<PAGE> 1
CORRESPONDENT CASH RESERVES
- --------------------------------------------------------------------------------
To Our Shareholders:
We are pleased to send you this annual report, which covers the 12 months ended
December 31, 1997.
The Correspondent Cash Reserves Money Market and Tax Free Portfolios are
open-ended, diversified money market funds that seek to provide investors with a
high level of current income, while preserving capital and maintaining
liquidity.* Income provided by the Tax-Free Portfolio is intended to be exempt
from federal income tax.
The Money Market Portfolio, which exceeds $1.2 billion in assets under
management, invests in a diversified selection of very high quality, short-term
money market obligations--such as U.S. Treasury bills, short-term corporate
obligations and commercial paper. The Tax Free Portfolio, which reached its
one-year anniversary on October 7, 1997, invests in a wide variety of
short-term, tax-exempt securities issued by state, county and municipal
authorities.** Both Portfolios may invest in instruments rated in either of the
top two rating categories established by nationally recognized services.
Following this letter, you'll find a pie-chart analysis of the Portfolios, as
well as their performance for the 12-month period. A schedule of the Portfolios'
investments is included in the financial report that follows the performance
table. All investments are actively monitored to ensure that they maintain their
quality status and suitability.
ECONOMIC OVERVIEW
After surging at an annual growth rate of 5.9% in the first quarter of 1997, the
U.S. economy slowed to a more sustainable pace as the year drew to a close.
Unemployment remained low throughout 1997, yet despite hints of inflationary
pressures from steady wage growth, the consumer price index (CPI), a standard
measure of inflation, rose a tame 1.7% for the year. And despite fears of future
corporate earnings shortfalls resulting from the spreading crisis in Asia, the
economy ended 1997 in solid shape.
The Federal Reserve Board (the Fed), whose actions have an enormous impact on
interest rates and the economy as a whole, mostly stayed on the sidelines. The
sizzling growth rate in the first quarter prompted the Fed to raise interest
rates a mere 25 basis points (0.25%) in late March--after which the Fed left
rates untouched for the remainder of the year.
INTEREST RATE ENVIRONMENT
While long-term interest rates were exceptionally volatile at times, yields on
the type of short-term securities held by the Portfolios were much more tranquil
and remained relatively quiet throughout 1997. Also, the short end of the
fixed-income yield curve flattened considerably in the final quarter of the
year; securities with 13-month maturities, the longest that the Portfolios are
permitted to hold, offered only about five basis points (0.05%) more in yield
than one-month instruments.
Although yields on money-market funds in general were not high in absolute
terms, the real returns (yield minus the rate of inflation) provided to
shareholders were quite comfortable by historical standards. Both of our
Portfolios offered yields that far outdistanced increases in the cost of living,
as measured by the CPI.
INVESTMENT STRATEGY
The Money Market Portfolio was positioned in a bullish stance for the entire
year. In essence, we kept the Portfolio's average weighted maturity at between
five and ten days longer than the overall market's average. As of December 31,
1997, the Money Market Portfolio's average weighted maturity was 64 days.
<PAGE> 2
REPORT FROM THE INVESTMENT ADVISER -- (continued)
- --------------------------------------------------------------------------------
We believed that inflation would remain under control and that short-term
interest rates would hold steady within a narrow range or go lower. When our
expectations were met and interest rates fell, our "long" position gave us a
slight edge. (The value of fixed-income instruments generally rises when
interest rates fall.)
As of December 31, 1997, the Tax Free Portfolio maintained an average weighted
maturity of 49 days, a maturity that allowed us to meet the liquidity needs of
our shareholders. The Portfolio continues to be managed to provide relative
safety, convenience and federal tax-free income to investors.*
OUR OUTLOOK FOR THE NEXT SIX MONTHS
For the first half of 1998, we expect to keep our average maturity on the long
side, relative to the market in general. If anything, interest rates are poised
to go lower, rather than higher, and this would benefit a long position such as
ours. We see few indications that the economy will have trouble maintaining
slow, steady growth--at least in the near term. However, we do believe that the
turmoil sweeping across Asia probably will have some effect on the U.S. economy,
as well. But while the stock and bond markets are prone to respond sharply and
quickly to any such news, or even to the perception of changing circumstances,
money market funds such as ours generally react less dramatically.
We will continue to keep a careful watch on economic and market conditions and
take action accordingly, with our focus squarely on providing you with
Portfolios that offer liquidity and a high level of creditworthiness.
- ---------------
* The Tax Free Portfolio's income may be subject to certain state and local
taxes and, depending on your tax status, the federal alternative minimum tax.
** An investment in the Portfolios is neither insured nor guaranteed by the U.S.
Government. Yields will fluctuate, and there can be no assurance that the
Portfolios will be able to maintain a stable net asset value (NAV) of $1.00
per share.
<PAGE> 3
REPORT FROM THE INVESTMENT ADVISER -- (continued)
- --------------------------------------------------------------------------------
Portfolio Composition*
Money Market Portfolio Tax Free Portfolio
Bank Notes (4%) Commercial Paper (29%)
Commercial Paper (44.8%) Municipal Bonds (71%)
Certificate of Deposit (20%)
Cash (15%)
U.S. Government Agencies (9%)
Repurchase Agreements (6%)
*The composition of the Portfolios is subject to change. Percentages are based
on net assets.
PERFORMANCE
As of December 31, 1997, the 7-day and 30-day yields for the Portfolios were as
follows:
<TABLE>
<CAPTION>
7-DAY 30-DAY
YIELD YIELD
----- ------
<S> <C> <C>
Money Market Portfolio*............................ 4.87% 4.79%
Tax Free Portfolio*................................ 3.16% 3.01%
</TABLE>
* For the current 7-day yield as of December 31, 1997, the Portfolio's service
contractors voluntarily waived a portion of their fees. If the service
contractors had not waived a portion of their fees, the 7-day yield shown
would have been 4.59% for the Money Market Portfolio and 2.74% for the Tax
Free Portfolio. These voluntary waivers may be modified or terminated at any
time, which would reduce the performance. Yields will vary with market
conditions, and past performance is not a guarantee of future results.
Investments in the Portfolios are neither insured nor guaranteed by the U.S.
Government. Yields will fluctuate, and there can be no assurance that the
Portfolios will be able to maintain a stable net asset value of $1.00 per
share.
<PAGE> 4
THE INFINITY MUTUAL FUNDS, INC.
