
As provided in the investment advisory agreement in effect between
Insight and the Funds, Insight makes investment decisions and decisions as to
the execution of portfolio transactions for the Funds, subject to the general
supervision of the Board of Directors of Great Hall. At times, investment
decisions may be made to purchase or sell the same investment security for
more than one Fund, in which case the transactions will be allocated as to
amount and price in a manner considered equitable to each Fund. In some cases
this procedure may possibly have a detrimental effect on the price or volume
of the security as far as one or more Funds are concerned. On the other hand,
the ability of the Funds to participate in volume transactions may produce
better executions for the Funds in some cases. It is the opinion of the Board
of Directors that the benefits available because of Insight's organization
outweigh any disadvantages that may arise from exposure to simultaneous
transactions.
Under the 1940 Act, persons affiliated with Great Hall are prohibited
from dealing with Great Hall as a principal in the purchase and sale of
investments. Since over-the-counter transactions are usually principal
transactions, affiliated persons of Great Hall may not serve as a dealer in
connection with such transfers or commitments. The 1940 Act also prohibits
Great Hall from purchasing a security being publicly underwritten from a
syndicate in which any affiliated person is a principal underwriter except in
accordance with certain limitations. Furthermore, Great Hall may not use any
affiliated person as a broker or dealer in executing portfolio transactions
without complying with the limitations imposed by the rules of the SEC, which
rules require the commissions, fees or other remuneration received by such
affiliated broker or dealer be: (a) reasonable and fair compared to the
commissions, fees or other remuneration paid to other brokers or dealers in
connection with comparable transactions involving similar securities being
purchased or sold on a securities exchange during a comparable period of time;
<PAGE>
and (b) at least as favorable as commissions contemporaneously charged by such
affiliated broker or dealer on comparable transactions for its most favored
comparable unaffiliated customers.
Most purchase and sale transactions with respect to a Fund are with the
issuer or an underwriter or with major dealers of securities acting as
principals. Such transactions are normally on a net basis and generally do
not involve payment of brokerage commissions. However, the cost of securities
purchased from an underwriter normally includes a commission paid by the
issuer to the underwriter. Purchases or sales from or to dealers will
normally reflect the spread between bid and ask prices.
Insight, in effecting purchases and sales of portfolio securities for
the accounts of the Funds, will place orders in such manner as in its opinion
will offer the best price and market for the execution of each transaction.
Given the best price and market obtainable, it is the practice of the Funds
when purchasing through dealers to select them primarily on the basis of the
furnishing by such dealers, in addition to satisfactory execution of the
transaction, of research information and statistical and other services to
Insight. It is not always possible to place a dollar value on information and
services received from dealers. Since it is only supplementary to Insight's
own research efforts, the receipt of research information is not expected to
reduce significantly Insight's expenses. Such Funds may also consider,
subject to the requirement of best execution, dealers' sales of the Funds'
shares when selecting dealers to execute portfolio transactions. While
Insight will be primarily responsible for the placement of such Funds'
business, the policies and practices of the Funds in this regard must be
consistent with the foregoing and will at all times be subject to review by
the Board of Directors of Great Hall.
Because brokerage commissions as such are not usually paid in connection
with the purchase or sale of the securities in which the Funds invest and
because transactional costs are small, portfolio turnover is not expected to
materially affect net asset value or yields. Prime Fund did not pay any
brokerage commission during the period ended July 31, 1998. Securities with
maturities of less than one year are excluded from required portfolio turnover
rate calculations, and therefore, each Fund's turnover rate for reporting
purposes will be zero.
MANAGEMENT AND DISTRIBUTION AGREEMENTS
Investment Adviser; Investment Advisory Agreement
Insight serves as each Fund's investment adviser. Insight is a wholly-
owned subsidiary of Dain Rauscher Corporation ("DRC").
Pursuant to an investment advisory agreement (the "Advisory Agreement"),
Insight performs and bears the internal cost of research, statistical analysis
and continuous supervision of the investment portfolio of each Fund and
furnishes office facilities and certain clerical and administrative services
to the Funds. In addition, Insight bears all promotional expenses, including
the cost of printing and distributing prospectuses utilized for promotional
purposes. Other expenses are borne by whichever Fund incurs the expense and
such expenses include, but are not limited to, taxes, interest, brokerage fees
and commissions, and costs and expenses associated with the following matters
and services: registration and qualification of Great Hall, the Funds and
their shares with the SEC and the various states; services of custodians,
transfer agent, dividend disbursing agent, accounting services agents,
shareholder services agents, independent auditors and outside legal counsel;
maintenance of corporate existence; preparation, printing and distribution of
prospectuses to existing Fund shareholders; services of Great Hall directors
who are not employees of Insight or of the Distributor or any of their
affiliates; directors' and shareholders' meetings, including the printing and
mailing of proxy materials; insurance premiums for fidelity and other
coverage; issuance and sale of Fund shares (to the extent not borne by the
Distributor under its agreement with Great Hall); redemption of Fund shares;
printing and mailing of stock certificates representing shares of the Funds;
association membership dues; preparation, printing and mailing of shareholder
reports; and portfolio pricing services, if any. Expenses borne by Great Hall
and attributable to only one Fund will be allocated to that Fund; expenses
that are not specifically allocable will be allocated to each Fund in a manner
and on a basis determined in good faith by the Board of
<PAGE>
Directors of Great Hall, including a majority of the Directors who are not
"interested" persons of Great Hall or Insight, to be fair and equitable.
