<PAGE> 1
REPORT FROM THE INVESTMENT ADVISER
- - --------------------------------------------------------------------------------
To Our Shareholders:
We are pleased to send you this annual report, which covers the 12 months ended
December 31, 1998.
The Correspondent Cash Reserves Money Market and Tax Free Money Market
Portfolios are open-end, diversified money market funds that seek to provide
investors with a high level of current income while preserving capital and
maintaining liquidity. The Tax Free Money Market Portfolio seeks to provide
income that is exempt from federal income tax.*
The Money Market Portfolio, which exceeds $1.38 billion in net assets under
management, as of December 31, 1998, invests in a diversified selection of high
quality, short-term money market instruments -- such as U.S. Treasury Bills,
short-term corporate obligations and commercial paper. The Tax Free Money Market
Portfolio 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 credit rating agencies.**
Following this letter, you will find a pie-chart analysis of the Portfolios, as
well as their performance for the current period. The schedules of the
Portfolios' investments are included in the financial report that follows the
performance table. All investments are actively monitored to ensure that they
maintain their quality and investment suitability.
ECONOMIC OVERVIEW
Throughout much of the year, global markets were struck by seemingly continuous
waves of bad news. First, the financial crisis in Asia resisted initial remedies
and seriously depressed what had been the most robust region in the world. Then,
in mid-summer, came the news that Russia's economic troubles were worsening, a
situation that became a crisis when that country defaulted on $40 billion worth
of government debt. The markets were thrown into even greater turmoil when
Long-Term Capital Management -- a powerful hedge fund whose fortune rested on
highly leveraged positions -- found itself on the wrong side of billions of
dollars worth of interest-rate bets. The possibility that the hedge fund's
troubles could damage the world's fixed-income markets so rattled investors that
the Federal Reserve Board (the Fed) took the remarkable step of engineering a
bailout, with the help of a coalition of banks and other investment
institutions.
On the other side of the coin, the United States economy continued to hum along
at an agreeable pace. Economic growth was satisfactory; inflation remained
benign; and with unemployment low, consumers felt secure enough to spend freely,
especially during the critical holiday season.
- - ---------------
* The Tax Free Money Market 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 either Portfolio is neither insured nor guaranteed by the
FDIC or any other government agency. Although each Portfolio strives to
maintain the value of your investment at $1.00 per share, it is possible to
lose money by investing in the Portfolios.
<PAGE> 2
REPORT FROM THE INVESTMENT ADVISER -- (continued)
- - --------------------------------------------------------------------------------
INTEREST-RATE ENVIRONMENT
The big news was the Fed's decision to lower the fed funds rate, the rate at
which banks charge one another for short-term loans, three times in the last
four months of the year. Each time -- in September, October and November -- the
Fed lowered the fed funds rate 25 basis points (0.25%), so that the rate stood
at 4.75% at the end of the year. The Fed also lowered the discount rate, the
rate that the Fed charges banks for overnight loans, twice in the same period,
to 4.50%.
While these cuts were beneficial to long-term bonds, especially Treasuries, the
short-term debt our Portfolios favor became more expensive. Yields dropped
across the money market universe. The saving grace was an inflation rate well
below 2%. This made money market yields relatively strong, on an
inflation-adjusted basis.
INVESTMENT STRATEGY
In the Money Market Portfolio, we increased our holdings in U.S. Government
securities. More than once in the last year, we have seen worried investors
spark a "flight to quality" -- pouring money into super-safe Treasury debt. With
many concerns throughout the world still unresolved, we felt it was prudent to
increase our allocation to Treasury debt.
As of December 31, 1998, the Money Market Portfolio's average weighted maturity
was 64 days, compared to 71 days at the end of June 1998, the time of our last
semi annual report. We shortened our maturity structure in response to the fluid
nature of global economic events, and in order to meet year-end redemptions.
Nevertheless, we continued to maintain the Portfolio's maturity at five to ten
days longer than the average money market fund, a strategy that served us well
during the last year.
As of December 31, 1998, the Tax Free Money Market Portfolio maintained an
average weighted maturity of 45 days, compared to 51 days at the end of June
1998, the time of our last semi annual report. The Portfolio continues to be
managed to provide safety, convenience and federal tax-free income to investors.
OUR OUTLOOK FOR 1999
We expect to see U.S. economic growth slow somewhat as we move into 1999. We
believe that portfolios with slightly longer-than-average maturities should do
relatively well in such an environment.
As this report was written in mid-January, much of the economic uncertainty
throughout the world remained unresolved. Complicating matters, Brazil found it
necessary to devalue its currency, the real, leading to speculation that the
earlier crises that swept through the Far East and Russia might finally be
affecting Latin America. Such a trend could ignite another flight to quality
into Treasury Bills or U.S. Government agency securities. If so, rates on
short-term securities likely would fall further.
As we have written to you before, our primary objectives continue to be
liquidity and quality. We will keep the Portfolios as liquid as possible, so
that our shareholders can invest and redeem their money as often as it suits
their investment needs. We also will continue to invest primarily in the highest
quality, Tier 1 securities, minimizing any default risk to the Portfolios.
<PAGE> 3
REPORT FROM THE INVESTMENT ADVISER -- (continued)
- - --------------------------------------------------------------------------------
Portfolio Composition*
<TABLE>
<CAPTION>
COMMERCIAL PAPER MUNICIPAL BONDS
- - ---------------- ---------------
<S> <C>
26.4 73.6
</TABLE>
<TABLE>
<CAPTION>
SHORT-TERM U.S.
