<PAGE> 1
[AMERISTAR MUTUAL FUNDS LOGO]
AMERISTAR PRIME
MONEY MARKET PORTFOLIO
AMERISTAR U.S. TREASURY
MONEY MARKET PORTFOLIO
AMERISTAR CAPITAL
GROWTH PORTFOLIO
AMERISTAR DIVIDEND
GROWTH PORTFOLIO
SEMI-ANNUAL REPORT
AMERISTAR CORE
INCOME PORTFOLIO
AMERISTAR LIMITED
DURATION INCOME PORTFOLIO
AMERISTAR LIMITED DURATION
U.S. GOVERNMENT PORTFOLIO
AMERISTAR TENNESSEE TAX
EXEMPT BOND PORTFOLIO
AMERISTAR LIMITED DURATION
TENNESSEE TAX FREE PORTFOLIO
JUNE 30, 1997
<PAGE> 2
The AmeriStar Funds provide shareholders with a variety of features to
make investing in the Portfolios easy, convenient and manageable.
<TABLE>
<S> <C> <C>
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AMERISTAR FUND FEATURES AMERISTAR FUND BENEFITS
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PROFESSIONAL INVESTMENT The investment managers at First American National Bank are
MANAGEMENT experienced investment professionals who oversee the
investments in each mutual fund.
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LOW MINIMUM INVESTMENT Initial investments in the Portfolios can be as low as
$1,000.
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DEDICATED CUSTOMER Account information is available from helpful
SERVICE representatives. Just call 1-800-852-0045.
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AUTOMATIC INVESTMENTS Investments can be made once or twice a month with automatic
transfers from your checking account to your Portfolio
account.
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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.*
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AUTOMATIC WITHDRAWALS Automatic withdrawals from your Portfolio account can be
made and credited to any account you designate.
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FREE EXCHANGE PRIVILEGES Shares of a Portfolio can be exchanged into shares of other
AmeriStar Portfolios at no cost.**
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REGULAR, INFORMATIVE You will receive account statements after each transaction,
STATEMENTS AND REPORTS plus regular financial reports highlighting performance and
investment strategies.
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DIVIDEND REINVESTMENT Dividend income and capital gains can be reinvested
automatically in additional shares of a Portfolio.
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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.
* 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>
FUND FACTS
<PAGE> 3
[AMERISTAR MUTUAL FUNDS LOGO]
AMERISTAR PRIME
MONEY MARKET PORTFOLIO
AMERISTAR U.S. TREASURY
MONEY MARKET PORTFOLIO
AMERISTAR CAPITAL
GROWTH PORTFOLIO
AMERISTAR DIVIDEND
GROWTH PORTFOLIO
ANNUAL REPORT
AMERISTAR CORE
INCOME PORTFOLIO
AMERISTAR LIMITED
DURATION INCOME PORTFOLIO
AMERISTAR LIMITED DURATION
U.S. GOVERNMENT PORTFOLIO
AMERISTAR TENNESSEE TAX
EXEMPT BOND PORTFOLIO
AMERISTAR LIMITED DURATION
TENNESSEE TAX FREE PORTFOLIO
DECEMBER 31, 1997
<PAGE> 4
LETTER FROM THE CHIEF INVESTMENT OFFICER
- --------------------------------------------------------------------------------
To Our Shareholders:
I am pleased to send you the AmeriStar Mutual Funds' annual report for the 12
months ended December 31, 1997, a period that was kind to investors in both the
equity and fixed-income markets. The year 1997 also saw the introduction of
three new AmeriStar funds: the Dividend Growth Portfolio, the Limited Duration
U.S. Government Portfolio and the Limited Duration Tennessee Tax Free Portfolio.
NEW HEIGHTS FOR STOCKS; SOLID RETURNS FOR BONDS
Defying the dire warnings of many pundits and shrugging off often-vicious bouts
of volatility, the stock market finished substantially higher for the third
straight year. In fact, when the Dow Jones Industrial Average ended 1997 with a
gain of more than 22%, a historic milestone was achieved: For the first time
since the Dow was established in 1896, the blue-chip average rose more than 20%
for three consecutive years. Long-time investors will be even more heartened to
learn that the 300% gain stocks had since 1987 (again, as measured by the Dow)
represented the best ten-year gain of the market ever. Other market benchmarks,
such as the S&P 500 and Nasdaq, posted impressive gains, as well.
Shareholders in fixed-income funds also had reason to cheer, as interest rates
fell during the course of the year--the yield on the 30-year U.S. Treasury bond
dipped 72 basis points (0.72%)--boosting total returns for investors. Even
better, with the rate of inflation holding at a benign 1.7% at year's end, bond
investors enjoyed "real returns" (total return minus inflation) that were
positive by historical standards.
WHAT DROVE THE MARKETS?
Four essential factors were responsible for propelling stock and bond prices
higher: Along with declining interest rates and virtually negligible inflation,
other heroes were strong economic growth and higher productivity. If anything,
it was the influence and power of productivity that helped drive the current
economic expansion through its seventh year. Although unemployment was low--in
fact, one could argue that by most standards, this country's workforce was
virtually fully employed--and wages continued to rise, inflation was dampened by
the productivity gains of the American worker.
This is an essential point that the markets have come to understand and
appreciate: If wages go up 4%, such a rise can ignite inflationary pressures.
But if we see an equivalent increase in productivity, as measured by the
year-to-year gains in the amount of goods produced by a worker in a single hour
or work week, inflation becomes less of a concern.
CAN IT HAPPEN AGAIN?
What are the prospects for continued strength in stocks and bonds? This is the
million-dollar question, one that bedevils professional money managers and
individual investors alike. A year ago, many stock market experts warned that
after two years of sterling performance (the Dow rose 33% in 1995 and 26% in
1996), investors should be prepared for average, or even below-average, returns
in 1997. Then, despite some tense moments, the Dow raced to a high of 8259 in
early August, though it gave up some ground in the fourth quarter.
Who is to say it won't happen again? Not I. Here at AmeriStar, we think of
ourselves as dedicated stock pickers, not momentum-driven market timers.
At the same time, we believe a note of caution is appropriate. From a historical
perspective, stocks provide excellent returns on a long-term basis, but they
simply do not go up sharply every year. They certainly cannot be expected to
deliver 20%-plus returns year after year, without pause. As we enter 1998, we
see some positive trends in the economy--the old refrain of low inflation, low
interest rates and solid economic growth stills sounds good to us--yet it is
hard to feel wildly bullish on stocks. The chief cause for our concern? In a
word: Asia.
By now, you have certainly become aware that many of the economies in the Far
East find themselves in desperate straits. Thailand, Indonesia, South Korea,
even Japan--the world's second-largest economy--are struggling against a tidal
wave of economic stagnation, devalued currencies, countless bankruptcies and
plummeting stock market values. At this point, we do not believe that all the
news is in, nor are we confident that the full extent of the fallout from Asia
has been discounted by our markets. At the very least, the earnings of American
companies dependent on exports for a significant portion of their income will be
depressed in 1998.
The other side is that the cost of imported goods should continue to fall. Lower
costs can lead to lower, or at least steady, prices for goods and services in
this country, which could help keep inflation in check for another year.
Moreover, with continued low inflation, the Federal Reserve Board may very well
decide not to raise interest rates. All of which works to produce an environment
in which bonds might flourish and stocks could beat off the threat posed by
sluggish earnings growth.
WHAT SHOULD YOU DO?
Admittedly, what we have here is a complicated mixture of competing and
complementary crosscurrents, but the world's markets are never easy to predict.
Still, as an investor, you have to make decisions to ensure your short- and
long-term financial well-being.
With this in mind, my colleagues and I offer the following suggestion: We
encourage you to take the time to reexamine your investment goals, review your
portfolio and, if you're satisfied with your present investment strategy, simply
remain patient and calm. If your personal circumstances have changed over the
last year, feel free to talk with your investment representative.
In either case, remember that it is best to take a long-term view on the equity
and fixed-income markets, and on the funds in which you have invested your
money. The year just past was an unusually volatile period for both stocks and
bonds, and we expect more volatility in the months ahead. However, with
volatility, comes opportunity, and the portfolio managers in the fund family
remain focused on finding good investments for you, the shareholders, wherever
they may lie.
We thank you for your continued trust and support.
Sincerely,
/s/ Frederick S. Crown Jr.
Frederick S. Crown Jr., CFA
Chief Investment Officer
<PAGE> 5
<TABLE>
<S> <C> <C> <C>
DONALD F. TURK, CFA
JACQUELINE R. LUNSFORD, CFA Portfolio Manager
Portfolio Manager U.S. Treasury Money
[Lunsford Photo] Prime Money Market Portfolio [Turk Photo] Market Portfolio
</TABLE>
INVESTMENT GOAL
The AmeriStar 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 MONEY MARKET FUNDS?*
A. Interest-rate movements, in and of themselves, were not a significant factor
this past year; the Federal Reserve Board (the Fed) changed rates just once,
raising them 25 basis points (0.25%) in March. Although fluctuations in economic
indicators and the resulting perception of impending rate changes did have some
impact on market prices from time to time, for most of the year short-term rates
traded in a very narrow range of plus or minus 10 basis points (0.10%). Since
the short-term yield curve has been very flat over the past few months, the
greatest challenge has been to find, and take advantage of, any undervalued
maturity or issuer sectors in the markets.
Another significant factor has been a continuing supply and demand problem in
the short-term markets, which has kept prices somewhat higher due to the lack of
supply. Finally, one last factor is that past issuers of short-term products are
now cash-rich themselves, which means that they are no longer issuers of
securities, but purchasers. They are competing directly with the investors who
used to purchase their products. This situation has resulted in too much cash
chasing too few opportunities.
Q. WHAT IS YOUR OUTLOOK FOR THE NEXT SIX TO 12 MONTHS, AND HOW HAVE YOU
POSITIONED THE PORTFOLIOS?
A. With inflation very low, a continuing rally in bonds and persistent problems
in the international markets, it now appears that the next Fed movement will
likely be a decrease, rather than an increase. However, we do not expect the Fed
to make any changes to interest rates in the early part of the year. Employment
numbers and the housing market both remain strong, and early releases of holiday
retail sales figures seem to be mixed. Therefore, we believe that the Fed will
continue its watchful stance and hold short-term rates stable through their
meeting in early February, rather than risk easing credit too soon. We expect to
lengthen the average maturity of the Portfolios as opportunities arise.
- ---------------
* An investment in the AmeriStar Money Market Portfolios is neither insured nor
guaranteed by the U.S. Government. 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.
2
<PAGE> 6
- --------------------------------------------------------------------------------
AMERISTAR CAPITAL GROWTH PORTFOLIO
PERFORMANCE (AS OF DECEMBER 31, 1997)
- --------------------------------------------------------------------------------
INVESTOR SHARES
<TABLE>
<CAPTION>
Investor Investor
Measurement Shares Shares
Period (without S&P (with
(Fiscal Year sales 500 sales
Covered) charge) Index charge)
<S> <C> <C> <C>
80 10000 10000 9717
81 9918 9508 9623
82 12104 11557 11745
83 13135 14113 12783
84 12163 14937 11840
85 15388 19440 14953
86 18271 23068 17736
87 19397 24217 18868
88 20714 28182 20142
89 26696 37030 25943
90 25194 35794 24481
91 31434 46674 30519
92 33457 50160 32500
93 34602 55124 33632
94 34491 55777 33491
95 44951 76714 43679
96 54958 94315 53396
97 71879 125778 68544
</TABLE>
Past performance is no guarantee of future results.
<TABLE>
<CAPTION>
AVERAGE ANNUAL
TOTAL RETURN
--------------------------
WITH SALES WITHOUT SALES
CHARGE* CHARGE
INVESTOR SHARES ---------- -------------
<S> <C> <C>
1-Year........................ 24.62% 30.79%
5-Year........................ 15.41% 16.53%
10-Year....................... 13.43% 14.00%
Since Inception (4/1/96)**.... 11.98% 12.29%
*Reflects 4.75% sales charge.
</TABLE>
TRUST SHARES***
<TABLE>
<CAPTION>
Measurement
Period
(Fiscal Year Trust S&P 500
Covered) Shares Index
<S> <C> <C>
80 10000 10000
81 9918 9508
82 12104 11557
83 13135 14113
84 12163 14937
85 15388 19440
86 18271 23068
87 19397 24217
88 20714 28182
89 26696 37030
90 25194 35794
91 31434 46674
92 33457 50160
93 34602 55124
94 34491 55777
95 44951 76714
96 54958 94315
97 71127 125778
</TABLE>
Past performance is no guarantee of future results.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN
---------------------------
TRUST SHARES***
<S> <C>
1-Year.............. 29.68%
5-Year.............. 16.33%
10-Year............. 13.90%
Since Inception
(10/3/97)**....... 12.24%
</TABLE>
SECTOR PROFILE
<TABLE>
<CAPTION>
<S> <C>
Transportation 2.9%
Depositary Receipts 2.4%
Cash 2.8%
Consumer Services 7.9%
Energy 5.2%
Capital Goods - Tech 11.2%
Consumer Cyclicals 19.4%
Capital Goods - Industry 5.8%
Utilities/Telecommunications 2.5%
Consumer Staples 5.3%
Financial Services 17.4%
Health Care 17.2%
</TABLE>
The AmeriStar Capital Growth Portfolio invests in a portfolio designed to
provide capital growth, which consists primarily of stocks of large, well-
capitalized U.S. companies. The Portfolio's adviser has latitude in
deciding which companies and industries provide the greatest growth
potential at any given time. The Portfolio currently invests in 10 major
industry groups, including health care, energy and consumer staples.
TOP 10 EQUITY HOLDINGS
<TABLE>
<CAPTION>
PERCENT OF
TOTAL ASSETS
------------
<C> <S> <C>
1. General Electric Co.................. 3.2%
2. Norwest Corp......................... 3.2%
3. Newell Co............................ 3.1%
4. Arbor Drugs, Inc..................... 3.0%
5. Federal Natl. Mtg. Assn.............. 3.0%
6. Home Depot, Inc...................... 3.0%
7. Wachovia Corp........................ 3.0%
8. Southwest Airlines................... 2.9%
9. Pfizer, Inc.......................... 2.8%
10. Walgreen's........................... 2.7%
</TABLE>
A hypothetical $10,000 investment made on December 31, 1980, would have been
worth on December 31, 1997, $71,879 without the sales charge and $68,544 after
taking the maximum 4.75% sales charge into account.
The AmeriStar Capital Growth Portfolio is compared to the Standard & Poor's 500
Stock Index, a broad measure of the stock market as a whole. The index is
unmanaged and does not reflect expenses associated with a mutual fund, such as
sales charges, expenses for fund operations, management fees, portfolio
transaction costs or the cash reserves required to provide daily liquidity. The
Portfolio's performance reflects the deduction of fees for these value-added
services.
**The AmeriStar Capital Growth Portfolio commenced operations on 4/1/96, through
a transfer of assets from certain collective trust fund ("Commingled") accounts
managed by First American National Bank, using materially equivalent investment
objectives, policies and methodologies as the Portfolio. The quoted performance
of the Portfolio includes performance of the Commingled accounts for periods
dating back to 12/31/80, and prior to the Portfolio's commencement of
operations, as adjusted to reflect the expenses associated with the Portfolio.
The Commingled accounts were not registered with the Securities and Exchange
Commission and, therefore, were not subject to the investment restrictions
imposed by law on registered mutual funds. If the Commingled accounts had been
so registered, the Commingled accounts' performance may have been adversely
affected. The performance also reflects reinvestment of all dividends and
capital gains distributions. Past performance is not a prediction of future
results. The Portfolio's investment return and principal value will fluctuate,
so that an investor's shares, when redeemed, may be worth more or less than
their original purchase price.
***The Trust Share class reflects the historical performance of the Investor
(no-load) share class.
3
<PAGE> 7
<TABLE>
<S> <C>
CHARLES WINGER
Portfolio Manager
Capital Growth
[Winger Photo] Portfolio
</TABLE>
===============================================================
INVESTMENT GOAL
The Portfolio seeks to provide investors with the potential to achieve
long-term capital growth by investing primarily in the equity securities of
domestic issuers whose earnings are growing faster than the economy as a
whole. The portfolio invests primarily in large U.S. companies with market
capitalization of at least $500 million. This Portfolio maybe suitable for
investors who are investing for the long term and are comfortable assuming the
additional risk of investing in stocks in exchange for potentially higher
total returns.
- ---------------------------------------------------------------
Q. HOW DID THE PORTFOLIO PERFORM DURING 1997?
A. It was an excellent year for us, especially relative to our benchmark, the
Standard & Poor's 500 Index. For the 12 months ended December 31, 1997, the
Portfolio's total return was 30.79% (Net Asset Value).* In comparison, the
Lipper Growth Fund Index was up 28.08%, and the S&P 500 rose 33.36%. The Lipper
Growth Fund Index is an index of managed funds that is generally representative
of growth stock funds. The S&P 500 is an unmanaged index that is considered to
be generally representative of the U.S. market as a whole.
Q. WHAT FACTORS AFFECTED YOUR PERFORMANCE?
A. Our good performance was attributable as much to what we avoided as to what
we were invested in throughout the year. We were underweighted in basic industry
stocks--for example, the shares of paper, chemical and steel companies--which
performed poorly. As far as what we did own, our emphasis on buying
large-capitalization issues was a positive factor. Larger stocks did
particularly well in 1997. We enjoyed great success with a sector in which we
are still overweighted: health care. Pharmaceutical stocks as Bristol Myers
Squibb (2.5% of the Portfolio), Eli Lilly (2.7%) and Pfizer (2.8%) all
contributed to our performance. The drug industry fits one of our primary
investment themes: capitalizing on changing demographics. The aging population
in this country favors the entire health-care industry, and pharmaceutical
companies in particular.**
We also were overweighted in selected consumer stocks. We liked Dayton-Hudson
(2.7%), which has turned around their Mervyn's and Target department store
operations. The stock rose sharply last year, and we think the discount-
retailer concept will continue to grow in 1998. In addition, we did well, for
the year as a whole, with Halliburton (2.2%) and Schlumberger (2.2%), two
oil-services companies. However, we were hurt in the fourth quarter by these and
other energy stocks, such as Texaco and Mobil Oil (neither is presently in the
Portfolio). The energy sector as a whole took a fall at the end of the year.**
Q. WHAT ARE SOME OF THE "INVESTMENT THEMES" THAT GUIDE YOUR STOCK SELECTION?
A. We have five basic themes. First, we look for large, domestic growth
companies that offer the prospect of solid earnings growth. Second, we employ an
emphasis on changing demographics, as we discussed earlier. Third, we look for
opportunities in the financial services sector, which, we think, is ripe for
significant merger activity. Fourth, we like companies that provide productivity
enhancement, which is a fancy way of saying "technology." We think tech stocks
will perform well in the long term, though they will be exceedingly volatile.
Fifth, we are searching for good stocks in the mid-cap universe.
Q. WHAT IS YOUR STRATEGY FOR 1998?
A. For the time being, we are going to stay away from the basic industry
companies we avoided last year. We would not be surprised to see a significant
slowdown in the U.S. economy, especially during the first half of the year. In
that scenario, the basic industry stocks, which are very sensitive to the
economic cycle, would be hurt. We are also trying to avoid those stocks that
appear to be most vulnerable to problems stemming from the situation in Asia.
There are a lot of risks out there. Overall, we are cautiously optimistic that
the market offers a number of good opportunities.
- ---------------
* Including the 4.75% sales load, the Portfolio's return was 24.62% for the
period.
** The portfolio composition is subject to change.
4
<PAGE> 8
- --------------------------------------------------------------------------------
AMERISTAR DIVIDEND GROWTH PORTFOLIO
PERFORMANCE (AS OF DECEMBER 31, 1997)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Investor Shares
Investor Investor
Measurement Share Share
Period (without S&P (with
(Fiscal Year sales 500 sales
Covered) charge) Index charge)
<S> <C> <C> <C>
86 10000 10000 9522
87 10510 10523 10000
88 11722 12292 11164
89 15132 16163 14418
90 15102 15650 14388
91 18454 20431 17582
92 18964 21998 18060
93 20850 24196 19851
94 19518 24512 18597
95 25593 33687 24388
96 29350 41460 27970
97 38916 55291 37075
</TABLE>
Past Performance is no guarantee of future results.
<TABLE>
<CAPTION>
Trust Shares***
Investor
Share
Measurement Period (without
(Fiscal Year sales S&P 500
Covered) charge) Index
<S> <C> <C>
86 10000 10000
87 10510 10523
88 11722 12292
89 15132 16163
90 15102 15650
91 18454 20431
92 18964 21998
93 20850 24196
94 19518 24512
95 25593 33687
96 29350 41460
97 38916 55291
Past Performance is no guarantee of future results.
</TABLE>
<TABLE>
<CAPTION>
AVERAGE ANNUAL
TOTAL RETURN
--------------------------
WITH SALES WITHOUT SALES
CHARGE* CHARGE
INVESTOR SHARES ---------- -------------
<S> <C> <C> <C>
1-Year........................ 26.22% 32.59%
5-Year........................ 14.36% 15.46%
10-Year....................... 13.44% 13.99%
Since Inception (2/28/97)**... 12.64% 13.14%
*Reflects 4.75% sales charge.
</TABLE>
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN
TRUST SHARES*** ---------------------------
<S> <C> <C>
1-Year.............. 32.60%
5-Year.............. 15.46%
10-Year............. 13.99%
Since Inception
(10/3/97)**....... 13.14%
</TABLE>
<TABLE>
<CAPTION>
Sector Profile
<S> <C>
Financial Services 22.7%
Comsumer Staples 17.4%
Capital Goods and
Technology 7.7%
S&P Depositary
Receipts 2.0%
Cash and Cash
Equivalents 5.9%
Health Care 10.0%
Energy 6.5%
Consumer Cyclicals 8.5%
Capital Goods 16.9%
Utilities/Telecommunications 16.0%
</TABLE>
TOP 10 EQUITY HOLDINGS
<TABLE>
<CAPTION>
PERCENT OF
TOTAL ASSETS
------------
<C> <S> <C>
1. Emerson Electric..................... 3.7%
2. Sysco Corp........................... 3.5%
3. Duke Energy Corp..................... 3.3%
4. Bristol-Myers Squibb Co.............. 3.3%
5. Consolidated Natural Gas............. 2.9%
6. Automatic Data Processing............ 2.8%
7. Johnson Controls..................... 2.7%
8. Mellon Bank Corp..................... 2.7%
9. Abbott Labs.......................... 2.6%
10. Pepsico.............................. 2.6%
</TABLE>
A hypothetical $10,000 investment made on December 31, 1986, would have been
worth on December 31, 1997, $38,916 without the sales charge and $37,075
after taking the maximum 4.75% sales charge into account.
The AmeriStar Dividend Growth Portfolio is compared to the Standard & Poor's
500 Stock Index, a broad measure of the stock market as a whole. The index is
unmanaged and does not reflect expenses associated with a mutual fund, such
as sales charges, expenses for fund operations, management fees, portfolio
transaction costs or the cash reserves required to provide daily liquidity.
The Portfolio's performance reflects the deduction of fees for these
value-added services.
** The AmeriStar Dividend Growth Portfolio commenced operations on 2/28/97,
through a transfer of assets from certain collective trust fund
("Commingled") accounts managed by First American National Bank, using
materially equivalent investment objectives, policies and methodologies as
the Portfolio. The quoted performance of the Portfolio includes performance
of the Commingled accounts for periods dating back to 12/31/86, and prior to
the Portfolio's commencement of operations, as adjusted to reflect the
expenses associated with the Portfolio. The Commingled accounts were not
registered with the Securities and Exchange Commission and, therefore, were
not subject to the investment restrictions imposed by law on registered
mutual funds. If the Commingled accounts had been so registered, the
Commingled accounts' performance may have been adversely affected. The
performance also reflects reinvestment of all dividends and capital gains
distributions. Past performance is not a prediction of future results. The
Portfolio's investment return and principal value will fluctuate, so that an
investor's shares, when redeemed, may be worth more or less than their
original purchase price.
***The Trust Share class reflects the historical performance of the Investor
(no-load) share class.
5
<PAGE> 9
<TABLE>
<S> <C>
JAY BAUMGARDNER
Portfolio Manager
Dividend Growth
[Baumgardner Photo] Portfolio
</TABLE>
===============================================================
INVESTMENT GOAL
The Portfolio seeks to provide investors with current income and capital
appreciation. This Portfolio invests primarily in dividend-paying equity
securities of domestic issuers that are expected to provide reasonable income
and may have capital appreciation potential.
- ---------------------------------------------------------------
Q. HOW DID THE PORTFOLIO PERFORM DURING 1997?
A. We had a very good year, thanks to outstanding performance in each of our key
sectors. For the 12 months ended December 31, 1997, the Portfolio's total return
was 32.59% (at Net Asset Value).* In comparison, the Lipper Equity Income Index
rose 27.51%. The Lipper Equity Index is an index of managed funds that is
generally representative of funds that invest more than 60% of assets in
equities.
Considering that our goal is to provide current income, and not just focus on
capital appreciation, outperforming our benchmark index by nearly five
percentage points was very gratifying.
Q. WHAT FACTORS LED TO THESE STRONG RETURNS?
A. First, like other equity income funds, we were heavily invested in three
sectors: financial services, energy stocks and utilities. These companies
historically provide the price stability and higher-than-average dividends that
we seek. In 1997, all three sectors performed well, which is unusual, since they
don't generally move up at the same time. For example, when energy stocks are
rising, it's often the result of higher oil prices and rising inflation. And in
times of rising inflation, companies in the financial and utility sectors
usually perform poorly. This past year was atypical, but positive for investors.
Second, we did some good stock-picking in the broader list of stocks we own
outside our three key sectors. Colgate Palmolive (1.1% of the Portfolio), in the
consumer staples area, was up nearly 60% for the year. McGraw Hill (1.1%), the
publishing giant, also rose in the neighborhood of 60%. And Gannett Co. (1.6%),
the publisher of USA Today, gained 65%. These are the types of stocks we
expected to provide stable growth; instead, they all exploded upward.
Getting back to the sectors that we focus on, we enjoyed great success with
Mellon Bank Corp. (2.7%), up more than 70% in 1997. During the year, there was
some speculation that the bank would be taken over; this certainly pushed the
stock's price up. At the same time, Mellon is a very solid "fee-based bank,"
generating healthy revenues with money-management businesses such as credit
cards and foreign loans. Another bank that did well for us was First Tennessee
National Corp. (1.2%), a home state bank that we know quite well.**
Q. IN ORDER TO PROVIDE ABOVE-AVERAGE DIVIDEND INCOME, WHAT OTHER AREAS IN THE
MARKET DID YOU PURSUE?
A. Along with searching for good, solid companies offering above-average yields,
we've had good success investing in real estate investment trusts (REITs) since
late 1996. One of our REIT stocks, Crescent Real Estate (1.6%), was up nearly
50% in 1997. Another holding in our portfolio, Equity Residential Properties
(1.8%), the largest apartment REIT in the United States, rose more than 22% for
the year. We believe REITs offer the potential for significant, long-term
capital appreciation, along with yields that often are in the 5%-6% range.
High relative yield is important to us, especially in the current stock market
environment. When the market runs up as it has the last three years, yields
generally fall; the yield for the stocks in the S&P 500 was down to
approximately 1.6% at the end of 1997.
Q. WHAT IS YOUR STRATEGY FOR THE NEXT 12 MONTHS?
A. We believe the equity markets look very challenging. Stocks have run up so
much that their valuations are pretty full. It will take a lot of good
stock-picking this year to generate a double-digit return. With that in mind,
our strategy is to take less risk than the market in general. For example, we're
maintaining a higher-than-average weighting in utilities, and a
lower-than-average weighting in technology. With this approach, we hope to
provide shareholders with superior, risk-adjusted returns.
- ---------------
* Including the 4.75% sales load, the Portfolio's return was 26.22% for the
period.
** The portfolio composition is subject to change.
6
<PAGE> 10
- --------------------------------------------------------------------------------
AMERISTAR CORE INCOME PORTFOLIO
PERFORMANCE (AS OF DECEMBER 31, 1997)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Investor Merrill Investor
Measurement Shares Lynch Shares
Period (without Corp./Gov't. (with
(Fiscal Year sales Master sales
Covered) charge) Index charge)
<S> <C> <C> <C>
80 10000 10000 9711
81 10378 10700 10083
82 13777 13892 13388
83 14646 14973 14215
84 16372 17237 15909
85 19859 20998 19256
86 23274 24281 22603
87 22940 24791 22273
88 24480 26704 23760
89 27232 30476 26446
90 28946 33065 28099
91 33412 38319 32438
92 35437 41264 34380
93 38996 45826 37851
94 37579 44329 36488
95 43840 52745 42562
96 44330 54312 43024
97 48171 59624 46751
</TABLE>
Past performance is no guarantee of future results.