CORRESPONDENT CASH RESERVES 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>
U.S. GOVERNMENT AGENCY OBLIGATIONS -- 9.0%
Federal Home Loan Bank....................... Aaa/AAA** 5.80% 2/5/98 $ 6,000,000 $ 6,000,000
Federal Home Loan Bank....................... Aaa/AAA** 5.86 8/4/98 7,000,000 7,000,000
Federal Home Loan Bank....................... Aaa/AAA** 5.89 10/2/98 7,500,000 7,500,000
Federal Home Loan Bank....................... Aaa/AAA** 5.85 10/15/98 6,000,000 6,000,000
Federal Home Loan Bank....................... Aaa/AAA** 5.84 10/20/98 4,350,000 4,350,000
Federal Home Loan Bank....................... Aaa/AAA** 5.91* 10/23/98 5,000,000 4,998,826
Federal National Mortgage Assoc.............. Aaa/AAA** 5.54* 6/18/98 9,000,000 8,997,542
Student Loan Marketing Assoc................. Aaa/AAA** 5.75 1/8/98 4,000,000 4,000,000
Student Loan Marketing Assoc................. Aaa/AAA** 5.75 1/23/98 5,000,000 5,000,000
Student Loan Marketing Assoc................. Aaa/AAA** 5.65* 2/19/98 15,000,000 15,000,001
Student Loan Marketing Assoc................. Aaa/AAA** 5.70* 3/19/98 10,000,000 10,000,000
Student Loan Marketing Assoc................. Aaa/AAA** 5.85 3/20/98 5,850,000 5,850,000
Student Loan Marketing Assoc................. Aaa/AAA** 5.79* 4/16/98 15,000,000 15,000,000
Student Loan Marketing Assoc................. Aaa/AAA** 5.85 11/20/98 4,000,000 4,000,000
--------------
Total U.S. Government Agency Obligations (cost
$103,696,369)................................ 103,696,369
--------------
BANK NOTES--4.2%
DOMESTIC--4.2%
Bank of America, Illinois.................... A-1+/P-1 6.15 5/5/98 5,000,000 4,999,988
Comerica Bank N.A., Detroit.................. A-1/P-1 5.98* 10/21/98 8,000,000 7,997,495
National Australia Bank Ltd.................. A-1+/P-1 5.85 10/5/98 7,000,000 6,999,987
PNC Bank, NA................................. A-1/P-1 6.12* 7/2/98 6,000,000 5,997,664
PNC Bank, NA................................. A-1/P-1 5.68* 9/23/98 12,000,000 11,994,112
Wachovia Bank, North Carolina................ A-1+/P-1 5.81 10/8/98 10,000,000 9,997,438
--------------
Total Bank Notes
(cost $47,986,684)........................... 47,986,684
--------------
CERTIFICATES OF DEPOSIT -- 20.3%
DOMESTIC -- 4.1%
Bankers Trust NY Corp........................ A-1/P-1 6.00 3/24/98 5,000,000 4,998,713
Bankers Trust NY Corp........................ A-1/P-1 6.28 4/30/98 10,000,000 10,000,622
Bankers Trust NY Corp........................ A-1/P-1 6.19 5/26/98 5,000,000 4,999,621
Bankers Trust NY Corp........................ A-1/P-1 6.16 6/2/98 7,000,000 6,999,166
Bankers Trust NY Corp........................ A-1/P-1 6.00 7/7/98 5,000,000 5,001,715
</TABLE>
Continued
4
<PAGE> 5
<TABLE>
<CAPTION>
S&P/MOODY'S AMORTIZED
RATINGS MATURITY PRINCIPAL COST
(UNAUDITED) RATE DATE AMOUNT (NOTE 2)
---------------- ---- --------- ----------- --------------
<S> <C> <C> <C> <C> <C>
CERTIFICATES OF DEPOSIT, CONTINUED:
DOMESTIC, CONTINUED:
Bankers Trust NY Corp........................ A-1/P-1 5.97% 8/28/98 $ 5,000,000 $ 4,999,061
Greenwood Trust Co........................... A-1/P-1 5.66 1/15/98 10,000,000 10,000,000
--------------
46,998,898
--------------
YANKEE -- 16.2%
ABN AMRO Bank, N.V........................... A-1+/P-1 6.14 5/1/98 10,000,000 9,999,339
Barclays Bank, PLC........................... A-1+/P-1 5.90 10/22/98 5,000,000 4,998,195
Canadian Imperial Bank of Commerce........... A-1+/P-1 5.76 2/27/98 4,000,000 3,999,456
Canadian Imperial Bank of Commerce........... A-1+/P-1 5.95 6/29/98 5,000,000 4,998,711
Credit Agricole Indosuez..................... A-1+/P-1 5.90 10/26/98 5,000,000 5,000,000
Credit Suisse First Boston................... A-1+/P-1 5.96* 10/5/98 20,000,000 20,000,000
Creditanstalt Bankverein..................... A-1/P-1 5.68 3/17/98 5,000,000 4,999,701
Creditanstalt Bankverein..................... A-1/P-1 6.08 6/4/98 6,000,000 6,001,717
Deutsche Bank AG............................. A-1+/P-1 5.64 1/16/98 5,000,000 4,999,995
Deutsche Bank AG............................. A-1+/P-1 5.92 11/17/98 5,000,000 5,000,000
National Bank of Canada...................... A-1/P-1 5.87 8/10/98 5,000,000 5,000,295
National Bank of Canada...................... A-1/P-1 5.92 11/19/98 4,800,000 4,800,366
National Bank of Canada...................... A-1/P-1 5.92 11/20/98 3,000,000 3,000,952
National Westminster Bank PLC................ A-1+/P-1 5.79 7/30/98 12,000,000 11,999,339
Rabobank Nederland........................... A-1+/P-1 5.98 3/20/98 5,000,000 4,999,796
Royal Bank of Canada......................... A-1+/P-1 5.64 10/1/98 7,000,000 6,997,494
Skandinavian Enskilada Banken................ A-2/P-1 5.91 1/5/98 20,000,000 20,000,023
Societe Generale............................. A-1+/P-1 5.72 1/6/98 5,000,000 4,999,967
Societe Generale............................. A-1+/P-1 5.85 3/3/98 2,000,000 1,999,872
Societe Generale............................. A-1+/P-1 6.35 4/15/98 4,000,000 4,000,507
Societe Generale............................. A-1+/P-1 6.20 5/12/98 3,000,000 3,000,276
Societe Generale............................. A-1+/P-1 5.90 6/16/98 5,000,000 4,997,805
Societe Generale............................. A-1+/P-1 5.89 7/24/98 10,000,000 10,001,936
Societe Generale............................. A-1+/P-1 5.76 8/4/98 6,000,000 5,998,308
Societe Generale............................. A-1+/P-1 5.97 9/15/98 6,000,000 5,999,742
Societe Generale............................. A-1+/P-1 5.82 10/7/98 4,000,000 3,999,122
</TABLE>
Continued
5
<PAGE> 6
<TABLE>
<CAPTION>
S&P/MOODY'S AMORTIZED
RATINGS MATURITY PRINCIPAL COST
(UNAUDITED) RATE DATE AMOUNT (NOTE 2)
---------------- ---- --------- ----------- --------------
<S> <C> <C> <C> <C> <C>
CERTIFICATES OF DEPOSIT, CONTINUED:
YANKEE, CONTINUED:
Societe Generale............................. A-1+/P-1 5.77% 10/9/98 $ 2,000,000 $ 1,999,558
Societe Generale............................. A1+/P-1 5.85 12/17/98 4,000,000 3,996,699
Swiss Bank Corp.............................. A-1+/P-1 5.85 7/17/98 5,000,000 4,998,450
Swiss Bank Corp.............................. A-1+/P-1 5.88 11/20/98 4,000,000 3,998,984
--------------
186,786,605
--------------
Total Certificates of Deposit
(cost $233,785,503).......................... 233,785,503
--------------
COMMERCIAL PAPER -- 44.8%
ASSET BACKED -- 17.2%
Asset Securitization Cooperative Corp. (b)... A-1+/P-1 6.20 1/7/98 22,000,000 21,977,267
Atlantis One Funding (b)..................... A-1+/P-1 6.10 1/29/98 25,000,000 24,881,389
Eiger Capital Corp. (b)...................... A-1+/P-1 5.84 2/20/98 20,000,000 19,837,778
Falcon Asset Securitization Corp. (b)........ A-1/P-1 5.75 1/20/98 15,000,000 14,954,479
Falcon Asset Securitization Corp. (b)........ A-1/P-1 5.57 1/27/98 19,475,000 19,396,656
New Center Asset Trust....................... A-1/P-1 6.75 1/2/98 40,000,000 39,992,499
New Center Asset Trust....................... A-1/P-1 5.77 3/17/98 10,000,000 9,879,792
Preferred Receivables Funding Corp. (b)...... A-1/P-1 5.65 1/13/98 18,000,000 17,966,100
Preferred Receivables Funding Corp. (b)...... A-1/P-1 5.75 1/27/98 7,400,000 7,369,269
Triple A One Funding......................... A-1/P-1 5.75 1/5/98 15,000,000 14,990,417
Triple A One Funding......................... A-1/P-1 5.92 1/7/98 7,000,000 6,993,093
--------------
198,238,739
--------------
AUTO-TRUCK -- 1.3%
Ford Motor Credit Corp....................... A-1/P-1 6.12 1/8/98 15,000,000 14,982,150
--------------
BANKING -- 12.7%
Banque et Caisse d'Epargne de L'Etat......... A-1+/P-1 5.70 1/21/98 10,000,000 9,968,333
Banque et Caisse d'Epargne de L'Etat......... A-1+/P-1 5.68 2/17/98 10,000,000 9,925,844
BBL North America, Inc....................... A-1/P-1 6.80 1/2/98 30,000,000 29,994,334
BBL North America, Inc....................... A-1/P-1 5.69 1/20/98 10,000,000 9,969,969
BBL North America, Inc....................... A-1/P-1 5.67 2/13/98 10,000,000 9,932,275
Credit Agricole Indosuez North America
Inc........................................ A-1+/P-1 5.59 1/14/98 10,000,000 9,979,814
Morgan (J.P.) & Co., Inc..................... A-1+/P-1 5.77 2/10/98 10,000,000 9,935,889
Nordbanken NA, Inc........................... A-1/P-1 5.84 1/16/98 15,000,000 14,963,500
Nordbanken NA, Inc........................... A-1/P-1 5.53 2/17/98 5,000,000 4,963,901
</TABLE>
Continued
6
<PAGE> 7
<TABLE>
<CAPTION>
S&P/MOODY'S AMORTIZED
RATINGS MATURITY PRINCIPAL COST
(UNAUDITED) RATE DATE AMOUNT (NOTE 2)
---------------- ---- --------- ----------- --------------
<S> <C> <C> <C> <C> <C>
COMMERCIAL PAPER, CONTINUED:
BANKING, CONTINUED:
