<PAGE> 1
REPORT FROM THE INVESTMENT ADVISER
- --------------------------------------------------------------------------------
Dear Shareholder:
The Correspondent Cash Reserves Money Market 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 does so by investing in a
diversified selection of very high-quality short-term money-market obligations.
ECONOMIC OVERVIEW
It is widely recognized that the Federal Reserve Board achieved its goal of a
"soft landing" for the U.S. economy in 1995. After raising interest rates seven
times between February 1994 and February 1995 in an effort to slow the economy
and control inflation, the economy weakened in the spring of 1995. Speculation
that the Federal Reserve would lower interest rates increased the demand for
bonds. As a result, bond prices rose, and intermediate- and long-term interest
rates fell sharply during 1995.
Between January 1, 1995, and December 31, 1995, yields on 5-year U.S. Treasury
notes fell from 7.83% to 5.37%. Yields on the bellwether 30-year U.S. Treasury
bond fell from 7.88% to 5.95%. But short-term rates, which are driven by Federal
Reserve Board actions, remained flat during this time. After raising the Federal
Funds rate from 5.50% to 6.00% on February 1, 1995, the Federal Reserve eased
rates just 0.25 of a percentage point on July 6 and another 0.25 of a point on
December 19, 1995. By keeping short-term rates relatively high, the Federal
Reserve restrained economic growth and kept inflation at a very low rate.
Meanwhile, money-market investors continued to enjoy very high
inflation-adjusted returns.
INVESTMENT STRATEGY
As of the end of 1995, the Portfolio's average maturity was 74 days, about 10
days longer than the average money market fund. By having a longer maturity,
which locks in current interest rates, the Fund should benefit as interest rates
come down. We expect the impact of this strategy to continue to be felt in
coming months, reflecting both the December 19 rate reduction and anticipated
reductions in the future.
OUTLOOK
Due to the currently stalemated budget negotiations in Washington, the Federal
Reserve will have difficulty getting economic data needed to assess the state of
the economy in a timely manner. Nevertheless, we believe it is likely that the
Federal Reserve will lower short-term interest rates in 1996. Short-term rates
continue to be very high in relation to intermediate- and long-term rates. In
addition, the Christmas selling season was poor and home sales have been
sluggish, suggesting a weak economy. As a result, we believe that the Federal
Reserve will continue to ease interest rates to prevent the economy from
slipping into a recession. To take advantage of the impact of lower interest
rates, we will continue to keep the average maturity of the Portfolio longer
than average.
Sincerely,
Mitchell Hutchins Asset Management Inc.
DENNIS MCCAULEY
Managing Director
SUSAN P. MESSINA
Portfolio Manager
<PAGE> 2
REPORT FROM THE INVESTMENT ADVISER -- (continued)
- --------------------------------------------------------------------------------
CORRESPONDENT CAS RESERVES MONEY MARKET PROTFOLIO
DECEMBER 31, 1995
PORTFOLIO COMPOSITION*
<TABLE>
<S> <C>
U.S. Government Obliga-
tions/Agencies 4%
Auto & Truck 4%
CDs 5%
Pollution Control 4%
Bank Notes 17%
Other 11%
Finance 7%
Banking 20%
Asset Backed 7%
Short-Term Corporate
Obligations 7%
Broker-Dealer 11%
Drugs & Health Care 3%
</TABLE>
* The composition of the Portfolio is subject to change.
PORTFOLIO PERFORMANCE
As of December 31, 1995, the 7-day and 30-day yields for the Retail and
Institutional Shares were as follows:
<TABLE>
<CAPTION>
7-DAY 30-DAY
YIELD YIELD
----- ------
<S> <C> <C>
Retail Shares**................................... 4.96% 4.99%
Institutional Shares.............................. 5.42% 5.44%
</TABLE>
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 net asset value of $1.00 per share.
** For the current 7-day and 30-day periods ended December 31, 1995, the service
contractors voluntarily reimbursed 0.18% of their fees for the Retail Shares.
If the service contractors had not reimbursed a portion of their fees, the
7-day and 30-day yields shown would have been 4.78% and 4.80% for the Retail
Shares. This voluntary reimbursement may be modified or terminated at any
time, which would reduce the performance of the Portfolio's Retail Shares.
Yields will vary with market conditions, and past performance is not a
guarantee of future results.
Concord Financial Group is the distributor of the Portfolio.
<PAGE> 3
THE INFINITY MUTUAL FUNDS, INC.
