<PAGE> 1
FUND FACTS
The ValueStar Family of Funds provides shareholders with a variety of
features to make investing in the Portfolios easy, convenient and
manageable.
<TABLE>
<S> <C>
---------------------------------------------------------------------------------------
VALUESTAR FUND FEATURES VALUESTAR FUND BENEFITS
PROFESSIONAL INVESTMENT The investment managers at First American National Bank are
MANAGEMENT experienced investment professionals who oversee the
investments in each mutual fund.
---------------------------------------------------------------------------------------
LOW MINIMUM INVESTMENT Initial investments in the Portfolios can be as low as
$1,000.
DEDICATED CUSTOMER Account information is available from helpful
SERVICE representatives. Just call 1-800-852-0045.
---------------------------------------------------------------------------------------
AUTOMATIC INVESTMENTS Investments can be made once or twice a month with automatic
transfers from your checking account to your Portfolio
account.
DOLLAR COST AVERAGING Dollar cost averaging is a means of investing by which you
invest a fixed dollar amount on a consistent basis. You
invest whether the financial markets are high or low. As a
result, you buy more shares when prices are low and fewer
when prices are high. In this way, you can achieve a lower
average cost per share.*
---------------------------------------------------------------------------------------
AUTOMATIC WITHDRAWALS Automatic withdrawals from your Portfolio account can be made
and credited to any account you designate.
FREE EXCHANGE PRIVILEGES Shares of a Portfolio can be exchanged into shares of other
ValueStar Portfolios at no cost.**
---------------------------------------------------------------------------------------
REGULAR, INFORMATIVE You will receive account statements after each transaction,
STATEMENTS AND REPORTS plus regular financial reports highlighting performance and
investment strategies.
DIVIDEND REINVESTMENT Dividend income and capital gains can be reinvested
automatically in additional shares of a Portfolio.
---------------------------------------------------------------------------------------
DAILY REDEMPTIONS Shares are redeemable each business day (at the net asset
value per share, which may be worth more or less than your
original cost, next determined after receipt of your
redemption request) by mail, telephone or bank wire.
<FN>
* Dollar cost averaging does not assure a profit and does not protect against loss in
declining markets. You should consider your financial ability to continue your
investment program during periods of extreme share price fluctuations.
** Exchange privileges may be modified or discontinued by the Portfolios at any time.
Upon redemption, shares may be worth more or less than their original cost.
HELPING PEOPLE PLAN FOR A BRIGHTER FUTURE.(SM)
</TABLE>
<PAGE> 2
<TABLE>
<S> <C> <C> <C>
[PHOTO] JACQUELINE R. LUNSFORD, CFA [PHOTO] DONALD F. TURK, CFA
Portfolio Manager Portfolio Manager
Prime Money Market U.S. Treasury Money
Portfolio Market Portfolio
</TABLE>
- --------------------------------------------------------------------------------
INVESTMENT GOAL
The ValueStar money-market portfolios seek to provide as high a level of
current income as is consistent with the preservation of capital and the
maintenance of liquidity. Each Portfolio seeks its objective by investing in:
PRIME MONEY MARKET PORTFOLIO -- A broad range of U.S. Government, bank and
corporate short-term money-market obligations.
U.S. TREASURY MONEY MARKET PORTFOLIO -- U.S. Treasury securities, other
obligations that are guaranteed as to principal and interest by the U.S.
Government and related repurchase agreements.*
- --------------------------------------------------------------------------------
Q. WHAT FACTORS AFFECTED THE PERFORMANCE OF THE PORTFOLIOS, AND WHAT STRATEGIES
WERE EMPLOYED TO MAXIMIZE PERFORMANCE RESULTS?
A. Months of declining short-term interest rates came to an abrupt halt during
the first quarter of 1996. Short-term interest rates were pushed lower one last
time at the end of January as the Federal Reserve Board (Fed) lowered the Fed
Funds rate -- the rate banks charge each other for overnight loans -- another 25
basis points (0.25 percentage points), but unexpectedly strong economic
indicators in February and March dashed hopes of further easing by the Fed. As a
result, the short-term yield curve resumed its normal upward slope for prime
issuance toward the end of the first quarter, which has allowed us to increase
yield by extending the average maturities of the money-market portfolios. For
the preceding several months the yield curve had been flat, which meant that
money managers did not receive higher yields for investing in securities with
longer maturities, as they normally would. The shift in the yield curve has also
sparked new issuance of one-year/quarterly callable notes, and the purchase of a
small position in these securities is also partially responsible for the Prime
Money Market Portfolio's higher returns and its longer average maturity.
- ----------------------------------------------------
YIELDS (AS OF JUNE 30, 1996)
INVESTOR SHARES
<TABLE>
<CAPTION>
PRIME TREASURY
----- --------
<S> <C> <C>
7-Day Yield 4.90% 4.72%
30-Day Yield 4.90 4.73
Yields will vary with market conditions,
and past performance is no guarantee of
future results.