COMMERCIAL CORPORATE CERTIFICATES OF GOVERNMENT U.S. TREASURY REPURCHASE
BANK NOTES PAPER OBLIGATIONS DEPOSIT AGENCIES OBLIGATIONS AGREEMENTS
- - ---------- ---------- ----------- --------------- ---------- ------------- ----------
<S> <C> <C> <C> <C> <C> <C>
1.7 35.8 15.6 23.3 20.0 2.1 1.5
</TABLE>
*The composition of the Portfolios is subject to change. Percentages are based
on total investments.
PERFORMANCE
As of December 31, 1998, 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**........................... 4.35% 4.35%
Tax Free Money Market Portfolio**.................. 2.81% 2.57%
</TABLE>
** For the current 7-day yield as of December 31, 1998, 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 4.24% for the Money Market Portfolio and 2.50% for the Tax
Free Money Market 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.
An investment in either Portfolio is neither insured nor guaranteed by the
FDIC or any other government agency. Although each Portfolio strives to
maintain the value of your investment at $1.00 per share, it is possible to
lose money by investing in the Portfolios.
<PAGE> 4
THE INFINITY MUTUAL FUNDS, INC.
CORRESPONDENT CASH RESERVES MONEY MARKET PORTFOLIO
- - --------------------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS
DECEMBER 31, 1998
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MOODY'S/S&P AMORTIZED
RATINGS MATURITY PRINCIPAL COST
(UNAUDITED) RATE DATE AMOUNT (NOTE 2)
---------------- ---- --------- ----------- --------------
<S> <C> <C> <C> <C> <C>
U.S. GOVERNMENT AND AGENCY OBLIGATIONS -- 22.4%
U.S. TREASURY -- 2.1%
U.S. Treasury Bill........................... AAA/Aaa** 3.86% 4/22/99 $10,000,000 $ 9,880,983
U.S. Treasury Bill........................... AAA/Aaa** 3.93 4/22/99 10,000,000 9,878,825
U.S. Treasury Bill........................... AAA/Aaa** 4.23 10/14/99 10,000,000 9,663,950
--------------
29,423,758
--------------
AGENCY -- 20.3%
Federal Farm Credit Bank..................... AAA/Aaa** 5.26* 1/25/99 10,000,000 10,000,000
Federal Home Loan Bank....................... AAA/Aaa** 5.07* 1/5/99 5,000,000 4,999,482
Federal Home Loan Bank....................... AAA/Aaa** 4.85 1/19/99 14,500,000 14,500,000
Federal Home Loan Bank....................... AAA/Aaa** 5.01 2/26/99 10,000,000 9,922,067
Federal Home Loan Bank....................... AAA/Aaa** 5.26 10/5/99 5,500,000 5,500,000
Federal Home Loan Bank....................... AAA/Aaa** 5.30 10/6/99 5,000,000 5,000,000
Federal Home Loan Bank....................... AAA/Aaa** 5.30 10/8/99 5,000,000 5,000,000
Federal Home Loan Bank....................... AAA/Aaa** 4.92 10/27/99 5,000,000 5,000,000
Federal Home Loan Bank....................... AAA/Aaa** 5.00 10/27/99 6,000,000 6,000,000
Federal Home Loan Bank....................... AAA/Aaa** 5.08 11/9/99 5,000,000 4,998,664
Federal Home Loan Bank....................... AAA/Aaa** 5.00 12/29/99 10,000,000 10,000,000
Federal Home Loan Mortgage Corp.............. AAA/Aaa** 5.08 1/14/99 9,700,000 9,682,206
Federal Home Loan Mortgage Corp.............. AAA/Aaa** 4.95 2/17/99 25,000,000 24,838,438
Federal Home Loan Mortgage Corp.............. AAA/Aaa** 4.92 3/19/99 20,000,000 19,789,533
Federal National Mortgage Association........ AAA/Aaa** 5.08 1/26/99 14,265,000 14,214,676
Federal National Mortgage Association........ AAA/Aaa** 4.96 2/5/99 10,000,000 9,951,778
Federal National Mortgage Association........ AAA/Aaa** 4.98 3/10/99 30,000,000 29,717,801
Federal National Mortgage Association........ AAA/Aaa** 4.85 3/15/99 15,400,000 15,248,545
Federal National Mortgage Association........ AAA/Aaa** 4.88 4/1/99 5,000,000 4,939,000
Student Loan Marketing Association........... AAA/Aaa** 5.29* 1/5/99 15,000,000 14,998,656
Student Loan Marketing Association........... AAA/Aaa** 5.29* 1/5/99 15,000,000 15,000,000
Student Loan Marketing Association........... AAA/Aaa** 5.34* 1/5/99 15,000,000 15,000,000
Student Loan Marketing Association........... AAA/Aaa** 5.39* 1/5/99 15,000,000 15,000,000
</TABLE>
Continued
4
<PAGE> 5
<TABLE>
<CAPTION>
MOODY'S/S&P AMORTIZED
RATINGS MATURITY PRINCIPAL COST
(UNAUDITED) RATE DATE AMOUNT (NOTE 2)
---------------- ---- --------- ----------- --------------