CORRESPONDENT CASH RESERVES MONEY MARKET PORTFOLIO
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
RATINGS PRINCIPAL
S&P/MOODY'S MATURITY AMOUNT AMORTIZED
(UNAUDITED) RATE DATE (000) COST
---------- ---- -------- ------- ------------
<S> <C> <C> <C> <C> <C>
U.S. GOVERNMENT AGENCY NOTES -- 4.0%
Federal Farm Credit Bank.............................. Aaa/AAA* 5.88% 09/03/96 $ 4,000 $ 3,997,268
Federal Home Loan Bank (FRN)****...................... Aaa/AAA* 4.82(b) 05/07/96 5,000 5,000,000
Federal Home Loan Mortgage Corp. ..................... Aaa/AAA* 6.21 05/13/96 5,000 4,999,715
Federal Home Loan Mortgage Corp. ..................... Aaa/AAA* 5.65 08/15/96 4,000 3,986,875
Federal Home Loan Mortgage Corp. (FRN)****............ Aaa/AAA* 4.85(c) 01/02/96 7,000 7,000,000
Student Loan Marketing Association (FRN).............. Aaa/AAA* 6.08 07/01/96 8,000 8,000,000
------------
Total U.S. Government Agency Notes
(amortized cost $32,983,858).......................... 32,983,858
------------
BANK NOTES -- 17.3%
DOMESTIC -- 16.3%
Bank of America, Illinois............................. A-1/P-1 5.80 01/12/96 10,000 10,000,000
Bank of America, Illinois............................. A-1/P-1 5.70 03/14/96 5,000 5,000,000
Bank of Hawaii........................................ A-1/P-1 5.50 01/03/97 10,000 10,000,000
Bank of New York...................................... A-1/P-1 5.60 05/28/96 5,000 5,000,000
Bank One, Milwaukee NA................................ A-1+/P-1 6.82 03/07/96 10,000 10,008,467
Comerica Bank, Detroit................................ A-1/P-1 6.18 05/28/96 5,000 5,003,098
FCC National Bank..................................... A-1+/P-1 5.65 11/01/96 5,000 5,001,428
First National Bank of Chicago........................ A-1+/P-1 5.50 06/05/96 5,000 4,999,982
Greenwood Trust Co. .................................. A-1/P-1 5.80 01/30/96 5,000 5,000,000
Greenwood Trust Co. .................................. A-1/P-1 5.78 02/16/96 10,000 10,000,000
Huntington National Bank (FRN)........................ A-1/P-1 5.87 01/02/96 10,000 9,999,129
LaSalle National Bank................................. A-1+/P-1 7.56 01/11/96 5,000 5,000,000
LaSalle National Bank................................. A-1+/P-1 5.70 01/18/96 5,000 5,000,000
NationsBank, Georgia.................................. A-1/P-1 5.65 06/05/96 5,000 5,000,000
NationsBank, Texas.................................... A-1/P-1 5.55 11/08/96 7,000 6,996,752
Old Kent Bank......................................... A-1/P-1 5.55 06/05/96 4,000 3,993,677
Old Kent Bank......................................... A-1/P-1 5.53 12/04/96 6,000 5,997,867
PNC Bank, N.A. (FRN).................................. A-1/P-1 5.58 01/02/96 5,000 4,996,142
PNC Bank, N.A. ....................................... A-1/P-1 5.93 02/26/96 5,000 5,001,912
PNC Bank, N.A. ....................................... A-1/P-1 6.04 05/24/96 5,000 5,009,148
Seattle First, NB..................................... A-1+/P-1 5.73 10/24/96 7,000 6,996,183
------------
134,003,785
------------
</TABLE>
Continued
3
<PAGE> 4
<TABLE>
<CAPTION>
RATINGS PRINCIPAL
S&P/MOODY'S MATURITY AMOUNT AMORTIZED
(UNAUDITED) RATE DATE (000) COST
---------- ---- -------- ------- ------------
<S> <C> <C> <C> <C> <C>
YANKEE -- 1.0%
Westdeutsche Landesbank Gironzentrale................. A-1+/P-1 6.63% 03/01/96 $ 8,000 $ 7,998,431
------------
Total Bank Notes
(amortized cost $142,002,216)......................... 142,002,216
------------
CERTIFICATES OF DEPOSIT -- 3.7%
YANKEE -- 2.7%
Dresdner Bank AG...................................... A-1+/P-1 6.65 03/15/96 7,000 7,010,306
National Westminster Bank PLC......................... A-1+/P-1 5.78 01/16/96 10,000 9,999,992
Societe Generale...................................... A-1+/P-1 5.74 02/09/96 5,000 5,000,000
------------
22,010,298
------------
DOMESTIC -- 1.0%
Republic National Bank of New York.................... A-1+/P-1 6.54 02/12/96 5,000 4,999,334
Old Kent Bank & Trust Co. ............................ A-1/P-1 6.05 06/17/96 3,000 3,001,114
------------
8,000,448
------------
Total Certificates of Deposit
(amortized cost $30,010,746).......................... 30,010,746
------------
COMMERCIAL PAPER -- 66.9%
Abbey National North America.......................... A-1+/P-1 5.60 01/08/96 5,000 4,994,556
Abbey National North America.......................... A-1+/P-1 5.27 06/03/96 18,000 17,594,210