<TABLE>
<CAPTION>
AVERAGE ANNUAL
TOTAL RETURN
--------------------------
WITH SALES WITHOUT SALES
CHARGE* CHARGE
INVESTOR SHARES ---------- -------------
<S> <C> <C>
1-Year........................ 5.40% 8.66%
5-Year........................ 5.69% 6.33%
10-Year....................... 7.36% 7.70%
Since Inception (4/1/96)**.... 9.49% 9.68%
*Reflects 3.00% sales charge.
</TABLE>
<TABLE>
<CAPTION>
Measurement Merril Lynch
Period Corp./Gov't.
(Fiscal Year Trust Master
Covered) Shares Index
<S> <C> <C>
80 10000 10000
81 10378 10700
82 13777 13892
83 14646 14973
84 16372 17237
85 19859 20998
86 23274 24281
87 22940 24791
88 24480 26704
89 27232 30476
90 28946 33065
91 33412 38319
92 35437 41264
93 38996 45826
94 37579 44329
95 43840 52745
96 44330 54312
97 48143 59624
</TABLE>
Past performance is no guarantee of future results.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN
---------------------------
TRUST SHARES***
<S> <C>
1-Year.............. 8.60%
5-Year.............. 6.32%
10-Year............. 7.69%
Since Inception
(10/3/97)**....... 9.68%
</TABLE>
SECTOR PROFILE
<TABLE>
<S> <C>
U.S. Treasuries 11.0%
U.S. Agencies 11.3%
Cash and Cash
Equivalents 2.4%
Bonds 75.3%
</TABLE>
The AmeriStar Core Income Portfolio invests primarily in investment-grade, U.S.
dollar denominated, fixed-income securities of domestic and foreign issuers.
The Portfolio is designed to provide current income without assuming undue
risk. The Portfolio's adviser has latitude in deciding how assets are invested
among corporate and government obligations. As a result, the Portfolio enjoys
flexibility to make the most of changing market conditions.
MATURITY PROFILE
<TABLE>
<S> <C>
0-5 years 44.6%
6-10 years 24.7%
11-20 years 4.5%
over 20 years 26.1%
</TABLE>
By design, the Portfolio attempts to generate current income without undue
risk to principal. The chart shows that the Portfolio is currently focused on
bonds with maturities of 1 to 7 years and those with maturities greater than
20 years.
QUALITY PROFILE
<TABLE>
<S> <C>
A 51.0%
AA 10.8%
AAA 31.8%
BBB 6.4%
</TABLE>
The Portfolio's research team and the Portfolio Manager continuously monitor
debt instruments and issuer quality to identify fixed-income securities for
the Portfolio.
A hypothetical $10,000 investment made on December 31, 1980, would have been
worth on December 31, 1997, $48,171 without the sales charge and $46,751 after
taking the maximum 3% sales charge into account.
The AmeriStar Core Income Portfolio is compared to the Merrill Lynch
Corporate/Government Master Index, which is generally representative of the
performance of corporate and U.S. Government bonds. The index is unmanaged and
does not reflect expenses associated with a mutual fund, such as sales charges,
expenses for fund operations, management fees, portfolio transaction costs or
the cash reserves required to provide daily liquidity. The Portfolio's
performance reflects the deduction of fees for these value-added services.
**The AmeriStar Core Income Portfolio commenced operations on 4/1/96, through a
transfer of assets from certain collective trust fund ("Commingled") accounts
managed by First American National Bank, using materially equivalent investment
objectives, policies and methodologies as the Portfolio. The quoted performance
of the Portfolio includes performance of the Commingled accounts for periods
dating back to 12/31/80, and prior to the Portfolio's commencement of
operations, as adjusted to reflect the expenses associated with the Portfolio.
The Commingled accounts were not registered with the Securities and Exchange
Commission and, therefore, were not subject to the investment restrictions
imposed by law on registered mutual funds. If the Commingled accounts had been
so registered, the Commingled accounts' performance may have been adversely
affected. The performance also reflects reinvestment of all dividends and
capital gains distributions. The service contractors are currently waiving a
portion of their fees; without such waivers the 30-day SEC yield would have been
5.03%. This voluntary waiver may be terminated or modified at anytime, which
would reduce the Portfolio's performance. Past performance is not a prediction
of future results. The Portfolio's investment return and principal value will
fluctuate, so that an investor's shares, when redeemed, may be worth more or
less than their original purchase price.
***The Trust Share class reflects the historical performance of the Investor
(no-load) share class.
7
<PAGE> 11
<TABLE>
<S> <C>
DONALD F. TURK, CFA
Portfolio Manager
Core Income
[Turk Photo] Portfolio
</TABLE>
===============================================================
INVESTMENT GOAL
The Portfolio seeks to provide investors with current income without assuming
undue risk. It invests primarily in investment-grade, U.S. dollar-denominated
fixed-income securities of domestic and foreign issuers with maturities of any
length. This Portfolio may be suitable for investors seeking regular monthly
income without undue risk to principal.
- ---------------------------------------------------------------
Q. HOW DID THE PORTFOLIO PERFORM DURING 1997?
A We were pleased with our performance for the year, which enabled us to
emphasize current income while providing a competitive total return. For the 12
months ended December 31, 1997, the Portfolio produced a total return of 8.66%
(at Net Asset Value).* In comparison, the Merrill Lynch Corporate/Government
Index, an unmanaged benchmark, produced a total return of 9.78%. The Merrill
Lynch Corporate/Government Master Index is generally representative of U.S.
Treasury and Agency bonds and investment-grade bonds. Total return equals yield,
plus or minus the change in the Portfolio's net asset values (NAV) during the
period.
It is also important to recognize income yield to shareholders. As of December
31, 1997, the Portfolio's 30-day SEC yield was 5.89% (at Net Asset Value),**
compared to 5.30% at the end of 1996. The yield percentage is annualized.
We achieved our objectives while maintaining an average credit quality of Aa3
(as rated by Moody's) and AA- (Standard & Poor's). As of December 31, 1997, the
average maturity of the Portfolio was 11.16 years.
Q. WHAT FACTORS AFFECTED YOUR PERFORMANCE?
A. It was a good year for bond investors, who are mostly concerned with "real
return" (total return minus inflation). Inflation was exceptionally mild during
1997, with the consumer price index rising just 1.7%. Therefore, our real return
to shareholders was 6.96%, which is very strong by historical standards.
At the same time, long-term interest rates were very volatile during the year.
The yield on the 30-year U.S. Treasury bond bounced up and down during the first
third of 1997, rising from a low of 6.35% in February to a peak of 7.17% in
April. That jump of 82 basis points (0.82%) in just two months caused some
damage to the bond market. From early spring to the end of 1997, however, the
general trend in interest rates was down, and for the full year, the 30-year
bond yield fell 72 basis points (0.72%). Because bond prices move inversely to
interest rates, this drop in rates benefited the bonds in our portfolio.
Q WITH ALL OF THIS VOLATILITY, WHAT STRATEGIES DID YOU EMPLOY TO HELP YOU MEET
YOUR OBJECTIVES?
A. Our key strategy was to participate in the downward move in rates, which we
did over the course of the year, by keeping our maturity structure as long, or
longer, than the Fund's benchmark. We lengthened maturities, especially in the
last six months, and we moved a lot of the Portfolio from government issues to
corporate bonds--to boost our yield. As always, we remained very conscious of
providing the highest possible yield, with an eye toward preserving capital.
In recent months, we have bought bonds issued by utilities, such as Virginia
Electric (2.5% of the Portfolio) and Puget Sound Power & Light (2.1%). Some of
our recent corporate purchases include the bonds of J.C. Penney (2.1%) and
Anheuser-Busch (2.2%). All of these issuers are good, solid companies offering
attractive yields.***
Q WHAT IS YOUR OUTLOOK FOR 1998?
A. We believe the economy will slow rather significantly over the next year. If
so, what does that do to the value of the bonds we hold? We think the companies
whose debt we own will continue to be stable businesses, and that there will be
a demand for the bonds that they have issued. On the Treasury side, the federal
government is backing away from the issuance of debt, especially long-term debt.
In all probability, the United States will have a balanced budget for this
fiscal year, perhaps even a slight surplus. These two factors could result in a
scarcity of all but the shortest term Treasury debt.
- ---------------
* Including the 3.00% sales load, the Portfolio's return was 5.40% for the
period.
** During the period, certain expenses were voluntarily waived and/or
reimbursed. Had these waivers and/or reimbursements not been in effect, the
30-day SEC yield would have been lower.
*** The portfolio composition is subject to change.
8
<PAGE> 12
- --------------------------------------------------------------------------------
AMERISTAR LIMITED DURATION INCOME PORTFOLIO
PERFORMANCE (AS OF DECEMBER 31, 1997)
- --------------------------------------------------------------------------------
INVESTER SHARES
<TABLE>
<CAPTION>
Merrill Lynch Investor Investor Merrill Lynch
1-5-Year Share (without share (with 1-3-Year Gov't/
Measurement Period Gov't/Corp. sales charge) sales charge Corp. Bond Index
(Fiscal Year Covered) Bond Index+
<S> <C> <C> <C> <C>
82 |Sept. 10000 9695 10000
82 |Dec. 10672 10335 10774
83 11528 11193 11729
84 12899 12513 13344
85 14720 14289 15206
86 16223 15736 16780
87 16698 16193 17727
88 10000 17668 17132 18831
89 11164 19414 18833 20878
90 12260 20982 20355 22909
91 13839 23751 23046 25585
92 14770 24901 24162 27197
93 15794 26449 25660 18668
94 15873 26275 25487 28832
95 17900 29218 28341 29149
96 18713 30467 29407 30601
97 20043 32440 31467 32639
</TABLE>
<TABLE>
<CAPTION>
AVERAGE ANNUAL
TOTAL RETURN
--------------------------
WITH SALES WITHOUT SALES
CHARGE* CHARGE
INVESTOR SHARES ---------- -------------
<S> <C> <C>
1-Year........................ 3.26% 6.47%
5-Year........................ 4.79% 5.43%
10-Year....................... 6.54% 6.87%
Since Inception (4/1/96)**.... 7.76% 7.97%
*Reflects 3.00% sales charge.
</TABLE>
<TABLE>
<CAPTION>
TRUST SHARES
Investor Merrill Merrill
Share Lynch Lynch
Measurement Period (without 1-5-Year 1-3-Year
(Fiscal Year sales Gov't/Corp. Gov't/Corp
Covered) charge) Bond Index+ Bond Index
<S> <C> <C> <C>
82 |Sept. 10000 10000
82 |Dec. 10672 10774
83 11528 11729
84 12899 13344
85 14728 15206
86 16223 16780
87 16698 17727
88 17668 10000 18831
89 19414 11164 20878
90 20982 12260 22909
91 23751 13839 25585
92 24901 14770 27197
93 26449 15794 28668
94 26275 15873 28832
95 29218 17900 29149
96 30467 18713 30601
97 32402 20043 32639
</TABLE>
<TABLE>
AVERAGE ANNUAL TOTAL RETURN
---------------------------
TRUST SHARES***
<S> <C>
1-Year.............. 6.35%
5-Year.............. 5.41%
10-Year............. 6.85%
Since Inception
(10/3/97)**....... 7.96%
</TABLE>
SECTOR PROFILE
<TABLE>
<S> <C> <C> <C>
Cash and Corporate U.S. Government U.S. Treasuries
Cash Equivalents Bonds Agencies 18.8%
2.6% 54.0% 24.6%
</TABLE>
The AmeriStar Limited Duration Income Portfolio invests primarily in
investment-grade, U.S. dollar-denominated, fixed-income securities of domestic
and foreign issuers. The Portfolio is designed to provide investors with
current income without assuming undue risk. The Portfolio's adviser has
latitude in deciding how assets are invested among corporate and government
obligations. As a result, the Portfolio enjoys flexibility to make the most of
changing market conditions.
MATURITY PROFILE
<TABLE>
<S> <C>
6-10 years 8.0%
0-5 years 92.0%
</TABLE>
By design, the Portfolio attempts to generate current income without undue
risk to principal. The chart shows that the Portfolio is focused on bonds with
maturities of 1 to 5 years.
QUALITY PROFILE
<TABLE>
<S> <C>
A 35.3%
AA 11.5%
AAA 47.5%
BBB 5.7%
</TABLE>
The Portfolio's research team a the Portfolio Manager continuously monitor
debt instruments and issuer quality to identify fixed-income securities for
the Portfolio.
A hypothetical $10,000 investment made on September 30, 1982, would have been
worth on December 31, 1997, $32,440 without the sales charge and $31,467
after taking the maximum 3.00% sales charge into account.
+ The AmeriStar Limited Duration Income Portfolio is measured against the
Merrill Lynch 1-3-Year Government/Corporate Bond Index from 9/30/82 to
12/31/88, prior to the creation of the Portfolio's benchmark of the Merrill
Lynch 1-5-Year Government/Corporate Bond Index. Both indices are
representative of the total return of short-term government and corporate
bonds. These indices are unmanaged and do not reflect the expenses associated
with a mutual fund, such as sales charges, expenses for fund operations,
management fees, portfolio transaction costs or the cash reserves required to
provide daily liquidity. The Portfolio's performance reflects the deduction
of fees for these value-added services.
** The AmeriStar Limited Duration Income Portfolio commenced operations on
4/1/96, through a transfer of assets from certain collective trust fund
("Commingled") accounts managed by First American National Bank, using
materially equivalent investment objectives, policies and methodologies as
the Portfolio. The quoted performance of the Portfolio includes performance
of the Commingled accounts for periods dating back to 9/1/82, and prior to
the Portfolio's commencement of operations, as adjusted to reflect the
expenses associated with the Portfolio. The Commingled accounts were not
registered with the Securities and Exchange Commission and, therefore, were
not subject to the investment restrictions imposed by law on registered
mutual funds. If the Commingled accounts had been so registered, the
Commingled accounts' performance may have been adversely affected. The
performance also reflects reinvestment of all dividends and capital gains
distributions. The service contractors are currently waiving a portion of
their fees; without such waivers the 30-day SEC yield would have been 5.05%.
This voluntary waiver may be terminated or modified at anytime, which would
reduce the Portfolio's performance. Past performance is not a prediction of
future results. The Portfolio's investment return and principal value will
fluctuate, so that an investor's shares, when redeemed, may be worth more or
less than their original purchase price.
*** The Trust Share class reflects the historical performance of the Investor
(no-load) share class.
9
<PAGE> 13
<TABLE>
<S> <C>
DONALD F. TURK, CFA
Portfolio Manager
Limited Duration
[Turk Photo] Income Portfolio
</TABLE>
===============================================================
INVESTMENT GOAL
The Portfolio seeks to provide investors with current income without assuming
undue risk. It invests primarily in investment-grade, U.S. dollar-denominated
fixed-income securities of domestic and foreign issuers that generally have a
duration of less than four years. This Portfolio maybe suitable for investors
seeking regular monthly income without undue risk to principal.
- ---------------------------------------------------------------
Q. HOW DID THE PORTFOLIO PERFORM IN 1997?
A. We were pleased with our performance for the year, which enabled us to
emphasize current income while providing a competitive total return. For the 12
months ended December 31, 1997, the Portfolio produced a total return of 6.47%
(at Net Asset Value).* In comparison, the Merrill Lynch 1-5-Year
Government/Corporate Index, an unmanaged benchmark, produced a total return of
7.16%. The index is a broad performance measure of bonds with maturities in the
one-to-five-year range. Total return equals yield, plus or minus the change in
the Portfolio's net asset values (NAV) during the period.
It is also important to recognize income yield to shareholders. As of December
31, 1997, the Portfolio's 30-day SEC yield was 5.92%( at Net Asset Value),**
compared to 5.32% at the end of 1996. The yield percentage is annualized.
We achieved our objectives, while maintaining an average credit quality of Aa2
(as rated by Moody's) and AA (Standard & Poor's). As of December 31, 1997, the
average maturity of the Portfolio was 3.14 years.
Q. WHAT FACTORS AFFECTED YOUR PERFORMANCE?
A. It was a good year for bond investors, who are mostly concerned with "real
return" (total return minus inflation). Inflation was exceptionally mild during
1997, with the consumer price index rising just 1.7%. Therefore, our real return
to shareholders was 4.77%, which is very strong by historical standards for a
Portfolio with a relatively short average maturity.
At the same time, interest rates were very volatile during the year. The yield
on the five-year U.S. Treasury bond rose from 6.21% at the end of 1996 to a peak
of 6.86% in April 1997. From early spring to the end of 1997, however, the
general trend in interest rates was down, and for the full year, the five-year
bond's yield fell 6.77%, to settle at 5.77%. Because bond prices move inversely
to interest rates, this drop in rates benefited the bonds in our portfolio.
Q. DID LONG- AND SHORT-TERM BONDS MOVE IN TANDEM THROUGHOUT THE YEAR?
A. No, and that did not surprise us. Bonds of various maturities do not always
move in lockstep. What counts is where you are in the economic cycle. If you are
in an expanding economy, long- and short-term interest rates will move in the
same direction. However, when you are late in the economic cycle, as we were in
1997, short-term rates will not move down as much as long-term rates do--or, as
very short-term securities did last year, they may even start moving up. This
causes the yield curve to flatten; that is, shorter maturities yield just about
the same as longer maturities.
Q. WHAT STRATEGIES DID YOU EMPLOY?
A. We consciously took steps to lengthen the Portfolio's average maturity, to
the point where it was markedly longer than the benchmark's. This helped our
relative performance when rates began to fall. As the spread between Treasury
and corporate bond yields widened, we were also able to boost the Portfolio's
yield while maintaining high credit quality.
Q. WHAT IS YOUR OUTLOOK FOR 1998?
A. We believe the economy will slow rather significantly over the next year, and
that interest rates could fall even further than they did at the end of 1997. If
so, demand for the Treasury and corporate bonds we hold could rise, which would
provide higher total return to our shareholders. Overall, the trend in interest
rates is very constructive, and we are approaching the New Year with optimism.
- ---------------
* Including the 3.00% sales load, the Portfolio's return was 3.26% for the
period.
** During the period, certain expenses were voluntarily waived and/or
reimbursed. Had these waivers and/or reimbursements not been in effect, the
30-day SEC yield would have been lower.
10
<PAGE> 14
- --------------------------------------------------------------------------------
AMERISTAR LIMITED DURATION U.S. GOVERNMENT PORTFOLIO
PERFORMANCE (AS OF DECEMBER 31, 1997)
- --------------------------------------------------------------------------------
Investor Shares
<TABLE>
<CAPTION>
Investor Investor Merrill Lynch Merrill Lynch
Measurement Share Share 1-5 Year 1-3 Year
Period (without (with Gov't Gov't
(Fiscal Year sales sales Bond Bond
Covered) charge) charge) Index+ Index
<S> <C> <C> <C> <C>
86 10000 9692 10000
87 10205 9891 10564
88 10799 10472 10000 11160
89 11998 11633 11164 11855
90 12960 12577 12260 13144
91 14607 14174 13839 14423
92 15426 14955 14771 16107
93 16502 16007 15794 17122
94 16325 15844 15695 18048
95 18105 17568 17699 18151
96 18598 18040 18503 20148
97 19746 19154 19818 21151
</TABLE>
Past Performance is no guarantee of future results.
<TABLE>
<CAPTION>
AVERAGE ANNUAL
TOTAL RETURN
--------------------------
WITH SALES WITHOUT SALES
CHARGE* CHARGE
INVESTOR SHARES ---------- -------------
<S> <C> <C>
1-Year...................... 2.97% 6.18%
5-Year...................... 4.45% 5.06%
10-Year..................... 6.50% 6.82%
Since Inception
(2/28/97)**............... 6.08% 6.38%
*Reflects 3.00% sales charge.
</TABLE>
<TABLE>
Sector Profile
<S> <C>
U.S. Government Agencies 48.8%
Cash and Cash Equivalents 2.7%
U.S. Treasury Notes 48.5%
</TABLE>
The Limited Duration U.S. Government Portfolio will invest in securities
issued or guaranteed by the U.S. Government or its agencies or
instrumentalities and repurchase agreements in respect of such securities. The
Portfolio is designed to provide high current income without assuming undue
risk.
<TABLE>
<CAPTION>
Maturity Profile
<S> <C>
0-5 years 76.9%
6-10 years 23.1%
</TABLE>
By design, the Portfolio attempts to generate current income without undue
risk to principal. The chart above shows that the Portfolio is focused on
bonds with maturities of 1 to 5 years.
<TABLE>
<CAPTION>
Quality Profile
<S> <C>
AAA 100.0%
</TABLE>
The Portfolio's research team and the Portfolio Manager continuously monitor
debt instruments and issuer quality to identify fixed-income securities for
the Portfolio.
A hypothetical $10,000 investment made on December 31, 1986, would have been
worth on December 31, 1997, $19,746 without the sales charge and $19,154
after taking the maximum 3% sales charge into account.
+ The Ameristar Limited Duration U.S. Government Portfolio is measured against
the Merrill Lynch 1-3-Year Government Bond Index from 12/31/86 to 12/31/88,
prior to the creation of the Portfolio's benchmark of the Merrill Lynch
1-5-Year Government Bond Index. Both indices reflect the performance of
government bonds in that maturity range with a rating of at least Baa. The
index is unmanaged and does not reflect expenses associated with a mutual
fund, such as sales charges, expenses for fund operations, management fees,
portfolio transaction costs or the cash reserves required to provide daily
liquidity. The Portfolio's performance reflects the deduction of fees for
these value-added services.
** The AmeriStar Limited Duration U.S. Government Portfolio commenced operations
on 2/28/97 through a transfer of assets from certain collective trust fund
("Commingled") accounts managed by First American National Bank, using
materially equivalent investment objectives, policies and methodologies as
the Portfolio. The quoted performance of the Portfolio includes performance
of the Commingled accounts for periods dating back to 12/31/86, and prior to
the Portfolio's commencement of operations, as adjusted to reflect the
expenses associated with the Portfolio. The Commingled accounts were not
registered with the Securities and Exchange Commission and, therefore, were
not subject to the investment restrictions imposed by law on registered
mutual funds. If the Commingled accounts had been so registered, the
Commingled accounts' performance may have been adversely affected.
Total return figures include changes in share price, reinvestment of
dividends and capital gains distributions, if any. The service contractors
are currently waiving a portion of their fees; without such waivers the
30-day SEC yield would have been 5.29%. This voluntary waiver may be
terminated or modified at any time, which would reduce the Portfolio's
performance. Past performance is not a prediction of future results.
Investment return and principal value will fluctuate, so that an investor's
shares, when redeemed, may be worth more or less than their original cost.
11
<PAGE> 15
<TABLE>
<S> <C>
DONALD F. TURK, CFA
Portfolio Manager
Limited Duration
U.S. Government
[Turk Photo] Portfolio
</TABLE>
===============================================================
INVESTMENT GOAL
The Portfolio seeks to provide investors with high current income without
assuming undue risk. This Portfolio will invest primarily in a portfolio of
U.S. Government securities that, under normal market conditions, has a
duration that approximates that of the Merrill Lynch 1-5-Year Government Bond
Index.
- ---------------------------------------------------------------
Q. HOW DID THE PORTFOLIO PERFORM IN 1997?
A. We were satisfied with our performance for the year, which enabled us to
emphasize current income while providing a competitive total return. For the 12
months ended December 31, 1997, the Portfolio produced a total return of 6.18%
(at Net Asset Value).* In comparison, the Merrill Lynch 1-5-Year Government Bond
Index, an unmanaged benchmark, produced a total return of 7.11%. The index is a
broad performance measure of government bonds with maturities in the
one-to-five-year range. Total return equals yield, plus or minus the change in
the Portfolio's net asset value (NAV) during the period.
It is also important to recognize income yield to shareholders. As of December
31, 1997, the Portfolio's 30-day SEC yield was 5.46%** at NAV, compared to 5.30%
at the end of 1996. The yield percentage is annualized.
As of December 31, 1997, the Portfolio's average maturity was 4.64 years.
Q. WHAT FACTORS AFFECTED YOUR PERFORMANCE?
A. It was a good year for bond investors, who are mostly concerned with "real
return" (total return minus inflation). Inflation was exceptionally mild during
1997, with the consumer price index rising just 1.7%. So, our real return to
shareholders was 4.48%, which is very strong by historical standards for a
Portfolio with a relatively short average maturity.
At the same time, interest rates were very volatile during the year. The yield
on the five-year U.S. Treasury bond rose from 6.21% at the end of 1996 to a peak
of 6.86% in April 1997. From early spring to the end of 1997, however, the
general trend in interest rates was down, and for the full year, the five-year
bond's yield fell 6.33%, to settle at 5.77%. Because bond prices move inversely
to interest rates, this drop in rates added value to the bonds in our portfolio.
Q. WHAT STRATEGY DID YOU EMPLOY?
A. We consciously took steps to lengthen the Portfolio's average maturity, to
the point were it was markedly longer than the benchmark's. This helped our
relative performance when rates began to fall. We also focused on generating
higher income, because that's what our shareholders want. We bought a number of
agency securities--such as Freddie Macs (Federal Home Loan Mortgage Corporation
bonds) due in 2002 and Fannie Maes (Federal National Mortgage Association bonds)
due in 2007.*** These moves helped increase our yield to shareholders.
We stayed away from new purchases of Ginnie Maes (securities issued by the
Government National Mortgage Association). They're a mixed blessing. They
generally offer solid yields, which we like, but as interest rates have dropped,
homeowners have been refinancing their mortgages. When that happens, you lose
your extra income quickly, and you find yourself in the situation of having to
buy new securities with lower yields.
Q. WHAT IS YOUR OUTLOOK FOR 1998?
A. We believe the economy will slow rather significantly over the next year and
that interest rates could fall even further than they did at the end of 1997. If
so, demand for the Treasury bonds we hold could rise, which would provide higher
total return to our shareholders. Overall, the trend in interest rates is very
constructive, and we're approaching the new year with optimism.
- ---------------
* Including the 3.00% sales load, the Portfolio's return was 2.97% for the
period.
** During the period, certain expenses were voluntarily waived and/or
reimbursed. Had these waivers and/or reimbursements not been in effect, the
30-day SEC yield would have been lower.
*** The portfolio composition is subject to change.
12
<PAGE> 16
- --------------------------------------------------------------------------------
AMERISTAR TENNESSEE TAX EXEMPT BOND PORTFOLIO
PERFORMANCE (AS OF DECEMBER 31, 1997)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INVESTOR SHARES
Investor Lehman
Measurement Shares Brothers Investor
Period (without Municipal Shares
(Fiscal Year sales 10-Year (with sales
Covered) charge) Index charge)
<S> <C> <C> <C>
80 10000 10000 9696
81 9107 8893 8836
82 11954 12610 11595
83 12941 13580 12532
84 13841 14696 13418
85 15774 17779 15291
86 18224 21161 17671
87 18313 21831 17747
88 19227 23532 18633
89 20702 26045 20076
90 21893 27959 21215
91 23922 31344 23190
92 25240 34139 24456
93 27809 38496 26962
94 25436 36659 24651
95 28843 42950 27953
96 29243 44901 28341
97 31327 49047 30360
Past performance is no guarantee of future results.
</TABLE>
<TABLE>
<CAPTION>
AVERAGE ANNUAL
TOTAL RETURN
--------------------------
WITH SALES WITHOUT SALES
CHARGE* CHARGE
---------- -------------
<S> <C> <C>
INVESTOR SHARES
1-Year........................ 3.87% 7.13%
5-Year........................ 3.78% 4.42%
10-Year....................... 5.19% 5.52%
Since Inception (3/28/94)**... 6.75% 6.94%
*Reflects 3.00% sales charge.
</TABLE>
<TABLE>
<CAPTION>
TRUST SHARES***
Lehman
Measurement Brothers
Period Municipal
(Fiscal Year Trust 10-Year
Covered) Shares Index
<S> <C> <C>
80 10000 10000
81 9318 8893
82 11954 12610
83 12941 13580
84 13841 14969
85 15774 17779
86 18224 21161
87 18313 21831
88 19227 23532
89 20702 26045
90 21893 27959
91 23922 31344
92 25240 34139
93 27809 38496
94 25436 36659
95 28843 42950
96 29243 44901
97 31331 49047
Past performance is no guarantee of future results.
</TABLE>
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN
---------------------------
<S> <C>
TRUST SHARES***
1-Year.............. 7.14%
5-Year.............. 4.42%
10-Year............. 5.52%
Since Inception
(10/3/97)**....... 6.94%
</TABLE>
<TABLE>
SECTOR PROFILE
<S> <C>
Municipal Bonds 99.1%
Cash and Cash
Equivalents 0.9%
</TABLE>
The AmeriStar Tennessee Tax Exempt Bond Portfolio invests primarily in
investment-grade, Tennessee Municipal Obligations. The Portfolio is designed
to provide investors with current income exempt from federal and Tennessee
personal income taxes, without assuming undue risk.
<TABLE>
MATURITY PROFILE
<S> <C>
0-5 years 7.7%
6-10 years 59.4%
11-20 years 29.3%
over 20 years 3.6%
</TABLE>
By design, the Portfolio attempts to generate current income without undue
risk to principal. The chart shows that the Portfolio is focused on bonds
primarily with maturities of 10 to 15 years.