<S> <C> <C> <C> <C> <C>
U.S. GOVERNMENT AND AGENCY OBLIGATIONS, CONTINUED:
AGENCY, CONTINUED:
Student Loan Marketing Association........... AAA/Aaa** 5.59%* 1/5/99 $ 5,000,000 $ 5,000,000
Student Loan Marketing Association........... AAA/Aaa 5.00 1/14/00 6,500,000 6,500,000
--------------
280,800,846
--------------
Total U.S. Government and Agency Obligations
(Cost $310,224,604).......................... 310,224,604
--------------
BANK NOTES -- 1.7%
DOMESTIC -- 1.7%
FCC National Bank............................ P-1/A-1 5.70 1/7/99 13,800,000 13,799,935
LaSalle National Bank........................ P-1/A-1+ 5.30 3/24/99 10,000,000 10,000,000
--------------
Total Bank Notes (Cost $23,799,935)............ 23,799,935
--------------
CERTIFICATES OF DEPOSIT -- 23.5%
DOMESTIC -- 7.4%
American Express Centurion Bank.............. P-1/A-1 5.27 1/7/99 20,000,000 19,999,648
American Express Centurion Bank.............. P-1/A-1 5.47 1/11/99 12,000,000 12,000,000
American Express Centurion Bank.............. P-1/A-1 5.46 1/12/99 15,000,000 15,000,000
Bankers Trust Co............................. P-1/A-1 4.82* 1/4/99 6,000,000 5,998,218
Bankers Trust Co............................. P-1/A-1 4.93* 1/4/99 10,000,000 9,999,962
Bankers Trust NY Corp........................ P-1/A-1 5.69 3/5/99 3,000,000 2,999,802
First Tennessee Bank, NA -- Memphis.......... P-1/A-1 5.44 1/14/99 12,000,000 12,000,000
Harris Trust & Savings Bank.................. P-1/A-1+ 5.46 1/6/99 25,000,000 25,000,000
--------------
102,997,630
--------------
EURO -- 1.1%
Westdeutsche Landesbank Girozentrale......... P-1/A-1+ 5.63 1/14/99 15,000,000 15,000,471
--------------
YANKEE -- 15.0%
ABN AMRO Bank, N.V........................... P-1/A-1+ 5.66 7/6/99 5,000,000 5,004,354
Bank of Nova Scotia.......................... P-1/A-1+ 5.80 4/29/99 15,000,000 14,997,679
Bank of Nova Scotia.......................... P-1/A-1+ 5.56 8/25/99 10,000,000 9,997,519
Credit Agricole Indosuez..................... P-1/A-1+ 5.75 5/19/99 7,000,000 6,997,593
Credit Agricole Indosuez..................... P-1/A-1+ 5.73 5/26/99 6,000,000 6,006,486
Deutsche Bank AG............................. P-1/A-1+ 5.64 3/22/99 5,000,000 4,999,727
</TABLE>
Continued
5
<PAGE> 6
<TABLE>
<CAPTION>
MOODY'S/S&P AMORTIZED
RATINGS MATURITY PRINCIPAL COST
(UNAUDITED) RATE DATE AMOUNT (NOTE 2)
---------------- ---- --------- ----------- --------------
<S> <C> <C> <C> <C> <C>
CERTIFICATES OF DEPOSIT, CONTINUED:
YANKEE, CONTINUED:
National Bank of Canada...................... P-1/A-1 5.21% 3/3/99 $20,000,000 $ 20,000,670
National Bank of Canada...................... P-1/A-1 5.70 3/5/99 11,000,000 10,999,457
National Bank of Canada...................... P-1/A-1 5.76 6/9/99 10,000,000 9,998,331
National Bank of Canada...................... P-1/A-1 5.76 6/10/99 6,000,000 5,998,969
National Bank of Canada...................... P-1/A-1 5.70 7/20/99 7,000,000 6,998,095
Rabobank Nederland........................... P-1/A-1+ 5.75 5/14/99 10,000,000 9,998,255
Rabobank Nederland........................... P-1/A-1+ 4.96 5/20/99 20,000,000 19,996,359
Royal Bank of Canada......................... P-1/A-1+ 5.70 6/23/99 8,000,000 7,999,075
Societe Generale............................. P-1/A-1+ 5.46* 1/4/99 4,000,000 3,998,716
Societe Generale............................. P-1/A-1+ 5.58 2/10/99 5,000,000 4,999,895
Societe Generale............................. P-1/A-1+ 5.75 4/6/99 4,000,000 3,999,651
Societe Generale............................. P-1/A-1+ 5.75 4/6/99 5,000,000 5,002,448
Societe Generale............................. P-1/A-1+ 5.77 4/19/99 5,000,000 4,999,504
Societe Generale............................. P-1/A-1+ 5.73 7/2/99 7,000,000 6,999,331
Svenska Handelsbanken........................ P-1/A-1 5.54 2/23/99 4,000,000 3,999,656
Svenska Handelsbanken........................ P-1/A-1 5.79 5/7/99 5,000,000 5,000,951
Svenska Handelsbanken........................ P-1/A-1 5.78 5/28/99 5,000,000 5,004,694
Svenska Handelsbanken........................ P-1/A-1 5.69 7/23/99 4,700,000 4,704,898
Svenska Handelsbanken........................ P-1/A-1 5.60 8/20/99 12,000,000 11,996,332