ABN Amro North America Finance Inc. .................. A-1+/P-1 5.50 04/25/96 5,500 5,403,368
Asset Securitization Cooperative Corp. ............... A-1+/P-1 5.77 01/11/96 8,000 7,987,178
Asset Securitization Cooperative Corp. ............... A-1+/P-1 5.75 01/24/96 14,700 14,645,998
Asset Securitization Cooperative Corp. ............... A-1+/P-1 5.73 01/24/96 6,000 5,978,035
AT&T Co. ............................................. A-1+/P-1 5.49 04/10/96 5,000 4,923,819
AT&T Co. ............................................. A-1+/P-1 5.47 05/03/96 7,000 6,869,176
AT&T Co. ............................................. A-1+/P-1 5.47 05/10/96 5,000 4,901,236
Bankers Trust New York Corp. ......................... A-1/P-1 5.69 02/29/96 10,000 9,906,747
BCI Funding Corp. .................................... A-1/P-1 5.68 02/27/96 5,000 4,955,033
BT Securities Corp. .................................. A-1/P-1 5.67 01/10/96 7,000 6,990,078
BTR Dunlop Finance Inc. .............................. A-1+/P-1 5.67 02/06/96 10,000 9,943,300
BTR Dunlop Finance Inc. .............................. A-1+/P-1 5.49 05/15/96 5,000 4,897,063
Bear Stearns Companies Inc. .......................... A-1/P-1 5.52 05/10/96 7,000 6,860,467
</TABLE>
Continued
4
<PAGE> 5
<TABLE>
<CAPTION>
RATINGS PRINCIPAL
S&P/MOODY'S MATURITY AMOUNT AMORTIZED
(UNAUDITED) RATE DATE (000) COST
---------- ---- -------- ------- ------------
<S> <C> <C> <C> <C> <C>
Bellsouth Telecommunications Inc. .................... A-1+/P-1 5.70% 01/11/96 $ 7,000 $ 6,988,917
Bellsouth Telecommunications Inc. .................... A-1+/P-1 5.87 01/12/96 5,000 4,991,032
Bex America Finance Inc. ............................. A-1+/P-1 5.66 02/12/96 10,000 9,933,967
Bex America Finance Inc. ............................. A-1+/P-1 5.66 02/14/96 10,000 9,930,822
Cariplo Finance Inc. ................................. A-1/P-1 5.78 01/03/96 15,000 14,995,187
Cariplo Finance Inc. ................................. A-1/P-1 5.80 01/10/96 10,000 9,985,500
Colonial Pipeline Co. ................................ A-1+/P-1 5.71 01/29/96 4,500 4,480,015
Compagnie Bancaire USA Finance Corp. ................. A-1/P-1 5.69 02/16/96 6,700 6,651,287
CPC International Inc. ............................... A-1/P-1 5.48 05/13/96 10,000 9,797,544
Credito Italiano (DE) Inc. ........................... A-1/P-1 5.74 01/10/96 15,000 14,978,475
Cregem North America Inc. ............................ A-1+/P-1 5.70 01/22/96 10,000 9,966,750
Daimler-Benz NA Corp. ................................ A-1/P-1 5.69 01/26/96 8,630 8,595,900
Dean Witter Discover & Co. ........................... A-1/P-1 5.70 02/12/96 5,000 4,966,750
DuPont (E.I.) deNemours & Co. ........................ A-1+/P-1 5.51 08/06/96 4,000 3,866,536
Eiger Capital Corp. .................................. A-1+/P-1 5.76 01/17/96 10,000 9,974,400
Eiger Capital Corp. .................................. A-1+/P-1 5.75 01/23/96 10,000 9,964,861
Lilly (Eli) & Co. .................................... A-1+/P-1 5.68 02/26/96 5,000 4,955,822
Falcon Asset Securitization Corp. .................... A-1/P-1 5.67 01/25/96 5,000 4,981,100
General Motors Acceptance Corp. ...................... D-1/P-1*** 6.13 01/02/96 20,000 19,996,597
Indosuez NA Inc. ..................................... A-1/P-1** 5.80 01/05/96 8,000 7,994,844
Indosuez NA Inc. ..................................... A-1/P-1** 5.62 01/10/96 10,000 9,985,950
McGraw-Hill Companies Inc. ........................... A-1/P-1 5.42 05/06/96 10,000 9,810,300
MPS U.S. Commercial Paper Corp. ...................... A-1/P-1 5.74 01/16/96 10,000 9,976,083
MPS U.S. Commercial Paper Corp. ...................... A-1/P-1 5.62 03/07/96 10,000 9,896,967
MPS U.S. Commercial Paper Corp. ...................... A-1/P-1 5.62 03/13/96 5,000 4,943,800
Merrill Lynch & Co. Inc. ............................. A-1+/P-1 5.72 01/26/96 5,000 4,980,139
Merrill Lynch & Co. Inc. ............................. A-1+/P-1 5.65 01/31/96 4,000 3,981,167
Merrill Lynch & Co. Inc. ............................. A-1+/P-1 5.76 01/31/96 6,000 5,971,200
Morgan Stanley Group Inc. ............................ A-1+/P-1 5.72 01/12/96 10,000 9,982,522
Morgan Stanley Group Inc. ............................ A-1+/P-1 5.73 01/24/96 3,000 2,989,018
Morgan Stanley Group Inc. ............................ A-1+/P-1 5.75 01/29/96 10,000 9,955,278
National Australia Funding (DE) Inc. ................. A-1+/P-1 5.41 05/03/96 8,600 8,441,036