<TABLE>
QUALITY PROFILE
<S> <C>
A 4.8%
AA 35.9%
AAA 59.3%
</TABLE>
By focusing on more general obligations and school and "essential services"
bonds the Portfolio Manager and the research team provided an additional
measure of security to the Portfolio.
A hypothetical $10,000 investment made on December 31, 1980, would have been
worth on December 31, 1997, $31,327 without the sales charge and $30,360 after
taking the maximum 3% sales charge into account.
The AmeriStar Tennessee Tax Exempt Bond Portfolio is compared to the Lehman
Brothers Municipal 10-Year Index, an unmanaged index that includes municipal
bonds issued within the last five years by municipalities throughout the United
States, with maturities of at least one year, but no more than 12 years, and a
credit quality of at least Baa. In contrast, the Tennessee Tax Exempt Bond
Portfolio targets higher quality bonds with a minimum rating of A, and at least
65% of the Portfolio must be comprised of Tennessee issues. The Lehman Brothers
index does not reflect expenses associated with a mutual fund, such as sales
charges, expenses for fund operations, management fees, portfolio transaction
costs or the cash reserves required to provide daily liquidity. The Portfolio's
performance reflects the deduction of fees for these value-added services.
**The AmeriStar Tennessee Tax Exempt Bond Portfolio commenced operations on
3/28/94 through a transfer of assets from certain collective trust fund
("Commingled") accounts managed by First American National Bank, using
materially equivalent investment objectives, policies and methodologies as the
Portfolio. The quoted performance of the Portfolio includes performance of the
Commingled accounts for periods dating back to 12/31/80, and prior to the
Portfolio's commencement of operations, as adjusted to reflect the expenses
associated with the Portfolio. The Commingled accounts were not registered with
the Securities and Exchange Commission and, therefore, were not subject to the
investment restrictions imposed by law on registered mutual funds. If the
Commingled accounts had been so registered, the Commingled accounts' performance
may have been adversely affected.
Total return figures include changes in share price, reinvestment of dividends
and capital gains distributions, if any. The service contractors are currently
waiving a portion of their fees; without such waivers, the 30-day SEC yield
would have been 4.01%. This voluntary waiver may be terminated or modified at
any time, which would reduce the Portfolio's performance. Past performance is
not a prediction of future results. Investment return and principal value will
fluctuate, so that an investor's shares, when redeemed, may be worth more or
less than the original cost.
Some investors may be subject to the federal alternative minimum tax and to
certain state and local taxes.
***The Trust Share class reflects the historical performance of the Investor
(no-load) share class.
13
<PAGE> 17
<TABLE>
<S> <C>
SHARON BROWN
Portfolio Manager
Tennessee
Tax Exempt
[Brown Photo] Bond Portfolio
</TABLE>
===============================================================
INVESTMENT GOAL
The Portfolio seeks to provide investors with current income exempt from federal
and Tennessee state income taxes without assuming undue risk. The Portfolio
invests primarily in investment-grade Tennessee municipal obligations, and is
suitable for Tennessee residents seeking monthly income exempt from both federal
and Tennessee personal income taxes.(1) The Portfolio affords greater
diversification and liquidity than most investors would achieve by purchasing
municipal securities directly.
- ---------------------------------------------------------------
Q. HOW DID THE PORTFOLIO PERFORM DURING 1997?
A. For the 12 months ended December 31, 1997, the Portfolio produced a total
return of 7.13% (at Net Asset Value).* In comparison, the Portfolio's benchmark,
the Lehman Brothers Municipal 10-Year Index, produced a total return of 9.24%.
The index is a broad performance measure of municipal bonds with
intermediate-term maturities. Total return equals yield, plus or minus the
change in the Portfolio's net asset value (NAV) during the period.
It is also important to recognize income yield to shareholders. As of December
31, 1997, the Portfolio's 30-day SEC yield was 4.14% (at Net Asset Value).** For
investors in the 36% federal income tax bracket, that is equivalent to a taxable
yield of 6.46%.** The yield percentage is annualized.
We achieved our objectives while maintaining an average credit quality of Aa1
(as rated by Moody's) and AA+ (Standard & Poor's). As of December 31, 1997, the
average maturity of the Portfolio was 9.45 years.
Q. WHAT FACTORS AFFECTED YOUR PERFORMANCE?
A. The strong economy resulted in narrow yield spreads between highly rated and
lower rated bonds, which meant that there was little incentive to buy lower-tier
issues. In addition, the yield curve flattened as 1997 progressed, with the
municipal market offering very little additional yield for longer maturity
bonds. So, it did not make sense for us to go out much further than 12 years on
the yield curve. We would have liked to have our average maturity a little
longer than ten years. But with the market moving as quickly as it did during
the year and with most municipal bonds carrying call features that tend to
shorten duration as interest rates decline, we found it difficult to keep our
duration as long as we wanted it to be, especially during the third quarter. At
the same time, the decline in interest rates helped boost the Portfolio's total
return for the year.
Q. WHAT ARE A FEW OF YOUR FAVORITE BONDS IN THE PORTFOLIO?
A. We own noncallable Shelby County, TN 6.25% bonds maturing in 2007 (2.2% of
the Portfolio). They are providing good current income, with no risk of being
called. We already have a significant gain in this holding, but if interest
rates drop further, we should see continued good price appreciation. Another
issue we own is a Charleston (S.C.) 5% bond due in 2022 (2.2%). We bought it at
a discount to par, and it has provided a solid rate of return, with more upside
potential remaining. Moreover, while an out-of-state issue such as this one is
not exempt from Tennessee state income tax, its dividend is exempt from federal
taxes in most cases. (We are permitted to own out-of-state bonds comprising up
to 35% of the Portfolio. As of December 31, 1997, approximately 31.0% of the
Portfolio was invested in bonds issued outside Tennessee.)***
Q. WHAT IS YOUR OUTLOOK FOR THE TENNESSEE MUNI MARKET IN 1998?
A. A lot depends on the infrastructure needs within the state. We saw a
significant lack of supply in the Tennessee muni market in 1997, but there are
some indications that activity could pick up in the coming year. With interest
rates dropping, a number of government agencies will be interested in refunding
their debt at lower rates.
- ---------------
(1) The Portfolio's income may be subject to certain state and local taxes
and, depending on your tax status, the federal alternative minimum tax.
* Including the 3.00% sales load, the Portfolio's return was 3.87% for the
period.
** During the period, certain expenses were voluntarily waived and/or
reimbursed. Had these waivers and/or reimbursements not been in effect, the
30-day SEC yield would have been lower.
*** The portfolio composition is subject to change.
14
<PAGE> 18
- --------------------------------------------------------------------------------
AMERISTAR LIMITED DURATION TENNESSEE TAX FREE PORTFOLIO
PERFORMANCE (AS OF DECEMBER 31, 1997)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Investor Investor Lehman
Measurement Share Share Brothers
Period (without (with Municipal
(Fiscal Year sales sales 1-5 Year
Covered) charge) charge) Index
<S> <C> <C> <C>
86 10000 9694 10000
87 10070 9755 10310
88 10584 10260 10969
89 11351 10995 11964
90 12038 11669 12885
91 13024 12619 14355
92 13629 13201 15449
93 14500 14043 16798
94 14114 13675 16579
95 15301 14824 18519
96 15633 15145 19297
97 16480 15967 20532
</TABLE>
<TABLE>
<CAPTION>
AVERAGE ANNUAL
TOTAL RETURN
--------------------------
WITH SALES WITHOUT SALES
CHARGE* CHARGE
INVESTOR SHARES ---------- -------------
<S> <C> <C> <C>
1-Year...................... 2.22% 5.42%
5-Year...................... 3.24% 3.87%
10-Year..................... 4.73% 5.05%
Since Inception
(2/28/97)**............... 4.34% 4.64%
*Reflects 3.00% sales charge.
</TABLE>
<TABLE>
<CAPTION>
Sector Profile
<S> <C>
Cash and Cash Equivalents 8.3%
Muni Bonds 91.7%
</TABLE>
The AmeriStar Limited Duration Tennessee Tax Free Portfolio invests primarily
in a portfolio of investment-grade Tennessee Municipal Obligations that, under
normal market conditions, has a duration of under five years and an effective
average portfolio maturity ranging between 3 - 5 years. With an emphasis on
quality, the Portfolio seeks to generate current income that is exempt from
federal and Tennessee personal income taxes without undue risk to principal.
<TABLE>
<CAPTION>
Maturity Profile
<S> <C>
0-5 years 40.6%
6-10 years 49.7%
over 20 years 9.7%
</TABLE>
By design, the Portfolio focuses on achieving an average maturity of 3 to 5
years. By emphasizing overall average maturity, the Portfolio attempts to
provide a high current tax-free yield while controlling principal value.
<TABLE>
<CAPTION>
Quality Profile
<S> <C>
A 17.7%
AA 31.9%
AAA 50.4%
</TABLE>
By focusing on more general obligations and school and "essential service"
bonds, the Portfolio Manager and the research team provide an additional
measure of security to the Portfolio.
A hypothetical $10,000 investment made on December 31, 1986, would have been
worth on December 31, 1997, $16,480 without the sales charge and $15,967 after
taking the maximum 3% sales charge into account.
The AmeriStar Limited Duration Tennessee Tax Free Portfolio is compared to the
Lehman Brothers Municipal 1-5 Year Index, an unmanaged index that is generally
representative of municipal bonds with maturities between 1 and 5 years. The
index does not reflect the expenses associated with a mutual fund, such as sales
charges, expenses for fund operations, management fees, portfolio transaction
costs or the cash reserves required to provide daily liquidity. The Portfolios
performance reflects the deduction of fees for these value-added services.
**The AmeriStar Limited Duration Tennessee Tax Free Portfolio commenced
operations on 2/28/97 through a transfer of assets from certain collective trust
fund ("Commingled") accounts advised by First American National Bank, using
materially equivalent investment objectives, policies and methodologies as the
Portfolio. The quoted performance of the Portfolio includes performance of the
Commingled accounts for periods dating back to 12/31/86 and prior to the mutual
fund's commencement of operations, as adjusted to reflect the expenses
associated with the mutual funds. The Commingled accounts were not registered
with the Securities and Exchange Commission and, therefore, were not subject to
the investment restrictions imposed by law on registered mutual funds. If the
Commingled accounts had been so registered, the Commingled accounts' performance
may have been adversely affected. The performance shown reflects the deduction
of fees for value-added services associated with a mutual fund, such as
investment management and fund accounting fees. The performance also reflects
reinvestment of all dividends and capital gains distributions.
Total return figures include changes in share price, reinvestment of dividends
and capital gains distributions, if any. The service contractors are currently
waiving a portion of their fees; without such waivers, the 30-day SEC yield
would have been 3.67%. This voluntary waiver may be terminated or modified at
any time, which would reduce the Portfolio's performance. Past performance is
not a prediction of future results. Investment return and principal value will
fluctuate, so that an investor's shares, when redeemed, may be worth more or
less than the original cost.
Some investors may be subject to the federal alternative minimum tax and to
certain state and local taxes.
15
<PAGE> 19
<TABLE>
<S> <C>
SHARON BROWN
Portfolio Manager
Limited Duration
Tennessee Tax Free
[Brown Photo] Portfolio
</TABLE>
===============================================================
INVESTMENT GOAL
The Portfolio seeks to provide investors with current income exempt from
federal and Tennessee State income taxes without assuming undue risk.(1) The
Portfolio invests primarily in investment-grade Tennessee Municipal
Obligations that generally have a duration of under five years, producing an
effective average portfolio maturity ranging between three and five years.
- ---------------------------------------------------------------
Q. HOW DID THE PORTFOLIO PERFORM DURING 1997?
A. For the 12 months ended December 31, 1997, the Portfolio produced a total
return of 5.42% (at Net Asset Value).* In comparison, the Portfolio's unmanaged
benchmark, the Lehman Brothers Municipal 1-5 Year Index, produced a total return
of 6.38%. The index is a broad performance measure of municipal bonds with
short-term maturities. Total return equals yield, plus or minus the change in
the Portfolio's net asset value (NAV) during the period.
It is also important to recognize income yield to shareholders. As of December
31, 1997, the Portfolio's 30-day SEC yield was 3.78% (at Net Asset Value).** For
investors in the 36% federal income tax bracket, that is equivalent to a taxable
yield of 5.91%.** The yield percentage is annualized.
We achieved our objectives while maintaining an average credit quality of Aa2
(as rated by Moody's) and AA+ (Standard & Poor's). As of December 31, 1997, the
average maturity of the Portfolio was 4.6 years.
Q. WHAT FACTORS AFFECTED YOUR PERFORMANCE?
A. The strong economy resulted in narrow yield spreads between highly rated and
lower rated bonds, which meant that there was little incentive to buy lower tier
issues. In addition, the general decline in interest rates helped boost the
Portfolio's total return for the year (bond prices go up when interest rates
fall).
We saw perhaps a little more activity and stronger overall performance in this
Portfolio than in our longer term Tennessee Tax Exempt Bond Portfolio. Because
the yield curve flattened, and shorter maturities yielded nearly as much as
longer ones, many investors were content to buy into the short end of market.
Consequently, there was more demand for the type of securities we held, and the
value of those securities rose.
Q. WHAT ARE A FEW OF YOUR FAVORITE BONDS IN THE PORTFOLIO?
A. Last year, we followed a "barbell" approach: buying bonds that were both
longer and shorter than the Portfolio's average weighted maturity of 4.6 years.
We pursued short-term bonds with high coupons, to enhance the Portfolio's yield,
and sought capital appreciation through the purchase of longer term securities.
Among the attractive issues in our Portfolio are Tennessee state 6.50% bonds
maturing in 2003 (4.5% of the Portfolio), an issue that provides high current
yield, on the long end of the yield parameters for this Portfolio. As rates have
come down, this issue has appreciated in value.
Q. WHAT IS YOUR OUTLOOK FOR 1998?
A. We see two factors that could cause continued volatility in the muni bond
market. First, we've witnessed in recent months a great deal of trading from
"crossover" buyers, such as insurance companies and funds serving individual
investors in the highest tax brackets. With these parties moving back and forth
between the taxable and tax-free bond markets, a lot of volatility has ensued.
That activity could continue well into 1998. Also, there is the outgrowth that
comes when some of the money that might be earmarked for muni bonds instead
finds its way into the stock market. The driving force behind this shift is
current demographics: baby boomers investing in stocks to help fund their
retirement. Until equities prove that they really are overvalued, we think we
are going to see this type of investment climate prevail, and under these
circumstances, the muni market can become volatile.
With this in mind, we will take every possible measure to limit volatility as
much as possible and provide stability--along with tax-exempt, current income.
With a relatively short-term bond Portfolio such as ours, volatility is somewhat
dampened naturally.
- ---------------
(1) The Portfolio's income may be subject to certain state and local taxes
and, depending on your tax status, the federal alternative minimum tax.
* Including the 3.00% sales load, the Portfolio's return was 2.22% for the
period.
** During the period, certain expenses were voluntarily waived and/or
reimbursed. Had these waivers and/or reimbursements not been in effect, the
30-day SEC yield would have been lower.
*** The portfolio composition is subject to change.
16
<PAGE> 20
THE INFINITY MUTUAL FUNDS, INC.
AMERISTAR PRIME MONEY MARKET PORTFOLIO
- --------------------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS
DECEMBER 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
S&P/MOODY'S AMORTIZED
RATINGS MATURITY PRINCIPAL COST
(UNAUDITED) RATE DATE AMOUNT (NOTE 2)
----------- -------- -------- ------------- -----------
<S> <C> <C> <C> <C> <C>
BANK NOTES -- 10.9%
AMEX Centurian.................................. A1/P1 6.05%* 1/12/98 $ 3,000,000 $ 3,002,230
First USA Bank.................................. A1+/P1 6.01* 1/21/98 3,000,000 3,000,919
Northern Trust Bank............................. A1+/P1 5.75 3/4/98 3,000,000 2,999,511
-----------
Total Bank Notes (Cost $9,002,660)................ 9,002,660
-----------
CERTIFICATES OF DEPOSIT -- 14.5%
DOMESTIC -- 8.4%
CS First Boston................................. A1/P1 6.04* 1/6/98 4,000,000 4,000,000
Regions Bank.................................... A1+/P1 5.69 1/5/98 3,000,000 3,000,005
-----------
7,000,005
-----------
YANKEE -- 6.1%
Canadian Imperial Bank, New York Branch......... A1+/P1 5.84 2/27/98 3,000,000 3,001,083
Swiss Bank, New York Branch..................... A1+/P1 5.98 3/19/98 2,000,000 1,999,585
-----------
5,000,668
-----------
Total Certificates of Deposit (Cost
$12,000,673).................................... 12,000,673
-----------
COMMERCIAL PAPER -- 29.0%
DOMESTIC -- 25.4%
Ameritech Capital Corp.......................... A1+/P1 5.85 1/29/98 3,000,000 2,986,350
Block Finance................................... A1/P1 6.02 1/22/98 3,000,000 2,989,465
Chrysler Financial Corp......................... A1/P2 5.80 1/16/98 3,000,000 2,992,751
Compagnie Bancaire USA Finance.................. A1/P1 5.84 2/24/98 3,000,000 2,974,035
Lehman Brothers Holdings Corp................... A1/P2 5.98 1/21/98 3,000,000 2,990,033
Sanwa Business Credit........................... A2/P1 6.75 1/21/98 3,000,000 2,988,750
Toyota Motor Credit Corp........................ A1+/P1 5.77 2/18/98 3,000,000 2,976,920
-----------
20,898,304
-----------
PRIVATE PLACEMENT -- 3.6%
Barton Capital Corp. (b)........................ A1+/P1 5.91 1/27/98 3,000,000 2,987,195
-----------
Total Commercial Paper (Cost $23,885,499)......... 23,885,499
-----------
CORPORATE OBLIGATIONS -- 20.6%
CSFP Capital/Sparcs Trust, Series 97-A, (c)..... NR/P1 6.09 1/9/98 3,000,000 3,000,000
CTN Trust, Series 1, Medium Term Note (c)....... A1/P1 6.32* 1/2/98 4,000,000 4,009,286
Dean Witter, Medium Term Note................... A1/P1 6.04* 1/21/98 3,000,000 3,000,341
Merrill Lynch & Co, Medium Term Note............ A1+/P1 6.03* 1/6/98 4,000,000 4,000,000
U.S. Leasing Capital Corp., Medium Term Note.... A1/P1 5.86* 1/6/98 3,000,000 3,000,971
-----------
Total Corporate Obligations (Cost $17,010,598).... 17,010,598
-----------
</TABLE>
Continued
17
<PAGE> 21
<TABLE>
<CAPTION>
S&P/MOODY'S AMORTIZED
RATINGS MATURITY PRINCIPAL COST
(UNAUDITED) RATE DATE AMOUNT/SHARES (NOTE 2)
----------- -------- -------- ------------- -----------
<S> <C> <C> <C> <C> <C>
TIME DEPOSITS -- 3.6%
Banque Paribas TD -- Grand Cayman Branch (b).... A1/P1 5.63% 2/5/98 $ 3,000,000 $ 3,000,000
-----------
Total Time Deposits (Cost $3,000,000)............. 3,000,000
-----------
REGULATED INVESTMENT COMPANIES -- 0.0%
Dreyfus Cash Management Fund.................... 1 1
Provident National Fund......................... 1 1
-----------
Total Regulated Investment Companies (Cost $2).... 2
-----------
REPURCHASE AGREEMENTS -- 21.2%
Goldman Sachs, dated 1/2/98, with a maturity
value of $17,504,391, (Collateralized by
$18,500,00 Commercial Paper, 4/6/98, fair
value -- $18,137,255)........................ 6.65 1/2/98 17,497,926 17,497,926
-----------
Total Repurchase Agreements (Cost $17,497,926).... 17,497,926
-----------
TOTAL (AMORTIZED COST $82,397,358) (A) 99.8%...... $82,397,358
===========
</TABLE>
- ---------------
Percentages indicated are based on net assets of $82,550,347.
(a) Cost for federal income tax and financial reporting purposes are the same.
(b) Illiquid
(c) Represents a restricted security, purchased under Rule 144A, which is exempt
from registration under the Securities Act of 1933, as amended. These
securities have been deemed liquid under guidelines established by the Board
of Directors.
* Variable rate security. Rate represents rate in effect at December 31, 1997.
Maturity date reflects the next rate change date.
NR -- Not Rated
See Notes to Financial Statements.
18
<PAGE> 22
THE INFINITY MUTUAL FUNDS, INC.
AMERISTAR PRIME MONEY MARKET PORTFOLIO
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investments in securities, at amortized cost.............. $64,899,432
Repurchase agreements, at amortized cost.................. 17,497,926
Interest receivable....................................... 512,761
Receivable for capital shares issued...................... 8,590
Deferred organization costs............................... 16,788
Prepaid expenses and other assets......................... 7,299
-----------
Total assets................................................ 82,942,796
-----------
LIABILITIES
Distributions payable..................................... 333,009
Payable for capital shares redeemed....................... 629
Accrued expenses:
Advisory fees.......................................... 6,611
Sub-advisory fees...................................... 9,917
Administration fees.................................... 6,611
Shareholder service fees--Investor Shares.............. 10,053
Accounting fees........................................ 4,462
Custodian fees......................................... 6,132
Audit fees............................................. 7,286
Other.................................................. 7,739
-----------
Total liabilities........................................... 392,449
-----------
NET ASSETS
Investor Shares........................................ 56,161,196
Trust Shares........................................... 26,389,151
-----------
Total Net Assets............................................ $82,550,347
===========
Shares Outstanding ($0.001 par value, 1 billion shares
authorized)
Investor Shares........................................ 56,162,574
Trust Shares........................................... 26,389,571
-----------
82,552,145
===========
Net Asset Value, Offering Price and Redemption Price per
Share
Investor Shares........................................ $1.00
-----
Trust Shares........................................... $1.00
-----
COMPOSITION OF NET ASSETS:
Shares of beneficial interest, at par..................... $ 82,552
Additional paid-in capital................................ 82,466,030
Undistributed net investment income....................... 3,563
Accumulated net realized losses on investment
transactions........................................... (1,798)
-----------
Net Assets, December 31, 1997............................... $82,550,347
===========
</TABLE>
- ---------------
See Notes to Financial Statements.
19
<PAGE> 23
THE INFINITY MUTUAL FUNDS, INC.
AMERISTAR PRIME MONEY MARKET PORTFOLIO
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Interest.................................................... $4,549,373
Expenses
Advisory fees............................................. $ 80,064
Sub-advisory fees......................................... 120,097
Administration fees....................................... 80,064
Shareholder service fees--Investor Shares................. 93,044
Custodian fees............................................ 34,049
Accounting fees........................................... 60,127
Transfer agent fees and expenses.......................... 52,685
Legal fees................................................ 4,650
Audit fees................................................ 18,029
Reports to shareholders................................... 17,006
Amortization of organization expenses..................... 12,410
Directors' fees........................................... 7,642
Insurance expense......................................... 6,005
Registration fees......................................... 5,606
Other expenses............................................ 1,448
--------
Total expenses.............................................. 592,926
----------
Net Investment Income....................................... 3,956,447
----------
REALIZED GAINS (LOSSES) ON INVESTMENT TRANSACTIONS
Net realized gains (losses) on investment transactions.... (760)
----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........ $3,955,687
==========
</TABLE>
- ---------------
See Notes to Financial Statements.
20
<PAGE> 24
THE INFINITY MUTUAL FUNDS, INC.
AMERISTAR PRIME MONEY MARKET PORTFOLIO
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, 1997 DECEMBER 31, 1996
----------------- -----------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations
Net investment income..................................... $ 3,956,447 $ 3,612,781
Net realized gains (losses) on investment transactions.... (760) (149)
------------- -------------
Net increase in net assets resulting from operations...... 3,955,687 3,612,632
------------- -------------
Distributions to Investor Class:
From net investment income................................ (1,794,260) (2,446,618)
Distributions to Trust Class:
From net investment income................................ (2,162,187) (1,166,163)(a)
------------- -------------
Total distributions to shareholders......................... (3,956,447) (3,612,781)
------------- -------------
Capital Share Transactions (at $1.00 per share)
Proceeds from shares issued............................... 347,193,012 381,614,137
Dividends reinvested...................................... 357,817 26,543
Cost of shares redeemed................................... (335,936,165) (374,623,264)
------------- -------------
Net increase in net assets from capital share
transactions........................................... 11,614,664 7,017,416
------------- -------------
Total increase (decrease) in Net Assets..................... 11,613,904 7,017,267
NET ASSETS
Beginning of period....................................... 70,936,443 63,919,176
------------- -------------
End of period............................................. $ 82,550,347 $ 70,936,443
============= =============
SHARE TRANSACTIONS:
Issued.................................................... 347,193,012 381,614,137
Reinvested................................................ 357,817 26,543
Redeemed.................................................. (335,936,165) (374,623,264)
------------- -------------
Change in shares.......................................... 11,614,664 7,017,416
============= =============
</TABLE>
- ---------------
(a) For the period from July 1, 1996 (commencement of operations of Trust
Shares) through December 31, 1996.
See Notes to Financial Statements.
21
<PAGE> 25
THE INFINITY MUTUAL FUNDS, INC.
AMERISTAR U.S. TREASURY MONEY MARKET PORTFOLIO
- --------------------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS
DECEMBER 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AMORTIZED
MATURITY PRINCIPAL COST
RATE DATE AMOUNT (NOTE 2)
---- -------- ----------- ------------
<S> <C> <C> <C> <C>
U.S. TREASURY BILLS -- 5.2%
U.S. Treasury Bill..................................... 5.15%* 3/12/98 $10,000,000 $ 9,900,931
------------
Total U.S. Treasury Bills (Cost $9,900,931).............. 9,900,931
------------
U.S. TREASURY NOTES -- 23.6%
U.S. Treasury Note..................................... 5.63 1/31/98 10,000,000 10,000,649
U.S. Treasury Note..................................... 5.13 2/28/98 5,000,000 4,996,353
U.S. Treasury Note..................................... 5.88 4/30/98 5,000,000 5,006,368
U.S. Treasury Note..................................... 6.13 5/15/98 5,000,000 5,010,007
U.S. Treasury Note..................................... 6.00 5/31/98 5,000,000 5,010,678
U.S. Treasury Note..................................... 5.13 6/30/98 5,000,000 4,991,786
U.S. Treasury Note..................................... 6.25 7/31/98 5,000,000 5,019,521
U.S. Treasury Note..................................... 5.88 8/15/98 5,000,000 5,006,564
------------
Total U.S. Treasury Notes (Cost $45,041,926)............. 45,041,926
------------
U.S. TREASURY STRIPS -- 18.1%
U.S. Treasury Strip.................................... 5.67* 2/15/98 15,000,000 14,902,391
U.S. Treasury Strip.................................... 5.67* 2/15/98 10,000,000 9,934,010
U.S. Treasury Strip.................................... 5.48* 5/15/98 5,000,000 4,901,439
U.S. Treasury Strip.................................... 5.61* 8/15/98 5,000,000 4,828,468
------------
Total U.S. Treasury Strips (Cost $34,566,308)............ 34,566,308
------------
REPURCHASE AGREEMENTS -- 53.2%
Goldman Sachs, dated 1/2/98, with a maturity value of
$46,438,003, (Collateralized by $46,035,000 U.S.
Treasury Bonds, 6.13%, 11/15/27, fair
value -- $47,352,483)............................... 5.75 1/2/98 46,423,173 46,423,173
Merrill Lynch, dated 1/5/98, with a maturity value of
$9,007,375, (Collateralized by $8,945,000 U.S.
Treasury Notes, 5.88%, 1/31/99, fair
value -- $9,180,307)................................ 5.90 1/5/98 9,000,000 9,000,000
Prudential, dated 1/5/98, with a maturity value of
$46,461,859, (Collateralized by $58,538,263
Government National Mortgage Assoc., 7.00%-8.50%,
1/1/00-11/15/27, fair value -- $47,351,637)......... 6.00 1/5/98 46,423,172 46,423,172
------------
Total Repurchase Agreements (Cost $101,846,345).......... 101,846,345
------------
TOTAL (AMORTIZED COST $191,355,510) (A) -- 100.1%........ $191,355,510
============
</TABLE>
- ------------------
Percentages indicated are based on net assets of $191,239,762.
(a) Cost for federal income tax and financial reporting purposes are the same.
* Yield effective at issue.
See Notes to Financial Statements.
22
<PAGE> 26
THE INFINITY MUTUAL FUNDS, INC.