Under the Advisory Agreement, Insight receives a monthly advisory fee
based upon the average value of each Fund's daily net assets. Each Fund pays
Insight a fee at an annual rate of .25% of its average daily net assets.
During the period ended July 31, 1998, Prime Fund paid advisory fees of
$237,858.
The Advisory Agreement continues in effect from year to year, if
specifically approved at least annually by a vote cast in person at a meeting
called for such purpose by a majority of the Directors of Great Hall, and a
majority of the Directors who are not "interested persons" (as defined in the
1940 Act) of Great Hall or Insight ("Independent Directors"). The Advisory
Agreement may be terminated by either party thereto, by the Independent
Directors or by a vote of the holders of a majority of the outstanding
securities of Great Hall, at any time, without penalty, upon 60 days' written
notice, and automatically terminates in the event of an assignment.
Termination will not affect the right of Insight to receive payment of any
unpaid balance of the compensation earned prior to termination.
The Distributor
The Funds are distributed by Dain Rauscher Incorporated, a member firm
of the New York Stock Exchange (the "NYSE"), the National Association of
Securities Dealers, Inc. and a wholly owned subsidiary of DRC (the
"Distributor"). The Funds have agreed to indemnify the Distributor and its
affiliates, to the extent permitted by applicable law, against certain
liabilities under the Securities Act of 1933.
DETERMINATION OF NET ASSET VALUE
The net asset value per share of each Fund is calculated separately for
each Fund. The assets and liabilities of each Fund are determined in
accordance with generally accepted accounting principles and the applicable
rules and regulations of the SEC. Assets and liabilities attributable to a
specific Fund are allocated to that Fund. Assets and liabilities not readily
identifiable to a Fund will be allocated among the Funds in a manner and on a
basis determined in good faith pursuant to procedures established by the Board
of Directors, including a majority of the Directors who are not "interested
persons" of Great Hall or Insight, to be fair and equitable.
The Funds value their portfolio securities using the amortized cost
method. This method involves valuing a security at its cost and thereafter
accruing any discount or premium at a constant rate to maturity. By declaring
these accruals to a Fund's shareholders in the daily dividend, the value of
such Fund's assets and, thus, its net asset value per share, will generally
remain constant. Although this method provides certainty in valuation, it may
result in periods during which the value of a Fund's securities, as determined
by amortized cost, is higher or lower than the price such Fund would receive
if it sold the securities. During such periods, the yields on shares of such
Fund may differ somewhat from that obtained in similar funds with identical
investments utilizing a method of valuation based upon market prices and
estimates of market prices for all of their portfolio securities.
In connection with the use of the amortized cost method, the Funds
maintain a dollar-weighted average portfolio maturity of 90 days or less and
purchase only portfolio securities having remaining maturities of 397 days or
less. With respect to Tax-Free Fund, and as described under "Great Hall
Institutional Tax-Free Money Market Fund - Variable and Floating Rate Demand
Municipal Obligations" in this Statement of Additional Information, securities
having a stated maturity of more than 397 days may be purchased by Tax-Free
Fund if they have demand and variable or floating rate features, together with
appropriate quality characteristics, that permit determination that such
securities may be deemed to have a maturity of less than 397 days. The Board
of Directors of Great Hall has also established procedures designed to
stabilize, to the extent reasonably possible, each Fund's net asset value per
share, as computed for purposes of sales and redemptions, at $1.00. Such
procedures include review of each Fund's portfolio holdings by the Board of
Directors of Great Hall at such intervals as it may deem appropriate to
determine whether each Fund's net asset value calculated by using available
market quotations deviates from $1.00 per share
<PAGE>
and, if so, whether such deviation may result in material dilution or may be
otherwise unfair to existing shareholders. With respect to Tax-Free Fund,
these procedures also include a review by Insight, in accordance with policies
established by the Board of Directors of Great Hall and not less frequently
than monthly, of the quality of certain municipal obligations having variable
or floating interest rates and demand features that permit Tax-Free Fund to
calculate the maturity of such obligations to a point in time prior to their
stated maturity. In the event that the Board of Directors of Great Hall
determines that a material deviation from net asset value exists, the Board
will take such corrective action as it deems necessary and appropriate, which
action might include selling portfolio securities prior to maturity to realize
capital gains or losses or to shorten average portfolio maturity, withholding
dividends, or establishing net asset values per share by using available market
quotations.
