<PAGE> 1
REPORT FROM THE INVESTMENT ADVISER
- --------------------------------------------------------------------------------
Dear Shareholder:
The Alpha Government Securities Portfolio is an open-end diversified money
market fund that 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 Portfolio invests primarily in short-term securities issued or
guaranteed by the U.S. Government, its agencies or instrumentalities and
repurchase agreements in respect thereof. All investments are restricted to
maturities of 13 months or less.
ECONOMIC OVERVIEW
Economic growth accelerated in the second quarter of 1996 as the Gross Domestic
Product advanced at an annual rate of about 4%, nearly twice the rate of the
first quarter. Although investors began to expect the Federal Reserve Board to
raise short-term interest rates to slow the economy, the Fed took no action in
the second quarter. The Fed last moved in January, when it lowered the federal
funds rate from 5.50% to 5.25% in an effort to stimulate the economy, which had
grown by just 0.5% during the fourth quarter of 1995. Although economic activity
has since strengthened, inflation has remained below 3%.
INTEREST-RATE ENVIRONMENT
Although the federal funds rate -- the interest rate banks charge each other for
overnight loans -- has fallen 0.25 percentage points, the yield on three-month
Treasury bills has risen 0.13 percentage points since the beginning of the year,
and the yield on six-month bills has risen 0.25 percentage points. These yields
have gone up because investors expect the Fed to raise the federal funds rate
between now and the end of the year. Meanwhile, interest rates beyond the
money-market spectrum -- longer than 13 months -- have risen sharply during the
first half of 1996, as investors became alarmed by the surge in economic growth
and the prospect of renewed inflation.
PORTFOLIO STRATEGY
The Alpha Government Securities Portfolio continues to be conservatively
managed, investing primarily in U.S. Treasury bills and U.S. Government agency
securities maturing within one month. By keeping the Portfolio's maturity very
short, we will be positioned to reinvest at higher rates once the Fed raises
short-term interest rates. In return for that flexibility, the Portfolio may
earn slightly less in income than more aggressive portfolios.
OUTLOOK
Although there is conflicting economic data, the consensus seems to be that the
Fed is going to raise short-term interest rates before the end of the year to
slow the economy. The timing of the increase may be delayed by the upcoming
presidential election. In any case, we do not expect the Fed to raise interest
rates more than 0.25 percentage points, because the data on inflation is not
compelling.
Sincerely,
Mark Silverstein
Portfolio Manager
- ------------------
INVESTMENTS IN THE PORTFOLIO ARE NEITHER INSURED NOR GUARANTEED BY THE U.S.
GOVERNMENT, AND THERE CAN BE NO ASSURANCE THAT THE PORTFOLIO WILL BE ABLE TO
MAINTAIN A STABLE NAV OF $1.00 PER SHARE.
<PAGE> 2
THE INFINITY MUTUAL FUNDS, INC.
ALPHA GOVERNMENT SECURITIES 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. GOVERNMENT AGENCIES -- 72.6%:
Federal Home Loan Mortgage Corp. ............................... 5.52% 7/1/96 $ 3,000 $ 3,000,000
Federal Home Loan Mortgage Corp. ............................... 5.28 8/14/96 6,000 5,961,280
Federal National Mortgage Assoc. ............................... 5.18 7/18/96 14,000 13,965,821
-----------
Total U.S. Government Agencies
(amortized cost -- $22,927,101)............................... 22,927,101
-----------
Total Investments -- 72.6%
(amortized cost -- $22,927,101)............................... 22,927,101
-----------
REPURCHASE AGREEMENTS -- 27.9%:
Morgan Stanley (Collateralized by $2,065,000 U.S. Treasury
Bonds, 11.25%, due 2/15/15, market value -- $3,060,000)..... 5.32 7/1/96 3,000 3,000,000
Nomura Securities International (Collateralized by $2,890,000
U.S. Treasury Notes, 5.00%, due 1/31/99, market
value -- $2,857,488)........................................ 5.35 7/1/96 2,800 2,800,000
Union Bank of Switzerland (Collateralized by $2,925,000 U.S.