AMERISTAR U.S. TREASURY MONEY MARKET PORTFOLIO
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investments in securities, at amortized cost.............. $ 89,509,165
Repurchase agreements, at amortized cost.................. 101,846,345
Interest receivable....................................... 698,003
Receivable for capital shares issued...................... 3,478
Deferred organization costs............................... 17,904
Prepaid expenses and other assets......................... 53,710
------------
Total assets................................................ 192,128,605
------------
LIABILITIES
Distributions payable..................................... 769,813
Payable for capital shares redeemed....................... 169
Accrued expenses:
Advisory fees.......................................... 39,027
Administration fees.................................... 15,610
Shareholder service fees--Investor Shares.............. 16,369
Accounting fees........................................ 8,886
Custodian fees......................................... 10,502
Audit fees............................................. 9,635
Other.................................................. 18,832
------------
Total liabilities........................................... 888,843
------------
NET ASSETS
Investor Shares........................................... $ 77,065,086
Trust Shares.............................................. 114,174,676
------------
$191,239,762
============
Shares Outstanding ($0.001 par value, 1 billion shares
authorized)
Investor Shares........................................... 77,065,086
Trust Shares.............................................. 114,174,676
------------
191,239,762
------------
Net Asset Value, Offering Price and Redemption Price per
Share
Investor Shares........................................... $1.00
-----
Trust Shares.............................................. $1.00
-----
COMPOSITION OF NET ASSETS:
Shares of beneficial interest, at par..................... $ 191,240
Additional paid-in capital................................ 191,044,983
Undistributed net investment income....................... 3,539
------------
Net Assets, December 31, 1997............................... $191,239,762
============
</TABLE>
- ---------------
See Notes to Financial Statements.
23
<PAGE> 27
THE INFINITY MUTUAL FUNDS, INC.
AMERISTAR U.S. TREASURY MONEY MARKET PORTFOLIO
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Interest.................................................... $10,306,993
Expenses
Advisory fees............................................. $474,129
Administration fees....................................... 189,650
Shareholder service fees--Investor Shares................. 201,894
Custodian fees............................................ 44,524
Accounting fees........................................... 73,102
Transfer agent fees and expenses.......................... 44,043
Legal fees................................................ 16,272
Audit fees................................................ 20,066
Reports to shareholders................................... 44,472
Amortization of organization expenses..................... 12,410
Directors' fees........................................... 4,535
Insurance expense......................................... 5,583
Registration fees......................................... 18,608
--------
Total expenses......................................... 1,149,288
-----------
Net Investment Income....................................... 9,157,705
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........ $ 9,157,705
===========
</TABLE>
- ---------------
See Notes to Financial Statements.
24
<PAGE> 28
THE INFINITY MUTUAL FUNDS, INC.
AMERISTAR U.S. TREASURY MONEY MARKET PORTFOLIO
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, 1997 DECEMBER 31, 1996
------------------ ------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations
Net investment income..................................... $ 9,157,705 $ 8,714,947
------------- -------------
Distributions to Investor Class
From net investment income................................ (3,780,942) (5,988,175)
Distributions to Trust Class
From net investment income................................ (5,376,763) (2,726,772)(a)
------------- -------------
Total distributions to shareholders......................... (9,157,705) (8,714,947)
------------- -------------
Capital Share Transactions (at $1.00 per share)
Proceeds from shares issued............................... 469,670,555 460,104,988
Dividends reinvested...................................... 107,555 56,500
Cost of shares redeemed................................... (466,544,751) (440,585,214)
------------- -------------
Net increase (decrease) in net assets from capital share
transactions........................................... 3,233,359 19,576,274
------------- -------------
Total Increase (Decrease) in Net Assets..................... 3,233,359 19,576,274
NET ASSETS
Beginning of period....................................... 188,006,403 168,430,129
------------- -------------
End of period............................................. $ 191,239,762 $ 188,006,403
============= =============
SHARE TRANSACTIONS:
Issued.................................................... 469,670,545 460,104,988
Reinvested................................................ 107,555 56,500
Redeemed.................................................. (466,544,741) (440,585,214)
------------- -------------
Change in shares.......................................... 3,233,359 19,576,274
============= =============
</TABLE>
- ---------------
(a) For the period from July 1, 1996 (commencement of operations of Trust
Shares) through December 31, 1996.
See Notes to Financial Statements.
25
<PAGE> 29
THE INFINITY MUTUAL FUNDS, INC.
AMERISTAR CAPITAL GROWTH PORTFOLIO
- --------------------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS
DECEMBER 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 2)
------ --------
<S> <C> <C>
COMMON STOCKS -- 94.9%
AIR TRANSPORTATION -- 2.9%
Southwest Airlines Co..................................... 169,950 $ 4,185,019
------------
BANKING -- 10.1%
Banc One Corp............................................. 65,000 3,530,313
First Union Corp.......................................... 42,000 2,152,500
Norwest Corp.............................................. 117,080 4,522,214
Wachovia Corp............................................. 52,000 4,218,500
------------
14,423,527
------------
COMPUTER SOFTWARE -- 6.4%
Cisco Systems, Inc. (b)................................... 65,825 3,669,744
Computer Sciences Corp. (b)............................... 33,500 2,797,250
Microsoft Corp. (b)....................................... 21,000 2,714,250
------------
9,181,244
------------
CONSUMER -- MISCELLANEOUS SERVICES -- 5.9%
Cendant Corp.............................................. 102,500 3,523,438
Corrections Corp. of America (b).......................... 36,200 1,341,663
Service Corp. International............................... 95,500 3,527,530
------------
8,392,631
------------
COSMETICS & TOILETRIES -- 2.3%
Gillette Co............................................... 32,000 3,214,000
------------
DATA PROCESSING -- 2.7%
Automatic Data Processing, Inc............................ 63,500 3,897,313
------------
ELECTRICAL EQUIPMENT -- 3.2%
General Electric Co....................................... 62,500 4,585,938
------------
ELECTRONIC COMPONENTS -- 1.0%
Intel Corp................................................ 20,000 1,405,000
------------
ENTERTAINMENT -- 2.1%
Time Warner, Inc.......................................... 48,000 2,976,000
------------
FINANCIAL SERVICES -- 3.0%
Fannie Mae................................................ 75,500 4,308,219
------------
FOOD & RELATED -- 2.2%
Conagra, Inc.............................................. 97,400 3,195,938
------------
HEALTH CARE -- DRUGS -- 8.0%
Bristol Myers Squibb Co................................... 37,500 3,548,438
Eli Lilly & Co............................................ 54,600 3,801,525
Pfizer, Inc............................................... 54,400 4,056,199
------------
11,406,162
------------
HEALTH CARE -- REHABILITATIVE SERVICES -- 2.1%
HEALTHSOUTH Rehabilitation Corp. (b)...................... 105,500 2,927,625
------------
HOUSEHOLD -- GENERAL PRODUCTS -- 3.1%
Newell Co................................................. 102,500 4,356,250
------------
INSURANCE -- LIFE -- 1.7%
Hartford Life -- Class A.................................. 52,000 2,356,250
------------
</TABLE>
Continued
26
<PAGE> 30
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 2)
------ --------
<S> <C> <C>
COMMON STOCKS, CONTINUED:
INSURANCE -- PROPERTY & CASUALTY -- 2.6%
American International Group, Inc......................... 34,500 $ 3,751,875
------------
MACHINERY & EQUIPMENT -- 0.6%
Deere & Co................................................ 15,000 874,688
------------
MANUFACTURING -- 2.0%
Tyco International........................................ 64,510 2,906,982
------------
MEDICAL -- HOSPITAL MANAGEMENT SERVICES -- 3.5%
Health Care & Retirement Corp. (b)........................ 77,500 3,119,375
HealthCare Compare Corp. (b).............................. 37,250 1,904,406
------------
5,023,781
------------
MEDICAL EQUIPMENT & SUPPLIES -- 3.6%
Biomet, Inc............................................... 90,000 2,306,250
Sybron International Corp. -- Wisconsin (b)............... 60,780 2,852,861
------------
5,159,111
------------
OIL & GAS -- 0.9%
Mitchell Energy & Development, Class B.................... 43,300 1,261,113
------------
PETROLEUM -- SERVICES -- 4.3%
Halliburton Co............................................ 59,500 3,090,281
Schlumberger Ltd.......................................... 38,500 3,099,250
------------
6,189,531
------------
RETAIL -- 2.7%
Dayton Hudson Corp........................................ 56,000 3,780,000
------------
RETAIL-SPECIALTY STORES -- 14.4%
Arbor Drugs, Inc.......................................... 233,250 4,315,124
AutoZone, Inc. (b)........................................ 67,500 1,957,500
Barnes & Noble, Inc. (b).................................. 112,000 3,738,000
Home Depot, Inc........................................... 72,750 4,283,156
Office Depot, Inc. (b).................................... 92,000 2,202,250
Walgreen Co............................................... 124,400 3,903,050
------------
20,399,080
------------
TELECOMMUNICATIONS -- 2.5%
Ericsson (LM) Telephone................................... 39,300 1,466,381
Lucent Technologies Inc................................... 26,500 2,116,688
------------
3,583,069
------------
TOOLS -- 1.1%
Stanley Works............................................. 33,300 1,571,344
------------
Total Common Stocks (Cost $98,072,289)...................... 135,311,690
------------
REGULATED INVESTMENT COMPANIES -- 4.2%
AIM Liquid Assets Money Market Fund....................... 8,095 8,095
AIM Prime Money Market Fund............................... 2,543,846 2,543,846
Dreyfus Prime Money Market Fund........................... 1 1
S & P 500 Depository Receipt.............................. 35,000 3,392,813
------------
Total Regulated Investment Companies (Cost $5,982,821)...... 5,944,755
------------
</TABLE>
Continued
27
<PAGE> 31
<TABLE>
<CAPTION>
MATURITY PRINCIPAL VALUE
RATE DATE AMOUNT (NOTE 2)
-------- -------- ---------- ------------
<S> <C> <C> <C> <C> <C>
U.S. TREASURY BILLS -- 1.0%
U.S. Treasury Bill............................................. 5.12%* 2/5/98 $1,500,000 $ 1,492,555
------------
TOTAL U.S. TREASURY BILLS (COST $1,492,417)...................... 1,492,555
------------
TOTAL (COST $105,547,527)(A) -- 100.1%........................... $142,749,000
============
</TABLE>
- ---------------
Percentages indicated are based on net assets of $142,619,358.
(a) Represents cost for financial reporting purposes and differs from cost basis
from income tax purposes by the amount of losses recognized for financial
reporting in excess of federal income reporting of approximately $115,791.
Cost for federal income tax purposes differs from value by net unrealized
appreciation of securities as follows:
<TABLE>
<S> <C>
Unrealized appreciation..................................... $37,375,032
Unrealized depreciation..................................... $ (289,350)
-----------
Net unrealized appreciation................................. $37,085,682
===========
</TABLE>
(b) Non-income producing security
* Yield at issue
See Notes to Financial Statements.
28
<PAGE> 32
THE INFINITY MUTUAL FUNDS, INC.
AMERISTAR CAPITAL GROWTH PORTFOLIO
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investments in securities, at value (Cost $105,547,527)... $142,749,000
Interest and dividends receivable......................... 141,877
Receivable for capital shares sold........................ 15,000
Deferred organization costs............................... 7,413
Prepaid expenses and other assets......................... 19,481
------------
Total assets................................................ 142,932,771
------------
LIABILITIES
Distributions payable..................................... 268,135
Accrued expenses:
Administration fees.................................... 18,083
Distribution fees -- Investor Shares................... 76
Accounting fees........................................ 3,509
Custodian fees......................................... 2,531
Audit fees............................................. 6,824
Other.................................................. 14,255
------------
Total liabilities........................................... 313,413
------------
NET ASSETS
Investor Shares........................................ 858,264
Trust Shares........................................... 141,761,094
------------
$142,619,358
------------
Shares Outstanding ($0.001 par value, 500 million shares
authorized)
Investor Shares........................................ 67,077
Trust Shares........................................... 11,172,613
------------
11,239,690
============
NET ASSET VALUE
Investor Shares -- redemption price per share............. $12.80
------
Investor Shares -- maximum sales charge................... 4.75%
------
Investor Shares -- maximum sales charge per share
(100%/(100% -- maximum sales charge)
of net asset adjusted to nearest cent)................. $13.44
======
Trust Shares -- offering and redemption price per share..... $12.69
======
COMPOSITION OF NET ASSETS:
Shares of common stock, at par............................ $ 11,240
Additional paid-in capital................................ 105,273,051
Undistributed (distributions in excess of) net investment
income................................................. (2,107)
Net unrealized appreciation from investments.............. 37,201,473*
Accumulated net realized gains on investment
transactions........................................... 135,701
------------
Net Assets, December 31, 1997............................... $142,619,358
============
</TABLE>
- ---------------
* Represents sum of current periods unrealized appreciation plus common trust
fund appreciation. See Note 7.
See Notes to Financial Statements.
29
<PAGE> 33
THE INFINITY MUTUAL FUNDS, INC.
AMERISTAR CAPITAL GROWTH PORTFOLIO
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Interest.................................................... $ 114,616
Dividends................................................... 1,527,699
-----------
Total Investment Income..................................... 1,642,315
Expenses
Advisory fees............................................. $ 783,646
Administration fees....................................... 180,842
Distribution fees -- Investor Shares...................... 214,963
Custodian fees............................................ 19,058
Accounting fees........................................... 57,524
Transfer agent fees and expenses.......................... 19,567
Legal fees................................................ 10,550
Audit fees................................................ 19,734
Reports to shareholders................................... 34,253
Amortization of organization expenses..................... 3,039
Directors' fees........................................... 6,555
Insurance expense......................................... 4,527
Registration fees......................................... 1,869
Other expenses............................................ 665
----------
Total expenses before fee waivers...................... 1,356,792
Less: Fee waivers...................................... (356,352)
----------
Total expenses......................................... 1,000,440
-----------
Net Investment Income....................................... 641,875
-----------
REALIZED AND UNREALIZED GAINS (LOSSES) FROM INVESTMENTS
Net realized gains (losses) on investment transactions.... 19,491,761
Net change in unrealized appreciation (depreciation) on
investments............................................ 11,188,742
-----------
Net Realized and Unrealized Gains (Losses) from
Investments............................................... 30,680,503
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........ $31,322,378
===========
</TABLE>
- ---------------
See Notes to Financial Statements.
30
<PAGE> 34
THE INFINITY MUTUAL FUNDS, INC.
AMERISTAR CAPITAL GROWTH PORTFOLIO
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED PERIOD ENDED
DECEMBER 31, 1997 DECEMBER 31, 1996 (A)
----------------- ---------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations
Net investment income..................................... $ 641,875 $ (5,801)
Net realized gains (losses) on investment transactions.... 19,491,761 (182,054)
Net change in unrealized appreciation (depreciation) on
investments............................................ 11,188,742 5,843,782
------------ -----------
Net increase in net assets resulting from operations...... 31,322,378 5,655,927
------------ -----------
Distributions to Investor Class
From net investment income................................ (374,481) --
From net realized gains................................... (121,087) --
Distributions to Trust Class (b)
From net investment income................................ (266,590) --
From net realized gains................................... (19,052,919) --
------------ -----------
Total distributions to shareholders......................... (19,815,077) --
------------ -----------
Capital Share Transactions
Proceeds from shares issued............................... 248,661,873 47,441,776
Dividends reinvested...................................... 19,301,059 --
Cost of shares redeemed................................... (185,858,842) (4,089,736)
------------ -----------
Net increase in net assets from capital share
transactions........................................... 82,104,090 43,352,040
------------ -----------
Total increase (decrease) in Net Assets..................... 93,611,391 49,007,967
NET ASSETS
Beginning of period....................................... 49,007,967 --
------------ -----------
End of period............................................. $142,619,358 $49,007,967
============ ===========
SHARE TRANSACTIONS
Issued.................................................... 17,028,511 4,712,999
Reinvested................................................ 1,524,272 --
Redeemed.................................................. (11,641,375) (384,717)
------------ -----------
Change in shares.......................................... 6,911,408 4,328,282
============ ===========
</TABLE>
- ---------------
(a) For the period from April 1, 1996 (commencement of operations) through
December 31, 1996.
(b) For the period from October 3, 1997 (commencement of operations of Trust
Shares) through December 31, 1997.
See Notes to Financial Statements.
31
<PAGE> 35
THE INFINITY MUTUAL FUNDS, INC.
AMERISTAR DIVIDEND GROWTH PORTFOLIO
- --------------------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS
DECEMBER 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 2)
------ --------
<S> <C> <C>
COMMON STOCKS -- 93.0%
BANKING -- 9.4%
Crestar Financial Corp.................................... 12,000 $ 684,000
First Tennessee National Corp............................. 13,000 867,750
Mellon Bank Corp.......................................... 31,000 1,879,374
NationsBank Corp.......................................... 21,000 1,277,063
Wells Fargo & Co.......................................... 5,000 1,697,187
------------
6,405,374
------------
BEVERAGES -- 2.7%
PepsiCo,Inc............................................... 50,000 1,821,875
------------
BUSINESS EQUIPMENT & SERVICES -- 2.6%
Xerox Corp................................................ 24,000 1,771,500
------------
CHEMICALS-SPECIALTY -- 1.1%
Witco Corp................................................ 19,000 775,438
------------
COSMETICS & TOILETRIES -- 1.1%
Colgate Palmolive Co...................................... 10,000 735,000
------------
DATA PROCESSING -- 4.2%
Automatic Data Processing, Inc............................ 31,400 1,927,175
First Data Corp........................................... 32,176 941,148
------------
2,868,323
------------
ELECTRICAL EQUIPMENT -- 3.8%
Emerson Electric.......................................... 46,000 2,596,125
------------
FINANCIAL SERVICES -- 4.3%
American Express Co....................................... 13,000 1,160,250
Fannie Mae................................................ 31,000 1,768,938
------------
2,929,188
------------
FOOD & RELATED -- 3.5%
Conagra, Inc.............................................. 29,000 951,563
H.J. Heinz Co............................................. 28,000 1,422,750
------------
2,374,313
------------
HEALTH CARE -- DRUGS -- 8.7%
Abbott Labs............................................... 28,000 1,835,750
Bristol Myers Squibb Co................................... 24,000 2,270,999
Glaxo Wellcome PLC--ADR................................... 38,000 1,819,250
------------
5,925,999
------------
HOUSEHOLD -- GENERAL PRODUCTS -- 2.5%
Newell Co................................................. 41,000 1,742,500
------------
INSURANCE -- 2.1%
Allstate Corp............................................. 16,000 1,454,000
------------
INSURANCE -- LIFE -- 1.1%
Jefferson Pilot Corp...................................... 10,000 778,750
------------
</TABLE>
Continued
32
<PAGE> 36
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 2)
------ --------
<S> <C> <C>
COMMON STOCKS, CONTINUED:
MANUFACTURING -- 5.4%
Fortune Brands Inc........................................ 48,000 $ 1,779,000
Johnson Controls, Inc..................................... 40,000 1,910,000
------------
3,689,000
------------
MEDICAL EQUIPMENT & SUPPLIES -- 1.3%
Baxter International, Inc................................. 17,000 857,438
------------
OIL & GAS -- 4.3%
Exxon Corp................................................ 10,000 611,875
Mobil Corp................................................ 8,000 577,500
Royal Dutch Petroleum..................................... 13,000 704,438
Texaco, Inc............................................... 19,000 1,033,125
------------
2,926,938
------------
PETROLEUM -- SERVICES -- 2.2%
Dresser Industries, Inc................................... 36,000 1,509,750
------------
PUBLISHING -- 2.7%
Gannett Co., Inc.......................................... 18,000 1,112,625
McGraw Hill, Inc.......................................... 10,000 740,000
------------
1,852,625
------------
REAL ESTATE INVESTMENT TRUST -- 5.8%
Crescent Real Estate...................................... 28,000 1,102,499
Equity Office Properties.................................. 20,500 647,031
Equity Residential Property............................... 25,000 1,264,062
Hospitality Properties Trust.............................. 29,500 969,813
------------
3,983,405
------------
RETAIL -- 3.2%
J.C. Penney, Inc.......................................... 18,000 1,085,625
Wal Mart Stores, Inc...................................... 28,000 1,104,250
------------
2,189,875
------------
TOBACCO -- 1.5%
Philip Morris Cos., Inc................................... 23,000 1,042,188
------------
UTILITIES -- 4.3%
DPL, Inc.................................................. 48,000 1,380,000
Scana Corp................................................ 27,200 814,300
Teco Energy, Inc.......................................... 25,600 720,000
------------
2,914,300
------------
UTILITIES-ELECTRIC -- 5.4%
Carolina Power & Light Co................................. 10,000 424,375
Duke Energy Corp.......................................... 42,000 2,325,750
NIPSCO Industries, Inc.................................... 18,400 909,650
------------
3,659,775
------------
UTILITIES-GAS & PIPELINE -- 2.9%
Consolidated Natural Gas Co............................... 33,000 1,996,500
------------
UTILITIES-TELEPHONE -- 3.4%
Bellsouth Corp............................................ 12,000 675,750
GTE Corp.................................................. 23,000 1,201,750
SBC Communications, Inc................................... 6,000 439,500
------------
2,317,000
------------
</TABLE>
Continued
33
<PAGE> 37
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 2)
------ --------
<S> <C> <C>
COMMON STOCKS, CONTINUED:
WHOLESALE -- 3.5%
Sysco Corp................................................ 53,000 $ 2,414,813
------------
Total Common Stocks (Cost $51,154,621)...................... 63,531,992
------------
PREFERRED STOCKS -- 1.3%
COMPUTER SOFTWARE -- 1.3%
Microsoft Corp., Series A................................. 10,000 898,750
------------
Total Preferred Stocks (Cost $820,260)...................... 898,750
------------
REGULATED INVESTMENT COMPANIES -- 4.7%
AIM Liquid Assets Money Market Fund....................... 266,191 266,191
AIM Prime Money Market Fund............................... 1,602,060 1,602,060
S & P 500 Depository Receipt.............................. 14,000 1,357,125
------------
Total Regulated Investment Companies (Cost $3,246,787)...... 3,225,376
------------
</TABLE>
<TABLE>
<CAPTION>
MATURITY PRINCIPAL
RATE DATE AMOUNT
-------- -------- ----------
<S> <C> <C> <C> <C> <C>
U.S. TREASURY BILLS -- 3.2%
U.S. Treasury Bill.............................................. 5.20%* 5/28/98 $ 750,000 $ 734,055
U.S. Treasury Bill.............................................. 5.26* 7/23/98 1,000,000 970,590
U.S. Treasury Bill.............................................. 5.28* 8/20/98 500,000 483,260
-----------
TOTAL U.S. TREASURY BILLS (COST $2,187,712)....................... 2,187,905
-----------
TOTAL (Cost $57,409,380) (a) 102.2%............................... $69,844,023
===========
</TABLE>
- ---------------
Percentages indicated are based on net assets of $68,337,680.
(a) Represents cost for financial reporting purposes and differs from cost basis
from income tax purposes by the amount of losses recognized for financial
reporting in excess of federal income reporting of approximately $4,137.
Cost for federal income tax purposes differs from value by net unrealized
appreciation of securities as follows:
<TABLE>
<S> <C>
Unrealized appreciation............................. $12,979,014
Unrealized depreciation............................. $ (548,508)
-----------
Net unrealized appreciation................................. $12,430,506
===========
</TABLE>
* Yield at issue
PLC = Public Limited Company
ADR = American Depository Receipt
See Notes to Financial Statements.
34
<PAGE> 38
THE INFINITY MUTUAL FUNDS, INC.
AMERISTAR DIVIDEND GROWTH PORTFOLIO
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investments in securities, at value (cost $57,409,380).... $69,844,023
Interest receivable....................................... 144,817
Receivable for investment securities sold................. 312,927
Deferred organization costs............................... 4,384
Prepaid expenses and other assets......................... 8,932
-----------
Total assets................................................ 70,315,083
-----------
LIABILITIES
Distributions payable..................................... 134,352
Payable for investment securities purchased............... 1,805,186
Accrued expenses:
Administration fees.................................... 8,499
Accounting fees........................................ 2,353
Custodian fees......................................... 5,234
Legal fees............................................. 2,859
Audit fees............................................. 9,064
Other.................................................. 9,856
-----------
Total liabilities........................................... 1,977,403
-----------
NET ASSETS
Investor Shares........................................ 388,420
Trust Shares........................................... 67,949,260
-----------
$68,337,680
===========
Shares Outstanding ($0.001 par value, 500 million shares
authorized)
Investor Shares........................................ 37,473
Trust Shares........................................... 6,554,392
-----------
6,591,865
===========
NET ASSET VALUE
Investor Shares -- redemption price per share............. $10.37
------
Investor Shares -- maximum sales charge................... 4.75%
------
Investor Shares -- maximum sales charge per share
(100%/(100% -- maximum sales charge)
of net asset adjusted to nearest cent)................. $10.89
======
Trust Shares -- offering and redemption price per share... $10.37
======
COMPOSITION OF NET ASSETS:
Shares of common stock, at par............................ $ 6,592
Additional paid-in capital................................ 53,498,948
Undistributed (distributions in excess of) net investment
income................................................. (2,069)
Net unrealized appreciation from investments.............. 12,434,643*
Accumulated net realized gains on investment
transactions........................................... 2,399,566
-----------
Net Assets, December 31, 1997............................... $68,337,680
===========
</TABLE>
- ---------------
* Represents sum of current periods unrealized appreciation plus common trust
fund appreciation. See Note 7.
See Notes to Financial Statements.
35
<PAGE> 39
THE INFINITY MUTUAL FUNDS, INC.
AMERISTAR DIVIDEND GROWTH PORTFOLIO
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
FOR THE PERIOD ENDED DECEMBER 31, 1997 (a)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Interest.................................................... $ 177,991
Dividends................................................... 1,384,374
-----------
Total Investment Income..................................... 1,562,365
Expenses
Advisory fees............................................. $ 332,185
Administration fees....................................... 76,658
Distribution fees -- Investor Shares...................... 88,282
Custodian fees............................................ 20,549
Accounting fees........................................... 42,513
Transfer agent fees and expenses.......................... 19,243
Legal fees................................................ 14,631
Audit fees................................................ 15,523
Reports to shareholders................................... 13,494
Amortization of organization expenses..................... 3,648
Directors' fees........................................... 2,128
Insurance expense......................................... 1,800
Registration fees......................................... 4,022
Other expenses............................................ 11
---------
Total expenses before fee waivers...................... 634,687
Less: Fee waivers...................................... (153,843)
---------
Total expenses............................................ 480,844
-----------
Net Investment Income....................................... 1,081,521
-----------
REALIZED AND UNREALIZED GAINS (LOSSES) FROM INVESTMENTS
Net realized gains (losses) on investment transactions.... 12,492,214
Net change in unrealized appreciation (depreciation) on
investments............................................ 132,903
-----------
Net Realized and Unrealized Gains (Losses) from
Investments............................................... 12,625,117
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........ $13,706,638
===========
</TABLE>
- ---------------
(a) For the period from February 28, 1997 (commencement of operations) to
December 31, 1997.
See Notes to Financial Statements.
36
<PAGE> 40
THE INFINITY MUTUAL FUNDS, INC.
AMERISTAR DIVIDEND GROWTH PORTFOLIO
- --------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERIOD ENDED
DECEMBER 31, 1997 (a)
---------------------
<S> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations
Net investment income..................................... $ 1,081,521
Net realized gains (losses) on investment transactions.... 12,492,214
Net change in unrealized appreciation (depreciation) on
investments............................................ 132,903
------------
Net increase in net assets resulting from operations...... 13,706,638
------------
Distributions to Investor Class
From net investment income................................ (723,804)
From net realized gains................................... (45,604)
Distributions to Trust Class (b)
From net investment income................................ (361,492)
From net realized gains................................... (10,045,338)
------------
Total distributions to shareholders......................... (11,176,238)
------------
Capital Share Transactions
Proceeds from shares issued............................... 137,340,554
Dividends reinvested...................................... 10,088,221
Cost of shares redeemed................................... (81,621,495)
------------
Net increase in net assets from capital share
transactions........................................... 65,807,280
------------
Total increase (decrease) in Net Assets..................... 68,337,680
NET ASSETS
Beginning of period....................................... --
------------
End of period............................................. $ 68,337,680
============
SHARE TRANSACTIONS
Issued.................................................... 11,546,178
Reinvested................................................ 988,858
Redeemed.................................................. (5,943,171)
------------
Change in shares.......................................... 6,591,865
============
</TABLE>
- ---------------
(a) For the period from February 28, 1997 (commencement of operations) through
December 31, 1997.
(b) For the period from October 3, 1997 (commencement of operations of Trust
Shares) through December 31, 1997.
See Notes to Financial Statements.
37
<PAGE> 41
THE INFINITY MUTUAL FUNDS, INC.