The portfolio securities in which each Fund invests fluctuate in value,
and hence the net asset value per share (and therefore, the public offering
price) of each Fund may also fluctuate. On July 31, 1998, the net asset
value and the maximum public offering price per share for Prime Fund were
calculated as follows:
Net Assets ($213,785,210) = Net Asset Value Per Share ($1.00)
----------------------------------
Shares Outstanding ($213,785,210)
CALCULATION OF PERFORMANCE DATA
Yield
As stated in the Prospectus, each Fund from time to time may advertise
its yield.
The current yield of the Funds is computed by determining the change,
exclusive of capital changes, in the value of a hypothetical pre-existing
account having a balance of one share at the beginning of a seven-day period,
and dividing the change by the value of the account at the beginning of the
base period to obtain the base period return, and then multiplying the base
period return by (365/7), with the resulting yield figure carried to at least
the nearest hundredth of one percent.
For the seven-day period ended July 31, 1998, the current yield of Prime
Fund was 5.25%.
The effective or compounded yield for the Funds is computed by
determining the change, exclusive of capital changes, in the value of a
hypothetical pre-existing account having a balance of one share at the
beginning of a seven-day period, and dividing the change by the value of the
account at the beginning of the base period to obtain the base period return,
and then compounding the base period return by adding 1, raising the sum to a
power equal to 365 divided by 7, and subtracting 1 from the result, according
to the following formula:
Effective yield = [(Base period return + 1) 365/7] - 1
For the seven-day period ended July 31, 1998, the effective yield of
Prime Fund was 5.39%.
The taxable equivalent yield of Tax-Free Fund is calculated by applying
the stated income tax rate only to that portion of the Tax-Free Fund's seven-
day yield or effective yield that is exempt from taxation. The stated income
tax rate is subtracted from the number 1 (e.g., 1 minus 36% equals 64%), and
the tax-exempt portion of the yield is divided by the difference. The result
is then added to that portion of the Tax-Free Fund's yield, if any, that is
not tax-exempt.
<PAGE>
DIRECTORS AND OFFICERS
Directors and officers of Great Hall, together with information as to
their principal occupations during the past five years, are set forth below.
Except as otherwise set forth below, the address of each officer and director
is the same as that of Great Hall - 60 South Sixth Street, Minneapolis,
Minnesota 55402.
<PAGE>
Principal Occupations During the
Name and Address Position Past Five Years and Other Affiliations
- ---------------- -------- --------------------------------------
T. Geron ("Jerry") Bell Director President of the Minnesota Twins
34 Puckett Place Baseball Club
Minneapolis, MN 55415 Incorporated since 1987.
Sandra J. Hale Director President of Enterprise Management,
2308 West Lake of the Int'l. since 1991; Minnesota
Isles Pkwy. Commissioner of Administration from
Minneapolis, MN 55405 1982 to 1990.
Ron James Director Formerly President and Chief Executive
300 Sycamore Lane Officer of Ceridian Corporation-Human
Plymouth, MN 55441 Resources Group (January 1996-January
1998); Vice-President - Minnesota of
U.S. West Communications from 1990 to
December 1995; Vice President and
General Manager-Large Business Markets
of U.S. West Communications from 1987
to 1990.
Jay H. Wein Director Independent consultant since April
5305 Elm Ridge Circle 1995; Director of Information
Excelsior, MN 55331 Advantage, Inc. since 1992 and
Chairman from 1992 to April 1995;
Retired in August 1989 after 15 years
as Office Managing Partner of the
Minneapolis/St. Paul Office of Arthur
Andersen & Co.
J. Scott Spiker Chief Executive Senior Executive Vice President of the
Officer Distributor; Chief Executive Officer
and Director of Insight; Senior Vice
President and Business Manager,
Employee Benefit Services, of Norwest
Corporation from 1990 through January
1994; Product Manager, Institutional
Collective Funds, of Norwest
Corporation from 1989 through January
1994.
Raye C. Kanzenbach Chief Investment Managing Director and Chief Investment
Officer Officer of Insight; prior to 1991,
Director, Senior Vice President and
Secretary of Insight Bond Management,
Inc. since 1983.
Julie K. Getchell Chief Financial President and Chief Operating Officer
Officer of Insight and Senior Vice President
of the Distributor.
<PAGE>
Principal Occupations During the
Name and Address Position Past Five Years and Other Affiliations
- ---------------- -------- --------------------------------------
Matthew L. Thompson Secretary Partner of Faegre & Benson LLP, Great
2200 Norwest Center Hall's general counsel, since May
90 South Seventh Street 1995; Vice President, Assistant
Minneapolis, MN 55402 Secretary and Corporate/Fund Counsel
of DRC from January 1994 to May 1995;
prior thereto, Partner of Dorsey &
Whitney since 1993 and Associate of
Dorsey & Whitney from 1985 through
1992.