An additional class of shares, Trust
Shares, has been authorized but had not
been issued as of June 30, 1996.
- ------------------------------------------------
</TABLE>
- ---------------
* While the individual securities in the U.S. Treasury Money Market Portfolio
are guaranteed as to payment of principal and interest by the U.S. Government,
an investment in the ValueStar Money Market Portfolios is not. Yields will
fluctuate, and there is no assurance that the Portfolios will be able to
maintain a stable net asset value of $1.00 per share. The Portfolios are
distributed by Concord Financial Group, Inc.
1
<PAGE> 3
Q. WHAT FACTORS COULD AFFECT THE PORTFOLIOS IN THE MONTHS AHEAD?
A. Since inflation currently is stable, it is unlikely that the Fed will raise
interest rates in the near future. While the Fed now feels that the economy will
slow in the second half of 1996, it also is quick to assure us that any increase
in inflation will be met with an increase in short-term interest rates.
Therefore, we feel that there well could be a rise in rates sometime in the
latter part of the fourth quarter, after the presidential election.
Short-term securities remain quite expensive, partly due to supply/demand
factors, but mostly due to the fact that an immediate rate hike is not expected.
Therefore, most investors are refusing to purchase longer-term securities at
these current rates and instead are placing excess cash in either overnight or
other very short-term securities. This will cause the average maturities of the
money-market portfolios to shorten, which we believe is beneficial because then
we will be in the position to extend our average maturities and take advantage
of higher yields as they become available.
2
<PAGE> 4
THE INFINITY MUTUAL FUNDS, INC.
VALUESTAR PRIME MONEY MARKET PORTFOLIO
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
JUNE 30, 1996 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
S&P/MOODY'S RATE OR MATURITY AMOUNT AMORTIZED
RATINGS DISCOUNT DATE (000) COST
----------- -------- --------- ---------- -----------
<S> <C> <C> <C> <C> <C>
BANK NOTES -- 18.1%
Bank of New York, Delaware......... A1/P1 5.63%* 10/25/96 $ 2,000 $ 2,000,000
Boatmen's 1st National Bank of
Kansas City..................... A1/P1 5.61* 6/17/97 2,000 2,000,000
Huntington National Bank........... A1/P1 5.51* 11/13/96 2,000 2,000,000
Key Bank of New York, FR BN........ A1/P1 5.25* 2/14/97 2,000 1,999,114
NationsBank, FR MTN................ A1/P1 5.64* 11/18/96 2,750 2,750,684
Society National Bank of
Cleveland....................... A1/P1 5.92 5/21/97 2,000 2,000,000
-----------
Total Bank Notes
(Amortized cost -- $12,749,798).... 12,749,798
-----------
YANKEE CERTIFICATES OF DEPOSIT -- 8.5%
Fuji Bank Ltd., New York Branch.... A1/P1 5.53 7/26/96 2,000 2,000,015
Hong Kong Shanghai Bank, New York
Branch.......................... A1/P1 5.24 3/03/97 2,000 2,000,000
Sumitomo Bank Ltd., New York
Branch.......................... A1/P1 5.49 7/26/96 2,000 1,999,970
-----------
Total Yankee Certificates of Deposit
(Amortized cost -- $5,999,985)..... 5,999,985
-----------
COMMERCIAL PAPER -- 42.2%
DOMESTIC -- 21.1%
Atlantic Asset Securitization
Corp. .......................... A1/P1 5.40 7/16/96 2,000 1,995,500
Bankers Trust...................... A1+/P1 5.47 12/31/96 2,000 1,944,388
Countrywide Funding................ A1/P2 5.43 8/02/96 2,000 1,990,347
Dakota Finance..................... A1+/P1 5.40 8/21/96 2,000 1,984,700
Dynamic Funding.................... A2/P1 5.50 7/10/96 2,000 1,997,250
Morgan Stanley..................... A1+/P1 5.60 7/01/96 5,000 5,000,000
-----------
14,912,185
-----------
</TABLE>
Continued
3
<PAGE> 5
<TABLE>
<CAPTION>
PRINCIPAL
S&P/MOODY'S RATE OR MATURITY AMOUNT AMORTIZED
RATINGS DISCOUNT DATE (000) COST
----------- -------- --------- ---------- -----------
<S> <C> <C> <C> <C> <C>
PRIVATE PLACEMENT -- 5.7%
Enterprise Funding (b)............. A1/P1 5.42% 7/30/96 $ 2,000 $ 1,991,268
Sigma Finance, Inc. (b)............ A1+/P1 5.35 8/28/96 2,000 1,982,761
-----------
3,974,029
-----------
FOREIGN -- 15.4%
ABN AMRO National Finance.......... A1+/P1 5.22 12/04/96 2,000 1,954,760
Hanson Finance P/C................. A1/P1 5.35 7/25/96 2,000 1,992,867
Hosokawa Micron International...... A1/P1 5.55 7/29/96 947 942,912
Mitsubishi Motor, LOC: Bank of
Tokyo, Mitsubishi............... A1/P1 5.38 8/05/96 2,000 1,989,539
Province of Quebec................. A1+/P1 5.24 9/16/96 2,000 1,977,584
Sanwa Business Credit.............. A2/P1 5.41 7/16/96 2,000 1,995,492
-----------
10,853,154
-----------
Total Commercial Paper
(Amortized cost -- $29,739,368).... 29,739,368
-----------
CORPORATE OBLIGATIONS -- 9.2%
Abbey National Treasury............ A1+/P1 5.05* 3/03/97 2,000 1,996,702