Toronto-Dominion Bank........................ P-1/A-1+ 5.68 8/3/99 7,000,000 6,998,427
--------------
207,697,072
--------------
Total Certificates of Deposit (Cost
$325,695,173)................................ 325,695,173
--------------
COMMERCIAL PAPER -- 36.1%
ASSET BACKED -- FINANCE -- 1.1%
Beta Finance, Inc. (b)....................... P-1/A-1+ 5.27 3/2/99 15,500,000 15,363,858
--------------
ASSET BACKED -- MISCELLANEOUS -- 5.2%
Asset Securitization Cooperative Corp. (b)... P-1/A-1+ 5.45 1/20/99 10,350,000 10,320,229
Enterprise Funding Corp. (b)................. P-1/A-1+ 6.09 1/8/99 7,057,000 7,048,643
Preferred Receivables Funding Corp. (b)...... P-1/A-1 5.20 2/23/99 15,000,000 14,885,167
</TABLE>
Continued
6
<PAGE> 7
<TABLE>
<CAPTION>
MOODY'S/S&P AMORTIZED
RATINGS MATURITY PRINCIPAL COST
(UNAUDITED) RATE DATE AMOUNT (NOTE 2)
---------------- ---- --------- ----------- --------------
<S> <C> <C> <C> <C> <C>
COMMERCIAL PAPER, CONTINUED:
ASSET BACKED -- MISCELLANEOUS, CONTINUED:
Triple A One Funding (b)..................... P-1/A-1 5.50% 1/4/99 $25,000,000 $ 24,988,542
Variable Funding Corp. (b)................... P-1/A-1 5.39 1/11/99 15,000,000 14,977,542
--------------
72,220,123
--------------
AUTO-TRUCK -- 1.6%
Ford Motor Credit Corp....................... P-1/A-1 5.41 1/8/99 15,000,000 14,984,221
Ford Motor Credit Corp....................... P-1/A-1 5.20 2/18/99 7,000,000 6,951,467
--------------
21,935,688
--------------
BANKING -- 8.5%
Bank of Nova Scotia.......................... P-1/A-1+ 6.25 1/8/99 25,000,000 24,969,618
Bankers Trust Corp........................... P-1/A-1 5.51 3/16/99 6,000,000 5,932,074
Bankers Trust Corp........................... P-1/A-1 5.46 4/5/99 5,000,000 4,928,749
BBL North America, Inc....................... P-1/A-1+ 5.50 1/5/99 20,000,000 19,987,778
BT Alex Brown Corp........................... P-1/A-1 5.47 4/14/99 4,000,000 3,937,399
Cregem N.A., Inc............................. P-1/A-1+ 5.24 1/7/99 15,000,000 14,986,900
Cregem N.A., Inc............................. P-1/A-1+ 5.47 1/7/99 10,000,000 9,990,883
Cregem N.A., Inc............................. P-1/A-1+ 5.10 3/4/99 20,000,000 19,824,333
Nordbanken N.A., Inc......................... P-1/A-1 5.10 3/8/99 15,000,000 14,859,750
--------------
119,417,484
--------------
BROKER/DEALER -- 5.4%
Goldman Sachs Group, L.P..................... P-1/A-1+ 5.05 1/4/99 34,000,000 33,985,693
Lehman Brothers Holdings, Inc. (c)........... P-2/A-1 5.53 2/19/99 5,000,000 4,962,365
Merrill Lynch & Co., Inc..................... P-1/A-1+ 5.47 4/30/99 15,000,000 14,728,779
Morgan Stanley, Dean Witter & Co............. P-1/A-1 5.51* 1/11/99 10,000,000 10,000,000
Morgan Stanley, Dean Witter & Co............. P-1/A-1 5.42 1/6/99 6,000,000 5,995,483
Morgan Stanley, Dean Witter & Co............. P-1/A-1 5.20 3/26/99 5,000,000 4,939,333
--------------
74,611,653
--------------
BUSINESS SERVICES -- 1.1%
Block Financial Corp......................... P-1/A-1 5.33 1/29/99 15,000,000 14,937,817
--------------
CHEMICALS -- 0.5%
Henkel Corp. (b)............................. P-1/A-1+ 5.05 3/18/99 7,000,000 6,925,372
--------------
</TABLE>
Continued
7
<PAGE> 8
<TABLE>
<CAPTION>
MOODY'S/S&P AMORTIZED
RATINGS MATURITY PRINCIPAL COST
(UNAUDITED) RATE DATE AMOUNT (NOTE 2)
---------------- ---- --------- ----------- --------------
<S> <C> <C> <C> <C> <C>
COMMERCIAL PAPER, CONTINUED:
CONSUMER PRODUCTS -- 0.7%
Procter & Gamble Co.......................... P-1/A-1+ 5.15% 2/11/99 $10,000,000 $ 9,941,347
--------------
DRUGS & HEALTHCARE -- 2.2%
Glaxo Wellcome, Inc. (b)..................... P-1/A-1+ 5.45 1/6/99 20,000,000 19,984,861
Pfizer, Inc. (b)............................. P-1/A-1+ 5.13 2/12/99 10,000,000 9,940,150
--------------
29,925,011
--------------
ELECTRONICS -- 0.9%
Motorola, Inc................................ P-1/A-1+ 4.85 4/1/99 13,000,000 12,842,375
--------------
FINANCE-CONSUMER -- 1.8%
Household Finance Corp....................... P-1/A-1 5.13 1/29/99 25,000,000 24,900,250
--------------
FINANCE-DIVERSIFIED -- 1.4%
Associates Corp. of N.A...................... P-1/A-1+ 5.32 1/13/99 10,000,000 9,982,266