Thomas D. Vogel Compliance Vice President and Controller of
Office Insight and the Distributor's Business
Services Group; Assistant Controller
of Insight from 1993 to 1995.
The annual compensation of each Director is $6,000 plus $1,000 for each
meeting attended. No compensation is paid by Great Hall to its officers. The
following table sets forth for such period the aggregate compensation
(excluding expenses) paid by Great Hall to its directors during the fiscal
year ended July 31, 1998:
COMPENSATION TABLE
------------------
Pensions or Retirement
Aggregate Benefits Accrued
Compensation as part of
Name of Director from Great Hall Great Hall Expenses
---------------- --------------- -------------------
T. Geron (Jerry) Bell $10,000 None
Sandra J. Hale $10,000 None
Ron James $10,000 None
Jay H. Wein $10,000 None
Additional directors of Insight are as follows:
Name Other Positions
- ----------------------- -------------------------------------
Irving Weiser Chairman, Chief Executive Officer and
President of the Distributor
John C. Appel Vice Chairman and Chief Financial
Officer of the Distributor
Ronald A. Tschetter Senior Executive Vice President of
the Distributor (Private Client Group)
Nelson D. Civello Senior Executive Vice President of
the Distributor (Fixed Income Capital
Markets Group)
Kenneth J. Wessels Senior Executive Vice President of the
Distributor (Dain Rauscher Wessels)
<PAGE>
GENERAL INFORMATION
Under the terms of the Custodian Agreement, Norwest Bank Minnesota, N.A.
(the "Custodian") holds and safekeeps all of the assets of each Fund. For its
services, the Custodian receives from each Fund a monthly fee based upon the
average market value of such Fund's securities held in custody plus securities
transaction charges; it is also reimbursed for certain out-of-pocket expenses.
Under the terms of an Investment Account Agreement, Investors Fiduciary
Trust Company (the "Fund Accounting Agent") performs necessary investment
accounting and recordkeeping services for the Fund. For its services, the
Fund Accounting Agent is paid a monthly fee and is reimbursed for certain out-
of-pocket expenses.
Under the terms of the Transfer Agency Agreement, PFPC Inc. (the
"Transfer Agent") maintains the shareholder account records for each Fund,
handles certain communications between shareholders and each Fund, distributes
dividends and distributions payable by each Fund and produces statements with
respect to account activity for each Fund and its shareholders. For these
services, the Transfer Agent receives a flat monthly fee and is also
reimbursed for certain out-of-pocket expenses.
The Distributor also performs certain shareholder account services for
the Funds pursuant to a Shareholder Account Service Agreement. Under the
terms of the Shareholder Account Service Agreement, the Distributor disburses
or credits all proceeds of redemptions, dividends and other distributions to
shareholders, handles certain communications between shareholders and each
Fund, prepares shareholder records, maintains a master account with the
Transfer Agent on behalf of shareholders and performs other related services.
For its services, the Distributor receives a monthly fee computed on the basis
of the number of shareholder accounts that are maintained for each Fund during
the month and also is reimbursed for certain out-of-pocket expenses.
Great Hall maintains accounting records that specifically allocate
assets and liabilities on a series by series basis. The shares of each series
represent an undivided interest in the assets and liabilities specifically
allocated to that series. Creditors and other persons contracting with Great
Hall with respect to a series may look solely to the assets of that series to
satisfy claims against Great Hall.
All Fund shares are the same class and are freely transferable. Each
share has equal dividend rights and is entitled to one vote at all shareholder
meetings. Separate votes are taken by each series of Great Hall except to the
extent that the 1940 Act requires shares of all series to be voted in the
aggregate. Shares have non-cumulative voting rights, so that the holders of
more than 50% of the shares can, if they choose to do so, elect all the
directors of Great Hall, in which event the holders of the remaining shares
will be unable to elect any person as a director. Whenever the approval of a
majority of the outstanding shares of a series of Great Hall is required in
connection with shareholder approval of an investment advisory agreement,
changes in the investment objectives, policies or limitations of that series,
or changes in the distribution expense plan, a "majority" shall mean the vote
of the lesser of: (a) 67% or more of the shares of such series present at a
meeting, if the holders of more than 50% of the outstanding shares of such
series are present in person or by proxy; or (b) more than 50% of the
outstanding shares of such series. To the knowledge of Great Hall, no
shareholder beneficially owned 5% or more of Prime Fund's shares as of
July 31, 1998. As of the date of this Statement of Additional Information,
the sole shareholder of Tax-Free Fund was Dain Rauscher Corporation.