Ford Motor Credit Corp., FR MTN.... A1/P1 5.78* 10/15/96 2,000 2,001,408
SMM Trust 1995-B (b)............... A1+/P1 5.63 8/02/96 2,475 2,475,000
-----------
Total Corporate Obligations
(Amortized cost -- $6,473,110)..... 6,473,110
-----------
TIME DEPOSITS -- 2.8%
Bank of Tokyo, Mitsubishi, London
Branch.......................... A1/P1 5.44 8/16/96 2,000 2,000,000
-----------
Total Time Deposits
(Amortized cost -- $2,000,000)..... 2,000,000
-----------
</TABLE>
Continued
4
<PAGE> 6
<TABLE>
<CAPTION>
PRINCIPAL
MATURITY AMOUNT AMORTIZED
RATE DATE (000) COST
---- -------- --------- ------------
<S> <C> <C> <C> <C>
REGULATED INVESTMENT COMPANIES -- 0.0%
Dreyfus Cash Management Fund.................... $ 1 $ 1
Provident National Fund......................... 1 1
------------
Total Regulated Investment Companies
(Amortized cost -- $2).......................... 2
------------
Total Investments, at value
(Amortized cost -- $56,962,263)................. 56,962,263
------------
REPURCHASE AGREEMENTS -- 19.3%
Fuji Securities, dated 6/28/96 with a maturity
value of $13,615,381 (Collateralized by
19,280,000 U.S. Treasury Strips dated
5/15/01, market value -- $14,187,574)........ 5.52% 7/01/96 13,609 13,609,121
------------
Total Repurchase Agreements
(Amortized cost -- $13,609,121)................. 13,609,121
------------
TOTAL (AMORTIZED COST -- $70,571,384)(A) --
100.1%.......................................... 70,571,384
Liabilities in excess of assets -- (0.1%)....... (48,824)
------------
NET ASSETS -- 100.0%............................ $ 70,522,560
===========
- ---------------
<FN>
Percentages indicated are based on net assets of $70,522,560.
(a) Cost for federal income tax and financial reporting purposes are the same.
(b) Represents a restricted security, purchased under Rule 144A, which is
exempt from registration under the Securities Act of 1933, as amended.
* Variable rate security. Maturity date reflects the next rate change date.
Rate resets weekly, monthly or quarterly. The rate reflected on the
Portfolio of Investments is the rate in effect at June 30, 1996.
LOC Letter of Credit
NA Not applicable
VRN Variable Rate Note
</TABLE>
See Notes to Financial Statements.
5
<PAGE> 7
THE INFINITY MUTUAL FUNDS, INC.
VALUESTAR PRIME MONEY MARKET PORTFOLIO
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1996 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investments in securities, at value
(amortized cost $56,962,263)......................................... $56,962,263
Repurchase agreements (amortized cost $13,609,121)...................... 13,609,121
Interest receivable..................................................... 275,353
Receivable for investment securities sold............................... 28,503,331
Receivable for Portfolio shares sold.................................... 1,000
Deferred organization costs............................................. 34,344
Prepaid expenses........................................................ 13,912
-----------
Total assets.............................................................. 99,399,324
-----------
LIABILITIES
Dividends payable....................................................... 289,027
Payable for investment securities purchased............................. 27,535,020
Payable for Portfolio shares redeemed................................... 973,046
Cash overdraft.......................................................... 14,353
Accrued expenses:
Advisory fees........................................................ 5,895
Sub-advisory fees.................................................... 8,843
Administration fees.................................................. 5,896
Other................................................................ 44,684
-----------
Total liabilities......................................................... 28,876,764
-----------
NET ASSETS................................................................ $70,522,560
===========
Shares Outstanding ($0.001 par value, 375 million shares authorized)...... 70,523,367
===========
Net Asset Value, Offering Price and Redemption Price per Share............ $1.00
=====
COMPOSITION OF NET ASSETS:
Shares of beneficial interest, at par................................... $ 70,523
Additional paid-in capital.............................................. 70,449,280
Undistributed net investment income..................................... 3,563
Accumulated net realized losses on investment transactions.............. (806)
-----------
Net Assets, June 30, 1996................................................. $70,522,560
===========
</TABLE>
- ---------------
See Notes to Financial Statements.