AMERISTAR CORE INCOME PORTFOLIO
- --------------------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS
DECEMBER 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
S&P/MOODY'S
RATINGS MATURITY PRINCIPAL VALUE
(UNAUDITED) RATE DATE AMOUNT (NOTE 2)
----------- -------- -------- ------------- -----------
<S> <C> <C> <C> <C> <C>
CORPORATE BONDS -- 73.5%
BANKING -- 11.9%
ABN AMRO Bank.................................... A/Aa3 6.63% 10/31/01 $ 1,550,000 $ 1,567,438
First Union Corp., Putable on 2/15/06 @ 100...... A/A1 6.18 2/15/36 1,500,000 1,488,750
NationsBank Corp................................. A/A1 7.75 8/15/15 925,000 1,018,656
SunTrust Banks................................... A/A2 7.38 7/1/06 2,200,000 2,332,000
Wachovia Corp.................................... AA-/A1 6.61 10/1/25 2,100,000 2,160,375
-----------
8,567,219
-----------
FINANCIAL SERVICES -- 10.0%
Associates Corp. N.A............................. AA-/Aa3 7.30 3/15/98 1,000,000 1,003,060
Associates Corp. N.A............................. AA-/Aa3 7.32 1/13/03 800,000 841,000
Ford Motor Credit Corp........................... A/A1 6.38 10/6/00 500,000 503,750
General Electric Capital Corp.................... AAA/Aaa 7.50 8/21/35 1,500,000 1,680,000
General Motors Acceptance Corp................... A-/A3 7.25 5/5/99 1,925,000 1,953,875
USLIFE Corp...................................... AA-/A2 6.38 6/15/00 1,250,000 1,246,875
-----------
7,228,560
-----------
INDUSTRIAL GOODS & SERVICES -- 21.2%
Air Products & Chemicals......................... A/A2 7.80 6/15/26 1,750,000 1,949,063
Anheuser-Busch Cos., Callable 7/1/07 @ 103.03.... A+/A1 7.13 7/1/17 1,500,000 1,560,000
Harris Corp., Callable 12/1/98 @ 105.14.......... A-/A3 10.38 12/1/18 1,050,000 1,139,250
IBM Corp......................................... A/A1 7.00 10/30/25 2,000,000 2,070,000
Lockheed Martin Corp............................. BBB+/A3 6.55 5/15/99 2,400,000 2,414,999
Motorola, Inc.................................... AA/Aa3 6.50 3/1/08 2,150,000 2,195,688
Reliance Electric Co............................. AA-/A2 6.80 4/15/03 1,500,000 1,545,000
Weyerhaeuser Paper Products Co................... A/A2 7.13 7/15/23 2,250,000 2,334,374
-----------
15,208,374
-----------
INSURANCE-PROPERTY & CASUALTY -- 2.6%
Travelers/Aetna Property & Casualty.............. A+/A1 6.75 4/15/01 1,850,000 1,882,375
-----------
RETAIL-STORES -- 5.6%
Dayton Hudson Co................................. BBB+/Baa1 6.80 10/1/01 1,500,000 1,524,375
J C Penney & Co.................................. A/A2 7.25 4/1/02 1,000,000 1,036,250
J C Penney & Co.................................. A/A2 6.50 6/15/02 1,500,000 1,511,250
-----------
4,071,875
-----------
TELECOMMUNICATIONS -- 5.7%
Ameritech Cap. Funding........................... AA+/Aa3 6.88 10/15/27 2,000,000 2,060,000
BellSouth Corp................................... AAA/Aaa 8.25 7/1/32 450,000 504,000
GTE Corp., Callable 2/1/07 @ 103.95.............. A/Baa1 7.90 2/1/27 1,450,000 1,524,313
-----------
4,088,313
-----------
</TABLE>
Continued
38
<PAGE> 42
<TABLE>
<CAPTION>
S&P/MOODY'S
RATINGS MATURITY PRINCIPAL VALUE
(UNAUDITED) RATE DATE AMOUNT (NOTE 2)
----------- -------- -------- ------------- -----------
<S> <C> <C> <C> <C> <C>
CORPORATE BONDS, CONTINUED:
UTILITIES-ELECTRIC--13.4%
Florida Power Corp............................... A+/A1 6.54% 7/1/02 $ 1,500,000 $ 1,520,625
Houston Light & Power Corp....................... A-/A3 6.10 3/1/00 1,725,000 1,725,000
National Rural Utilities Corp.................... AA-/A1 6.49* 7/10/02 1,600,000 1,618,000
Public Service Electric & Gas.................... A-/A3 6.50 6/1/00 1,500,000 1,516,875
Puget Sound Power & Light........................ A-/Baa1 6.61 2/9/00 1,500,000 1,513,125
Virginia Electric & Power........................ A/A2 6.63 4/1/03 1,750,000 1,785,000
-----------
9,678,625
-----------
UTILITIES-GAS--3.1%
Smith Enron...................................... NR/NR 5.97 12/15/06 2,229,000 2,206,710
-----------
Total Corporate Bonds (Cost $51,612,007)........... 52,932,051
-----------
MUNICIPAL BONDS -- 1.1%
GEORGIA -- 1.1%
Atlanta Downtown Development Lease Revenue Bond,
Callable 2/1/10 @ 100......................... AAA/NR 6.88 2/1/21 750,000 794,063
-----------
Total Municipal Bonds (Cost $708,275).............. 794,063
-----------
U.S. GOVERNMENT AGENCIES -- 11.1%
FEDERAL HOME LOAN MORTGAGE CORP. -- 2.7%
Federal Home Loan Mortgage Corp.................. 6.44 10/24/07 1,900,000 1,953,998
-----------
FEDERAL NATIONAL MORTGAGE ASSOC. -- 2.8%
Federal National Mortgage Assoc., Callable
11/23/99 @ 100................................ 6.35 11/23/01 2,000,000 2,006,620
-----------
GOVERNMENT NATIONAL MORTGAGE ASSOC. -- 5.6%
Government National Mortgage Assoc.,
Pool # 407413................................. 8.00 5/15/10 644,027 669,987
Government National Mortgage Assoc.,
Pool # 780479................................. 6.50 8/15/11 990,816 997,623
Government National Mortgage Assoc.,
Pool # 423914................................. 7.50 8/15/11 918,199 946,314
Government National Mortgage Assoc.,
Pool # 423923................................. 7.00 9/15/11 1,421,262 1,448,792
-----------
4,062,716
-----------
Total U.S. Government Agencies (Cost $8,103,076)... 8,023,334
-----------
U.S. TREASURY NOTES -- 5.2%
U.S. Treasury Note............................... 7.50 5/15/02 1,000,000 1,067,450
U.S. Treasury Note............................... 6.88 5/15/06 1,500,000 1,605,570
U.S. Treasury Note............................... 7.00 7/15/06 1,000,000 1,079,850
-----------
Total U.S. Treasury Notes (Cost $3,629,861)........ 3,752,870
-----------
</TABLE>
Continued
39
<PAGE> 43
<TABLE>
<CAPTION>
S&P/MOODY'S
RATINGS MATURITY PRINCIPAL VALUE
(UNAUDITED) RATE DATE AMOUNT/SHARES (NOTE 2)
----------- -------- -------- ------------- -----------
<S> <C> <C> <C> <C> <C>
U.S. TREASURY BOND--5.7%
U.S. Treasury Bond............................... 8.13% 8/15/21 $ 900,000 $ 1,135,710
U.S. Treasury Bond............................... 6.75 8/15/26 2,700,000 2,975,049
-----------
Total U.S. Treasury Bond (Cost $3,846,524)......... 4,110,759
-----------
REGULATED INVESTMENT COMPANIES -- 2.4%
AIM Liquid Assets Money Market Fund................................................... 12,669 $ 12,669
AIM Prime Money Market Fund........................................................... 1,724,372 1,724,372
-----------
Total Regulated Investment Companies (Cost $1,737,041)............................................... 1,737,041
-----------
TOTAL (COST $69,636,785) (a) -- 99.0%................................................................ $71,350,118
===========
</TABLE>
- ---------------
Percentages indicated are based on net assets of $72,085,674.
(a) Represents cost for federal income tax purposes and differs from value by
net unrealized depreciation of securities as follows:
<TABLE>
<S> <C>
Unrealized appreciation............................. $1,913,840
Unrealized depreciation............................. (200,507)
----------
Net unrealized depreciation......................... $1,713,333
==========
</TABLE>
* Floating rate certificates are securities with interest rates that change
whenever a specific interest rate changes. The interest rate is based on an
index of market rates or other index. The rate reflected is the rate in
effect on December 31, 1997.
See Notes to Financial Statements.
40
<PAGE> 44
THE INFINITY MUTUAL FUNDS, INC.
AMERISTAR CORE INCOME PORTFOLIO
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investments in securities, at value (cost $69,636,785).... $71,350,118
Interest receivable....................................... 1,204,976
Receivable for capital shares sold........................ 14
Prepaid expenses and other assets......................... 7,213
-----------
Total assets................................................ 72,562,321
-----------
LIABILITIES
Distributions payable....................................... 442,725
Accrued expenses:
Administration fees.................................... 9,279
Accounting fees........................................ 2,595
Custodian fees......................................... 3,691
Legal fees............................................. 2,258
Audit fees............................................. 7,969
Other.................................................. 8,130
-----------
Total liabilities........................................... 476,647
-----------
NET ASSETS
Investor Shares........................................ 94,671
Trust Shares........................................... 71,991,003
-----------
$72,085,674
===========
Shares Outstanding ($0.001 par value, 500 million shares
authorized)
Investor Shares........................................ 9,233
Trust Shares........................................... 7,026,230
-----------
7,035,463
===========
Net Asset Value
Investor Shares -- redemption price per share............. $10.25
------
Investor Shares -- maximum sales charge................... 3.00%
------
Investor Shares -- maximum sales charge per share
(100%/(100% -- maximum sales charge)
of net asset adjusted to nearest cent)................. $10.57
======
Trust Shares -- offering and redemption price per share... $10.25
======
COMPOSITION OF NET ASSETS:
Shares of common stock, at par............................ $ 7,035
Additional paid-in capital................................ 70,436,270
Undistributed (distributions in excess of) net investment
income................................................. (32,876)
Net unrealized appreciation from investments.............. 1,713,333*
Accumulated net realized losses on investment
transactions........................................... (38,088)
-----------
Net Assets, December 31, 1997............................... $72,085,674
===========
</TABLE>
- ---------------
* Represents sum of current periods unrealized appreciation plus common trust
fund appreciation. See Note 7.
See Notes to Financial Statements.
41
<PAGE> 45
THE INFINITY MUTUAL FUNDS, INC.
AMERISTAR CORE INCOME PORTFOLIO
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Interest.................................................... $4,283,522
Dividends................................................... 96,251
----------
Total Investment Income..................................... 4,379,773
Expenses
Advisory fees............................................. $ 328,302
Administration fees....................................... 98,491
Distribution fees -- Investor Shares...................... 120,305
Custodian fees............................................ 8,595
Accounting fees........................................... 57,397
Transfer agent fees and expenses.......................... 19,753
Legal fees................................................ 8,799
Audit fees................................................ 20,081
Reports to shareholders................................... 16,299
Amortization of organization expenses..................... 9,572
Directors' fees........................................... 4,420
Insurance expense......................................... 2,860
Registration fees......................................... 3,081
Other expenses............................................ 618
---------
Total expenses before fee waivers...................... 698,573
Less: Fee waivers...................................... (175,965)
---------
Total expenses............................................ 522,608
----------
Net Investment Income....................................... 3,857,165
----------
REALIZED AND UNREALIZED GAINS (LOSSES) FROM INVESTMENTS
Net realized gains (losses) on investment transactions.... 14,563
Net change in unrealized appreciation (depreciation) on
investments............................................ 1,897,381
----------
Net Realized and Unrealized Gains (Losses) from
Investments............................................... 1,911,944
----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........ $5,769,109
==========
</TABLE>
- ---------------
See Notes to Financial Statements.
42
<PAGE> 46
THE INFINITY MUTUAL FUNDS, INC.
AMERISTAR CORE INCOME PORTFOLIO
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED PERIOD ENDED
DECEMBER 31, 1997 DECEMBER 31, 1996 (a)
----------------- ---------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations
Net investment income..................................... $ 3,857,165 $ 1,465,659
Net realized gains (losses) on investment transactions.... 14,563 (85,527)
Net change in unrealized appreciation (depreciation) on
investments............................................ 1,897,381 143,278
------------ -----------
Net increase in net assets resulting from operations... 5,769,109 1,523,410
------------ -----------
Distributions to Investor Class
From net investment income................................ (2,755,744) (1,465,659)
Distributions to Trust Class (b)
From net investment income................................ (1,101,421) --
------------ -----------
Total distributions to shareholders......................... (3,857,165) (1,465,659)
------------ -----------
Capital Share Transactions
Proceeds from shares issued............................... 117,853,442 39,728,939
Dividends reinvested...................................... 1,329,244 754,643
Cost of shares redeemed................................... (87,824,216) (1,726,073)
------------ -----------
Net increase in net assets from capital share
transactions........................................... 31,358,470 38,757,509
------------ -----------
Total increase (decrease) in Net Assets..................... 33,270,414 38,815,260
NET ASSETS
Beginning of period....................................... 38,815,260 --
------------ -----------
End of period............................................. $ 72,085,674 $38,815,260
============ ===========
SHARE TRANSACTIONS
Issued.................................................... 11,695,438 3,978,187
Reinvested................................................ 132,886 76,179
Redeemed.................................................. (8,673,388) (173,839)
------------ -----------
Change in shares.......................................... $ 3,154,936 $ 3,880,527
============ ===========
</TABLE>
- ---------------
(a) For the period from April 1, 1996 (commencement of operations) through
December 31, 1996.
(b) For the period from October 3, 1997 (commencement of operations of Trust
Shares) through December 31, 1997.
See Notes to Financial Statements.
43
<PAGE> 47
THE INFINITY MUTUAL FUNDS, INC.
AMERISTAR LIMITED DURATION INCOME PORTFOLIO
- --------------------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS
DECEMBER 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
S&P/MOODY'S
RATINGS MATURITY PRINCIPAL VALUE
(UNAUDITED) RATE DATE AMOUNT (NOTE 2)
----------- ---- -------- ---------- -----------
<S> <C> <C> <C> <C> <C>
CORPORATE BONDS -- 53.4%
BANKING -- 6.2%
ABN AMRO Bank......................... A/Aa3 6.63% 10/31/01 $2,000,000 $ 2,022,500
Bankers Trust......................... A/A2 6.75 10/3/01 1,500,000 1,524,375
NationsBank Corp...................... A+/Aa3 7.00 9/15/01 2,000,000 2,050,000
5,596,875
-----------
ENTERTAINMENT -- 1.7%
The Walt Disney Co.................... A/A2 6.38 3/30/01 1,500,000 1,516,875
-----------
FINANCIAL SERVICES -- 9.2%
Associates Corp. N.A.................. AA-/Aa3 7.68 3/3/00 1,500,000 1,548,750
Ford Motor Credit Co.................. A/A1 6.50 2/28/02 2,500,000 2,521,875
General Motors Acceptance Corp........ A-/A3 7.75 1/15/99 2,500,000 2,543,750
Merrill Lynch & Co., Inc.............. AA-/Aa3 6.00 1/15/01 1,750,000 1,745,625
-----------
8,360,000
-----------
INDUSTRIAL GOODS & SERVICES -- 6.3%
Imperial Oil Ltd...................... AA+/Aa2 8.75 10/15/19 3,000,000 3,217,500
Martin Marietta Tech.................. BBB+/A3 6.50 4/15/03 2,500,000 2,531,250
-----------
5,748,750
-----------
INSURANCE -- PROPERTY & CASUALTY -- 3.4%
Travelers/Aetna Property & Casualty... A+/A1 6.75 4/15/01 3,000,000 3,052,500
-----------
PAPER PRODUCTS -- 2.2%
International Paper Co................ A-/A3 6.88 7/10/00 2,000,000 2,037,500
-----------
RAILROADS -- 3.3%
Union Pacific Railroad Co............. A/Aa3 6.44 1/15/98 3,000,000 3,000,524
-----------
RETAIL-STORES -- 4.5%
Dayton Hudson Co...................... BBB+/Baa1 7.50 3/1/99 2,000,000 2,035,000
J C Penney & Co....................... A/A2 7.25 4/1/02 2,000,000 2,072,500
-----------
4,107,500
-----------
UTILITIES-ELECTRIC -- 13.8%
Central Power & Light Co.............. A/A3 6.00 4/1/00 2,000,000 1,995,000
Florida Power & Light Co.............. AA-/Aa3 6.20 2/2/98 2,000,000 2,000,000
Florida Power Corp.................... A+/A1 6.54 7/1/02 2,000,000 2,027,500
MidAmerican Energy.................... A/A3 6.50 12/15/01 2,500,000 2,524,999
National Rural Utilities Corp......... AA-/A1 6.49* 7/10/02 2,000,000 2,022,500
Puget Sound Power & Light............. A-/Baa1 6.61 2/9/00 2,000,000 2,017,500
-----------
12,587,499
-----------
</TABLE>
Continued
44
<PAGE> 48
<TABLE>
<CAPTION>
S&P/MOODY'S
RATINGS MATURITY PRINCIPAL VALUE
(UNAUDITED) RATE DATE AMOUNT (NOTE 2)
----------- ---- -------- ------------ -------------
<S> <C> <C> <C> <C> <C>
CORPORATE BONDS, CONTINUED:
UTILITIES-GAS -- 2.8%
ENSERCH Corp.......................... BBB/Baa2 7.00% 8/15/99 $ 1,000,000 $ 1,013,750
Smith Enron........................... NR/NR 5.97 12/15/06 1,518,000 1,502,820
-------------
2,516,570
-------------
Total Corporate Bonds (Cost
$48,099,751).......................... 48,524,593
-------------
U.S. GOVERNMENT AGENCIES -- 24.3%
FEDERAL HOME LOAN BANK -- 2.7%
Federal Home Loan Bank,
Callable 2/28/98 @ 100............. 6.00 8/28/01 2,500,000 2,490,825
-------------
FEDERAL HOME LOAN MORTGAGE CORP. -- 2.8%
Federal Home Loan Mortgage Corp.,
Callable 1/23/98 @ 100................ 6.51 12/10/01 2,500,000 2,500,100
-------------
FEDERAL NATIONAL MORTGAGE ASSOC. -- 1.7%
Federal National Mortgage Assoc.,
Callable 11/23/99 @ 100............... 6.35 11/23/01 1,500,000 1,504,965
-------------
GOVERNMENT NATIONAL MORTGAGE ASSOC. -- 15.5%
Government National Mortgage Assoc.,
Pool # 339455...................... 8.00 12/15/07 757,815 788,363
Government National Mortgage Assoc.,
Pool # 358725...................... 8.00 8/15/08 1,371,313 1,426,590
Government National Mortgage Assoc.,
Pool # 392085...................... 7.50 4/15/09 717,155 739,114
Government National Mortgage Assoc.,
Pool # 368641...................... 7.50 4/15/09 648,264 668,114
Government National Mortgage Assoc.,
Pool # 345752...................... 7.50 6/15/09 633,492 652,889
Government National Mortgage Assoc.,
Pool # 376589...................... 8.50 9/15/09 1,167,411 1,215,929
Government National Mortgage Assoc.,
Pool # 380660...................... 8.00 11/15/09 1,466,904 1,526,035
Government National Mortgage Assoc.,
Pool # 392770...................... 8.50 12/15/09 543,702 566,298
Government National Mortgage Assoc.,
Pool # 392814...................... 8.50 12/15/09 951,045 990,571
Government National Mortgage Assoc.,
Pool # 405445...................... 8.00 4/15/10 1,708,307 1,777,169
Government National Mortgage Assoc.,
Pool # 407337...................... 8.00 4/15/10 1,446,950 1,505,276
Government National Mortgage Assoc.,
Pool # 423983...................... 7.50 8/15/11 2,129,497 2,194,702
-------------
14,051,050
-------------
STUDENT LOAN MARKETING ASSOC. -- 1.6%
Student Loan Marketing Assoc.,
Callable 7/23/98 @ 100............. 5.81 1/23/01 1,500,000 1,491,645
-------------
Total U.S. Government Agencies
(Cost $21,522,621).................... 22,038,585
-------------
U.S. TREASURY NOTES -- 18.6%
U.S. Treasury Note.................... 7.75 1/31/00 1,500,000 1,560,600
U.S. Treasury Note.................... 6.63 7/31/01 2,000,000 2,057,060
U.S. Treasury Note.................... 6.25 10/31/01 1,000,000 1,017,200
</TABLE>
Continued
45
<PAGE> 49
<TABLE>
<CAPTION>
MATURITY PRINCIPAL VALUE
RATE DATE AMOUNT/SHARES (NOTE 2)
---- -------- ------------- -----------
<S> <C> <C> <C> <C>
U.S. TREASURY NOTES, CONTINUED:
U.S. Treasury Note.................... 5.88% 11/30/01 $1,600,000 $ 1,606,800
U.S. Treasury Note.................... 6.13 12/31/01 2,000,000 2,027,120
U.S. Treasury Note.................... 6.25 1/31/02 4,000,000 4,073,000
U.S. Treasury Note.................... 6.25 6/30/02 2,000,000 2,040,680
U.S. Treasury Note.................... 5.88 2/15/04 2,500,000 2,523,425
-----------
Total U.S. Treasury Notes (Cost
$16,689,126).......................... 16,905,885
-----------
REGULATED INVESTMENT COMPANIES -- 2.6%
AIM Liquid Assets Money Market Fund... 68,357 68,357
AIM Prime Money Market Fund........... 2,267,373 2,267,373
-----------
Total Regulated Investment Companies
(Cost $2,335,730)..................... 2,335,730
-----------
TOTAL (Cost $88,647,228) (a) -- 98.9%... $89,804,793
===========
</TABLE>
- ---------------
Percentages indicated are based on net assets of $90,779,511.
(a) Represents cost for federal income tax purposes and differs from value by
net unrealized appreciation of securities as follows:
<TABLE>
<S> <C>
Unrealized appreciation............................. $ 1,168,424
Unrealized depreciation............................. (10,859)
-----------
Net unrealized appreciation......................... $ 1,157,565
===========
</TABLE>
* Variable rate security. Rate represents rate in effect at December 31, 1997.
Maturity date reflects the next rate change date.
See Notes to Financial Statements.
46
<PAGE> 50
THE INFINITY MUTUAL FUNDS, INC.
AMERISTAR LIMITED DURATION INCOME PORTFOLIO
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investments in securities, at value (cost $88,647,228).... $89,804,793
Interest receivable....................................... 1,501,315
Receivable for capital shares issued...................... 470
Deferred organization costs............................... 15,804
Prepaid expenses.......................................... 9,818
-----------
Total assets................................................ 91,332,200
-----------
LIABILITIES
Distributions payable..................................... 490,633
Payable for capital shares redeemed....................... 21,788
Accrued expenses and other payables:
Administration fees.................................... 11,689
Distribution fees -- Investor Shares................... 775
Accounting fees........................................ 2,740
Custodian fees......................................... 7,021
Audit fees............................................. 8,643
Other.................................................. 9,400
-----------
Total liabilities........................................... 552,689
-----------
NET ASSETS
Investor Shares........................................... 5,893,596
Trust Shares.............................................. 84,885,915
-----------
$90,779,511
===========
Shares Outstanding ($0.001 par value, 500 million shares
authorized)
Investor Shares........................................... 590,238
Trust Shares.............................................. 8,502,439
-----------
9,092,677
===========
NET ASSET VALUE
Investor Shares -- redemption price per share............. $9.99
------
Investor Shares -- maximum sales charge................... 3.00%
------
Investor Shares -- maximum sales charge per share
(100%/(100% -- maximum sales charge) of net asset
adjusted to nearest cent).............................. $10.30
======
Trust Shares -- offering and redemption price per share... $9.98
======
COMPOSITION OF NET ASSETS:
Shares of common stock, at par............................ $ 9,093
Additional paid-in capital................................ 89,601,873
Undistributed net investment income....................... 843
Net unrealized appreciation from investments.............. 1,157,565
Accumulated net realized gains from investment
transactions........................................... 10,137
-----------
Net Assets, December 31, 1997............................... $90,779,511
===========
</TABLE>
- ---------------
See Notes to Financial Statements.
47
<PAGE> 51
THE INFINITY MUTUAL FUNDS, INC.
AMERISTAR LIMITED DURATION INCOME PORTFOLIO
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Interest.................................................... $6,476,662
Dividends................................................... 191,281
----------
Total Investment Income..................................... 6,667,943
Expenses
Advisory fees............................................. $ 496,933
Administration fees....................................... 149,081
Distribution fees -- Investor Shares...................... 193,649
Custodian fees............................................ 27,190
Accounting fees........................................... 54,640
Transfer agent fees and expenses.......................... 25,538
Legal fees................................................ 6,410
Audit fees................................................ 24,047
Reports to shareholders................................... 23,398
Amortization of organization expenses..................... 11,680
Directors' fees........................................... 5,024
Insurance fees............................................ 4,028
Registration fees......................................... 4,533
Other expenses............................................ 1,466
----------
Total expenses before fee waivers...................... 1,027,617
Less: Fee Waivers...................................... (264,877)
----------
Total expenses......................................... 762,740
----------
Net Investment Income....................................... 5,905,203
----------
REALIZED AND UNREALIZED GAINS (LOSSES) FROM INVESTMENTS
Net realized gains (losses) on investment transactions.... 87,039
Net change in unrealized appreciation (depreciation) on
investments............................................ 185,389
----------
Net Realized and Unrealized Gains (Losses) from
Investments............................................... 272,428
----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........ $6,177,631
==========
</TABLE>
- ---------------
See Notes to Financial Statements.
48
<PAGE> 52
THE INFINITY MUTUAL FUNDS, INC.
AMERISTAR LIMITED DURATION INCOME PORTFOLIO
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, 1997 DECEMBER 31, 1996
----------------- ------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations
Net investment income..................................... $ 5,905,203 $ 6,053,847
Net realized gains (losses) on investment transactions.... 87,039 11,672
Net change in unrealized appreciation (depreciation) on
investments............................................ 185,389 (1,745,157)
------------- ------------
Net increase in net assets resulting from operations...... 6,177,631 4,320,362
------------- ------------
Distributions to Investor Class
From net investment income................................ (4,572,712) (6,053,731)
From net realized gains................................... (3,598) (11,672)
In excess of net realized gains........................... -- (38,269)
Distributions to Trust Class (a)
From net investment income................................ (1,330,194) --
From net realized gains................................... (49,934) --
------------- ------------
Total distributions to shareholders......................... (5,956,438) (6,103,672)
------------- ------------
Capital Share Transactions
Proceeds from shares issued............................... 115,326,621 25,676,365
Dividends reinvested...................................... 2,802,526 2,714,914
Cost of shares redeemed................................... (125,767,873) (31,792,677)
------------- ------------
Net increase (decrease) in net assets from capital share
transactions........................................... (7,638,726) (3,401,398)
------------- ------------
Total increase (decrease) in Net Assets..................... (7,417,533) (5,184,708)
NET ASSETS
Beginning of period....................................... 98,197,044 103,381,752
------------- ------------
End of period............................................. $ 90,779,511 $ 98,197,044
============= ============
SHARE TRANSACTIONS:
Issued.................................................... 11,542,505 2,575,513
Reinvested................................................ 281,855 272,329
Redeemed.................................................. (12,593,661) (3,194,471)
------------- ------------
Change in shares.......................................... (769,301) (346,629)
============= ============
</TABLE>
- ---------------
(a) For the period from October 3, 1997 (commencement of operations of Trust
Shares) through December 31, 1997.
See Notes to Financial Statements.
49
<PAGE> 53
THE INFINITY MUTUAL FUNDS, INC.