National Rural Utilities Cooperative Finance Corp. ... A-1+/P-1 5.65 02/20/96 5,000 4,960,764
New Center Asset Trust................................ A-1+/P-1 5.75 01/19/96 5,000 4,985,625
Pfizer, Inc. ......................................... A-1+/P-1 5.72 01/12/96 14,000 13,975,531
</TABLE>
Continued
5
<PAGE> 6
<TABLE>
<CAPTION>
RATINGS PRINCIPAL
S&P/MOODY'S MATURITY AMOUNT AMORTIZED
(UNAUDITED) RATE DATE (000) COST
---------- ---- -------- ------- ------------
<S> <C> <C> <C> <C> <C>
Prudential Funding Corp. ............................. A-1+/P-1 5.78% 01/09/96 $12,000 $ 11,984,587
Prudential Funding Corp. ............................. A-1+/P-1 5.42 05/23/96 5,000 4,892,353
Raytheon Co. ......................................... A-1/P-1 5.90 01/04/96 16,500 16,491,887
SBNSW (DE) Inc. ...................................... A-1+/P-1 5.35 06/10/96 5,000 4,880,368
Societe Generale...................................... A-1+/P-1 5.64 02/20/96 10,000 9,921,667
Southern Company...................................... A-1/P-1 5.72 01/26/96 5,000 4,980,139
Southern Company...................................... A-1/P-1 5.67 02/22/96 5,000 4,959,050
Svenska Handelsbanken Inc. ........................... A-1/P-1 5.68 02/20/96 7,000 6,944,778
Svenska Handelsbanken Inc. ........................... A-1/P-1 5.70 02/21/96 5,000 4,959,625
Svenska Handelsbanken Inc. ........................... A-1/P-1 5.65 03/29/96 10,000 9,861,889
Svenska Handelsbanken Inc. ........................... A-1/P-1 5.65 03/29/96 5,000 4,930,944
Svenska Handelsbanken Inc. ........................... A-1/P-1 5.42 04/10/96 5,000 4,925,475
Vermont American Corp. ............................... A-1+/P-1 5.72 01/25/96 18,900 18,827,928
WMX Technologies Inc. ................................ A-1/P-1 5.45 03/26/96 5,000 4,935,660
WMX Technologies Inc. ................................ A-1/P-1 5.57 05/23/96 5,600 5,476,098
WMX Technologies Inc. ................................ A-1/P-1 5.43 05/23/96 5,000 4,892,154
WMX Technologies Inc. ................................ A-1/P-1 5.52 06/11/96 6,800 6,631,088
WMX Technologies Inc. ................................ A-1/P-1 5.37 08/12/96 7,600 7,346,059
------------
Total Commercial Paper
(amortized cost $547,523,699)......................... 547,523,699
------------
SHORT-TERM CORPORATE OBLIGATIONS -- 7.1%
Bear Stearns Companies Inc. .......................... A-1/P-1 5.78 07/17/96 5,000 5,000,000
Beta Finance Inc. (FRN)****........................... A-1+/P-1 5.25 01/02/96 5,000 5,000,000
CIT Group Holdings Inc. .............................. A-1/P-1 7.13 11/15/96 3,800 3,850,566
Goldman Sachs Group L.P. (FRN)****.................... A-1+/P-1 5.53 01/02/96 5,000 4,998,802
J.P. Morgan & Co. Inc. ............................... A-1+/P-1 6.20 05/13/96 5,000 4,999,909
Merrill Lynch & Co. Inc. (FRN)........................ A-1+/P-1 5.68 01/02/96 8,000 8,000,000
Merrill Lynch & Co. Inc. ............................. A-1+/P-1 6.49 04/29/96 10,000 10,000,000
</TABLE>
Continued
6
<PAGE> 7
<TABLE>
<CAPTION>
RATINGS PRINCIPAL
S&P/MOODY'S MATURITY AMOUNT AMORTIZED
(UNAUDITED) RATE DATE (000) COST
---------- ---- -------- ------- ------------
<S> <C> <C> <C> <C> <C>
Morgan Stanley (FRN).................................. A-1+/P-1 5.74% 01/02/96 $ 6,000 $ 6,003,789
PHH Corp. (FRN)....................................... A-1/P-1 5.48 01/02/96 5,000 4,998,292
Pfizer Inc. .......................................... A-1+/P-1 7.13 10/01/96 5,000 5,050,958
------------
Total Short-Term Corporate Obligations
(amortized cost $57,902,316).......................... 57,902,316
------------
Total Investments in Securities
(amortized cost $810,422,835)......................... 810,422,835
------------
REPURCHASE AGREEMENT -- 1.3%
Daiwa Securities, dated 12/29/95, with a maturity
value of $10,534,668, (Collateralized by $9,990,000
U.S. Treasury Notes, 7.13%, due 9/30/99, value
$10,772,512) (amortized cost $10,528,000)........... 5.70 01/02/96 10,528 10,528,000
------------
TOTAL INVESTMENTS
(AMORTIZED COST $820,950,835)(a) -- 100.3%............ 820,950,835
LIABILITIES IN EXCESS OF OTHER ASSETS -- (0.3%)......... (2,453,995)
------------
NET ASSETS -- 100.0%.................................... $818,496,840
===========
</TABLE>
- ----------
Percentages indicated are based on net assets of $818,496,840.
* Implied long-term rating.