San Paolo U.S. Financial Co.................. A-1/P-1 5.58% 1/5/98 $ 7,000,000 $ 6,995,660
Unifunding................................... A-1/P-1 5.68 2/11/98 20,000,000 19,870,622
Unifunding................................... A-1/P-1 5.57 4/20/98 10,000,000 9,831,353
--------------
146,331,494
--------------
BROKER-DEALER -- 3.4%
Goldman Sachs Group LP....................... A-1+/P-1 6.00 1/12/98 15,000,000 14,972,500
Lehman Brothers Holdings Inc................. A-1/P-2 6.25 1/30/98 19,000,000 18,904,341
Morgan Stanley Group Inc..................... A-1/P-1 5.70 1/14/98 5,000,000 4,989,708
--------------
38,866,549
--------------
BUILDING MATERIALS -- 0.4%
Sherwin-Williams Co. (b)..................... A-1/P-1 6.05 1/9/98 4,500,000 4,493,950
--------------
CHEMICALS -- 1.6%
Monsanto Co.................................. A-1/P-1 5.82 1/15/98 18,000,000 17,959,260
--------------
FINANCE -- INDEPENDENT -- 0.9%
National Rural Utilities Co-op Finance
Corp....................................... A-1+/P-1 5.72 2/24/98 11,000,000 10,905,620
--------------
FINANCE-CONDUIT -- 1.7%
Commerzbank US Finance....................... A-1+/P-1 5.98 1/12/98 15,000,000 14,972,592
MetLife Funding Inc.......................... A-1+/P-1 6.05 2/5/98 5,000,000 4,970,590
--------------
19,943,182
--------------
FOOD, BEVERAGE & TOBACCO -- 0.3%
Hershey Foods Corp........................... A-1/P-1 5.95 1/15/98 3,000,000 2,993,058
--------------
HEALTH CARE -- 1.4%
Warner Lambert Co............................ A-1+/P-1 6.05 1/5/98 16,215,000 16,204,100
--------------
</TABLE>
Continued
7
<PAGE> 8
<TABLE>
<CAPTION>
S&P/MOODY'S AMORTIZED
RATINGS MATURITY PRINCIPAL COST
(UNAUDITED) RATE DATE AMOUNT (NOTE 2)
---------------- ---- --------- ----------- --------------
<S> <C> <C> <C> <C> <C>
COMMERCIAL PAPER, CONTINUED:
TELECOMMUNICATIONS -- 3.9%
Bell Atlantic Financial Services Inc......... A-1/P-1 5.80% 1/5/98 $15,510,000 $ 15,500,005
Bell Atlantic Network Funding Corp........... A-1+/P-1 6.15 1/14/98 19,000,000 18,957,804
BellSouth Telecommunications................. A-1+/P-1 6.00 1/9/98 10,000,000 9,986,667
--------------
44,444,476
--------------
Total Commercial Paper
(cost $515,362,578).......................... 515,362,578
--------------
SHORT-TERM CORPORATE OBLIGATIONS -- 14.7%
AUTO-TRUCK -- 0.3%
Ford Motor Credit Co......................... A-1/P-1 6.25 2/26/98 4,000,000 4,002,350
--------------
BANKING -- 1.3%
First National Bank of Chicago............... A-1+/P-1 5.61* 7/30/98 9,600,000 9,597,326
SunTrust Bank, Central Florida............... A-1+/P-1 5.83 7/14/98 5,000,000 4,998,326
--------------
14,595,652
--------------
BROKER-DEALER -- 8.5%
Bear Stearns Companies, Inc.................. A-1/P-1 5.77* 2/6/98 10,000,000 10,000,000
Bear Stearns Companies, Inc.................. A-1/P-1 5.67* 2/12/98 10,000,000 10,000,000
Bear Stearns Companies, Inc.................. A-1/P-1 5.72* 4/24/98 5,000,000 5,000,000
Bear Stearns Companies, Inc.................. A-1/P-1 6.00 6/22/98 5,000,000 5,000,000
Bear Stearns Companies, Inc.................. A-1/P-1 5.67* 6/26/98 4,000,000 4,000,000
Bear Stearns Companies, Inc.................. A-1/P-1 5.86* 7/8/98 8,000,000 8,000,000
Bear Stearns Companies, Inc.................. A-1/P-1 5.84* 8/5/98 7,000,000 7,000,000
Lehman Brothers Holdings, Inc................ A-1/P-2 5.70* 5/15/98 10,000,000 10,000,000
Merrill Lynch & Co., Inc..................... A-1+/P-1 5.96 10/9/98 8,000,000 8,000,000
Merrill Lynch & Co., Inc..................... A-1+/P-1 5.68* 2/12/98 5,000,000 4,999,888
Merrill Lynch & Co., Inc..................... A-1/P-1 5.55* 12/8/98 4,000,000 4,000,000
Morgan Stanley Group, Inc.................... A-1/P-1 6.23* 1/20/99 17,000,000 16,999,999
Morgan Stanley Group, Inc.................... A-1/P-1 5.82* 5/18/98 5,000,000 5,000,000
--------------
97,999,887
--------------
COMPUTER -- 1.7%
IBM Credit Corp.............................. A-1/P-1 5.76* 10/23/98 10,000,000 9,994,520
IBM Credit Corp.............................. A-1/P-1 5.86* 11/10/98 10,000,000 10,000,000
--------------
19,994,520
--------------
</TABLE>
Continued
8
<PAGE> 9
<TABLE>
<CAPTION>
S&P/MOODY'S AMORTIZED
RATINGS MATURITY PRINCIPAL COST
(UNAUDITED) RATE DATE AMOUNT (NOTE 2)
---------------- ---- --------- ----------- --------------
<S> <C> <C> <C> <C> <C>
SHORT-TERM CORPORATE OBLIGATIONS, CONTINUED:
INSURANCE -- 0.9%
Prudential Funding Corp...................... A-1/P-1 5.66% 1/6/98 $10,000,000 $ 10,000,000
--------------
MISCELLANEOUS -- 2.0%
Beta Finance Inc............................. A-1+/P-1 5.80 1/13/98 5,000,000 5,000,000
Beta Finance Inc............................. A-1+/P-1 5.82 1/28/98 5,000,000 5,000,000
Beta Finance Inc............................. A-1+/P-1 5.83 2/4/98 5,000,000 5,000,758
Beta Finance Inc............................. A-1+/P-1 6.12 6/10/98 8,000,000 8,000,000
--------------
23,000,758
--------------
Total Short-Term Corporate Obligations
(cost $169,593,167).......................... 169,593,167
--------------
REPURCHASE AGREEMENTS -- 6.4%
HSBC Repo, dated 12/31/97, (Collateralized by
$14,795,000 U.S. Treasury Bonds, 10.0%, due
5/15/10, fair value -- $18,678,687)........ 6.50 1/2/98 18,131,000 18,131,000
J P Morgan Securities, dated 12/31/97,
(Collaterized by $45,615,000 U.S. Treasury
Notes, 5.13%, due 4/30/98, fair
value -- $46,290,102)...................... 5.75 1/2/98 45,000,000 45,000,000
J P Morgan Securities, dated 12/31/97,
(Collaterized by $9,832,000 U.S. Treasury
Notes, 8.88%, due 11/15/98, fair
value -- $10,309,835)...................... 5.75 1/2/98 10,000,000 10,000,000
--------------
Total Repurchase Agreements
(cost $73,131,000)........................... 73,131,000
--------------
Total
(cost $1,143,555,301)(a) -- 99.4%........... $1,143,555,301
==============
</TABLE>
- ---------------
Percentages indicated are based on net assets of $1,151,011,868.
(a) Cost for federal income tax and financial reporting purposes are the same.
(b) Represents a restricted security, purchased under Rule 144A, which is exempt
from registration under the Securities Act of 1933, as amended. These
securities have been deemed liquid under guidelines established by the Board
of Directors.
* Floating and adjustable rate security. The coupon rate shown on floating or
adjustable rates securities represents the rate at December 31, 1997.
** Implied Long Term Rating.
PLC = Public Limited Company
See Notes to Financial Statements.
9
<PAGE> 10
THE INFINITY MUTUAL FUNDS, INC.
CORRESPONDENT CASH RESERVES MONEY MARKET PORTFOLIO
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investments in securities, at amortized cost.............. $1,070,424,301
Repurchase agreements, at amortized cost.................. 73,131,000
Cash...................................................... 952
Interest receivable....................................... 10,379,041
Receivable from capital shares issued..................... 37,054
Prepaid expenses and other assets......................... 79,929
--------------
Total assets................................................ 1,154,052,277
--------------
LIABILITIES
Dividends payable......................................... 2,180,676
Accrued expenses and other payables:
Advisory fees........................................... 99,832
Administration fees..................................... 99,232
Distribution fees....................................... 608,890
Accounting fees......................................... 5,216
Custodian fees.......................................... 21,845
Audit fees.............................................. 16,461
Other................................................... 8,257
--------------
Total liabilities........................................... 3,040,409
--------------
NET ASSETS.................................................. $1,151,011,868
==============
Shares Outstanding ($0.001 par value, 3 billion shares
authorized):.............................................. 1,151,954,022
==============
Net Asset Value, Offering Price and Redemption Price per
Share..................................................... $1.00
====
COMPOSITION OF NET ASSETS:
Shares of common stock, at par............................ $ 1,151,954
Additional paid-in capital................................ 1,150,833,499
Undistributed net investment income....................... 5,623
Accumulated net realized losses........................... (979,208)
--------------
Net Assets, December 31, 1997............................... $1,151,011,868
==============
</TABLE>
- ---------------
See Notes to Financial Statements.