AMERISTAR LIMITED DURATION U.S. GOVERNMENT PORTFOLIO
- --------------------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS
DECEMBER 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MATURITY PRINCIPAL VALUE
RATE DATE AMOUNT (NOTE 2)
---- -------- ---------- -----------
<S> <C> <C> <C> <C>
U.S. GOVERNMENT AGENCIES -- 48.3%
FEDERAL FARM CREDIT BANK -- 3.7%
Federal Farm Credit Bank, Callable 8/27/98 @ 100.......... 7.34% 8/27/07 $ 750,000 $ 753,248
-----------
FEDERAL HOME LOAN BANK -- 3.7%
Federal Home Loan Bank, Callable 2/28/98 @ 100............ 6.00 8/28/01 750,000 747,248
-----------
FEDERAL HOME LOAN MORTGAGE CORP. -- 5.0%
Federal Home Loan Mortgage Corp........................... 6.16 9/25/02 500,000 503,515
Federal Home Loan Mortgage Corp., Callable 9/30/98 @
100.................................................... 6.58 9/30/02 500,000 500,040
-----------
1,003,555
-----------
FEDERAL NATIONAL MORTGAGE ASSOC. -- 8.8%
Federal National Mortgage Assoc........................... 6.10 10/5/00 750,000 751,597
Federal National Mortgage Assoc........................... 6.44 8/14/07 500,000 512,185
Federal National Mortgage Assoc.,Callable 11/14/02 @
100.................................................... 6.65 11/14/07 500,000 507,520
-----------
1,771,302
-----------
GOVERNMENT NATIONAL MORTGAGE ASSOC. -- 21.6%
Government National Mortgage Assoc., Pool # 152718........ 9.00 12/15/01 63,029 66,279
Government National Mortgage Assoc., Pool # 248038........ 9.00 2/15/03 167,741 176,390
Government National Mortgage Assoc., Pool # 407408........ 7.50 5/15/10 771,751 795,382
Government National Mortgage Assoc., Pool # 423984........ 7.00 8/15/11 920,257 938,081
Government National Mortgage Assoc., Pool # 423914........ 7.50 8/15/11 918,199 946,313
Government National Mortgage Assoc., Pool # 423923........ 7.00 9/15/11 723,858 737,879
Government National Mortgage Assoc., Pool # 431451........ 7.50 10/15/11 663,425 683,739
-----------
4,344,063
-----------
STUDENT LOAN MARKETING ASSOC. -- 3.0%
Student Loan Marketing Assoc., Callable 7/23/98 @ 100..... 5.81 1/23/01 600,000 596,658
-----------
US GOVERNMENT AGENCY -- DISCOUNT -- 2.5%
FC Discount Note Security................................. 5.95* 1/21/98 500,000 498,332
-----------
Total U.S. Government Agencies (Cost $9,634,281)............ 9,714,406
-----------
U.S. TREASURY NOTES -- 48.6%
U.S. Treasury Note........................................ 6.13 5/15/98 750,000 751,875
U.S. Treasury Note........................................ 5.75 12/31/98 1,000,000 1,001,720
U.S. Treasury Note........................................ 5.88 3/31/99 1,250,000 1,253,638
U.S. Treasury Note........................................ 6.00 8/15/99 1,000,000 1,005,100
U.S. Treasury Note........................................ 6.38 5/15/00 500,000 507,670
U.S. Treasury Note........................................ 6.25 5/31/00 750,000 759,458
U.S. Treasury Note........................................ 7.50 11/15/01 2,500,000 2,651,349
U.S. Treasury Note........................................ 7.50 5/15/02 1,000,000 1,067,450
U.S. Treasury Note........................................ 6.25 6/30/02 750,000 765,255
-----------
Total U.S. Treasury Notes (Cost $9,596,089)................. 9,763,515
-----------
</TABLE>
Continued
50
<PAGE> 54
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 2)
------- -----------
<S> <C> <C>
REGULATED INVESTMENT COMPANIES -- 2.7%
Dreyfus Prime Money Market Fund........................... 44,443 $ 44,443
AIM Treasury Money Market Fund............................ 492,142 492,142
-----------
Total Regulated Investment Companies (Cost $536,585)........ 536,585
-----------
TOTAL (COST $19,766,955) (A) 99.6%.......................... $20,014,506
===========
</TABLE>
- ---------------
Percentages indicated are based on net assets of $20,103,351.
(a) Represents cost for federal income tax purposes and differs from value by
net unrealized appreciation of securities as follows:
<TABLE>
<S> <C>
Unrealized appreciation................................. $265,958
Unrealized depreciation................................. $(18,407)
--------
Net unrealized appreciation............................. $247,551
========
</TABLE>
* Yield effective at issue
See Notes to Financial Statements.
51
<PAGE> 55
THE INFINITY MUTUAL FUNDS, INC.
AMERISTAR LIMITED DURATION U.S. GOVERNMENT PORTFOLIO
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investments in securities, at value (cost $19,766,955).... $20,014,506
Interest and dividends receivable......................... 219,220
Deferred organization costs............................... 1,586
Prepaid expenses and other assets......................... 749
-----------
Total assets................................................ 20,236,061
-----------
LIABILITIES
Distributions payable..................................... 95,806
Accrued expenses:
Administration fees.................................... 677
Accounting fees........................................ 4,522
Custodian fees......................................... 2,961
Legal fees............................................. 13,091
Audit fees............................................. 9,496
Registration fees...................................... 2,284
Reports to shareholders................................ 3,645
Other.................................................. 228
-----------
Total liabilities........................................... 132,710
===========
NET ASSETS
Investor Shares........................................... $20,103,351
===========
Shares Outstanding ($0.001 par value, 500 million shares
authorized)
Investor Shares........................................... 1,985,989
===========
NET ASSET VALUE
Investor Shares -- redemption price per share............. $10.12
------
Investor Shares -- maximum sales charge................... 3.00%
------
Investor Shares -- maximum sales charge per share
(100%/(100% -- maximum sales charge)
of net asset adjusted to nearest cent)................. $10.43
======
COMPOSITION OF NET ASSETS:
Shares of common stock, at par............................ $ 1,986
Additional paid-in capital................................ 19,856,153
Undistributed (distributions in excess of) net investment
income................................................. (1,440)
Net unrealized appreciation from investments.............. 247,551*
Accumulated net realized losses on investment
transactions........................................... (899)
-----------
Net Assets, December 31, 1997............................... $20,103,351
===========
</TABLE>
- ---------------
* Represents sum of current periods unrealized appreciation plus common trust
fund appreciation. See Note 7.
See Notes to Financial Statements.
52
<PAGE> 56
THE INFINITY MUTUAL FUNDS, INC.
AMERISTAR LIMITED DURATION U.S. GOVERNMENT PORTFOLIO
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
FOR THE PERIOD ENDED DECEMBER 31, 1997 (a)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Interest.................................................... $ 990,841
Dividends................................................... 37,978
----------
Total Investment Income..................................... 1,028,819
Expenses
Advisory fees............................................. $ 81,110
Administration fees....................................... 24,333
Distribution fees......................................... 40,554
Custodian fees............................................ 9,110
Accounting fees........................................... 42,745
Transfer agent fees and expenses.......................... 19,012
Legal fees................................................ 17,196
Audit fees................................................ 15,523
Reports to shareholders................................... 4,707
Amortization of organization expenses..................... 1,520
Directors' fees........................................... 807
Insurance expense......................................... 689
Registration fees......................................... 4,952
Other expenses............................................ 599
---------
Total expenses before fee waivers...................... 262,857
Less: Fee waivers...................................... (99,957)
---------
Total expenses....................................... 162,900
----------
Net Investment Income....................................... 865,919
----------
REALIZED AND UNREALIZED GAINS (LOSSES) FROM INVESTMENTS
Net realized gains (losses) on investment transactions.... (2,339)
Net change in unrealized appreciation (depreciation) on
investments............................................ 220,368
----------
Net Realized and Unrealized Gains (Losses) from
Investments............................................... 218,029
----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........ $1,083,948
==========
</TABLE>
- ---------------
(a) For the period from February 28, 1997 (commencement of operations) through
December 31, 1997.
See Notes to Financial Statements.
53
<PAGE> 57
THE INFINITY MUTUAL FUNDS, INC.
AMERISTAR LIMITED DURATION U.S. GOVERNMENT PORTFOLIO
- --------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERIOD ENDED
DECEMBER 31, 1997 (a)
---------------------
<S> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations
Net investment income..................................... $ 865,919
Net realized gains (losses) on investment transactions.... (2,339)
Net change in unrealized appreciation (depreciation) on
investments............................................ 220,368
-----------
Net increase in net assets resulting from operations...... 1,083,948
-----------
DISTRIBUTIONS TO SHAREHOLDERS
From net investment income................................ (865,919)
-----------
Total distributions to shareholders......................... (865,919)
-----------
CAPITAL SHARE TRANSACTIONS
Proceeds from shares issued............................... 22,172,121
Dividends reinvested...................................... 4,769
Cost of shares redeemed................................... (2,291,568)
-----------
Net increase in net assets from capital share
transactions........................................... 19,885,322
-----------
Total increase (decrease) in Net Assets..................... 20,103,351
NET ASSETS
Beginning of period....................................... --
-----------
End of period............................................. $20,103,351
-----------
SHARE TRANSACTIONS
Issued.................................................... 2,213,380
Reinvested................................................ 473
Redeemed.................................................. (227,864)
-----------
Change in shares.......................................... 1,985,989
===========
</TABLE>
- ---------------
(a) For the period from February 28, 1997 (commencement of operations) through
December 31, 1997.
See Notes to Financial Statements.
54
<PAGE> 58
THE INFINITY MUTUAL FUNDS, INC.
AMERISTAR TENNESSEE TAX EXEMPT BOND PORTFOLIO
- --------------------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS
DECEMBER 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
S&P/MOODY'S
RATINGS MATURITY PRINCIPAL VALUE
(UNAUDITED) RATE DATE AMOUNT (NOTE 2)
----------- ----- -------- ---------- ------------
<S> <C> <C> <C> <C> <C>
MUNICIPAL BONDS -- 97.8%
GEORGIA -- 2.7%
Georgia Municipal Electric Authority
Power Revenue, Callable 1/1/08 @
100, MBIA.......................... AAA/Aaa 6.50% 1/1/12 $2,300,000 $ 2,714,000
------------
KENTUCKY -- 4.7%
Kentucky Infrastructure Authority
Ref-Revolving, Series L, Callable
6/1/07 @ 101....................... A/A2 5.00 6/1/09 2,680,000 2,770,449
Louisville & Jefferson County
Metropolitan Sewer District, Sewer
& Drain Systems,
Revenue Bond, MBIA................. AAA/Aaa 6.50 5/15/07 1,770,000 2,050,988
------------
4,821,437
------------
MASSACHUSETTS -- 1.9%
Worcester Mass, GO, Callable 8/1/07 @
101, MBIA.......................... AAA/Aaa 5.00 8/1/15 1,970,000 1,972,463
------------
MICHIGAN -- 1.7%
Detroit, Michigan City School
District,
Series A, GO, AMBAC................ AAA/Aaa 6.50 5/1/08 1,500,000 1,747,500
------------
MINNESOTA -- 2.0%
Minnesota State, GO................... AAA/Aaa 5.50 5/1/04 1,000,000 1,075,000
Minnesota State, GO, Callable 8/1/07 @
100................................ AAA/Aaa 4.90 8/1/13 1,000,000 1,003,750
------------
2,078,750
------------
MISSISSIPPI -- 2.1%
Mississippi State Capital
Improvements -- A, GO, Callable
7/1/07 @ 100....................... AA/Aa3 5.00 7/1/08 1,000,000 1,038,750
Mississippi State Refunded, Series B,
GO................................. AA/Aa3 5.90 11/15/10 1,000,000 1,135,000
------------
2,173,750
------------
NEW YORK -- 4.3%
Suffolk County Water Authority
Waterworks, Revenue Bonds, Callable
6/1/08
@ 100, MBIA........................ AAA/Aaa 6.00 6/1/09 2,000,000 2,262,500
Transportation Authority, NY & NJ
Construction,
Eighty-Fifth Series................ AA-/A1 5.38 3/1/28 2,000,000 2,130,000
------------
4,392,500
------------
PENNSYLVANIA -- 1.0%
Indiana County Industrial Development
Authority, Pollution Control
Revenue, MBIA...................... AAA/Aaa 5.35 11/1/10 1,000,000 1,070,000
------------
</TABLE>
Continued
55
<PAGE> 59
<TABLE>
<CAPTION>
S&P/MOODY'S
RATINGS MATURITY PRINCIPAL VALUE
(UNAUDITED) RATE DATE AMOUNT (NOTE 2)
----------- ----- -------- ----------- --------------
<S> <C> <C> <C> <C> <C>
MUNICIPAL BONDS, CONTINUED:
SOUTH CAROLINA -- 2.2%
Charleston Waterworks & Sewer Revenue
Refunded & Improvements, Callable
1/1/02 @ 100, MBIA................. AAA/Aaa 5.00% 1/1/22 $ 2,250,000 $ 2,213,438
--------------
TENNESSEE -- 69.2%
Blount County Public Building
Authority, GO, Callable 3/1/07 @
101, FGIC.......................... AA+/Aaa 5.13 3/1/19 1,000,000 1,001,250
Bristol Health & Educational
Facilities Revenue, Bristol
Memorial Hospital, Revenue Bond,
FGIC............................... AAA/Aaa 6.75 9/1/07 2,140,000 2,530,549
Dickson County, GO, FGIC.............. NR/Aaa 6.25 4/1/08 1,220,000 1,377,075
Dickson County, GO, Callable 4/1/08
@ 100, FGIC........................ NR/Aaa 5.00 4/1/14 2,120,000 2,122,650
Hamilton County Industrial Development
Board Lease, Rent Revenue, FGIC.... AAA/Aaa 5.75 9/1/05 1,000,000 1,092,500
Hamilton County Public School
Improvements, Series A, GO,
Callable 10/1/02 @ 102............. NR/Aa2 5.50 10/1/04 1,930,000 2,065,100
Humphreys County Industrial
Development Board, Solid Waste
Disposal Revenue,
E.I. Dupont de Nemours & Co.
Project, Callable 5/1/04 @ 102..... AA-/Aa3 6.70 5/1/24 1,455,000 1,616,869
Johnson City Health & Educational
Improvements, Revenue Bond,
Prerefunded 7/1/01 @ 102, MBIA..... AAA/Aaa 6.75 7/1/16 1,000,000 1,102,500
Johnson City Medical Center, Revenue
Bond, Callable 7/1/04 @ 102,
MBIA............................... AAA/Aaa 5.00 7/1/13 1,000,000 996,250
Johnson City Public Works, Callable
9/1/04
@ 101, MBIA........................ AAA/Aaa 5.00 9/1/22 1,000,000 980,000
Johnson City Refunding, GO, FGIC...... AAA/Aaa 5.60* 5/1/11 1,430,000 756,113
Knox County, GO, Callable 4/1/03 @
102................................ AA/Aa 6.50 4/1/04 1,965,000 2,203,256
Knox County, GO, Callable 2/1/04 @
101................................ AA/Aa3 5.00 2/1/15 1,000,000 1,006,250
Knox County Health, Education &
Housing Facilities Board, Hospital
Facilities Revenue, Fort Sanders
Alliance, MBIA..................... AAA/Aaa 6.25 1/1/13 1,000,000 1,155,000
Lawrenceburg Electric, Revenue Bond,
MBIA............................... AAA/Aaa 6.63 7/1/18 1,250,000 1,514,063
Memphis, GO........................... AA/Aa 6.25 7/1/04 1,000,000 1,111,250
Memphis, GO........................... AA/Aa 6.00 11/1/06 1,000,000 1,113,750
Memphis, GO, Callable 7/1/05 @ 101.... AA/Aa 5.00 7/1/17 1,200,000 1,189,500
Memphis-Shelby County Airport
Authority,
Revenue Bonds, MBIA................ AAA/Aaa 6.25 2/15/09 1,790,000 2,033,888
Metropolitan Government, Nashville &
Davidson County, GO, Callable
5/15/06 @ 101...................... AA/Aa 5.60 5/15/07 1,045,000 1,137,744
Metropolitan Government, Nashville &
Davidson County, GO, Callable
5/15/07 @ 102...................... AA/Aa2 5.00 5/15/13 2,000,000 2,002,500
Metropolitan Government, Nashville &
Davidson County, GO, Callable
11/15/06 @ 101..................... AA/Aa2 5.13 11/15/13 1,555,000 1,582,213
Metropolitan Government, Nashville &
Davidson County, GO, Callable
5/15/07 @ 102...................... AA/Aa2 5.13 5/15/18 1,000,000 1,002,500
Metropolitan Government, Nashville &
Davidson County, Series A, GO,
Callable 11/15/06 @ 101............ AA/Aa2 5.13 11/15/19 1,000,000 1,007,500
Metropolitan Government, Nashville &
Davidson County TN Health &
Education Facilities Board,
Refunding & Improvement -- Meharry
Medical College, AMBAC............. AAA/Aaa 6.00 12/1/09 1,000,000 1,142,500
</TABLE>
Continued
56
<PAGE> 60
<TABLE>
<CAPTION>
S&P/MOODY'S
RATINGS MATURITY PRINCIPAL VALUE
(UNAUDITED) RATE DATE AMOUNT (NOTE 2)
----------- ----- -------- ------------ --------------
<S> <C> <C> <C> <C> <C>
MUNICIPAL BONDS, CONTINUED:
TENNESSEE, CONTINUED:
Metropolitan Government, Nashville &
Davidson County Water & Sewer
Revenue............................ AAA/AAA 6.50% 4/1/03 $ 1,000,000 $ 1,102,500
Metropolitan Government, Nashville &
Davidson County, Health &
Educational Facilities Board,
Refunding & Improvements, Meharry
Medical College, AMBAC............. AAA/Aaa 6.00 12/1/13 2,030,000 2,293,900
Metropolitan Government, Nashville &
Davidson County, Meharry Medical
College Project, Prerefunded
12/1/04 @ 102, AMBAC............... AAA/AAA 6.88 12/1/24 4,750,000 5,545,624
Metropolitan Government, Nashville &
Davidson County, TN Energy Project,
Series B,
Revenue Bond....................... AAA/Aaa 6.00 7/1/10 1,335,000 1,513,556
Metropolitan Government, Nashville &
Davidson County, Vanderbilt
University, Series A............... AA/Aa3 5.75 1/1/07 1,035,000 1,135,913
Rutherford County Capital Outlay,
GO................................. AA-/Aa3 6.00 4/1/04 1,370,000 1,498,438
Rutherford County Capital Outlay,
Series A........................... AA-/Aa3 6.25 5/1/05 3,500,000 3,919,999
Shelby County, Series A, GO........... AA+/Aa2 6.75 4/1/05 1,000,000 1,148,750
Shelby County, Series A, GO........... AA+/Aa2 5.63 6/1/05 1,000,000 1,083,750
Shelby County, Series B, GO........... AA+/Aa2 6.00 12/1/05 2,000,000 2,230,000
Shelby County, Series B, GO,
Callable 8/1/07 @ 101.............. AA+/Aa2 5.13 8/1/19 1,000,000 1,005,000
Shelby County Health, Education &
Housing Facilities Board, Hospital
Revenue, Methodist Health Systems,
Inc., Callable 8/1/07 @ 102,
MBIA............................... AAA/Aaa 5.20 8/1/13 2,020,000 2,050,300
Shelby County Health, Education &
Housing Facilities Board, Hospital
Revenue Bond, Methodist Health
Systems, Inc., MBIA................ AAA/Aaa 6.25 8/1/07 2,000,000 2,285,000
Shelby County Health, Educational &
Housing Facilities Board, Hospital
Revenue, Methodist Health Systems,
Inc., MBIA......................... AAA/Aaa 5.50 8/1/05 3,000,000 3,228,749
Shelby County Health, Educational &
Housing Facilities Board, Hospital
Revenue, Methodist Health Systems,
Inc., MBIA......................... AAA/Aaa 6.25 8/1/08 2,000,000 2,307,500
Tennessee State, Series B, GO......... AA+/Aaa 6.20 6/1/01 1,350,000 1,447,875
Tennessee State Reference, Series B,
GO................................. AA+/Aaa 6.00 5/1/05 1,000,000 1,112,500
Williamson County Public Improvement,
GO................................. NR/Aa1 6.25 4/1/06 1,000,000 1,130,000
--------------
70,882,124
--------------
TEXAS -- 3.2%
Humble Independent School District,
GO................................. AAA/Aaa 6.00 2/15/09 1,900,000 2,135,125
University of Texas Revenue Financing
System, Series A................... AAA/Aa1 6.00 8/15/05 1,000,000 1,108,750
--------------
3,243,875
--------------
WISCONSIN -- 2.8%
Milwaukee, GO......................... AA+/Aa1 6.00 2/1/10 2,540,000 2,873,375
--------------
Total Municipal Bonds (Cost
$97,291,469).......................... 100,183,212
--------------
</TABLE>
Continued
57
<PAGE> 61
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 2)
-------- ------------
<S> <C> <C>
REGULATED INVESTMENT COMPANIES -- 0.9%
AIM Tax Free Money Market Fund............................ 882,167 $ 882,167
Dreyfus Tax Free Money Market Fund........................ 1,264 1,264
------------
Total Regulated Investment Companies (Cost $883,431)........ 883,431
------------
TOTAL (COST $98,174,899) (A) -- 98.7%....................... $101,066,643
============
</TABLE>
- ---------------
Percentages indicated are based on net assets of $102,410,895.
(a) Represents cost for federal income tax purposes and differs from value by
net unrealized depreciation of securities as follows:
<TABLE>
<S> <C>
Unrealized appreciation............................. $2,891,744
Unrealized depreciation............................. --
----------
Net unrealized depreciation......................... $2,891,744
==========
</TABLE>
* Yield effective at issue.
AMBAC = Insured by American Municipal Bond Assurance Corp.
FGIC = Insured by Financial Guaranty Insurance Corp.
GO = General Obligation
MBIA = Insured by Municipal Bond Insurance Assoc.
See Notes to Financial Statements.
58
<PAGE> 62
THE INFINITY MUTUAL FUNDS, INC.
AMERISTAR TENNESSEE TAX EXEMPT BOND PORTFOLIO
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investments in securities, at value (cost $98,174,899).... $101,066,643
Interest receivable....................................... 1,428,989
Receivable for investment securities sold................. 1,311,083
Deferred organization costs............................... 15,712
Prepaid expenses.......................................... 9,697
------------
Total assets................................................ 103,832,124
------------
LIABILITIES
Distributions payable..................................... 377,948
Payable for investment securities purchased............... 995,000
Payable for capital shares redeemed....................... 10,263
Accrued expenses:
Administration fees.................................... 13,036
Distribution fees--Investor Shares..................... 218
Accounting fees........................................ 3,124
Custodian fees......................................... 2,833
Audit fees............................................. 9,595
Other.................................................. 9,212
------------
Total liabilities........................................... 1,421,229
------------
NET ASSETS
Investor Shares........................................ 1,668,661
Trust Shares........................................... 100,742,234
------------
$102,410,895
============
Shares Outstanding ($0.001 par value, 500 million shares
authorized)
Investor Shares........................................ 163,916
Trust Shares........................................... 9,897,987
------------
10,061,903
============
NET ASSET VALUE
Investor Shares -- redemption price per share............. $10.18
------
Investor Shares -- maximum sales charge................... 3.00%
------
Investor Shares -- maximum sales charge per share
(100%/(100%--maximum sales charge)
of net asset adjusted to nearest cent)................. $10.49
======
Trust Shares--offering and redemption price per share....... $10.18
-----
------
COMPOSITION OF NET ASSETS:
Shares of common stock, at par............................ $ 10,062
Additional paid-in capital................................ 100,163,732
Undistributed net investment income....................... 5,860
Net unrealized appreciation from investments.............. 2,891,744*
Accumulated net realized losses from investment
transactions........................................... (660,503)
------------
Net Assets, December 31, 1997............................... $102,410,895
============
</TABLE>
- ---------------
* Represents sum of current period's unrealized appreciation plus common trust
fund appreciation. See Note 7.
See Notes to Financial Statements
59
<PAGE> 63
THE INFINITY MUTUAL FUNDS, INC.
AMERISTAR TENNESSEE TAX EXEMPT BOND PORTFOLIO
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Interest.................................................... $4,769,144
Dividends................................................... 158,366
----------
Total Investment Income..................................... 4,927,510
Expenses
Advisory fees............................................. $ 502,268
Administration fees....................................... 150,681
Distribution fees--Investor Shares........................ 189,842
Custodian fees............................................ 26,724
Accounting fees........................................... 51,211
Transfer agent fees and expenses.......................... 25,511
Legal fees................................................ 8,360
Audit fees................................................ 26,032
Reports to shareholders................................... 22,841
Amortization of organization expenses..................... 11,680
Directors' fees........................................... 5,841
Insurance expense......................................... 4,232
Registration fees......................................... 4,333
Other expenses............................................ 7,553
-----------
Total expenses before fee waivers...................... 1,037,109
Less: Fee waivers...................................... (268,092)
-----------
Total expenses......................................... 769,017
----------
Net Investment Income....................................... 4,158,493
----------
REALIZED AND UNREALIZED GAINS (LOSSES) FROM INVESTMENTS
Net realized gains (losses) on investment transactions.... 495,596
Net change in unrealized appreciation (depreciation) on
investments............................................ 2,311,170
----------
Net Realized and Unrealized Gains (Losses) from
Investments............................................... 2,806,776
----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........ $6,965,259
==========
</TABLE>
- ---------------
See Notes to Financial Statements.
60
<PAGE> 64
THE INFINITY MUTUAL FUNDS, INC.
AMERISTAR TENNESSEE TAX EXEMPT BOND PORTFOLIO
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, 1997 DECEMBER 31, 1996
------------------ ------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations
Net investment income..................................... $ 4,158,493 $ 3,906,644
Net realized gains (losses) on investment transactions.... 495,596 (577,774)
Net change in unrealized appreciation (depreciation) on
investments............................................ 2,311,170 (2,118,918)
------------- ------------
Net increase in net assets resulting from operations... 6,965,259 1,209,952
------------- ------------
DISTRIBUTIONS TO INVESTOR CLASS
From net investment income................................ (3,124,095) (3,905,475)
DISTRIBUTIONS TO TRUST CLASS (A)
From net investment income................................ (1,034,398) --
------------- ------------
Total distributions to shareholders......................... (4,158,493) (3,905,475)
------------- ------------
Capital Share Transactions
Proceeds from shares issued............................... 126,708,115 9,672,959
Dividends reinvested...................................... 233,018 187,651
Cost of shares redeemed................................... (115,420,799) (13,224,484)
------------- ------------
Net increase (decrease) in net assets from capital share
transactions........................................... 11,520,334 (3,363,874)
------------- ------------
Total increase (decrease) in Net Assets..................... 14,327,100 (6,059,397)
NET ASSETS
Beginning of period....................................... 88,083,795 94,143,192
------------- ------------
End of period............................................. $ 102,410,895 $ 88,083,795
============= ============
SHARE TRANSACTIONS
Issued.................................................... 12,634,903 980,116
Reinvested................................................ 23,483 19,014
Redeemed.................................................. (11,495,098) (1,339,773)
------------- ------------
Change in shares.......................................... 1,163,288 (340,643)
============= ============
</TABLE>
- ---------------
(a) For the period from October 3, 1997 (commencement of operations of Trust
Shares) through December 31, 1997.
See Notes to Financial Statements.
61
<PAGE> 65
THE INFINITY MUTUAL FUNDS, INC.
AMERISTAR LIMITED DURATION TENNESSEE TAX FREE PORTFOLIO
- --------------------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS
DECEMBER 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
S&P/MOODY'S
RATINGS MATURITY PRINCIPAL VALUE
(UNAUDITED) RATE DATE AMOUNT (NOTE 2)
----------- -------- -------- ------------- -----------
<S> <C> <C> <C> <C> <C>
MUNICIPAL BONDS -- 98.7%
ALABAMA -- 10.5%
Columbia Industrial Development Board............ A/A2 4.50%* 10/1/22 $ 2,400,000 $ 2,400,000
-----------
NEW JERSEY -- 4.8%
Morris County, GO................................ AAA/Aaa 6.50 8/1/02 1,000,000 1,101,250
-----------
TENNESSEE -- 83.4%
Chattanooga Public & Sewer Improvements, GO...... AA-/A1 7.75 8/1/01 550,000 616,688
Hamilton County Industrial Development Board,
Lease/Rent Revenue Bond, FGIC................. AAA/Aaa 5.50 9/1/02 750,000 792,188
Hamilton County Public School Improvements,
Series A, GO, Callable 10/1/02 @ 102.......... NR/Aa2 5.50 10/1/04 1,000,000 1,070,000
Johnson City Health & Educational Improvements,
Revenue Bond, Prerefunded 7/1/01 @ 102,
MBIA.......................................... AAA/Aaa 6.75 7/1/16 1,000,000 1,102,500
Knox County, GO, Callable 4/1/03 @ 102........... AA/Aa 6.50 4/1/04 1,000,000 1,121,250
Madison County, GO............................... NR/A1 4.40 4/1/02 1,015,000 1,023,881
Memphis, GO...................................... AA/Aa2 6.00 7/1/03 500,000 543,125
Memphis, GO...................................... AA/Aa 6.00 11/1/03 500,000 548,125
Memphis, GO...................................... AA/Aa2 6.00 7/1/04 1,000,000 1,096,250
Memphis Electrical System Revenue Refunding,
Revenue Bond.................................. AA/Aa 5.80 1/1/03 1,000,000 1,071,250
Metropolitan Government, Nashville & Davidson
County Energy Production, Series A,
Revenue Bond, Callable 7/1/07 @ 101, AMBAC.... AAA/Aaa 5.25 7/1/13 1,500,000 1,541,250
Metropolitan Government, Nashville & Davidson
County Energy Production Facilities, Revenue
Bond, AMBAC................................... AAA/Aaa 5.20 7/1/05 1,000,000 1,061,250
Metropolitan Government, Nashville & Davidson
County, TN Health & Education Facilities Board
Revenue,
The Vanderbilt University, Series A........... AA/Aa3 6.00 7/1/07 625,000 700,781
Metropolitan Nashville Airport Improvement,
Revenue Bond, FGIC............................ AAA/Aaa 5.00** 7/1/02 1,000,000 1,033,750
Shelby County Health, Education & Housing
Facilities Board, Hospital Revenue Bond,
Methodist Health Systems, Inc., MBIA.......... AAA/Aaa 6.25 8/1/07 1,500,000 1,713,749
Shelby County Health, Education & Housing
Facilities Board, Hospital Revenue Bond,
Methodist Health Systems, Callable 8/1/07 @
102, MBIA..................................... AAA/Aaa 5.25 8/1/14 750,000 761,250
Shelby County Refunded, Series B, GO............. AA+/Aa2 5.00*** 8/1/03 1,000,000 1,041,250
Tennessee State, Series B, GO,
Prerefunded 6/1/01 @ 102...................... AA+/Aaa 6.50 6/1/03 1,115,000 1,216,744
Tennessee State Reference, Series C, GO.......... AA+/Aaa 5.00 3/1/05 1,000,000 1,047,500
-----------
19,102,781
-----------
Total Municipal Bonds (Cost $22,302,745)........................ 22,604,031
-----------
</TABLE>
Continued
62
<PAGE> 66
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 2)
--------- -----------
<S> <C> <C>
REGULATED INVESTMENT COMPANIES -- 9.0%
AIM Tax Free Money Market Fund............................ 1,071,992 1,071,992
Dreyfus Tax Free Money Market Fund........................ 985,405 985,405
-----------
Total Regulated Investment Companies (Cost $2,057,397)...... 2,057,397
-----------
TOTAL (COST $24,360,141) (A) -- 107.7%...................... $24,661,428
===========
</TABLE>
- ---------------
Percentages indicated are based on net assets of $22,893,060.