** IBCA rating.
*** Duff & Phelps rating.
**** Illiquid security.
FRN Floating Rate Note. Maturity date reflects the earlier of the reset date or
maturity date. Rate resets either daily, weekly, monthly or quarterly. The
rate reflected is the effective rate as of December 31, 1995.
(a) Cost for federal income tax and financial reporting purposes are the same.
(b) Resets weekly at 0.50 times the Prime Rate plus 0.57%.
(c) Resets weekly at 0.50 times the Prime Rate plus 0.60%.
See Notes to Financial Statements.
7
<PAGE> 8
THE INFINITY MUTUAL FUNDS, INC.
CORRESPONDENT CASH RESERVES MONEY MARKET PORTFOLIO
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investments in securities, at amortized cost (amortized cost $810,422,835)................. $810,422,835
Repurchase agreements (amortized cost $10,528,000)......................................... 10,528,000
Cash....................................................................................... 370
Interest receivable........................................................................ 4,382,680
Deferred organization costs................................................................ 8,711
Prepaid expenses........................................................................... 36,232
------------
Total assets................................................................................. 825,378,828
------------
LIABILITIES
Payable to brokers for securities purchased................................................ 4,925,475
Dividends payable.......................................................................... 1,244,364
Accrued expenses and other payables:
Advisory fees............................................................................ 70,417
Administration fees...................................................................... 70,446
Distribution fees........................................................................ 352,000
Other.................................................................................... 219,286
------------
Total liabilities............................................................................ 6,881,988
------------
NET ASSETS................................................................................... $818,496,840
===========
Shares Outstanding ($0.001 par value, 2 billion shares authorized):
Retail Shares.............................................................................. 780,070,208
Institutional Shares....................................................................... 39,539,013
------------
Total Shares Outstanding..................................................................... 819,609,221
===========
Net Asset Value, Offering Price and Redemption Price per Share............................... $1.00
====
COMPOSITION OF NET ASSETS:
Shares of common stock, at par............................................................. $ 819,609
Additional paid-in-capital................................................................. 818,789,611
Accumulated net realized losses............................................................ (1,112,380)
------------
Net Assets, December 31, 1995................................................................ $818,496,840
===========
</TABLE>
- ---------------
See Notes to Financial Statements.
8
<PAGE> 9
THE INFINITY MUTUAL FUNDS, INC.
CORRESPONDENT CASH RESERVES MONEY MARKET PORTFOLIO
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Interest........................................................................... $38,466,657
Expenses
Advisory fees.................................................................... $ 644,228
Administration fees.............................................................. 644,228
Special management services fees (Retail Shares)................................. 612,373
Distribution fees (Retail Shares)................................................ 3,674,240
Custodian fees and expenses...................................................... 110,247
Registration fees................................................................ 75,886
Legal fees....................................................................... 81,638
Insurance expense................................................................ 26,243
Reports to shareholders.......................................................... 5,567
Transfer agent fees and expenses................................................. 465,388
Amortization of organization expenses............................................ 21,484
Audit fees....................................................................... 15,956
Directors' fees.................................................................. 7,278
Other expenses................................................................... 4,925
----------
Total expenses before expense reimbursements................................... 6,389,681
Less: Expense reimbursements................................................... (1,102,272)
----------
Total Expenses..................................................................... 5,287,409
-----------
Net Investment Income.............................................................. 33,179,248
REALIZED GAINS FROM SECURITIES TRANSACTIONS
Net realized gains from securities transactions.................................. 130,404
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS............................... $33,309,652
==========
</TABLE>
- ---------------
See Notes to Financial Statements.
9
<PAGE> 10
THE INFINITY MUTUAL FUNDS, INC.
CORRESPONDENT CASH RESERVES MONEY MARKET PORTFOLIO
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1995 1994
-------------- --------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations
Net investment income...................................................... $ 33,179,248 $ 15,139,656
Net realized gains/(losses) from securities transactions................... 130,404 (1,216,771)
-------------- --------------
Net increase in net assets resulting from operations..................... 33,309,652 13,922,885
-------------- --------------
Dividends to shareholders from net investment income
Retail Shares.............................................................. (31,381,356) (13,124,754)
Institutional Shares....................................................... (1,797,892) (2,014,902)
-------------- --------------
Total dividends to shareholders from net investment income................... (33,179,248) (15,139,656)
-------------- --------------
Portfolio Share Transactions (at $1.00 per share)
Net proceeds from shares subscribed........................................ 3,863,586,535 2,585,316,888
Net asset value of shares issued to shareholders in reinvestment of
dividends................................................................ 29,259,566 12,806,513
Cost of shares redeemed.................................................... (3,563,662,794) (2,506,163,633)
-------------- --------------
Net increase in net assets from Portfolio share transactions............. 329,183,307 91,959,768
-------------- --------------
Total Increase............................................................... 329,313,711 90,742,997
NET ASSETS
Beginning of period........................................................ 489,183,129 398,440,132
-------------- --------------
End of period.............................................................. $ 818,496,840 $ 489,183,129
============== ==============
SHARE TRANSACTIONS:
Issued..................................................................... 3,863,586,535 2,585,316,888
Reinvested................................................................. 29,259,566 12,806,513
Redeemed................................................................... (3,563,662,794) (2,506,163,633)
-------------- --------------
Change in shares........................................................... 329,183,307 91,959,768
============== ==============
</TABLE>
- ---------------
See Notes to Financial Statements.