10
<PAGE> 11
THE INFINITY MUTUAL FUNDS, INC.
CORRESPONDENT CASH RESERVES MONEY MARKET PORTFOLIO
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Interest.................................................... $61,289,334
Expenses
Advisory fees............................................. $ 1,088,088
Administration fees....................................... 1,088,088
Special management services fees.......................... 1,088,088
Distribution fees......................................... 6,528,555
Accounting fees........................................... 13,649
Custodian fees and expenses............................... 149,346
Transfer agent fees and expenses.......................... 589,613
Directors' fees........................................... 51,747
Legal fees................................................ 96,454
Audit fees................................................ 22,985
Registration fees......................................... 689,740
Insurance expense......................................... 45,610
Reports to shareholders................................... 112,654
Other expenses............................................ 5,788
-----------
Total expenses before fee waivers and expense
reimbursements......................................... 11,570,405
Less: Fee waivers and expense reimbursements............ (1,186,175)
-----------
Total Expenses.............................................. 10,384,230
-----------
Net Investment Income....................................... 50,905,104
REALIZED GAINS (LOSSES) ON INVESTMENT TRANSACTIONS
Net realized gains (losses) on investment transactions.... (3,332)
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........ $50,901,772
===========
</TABLE>
- ---------------
See Notes to Financial Statements.
11
<PAGE> 12
THE INFINITY MUTUAL FUNDS, INC.
CORRESPONDENT CASH RESERVES MONEY MARKET PORTFOLIO
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended Year Ended
December 31, December 31,
1997 1996
--------------- ---------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations
Net investment income..................................... $ 50,905,104 $ 44,071,926
Net realized gains (losses) on investment transactions.... (3,332) 136,504
--------------- ---------------
Net increase in net assets resulting from operations.... 50,901,772 44,208,430
--------------- ---------------
Dividends to shareholders from net investment income
Retail Shares............................................. (50,905,104) (43,484,087)
Institutional Shares (b).................................. -- (587,839)(a)
--------------- ---------------
Total dividends to shareholders............................. (50,905,104) (44,071,926)
--------------- ---------------
Capital Share Transactions (at $1.00 per share)
Proceeds from shares issued............................... 6,437,748,169 5,526,532,249
Dividends reinvestment.................................... 48,756,978 44,022,773
Cost of shares redeemed................................... (6,342,754,703) (5,381,923,610)
--------------- ---------------
Net increase in net assets from Capital share
transactions.......................................... 143,750,444 188,631,412
--------------- ---------------
Total Increase in Net Assets................................ 143,747,112 188,767,916
NET ASSETS
Beginning of period....................................... 1,007,264,756 818,496,840
--------------- ---------------
End of period............................................. $ 1,151,011,868 $ 1,007,264,756
=============== ===============
SHARE TRANSACTIONS:
Issued.................................................... 6,437,748,169 5,526,532,249
Reinvested................................................ 48,756,978 44,022,773
Redeemed.................................................. (6,342,754,703) (5,381,923,610)
--------------- ---------------
Change in shares.......................................... 143,750,444 188,631,412
=============== ===============
</TABLE>
- ---------------
(a) For the period from January 1, 1996 through December 25, 1996.
(b) On December 26, 1996, the Portfolio terminated and redeemed its offering of
Institutional Shares.
See Notes to Financial Statements.
12
<PAGE> 13
THE INFINITY MUTUAL FUNDS, INC.
CORRESPONDENT CASH RESERVES TAX FREE 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>
COMMERCIAL PAPER -- 28.8%
Allegheny County Development Authority,
US Corp....................................... A-1+/NR 3.70% 2/12/98 $ 500,000 $ 500,000
City of Austin, Combined Utility System......... A-1+/P-1 3.80 2/5/98 650,000 650,000
City of Austin, Combined Utility System......... A-1+/P-1 3.80 3/6/98 1,000,000 1,000,000
City of Burlington, National Rural Utilities,
Kansas Electric Power......................... A-1+/P-1 3.80 2/13/98 1,000,000 1,000,000
City of Houston................................. A-1+/P-1 3.80 1/20/98 1,000,000 1,000,000
City of Houston................................. A-1+/P-1 3.80 1/29/98 400,000 400,000
City of Houston................................. A-1+/P-1 3.75 3/11/98 1,500,000 1,500,000
Dallas Area Rapid Transit Authority............. A-1+/P-1 3.80 3/16/98 550,000 550,000
Illinois Health Facilities Authority,
Rush Presbyterian Hospital.................... A-1/VMIG1 3.70 2/11/98 2,100,000 2,100,000
Industrial Division of Norfolk,
Pooled Hospital Authority -- Sentara
Hospital...................................... A-1/VMIG1 3.80 3/19/98 500,000 500,000
King County Washington Sewer.................... A-1/P-1 3.80 2/23/98 2,000,000 2,000,000
Maryland Health & Education Authority -
Johns Hopkins................................. A-1+/P-1 3.80 2/20/98 2,412,000 2,412,000
Massachusetts Health & Education Authority,
Boston University............................. A-1+/P-1 3.80 1/21/98 600,000 600,000
Michigan Building Authority..................... A-1+/P-1 3.75 3/2/98 1,000,000 1,000,000
Michigan Strategic Fund -- Dow Chemical......... A-1/P-1 3.55 1/23/98 900,000 900,000
New Jersey Tax & Revenue Anticipation Note...... A-1+/P-1 3.75 1/21/98 1,000,000 1,000,000
New York City Municipal Water Authority......... A-1+/P-1 3.80 2/18/98 500,000 500,000
New York State Power Authority.................. A-1/P-1 3.70 2/25/98 1,000,000 1,000,000
New York State Power Authority.................. A-1/P-1 3.80 3/5/98 1,000,000 1,000,000
New York State Power Authority.................. A-1/P-1 3.85 3/6/98 500,000 500,000
Northeast PA Hospital Authority, Hospital
Central Services.............................. A-1/NR 3.70 1/28/98 640,000 640,000
Plaquemenes Port Authority PCR, Tampa
Electric...................................... A-1+/P-1 3.75 2/6/98 1,000,000 1,000,000
Puerto Rico Government Development Bank......... A-1/P-1 3.70 5/8/98 1,500,000 1,500,000
Salt Lake City Pooled Hospital.................. A-1/P-1 3.85 2/9/98 1,000,000 1,000,000
Salt River Agricultural Improvement District.... A-1+/P-1 3.70 2/17/98 1,000,000 1,000,000
Salt River Agricultural Improvement District.... A-1+/P-1 3.80 4/8/98 1,000,000 1,000,000
</TABLE>
Continued
13
<PAGE> 14
<TABLE>
<CAPTION>
S&P/MOODY'S AMORTIZED
RATINGS MATURITY PRINCIPAL COST
(UNAUDITED) RATE DATE AMOUNT (NOTE 2)
---------------- ---- -------- ---------- ------------
<S> <C> <C> <C> <C> <C>
COMMERCIAL PAPER, CONTINUED:
Shelby County Bankers Anticipation Note......... A-1+/P-1 3.70% 1/27/98 $1,000,000 $ 1,000,000
<S> <C> <C> <C> <C> <C>
Texas Tax & Revenue Anticipation Note........... A-1+/P-1 3.70 2/24/98 500,000 500,000
Town of Louisa PCR, Virginia Electric Power..... A-1/VMIG1 3.90 1/28/98 500,000 500,000
Town of Louisa Industrial Development Authority,
Virginia Electric Power....................... A-1/VMIG1 3.80 3/30/98 500,000 500,000
Trimble County PCR, Louisville Gas & Electric... A-1+/P-1 3.85 2/10/98 1,000,000 1,000,000
------------
Total Commercial Paper (cost $29,752,000)......... 29,752,000
------------
MUNICIPAL BONDS -- 70.8%
ARIZONA -- 2.6%
Phoenix Industrial Development Authority,