Associates Corp. of N.A...................... P-1/A-1+ 5.20 1/22/99 10,000,000 9,969,667
--------------
19,951,933
--------------
FOOD, BEVERAGE & TOBACCO -- 2.8%
Campbell Soup Co. (b)........................ P-1/A-1+ 5.12 9/3/99 10,000,000 9,651,556
Diageo Capital PLC (b)....................... P-1/A-1 5.00 1/27/99 10,000,000 9,963,889
Diageo Capital PLC (b)....................... P-1/A-1 5.15 2/3/99 19,000,000 18,910,304
--------------
38,525,749
--------------
INSURANCE -- 1.3%
Prudential Funding Corp...................... P-1/A-1 5.30 1/12/99 18,000,000 17,970,850
--------------
MANUFACTURING -- DIVERSIFIED -- 1.0%
BTR Dunlop Finance Inc. (b).................. P-1/A-1 5.32 1/21/99 14,400,000 14,357,440
--------------
UTILITIES -- ELECTRIC -- 0.6%
Southern Company (b)......................... P-1/A-1 5.10 2/2/99 8,000,000 7,963,733
--------------
Total Commercial Paper (Cost $501,790,683)..... 501,790,683
--------------
</TABLE>
Continued
8
<PAGE> 9
<TABLE>
<CAPTION>
MOODY'S/S&P AMORTIZED
RATINGS MATURITY PRINCIPAL COST
(UNAUDITED) RATE DATE AMOUNT (NOTE 2)
---------------- ---- --------- ----------- --------------
<S> <C> <C> <C> <C> <C>
SHORT-TERM CORPORATE OBLIGATIONS -- 15.7%
BANKING -- 1.2%
Bankers Trust NY Corp........................ P-1/A-1 5.38%* 2/19/99 $ 9,800,000 $ 9,799,868
Norwest Corp................................. P-1/A-1+ 5.55 8/31/99 7,000,000 6,998,664
--------------
16,798,532
--------------
BROKER/DEALER -- 9.3%
Bear Stearns Companies, Inc.................. P-1/A-1 5.24* 1/5/99 10,000,000 10,000,000
Bear Stearns Companies, Inc.................. P-1/A-1 5.56* 1/6/99 8,000,000 8,000,000
Bear Stearns Companies, Inc.................. P-1/A-1 5.53* 1/20/99 6,000,000 6,000,000
Bear Stearns Companies, Inc.................. P-1/A-1 5.80 4/26/99 10,000,000 10,000,000
C.S. First Boston, Inc. (c).................. P-1/A-1+ 5.22* 1/5/99 25,000,000 25,000,001
Lehman Brothers Holdings, Inc. (c)........... P-2/A-1 4.91* 1/1/99 5,000,000 4,999,872
Lehman Brothers Holdings, Inc. (c)........... P-2/A-1 4.97* 1/4/99 10,000,000 10,000,000
Lehman Brothers Holdings, Inc. (c)........... P-2/A-1 5.04* 1/4/99 13,000,000 13,006,981
Lehman Brothers Holdings, Inc. (c)........... P-2/A-1 5.77* 1/25/99 5,000,000 5,002,709
Lehman Brothers Holdings, Inc. (c)........... P-2/A-1 5.68* 1/26/99 4,000,000 4,000,000
Merrill Lynch & Co., Inc..................... P-1/A-1+ 4.85* 1/4/99 5,000,000 5,000,000
Morgan Stanley Group, Inc.................... P-1/A-1 4.96* 1/4/99 17,000,000 17,000,000
Morgan Stanley Group, Inc.................... P-1/A-1 5.63 3/1/99 10,900,000 10,900,361
--------------
128,909,924
--------------
COMPUTER -- 0.4%
IBM Credit Corp.............................. P-1/A-1 5.17* 3/11/99 5,000,000 5,000,000
--------------
FINANCE-AIRCRAFT -- 0.5%
International Lease Financing................ P-1/A-1+ 7.41 9/1/99 7,500,000 7,591,584
--------------
INSURANCE -- 2.6%
Prudential Funding Corp. (b)................. P-1/A-1 5.14* 1/5/99 8,000,000 8,000,000
Prudential Funding Corp. (b)................. P-1/A-1 5.16* 1/5/99 10,000,000 10,000,000
Prudential Funding Corp. (b)................. P-1/A-1 5.20* 1/5/99 5,000,000 5,000,000
Prudential Funding Corp. (b)................. P-1/A-1 5.26* 1/5/99 7,000,000 7,000,000
Prudential Funding Corp. (b)................. P-1/A-1 5.52* 1/5/99 6,000,000 6,000,000
--------------
36,000,000
--------------
</TABLE>
Continued
9
<PAGE> 10
<TABLE>
<CAPTION>
MOODY'S/S&P AMORTIZED
RATINGS MATURITY PRINCIPAL COST
(UNAUDITED) RATE DATE AMOUNT (NOTE 2)
---------------- ---- --------- ----------- --------------
<S> <C> <C> <C> <C> <C>
SHORT-TERM CORPORATE OBLIGATIONS, CONTINUED:
MISCELLANEOUS -- 1.7%
Beta Finance Inc. (b)........................ P-1/A-1+ 5.77% 1/15/99 $15,000,000 $ 15,000,000
Beta Finance Inc. (b)........................ P-1/A-1+ 5.56 2/16/99 5,000,000 5,000,000
Beta Finance Inc. (b)........................ P-1/A-1+ 5.70 3/10/99 4,000,000 4,000,000
--------------
24,000,000
--------------
Total Short-Term Corporate Obligations (Cost
$218,300,040)................................ 218,300,040
--------------
REPURCHASE AGREEMENTS -- 1.5%
S.G. Cowen Securities Corp., dated 12/31/98
(Collateralized by $19,804,000 U.S.