6
<PAGE> 8
THE INFINITY MUTUAL FUNDS, INC.
VALUESTAR PRIME MONEY MARKET PORTFOLIO
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1996 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Interest.......................................................... $1,956,632
Expenses
Advisory fees................................................... $ 35,482
Sub-advisory fees............................................... 52,920
Administration fees............................................. 35,482
Shareholder Services fees....................................... 88,752
Custodian fees and expenses..................................... 39,336
Reports to shareholders......................................... 5,748
Registration fees............................................... 1,525
Transfer agent fees and expenses................................ 13,591
Legal fees...................................................... 6,125
Amortization of organization expenses........................... 6,219
Directors' fees................................................. 2,550
Insurance expense............................................... 2,229
Audit fees...................................................... 7,753
Other expenses.................................................. 303
-------
Total expenses before fee waivers............................... 298,015
Less: Fee waivers............................................... (88,752)
Expenses paid by third parties............................ (83)
-------
Net expenses.................................................... 209,180
----------
Net Investment Income............................................. 1,747,452
----------
REALIZED GAINS ON SECURITIES TRANSACTIONS
Net realized gains on securities transactions................... 83
----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS.............. $1,747,535
==========
</TABLE>
- ---------------
See Notes to Financial Statements.
7
<PAGE> 9
THE INFINITY MUTUAL FUNDS, INC.
VALUESTAR PRIME MONEY MARKET PORTFOLIO
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS YEAR
ENDED ENDED
JUNE 30, 1996 DECEMBER 31, 1995
------------- -----------------
(UNAUDITED)
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations
Net investment income.................................. $ 1,747,452 $ 3,490,950
Net realized gains from securities transactions........ 83 --
------------- -------------
Net increase in net assets resulting from operations... 1,747,535 3,490,950
------------- -------------
Dividends to shareholders from net investment income..... (1,747,452) (3,490,950)
------------- -------------
Portfolio Share Transactions (at $1.00 per share)
Net proceeds from shares subscribed.................... 154,873,528 225,004,855
Net asset value of shares issued to shareholders in
reinvestment of dividends........................... 12,366 16,317
Cost of shares redeemed................................ (148,282,593) (243,452,709)
------------- -------------
Net increase (decrease) in net assets from Portfolio
share transactions.................................. 6,603,301 (18,431,537)
------------- -------------
Total Increase (Decrease)................................ 6,603,384 (18,431,537)
NET ASSETS
Beginning of period.................................... 63,919,176 82,350,713
------------- -------------
End of period.......................................... $ 70,522,560 $ 63,919,176
============= =============
SHARE TRANSACTIONS:
Issued................................................. 154,873,528 225,004,855
Reinvested............................................. 12,366 16,317
Redeemed............................................... (148,282,593) (243,452,709)
------------- -------------
Change in shares....................................... 6,603,301 (18,431,537)
============= =============
</TABLE>
- ---------------
See Notes to Financial Statements.
8
<PAGE> 10
THE INFINITY MUTUAL FUNDS, INC.
VALUESTAR U.S. TREASURY MONEY MARKET PORTFOLIO
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
JUNE 30, 1996 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
MATURITY AMOUNT AMORTIZED
RATE DATE (000) COST
---- -------- --------- ------------
<S> <C> <C> <C> <C>
U.S. TREASURY BILLS -- 46.7%
U.S. Treasury Bill.............................. 5.00%* 7/05/96 $ 5,000 $ 4,997,225
U.S. Treasury Bill.............................. 4.97* 7/11/96 5,000 4,993,097
U.S. Treasury Bill.............................. 4.88* 7/25/96 5,000 4,983,733
U.S. Treasury Bill.............................. 4.70* 8/01/96 5,000 4,979,785
U.S. Treasury Bill.............................. 4.75* 8/08/96 5,000 4,974,931
U.S. Treasury Bill.............................. 5.04* 8/15/96 5,000 4,968,500
U.S. Treasury Bill.............................. 4.86* 8/22/96 5,000 4,964,936
U.S. Treasury Bill.............................. 5.04* 8/29/96 5,000 4,960,503
U.S. Treasury Bill.............................. 5.01* 9/05/96 5,000 4,954,121
U.S. Treasury Bill.............................. 5.11* 9/12/96 5,000 4,948,241
U.S. Treasury Bill.............................. 5.02* 9/19/96 5,000 4,944,278
U.S. Treasury Bill.............................. 5.04* 10/03/96 5,000 4,934,200
U.S. Treasury Bill.............................. 5.06* 10/10/96 10,000 9,858,179
U.S. Treasury Bill.............................. 5.13* 10/17/96 5,000 4,924,850
U.S. Treasury Bill.............................. 5.08* 10/31/96 5,000 4,913,922
U.S. Treasury Bill.............................. 5.08* 11/07/96 5,000 4,908,984
U.S. Treasury Bill.............................. 5.11* 11/14/96 5,000 4,903,572
U.S. Treasury Bill.............................. 5.17* 11/21/96 5,000 4,897,318
------------
Total U.S. Treasury Bills
(Amortized cost -- $94,010,375)................. 94,010,375
------------
Total Investments, at value
(Amortized cost -- $94,010,375)................. 94,010,375
------------
</TABLE>
Continued
9
<PAGE> 11
<TABLE>
<CAPTION>
PRINCIPAL
MATURITY AMOUNT AMORTIZED
RATE DATE (000) COST
---- -------- --------- ------------
<S> <C> <C> <C> <C>
REPURCHASE AGREEMENTS -- 53.7%
Prudential
(Collateralized by $59,615,000 various U.S.