Treasury Notes, 6.75%, due 6/30/99, market
value -- $$3,060,281)....................................... 5.42 7/1/96 3,000 3,000,000
-----------
TOTAL REPURCHASE AGREEMENTS
(AMORTIZED COST -- $8,800,000)................................ 8,800,000
-----------
TOTAL INVESTMENTS -- 100.5% (COST -- $31,727,101)(A)............ $31,727,101
===========
- ----------
<FN>
Percentages indicated are based on net assets of $31,584,741.
(a) Cost for federal income tax and financial reporting purposes are the same.
</TABLE>
- ----------
See Notes to Financial Statements.
3
<PAGE> 3
THE INFINITY MUTUAL FUNDS, INC.
ALPHA GOVERNMENT SECURITIES PORTFOLIO
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1996 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investments in securities, at value (amortized cost $22,927,101)............................. $22,927,101
Repurchase agreements (amortized cost $8,800,000)............................................ 8,800,000
Cash......................................................................................... 14,741,983
Interest receivable.......................................................................... 3,933
Receivable for capital shares sold........................................................... 2,437,832
Deferred organization costs and prepaid expenses............................................. 21,595
-----------
Total assets................................................................................... 48,932,444
-----------
LIABILITIES
Dividends payable............................................................................ 115,339
Payable for investments purchased............................................................ 11,798,620
Payable for capital shares redeemed.......................................................... 5,353,554
Accrued expenses and other payables:
Advisory fees.............................................................................. 2,685
Administration fees........................................................................ 2,148
Shareholder service fees................................................................... 10,796
Other...................................................................................... 64,561
-----------
Total liabilities.............................................................................. 17,347,703
-----------
NET ASSETS..................................................................................... $31,584,741
===========
Shares Outstanding ($0.001 par value, 1 billion shares authorized)............................. 31,609,664
===========
Net Asset Value, Offering Price and Redemption Price per Share................................. $1.00
=====
COMPOSITION OF NET ASSETS:
Shares of common stock, at par............................................................... $ 31,610
Additional paid-in capital................................................................... 31,709,491
Undistributed net investment income.......................................................... 3,563
Accumulated net realized losses on investment transactions................................... (159,923)
-----------
Net Assets, June 30, 1996...................................................................... $31,584,741
===========
</TABLE>
- ----------
See Notes to Financial Statements.
4
<PAGE> 4
THE INFINITY MUTUAL FUNDS, INC.
ALPHA GOVERNMENT SECURITIES PORTFOLIO
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1996 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Interest............................................................................... $1,037,831
----------
EXPENSES
Advisory fees........................................................................ $ 19,553
Administration fees.................................................................. 25,420
Shareholder service fees............................................................. 87,992
Custodian fees and expenses.......................................................... 46,649
Transfer agent fees and expenses..................................................... 15,815
Audit fees........................................................................... 10,193
Legal fees........................................................................... 14,284
Reports to shareholders.............................................................. 5,876
Directors' fees...................................................................... 2,337
Registration fees.................................................................... 2,767
Other expenses....................................................................... 3,736
--------
Total expenses before waivers........................................................ 234,622
Less: Fee waivers.................................................................... (68,440)
Expenses paid by third parties....................................................... (4,300)
--------
Net expenses......................................................................... 161,882
----------
Net Investment Income.................................................................. 875,949
----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS................................... $ 875,949
==========
</TABLE>
- ----------
See Notes to Financial Statements.
5
<PAGE> 5
THE INFINITY MUTUAL FUNDS, INC.