10
<PAGE> 11
THE INFINITY MUTUAL FUNDS, INC.
CORRESPONDENT CASH RESERVES MONEY MARKET PORTFOLIO
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
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 Correspondent
Cash Reserves Money Market Portfolio (the "Portfolio"). The Portfolio's
investment objective 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.
The Portfolio issues two classes of shares (Retail Shares and Institutional
Shares). Retail Shares and Institutional Shares are substantially the same,
except that Retail Shares bear the fees that are payable under a Distribution
Plan adopted by the Board of Directors (the "Distribution Plan"). Additionally,
the Retail Shares bear the fees that are payable to Mitchell Hutchins Asset
Management, Inc. ("Mitchell Hutchins") and Concord Holding Corporation
("Concord") under the Special Management Services Agreement (the "Services
Agreement"). In addition to the fees paid pursuant to the Distribution Plan and
the Services Agreement, each class also bears the expenses associated with the
printing of their shareholder reports, transfer agent fees and registration
fees.
NOTE 2 -- SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies followed by
the Portfolio in the preparation of its financial statements.
A) Security 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) Security Transactions and Investment Income
Security transactions are recorded on the trade date. Realized gains and
losses on the 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. The investment income of the Portfolio is
allocated to the separate classes of shares based upon their relative net asset
value.
C) Repurchase Agreements
The Portfolio's custodian and other banks acting in a sub-custodian
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 of 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,
11
<PAGE> 12
realization and/or retention of the collateral may be subject to legal
proceedings.
D) Expenses
Organization costs totaling $8,711 have been deferred and are being
amortized by the Portfolio on a straight-line basis over five years. Direct
expenses of the Portfolio are borne solely by the Portfolio and general Fund
expenses are allocated among the Fund's respective investment portfolios.
Portfolio expenses (other than transfer agent fees and expenses, reports to
shareholders expenses, registration and filing fees, expenses incurred under the
Distribution Plan and expenses incurred under the Services Agreement) are
allocated to their separate classes of shares based upon their relative net
asset value.
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 a capital loss carryover of
approximately $1,112,380 which is available to offset future net realized gains
on securities transactions to the extent provided for in the Code. Such capital
loss carryover will expire in fiscal year 2002.
F) Dividends and Distributions
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) Use of Estimates
Estimates and assumptions are required to be made regarding assets,
liabilities, and changes in net assets resulting from operations when financial
statements are prepared. Changes in the economic environment, financial markets
and any other parameters used in determining these estimates could cause actual
results to differ from these amounts.
NOTE 3 -- AGREEMENTS AND OTHER TRANSACTIONS WITH AFFILIATES
Mitchell Hutchins, a wholly-owned subsidiary of Paine Webber Incorporated
("Paine Webber"), serves as the Portfolio's investment adviser. 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 wholly-owned subsidiary of The BISYS Group, Inc.
As investment adviser, Mitchell Hutchins supervises and assists in the
overall operations of the Portfolio. Pursuant to the terms of the Investment
Advisory Agreement, Mitchell Hutchins is entitled to a fee, accrued daily and
payable monthly, at an
12
<PAGE> 13
annual rate of 0.10% of the average daily net assets of the Portfolio.
As administrator, Concord assists in supervising the operations of the
Portfolio. For its services, Concord is entitled to a fee, accrued daily and
payable monthly, at an annual rate of 0.10% of the average daily net assets of
the Portfolio. The Distributor does not receive a fee under the Distribution
Agreement.
Under the terms of the Special Management Services Agreement, the Portfolio
has agreed to pay Mitchell Hutchins and Concord each a monthly fee at the annual
rate of .05% of the net asset value of the Portfolio's outstanding Retail Shares
for certain services, other than those provided pursuant to the Portfolio's
Distribution Plan. These services include developing and monitoring customized
investor programs including individual retirement accounts and other ERISA
options, automatic deposit and withdrawal programs and other programs requested
by certain securities dealers that have entered into securities clearing
arrangements with Paine Webber. For the year ended December 31, 1995, Mitchell
Hutchins and Concord each reimbursed the Fund $306,186 for the Special
Management Services Agreement.
The Portfolio has adopted a Distribution Plan pursuant to Rule 12b-1 under
the Act. Pursuant to the Distribution Plan, the Portfolio is authorized to pay
Correspondent Services Corporation (CSC), an affiliate of Paine Webber, and
certain securities dealers that have entered into clearing arrangements with
CSC, a monthly fee at an annual rate of up to 0.60% of the net asset value of
the Portfolio's outstanding Retail Shares held in accounts serviced by such
firms. Such fees will be paid in respect of certain services provided by such
firms, including answering client inquiries regarding the Portfolio; assisting
clients in changing dividend options, account designations and addresses;
performing sub-accounting; establishing and maintaining shareholder accounts and
records; processing purchase and redemption transactions; investing client cash
account balances automatically in Portfolio shares; providing periodic
statements showing a client's account balance and integrating such statements
with those of other transactions and balances in the client's other accounts
serviced by such firm; arranging for bank wires; and such other services as the
clients may request. For the year ended December 31, 1995, the Portfolio
incurred expenses of $3,674,240 pursuant to the Distribution Plan, and
reimbursed $489,900 to the Fund.