Treasury and U.S. Government Agency
Securities, 0.00%-8.00%, 5/15/01-2/15/23,
market value -- $40,800,159)................. 5.08% 7/01/96 $ 40,000 $ 40,000,000
Goldman Sach
(Collateralized by $29,312,000 U.S. Treasury
Bonds, 10.38%, 11/15/09, market
value -- $36,005,187)........................ 5.11 7/01/96 35,299 35,298,923
HSBC
(Collateralized by $32,576,000 U.S. Treasury
Notes 5.00%-9.25%, 4/15/98-10/31/98, market
value -- $33,464,170)........................ 5.25 7/01/96 32,807 32,807,329
------------
Total Repurchase Agreements
(Amortized cost -- $108,106,252)................ 108,106,252
------------
TOTAL INVESTMENTS (AMORTIZED
COST -- $202,116,627)(a) -- 100.4%.............. 202,116,627
Liabilities in excess of other assets --
(0.4%)....................................... (744,347)
------------
NET ASSETS -- 100.0%............................ $201,372,280
============
- ------------------
<FN>
Percentages indicated are based on net assets of $201,372,280.
* Effective Yield.
(a) Cost for federal income tax and financial reporting purposes are the same.
</TABLE>
See Notes to Financial Statements.
10
<PAGE> 12
THE INFINITY MUTUAL FUNDS, INC.
VALUESTAR U.S. TREASURY MONEY MARKET PORTFOLIO
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1996 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investments in securities, at value
(amortized cost $94,010,375)........................................ $ 94,010,375
Repurchase agreements (amortized cost $108,106,252).................... 108,106,252
Cash................................................................... 47,198,163
Interest receivable.................................................... 62,617
Receivable for capital shares sold..................................... 39
Deferred organization costs............................................ 34,153
Prepaid expenses....................................................... 40,213
------------
Total assets............................................................. 249,451,812
------------
LIABILITIES
Dividends payable...................................................... 784,358
Payable for investment securities purchased............................ 32,807,329
Payable for Portfolio shares redeemed.................................. 14,385,032
Accrued expenses:
Advisory fees....................................................... 41,395
Administration fees................................................. 16,558
Other............................................................... 44,860
------------
Total liabilities........................................................ 48,079,532
------------
NET ASSETS............................................................... $201,372,280
============
Shares Outstanding ($0.001 par value, 375 million shares authorized)..... 201,372,280
============
Net Asset Value, Offering Price and Redemption Price per Share........... $1.00
=====
COMPOSITION OF NET ASSETS:
Shares of beneficial interest, at par.................................. $ 201,372
Additional paid-in capital............................................. 201,167,369
Undistributed net investment income.................................... 3,539
------------
Net Assets, June 30, 1996................................................ $201,372,280
============
</TABLE>
- ---------------
See Notes to Financial Statements.
11
<PAGE> 13
THE INFINITY MUTUAL FUNDS, INC.
VALUESTAR U.S. TREASURY MONEY MARKET PORTFOLIO
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1996 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Interest......................................................... $4,589,436
Expenses
Advisory fees.................................................. $ 217,815
Administration fees............................................ 87,126
Shareholder Services fees...................................... 224,563
Custodian fees and expenses.................................... 41,529
Registration fees.............................................. 5,535
Transfer agent fees and expenses............................... 14,024
Amortization of organization expenses.......................... 6,198
Audit fees..................................................... 7,119
Legal fees..................................................... 13,126
Insurance expense.............................................. 3,349
Directors' fees................................................ 4,074
Reports to shareholders........................................ 3,630
Other expenses................................................. 6,148
---------
Total expenses before fee waivers.............................. 634,236
Less: Fee waivers.............................................. (224,563)
Expenses paid by third parties........................... (394)
---------
Net expenses................................................... 409,279
----------
Net Investment Income............................................ 4,180,157
----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS............. $4,180,157
==========
</TABLE>
- ---------------
See Notes to Financial Statements.