ALPHA GOVERNMENT SECURITIES PORTFOLIO
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS YEAR
ENDED ENDED
JUNE 30, DECEMBER 31,
1996 1995
------------- -------------
<S> <C> <C>
(UNAUDITED)
INCREASE (DECREASE) IN NET ASSETS
Operations
Net investment income........................................................ $ 875,949 $ 2,377,992
Net realized losses from securities transactions............................. -- (650)
------------- -------------
Net increase in net assets resulting from operations......................... 875,949 2,377,342
------------- -------------
Dividends to shareholders from net investment income........................... (875,949) (2,377,992)
------------- -------------
Portfolio Share Transactions (at $1.00 per share)
Net proceeds from shares subscribed.......................................... 247,004,471 667,359,185
Net asset value of shares issued to shareholders in reinvestment of
dividends.................................................................. 757,578 2,346,709
Cost of shares redeemed...................................................... (271,058,155) (657,928,571)
------------- -------------
Net increase (decrease) in net assets from Portfolio share transactions...... (23,296,106) 11,777,323
------------- -------------
Total Increase (Decrease)...................................................... (23,296,106) 11,776,673
NET ASSETS
Beginning of period.......................................................... 54,880,847 43,104,174
------------- -------------
End of period................................................................ $ 31,584,741 $ 54,880,847
============= ============
SHARE TRANSACTIONS:
Issued....................................................................... 247,004,471 667,359,185
Reinvested................................................................... 757,578 2,346,709
Redeemed..................................................................... (271,058,155) (657,928,571)
------------- -------------
Change in shares............................................................. (23,296,106) 11,777,323
============= ============
</TABLE>
- ----------
See Notes to Financial Statements.
6
<PAGE> 6
THE INFINITY MUTUAL FUNDS, INC.
ALPHA GOVERNMENT SECURITIES PORTFOLIO
- --------------------------------------------------------------------------------
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 only to the Alpha
Government Securities Portfolio (the "Portfolio"). The investment objective of
the Portfolio is to provide investors with as high a level of current income as
is consistent with the preservation of capital and the maintenance of liquidity.
NOTE 2 -- SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies followed by
the Portfolio in preparation of its 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 Portfolio 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) Securities 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, is
accrued daily.
C) Repurchase Agreements:
The Portfolio's 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
Portfolio has 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.
D) Expenses:
Organization costs totaling $86,185 have been deferred and are being
amortized by the Portfolio on a straight-line basis over five years. Direct
expenses of the Portfolio are charged to the Portfolio and general Fund expenses
are allocated among the Fund's respective portfolios.
7
<PAGE> 7
E) Federal Income Taxes:
It is the policy of the Portfolio to meet the requirements of the Internal
Revenue Code (the "Code") applicable to regulated investment companies and to
distribute substantially all of its income to shareholders. Therefore, no
federal income tax provision is required.
At December 31, 1995, the Portfolio had capital loss carryovers of
approximately $159,923 which are available to offset future net realized gains
on securities transactions to the extent provided for in the Code. Such capital
loss carryovers will expire in 2001 ($1,266), 2002 ($156,833) and 2003 ($1,824).
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.
NOTE 3 -- AGREEMENTS AND OTHER TRANSACTIONS WITH AFFILIATES
BEA Associates ("BEA") serves as the Portfolio's investment adviser.
Concord Holding Corporation ("Concord") serves as the Portfolio's administrator
and Concord Financial Group, Inc. ("Distributor") serves as the distributor of
the Portfolio's shares. Concord and the Distributor are each a subsidiary of The
BISYS Group, Inc.
As investment adviser, BEA supervises and assists in the overall operations
of the Portfolio. Pursuant to the terms of the Investment Advisory Agreement,
BEA is entitled to receive a fee from the Portfolio at an annual rate of 0.10%
of the average daily net assets of the Portfolio. Such fees are accrued daily
and paid monthly.
As administrator, Concord assists in supervising the operations of the
Portfolio. For its services, Concord is entitled to receive a fee based on the
following schedule:
<TABLE>
<CAPTION>
ANNUAL PORTFOLIO'S AVERAGE
RATE DAILY NET ASSETS
------ -----------------------------------
<C> <S>
0.13% Less than $200 million
$200 million to less than $300
0.12% million
$300 million to less than $350
0.11% million
0.10% $350 million and over
</TABLE>
For the six months ended June 30, 1996, Concord waived $9,778 of its fee.
The Portfolio has a Shareholder Servicing Agreement (the "Servicing
Agreement"), pursuant to which financial institutions agree to provide certain
services to the Portfolio's shareholders in return for payment by the Portfolio
of 0.45% (annualized) of the average daily net assets of the Portfolio. Services
provided by the financial institutions may include developing and monitoring
investor programs that are offered from time to time, providing dedicated
walk-in and telephone facilities to handle shareholder inquiries and investor
needs, developing and maintaining specialized systems for the automatic
investment of such institution's client account balances, paying for the
operation of arrangements that facilitate same-day
8
<PAGE> 8
share purchases by such institution's clients and providing a facility to
receive purchase and redemption orders. For the six months ended June 30, 1996,
expenses of $58,661 were waived relating to the Servicing Agreement.