Treasury Notes, 5.88%, due 11/15/05, fair
value -- $21,292,532)..................... 4.80 1/4/99 20,871,000 20,871,000
--------------
Total Repurchase Agreements (Cost
$20,871,000)................................. 20,871,000
--------------
Total Investments (Cost $1,400,681,435) (a) --
100.9%....................................... 1,400,681,435
--------------
Liabilities in excess of other
assets -- (0.9%)........................... (12,778,045)
--------------
Total Net Assets -- 100.0%................... $1,387,903,390
==============
</TABLE>
- - ---------------
(a) Cost for federal income tax and financial reporting purposes are the same.
(b) Represents a restricted security, purchased under Rule 144A or Section 4(2),
which is exempt from registration under the Security Act of 1933, as
amended. These securities have been deemed liquid under guidelines
established by the Board of Directors.
(c) Illiquid security.
* Variable rate security. Rate presented represents the rate in effect at
December 31, 1998. Maturity date presented reflects earlier of next rate
change date or maturity date.
** Implied Long Term Rating.
- - ---------------
See Notes to Financial Statements.
10
<PAGE> 11
THE INFINITY MUTUAL FUNDS, INC.
CORRESPONDENT CASH RESERVES MONEY MARKET PORTFOLIO
- - --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1998
- - --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investments in securities, at amortized cost.............. $1,379,810,435
Repurchase agreements, at cost............................ 20,871,000
--------------
Total Investments......................................... 1,400,681,435
Cash...................................................... 323
Interest receivable....................................... 11,916,196
Prepaid expenses and other assets......................... 17,775
--------------
Total assets................................................ 1,412,615,729
--------------
LIABILITIES
Dividends payable......................................... 2,568,050
Payable for securities purchased.......................... 21,000,000
Accrued expenses and other payables:
Advisory fees........................................... 122,658
Administration fees..................................... 122,658
Distribution fees....................................... 780,552
Directors' fees......................................... 6,889
Other................................................... 111,532
--------------
Total liabilities........................................... 24,712,339
--------------
NET ASSETS.................................................. $1,387,903,390
==============
Shares Outstanding ($0.001 par value, 3 billion shares
authorized):.............................................. 1,388,763,271
==============
Net Asset Value, Offering Price and Redemption Price per
Share..................................................... $1.00
=====
COMPOSITION OF NET ASSETS
Shares of common stock, at par............................ $ 1,388,763
Additional paid-in capital................................ 1,387,405,939
Accumulated net realized losses........................... (891,312)
--------------
Net Assets.................................................. $1,387,903,390
==============
</TABLE>
- - ---------------
See Notes to Financial Statements.
11
<PAGE> 12
THE INFINITY MUTUAL FUNDS, INC.
CORRESPONDENT CASH RESERVES MONEY MARKET PORTFOLIO
- - --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
- - --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Interest.................................................... $74,096,359
Expenses
Advisory fees............................................. $ 1,328,616
Administration fees....................................... 1,328,616
Special management services fees.......................... 1,328,616
Distribution fees......................................... 7,981,102
Accounting fees........................................... 58,223
Transfer agent fees and expenses.......................... 696,739
Directors' fees........................................... 80,677
Registration fees......................................... 646,062
Custodian fees and expenses............................... 154,601
Printing fees............................................. 103,959
Legal fees................................................ 102,505
Other expenses............................................ 33,276
-----------
Total expenses before fee waivers....................... 13,842,992
Less: Fee waivers....................................... (1,439,052)
-----------
Total Expenses.............................................. 12,403,940
-----------
Net Investment Income....................................... 61,692,419
REALIZED GAINS ON INVESTMENT TRANSACTIONS
Net realized gains on investment transactions............. 87,896
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........ $61,780,315
===========
</TABLE>
- - ---------------
See Notes to Financial Statements.
12
<PAGE> 13
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,
1998 1997
--------------- ---------------
<S> <C> <C>
INCREASE IN NET ASSETS
Operations
Net investment income..................................... $ 61,692,419 $ 50,905,104
Net realized gains (losses) on investment transactions.... 87,896 (3,332)
--------------- ---------------
Net increase in net assets resulting from operations.... 61,780,315 50,901,772
--------------- ---------------
Dividends to shareholders from net investment income........ (61,698,042) (50,905,104)
--------------- ---------------
Capital Share Transactions
Proceeds from shares issued............................... 7,074,460,107 6,437,748,169
Dividends reinvested...................................... 59,507,058 48,756,978
Cost of shares redeemed................................... (6,897,157,916) (6,342,754,703)
--------------- ---------------
Net increase in net assets from capital share
transactions.......................................... 236,809,249 143,750,444
--------------- ---------------
Total Increase in Net Assets................................ 236,891,522 143,747,112
NET ASSETS
Beginning of period....................................... 1,151,011,868 1,007,264,756
--------------- ---------------
End of period............................................. $1,387,903,390 $ 1,151,011,868
=============== ===============
SHARE TRANSACTIONS
Issued.................................................... 7,074,460,107 6,437,748,169
Reinvested................................................ 59,507,058 48,756,978
Redeemed.................................................. (6,897,157,916) (6,342,754,703)
--------------- ---------------
Change in shares.......................................... 236,809,249 143,750,444
=============== ===============
</TABLE>
- - ---------------
See Notes to Financial Statements.