12
<PAGE> 14
THE INFINITY MUTUAL FUNDS, INC.
VALUESTAR U.S. TREASURY MONEY MARKET PORTFOLIO
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
JUNE 30, 1996 DECEMBER 31, 1995
------------- -----------------
(UNAUDITED)
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations
Net investment income.................................. $ 4,180,157 $ 7,556,840
------------- -------------
Dividends to shareholders from net investment income..... (4,180,157) 7,556,840
------------- -------------
Portfolio Share Transactions (at $1.00 per share)
Net proceeds from shares subscribed.................... 179,106,611 321,162,078
Net asset value of shares issued to shareholders in
reinvestment of dividends........................... 22,145 15,142
Cost of shares redeemed................................ (146,186,605) (292,461,858)
------------- -------------
Net increase in net assets from Portfolio share
transactions........................................ 32,942,151 28,715,362
------------- -------------
Total Increase........................................... 32,942,151 28,715,362
NET ASSETS
Beginning of period.................................... 168,430,129 139,714,767
------------- -------------
End of period.......................................... $ 201,372,280 $ 168,430,129
============= =============
SHARE TRANSACTIONS:
Issued................................................. 179,106,611 321,162,078
Reinvested............................................. 22,145 15,142
Redeemed............................................... (146,186,605) (292,461,858)
------------- -------------
Change in shares....................................... 32,942,151 28,715,362
============= =============
</TABLE>
- ---------------
See Notes to Financial Statements.
13
<PAGE> 15
THE INFINITY MUTUAL FUNDS, INC.
VALUESTAR FUNDS
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
NOTE 1 -- GENERAL
The Infinity Mutual Funds, Inc. (the "Fund") was organized as a Maryland
corporation on March 6, 1990 and is registered under the Investment Company Act
of 1940, as amended (the "Act"), as an open-end, management investment company.
The Fund operates as a series company currently comprising twelve portfolios.
The accompanying financial statements and notes relate to the ValueStar Prime
Money Market Portfolio and the ValueStar U.S. Treasury Money Market Portfolio
(the "Portfolios") only. Each Portfolio seeks to provide investors with as high
a level of current income as is consistent with the preservation of capital and
the maintenance of liquidity.
The Portfolios are authorized to issue two classes of shares as follows:
Investor Shares and Trust Shares. Investor Shares and Trust Shares are
substantially the same, except that Investor Shares bear the fees that are
payable under a plan adopted by the Fund's Board of Directors (the "Shareholder
Services Plan").
At June 30, 1996, there were 1.5 billion shares of the Portfolios' $0.001
par value common stock authorized of which each Portfolio's shares are
classified into Investor Shares (375 million shares authorized per Portfolio)
and Trust Shares (375 million shares authorized per Portfolio).
NOTE 2 -- SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies followed by
the Portfolios in preparation of their financial statements. The policies are in
conformity with generally accepted accounting principles. The preparation of
financial statements requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of income and expenses for the
period. Actual results could differ from those estimates.
A) Securities Valuation:
Portfolio securities are valued at amortized cost, which approximates
market value. The amortized cost method involves valuing a security at its cost
on the date of purchase and thereafter assuming a constant amortization to
maturity of the difference between the principal amount due at maturity and
cost. In addition the Portfolios may not a) purchase any instrument with a
remaining maturity greater than thirteen months unless such investment is
subject to a demand feature, or b) maintain a dollar-weighted average portfolio
maturity which exceeds 90 days.
B) Security Transactions and Investment Income:
Securities transactions are recorded on trade date. Realized gains and
losses from sales of investments are calculated on the identified cost basis.
Interest income, including accretion of discount and amortization of premium on
investments, is accrued daily.
C) Expenses:
The Portfolios incurred certain costs in connection with their
organization. These costs were deferred and are being amortized on a
straight-line basis through 1999 (five years from commencement of operations).
The Fund accounts separately for the assets, liabilities and operations of each
Portfolio. Direct expenses of a Portfolio are charged to that Portfolio and
general Fund
14
<PAGE> 16
- --------------------------------------------------------------------------------
expenses are allocated among the Fund's respective Portfolios.
D) Repurchase Agreements:
The Portfolios' custodian and other banks acting in a subcustodian capacity
take possession of the collateral pledged for investments in repurchase
agreements. The underlying collateral is valued daily on a mark-to-market basis
to determine that the value, including accrued interest, exceeds the repurchase
price. In the event of the seller's default on the obligation to repurchase, the
Portfolios have the right to liquidate the collateral and apply the proceeds in
satisfaction of the obligation. Under certain circumstances, in the event of
default or bankruptcy by the other party to the agreement, realization and/or
retention of the collateral may be subject to legal proceedings.