Great Hall is not required under Minnesota law to hold annual or
periodically scheduled regular meetings of shareholders, and does not intend
to hold such meetings. The Board of Directors may convene shareholder
meetings when it deems appropriate. In addition, if a regular meeting of
shareholders has not been held during the immediately preceding 15 months, a
shareholder or shareholders holding three percent or more of the voting shares
of Great Hall may demand a regular meeting of shareholders by written notice
of demand given to the chief executive officer or the chief financial officer
of Great Hall. Within 90 days after receipt of the demand, a regular meeting
of shareholders must be held at the expense of Great Hall. Irrespective of
whether a regular meeting of shareholders has been held during the immediately
preceding 15 months, in accordance with Section 16(c) of the 1940 Act, the
Board of Directors of Great Hall shall promptly call a meeting of shareholders
for the purpose of
<Page
voting upon the question of removal of any director when requested in writing
to do so by the record holders of not less than 10% of the outstanding
shares, and Great Hall will assist in communications with other shareholders
as required by the 1940 Act.
Under Minnesota law, the Board of Directors has overall responsibility
for managing Great Hall in good faith, in a manner reasonably believed to be
in the best interests of Great Hall, and with the care an ordinarily prudent
person in a like position would exercise in similar circumstances.
Under Minnesota law, directors owe Great Hall and its shareholders
certain fiduciary duties, including a duty of "loyalty" (to act in good faith
and in the best interests of Great Hall) and a duty of "care" (to act with the
care that a reasonably prudent person would exercise under similar
circumstances). Minnesota law authorizes corporations to eliminate the
personal monetary liability of directors to the corporation or its
shareholders for breach of the duty of "care." Directors of corporations
adopting such a limitation provision still owe the corporation this duty of
"care," but under most circumstances cannot be sued for monetary damages for
breaches of such duty. The Articles of Incorporation of Great Hall limit the
liability of directors to the fullest extent permitted by law.
The directors of Great Hall remain fully liable (including possibly for
monetary damages) for breaches of their duty of "loyalty," for self-dealing,
for bad faith and intentional misconduct, and for violations of the 1933 Act,
the Securities Exchange Act of 1934, and certain provisions of Minnesota
corporation law. Additionally, the 1940 Act prohibits limiting a director's
liability for willful misfeasance, bad faith, gross negligence, or reckless
disregard of the director's duties in the conduct of the director's office,
and it is uncertain whether and to what extent directors remain liable for
monetary damages for violations of the 1940 Act. The SEC staff has taken the
position that investment company directors remain liable for monetary damages
under certain circumstances.
Upon issuance and sale in accordance with the terms of the Funds'
Prospectus and Statement of Additional Information, each share of a Fund will
be fully paid and non-assessable. Shares have no preemptive, subscription or
conversion rights and are redeemable as set forth under "How To Redeem Shares"
in the Prospectus. In the event of the dissolution or liquidation of Great
Hall, the holders of the shares of any Fund are entitled to receive, as a
class, the underlying assets of such Fund available for distribution to
shareholders.
COUNSEL AND AUDITORS
Faegre & Benson LLP, 2200 Norwest Center, 90 South Seventh Street,
Minneapolis, Minnesota 55402, serves as Great Hall's general counsel.
Lindquist & Vennum PLLP, 4200 IDS Center, 80 South Eighth Street, Minneapolis,
Minnesota 55402, serves as counsel to Great Hall's disinterested directors.
KPMG Peat Marwick LLP, 90 South Seventh Street, 4200 Norwest Tower,
Minneapolis, Minnesota 55402, has been selected as the independent auditors of
Great Hall for its fiscal year ending July 31, 1999.
FINANCIAL AND OTHER INFORMATION
The prospectus and this Statement of Additional Information do not
contain all the information included in Great Hall's Registration Statement
filed with the SEC under the 1933 Act and the 1940 Act (the "Registration
Statement") with respect to the securities offered by the Prospectus and this
Statement of Additional Information. Certain portions of the Registration
Statement have been omitted from the Prospectus and this Statement of
Additional Information pursuant to the rules and regulations of the SEC. The
Registration Statement including the exhibits thereto may be examined at the
office of the SEC in Washington, D.C.
Statements contained in the Prospectus or in this Statement of
Additional Information as to any contract or other document referred to are
not necessarily complete, and, in each instance, reference is made to the copy
of such contract or other document filed as an exhibit to the Registration
Statement of which the Prospectus and this
<PAGE>
Statement of Additional Information form a part, each such statement being
qualified in all respects by such reference.
<PAGE>
APPENDIX
RATINGS OF INVESTMENTS
The following is a description of Standard & Poor's Corporation ("S&P")
and Moody's Investors Service, Inc. ("Moody's") commercial paper, loan, note
and bond ratings. To the extent that ratings accorded by S&P or Moody's may
change as a result of changes in such organizations, the Funds will attempt to
use comparable rating standards for their permissible investments.
Description of Moody's Commercial Paper, Loan and Note Ratings.