13
<PAGE> 14
THE INFINITY MUTUAL FUNDS, INC.
CORRESPONDENT CASH RESERVES TAX FREE MONEY MARKET PORTFOLIO
- - --------------------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS
DECEMBER 31, 1998
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MOODY'S/S&P AMORTIZED
RATINGS MATURITY PRINCIPAL COST
(UNAUDITED) RATE DATE AMOUNT (NOTE 2)
---------------- ---- -------- ---------- ------------
<S> <C> <C> <C> <C> <C>
COMMERCIAL PAPER -- 26.2%
FLORIDA -- 1.7%
Plaquemenes Port Authority, PCR (Tampa
Electric)...................................... P-1/A-1 3.00% 3/4/99 $1,000,000 $ 1,000,000
Sarasota Public Hospital District (Sarasota
Memorial)...................................... VMIG1/A-1+ 3.00 1/25/99 750,000 750,000
------------
1,750,000
------------
INDIANA -- 2.9%
Beaver County, PCR (Duquesne Light Co.).......... VMIG1/A-1 3.00 1/29/99 970,000 970,000
City of Indianapolis Gas Utility System.......... P-1/NR 3.05 2/16/99 1,000,000 1,000,000
City of Indianapolis Gas Utility System.......... P-1/NR 2.95 3/24/99 1,000,000 1,000,000
------------
2,970,000
------------
MINNESOTA -- 1.0%
City of Rochester Healthcare Facilities (Mayo
Clinic)........................................ NR/A-1+ 3.00 2/23/99 1,000,000 1,000,000
------------
NEBRASKA -- 2.9%
Omaha Public Power District...................... P-1/A-1+ 3.10 3/11/99 3,000,000 3,000,000
------------
PUERTO RICO -- 2.9%
Puerto Rico Government Development Bank.......... NR/A-1+ 2.90 1/19/99 1,000,000 1,000,000
Puerto Rico Government Development Bank.......... NR/A-1+ 3.00 1/25/99 1,000,000 1,000,000
Puerto Rico Government Development Bank.......... NR/A-1+ 2.95 3/5/99 1,000,000 1,000,000
------------
3,000,000
------------
SOUTH CAROLINA -- 0.4%
South Carolina Public Service Authority.......... P-1/A-1+ 2.95 2/22/99 400,000 400,000
------------
TENNESSEE -- 1.0%
Shelby County Tax Anticipation Notes............. P-1/A-1+ 3.15 2/12/99 1,000,000 1,000,000
------------
TEXAS -- 10.6%
Brazos Harbor Industrial Development (Dow
Chemical)...................................... P-1/A-1 3.00 2/17/99 1,500,000 1,500,000
City of Fort Worth............................... Aa2/Aa 5.50 3/1/99 500,000 501,918
City of Houston Water & Sewer.................... NR/NR 3.25 2/23/99 1,000,000 1,000,000
North Central Texas Health Facilities (Methodist
Hospital)...................................... P-1/A-1+ 3.15 2/12/99 1,000,000 1,000,000
Port City Medical Clinic (Mobile Infirmary)...... P-1/A-1+ 2.95 2/18/99 1,000,000 1,000,000
</TABLE>
Continued
14
<PAGE> 15
<TABLE>
<CAPTION>
MOODY'S/S&P AMORTIZED
RATINGS MATURITY PRINCIPAL COST
(UNAUDITED) RATE DATE AMOUNT (NOTE 2)
---------------- ---- -------- ---------- ------------
<S> <C> <C> <C> <C> <C>
COMMERCIAL PAPER, CONTINUED:
TEXAS, CONTINUED:
San Antonio Electric and Gas..................... P-1/A-1+ 3.05% 1/21/99 $3,000,000 $ 3,000,000
State of Texas................................... P-1/A-1+ 2.95 7/23/99 1,000,000 1,000,000
State of Texas................................... P-1/A-1+ 2.95 7/30/99 1,000,000 1,000,000
State of Texas................................... P-1/A-1+ 2.95 8/20/99 1,000,000 1,000,000
------------
11,001,918
------------
UTAH -- 1.8%
Salt River Agricultural Improvement.............. P-1/A-1+ 2.95 2/25/99 1,000,000 1,000,000
Salt River Agricultural Improvement.............. P-1/A-1+ 3.10 3/8/99 800,000 800,000
------------
1,800,000
------------
VIRGINIA -- 1.0%
Town of Louisa Industrial Development Authority
(Virginia Electric Power)...................... VMIG1/A-1 3.05 1/29/99 1,000,000 1,000,000
------------
Total Commercial Paper (Cost $26,921,918).......... 26,921,918
------------
MUNICIPAL BONDS -- 73.0%
ARIZONA -- 4.1%
Maricopa County, PCR, Series B (Arizona Public
Services Company).............................. P-1/A-1+ 5.10* 5/1/29 500,000 500,000
Phoenix Industrial Development Authority,
Multi-Family Housing (Southwest Villages)...... NR/A-1+ 3.85* 12/1/06 2,200,000 2,200,000