(a) Represents cost for federal income tax purposes and differs from value by
net unrealized depreciation of securities as follows:
<TABLE>
<S> <C>
Unrealized appreciation............................. $309,338
Unrealized depreciation............................. (8,051)
--------
Net unrealized depreciation......................... $301,287
========
</TABLE>
* Variable Rate Security. Rate represents rate in effect at December 31, 1997.
** When issued security.
*** Collateral for when issued security.
AMBAC = Insured by American Municipal Bond Assurance Corp.
FGIC = Insured by Financial Guaranty Insurance Corp.
GO = General Obligation
MBIA = Insured by Municipal Bond Insurance Assoc.
See Notes to Financial Statements.
63
<PAGE> 67
THE INFINITY MUTUAL FUNDS, INC.
AMERISTAR LIMITED DURATION TENNESSEE TAX FREE PORTFOLIO
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investments in securities, at value (cost $24,360,141).... $24,661,428
Interest receivable....................................... 391,578
Deferred organization costs............................... 1,767
Prepaid expenses and other assets......................... 890
-----------
Total assets................................................ 25,055,663
-----------
LIABILITIES
Distributions payable..................................... 76,494
Payable for investment securities purchased............... 2,053,065
Accrued expenses:
Administration fees.................................... 788
Accounting fees........................................ 3,966
Custodian fees......................................... 2,819
Legal fees............................................. 11,935
Audit fees............................................. 9,489
Other.................................................. 4,047
-----------
Total liabilities........................................... 2,162,603
-----------
NET ASSETS
Investor Shares........................................... $22,893,060
===========
Shares Outstanding ($0.001 par value, 500 million shares
authorized)
Investor Shares........................................... 2,259,099
===========
NET ASSET VALUE
Investor Shares -- redemption price per share............. $10.13
------
Investor Shares -- maximum sales charge................... 3.00%
------
Investor Shares -- maximum sales charge per share
(100%/(100% -- maximum sales charge)
of net asset adjusted to nearest cent)................. $10.44
======
COMPOSITION OF NET ASSETS:
Shares of common stock, at par............................ $ 2,259
Additional paid-in capital................................ 22,584,308
Net unrealized appreciation from investments.............. 301,287*
Accumulated net realized gains from investment
transactions........................................... 5,206
-----------
Net Assets, December 31, 1997............................... $22,893,060
===========
</TABLE>
- ---------------
* Represents sum of current period's unrealized appreciation plus common trust
fund appreciation. See Note 7.
See Notes to Financial Statements.
64
<PAGE> 68
THE INFINITY MUTUAL FUNDS, INC.
AMERISTAR LIMITED DURATION TENNESSEE TAX FREE PORTFOLIO
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
FOR THE PERIOD ENDED DECEMBER 31, 1997 (a)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Interest.................................................... $800,918
Dividends................................................... 34,832
--------
Total Investment Income..................................... 835,750
Expenses
Advisory fees............................................. $ 93,669
Administration fees....................................... 28,101
Distribution fees......................................... 46,847
Custodian fees............................................ 10,226
Accounting fees........................................... 43,086
Transfer agent fees and expenses.......................... 18,871
Legal fees................................................ 16,836
Audit fees................................................ 15,523
Reports to shareholders................................... 5,259
Amortization of organization expenses..................... 1,824
Directors' fees........................................... 912
Insurance expense......................................... 795
Registration fees......................................... 3,836
Other expenses............................................ 257
---------
Total expenses before fee waivers...................... 286,042
Less: Fee waivers...................................... (102,123)
---------
Total expenses......................................... 183,919
--------
Net Investment Income....................................... 651,831
--------
REALIZED AND UNREALIZED GAINS (LOSSES) FROM INVESTMENTS
Net realized gains (losses) on investment transactions.... 5,206
Net change in unrealized appreciation (depreciation) on
investments............................................ 174,157
--------
Net Realized and Unrealized Gains (Losses) from
Investments............................................... 179,363
--------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........ $831,194
========
</TABLE>
- ---------------
(a) For the period from February 28, 1997 (commencement of operations) through
December 31, 1997.
See Notes to Financial Statements.
65
<PAGE> 69
THE INFINITY MUTUAL FUNDS, INC.
AMERISTAR LIMITED DURATION TENNESSEE TAX FREE PORTFOLIO
- --------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERIOD ENDED
DECEMBER 31, 1997 (a)
---------------------
<S> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations
Net investment income..................................... $ 651,831
Net realized gains (losses) on investment transactions.... 5,206
Net change in unrealized appreciation (depreciation) on
investments............................................ 174,157
-----------
Net increase in net assets resulting from operations...... 831,194
-----------
Distributions to Shareholders
From net investment income................................ (651,831)
-----------
Total distributions to shareholders......................... (651,831)
-----------
Capital Share Transactions
Proceeds from shares issued............................... 28,464,155
Dividends reinvested...................................... 6
Cost of shares redeemed................................... (5,750,464)
-----------
Net increase in net assets from capital share
transactions........................................... 22,713,697
-----------
Total increase (decrease) in Net Assets..................... 22,893,060
NET ASSETS
Beginning of period....................................... --
-----------
End of period............................................. $22,893,060
===========
SHARE TRANSACTIONS
Issued.................................................... 2,833,470
Reinvested................................................ 1
Redeemed.................................................. (574,372)
-----------
Change in shares.......................................... 2,259,099
===========
</TABLE>
- ---------------
(a) For the period from February 28, 1997 (commencement of operations) through
December 31, 1997.
See Notes to Financial Statements.
66
<PAGE> 70
THE INFINITY MUTUAL FUNDS, INC.
AMERISTAR FUNDS
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997
- --------------------------------------------------------------------------------
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 eleven portfolios.
The accompanying financial statements and notes relate to the AmeriStar Prime
Money Market Portfolio, the AmeriStar U.S. Treasury Money Market Portfolio, the
AmeriStar Capital Growth Portfolio, the AmeriStar Dividend Growth Portfolio, the
AmeriStar Core Income Portfolio, the AmeriStar Limited Duration Income
Portfolio, the AmeriStar Limited Duration U.S. Government Portfolio, the
AmeriStar Tennessee Tax Exempt Bond Portfolio and the AmeriStar Limited Duration
Tennessee Tax Free Portfolio (together, the "Portfolios").
The Prime Money Market Portfolio and U.S. Treasury Money Market Portfolio
both seek 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 Prime Money Market Portfolio invests in short-term money market instruments
consisting of securities issued or guaranteed by the U.S. Government or its
agencies or instrumentalities. The U.S. Treasury Money Market Portfolio invests
only in U.S. Treasury securities and in other securities guaranteed as the
principal and interest by the U.S. Government. The Capital Growth Portfolio
seeks to provide investors with capital growth by investing primarily in the
equity securities of domestic issuers. The Dividend Growth Portfolio seeks to
provide investors with current income and capital appreciation. This Portfolio
will invest primarily in dividend-paying equity securities of domestic issuers
that are expected to provide reasonable income and may have capital appreciation
potential. The Core Income Portfolio seeks to provide investors with current
income without assuming undue risk. This Portfolio will invest primarily in
investment grade, U.S. dollar denominated fixed-income securities of domestic
and foreign issuers. Under normal market conditions, the Core Income Portfolio
will invest in a portfolio of securities, except when maintaining a temporary
defensive position, that has an effective duration of 50% to 150% of that of the
Merrill Lynch Corporate Government Master Index. The Limited Duration Income
Portfolio seeks to provide investors with current income without assuming undue
risk. This Portfolio will invest primarily in investment grade, U.S. dollar
denominated fixed-income securities of domestic and foreign issuers. Under
normal market conditions, the Limited Duration Income Portfolio will invest in a
portfolio of securities that has a duration of less than four years. The Limited
Duration U.S. Government Portfolio seeks to provide investors with high current
income without assuming undue risk. This Portfolio will invest primarily in a
portfolio of U.S. Government securities that, under normal market conditions,
has an effective duration that approximates that of the Merrill Lynch Government
1 to 5 Year Bond Index. The Tennessee Tax Exempt Bond Portfolio seeks to provide
investors with current income exempt from Federal and Tennessee income taxes
without assuming undue risk. This Portfolio will invest primarily in investment
grade Tennessee Municipal Obligations without regard to maturity. The Limited
Duration Tennessee Tax Free Portfolio seeks to provide investors with current
income exempt from Federal and Tennessee income taxes without assuming undue
risk. This Portfolio will invest primarily in a portfolio of investment grade
Tennessee Municipal Obligations that, under normal market conditions, has a
duration of under five years and an effective average portfolio maturity ranging
between three and five years.
At December 31, 1997, the Portfolios were authorized to issue two classes
of shares as follows: Investor Shares and Trust Shares. See Note 10 below.
Investor Shares and Trust Shares are substantially the same, except that
Investor Shares bear the fees that are payable under the plans adopted by the
Fund's Board of Directors. Under the shareholder services plan (the "Shareholder
Services Plan") for the Prime Money Market Portfolio and U.S. Treasury Money
Market Portfolio (the "Money Market Portfolios"), fees are payable at an annual
rate of 0.25% of each Money Market Portfolio's average daily net assets
represented by Investor Shares. Under the plan adopted pursuant to Rule 12b-1
under the Act (the "Distribution Plan"), the Capital Growth Portfolio, Dividend
Growth Portfolio, Core Income Portfolio, Limited Duration Income Portfolio,
Limited Duration U.S. Government Portfolio, Tennessee Tax Exempt Bond Portfolio
and Limited Duration Tennessee Tax Free Portfolio (the "Variable Net Asset Value
Portfolios") pay fees at an annual rate of 0.25% of each Variable Net Asset
Value Portfolio's average daily net assets represented by Investor Shares. As of
December 31, 1997, both the Limited Duration U.S. Government Portfolio and the
Limited Duration Tennessee Tax Free Portfolio offered only Investor Shares.
At December 31, 1997, there were 2.0 billion shares of the Money Market
Portfolios' $0.001 par value common stock authorized, of which each Portfolio's
shares are classified into Investor Shares (500 million shares authorized per
Portfolio) and Trust Shares (500 million shares authorized per Portfolio). There
were 3.5 billion shares of the Variable Net Asset Value
Continued
67
<PAGE> 71
- --------------------------------------------------------------------------------
Portfolios' $0.001 par value common stock authorized, of which each Portfolio's
shares are classified into Investor Shares (250 million shares authorized per
Portfolio) and Trust Shares (250 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) Security Valuation:
The Money Market Portfolios' 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 Money Market Portfolios may not (a) purchase
any instrument with a remaining maturity greater than 397 days unless such
investment is subject to a demand feature, or (b) maintain a dollar-weighted
average portfolio maturity which exceeds 90 days.
The Variable Net Asset Value Portfolios' investments are valued each
business day using available market quotations or at fair value as determined by
one or more independent pricing services (collectively, the "Service") approved
by the Board of Directors. The Service may use available market quotations,
employ electronic data processing techniques and/or a matrix system to determine
valuations. Restricted securities and securities for which market quotations are
not readily available, if any, are valued at fair value using methods approved
by the Board of Directors. Unit investment trusts are valued at the published
unit value per share. Debt securities with remaining maturities of 60 days or
less are normally valued at amortized cost, which approximates market value. The
amortized cost method involves valuing a security at its cost on the date of
purchase or, in the case of securities purchased more than 60 days to maturity,
at their market value each day until the 61st day prior to maturity, and there
after assuming a constant amortization to maturity of the difference between the
principal amount due at maturity and such valuation.
B) Security Transactions and Investment Income:
Security 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. Dividend income is recorded on the ex-dividend
date.
C) Repurchase Agreements:
The Portfolios' 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 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.
D) Expenses:
The Portfolios incurred certain costs in connection with their
organization. These costs were deferred and are being amortized on a
straight-line basis over five years from their 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 while
general Fund expenses are allocated among the Fund's respective portfolios based
on the relative net assets of each Portfolio.
At December 31, 1997, deferred organization costs were $16,788, $17,904
$7,413, $4,384, $15,804, $1,586, $15,712 and $1,767 for the Prime Money Market
Portfolio, U.S. Treasury Money Market Portfolio, Capital Growth Portfolio,
Dividend Growth Portfolio, Limited Duration Income Portfolio, Limited Duration
U.S. Government Portfolio, Tennessee Tax Exempt Bond Portfolio and Limited
Duration Tennessee Tax Free Portfolio, respectively.
Continued
68
<PAGE> 72
- --------------------------------------------------------------------------------
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.
For federal income tax purposes, the following Portfolios have capital loss
carryovers as of December 31, 1997, which are available to offset future capital
gains, if any, on securities transactions to the extent provided for in the
Code:
<TABLE>
<CAPTION>
AMOUNT EXPIRES
-------- -------
<S> <C> <C>
Prime Money Market Portfolio................................ $ 889 2002
Prime Money Market Portfolio................................ 149 2004
Prime Money Market Portfolio................................ 9 2005
Core Income Portfolio....................................... 16,266 2004
Tennessee Tax Exempt Portfolio.............................. 82,323 2002
Tennessee Tax Exempt Portfolio.............................. 578,180 2004
</TABLE>
Under current tax law, capital losses realized after October 31 may be deferred
and treated as occurring on the first day of the fiscal year ending December 31,
1998. Prime Money Market Portfolio, Core Income Portfolio and Limited Duration
U.S. Government Portfolio deferred such losses of $751, $21,821 and $1,547,
respectively.
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 for the Prime Money
Market Portfolio, U.S. Treasury Money Market Portfolio, Core Income Portfolio,
Limited Duration Income Portfolio, Limited Duration U.S. Government Portfolio,
Tennessee Tax Exempt Bond Portfolio and the Limited Duration Tennessee Tax Free
Portfolio. Dividends are declared and paid quarterly for the Capital Growth
Portfolio. Dividends are declared and paid monthly for the Dividend Growth
Portfolio. For all Portfolios, 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 that 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:
Each Portfolio maintains a cash balance with its custodian and receives a
reduction of its custody fees for the amounts of interest earned on such
uninvested cash balances. For financial reporting purposes for the year ended
December 31, 1997, there were no reductions in custodian fees and expenses paid
by third parties.
NOTE 3 -- AGREEMENTS AND OTHER TRANSACTIONS WITH AFFILIATES
First American National Bank ("First American") serves as the Portfolios'
investment adviser. At December 31, 1997, Barnett Capital Advisors, Inc.
("Barnett") serves as the sub-investment adviser with respect to the Prime Money
Market Portfolio. See Note 10 below. BISYS Fund Services Limited Partnership
("BISYS") serves as the Portfolios' administrator and distributor of the
Portfolios' shares. BISYS is a subsidiary of The BISYS Group, Inc.
As investment adviser, First American manages the investments of each
Portfolio, supervises the sub-investment adviser with respect to the Prime Money
Market Portfolio and is responsible for all purchases and sales of each
Portfolio's investment securities.
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 daily 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 Money Market Portfolio and
0.15% of the average daily net assets of each Variable Net Asset Value
Portfolio.
Continued
69
<PAGE> 73
- --------------------------------------------------------------------------------
Pursuant to the Shareholder Services Plan, the Money Market Portfolios pay
BISYS 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 Money Market
Portfolios' Investor Shares. The services provided may include personal services
relating to shareholder accounts and services related to the maintenance of such
shareholder accounts. BISYS may pay financial institutions, including the
investment adviser, broker/dealers and other institutions in respect of these
services.
Pursuant to the Distribution Plan, each Variable Net Asset Value Portfolio
pays BISYS for advertising, marketing and distributing such Portfolios' Investor
Shares at an annual rate of 0.25% of the average daily net assets of such
Investor Shares. BISYS may pay financial institutions, broker/dealers and other
institutions, in respect of these services. For the year ended December 31,
1997, BISYS realized $28,514 from commissions on sales of Investor Shares of
which $28,434 was allowed to affiliated broker/dealers of the Funds.
Pursuant to the Fund Accounting Agreement, BISYS is entitled to receive a
fee at the annual rate of 0.03% of the daily net assets of each Portfolio,
provided, however, that such fee shall be subject to a minimum annual fee amount
of $48,000 per Portfolio. Also, Portfolios having two or more classes of shares
each having different net asset values or paying different daily dividends are
subject to an additional annual fee of $10,000 per additional class per
Portfolio.
Information regarding these transactions for the year ended December 31,
1997 is as follows:
<TABLE>
<CAPTION>
INVESTMENT ADVISORY FEES
-------------------------------
ANNUAL FEE AS A
PERCENTAGE OF FEES ADMINISTRATION 12b-1 FEES
AVERAGE DAILY NET VOLUNTARILY FEES VOLUNTARILY VOLUNTARILY ACCOUNTING
ASSETS WAIVED WAIVED WAIVED FEES*
----------------- ----------- ---------------- ------------ ----------
<S> <C> <C> <C> <C> <C>
Prime Money Market Portfolio..................... 0.25% $ -- $ -- $ -- $58,258
U.S. Treasury Money Market Portfolio............. 0.25% -- -- -- 63,416
Capital Growth Portfolio......................... 0.65% 141,465 -- 214,887 54,748
Dividend Growth Portfolio........................ 0.65% 65,601 -- 88,242 40,149
Core Income Portfolio............................ 0.50% 55,665 -- 120,300 51,469
Limited Duration Income Portfolio................ 0.50% 72,002 -- 192,875 47,343
Limited Duration U.S. Government Portfolio....... 0.50% 41,559 17,844 40,554 40,159
Tennessee Tax Exempt Bond Portfolio.............. 0.50% 78,469 -- 189,623 41,449
Limited Duration Tennessee Tax Free Portfolio.... 0.50% 34,669 20,607 46,847 40,140
</TABLE>
- ---------------
* Accounting fees do not include out-of-pocket expenses.
Certain officers and Directors of the Fund are "affiliated persons" (as
defined in the Act) of BISYS. 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 -- SECURITIES TRANSACTIONS
For the year ended December 31, 1997, the cost of purchases and the
proceeds from sales of portfolio securities (excluding short-term investments)
were as follows:
<TABLE>
<CAPTION>
PURCHASES SALES
------------ ------------
<S> <C> <C>
Capital Growth Portfolio.................................... $168,037,290 $124,757,203
Dividend Growth Portfolio (a)............................... $ 89,153,783 $ 48,291,070
Core Income Portfolio....................................... $ 65,642,639 $ 33,959,785
Limited Duration Income Portfolio........................... $ 42,224,609 $ 45,317,533
Limited Duration U.S. Government Portfolio (a).............. $ 27,300,694 $ 9,298,281
Tennessee Tax Exempt Bond Portfolio......................... $252,538,427 $241,195,208
Limited Duration Tennessee Tax Free Portfolio (a)........... $ 59,862,930 $ 37,401,431
</TABLE>
- ---------------
(a) For the period from February 28, 1997(commencement of operations) through
December 31, 1997.
NOTE 5 -- 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 denominated 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 Tennessee Tax Exempt Bond Portfolio and Limited Duration Tennessee Tax
Free Portfolio invest substantially all of their assets in a non-diversified
portfolio of tax-exempt debt obligations primarily consisting of securities
issued by the State of
Continued
70
<PAGE> 74
- --------------------------------------------------------------------------------
Tennessee, its municipalities, counties and other taxing districts. The issuers'
abilities to meet their obligations may be affected by Tennessee economic,
regional and political developments.
The Tennessee Tax Exempt Bond Portfolio and Limited Duration Tennessee Tax
Free Portfolio had the following concentrations by sector at December 31, 1997
(as a percentage of total investments):
<TABLE>
<CAPTION>
LIMITED DURATION
TENNESSEE TENNESSEE
TAX EXEMPT TAX FREE
BOND PORTFOLIO PORTFOLIO
-------------- ----------------
<S> <C> <C>
General Obligations......................................... 48.7% 42.3%
Utilities................................................... 17.0% 24.6%
Health & Medical............................................ 15.5% 14.5%
Educational................................................. 11.1% 2.9%
Transportation.............................................. 4.1% 4.2%
Housing..................................................... 1.1% 3.2%
Others...................................................... 1.6% --
Cash and Cash
Equivalents............................................... 0.9% 8.3%
------ ------
100.0% 100.0%
====== ======
</TABLE>
NOTE 6 -- CAPITAL SHARE TRANSACTIONS
Transactions in shares in the multi-class Portfolios are summarized below:
<TABLE>
<CAPTION>
U.S.
PRIME TREASURY
MONEY MONEY
MARKET MARKET
PORTFOLIO PORTFOLIO
------------ ------------
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1997 1997
------------ ------------
<S> <C> <C>
INVESTOR SHARES
Shares issued............................................. 203,448,543 261,551,242
Dividends reinvested...................................... 357,816 107,555
Shares redeemed........................................... (170,480,515) (262,902,182)
------------ ------------
33,325,844 (1,243,385)
============ ============
TRUST SHARES
Shares issued............................................. 143,744,469 208,119,313
Dividends reinvested...................................... 1 --
Shares redeemed........................................... (165,455,650) (203,642,569)
------------ ------------
(21,711,180) 4,476,744
============ ============
Net increase/(decrease)..................................... 11,614,664 3,233,359
============ ============
</TABLE>
<TABLE>
<CAPTION>
DIVIDEND GROWTH
CAPITAL GROWTH PORTFOLIO PORTFOLIO
---------------------------- ------------------------
FOR THE YEAR ENDED FOR THE PERIOD ENDED
DECEMBER 31, 1997 December 31, 1997 (b)
---------------------------- ------------------------
AMOUNT SHARES AMOUNT SHARES
------------- ------------ ----------- ----------
<S> <C> <C> <C> <C>
INVESTOR SHARES
Shares issued............................................. $ 101,329,579 6,860,600 $71,071,654 5,889,075
Dividends reinvested...................................... 250,838 19,516 58,646 5,646
Shares redeemed........................................... (179,442,673) (11,141,321) (80,669,327) (5,857,248)
------------- ------------ ----------- ----------
$ (77,862,256) (4,261,205) $(9,539,027) 37,473
============= ============ =========== ==========
TRUST SHARES (A)
Shares issued............................................. $ 147,332,294 10,167,911 $66,268,900 5,657,103
Dividends reinvested...................................... 19,050,221 1,504,756 10,029,575 983,212
Shares redeemed........................................... (6,416,169) (500,054) (952,168) (85,923)
------------- ------------ ----------- ----------
$ 159,966,346 11,172,613 $75,346,307 6,554,392
============= ============ =========== ==========
Net increase/(decrease)..................................... $ 82,104,090 6,911,408 $65,807,280 6,591,865
============= ============ =========== ==========
</TABLE>
Continued
71
<PAGE> 75
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
LIMITED DURATION INCOME
CORE INCOME PORTFOLIO PORTFOLIO
------------------------------- -----------------------------
FOR THE YEAR ENDED FOR THE YEAR ENDED
DECEMBER 31, 1997 DECEMBER 31, 1997
------------------------------- -----------------------------
AMOUNT SHARES AMOUNT SHARES
------------- ------------ ------------ -----------
<S> <C> <C> <C> <C>
INVESTOR SHARES
Shares issued............................................. $ 43,676,646 4,394,727 $ 18,061,691 1,811,625
Dividends reinvested...................................... 1,100,106 110,432 2,425,448 244,124
Shares redeemed........................................... (84,785,631) (8,376,453) (113,120,158) (11,327,489)
------------- ------------ ------------ -----------
$ (40,008,879) (3,871,294) $(92,633,019) (9,271,740)
============= ============ ============ ===========
TRUST SHARES (a)
Shares issued............................................. $ 74,176,796 7,300,711 $ 97,264,930 9,730,880
Dividends reinvested...................................... 229,138 22,454 377,078 37,731
Shares redeemed........................................... (3,038,585) (296,935) (12,647,715) (1,266,172)
------------- ------------ ------------ -----------
$ 71,367,349 7,026,230 $ 84,994,293 8,502,439
============= ============ ============ ===========
Net increase/(decrease)................................... $ 31,358,470 3,154,936 $ (7,638,726) (769,301)
============= ============ ============ ===========
</TABLE>
- ---------------
(a) Trust Shares commenced operations on October 3, 1997
(b) For the period from February 28, 1997 (commencement of operations) through
December 31, 1997.
<TABLE>
<CAPTION>
TENNESSEE TAX
EXEMPT BOND PORTFOLIO
---------------------------
FOR THE YEAR ENDED
DECEMBER 31, 1997
---------------------------
AMOUNT SHARES
------------- -----------
<S> <C> <C>
INVESTOR SHARES
Shares issued............................................. $ 23,465,567 2,362,712
Dividends reinvested...................................... 208,184 21,009
Shares redeemed........................................... (111,627,908) (11,118,420)
------------- -----------
$ (87,954,157) (8,734,699)
============= ===========
TRUST SHARES (a)
Shares issued............................................. $ 103,242,548 10,272,191
Dividends reinvested...................................... 24,834 2,474
Shares redeemed........................................... (3,792,891) (376,678)
------------- -----------
$ 99,474,491 9,897,987
============= ===========
Net increase/(decrease)................................... $ 11,520,334 1,163,288
============= ===========
</TABLE>
- ---------------
(a) Trust Shares commenced operations on October 3, 1997.
NOTE 7 -- COMMON TRUST CONVERSION
On March 3, 1997, the Capital Growth Portfolio, Dividend Growth Portfolio,
Core Income Portfolio, Limited Duration U.S. Government Portfolio, Tennessee Tax
Exempt Bond Portfolio and Limited Duration Tennessee Tax Free Portfolio issued
shares to acquire all of the assets and liabilities of certain common trust
funds of First American National Bank. The following is a summary of shares
issued, net assets converted, net asset value per share and unrealized
appreciation (depreciation) as of the conversion date (amounts in thousands,
except per share amounts):
<TABLE>
<CAPTION>
NET ASSET UNREALIZED
NET VALUE APPRECIATION
SHARES ASSETS PER SHARE (DEPRECIATION)
------ ------ --------- --------------
<S> <C> <C> <C> <C>
Capital Growth Portfolio.................................... 6,276 $73,749 $11.75 $20,169
Dividend Growth Portfolio................................... 5,499 54,987 10.00 12,302
Core Income Portfolio....................................... 3,314 32,904 9.93 (327)
Limited Duration U.S. Government Portfolio.................. 1,993 19,925 10.00 27
Tennessee Tax Exempt Bond Portfolio......................... 1,679 16,624 9.90 78
Limited Duration Tennessee Tax Free Portfolio............... 2,105 21,050 10.00 127
</TABLE>
Continued
72
<PAGE> 76
- --------------------------------------------------------------------------------
NOTE 8 -- ELIGIBLE DISTRIBUTIONS (UNAUDITED)
The Fund designates the following eligible distributions for the dividends
received deduction for corporations for the Fund's taxable year ended December
31, 1997.
<TABLE>
<S> <C>
Capital Growth Portfolio
Investor Shares........................................... $522,227
Trust Shares.............................................. $399,118
Dividend Growth Portfolio
Investor Shares........................................... $560,629
Trust Shares.............................................. $257,550
</TABLE>
NOTE 9 -- EXEMPT-INTEREST INCOME DESIGNATION
(UNAUDITED)
The Fund designates the following exempt-interest dividends for the Fund's
taxable year ended December 31, 1997.