The rating Prime-1 is the highest commercial paper rating assigned by
Moody's. Issuers rated Prime-1 (or related supporting institutions) have a
superior capacity for repayment of short-term promissory obligations.
Repayment capacity will normally be evidenced by the following
characteristics:
bullet Leading market positions in well established industries.
bullet High rates of return on funds employed.
bullet Conservative capitalization structures with moderate reliance
on debt and ample asset protection.
bullet Broad margins in earnings coverage of fixed financial charges and
high internal cash generation.
bullet Well established access to a range of financial markets and
assured sources of alternate liquidity.
Issuers rated Prime-2 (or related supporting institutions) have a strong
capacity for repayment of short-term promissory obligations. This will
normally be evidenced by many of the characteristics cited above but to a
lesser degree. Earnings trends and coverage ratios, while sound, will be more
subject to variation. Capitalization characteristics, while still
appropriate, may be more affected by external conditions. Ample alternative
liquidity is maintained.
Issuers rated Prime-3 (or related supporting institutions) have an
acceptable capacity for repayment of short-term promissory obligations. The
effect of industry characteristics and market composition may be more
pronounced. Variability in earnings and profitability may result in changes
in the level of debt protection measurements and the requirement for
relatively high financial leverage. Adequate alternate liquidity is
maintained.
Loans bearing the designation MIG-1 by Moody's are of the best quality,
enjoying strong protection from established cash flows, superior liquidity
support or demonstrated broad-based access to the market for refinancing.
Loans bearing the designation of MIG-2 are of high quality, with margins
of protection ample although not so large as the preceding group.
Loans bearing the designation of MIG-3 are of favorable quality. All
security elements are accounted for but there is lacking the undeniable
strength of the preceding grades. Liquidity and cash flow protection may be
narrow and market access for refinancing is likely to be less well
established.
<PAGE>
Description of S&P's Commercial Paper and Municipal Note Ratings
The rating A is the highest commercial paper rating assigned by S&P.
Issues in this category have the greatest capacity for timely payment and are
delineated with the numbers 1, 2 and 3 to indicate the relative degree of
safety.
The designation A-1 indicates that the degree of safety regarding timely
payment is either overwhelming or very strong. Those issues determined to
possess overwhelming safety characteristics are denoted with a plus (+) sign
designation.
The designation A-2 indicates that the capacity for timely payment is
strong. However, the relative degree of safety is not as high as for issues
designated "A-1."
The designation A-3 indicates a satisfactory capacity for timely
payment. However, issues with this designation are somewhat more vulnerable
to the adverse effects of changes in circumstances than issues carrying the
higher designations.
Municipal notes rated SP-1 have a very strong or strong capacity to pay
principal and interest. Those issuers determined to possess overwhelming
safety characteristics will be given a plus (+) designation.
Municipal notes rated SP-2 have a satisfactory capacity to pay principal
and interest.
Municipal notes rated SP-3 have a speculative capacity to pay principal
and interest.
Description of S&P's Bond Ratings
AAA-Bonds rated AAA have the highest rating assigned by S&P to a debt
obligation. Capacity to pay interest and repay principal is extremely strong.
AA-Bonds rated AA have a very strong capacity to pay interest and repay
principal and differ from AAA issues only in a small degree.
A-Bonds rated A have a strong capacity to pay interest and repay
principal, although they are somewhat more susceptible to the adverse effects
of changes in circumstances and economic conditions than bonds in higher rated
categories.
BBB-Bonds rated BBB are regarded as having an adequate capacity to pay
interest and repay principal. Although they normally exhibit adequate
protection parameters, adverse economic conditions or changing circumstances
are more likely to lead to a weakened capacity to pay interest and repay
principal for bonds in this category than for bonds in higher-rated
categories.
BB, B, CCC, CC, C-Bonds rated BB, B, CCC, CC and C are regarded, on
balance, as predominantly speculative with respect to capacity to pay interest
and repay principal in accordance with the terms of the obligation. BB
indicates the lowest degree of speculation and C the highest degree of
speculation. While such bonds will likely have some quality and protective
characteristics, these are outweighed by large uncertainties or major risk
exposures to adverse conditions.
<PAGE>
Plus (+) or (-): The ratings from AA to CCC may be modified by the
addition of a plus or minus sign to show relative standing within the major
rating categories.
Description of Moody's Bond Ratings
Aaa-Bonds which are rated Aaa are judged to be of the best quality.
They carry the smallest degree of investment risk and are generally referred
to as "gilt-edged." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized
are most unlikely to impair the fundamentally strong position of such issues.
Aa-Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group, they comprise what are generally
known as high-grade bonds. They are rated lower than the best bonds because
margins of protection may not be as large as in Aaa securities or fluctuation
of protective elements may be of greater amplitude or there may be other
elements present which make the long-term risks appear somewhat larger than
with respect to Aaa securities.