Multi-Family Housing Southwest Villages,
LOC: Citibank NA.............................. A-1+/NR 3.65* 12/1/06 2,200,000 2,200,000
Scottsdale Industrial Development Authority
Hospital Revenue, Memorial Hospital, Series A,
Prefunded 9/1/98 @ 101, AMBAC................. A-1/VMIG1 7.05 9/1/98 500,000 513,680
------------
2,713,680
------------
ARKANSAS -- 0.5%
University of Arkansas Revenue,
Athletic Facilities Fayetteville.............. NR/A1 4.50 9/15/98 500,000 501,691
------------
CALIFORNIA -- 3.3%
California Higher Education Loan Authority Inc.,
Student Loan Revenue, Series D-2,
LOC: Dresdner Bank............................ NR/Aaa 3.95* 4/1/00 500,000 500,017
California Higher Education Loan Authority,
Student Loan Revenue, LOC: National
Westminster................................... NR/Aa2 3.95* 6/1/01 500,000 500,000
California Statewide Community Development Tax &
Revenue Anticipation Note, Series A........... AAA/Aaa 4.50 6/30/98 600,000 602,020
Fresno Tax & Revenue Anticipation Notes, GO..... NR/MIG1 4.25 6/30/98 500,000 501,066
Riverside County Tax & Revenue Anticipation
Notes, Series A, GO........................... SP1+/MIG1 4.50 6/30/98 300,000 300,782
Continued
14
</TABLE>
<PAGE> 15
<TABLE>
<CAPTION>
S&P/MOODY'S AMORTIZED
RATINGS MATURITY PRINCIPAL COST
(UNAUDITED) RATE DATE AMOUNT (NOTE 2)
---------------- ---- -------- ---------- ------------
<S> <C> <C> <C> <C> <C>
COMMERCIAL PAPER, CONTINUED:
CALIFORNIA, CONTINUED:
San Bernardino County Tax & Revenue
Anticipation Notes, Series A, GO............... SP1+/MIG1 4.50% 6/30/98 $ 500,000 $ 501,543
South Coast Local Education Agencies Tax &
Revenue Anticipation Notes, Series A, MBIA.... SP1+/MIG1 4.50 6/30/98 500,000 501,662
------------
3,407,090
------------
COLORADO -- 1.8%
Northglenn Industrial Development Revenue,
Castle Gardens Retirement Center,
LOC: Morgan Guaranty Trust.................... NR/VMIG1 3.95* 1/1/09 1,900,000 1,900,000
------------
DISTRICT OF COLUMBIA -- 0.5%
District of Columbia, Tax and Revenue
Anticipation Notes, Series B, GO, LOC: Union
Bank of Switzerland/Morgan Guaranty Trust..... SP1/MIG1 4.50 9/30/98 500,000 502,255
------------
FLORIDA -- 3.9%
Broward County School District Revenue
Anticipation Notes, Series C.................. SP1+/MIG1 4.50 4/22/98 500,000 500,841
Dade County Health Facilities Authority Hospital
Revenue, Miami Children's Hospital Project,
AMBAC......................................... AAA/Aaa 3.65* 9/1/25 1,100,000 1,100,000
Indian Trace Community Development District -
Basin 1 Water Management, Series A, MBIA...... AAA/Aaa 3.65* 5/1/11 1,900,000 1,900,000
Putnam County Development Authority Pollution
Control Revenue, Callable 3/15/98 @ 100....... AA-/MIG1 3.70* 3/15/14 500,000 500,000
------------
4,000,841
------------
</TABLE>
Continued
15
<PAGE> 16
<TABLE>
<CAPTION>
S&P/MOODY'S AMORTIZED
RATINGS MATURITY PRINCIPAL COST
(UNAUDITED) RATE DATE AMOUNT (NOTE 2)
---------------- ---- -------- ---------- ------------
<S> <C> <C> <C> <C> <C>
COMMERCIAL PAPER, CONTINUED:
GEORGIA -- 4.0%
Burke Co. Georgia Development Authority
Pollution Control Revenue, Series A........... AAA/Aaa 3.65%* 1/1/19 $1,800,000 $ 1,800,000
De Kalb Private Hospital Authority Revenue
Anticipation Bonds, Eagleston Childrens Health
Center, LOC: SunTrust Bank.................... AA-/Aa3 3.70* 12/1/17 1,800,000 1,800,000
Georgia State, Series B, GO..................... AAA/Aaa 6.75 3/1/98 500,000 502,383
------------
4,102,383
------------
ILLINOIS -- 9.0%
Chicago O'Hare International Airport Revenue,
American Airlines C, LOC: Royal Bank of
Canada........................................ NR/Aa2 4.90* 12/1/17 800,000 800,000
Illinois Educational Facilities Authority
Revenue,
DePaul University, Series Cp-1,
LOC: Northern Trust........................... AA-/Aa3 3.80* 4/1/26 1,900,000 1,900,000
Illinois Health Facilities Authority Revenue,
Advocate Health Care B, LOC: Northern Trust... AA/A1 3.80* 8/15/22 2,060,000 2,060,000
Illinois Health Facilities Authority Revenue,
Elmhurst Memorial Hospital Project, Series
B............................................. NR/VMIG1 5.15* 1/1/20 1,200,000 1,200,000
Illinois Health Facilities Authority Revenue,
Franciscan Sisters Health Project............. NR/VMIG1 5.15* 1/1/18 2,500,000 2,500,000
Illinois Health Facilities Authority Revenue,
Evanston Hospital Corp. Project............... AA+/Aa2 3.80* 8/15/10 1,000,000 1,000,000
------------
9,460,000
------------
INDIANA -- 1.8%
Indiana Health Facilities Financing Authority
Revenues, Access Designated Pool, LOC:
Comerica Bank................................. NR/VMIG1 3.75* 8/1/06 1,000,000 1,000,000
Indianapolis Local Public Improvements, Series
H............................................. SP1+/NR 4.25 7/9/98 900,000 902,053
------------
1,902,053
------------
IOWA -- 2.1%
Iowa Finance Authority Small Business
Development Revenue, Multi-Family Housing
Village Court
Assoc. - B, LOC: Rabobank Nederland........... NR/VMIG1 4.15* 11/1/15 2,200,000 2,200,000
------------
</TABLE>
Continued
16
<PAGE> 17
<TABLE>
<CAPTION>
S&P/MOODY'S AMORTIZED
RATINGS MATURITY PRINCIPAL COST
(UNAUDITED) RATE DATE AMOUNT (NOTE 2)
---------------- ---- -------- ---------- ------------
<S> <C> <C> <C> <C> <C>
COMMERCIAL PAPER, CONTINUED:
KANSAS -- 1.0%
Topeka Temporary Notes, Series B, GO............ NR/MIG1 4.25% 3/4/98 $ 500,000 $ 500,369
Wichita Improvement Temporary Notes,
Series 192, GO................................ SP1+/MIG1 4.50* 2/26/98 500,000 500,522
------------
1,000,891
------------
MASSACHUSETTS -- 1.0%
Massachusetts Municipal Wholesale Electrical
Corp., Power Supply System Revenue, Series C,
MBIA.......................................... A-1+/VMIG1 3.50* 7/1/19 1,000,000 1,000,000
------------
MICHIGAN -- 1.9%
Michigan State Hospital Finance Authority
Revenue, St. Mary Hospital of Livonia Project,
Series A,
LOC: Comerica Bank............................ A-1/VMIG1 3.70* 7/1/17 2,000,000 2,000,000
------------
MISSISSIPPI -- 0.1%
Harrison County Pollution Control Revenues,
Dupont E I De Nemours......................... A-1+/P-1 5.10* 9/1/10 100,000 100,000
------------
MISSOURI -- 1.0%
State Health & Educational Facilities Authority
Health Facilities Revenue, SSM Health Care
Project, Prerefunded 6/1/98 @ 102............. AAA/Aaa 7.75 6/1/98 500,000 517,717
State Health & Educational Facilities Authority
School District Advance Funding Program,
Mehlville School District..................... SP1+/NR 4.50 9/14/98 500,000 501,940
------------
1,019,657
------------
NEVADA -- 2.2%
Clark County Airport Improvement Revenue,
Series A...................................... A-1+/VMIG1 3.65* 7/1/25 2,300,000 2,300,000
------------
NEW HAMPSHIRE -- 1.4%
State Housing Finance Authority Multi-family
Revenues, EQR Bond Partnership................ NR/VMIG1 3.70* 9/15/26 1,400,000 1,400,000
------------
</TABLE>
Continued
17
<PAGE> 18
<TABLE>
<CAPTION>
S&P/MOODY'S AMORTIZED
RATINGS MATURITY PRINCIPAL COST
(UNAUDITED) RATE DATE AMOUNT (NOTE 2)
---------------- ---- -------- ---------- ------------
<S> <C> <C> <C> <C> <C>
COMMERCIAL PAPER, CONTINUED:
NEW JERSEY -- 1.0%
South Plainfield Bond Anticipation Notes, GO.... NR/NR 4.25% 7/22/98 $1,000,000 $ 1,001,221
------------
NEW MEXICO -- 2.3%
University of New Mexico, University Revenue,
AMBAC......................................... A-1+/VMIG1 3.65* 6/1/06 2,400,000 2,400,000
------------
NEW YORK -- 10.0%
Energy Research & Development Authority
Pollution Control Revenue, Orange/Rockland
Utilities, Series A, AMBAC.................... A-1+/VMIG1 3.55* 8/1/15 1,400,000 1,400,000
Local Government Assistance Corp. Revenue,
Series A...................................... A-1+/VMIG1 3.50* 4/1/22 1,500,000 1,500,000
Municipal Assistance Corporation for New York
City, Revenue Bond............................ A-1+/VMIG1 3.55%* 7/1/08 500,000 500,000
Nassau County New York Revenue Anticipation
Notes, Series A, GO........................... SP1/MIG1 4.25 3/10/98 500,000 500,363