On December 16, 1994, the Board of Directors approved an agreement between
BEA, Concord and the financial institutions who provide services to the
Portfolio under the Servicing Agreement, to make a capital contribution payable
from their fees to the Portfolio in the aggregate amount of approximately
$135,000. This contribution commenced on January 1, 1995. The parties
contributing their fees received no shares of the Portfolio or other
consideration in exchange for such contribution.
Certain officers and Directors of the Fund are "affiliated persons" (as
defined in the Act) of Concord. 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 of the portfolios constituting the Fund.
9
<PAGE> 9
THE INFINITY MUTUAL FUNDS, INC.
ALPHA GOVERNMENT SECURITIES PORTFOLIO
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
SIX MONTHS ---------------------------------------------------------------
ENDED DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
JUNE 30, 1996 1995 1994 1993 1992
------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
(UNAUDITED)
<CAPTION>
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD...... $ 0.9995 $ 0.9994 $ 1.0000 $ 1.0000 $ 1.0000
--------- -------- -------- -------- --------
Income from investment operations:
Net investment income.................... 0.0222 0.0484 0.0362 0.0270 0.0333
Net realized and unrealized gains
(losses) from securities
transactions........................... (0.0003) 0.0001 (0.0037) -- 0.0001
--------- -------- -------- -------- --------
Net income from investment operations.... 0.0219 0.0485 0.0325 0.0270 0.0334
--------- -------- -------- -------- --------
Less dividends and distributions:
Dividends from net investment income..... (0.0222) (0.0484) (0.0362) (0.0270) (0.0333)
Distributions from net realized gains on
securities transactions................ -- -- -- -- (0.0001)
--------- -------- -------- -------- --------
Total dividends and distributions........ (0.0222) (0.0484) (0.0362) (0.0270) (0.0334)
--------- -------- -------- -------- --------
Increase due to voluntary capital
contribution from affiliates (Note 3).... -- -- 0.0031 -- --
--------- -------- -------- -------- --------
Net change in net asset value............. (0.0003) 0.0001 (0.0006) -- --
--------- -------- -------- -------- --------
NET ASSET VALUE, END OF PERIOD............ $ 0.9992 $ 0.9995 $ 0.9994 $ 1.0000 $ 1.0000
========= ======== ======== ======== ========
Total Return.............................. 2.24%(a) 4.95% 3.65% 2.73% 3.39%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000).......... $ 31,585 $ 54,881 $ 43,104 $ 39,069 $ 43,124
Ratio of expenses to average net
assets................................. 0.83%(b) 0.76% 0.60% 0.56% 0.60%
Ratio of net investment income to average
net assets............................. 4.48%(b) 4.83% 3.61% 2.70% 3.40%
Ratio of expenses to average net
assets*................................ 1.18%(b) 1.11% 1.06% 1.06% 1.10%
Ratio of net investment income to average
net assets*............................ 4.13%(b) 4.48% 3.15% 2.20% 2.90%
- ----------
<FN>
* 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.
10
<PAGE> 10
-----------------------------------------------
[LOGO]
-----------------------------------------------
THE INFINITY MUTUAL FUNDS, INC.
3435 Stelzer Road
Columbus, OH 43219
1-800-852-9730
-----------------------------------------------
INVESTMENT ADVISER
BEA ASSOCIATES
One Citicorp Center
153 East 53rd Street
New York, NY 10019
-----------------------------------------------
ADMINISTRATOR
CONCORD HOLDING CORPORATION
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, INC.
3435 Stelzer Road
Columbus, OH 43219
This report is not authorized for distribution
to prospective investors unless preceded or accompanied
by a current prospectus.
----------------------------------------------------
----------------------------------------------------
SEMI-ANNUAL REPORT
JUNE 30, 1996
ALPHA
GOVERNMENT
SECURITIES
PORTFOLIO
[LOGO]
----------------------------------------------------