Certain Directors and officers of the Fund are "affiliated persons" (as
defined in the Act) of Concord. Each "non-affiliated" Director receives an
annual fee of $5,000 and a meeting fee of $1,250 per meeting for services
relating to all of the portfolios constituting the Fund.
NOTE 4 -- CONCENTRATION OF CREDIT RISK
The Portfolio invests substantially all of its assets in a diversified
portfolio of high quality U.S. dollar denominated money market instruments as
disclosed in the Portfolio of Investments by security type.
13
<PAGE> 14
The Portfolio had the following concentration by industry sector at
December 31, 1995 (as a percentage of total investments):
<TABLE>
<S> <C>
Banking........................... 39.9%
Finance........................... 13.7%
Brokerage Services................ 7.2%
Asset Backed Commercial Paper..... 7.1%
U.S. Government
Obligations/Agencies............ 3.9%
Pollution Control & Waste
Management...................... 3.6%
Automobiles....................... 3.5%
Utilities......................... 3.2%
Conglomerates..................... 2.2%
Insurance......................... 2.1%
Aerospace & Defense............... 2.0%
Pharmaceuticals................... 1.7%
Publishing........................ 1.2%
Health Care Products & Services... 0.6%
Industrial Goods & Equipment...... 0.6%
Telecommunications................ 0.6%
Chemicals......................... 0.5%
Other............................. 6.4%
-------
100.0%
======
</TABLE>
The issuers' abilities to meet their obligations may be affected by
domestic and foreign economic, regional and political developments.
NOTE 5 -- CAPITAL SHARE TRANSACTIONS
Transactions in shares of the Portfolio (at $1.00 per share) are summarized
below:
<TABLE>
<CAPTION>
YEAR ENDED
---------------------------------
DECEMBER 31, DECEMBER 31,
1995 1994
-------------- --------------
<S> <C> <C>
RETAIL SHARES:
Shares sold.......................... 3,571,545,151 2,127,430,289
Shares issued in reinvestment of
dividends and distributions........ 29,259,565 12,718,381
Shares redeemed...................... (3,279,990,042) (2,012,125,058)
-------------- --------------
Net increase in Retail Shares........ 320,814,674 128,023,612
-------------- --------------
INSTITUTIONAL SHARES:
Shares sold.......................... 292,041,384 457,886,599
Shares issued in reinvestment of
dividends and distributions........ 1 88,132
Shares redeemed...................... (283,672,752) (494,038,575)
-------------- --------------
Net increase (decrease) in
Institutional Shares............... 8,368,633 (36,063,844)
-------------- --------------
Net increase in Portfolio Shares..... 329,183,307 91,959,768
============== ==============
</TABLE>
14
<PAGE> 15
THE INFINITY MUTUAL FUNDS, INC.
CORRESPONDENT CASH RESERVES MONEY MARKET PORTFOLIO
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, PERIOD ENDED
-------------------------------------------- DECEMBER 31,
1995 1994 1993 1992 1991*
-------- -------- -------- -------- ------------
<S> <C> <C> <C> <C> <C>
RETAIL SHARES:
NET ASSET VALUE, BEGINNING OF PERIOD............... $ 0.9975 $ 0.9999 $ 1.0000 $ 1.0000 $ 1.0000
-------- -------- -------- -------- --------
Income from investment operations
Net investment income............................ 0.0512 0.0340 0.0245 0.0306 0.0310
Net realized gains/(losses) on securities........ 0.0011 (0.0024) (0.0001) -- --
-------- -------- -------- -------- --------
Net gains from investment operations............. 0.0523 0.0316 0.0244 0.0306 0.0310
-------- -------- -------- -------- --------
Dividends from net investment income............... (0.0512) (0.0340) (0.0245) (0.0306) (0.0310)
-------- -------- -------- -------- --------
Net change in net asset value...................... 0.0011 (0.0024) (0.0001) -- --
-------- -------- -------- -------- --------
NET ASSET VALUE, END OF PERIOD..................... $ 0.9986 $ 0.9975 $ 0.9999 $ 1.0000 $ 1.0000
======== ======== ======== ======== ========
Total return....................................... 5.24% 3.45% 2.48% 3.11% 5.07%(b)
Ratios/supplemental data:
Net assets, end of period (000's)................ $779,011 $458,092 $331,210 $267,895 $192,992
Ratio of expenses to average net assets.......... 0.85% 0.94% 1.02% 1.12% 0.83%(a)
Ratio of net interest income to average net
assets......................................... 5.14% 3.47% 2.44% 3.01% 4.99%(a)
Ratio of expenses to average net assets**........ 1.03% 1.12% 1.20% 1.35% 1.16%(a)
Ratio of net interest income to average net
assets**....................................... 4.96% 3.29% 2.26% 2.78% 4.66%(a)
</TABLE>
- ---------------
* For the period May 20, 1991 (commencement of operations) through December 31,
1991.
** During the period, certain fees and expenses were voluntarily waived and/or
reimbursed. If such voluntary reductions and/or reimbursements had not
occurred, the ratios would have been as indicated.