New York City Cultural Research Revenue,
American Museum of Natural History, MBIA...... A-1+/VMIG1 3.55* 4/1/21 2,000,000 2,000,000
New York State, GO.............................. A/A2 7.80 11/15/98 1,000,000 1,033,739
Suffolk County Water Authority Anticipation
Revenue Notes................................. NR/VMIG1 3.60* 11/1/02 2,500,000 2,500,001
Triborough Bridge and Tunnel Authority
Special Obligation, FGIC...................... A-1+/VMIG1 3.55* 1/1/24 1,000,000 1,000,000
------------
10,434,103
------------
NORTH CAROLINA -- 3.1%
North Carolina Educational Facilities, Finance
Agency Revenue, Duke University, Series B..... A-1+/VMIG1 4.10* 12/1/21 1,700,000 1,700,000
University of North Carolina Chapel Hill
Foundation, Certification of Participation,
LOC: NationsBank.............................. NR/VMIG1 3.75* 10/1/09 1,500,000 1,500,000
------------
3,200,000
------------
</TABLE>
Continued
18
<PAGE> 19
<TABLE>
<CAPTION>
S&P/MOODY'S AMORTIZED
RATINGS MATURITY PRINCIPAL COST
(UNAUDITED) RATE DATE AMOUNT (NOTE 2)
---------------- ---- -------- ---------- ------------
<S> <C> <C> <C> <C> <C>
COMMERCIAL PAPER, CONTINUED:
OKLAHOMA -- 1.0%
Tulsa Parking Authority Revenue First Mortgage,
Williams Center Project, Series A,
LOC: NationsBank.............................. NR/VMIG1 3.80%* 5/15/07 $1,000,000 $ 1,000,000
------------
OREGON -- 0.5%
State Housing & Community Services Revenue,
Single Family Mortgages Project, Series C..... NR/Aa2 3.95* 7/1/18 500,000 500,000
------------
PENNSYLVANIA -- 5.0%
Allegheny County Hospital Development Authority
Revenue, Childrens Hospital Pittsburgh,
Series B, MBIA................................ A-1/VMIG1 3.90* 12/1/15 700,000 700,000
Delaware Valley Regulatory Financing Authority
Local Government Revenue, Series A,
LOC: Credit Suisse First Boston............... A-1+/VMIG1 3.65* 12/1/19 2,000,000 2,000,000
North Cumberland Industrial Development
Authority Revenue, Merck Project.............. A-1+/NR 4.40* 10/1/22 2,000,000 2,000,000
Temple University of the Commonwealth, System of
Higher Education University Funding
Obligations................................... SP1+/NR 4.75 5/18/98 500,000 501,534
------------
5,201,534
------------
PUERTO RICO -- 1.0%
Aqueduct and Sewer Authority Revenue............ A/Baa1 4.40 7/1/98 490,000 490,935
Puerto Rico Commonwealth Tax and Revenue
Anticipation Notes, Series A.................. SP1+/MIG1 4.50 7/30/98 500,000 502,113
------------
993,048
------------
TENNESSEE -- 0.5%
Metropolitan Government, Nashville & Davidson
County Health & Education Facilities Board
Revenue, Vanderbilt University, Series B...... A-1+/VMIG1 3.95* 5/1/13 500,000 500,000
------------
</TABLE>
Continued
19
<PAGE> 20
<TABLE>
<CAPTION>
S&P/MOODY'S AMORTIZED
RATINGS MATURITY PRINCIPAL COST
(UNAUDITED) RATE DATE AMOUNT (NOTE 2)
---------------- ---- -------- ---------- ------------
<S> <C> <C> <C> <C> <C>
COMMERCIAL PAPER, CONTINUED:
TEXAS -- 3.6%
Denton Independant School District, GO.......... A-1+/NR 3.90%* 8/15/21 $ 500,000 $ 500,000
Guadalupe Blanco River Authority Pollution
Control Revenue, Central Power & Light Corp.
Project....................................... A-1+/VMIG1 5.10* 11/1/15 700,000 700,000
Nueces River Authority Pollution Revenue,
Reynolds Metals Co. Project, LOC: Bank of Nova
Scotia........................................ NR/P-1 5.20* 12/1/99 300,000 300,000
Sabine River Authority Pollution Control
Revenue, Texas Utilities Electric Corp.,
AMBAC......................................... A-1+/VMIG1 3.10* 3/1/26 600,000 600,000
Texas State Tax & Revenue Anticipation Notes,
Series A...................................... SP1+/MIG1 4.75 8/31/98 1,000,000 1,005,769
Tom Green County Health Facilities Development
Corp., Health Facilities Revenue, Universal
Health Services, LOC: Morgan Guaranty Trust... A-1+/NR 3.65* 12/1/15 600,000 600,000
------------
3,705,769
------------
VIRGINIA -- 0.6%
Roanoke Industrial Development Authority
Hospital Revenue, Carilion Health System,
Series A...................................... A-1+/VMIG1 4.90* 7/1/27 600,000 600,000
------------
WASHINGTON -- 1.9%
Washington State, Series 96B, GO................ A-1+/VMIG1 3.60* 6/1/20 2,000,000 2,000,000
------------
WISCONSIN -- 1.2%
Racine School District Tax and Revenue
Anticipation Notes............................ SP1+/NR 4.25 8/24/98 1,200,000 1,202,551
------------
</TABLE>
Continued
20
<PAGE> 21
<TABLE>
<CAPTION>
S&P/MOODY'S AMORTIZED
RATINGS MATURITY PRINCIPAL COST
(UNAUDITED) RATE DATE AMOUNT (NOTE 2)
---------------- ---- -------- ---------- ------------
<S> <C> <C> <C> <C> <C>
COMMERCIAL PAPER, CONTINUED:
WYOMING -- 1.0%
Carson County Pollution Control Revenue,
Amoco Project................................. A-1+/Aa1 3.75%* 11/1/14 $ 500,000 $ 500,000
Lincoln County Pollution Control Revenues,
Amoco Project - Standard Oil of California,
Callable 4/1/98 @ 100......................... A-1+/Aa1 3.75* 10/1/12 500,000 500,000
------------
1,000,000
------------
Total Municipal Bonds
(cost $73,248,767).............................. 73,248,767
------------
Total
(cost $103,000,767)(a) - 99.6%.................. $103,000,767
============
- ---------------
Percentages indicated are based on net assets of $103,398,580.
(a) Cost for federal income tax and financial reporting purposes are the same.
* Floating/adjustable rate security. The coupon rate shown on floating or
adjustable rates securities represents the rate at December 31, 1997.
AMBAC = Insured by AMBAC Assurance Corporation
FGIC = Insured by Financial Guaranty Insurance Company
GO = General Obligation
LOC = Letter of Credit
MBIA = Insured by MBIA Insurance Corporation
NR = Not rated
PCR = Pollution Control Revenue
</TABLE>
See Notes to Financial Statements.
21
<PAGE> 22
THE INFINITY MUTUAL FUNDS, INC.
CORRESPONDENT CASH RESERVES TAX FREE MONEY MARKET PORTFOLIO
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investments in securities, at amortized cost.............. $ 103,000,767
Cash...................................................... 44,278
Interest receivable....................................... 613,273
Prepaid expenses.......................................... 158
--------------
Total assets................................................ 103,658,476
--------------
LIABILITIES
Dividends payable......................................... 129,510
Accrued expenses and other payables:
Advisory fees........................................... 8,943
Administration fees..................................... 3,577
Distribution fees....................................... 35,773
Accounting fees......................................... 60
Transfer agent fees and expenses........................ 9,845
Directors' fees......................................... 201
Custodian fees.......................................... 13,735
Legal fees.............................................. 5,513
Audit fees.............................................. 12,141
Registration fees....................................... 32,403
Other................................................... 8,195
--------------
Total liabilities........................................... 259,896
--------------
NET ASSETS.................................................. $ 103,398,580
==============
Shares Outstanding ($0.001 par value, 3 billion shares
authorized):.............................................. 103,399,535
==============
Net Asset Value, Offering Price and
Redemption Price per Share................................ $1.00
COMPOSITION OF NET ASSETS:
Shares of common stock, at par............................ $ 103,400
Additional paid-in capital................................ 103,296,134
Accumulated net realized losses........................... (954)
--------------
Net Assets, December 31, 1997............................... $ 103,398,580
==============
</TABLE>
- ---------------
See Notes to Financial Statements.
22
<PAGE> 23
THE INFINITY MUTUAL FUNDS, INC.