E) Federal Income Taxes:
For federal income tax purposes, each Portfolio is treated as a separate
entity for the purpose of determining its qualification as a regulated
investment company under the Internal Revenue Code (the "Code"). It is the
policy of each Portfolio to meet the requirements of the Code applicable to
regulated investment companies, including the requirement that they distribute
substantially all of their income to shareholders. Therefore, no federal income
tax provision is required.
At December 31, 1995, the Prime Money Market Portfolio had a capital loss
carryover of approximately $889 which is available to offset future net realized
gains on securities transactions to the extent provided for in the Code. Such
capital loss carryover expires in 2003 ($889).
F) Dividends and Distributions to Shareholders:
Dividends are declared daily to shareholders of record at the close of
business on the day of declaration and are paid monthly. Distributions of net
realized gains, if any, will be paid at least annually. Dividends and
distributions are recorded on the ex-dividend date. Distributions from net
investment income and from net realized gains are determined in accordance with
income tax regulations which may differ from generally accepted accounting
principles. Timing differences relating to shareholder distributions have been
reclassified to paid-in-capital. These differences are primarily due to
deferrals of certain losses and expiring capital loss carryovers.
G) Other:
The Portfolio maintains a cash balance with its custodian and receives a
reduction of its custody fees and expenses for the amounts of interest earned on
such uninvested cash balances. For financial reporting purposes for the six
months ended June 30, 1996, custodian fees and expenses and expenses paid by
third parties were increased by $83 and $394 for the Prime Money Market
Portfolio and U.S. Treasury Money Market Portfolio, respectively. There was no
effect on net investment income. The Portfolio could have invested such cash
amounts in an income producing asset if it had not agreed to a reduction of fees
or expenses under the expense offset arrangement with its custodian.
NOTE 3 -- AGREEMENTS AND OTHER TRANSACTIONS WITH AFFILIATES
First American National Bank ("First American") serves as the Portfolios'
investment adviser. Barnett Banks Trust Company, N.A. ("Barnett") serves as the
sub-investment adviser with respect to the Prime Money Market Portfolio.
Effective April 4, 1996, BISYS Fund Services Limited Partnership ("BISYS")
became the Portfolios' administrator. Concord Financial Group, Inc. (the
"Distributor") serves as the distributor of the Portfolios' shares. BISYS and
the Distributor are each a subsidiary of The BISYS Group, Inc.
15
<PAGE> 17
- --------------------------------------------------------------------------------
As investment adviser, First American supervises the sub-investment adviser
with respect to the Prime Money Market Portfolio, and manages the investments of
each Portfolio. For its services, First American is entitled to receive fees at
an annual rate of 0.25% of each Portfolio's average daily net assets less, in
the case of the Prime Money Market Portfolio, any amount payable by the
Portfolio to Barnett pursuant to the Sub-Investment Advisory Agreement.
As sub-investment adviser, Barnett provides the day-to-day management of
the Prime Money Market Portfolio's investments. For its services, the Prime
Money Market Portfolio has agreed to pay Barnett a fee at an annual rate of
0.15% of the Prime Money Market Portfolio's average net assets. Such fees are
accrued daily and paid monthly.
As administrator, BISYS assists in supervising the operations of the
Portfolios. For its services, BISYS is entitled to receive a fee at the annual
rate of 0.10% of the average daily net assets of each of the Portfolios. The
Distributor does not receive a fee under the Distribution Agreement.
Pursuant to the Shareholder Services Plan, the Portfolios pay the
Distributor for the provision of certain services to the holders of Investor
Shares at an annual rate of 0.25% of the average daily net assets of the
Investor Shares. The services provided may include personal services relating to
shareholder accounts and services related to the maintenance of such shareholder
accounts. For the six months ended June 30, 1996, the Distributor waived $88,752
and $224,563 in shareholder services fees from the Prime Money Market Portfolio
and the U.S. Treasury Money Market Portfolio, respectively.
Certain officers and Directors of the Fund are "affiliated persons" (each
defined in the Act) of BISYS or the Distributor. Each non-affiliated Director
receives an annual fee of $12,000 and a meeting fee of $1,500 per meeting for
services relating to all the portfolios constituting the Fund.
NOTE 4 -- CONCENTRATION OF CREDIT RISK
The Prime Money Market Portfolio invests substantially all of its assets in
a diversified portfolio of high quality U.S. dollar dominated money market
instruments as disclosed in the Portfolio of Investments by security type. The
issuers' abilities to meet their obligations may be affected by domestic and
foreign economic, regional and political developments.
The Prime Money Market Portfolio had the following concentrations by
industry sector at June 30, 1996 (as a percentage of total investments):
<TABLE>
<S> <C>
Commercial Paper.................. 42.1%
Repurchase Agreements............. 19.3%
Bank Notes........................ 18.1%
Corporate Obligations............. 9.2%
Certificates of Deposit........... 8.5%
Time Deposits..................... 2.8%
-----
100.0%
=====
</TABLE>
16
<PAGE> 18
THE INFINITY MUTUAL FUNDS, INC.