A-Bonds which are rated A possess many favorable investment attributes
and are to be considered as upper medium grade obligations. Factors giving
security to principal and interest are considered adequate but elements may be
present which suggest a susceptibility to impairment sometime in the future.
Baa-Bonds which are rated Baa are considered as medium grade
obligations, i.e., they are neither highly protected nor poorly secured.
Interest payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack outstanding
investment characteristics and in fact have speculative characteristics as
well.
Ba-Bonds which are rated Ba are judged to have speculative elements;
their future cannot be considered as well assured. Often the protection of
interest and principal payments may be very moderate and thereby not well
safeguarded during both good and bad times over the future. Uncertainty of
position characterizes bonds in this class.
B-Bonds which are rated B generally lack characteristics of the
desirable investment. Assurance of interest and principal payments or of
maintenance of other terms of the contract over any long period of time may be
small.
Caa-Bonds which are rated Caa are of poor standing. Such issues may be
in default or there may be present elements of danger with respect to
principal or interest.
Within each rating classification from Aa through B, Moody's has
assigned the numerical modifiers 1, 2 and 3. The modifier 1 indicates that a
security ranks in the high end of that rating category, 2 in the mid-range of
a category and 3 nearer the low end of a category.
<PAGE>
GREAT HALL INVESTMENT FUNDS, INC.
Post-Effective Amendment No. 11 to the
Registration Statement on Form N-1A
PART C
OTHER INFORMATION
<PAGE>
PART C
OTHER INFORMATION
Item 24 -- Financial Statements and Exhibits
- --------------------------------------------
(a) Audited financial statements for each of Series A, Series B,
Series C and Series F of Great Hall Investment Funds, Inc. are included as
part of such series' Statement of Additional Information.
(b) Exhibits:
1 Articles of Incorporation 1
2 Bylaws
3 Not applicable
4 Not applicable
5 Investment Advisory Agreement
6 Distributor Agreement
7 Not applicable
8 Custodian Contract (1)
9.1 Transfer Agency and Service Agreement (2)
9.2 Shareholder Account Services Agreement
9.3 Investment Accounting Agreement (3)
10 Opinion and Consent of Faegre & Benson LLP
11 Consent of KPMG Peat Marwick L.L.P.
12 Not applicable
13 Letter of Investment Intent (1)
14 Not applicable
15 Not applicable
16 Schedules Supporting Computations of Performance Data (1)
17 Powers of Attorney (1)
18 Officers/Directors of Dain Rauscher Incorporated
19 Code of Ethics (1)
(1) Incorporated by reference to the like numbered exhibit to Post-Effective
Amendment No. 7 to the Registration Statement filed on or about November 29,
1995.
(2) Incorporated by reference to the like numbered exhibit to Post-Effective
Amendment No. 8 to the Registration Statement filed on or about December 1,
1996.
(3) Incorporated by reference to the like numbered exhibit to Post-Effective
Amendment No. 9 to the Registration Statement filed on or about August 1,
1997.
<PAGE>
Item 25 -- Persons Controlled by or Under Common Control with Registrant
See the information set forth under the caption "Investment Management"
in the accompanying Prospectuses (Part A of this Registration Statement) and
under the captions "Management and Distribution Agreements" and "Directors and
Officers" in the accompanying Statements of Additional Information (Part B of
this Registration Statement).
Item 26 -- Number of Holders of Securities
- ------------------------------------------
The following table sets forth the number of holders of shares of the
Registrant as of July 31, 1998:
Title of Class Number of Shareholders
-------------- ----------------------
Series A Common Shares,
par value $.01 per share 395,203
Series B Common Shares,
par value $.01 per share 9,443
Series C Common Shares,
par value $.01 per share 9,451
Series F Common Shares,
par value $.01 per share 104
Item 27 -- Indemnification
- --------------------------
The Articles of Incorporation (Exhibit 1) and Bylaws (Exhibit 2) of the
Registrant provide that the Registrant shall indemnify such persons, for such
expenses and liabilities, in such manner, under such circumstances, and to the
full extent permitted by Section 302A.521 of the Minnesota Statutes, as now
enacted or hereafter amended, provided that no such indemnification may be
made if it would be in violation of Section 17(h) of the Investment Company
Act of 1940, as now enacted or hereafter amended. Section 302A.521 of the
Minnesota Statutes, as now enacted, provides that a corporation shall
indemnify a person made or threatened to be made a party to a proceeding
against judgments, penalties, fines, settlements and reasonable expenses,
including attorneys' fees and disbursements, incurred by the person in
connection with the proceeding, if, with respect to the acts or omissions of
the person complained of in the proceeding, the person: (a) has not been
indemnified by another organization for the same judgments, penalties, fines,
settlements and reasonable expenses incurred by the person in connection with
the proceeding with respect to the same acts or omissions; (b) acted in good
faith; (c) received no improper personal benefit; (d) complied with the
Minnesota Statute dealing with directors' conflicts of interest, if
applicable; (e) in the case of a criminal proceeding, had no reasonable cause
to believe the conduct was unlawful; and (f) reasonably believed that the
conduct was in the best interests of the corporation or, in certain
<PAGE>
circumstances, reasonably believed that the conduct was not opposed to the best
interests of the corporation.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act
and will be governed by the final adjudication of such issue.