CORRESPONDENT CASH RESERVES TAX FREE MONEY MARKET PORTFOLIO
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Interest.................................................... $3,405,806
Expenses
Advisory fees............................................. $ 93,494
Administration fees....................................... 93,494
Special Management Services fees.......................... 93,494
Distribution fees......................................... 560,968
Accounting fees........................................... 7,611
Custodian fees and expenses............................... 72,707
Transfer agent fees and expenses.......................... 26,059
Directors' fees........................................... 3,879
Audit fees................................................ 14,470
Legal fees................................................ 9,497
Registration fees......................................... 114,387
Insurance expense......................................... 3,630
Reports to shareholders................................... 12,805
Other expenses............................................ 662
----------
Total expenses before fee waivers and expense
reimbursements......................................... 1,107,157
Less: Fee waivers and expense reimbursements............ (377,787)
----------
Total Expenses.............................................. 729,370
----------
Net Investment Income....................................... 2,676,436
REALIZED GAINS (LOSSES) ON INVESTMENT TRANSACTIONS
Net realized gains (losses) on investment transactions.... (954)
----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........ $2,675,482
==========
</TABLE>
- ---------------
See Notes to Financial Statements.
23
<PAGE> 24
THE INFINITY MUTUAL FUNDS, INC.
CORRESPONDENT CASH RESERVES TAX FREE MONEY MARKET PORTFOLIO
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended Period Ended
December 31, December 31,
1997 1996*
------------ ------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations
Net investment income..................................... $ 2,676,436 $ 558,131
Net realized loss on investment transactions.............. (954) --
------------- ------------
Net increase in net assets resulting from operations.... 2,675,482 558,131
------------- ------------
Dividends to shareholders from net investment income........ (2,676,436) (558,131)
------------- ------------
Capital Share Transactions (at $1.00 per share)
Proceeds from shares issued............................... 492,981,689 166,978,246
Dividends reinvestment.................................... 2,390,128 460,012
Cost of shares redeemed................................... (472,381,555) (87,028,986)
------------- ------------
Net increase in net assets from Capital share
transactions.......................................... 22,990,262 80,409,272
------------- ------------
Total Increase in Net Assets................................ 22,989,308 80,409,272
NET ASSETS
Beginning of period....................................... 80,409,272 --
------------- ------------
End of period............................................. $103,398,580 $ 80,409,272
============= ============
SHARE TRANSACTIONS:
Issued.................................................... 492,981,689 166,978,246
Reinvested................................................ 2,390,128 460,012
Redeemed.................................................. (472,381,555) (87,028,986)
------------- ------------
Change in shares.......................................... 22,990,262 80,409,272
============= ============
</TABLE>
- ---------------
* For the period from October 7, 1996 (commencement of operations) through
December 31, 1996.
See Notes to Financial Statements.
24
<PAGE> 25
THE INFINITY MUTUAL FUNDS, INC.
CORRESPONDENT CASH RESERVES MONEY MARKET PORTFOLIO
CORRESPONDENT CASH RESERVES TAX FREE MONEY MARKET PORTFOLIO
- --------------------------------------------------------------------------------
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 only to the Correspondent
Cash Reserves Money Market Portfolio (the "Money Market Portfolio"), which
commenced operations on May 20, 1991, and the Correspondent Cash Reserves Tax
Free Money Market Portfolio (the "Tax Free Money Market Portfolio"), which
commenced operations on October 7, 1996 (together the "Portfolios"). The Money
Market Portfolio seeks to provide investors with as high a level of current
income as is consistent with the preservation of capital and the maintenance of
liquidity by making investments in short-term money market obligations. The Tax
Free Money Market Portfolio seeks to provide investors with as high a level of
current income exempt from Federal income tax as is consistent with the
preservation of capital and the maintenance of liquidity by investing in
short-term municipal obligations.
Before December 26, 1996, the Money Market Portfolio issued two classes of
shares (Retail shares and Institutional shares). On December 26, 1996 the
Portfolio terminated and redeemed its offering of Institutional shares.
Currently both Portfolios have only one class of shares.
NOTE 2--SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies followed by
each Portfolio in preparation of its financial statements. The policies are in
conformity with generally accepted accounting principles. The preparation of
financial statements requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of income and expenses for the
period. Actual results could differ from those estimates.
A) Securities Valuation and Restrictions
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. The 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.
B) Security Transactions and Investment Income
Security transactions are recorded on the trade date. Realized gains and
losses on the sale of investments are calculated on the identified cost basis.
Interest income, including accretion of discount and amortization of premium on
investments, where applicable, is accrued daily.
25
<PAGE> 26
C) Repurchase Agreements
The Money Market Portfolio's custodian and other banks acting in a
sub-custodian capacity take possession of the collateral pledged for investments
in repurchase agreements. The underlying collateral is valued daily on a
mark-to-market basis to determine that the fair value, including accrued
interest, exceeds the repurchase price. In the event of the seller's default of
the obligation to repurchase, the Money Market Portfolio has the right to
liquidate the collateral and apply the proceeds in satisfaction of the
obligation. Under certain circumstances, in the event of default or bankruptcy
by the other party to the agreement, realization and/or retention of the
collateral may be subject to legal proceedings.
D) Expenses
Direct expenses of the Portfolios are borne solely by each Portfolio and
general Fund expenses are allocated among the Fund's respective investment
portfolios based on the relative net assets of each Portfolio.
E) Federal Income taxes
It is the policy of the Portfolios to meet the requirements of the Internal
Revenue Code (the "Code") applicable to regulated investment companies and to
distribute substantially all of their income to shareholders. Therefore, no
federal income tax provision is required.
At December 31, 1997, the Money Market Portfolio had capital loss
carryovers of approximately $926,225 which are available to offset future net
realized gains on securities transactions to the extent provided for in the
Code. Such capital loss carryover will expire in fiscal year 2002. The Tax Free
Money Market Portfolio had capital loss carryover of approximately $954 which
will expire in fiscal year 2005.
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. Money Market Portfolio deferred such losses of $52,983.
F) Dividends and Distributions
Dividends are declared daily to shareholders of record at the close of
business on the day of declaration and are paid monthly. Distributions of net
realized gains, if any, will be paid at least annually. Dividends and
distributions are recorded on the ex-dividend date. Distributions from net
investment income and from net realized gains are determined in accordance with
income tax regulations which may differ from generally accepted accounting
principles. Reclassifications are made to the Portfolios' capital accounts to
reflect permanent book/tax differences and income and gains available for
distributions under income tax regulations. Net investment income, net realized
gains and net assets are not affected by this change.
G) Other
Each Portfolio maintains a cash balance with its custodian and receives a
reduction of their custody fees for the amounts of interest earned on such
uninvested cash balance. For financial reporting purposes, custody fees and
expenses were increased by $200 for the Money Market Portfolio and $3,018 for
the Tax Free Money Market Portfolio for the year ended December 31, 1997.
26
<PAGE> 27
NOTE 3 -- AGREEMENTS AND OTHER TRANSACTIONS WITH AFFILIATES
Mitchell Hutchins Asset Management Inc. ("Mitchell Hutchins"), a
wholly-owned subsidiary of Paine Webber Incorporated ("Paine Webber"), serves as
the Portfolios' investment adviser. BISYS Fund Services Limited Partnership
("BISYS") serves as the Portfolios' administrator and distributor of Portfolio
shares. BISYS is a wholly-owned subsidiary of The BISYS Group, Inc.
As investment adviser, Mitchell Hutchins supervises and assists in the
overall operations of the Portfolios. Pursuant to the terms of the Investment
Advisory Agreement, Mitchell Hutchins is entitled to a fee, accrued daily and
payable monthly, at an annual rate of 0.10% of the average daily net assets of
each Portfolio. For the year ended December 31, 1997, there were no waivers with
respect to the Money Market Portfolio and Mitchell Hutchins waived fees of
$14,024 with respect to the Tax Free Money Market Portfolio.
As administrator, BISYS assists in supervising the operations of the
Portfolios. For its services, BISYS is entitled to a fee, accrued daily and
payable monthly, at an annual rate of 0.10% of the average daily net assets of
each Portfolio. For the year ended December 31, 1997, there were no waivers with
respect to the Money Market Portfolio and BISYS waived fees of $67,007 with
respect to the Tax Free Money Market Portfolio.
Under the terms of the Special Management Services Agreement, the
Portfolios have agreed to pay Mitchell Hutchins and BISYS each a monthly fee at
the annual rate of 0.05% of the average daily net assets of each Portfolio for
certain services, other than those provided pursuant to the Portfolios'
Distribution Plan. These services include developing and monitoring customized
investor programs including individual retirement accounts and other ERISA
options, automatic deposit and withdrawal programs and other programs requested
by certain securities dealers that have entered into securities clearing
arrangements with Paine Webber. Mitchell Hutchins and BISYS together waived
$1,088,088 for the Money Market Portfolio and $93,494 for the Tax Free Money
Market Portfolio for the year ended December 31, 1997, under the Special
Management Services Agreement, which represented 100% of the fee charged.