(a) Annualized.
(b) Total return is not annualized, as it may not be representative of the total
return for the year.
See Notes to Financial Statements.
15
<PAGE> 16
THE INFINITY MUTUAL FUNDS, INC.
CORRESPONDENT CASH RESERVES MONEY MARKET PORTFOLIO
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31, PERIOD ENDED
-------------------------------------------- DECEMBER 31,
1995 1994 1993 1992 1991*
-------- -------- -------- -------- ------------
<S> <C> <C> <C> <C> <C>
INSTITUTIONAL SHARES:
NET ASSET VALUE, BEGINNING OF PERIOD................ $ 0.9975 $ 0.9999 $ 1.0000 $ 1.0000 $ 1.0000
-------- -------- -------- -------- --------
Income from investment operations
Net investment income............................. 0.0563 0.0402 0.0320 0.0391 0.0220
Net realized gains/(losses) on securities......... 0.0011 (0.0024) (0.0001) -- --
-------- -------- -------- -------- --------
Net gains from investment operations.............. 0.0574 0.0378 0.0319 0.0391 0.0220
-------- -------- -------- -------- --------
Distributions
Dividends from net investment income.............. (0.0563) (0.0402) (0.0320) (0.0391) (0.0220)
-------- -------- -------- -------- --------
Net change in net asset value....................... 0.0011 (0.0024) (0.0001) -- --
-------- -------- -------- -------- --------
NET ASSET VALUE, END OF PERIOD...................... $ 0.9986 $ 0.9975 $ 0.9999 $ 1.0000 $ 1.0000
-------- -------- -------- -------- --------
Total return........................................ 5.78% 4.09% 3.25% 3.98% 4.30%(b)
Ratios/supplemental data:
Net assets, end of period (000's)................. $ 39,485 $ 31,091 $ 67,230 $ 64,306 $ 0
Ratio of expenses to average net assets........... 0.34% 0.31% 0.25% 0.27% 0.40%(a)
Ratio of net interest income to average net
assets.......................................... 5.66% 3.87% 3.20% 3.73% 5.27%(a)
Ratio of expenses to average net assets**......... 0.34% 0.31% 0.25% 0.32% 0.50%(a)
Ratio of net interest income to average net
assets**........................................ 5.66% 3.87% 3.20% 3.68% 5.17%(a)
</TABLE>
- ---------------
* For the period August 2, 1991 (commencement of operations) through December
31, 1991.
** During the period, certain fees and expenses were voluntarily waived and/or
reimbursed. If such voluntary reductions and/or reimbursements had not
occurred, the ratios would have been as indicated.
(a) Annualized.
(b) Total return is not annualized, as it may not be representative of the total
return for the year.
See Notes to Financial Statements.
16
<PAGE> 17
INDEPENDENT AUDITORS' REPORT
- --------------------------------------------------------------------------------
To the Shareholders and Board of Directors
The Infinity Mutual Funds, Inc.:
We have audited the accompanying statement of assets and liabilities of the
Correspondent Cash Reserves Money Market Portfolio (one of the portfolios
constituting The Infinity Mutual Funds, Inc.), including the portfolio of
investments as of December 31, 1995, the related statement of operations for the
year then ended, the related statements of changes in net assets for each of the
years in the two-year period then ended and the financial highlights for each of
the years in the four-year period then ended and for the period from May 20,
1991 (commencement of operations) to December 31, 1991. These financial
statements and financial highlights are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based upon our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1995, by correspondence with the custodian. As to securities
purchased but not received, we performed other appropriate auditing procedures.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material aspects, the financial position of the
Correspondent Cash Reserves Money Market Portfolio as of December 31, 1995, the
results of its operations for the year then ended, the changes in its net assets
for each of the years in the two-year period then ended and financial highlights
for each of the years in the four-year period then ended and for the period from
May 20, 1991 (commencement of operations) to December 31, 1991, in conformity
with generally accepted accounting principles.
KPMG Peat Marwick LLP
New York, New York
February 9, 1996
Federal Income Tax Status of Dividends (Unaudited)
- --------------------------------------------------------------------------------
The Infinity Mutual Funds, Inc. -- Correspondent Cash Reserves Money Market
Portfolio has determined that 100% of the dividends paid during the year ended
December 31, 1995 were paid from net investment income and are subject to
federal income tax. Of these dividends, 2.99% was derived from U.S. Government
Obligations.
17
<PAGE> 18
CORRESPONDENT CASH
---------------------------------------------
RESERVES
- ---------------------------------------------------
THE INFINITY MUTUAL FUNDS, INC.
3435 Stelzer Road
Columbus, OH 43219
- ---------------------------------------------------
INVESTMENT ADVISER
MITCHELL HUTCHINS ASSET MANAGEMENT INC.
1285 Avenue of the Americas
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
3435 Stelzer Road
Columbus, OH 43229
This report is not authorized for distribution to prospective investors unless
preceded or accompanied by a current prospectus.
CORRESPONDENT CASH
---------------------------------------------
RESERVES
[LOGO]
ANNUAL REPORT
------------------
DECEMBER 31, 1995
[LOGO]
COICCRD95A