<TABLE>
<S> <C>
Tennessee Tax Exempt Bond Portfolio
Investor Shares........................................ $10,636,950
Trust Shares........................................... $ 3,521,929
Limited Duration Tennessee Tax Free Portfolio
Investor Shares........................................ $ 638,420
</TABLE>
Continued
73
<PAGE> 77
- --------------------------------------------------------------------------------
The percentage break-down of the exempt-interest income by state for the
Tennessee Tax Exempt Bond Portfolio and the Limited Duration Tennessee Tax Free
for the taxable year ended December 31, 1997 were as follows:
<TABLE>
<CAPTION>
LIMITED
DURATION
TENNESSEE TAX TENNESSEE TAX
EXEMPT BOND FREE
------------- -------------
<S> <C> <C>
Alabama..................................................... -- 0.20%
Alaska...................................................... 0.77% --
Arizona..................................................... 0.14% --
Arkansas.................................................... 1.00% --
Connecticut................................................. 0.05% --
Florida..................................................... 0.66% --
Georgia..................................................... 3.39% 0.64%
Illinois.................................................... 0.29% --
Kentucky.................................................... 3.52% --
Maryland.................................................... 0.33% --
Massachusetts............................................... 0.31% --
Michigan.................................................... 0.76% --
Minnesota................................................... 0.75% --
Mississippi................................................. 0.38% --
Missouri.................................................... 0.07% --
New Jersey.................................................. 0.30% 2.14%
New York.................................................... 0.27% 0.02%
North Carolina.............................................. 0.90% --
Oklahoma.................................................... 0.44% --
Oregon...................................................... 0.18% --
Pennsylvania................................................ 0.47% --
South Carolina.............................................. 1.00% 0.05%
Tennessee................................................... 78.54% 96.95%
Texas....................................................... 2.25% --
Utah........................................................ 0.42% --
Virginia.................................................... 1.02% --
Washington.................................................. 0.54% --
Wisconsin................................................... 1.25% --
------ ------
100.00% 100.00%
====== ======
</TABLE>
NOTE 10--SUBSEQUENT EVENTS
Effective January 30, 1998, the sub-investment advisory agreement among the
funds, First American and Barnett was terminated and First American assumed the
day-to-day management of the Prime Money Market Portfolio's investments.
As of January 30, 1998, the Variable Net Asset Value Portfolios were authorized
to issue an additional class of shares -- Class B Shares -- and the Portfolios'
Investor Shares were redesignated Class A Shares. It is anticipated that the
Prime Money Market Portfolio will by authorized to issue Class B Shares by March
1998. The U.S. Treasury Money Market Portfolio currently will not offer Class B
Shares.
Continued
74
<PAGE> 78
THE INFINITY MUTUAL FUNDS, INC.
AMERISTAR PRIME MONEY MARKET PORTFOLIO
- --------------------------------------------------------------------------------
INVESTOR SHARES
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED PERIOD ENDED
DECEMBER 31, 1997 DECEMBER 31, 1996 DECEMBER 31, 1995 DECEMBER 31, 1994*
------------------- ----------------- ----------------- ------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD...... $ 1.00 $ 1.00 $ 1.00 $ 1.00
------- ------- ------- -------
Income from investment operations:
Net investment income................... 0.048 0.048 0.054 0.031
Less distributions:
Net investment income................... (0.048) (0.048) (0.054) (0.031)
------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD............ $ 1.00 $ 1.00 $ 1.00 $ 1.00
------- ------- ------- -------
Total Return.............................. 4.90% 4.88% 5.51% 3.13%(a)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's)....... $56,163 $22,836 $63,919 $82,351
Ratio of expenses to average net
assets............................... 0.87% 0.68% 0.65% 0.63%(b)
Ratio of net investment income to
average net assets................... 4.82% 4.83% 5.37% 4.00%(b)
Ratio of expenses to average net
assets**............................. 0.87%(c) 0.86% 0.90% 0.93%(b)
Ratio of net investment income to
average net assets**................. 4.82%(c) 4.65% 5.12% 3.76%(b)
</TABLE>
- ---------------
* 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) Not annualized.
(b) Annualized.
(c) There were no fee waivers or expense reimbursements for this fund during
this period.
See Notes to Financial Statements.
75
<PAGE> 79
THE INFINITY MUTUAL FUNDS, INC.
AMERISTAR PRIME MONEY MARKET PORTFOLIO
- --------------------------------------------------------------------------------
TRUST SHARES
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED PERIOD ENDED
DECEMBER 31, DECEMBER 31,
1997 1996*
------------ -----------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD........................ $ 1.00 $ 1.00
------- -------
Income from investment operations:
Net investment income..................................... 0.051 0.024
------- -------
Less distributions:
Net investment income..................................... (0.051) (0.024)
------- -------
NET ASSET VALUE, END OF PERIOD.............................. $ 1.00 $ 1.00
======= =======
Total Return................................................ 5.17% 2.46%(a)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's)......................... $26,389 $48,101
Ratio of expenses to average net assets................... 0.62% 0.65%(b)
Ratio of net investment income to average net assets...... 5.05% 4.86%(b)
Ratio of expenses to average net assets**................. 0.62% 0.65%(b)
Ratio of net investment income to average net assets**.... 5.05% 4.86%(b)
</TABLE>
- ---------------
* For the period from July 1, 1996 (commencement of operations) through
December 31, 1996.
** There were no fee waivers or expense reimbursements for this fund.
(a) Not annualized.
(b) Annualized.
See Notes to Financial Statements.
76
<PAGE> 80
THE INFINITY MUTUAL FUNDS, INC.
AMERISTAR U.S. TREASURY MONEY MARKET PORTFOLIO
- --------------------------------------------------------------------------------
INVESTOR SHARES
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED PERIOD ENDED
DECEMBER 31, 1997 DECEMBER 31, 1996 DECEMBER 31, 1995 DECEMBER 31, 1994*
----------------- ----------------- ----------------- ------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD...... $ 1.00 $ 1.00 $ 1.00 $ 1.00
------- ------- -------- --------
Income from investment operations:
Net investment income................... 0.047 0.047 0.053 0.030
------- ------- -------- --------
Less distributions:
Net investment income................... (0.047) (0.047) (0.053) (0.030)
------- ------- -------- --------
NET ASSET VALUE, END OF PERIOD............ $ 1.00 $ 1.00 $ 1.00 $ 1.00
======= ======= ======== ========
Total Return.............................. 4.78% 4.78% 5.41% 3.01%(a)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's)....... $77,065 $78,308 $168,430 $139,715
Ratio of expenses to average net
assets............................... 0.75% 0.56% 0.50% 0.54%(b)
Ratio of net investment income to
average net assets................... 4.68% 4.72% 5.28% 4.02%(b)
Ratio of expenses to average net
assets**............................. 0.75%(c) 0.74% 0.75% 0.83%(b)
Ratio of net investment income to
average net assets**................. 4.68%(c) 4.54% 5.03% 3.73%(b)
</TABLE>
- ---------------
* For the period from 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) Not annualized.
(b) Annualized.
(c) There were no fee waivers or expense reimbursements for this fund during
this period.
See Notes to Financial Statements.
77
<PAGE> 81
THE INFINITY MUTUAL FUNDS, INC.
AMERISTAR U.S. TREASURY MONEY MARKET PORTFOLIO
- --------------------------------------------------------------------------------
TRUST SHARES
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED PERIOD ENDED
DECEMBER 31, 1997 DECEMBER 31, 1996*
----------------- ------------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD........................ $ 1.00 $ 1.00
-------- --------
Income from investment operations:
Net investment income..................................... 0.049 0.024
-------- --------
Less distributions:
Net investment income..................................... (0.049) (0.024)
-------- --------
NET ASSET VALUE, END OF PERIOD.............................. $ 1.00 $ 1.00
======== ========
Total Return................................................ 5.05% 2.43%(a)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's)......................... $114,175 $109,698
Ratio of expenses to average net assets................... 0.50% 0.52%(b)
Ratio of net investment income to average net assets...... 4.94% 4.78%(b)
Ratio of expenses to average net assets**................. 0.50% 0.52%(b)
Ratio of net investment income to average net assets**.... 4.94% 4.78%(b)
</TABLE>
- ---------------
* For the period from July 1, 1996 (commencement of operations) through
December 31, 1996.
** There were no fee waivers or expense reimbursements for this fund.
(a) Not annualized.
(b) Annualized.
See Notes to Financial Statements.
78
<PAGE> 82
THE INFINITY MUTUAL FUNDS, INC.
AMERISTAR CAPITAL GROWTH PORTFOLIO
- --------------------------------------------------------------------------------
INVESTOR SHARES
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED PERIOD ENDED
DECEMBER 31, 1997 DECEMBER 31, 1996*
----------------- -------------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD........................ $ 11.32 $ 10.00
------- -------
Income from investment operations:
Net investment income..................................... 0.06 --
Net realized and unrealized gains on securities
transactions........................................... 3.40 1.32
------- -------
Net income from investment operations..................... 3.46 1.32
------- -------
Less distributions:
Net investment income..................................... (0.06) --
Net realized gains........................................ (1.92) --
------- -------
Net change in net asset value............................... 1.48 1.32
------- -------
NET ASSET VALUE, END OF PERIOD.............................. $ 12.80 $ 11.32
======= =======
Total Return (excluding sales charge)....................... 30.79% 13.20%(a)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's)......................... $ 858 $49,008
Ratio of expenses to average net assets................... 0.93% 1.20%(b)
Ratio of net investment income to average net assets...... 0.42% (0.02)%(b)
Ratio of expenses to average net assets**................. 1.18% 1.39%(b)
Ratio of net investment income to average net assets**.... 0.17% (0.21)%(b)
Portfolio Turnover (c).................................... 116% 69%
Average Commission rate paid (d).......................... $0.0800 $0.0838
</TABLE>
- ---------------
* For the period from April 1, 1996 (commencement of operations) through
December 31, 1996.
** During the period certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(a) Not annualized.
(b) Annualized.
(c) Portfolio turnover is calculated on the basis of the Fund, as a whole,
without distinguishing between the classes of shares issued.
(d) Represents the total dollar amount of commissions paid on portfolio
transactions divided by total number of portfolio shares purchased and sold
for which commissions were charged.
See Notes to Financial Statements.
79
<PAGE> 83
THE INFINITY MUTUAL FUNDS, INC.
AMERISTAR CAPITAL GROWTH PORTFOLIO
- --------------------------------------------------------------------------------
TRUST SHARES
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERIOD ENDED
DECEMBER 31, 1997*
------------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD........................ $ 14.51
--------
Income from investment operations:
Net investment income..................................... 0.02
Net realized and unrealized gains (losses) on securities
transactions........................................... 0.10
--------
Net income from investment operations..................... 0.12
--------
Less distributions:
Net investment income..................................... (0.02)
Net realized gains........................................ (1.92)
--------
Net change in net asset value............................... (1.82)
--------
NET ASSET VALUE, END OF PERIOD.............................. $ 12.69
========
Total Return (excluding sales charge)....................... 0.88%(a)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's)......................... $141,761
Ratio of expenses to average net assets................... 0.58%(b)
Ratio of net investment income to average net assets...... 0.80%(b)
Ratio of expenses to average net assets**................. 0.99%(b)
Ratio of net investment income to average net assets**.... 0.39%(b)
Portfolio Turnover (c).................................... 116%
Average Commission rate paid (d).......................... $ 0.0800
</TABLE>
- ---------------
* For the period from October 3, 1997 (commencement of operations) through
December 31, 1997.
** During the period certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(a) Not annualized.
(b) Annualized.
(c) Portfolio turnover is calculated on the basis of the Fund, as a whole,
without distinguishing between the classes of shares issued.
(d) Represents the total dollar amount of commissions paid on portfolio
transactions divided by total number of portfolio shares purchased and sold
for which commissions were charged.
See Notes to Financial Statements.
80
<PAGE> 84
THE INFINITY MUTUAL FUNDS, INC.
AMERISTAR DIVIDEND GROWTH PORTFOLIO
- --------------------------------------------------------------------------------
INVESTOR SHARES
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERIOD ENDED
DECEMBER 31, 1997*
------------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD........................ $ 10.00
-------
Income from investment operations:
Net investment income..................................... 0.65
Net realized and unrealized gains on securities
transactions........................................... 1.71
-------
Net income from investment operations..................... 2.36
-------
Less distributions:
Net investment income..................................... (0.19)
Net realized gains........................................ (1.80)
-------
Net change in net asset value............................... 0.37
-------
NET ASSET VALUE, END OF PERIOD.............................. $ 10.37
=======
Total Return (excluding sales charge)....................... 24.20%(a)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's)......................... $ 388
Ratio of expenses to average net assets................... 1.06%(b)
Ratio of net investment income to average net assets...... 2.11%(b)
Ratio of expenses to average net assets**................. 1.31%(b)
Ratio of net investment income to average net assets**.... 1.86%(b)
Portfolio Turnover(c)..................................... 86%
Average commission rate paid(d)........................... $0.0934
</TABLE>
- ---------------
* For period from February 28, 1997 (commencement of operations) through
December 31, 1997.
** During the period certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(a) Not annualized.
(b) Annualized.
(c) Portfolio turnover is calculated on the basis of the Fund, as a whole,
without distinguishing between the classes of shares issued.
(d) Represents the total dollar amount of commissions paid on portfolio
transactions divided by total number of portfolio shares purchased and sold
for which commissions were charged.
See Notes to Financial Statements.
81
<PAGE> 85
THE INFINITY MUTUAL FUNDS, INC.
AMERISTAR DIVIDEND GROWTH PORTFOLIO
- --------------------------------------------------------------------------------
TRUST SHARES
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERIOD ENDED
DECEMBER 31, 1997*
------------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD........................ $ 11.73
-------
Income from investment operations:
Net investment income..................................... 0.06
Net realized and unrealized gains (losses) on securities
transactions........................................... 0.44
-------
Net income from investment operations..................... 0.50
-------
Less distributions:
Net investment income..................................... (0.06)
Net realized gains........................................ (1.80)
-------
Total distributions......................................... (1.86)
-------
Net change in net asset value............................... (1.36)
-------
NET ASSET VALUE, END OF PERIOD.............................. $ 10.37
=======
Total Return (excluding sales charge)....................... 4.62%(a)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's)......................... $67,949
Ratio of expenses to average net assets................... 0.68%(b)
Ratio of net investment income to average net assets...... 2.15%(b)
Ratio of expenses to average net assets**................. 1.09%(b)
Ratio of net investment income to average net assets**.... 1.74%(b)
Portfolio Turnover (c).................................... 86%
Average commission rate paid (d).......................... $0.0934
</TABLE>
- ---------------
* For the period from October 3, 1997 (commencement of operations) through
December 31, 1997.
** During the period certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(a) Not annualized.
(b) Annualized.
(c) Portfolio turnover is calculated on the basis of the Fund, as a whole,
without distinguishing between the classes of shares issued.
(d) Represents the total dollar amount of commissions paid on portfolio
transactions divided by total number of portfolio shares purchased and sold
for which commissions were charged.
See Notes to Financial Statements.
82
<PAGE> 86
THE INFINITY MUTUAL FUNDS, INC.
AMERISTAR CORE INCOME MARKET PORTFOLIO
- --------------------------------------------------------------------------------
INVESTOR SHARES
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED PERIOD ENDED
DECEMBER 31, 1997 DECEMBER 31, 1996*
----------------- ------------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD........................ $ 10.00 $ 10.00
------- -------
Income from investment operations:
Net investment income..................................... 0.58 0.40
Net realized and unrealized gains on securities
transactions........................................... 0.26 --
------- -------
Net income from investment operations..................... 0.84 0.40
------- -------
Less distributions:
Net investment income..................................... (0.59) (0.40)
------- -------
Net change in net asset value............................... 0.25 0.00
------- -------
NET ASSET VALUE, END OF PERIOD.............................. $ 10.25 $ 10.00
======= =======
Total Return (excluding sales charge)....................... 8.66% 4.12%(a)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's)......................... $ 95 $38,815
Ratio of expenses to average net assets................... 0.87% 1.13%(b)
Ratio of net investment income to average net assets...... 5.74% 5.37%(b)
Ratio of expenses to average net assets**................. 1.12% 1.32%(b)
Ratio of net investment income to average net assets**.... 5.49% 5.18%(b)
Portfolio Turnover (c).................................... 56% 65%
</TABLE>
- ---------------
* For the period from April 1, 1996 (commencement of operations) through
December 31, 1996.
** During the period certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(a) Not annualized.
(b) Annualized.
(c) Portfolio turnover is calculated on the basis of the Fund, as a whole,
without distinguishing between the classes of shares issued.
See Notes to Financial Statements.
83
<PAGE> 87
THE INFINITY MUTUAL FUNDS, INC.
AMERISTAR CORE INCOME MARKET PORTFOLIO
- --------------------------------------------------------------------------------
TRUST SHARES
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERIOD ENDED
DECEMBER 31, 1997*
------------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD........................ $ 10.16
-------
Income from investment operations:
Net investment income..................................... 0.16
Net realized and unrealized gains (losses) on securities
transactions........................................... 0.09
-------
Net income from investment operations..................... 0.25
-------
Less distributions:
Net investment income..................................... (0.16)
-------
Net change in net asset value............................... 0.09
-------
NET ASSET VALUE, END OF PERIOD.............................. $ 10.25
=======
Total Return (excluding sales charge)....................... 2.45%(a)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's)......................... $71,991
Ratio of expenses to average net assets................... 0.60%(b)
Ratio of net investment income to average net assets...... 6.28%(b)
Ratio of expenses to average net assets**................. 0.92%(b)
Ratio of net investment income to average net assets**.... 5.96%(b)
Portfolio Turnover (c).................................... 56%
</TABLE>
- ---------------
* For the period from October 3, 1997 (commencement of operations) through
December 31, 1997.
** During the period certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(a) Not annualized.
(b) Annualized.
(c) Portfolio turnover is calculated on the basis of the Fund, as a whole,
without distinguishing between the classes of shares issued.
See Notes to Financial Statements.
84
<PAGE> 88
THE INFINITY MUTUAL FUNDS, INC.
AMERISTAR LIMITED DURATION INCOME PORTFOLIO
- --------------------------------------------------------------------------------
INVESTOR SHARES
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED PERIOD ENDED
DECEMBER 31, 1997 DECEMBER 31, 1996 DECEMBER 31, 1995 DECEMBER 31, 1994*
----------------- ----------------- ----------------- ------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD........ $ 9.96 $ 10.13 $ 9.66 $ 10.00
------- ------- -------- -------
Income from investment operations:
Net investment income..................... 0.59 0.58 0.59 0.38
Net realized and unrealized gains (losses)
on securities transactions............. 0.04 (0.16) 0.47 (0.34)
------- ------- -------- -------
Net income from investment operations..... 0.63 0.42 1.06 0.04
------- ------- -------- -------
Less distributions:
Net investment income..................... (0.59) (0.58) (0.59) (0.38)
Net realized gains........................ (0.01) (0.01) -- --
------- ------- -------- -------
Net change in net asset value............... 0.03 (0.17) 0.47 (0.34)
------- ------- -------- -------
NET ASSET VALUE, END OF PERIOD.............. $ 9.99 $ 9.96 $ 10.13 $ 9.66
======= ======= ======== =======
Total Return (excluding sales charge)....... 6.47% 4.28% 11.20% 0.42%(a)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's)......... $ 5,894 $98,197 $103,382 $93,189
Ratio of expenses to average net assets... 0.83% 0.83% 0.87% 0.83%(b)
Ratio of net investment income to average
net assets............................. 5.92% 5.84% 5.89% 5.27%(b)
Ratio of expenses to average net
assets**............................... 1.09% 1.08% 1.12% 1.28%(b)
Ratio of net investment income to average
net assets**........................... 5.66% 5.59% 5.64% 4.82%(b)
Portfolio Turnover (c).................... 45% 51% 28% 6%
</TABLE>
- ---------------
* For the period from March 28, 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) Not annualized.
(b) Annualized.
(c) Portfolio turnover is calculated on the basis of the Fund, as a whole,
without distinguishing between the classes of shares issued.
See Notes to Financial Statements.
85
<PAGE> 89
THE INFINITY MUTUAL FUNDS, INC.
AMERISTAR LIMITED DURATION INCOME PORTFOLIO
- --------------------------------------------------------------------------------
TRUST SHARES
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERIOD ENDED
DECEMBER 31, 1997*
------------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD........................ $ 10.00
-------
Income from investment operations:
Net investment income..................................... 0.15
Net realized and unrealized gains (losses) on securities
transactions........................................... (0.01)
-------
Net income from investment operations..................... 0.14
-------
Less distributions:
Net investment income..................................... (0.15)
Net realized gains........................................ (0.01)
-------
Net change in net asset value............................... (0.02)
-------
NET ASSET VALUE, END OF PERIOD.............................. $ 9.98
=======
Total Return (excluding sales charge)....................... 1.36%(a)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's)......................... $84,886
Ratio of expenses to average net assets................... 0.56%(b)
Ratio of net investment income to average net assets...... 6.08%(b)
Ratio of expenses to average net assets**................. 0.87%(b)
Ratio of net investment income to average net assets**.... 5.77%(b)
Portfolio Turnover (c).................................... 45%
</TABLE>
- ---------------
* For the period from October 3, 1997 (commencement of operations) through
December 31, 1997.
** During the period certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(a) Not annualized.
(b) Annualized.
(c) Portfolio turnover is calculated on the basis of the Fund, as a whole,
without distinguishing between the classes of shares issued.
See Notes to Financial Statements.
86
<PAGE> 90
THE INFINITY MUTUAL FUNDS, INC.
AMERISTAR LIMITED DURATION U.S. GOVERNMENT PORTFOLIO
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERIOD ENDED
DECEMBER 31, 1997*
------------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD........................ $ 10.00
-------
Income from investment operations:
Net investment income..................................... 0.42
Net realized and unrealized gains on securities
transactions........................................... 0.12
-------
Net income from investment operations..................... 0.54
-------
Less distributions:
Net investment income..................................... (0.42)
-------
Net change in net asset value............................... 0.12
-------
NET ASSET VALUE, END OF PERIOD.............................. $ 10.12
=======
Total Return (excluding sales charge)....................... 5.54%(a)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's)......................... $20,103
Ratio of expenses to average net assets................... 1.00%(b)
Ratio of net investment income to average net assets...... 5.34%(b)
Ratio of expenses to average net assets**................. 1.62%(b)
Ratio of net investment income to average net assets**.... 4.72%(b)
Portfolio Turnover........................................ 52%
</TABLE>
- ---------------
* For the period from February 28, 1997 (commencement of operations) through
December 31, 1997.
** During the period certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(a) Not annualized.
(b) Annualized.
See Notes to Financial Statements.
87
<PAGE> 91
THE INFINITY MUTUAL FUNDS, INC.
AMERISTAR TENNESSEE TAX EXEMPT BOND PORTFOLIO
- --------------------------------------------------------------------------------
INVESTOR SHARES
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED PERIOD ENDED
DECEMBER 31, 1997 DECEMBER 31, 1996 DECEMBER 31, 1995 DECEMBER 31, 1994*
----------------- ----------------- ----------------- ------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD............................. $ 9.90 $ 10.19 $ 9.40 $ 10.00
------- ------- ------- -------
Income from investment operations:
Net investment income.............. 0.44 0.42 0.45 0.34
Net realized and unrealized gains
(losses) on securities
transactions.................... 0.25 (0.29) 0.79 (0.60)
------- ------- ------- -------
Net income (loss) from investment
operations...................... 0.69 0.13 1.24 (0.26)
------- ------- ------- -------
Less distributions:
Net investment income.............. (0.41) (0.42) (0.45) (0.34)
------- ------- ------- -------
Net change in net asset value........ 0.28 (0.29) 0.79 (0.60)
------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD....... $ 10.18 $ 9.90 $ 10.19 $ 9.40
======= ======= ======= =======
Total Return (excluding sales
charge)............................ 7.13% 1.39% 13.40% (2.63)%(a)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000's)......................... $ 1,669 $88,084 $94,143 $86,127
Ratio of expenses to average net
assets.......................... 0.84% 0.86% 0.87% 0.82%(b)
Ratio of net investment income to
average net assets.............. 4.13% 4.29% 4.52% 4.61%(b)
Ratio of expenses to average net
assets**........................ 1.09% 1.11% 1.12% 1.18%(b)
Ratio of net investment income to
average net assets**............ 3.88% 4.04% 4.27% 4.25%(b)
Portfolio Turnover (c)............. 253% 219% 188% 0.41%
</TABLE>
- ---------------
* For the period from March 28, 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) Not annualized.
(b) Annualized.
(c) Portfolio turnover is calculated on the basis of the Fund, as a whole,
without distinguishing between the classes of shares issued.
See Notes to Financial Statements.
88
<PAGE> 92
THE INFINITY MUTUAL FUNDS, INC.
AMERISTAR TENNESSEE TAX EXEMPT BOND PORTFOLIO
- --------------------------------------------------------------------------------
TRUST SHARES
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERIOD ENDED
DECEMBER 31, 1997*
------------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD........................ $ 10.05
Income from investment operations:.......................... --
Net investment income..................................... 0.10
Net realized and unrealized gains (losses) on securities
transactions........................................... 0.13
--------
Net income from investment operations..................... 0.23
--------
Less distributions:
Net investment income..................................... (0.10)
--------
Net change in net asset value............................... 0.13
--------
NET ASSET VALUE, END OF PERIOD.............................. $ 10.18
========
Total Return (excluding sales charge)....................... 2.35%(a)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's)......................... $100,742
Ratio of expenses to average net assets................... 0.56%(b)
Ratio of net investment income to average net assets...... 4.22%(b)
Ratio of expenses to average net assets**................. 0.87%(b)
Ratio of net investment income to average net assets**.... 3.91%(b)
Portfolio Turnover (c).................................... 253%
</TABLE>
- ---------------
* For the period from October 3, 1997 (commencement of operations) through
December 31, 1997.
** During the period certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(a) Not annualized.
(b) Annualized.
(c) Portfolio turnover is calculated on the basis of the Fund, as a whole,
without distinguishing between the classes of shares issued.
See Notes to Financial Statements.
89
<PAGE> 93
THE INFINITY MUTUAL FUNDS, INC.
AMERISTAR LIMITED DURATION TENNESSEE TAX FREE PORTFOLIO
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERIOD ENDED
DECEMBER 31, 1997*
------------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD........................ $ 10.00
-------
Income from investment operations:
Net investment income..................................... 0.29
Net realized and unrealized gains on securities
transactions........................................... 0.13
-------
Net income from investment operations..................... 0.42
-------
Less distributions:
Net investment income..................................... (0.29)
-------
Net change in net asset value............................... 0.13
-------
NET ASSET VALUE, END OF PERIOD.............................. $ 10.13
=======
Total Return (excluding sales charge)....................... 4.26%(a)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's)......................... $22,893
Ratio of expenses to average net assets................... 0.98%(b)
Ratio of net investment income to average net assets...... 3.48%(b)
Ratio of expenses to average net assets**................. 1.52%(b)
Ratio of net investment income to average net assets**.... 2.94%(b)
Portfolio Turnover........................................ 179%
</TABLE>
- ---------------
* For the period from February 28, 1997 (commencement of operations) through
December 31, 1997.
** During the period certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(a) Not annualized.
(b) Annualized.
See Notes to Financial Statements.
90
<PAGE> 94
INDEPENDENT AUDITORS' REPORT
- --------------------------------------------------------------------------------
The Shareholders and Board of Directors of
The Infinity Mutual Funds, Inc.--
The AmeriStar Mutual Funds:
We have audited the accompanying statements of assets and liabilities of The
Infinity Mutual Funds, Inc. -- The AmeriStar Mutual Funds (AmeriStar Money
Market Portfolio, AmeriStar U.S. Treasury Money Market Portfolio, AmeriStar
Capital Growth Portfolio, AmeriStar Dividend Growth Portfolio, AmeriStar Limited
Duration U.S. Government Portfolio, AmeriStar Limited Duration Income Portfolio,
AmeriStar Limited Duration Tennessee Tax Free Portfolio, AmeriStar Core Income
Portfolio, and AmeriStar Tennessee Tax Exempt Bond Portfolio) including the
schedules of portfolio investments, as of December 31, 1997, and the related
statements of operations, statements of changes in net assets and the financial
highlights for each of the periods indicated herein. These financial statements
and the financial highlights are the responsibility of The Infinity Mutual
Funds, Inc.'s management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and 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 verification of securities owned as of
December 31, 1997, by confirmation with the custodian and brokers and other
appropriate audit procedures. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of each
of the aforementioned portfolios comprising The Infinity Mutual Funds, Inc. at
December 31, 1997, the results of their operations, the changes in their net
assets and the financial highlights for each of the periods indicated herein, in
conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
Columbus, Ohio
February 20, 1998
91
<PAGE> 95
THE INFINITY MUTUAL FUNDS, INC.
AMERISTAR MUTUAL FUNDS
3435 Stelzer Road * Columbus, Ohio 43219
INVESTMENT ADVISER
First American National Bank
315 Deaderick Street * Nashville, TN 37237-0401
ADMINISTRATOR
BISYS Fund Services Limited Partnership
3435 Stelzer Road * Columbus, OH 43219
DISTRIBUTOR
BISYS Fund Services Limited Partnership
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 43219
BISYS Fund Services Limited Partnership
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.
<PAGE> 96
[AMERISTAR MUTUAL FUNDS LOGO]
HELPING PEOPLE PLAN
FOR A BRIGHTER FUTURE. (SM)
760007 2/98
BULK RATE
U.S. POSTAGE
PAID
COLUMBUS, OH
PERMIT NO. 688