The Portfolios have adopted a Distribution Plan pursuant to Rule 12b-1
under the Act. Pursuant to the Distribution Plan, the Portfolios are authorized
to pay Correspondent Services Corporation [csc], an affiliate of Paine Webber,
and certain securities dealers that have entered into clearing arrangements with
CSC, a monthly fee at an annual rate of up to 0.60% of the average daily net
assets of each Portfolio's shares held in accounts serviced by such firms. Such
fees will be paid in respect of certain services provided by such firms,
including answering client inquiries regarding the Portfolios; assisting clients
in changing dividend options, account designations and addresses; performing
sub-accounting; establishing and maintaining shareholder accounts and records;
processing purchase and redemption transactions; investing client cash account
balances automatically in Portfolio shares; providing periodic statements
showing a client's account balance and integrating such statements with those of
other transactions and balances in the client's other accounts serviced by such
firm; arranging for bank wires; and such other services as the clients may
request. For the year ended December 31, 1997, the Money Market Portfolio
incurred expenses of $6,528,555 and the Tax
27
<PAGE> 28
Free Money Market Portfolio incurred expenses of $560,968 pursuant to the
Distribution Plan. For the year ended December 31, 1997, CSC waived fees of
$97,887 for the Money Market Portfolio and $200,244 for the Tax Free Money
Market Portfolio.
Certain Directors and officers 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 of the portfolios constituting the Fund.
NOTE 4 -- CONCENTRATION OF CREDIT RISK
The 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 Tax Free Money Market Portfolio invests substantially all of its assets
in a diversified portfolio of high quality municipal obligations. The Portfolio
had the following concentration by security type at December 31, 1997 (as a
percentage of total investments):
<TABLE>
<S> <C>
Commercial Paper.................. 28.9%
General Obligations............... 11.7%
Revenue Bonds:
Health.......................... 14.2%
Utilities....................... 12.9%
Education....................... 12.1%
Housing......................... 8.9%
Transportation.................. 5.0%
Other............................. 6.3%
------
100.0%
======
</TABLE>
The issuers' abilities to meet their obligations may be affected by
domestic and foreign economic, regional and political developments.
NOTE 5 -- EXEMPT-INTEREST INCOME DESIGNATION (UNAUDITED)
The Fund designates the following exempt-interest paid by the Tax Free
Money Market Portfolio for the year ended December 31, 1997:
Exempt-Interest Distribution...................................... $2,676,436
The percentage break-down by state of exempt-interest for the Tax Free
Money Market Portfolio's taxable year ended December 31, 1997 was as follows:
<TABLE>
<S> <C>
Alabama.......................... 0.36%
Alaska........................... 0.21%
Arizona.......................... 2.24%
Arkansas......................... 0.08%
California....................... 4.92%
Colorado......................... 2.80%
Connecticut...................... 0.07%
District of Columbia............. 0.20%
Florida.......................... 7.47%
Georgia.......................... 3.64%
Idaho............................ 1.03%
Illinois......................... 11.32%
Indiana.......................... 1.35%
Iowa............................. 3.30%
Kansas........................... 0.65%
Kentucky......................... 0.42%
Louisiana........................ 2.33%
Maryland......................... 0.76%
Massachusetts.................... 0.51%
Michigan......................... 4.62%
Mississippi...................... 0.27%
Missouri......................... 0.38%
Nevada........................... 2.74%
</TABLE>
28
<PAGE> 29
<TABLE>
<S> <C>
New Hampshire.................... 1.97%
New Jersey....................... 1.05%
New Mexico....................... 3.14%
New York......................... 12.17%
North Carolina................... 2.60%
North Dakota..................... 0.49%
Ohio............................. 0.01%
Oklahoma......................... 1.38%
Oregon........................... 0.69%
Pennsylvania..................... 5.28%
Puerto Rico...................... 0.88%
Tennessee........................ 0.85%
Texas............................ 9.69%
Utah............................. 0.89%
Virginia......................... 0.24%
Washington....................... 3.34%
Wisconsin........................ 1.92%
Wyoming.......................... 1.74%
-------
100.00%
=======
</TABLE>
29
<PAGE> 30
THE INFINITY MUTUAL FUNDS, INC.
CORRESPONDENT CASH RESERVES MONEY MARKET PORTFOLIO
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED
------------------------------------------------------------------------
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1997 1996 1995 1994 1993
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
RETAIL SHARES:
NET ASSET VALUE, BEGINNING OF
PERIOD............................... $ 0.9991 $ 0.9986 $ 0.9975 $ 0.9999 $ 1.0000
---------- ---------- -------- -------- --------
Income from investment operations:
Net investment income................ 0.0467 0.0462 0.0512 0.0340 0.0245
Net realized gains (losses) from
securities transactions............ 0.0001 0.0005 0.0011 (0.0024) (0.0001)
---------- ---------- -------- -------- --------
Net income from investment
operations......................... 0.0468 0.0467 0.0523 0.0316 0.0244
---------- ---------- -------- -------- --------
Dividends from net investment
income............................... (0.0467) (0.0462) (0.0512) (0.0340) (0.0245)
---------- ---------- -------- -------- --------
Net change in net asset value........ -- 0.0005 0.0011 (0.0024) (0.0001)
---------- ---------- -------- -------- --------
NET ASSET VALUE, END OF PERIOD........ $ 0.9992 $ 0.9991 $ 0.9986 $ 0.9975 $ 0.9999
========== ========== ======== ======== ========
Total Return.......................... 4.77% 4.72% 5.24% 3.45% 2.48%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's).... $1,151,012 $1,007,265 $779,011 $458,092 $331,210
Ratio of expenses to average net
assets............................. 0.95% 0.88% 0.85% 0.94% 1.02%
Ratio of net investment income to
average net assets................. 4.68% 4.65% 5.14% 3.47% 2.44%
Ratio of expenses to average
net assets *....................... 1.06% 1.01% 1.03% 1.12% 1.20%
Ratio of net investment income to
average net assets *............... 4.57% 4.53% 4.96% 3.29% 2.26%
</TABLE>
- ---------------
* During the period, certain fees and expenses were voluntarily waived and/or
reimbursed. If such voluntary reductions and/or reimbursements had not
occurred, the ratios would have been as indicated.
See Notes to Financial Statements.
30
<PAGE> 31
THE INFINITY MUTUAL FUNDS, INC.
CORRESPONDENT CASH RESERVES TAX FREE MONEY MARKET PORTFOLIO
- --------------------------------------------------------------------------------
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..................................... 0.0286 0.0100
-------- -------
Net income from investment operations..................... 0.0286 0.0100
-------- -------
Dividends from net investment income........................ (0.0286) (0.0100)
-------- -------
Net change in net asset value............................... -- --
-------- -------
NET ASSET VALUE, END OF PERIOD.............................. $ 1.00 $ 1.00
======== =======
Total Return................................................ 2.90% 0.66%(a)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's)......................... $103,399 $80,409
Ratio of expenses to average net assets................... 0.78% 0.74%(b)
Ratio of net investment income to average net assets...... 2.86% 2.80%(b)
Ratio of expenses to average net assets **................ 1.18% 1.20%(b)
Ratio of net investment income to average net assets **... 2.46% 2.34%(b)
</TABLE>
- ---------------
* For the period from October 7, 1996 (commencement of operations) through
December 31, 1996.
** During the period, certain fees and expenses were voluntarily waived and/or
reimbursed. If such voluntary reductions and/or reimbursements had not
occurred, the ratios would have been as indicated.
(a) Not annualized.
(b) Annualized.
See Notes to Financial Statements.
31
<PAGE> 32
INDEPENDENT AUDITORS' REPORT
- --------------------------------------------------------------------------------
The Shareholders and Board of Directors of
The Infinity Mutual Funds, Inc.--
The Correspondent Cash Reserves:
We have audited the accompanying statements of assets and liabilities of
The Infinity Mutual Funds, Inc. -- The Correspondent Cash Reserves
(Correspondent Cash Reserves Money Market Portfolio and Correspondent Cash
Reserves Tax Free Money Market 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. 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
32
<PAGE> 33
CORRESPONDENT CASH CORRESPONDENT CASH
- --------------------------------------- -----------------------------------
RESERVES RESERVES
- --------------------------------------- -----------------------------------
- ---------------------------------------
THE INFINITY MUTUAL FUNDS, INC.
3435 Stelzer Road
Columbus, OH 43219
- ---------------------------------------
INVESTMENT ADVISER
MITCHELL HUTCHINS ASSET MANAGEMENT INC.
1285 Avenue of the Americas
New York, NY 10019
- ---------------------------------------
ADMINISTRATOR AND DISTRIBUTOR LOGO
BISYS FUND SERVICES, LP
3435 Stelzer Road
Columbus, OH 43219
- ---------------------------------------
CUSTODIAN
THE BANK OF NEW YORK
90 Washington Street
New York, NY 10286
- ---------------------------------------
TRANSFER AGENT
& DIVIDEND DISBURSING AGENT
BISYS FUND SERVICES OHIO, INC.
3435 Stelzer Road
Columbus, OH 43219
- ---------------------------------------
AUDITORS
KPMG Peat Marwick LLP
Two Nationwide Plaza
Columbus, OH 43215
This report is not authorized for ANNUAL REPORT
distribution to prospective investors unless ------------------
preceded or accompanied by a current prospectus. DECEMBER 31, 1997
(LOGO)
COICCRD98A 2/98