Item 28 -- Business and Other Connections of Investment Adviser
- ---------------------------------------------------------------
Information on the business of the Registrant's investment adviser and
on the officers and directors of the investment adviser is set forth under the
caption "Investment Management" in the accompanying Prospectuses (Part A of
this Registration Statement) and under the captions "Management and
Distribution Agreements" and "Directors and Officers" in the accompanying
Statements of Additional Information (Part B of this Registration Statement)
Item 29 -- Principal Underwriters
- ---------------------------------
(a) As set forth in the accompanying Prospectus and Statement of
Additional Information, Dain Rauscher Incorporated ("DRC") serves as the
principal underwriter of the Registrant's shares of common stock. As of the
date of this filing, DRC does not serve as a principal underwriter to any
other registered investment companies.
(b) The names, principal business addresses, positions and offices of
directors and officers of DRC are set forth in Exhibit 18.
(c) Not applicable.
Item 30 -- Location of Accounts and Records
- -------------------------------------------
The custodian of the Registrant is Norwest Bank Minnesota, N.A.,
90 South Seventh Street, Minneapolis, Minnesota 55402. The dividend
disbursing agent and transfer agent of the Registrant is PFPC Inc.,
400 Bellevue Parkway, Wilmington, Delaware 19809. The fund accounting agent
of the Registrant is Investors Fiduciary Trust Company, 127 West 10th Street,
Kansas City, Missouri 64105-1716. Other records will be maintained by the
Registrant at its principal offices, which are located at 60 South Sixth
Street, Minneapolis, Minnesota 55402.
<PAGE>
Item 31 -- Management Services
- ------------------------------
Not applicable.
Item 32 -- Undertakings
- -----------------------
Not applicable.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all the
requirements for effectiveness of this Registration Statement pursuant to Rule
485(b) under the Securities Act of 1933 and has duly caused this Post-Effective
Amendment to its Registration Statement on Form N-1A to be signed on its behalf
by the undersigned, thereunto duly authorized, in the City of Minneapolis, and
State of Minnesota, on the 28th day of August, 1998.
GREAT HALL INVESTMENT FUNDS, INC.
By /s/ J. Scott Spiker
J. Scott Spiker
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this Post-
Effective Amendment to the Registration Statement on Form N-1A has been signed
below by the following persons in the capacities and on the date indicated.
Name/Signature Title Date
- -------------- ----- ----
/s/ J. Scott Spiker Chief Executive Officer
J. Scott Spiker (Principal Executive Officer) August 28, 1998
/s/ Julie K. Getchell Chief Financial Officer
Julie K. Getchell (Principal Financial and August 28, 1998
Accounting Officer)
T. Geron Bell* Director
Sandra J. Hale* Director
Ron James* Director
Jay H. Wein* Director
*By /s/ Julie K. Getchell
Julie K. Getchell,
Attorney-in-Fact August 28, 1998
(Pursuant to Powers of Attorney dated August 17, 1994, filed as Exhibit 17 to
Post-Effective Amendment No. 7 to the Registration Statement on November 29,
1995.)
<PAGE>
EXHIBIT INDEX
Exhibit Description Page
------- ----------- ----
1 Articles of Incorporation (1)
2 Bylaws *
3 Not applicable
4 Not applicable
5 Investment Advisory Agreement *
6 Distributor Agreement *
7 Not applicable
8 Custodian Contract (1)
9.1 Transfer Agency and Service Agreement (2)
9.2 Shareholder Account Services Agreement *
9.3 Investment Accounting Agreement (3)
10 Opinion and Consent of Faegre & Benson LLP *
11 Consent of KPMG Peak Marwick L.L.P. *
12 Not applicable
13 Letter of Investment Intent (1)
14 Not applicable
15 Not applicable
16 Schedules Supporting
Computations of Performance Data (1)
17 Powers of Attorney (1)
18 Officers/Directors of Dain Rauscher Incorporated *
19 Code of Ethics (1)
_____________________________________________________________________________
(1) Incorporated by reference to the like numbered exhibit to Post-Effective
Amendment No. 7 to the Registration Statement filed on or about November 29,
1995.
(2) Incorporated by reference to the like numbered exhibit to Post-Effective
Amendment No. 8 to the Registration Statement filed on or about December 1,
1996.
(3) Incorporated by reference to the like numbered exhibit to Post-Effective
Amendment No. 9 to the Registration Statement filed on or about August 1,
1997.
* To be filed by amendment.