VALUESTAR PRIME MONEY MARKET PORTFOLIO
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED PERIOD ENDED
JUNE 30, 1996 DECEMBER 31, 1995 DECEMBER 31, 1994*
------------- ----------------- ------------------
(UNAUDITED)
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD...... $ 1.0000 $ 1.0000 $ 1.0000
----------- ------------- -------------
Income from investment operations:
Net investment income................... 0.0245 0.0538 0.0309
----------- ------------- -------------
Less dividends and distributions:
Dividends from net investment income.... (0.0245) (0.0538) (0.0309)
----------- ------------- -------------
NET ASSET VALUE, END OF PERIOD............ $ 1.0000 $ 1.0000 $ 1.0000
========== ============= =============
Total Return.............................. 2.48%(b) 5.51% 3.13%(b)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's)....... $ 70,523 $ 63,919 $ 82,351
Ratio of expenses to average net
assets............................... 0.59%(a) 0.65% 0.63%(a)
Ratio of net investment income to
average net assets................... 4.90%(a) 5.37% 4.06%(a)
Ratio of expenses to average net
assets**............................. 0.84%(a) 0.90% 0.93%(a)
Ratio of net investment income to
average net assets**................. 4.65%(a) 5.12% 3.76%(a)
- ---------------
<FN>
* For the period March 29, 1994 (commencement of operations) through December
31, 1994.
** During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(a) Annualized.
(b) Not annualized.
</TABLE>
See Notes to Financial Statements.
17
<PAGE> 19
THE INFINITY MUTUAL FUNDS, INC.
VALUESTAR U.S. TREASURY MONEY MARKET PORTFOLIO
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED PERIOD ENDED
JUNE 30, 1996 DECEMBER 31, 1995 DECEMBER 31, 1994*
------------- ----------------- ------------------
(UNAUDITED)
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD...... $ 1.0000 $ 1.0000 $ 1.0000
--------- --------- --------
Income from investment operations:
Net investment income................... 0.0239 0.0528 0.0297
--------- --------- --------
Less dividends and distributions:
Dividends from net investment income.... (0.0239) (0.0528) (0.0297)
--------- --------- --------
NET ASSET VALUE, END OF PERIOD............ $ 1.0000 $ 1.0000 $ 1.0000
========= ========= ========
Total Return.............................. 2.41%(b) 5.41% 3.01%(b)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's)....... $ 201,372 $ 168,430 $139,715
Ratio of expenses to average net
assets............................... 0.47%(a) 0.50% 0.54%(a)
Ratio of net investment income to
average net assets................... 4.80%(a) 5.28% 4.02%(a)
Ratio of expenses to average net
assets**............................. 0.72%(a) 0.75% 0.83%(a)
Ratio of net investment income to
average net assets**................. 4.55%(a) 5.03% 3.73%(a)
- ---------------
<FN>
* For the period March 29, 1994 (commencement of operations) through December
31, 1994.
** During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(a) Annualized.
(b) Not annualized.
</TABLE>
See Notes to Financial Statements.
18
<PAGE> 20
The Infinity Mutual Funds, Inc.
VALUESTAR FAMILY OF MUTUAL FUNDS
3435 Stelzer Road
Columbus, OH 43219
INVESTMENT ADVISER
First American National Bank
315 Deaderick Street
Nashville, TN 37237-0401
ADMINISTRATOR
BISYS Fund Services LP
3435 Stelzer Road
Columbus, OH 43219
DISTRIBUTOR
Concord Financial Group, Inc.
3435 Stelzer Road
Columbus, OH 43219
CUSTODIAN
The Bank of New York
90 Washington Street
New York, NY 10286
TRANSFER AGENT &
DIVIDEND DISBURSING AGENT
BISYS Fund Services Ohio, Inc.
3435 Stelzer Road
Columbus, OH 43219
Concord Financial Group, Inc. is the Portfolios'
distributor and is unaffiliated with First American
National Bank, the Portfolios' adviser.
Investments in the Portfolios are neither guaranteed by
nor obligations of First American National Bank
or any other bank and are not insured
by the FDIC or any other government agency.
Investments in mutual funds involve risk,
including the possible loss of principal.
This material must be preceded or accompanied
by a current prospectus.
HELPING PEOPLE PLAN
FOR A BRIGHTER FUTURE.(SM)
05115-0 Rev. 8/96
VLSTMMD96SA
----------------------------------------------------
VALUESTAR
Family Of Mutual Funds
----------------------------------------------------
VALUESTAR PRIME
MONEY MARKET PORTFOLIO
VALUESTAR U.S. TREASURY
MONEY MARKET PORTFOLIO
-----------------------------------------
Semi-Annual Report
June 30, 1996
[VALUESTAR LOGO]