Pima County Industrial Development Authority
Revenue (Tucson Electric Light & Power
Improvements).................................. VMIG1/A-1+ 4.00* 12/1/22 1,500,000 1,500,000
------------
4,200,000
------------
CALIFORNIA -- 2.4%
California Higher Education Loan Authority Inc.,
Student Loan Revenue, Series A................. VMIG1/NR 3.75* 5/1/99** 500,000 500,000
California Higher Education Loan Authority Inc.,
Student Loan Revenue, Series D-2............... VMIG1/NR 3.05 7/1/99** 500,000 500,000
California School Cash Reserve Program Authority,
Revenue Bonds.................................. MIG1/SP1+ 4.50 7/2/99 1,000,000 1,003,650
</TABLE>
Continued
15
<PAGE> 16
<TABLE>
<CAPTION>
MOODY'S/S&P AMORTIZED
RATINGS MATURITY PRINCIPAL COST
(UNAUDITED) RATE DATE AMOUNT (NOTE 2)
---------------- ---- -------- ---------- ------------
<S> <C> <C> <C> <C> <C>
MUNICIPAL BONDS, CONTINUED:
CALIFORNIA, CONTINUED:
Santa Cruz County Board of Education, Tax &
Revenue Anticipation Notes..................... NR/SP1+ 4.00% 6/30/99 $ 510,000 $ 510,774
------------
2,514,424
------------
COLORADO -- 1.0%
Douglas County, Tax Anticipation Notes........... MIG1/SP1+ 3.75 6/30/99 1,000,000 1,003,873
------------
FLORIDA -- 4.4%
Broward County School District, GO Mandatory Call
2/15/99 @ 102.................................. AAA/Aaa 7.13 2/15/08 590,000 604,271
Dade County Health Facilities Authority, Hospital
Revenue (Miami Children's Hospital Project).... NR/A-1+ 3.40* 9/1/25 2,100,000 2,100,000
Indian Trace Community Development District,
Series A (Basin 1 Water Management)............ VMIG1/A-1+ 3.40* 11/1/99 1,800,000 1,800,000
------------
4,504,271
------------
GEORGIA -- 6.3%
Burke County, Georgia Development Authority, PCR,
Series A (Oglethorpe Power Corp.).............. VMIG1/A-1+ 3.85* 1/1/16 1,000,000 1,000,000
Burke County Georgia Development Authority, PCR,
Series A (Oglethorpe Power Corp.).............. VMIG1/A-1+ 3.85* 1/1/19 1,800,000 1,800,000
De Kalb Private Hospital Authority, Revenue
Anticipation Bonds (Eagleston Childrens Health
Center)........................................ VMIG1/A-1+ 3.90* 12/1/17 1,800,000 1,800,000
Georgia Municipal Gas Authority Gas Revenue,
Series B....................................... NR/A-1+ 3.90* 9/1/07 1,400,000 1,400,000
Gwinett County Housing Authority, Multi-Family
Housing (Post Court)........................... NR/A-1+ 4.00* 6/1/25 500,000 500,000
------------
6,500,000
------------
IDAHO -- 0.8%
Power County, PCR (FMC Corp.).................... VMIG1/NR 5.15* 12/1/10 800,000 800,000
------------
</TABLE>
Continued
16
<PAGE> 17
<TABLE>
<CAPTION>
MOODY'S/S&P AMORTIZED
RATINGS MATURITY PRINCIPAL COST
(UNAUDITED) RATE DATE AMOUNT (NOTE 2)
---------------- ---- -------- ---------- ------------
<S> <C> <C> <C> <C> <C>
MUNICIPAL BONDS, CONTINUED:
ILLINOIS -- 12.1%
Illinois Development Finance Authority, PCR (A.E.
Staley Manufacturing Co.)...................... P-1/NR 3.85%* 12/1/05 $1,800,000 $ 1,800,000
Illinois Educational Facilities Authority Revenue
(Field Museum of Natural History).............. VMIG1/A-1+ 3.65 1/28/99** 1,000,000 1,000,000
Illinois Educational Facilities Authority
Revenue, Series Cp-1 (DePaul University)....... VMIG1/A-1+ 4.10* 4/1/26 1,800,000 1,800,000
Illinois Health Facilities Authority Revenue
(Combined Health & NW Community)............... VMIG1/NR 3.55* 10/1/15 2,000,000 2,000,000
Illinois Health Facilities Authority Revenue
(Evanston Hospital Corp. Project).............. VMIG1/NR 3.70 3/1/99** 1,000,000 1,000,000
Illinois Health Facilities Authority Revenue
(Evanston Northwestern Corp.).................. VMIG1/NR 3.70* 6/1/32 500,000 500,000
Illinois Health Facilities Authority Revenue,
Series B (Advocate Health Care)................ VMIG1/A-1+ 4.00* 8/15/22 1,960,000 1,960,000
Illinois Health Facilities Authority Revenue,
Series B (Elmhurst Memorial Hospital
Project)....................................... VMIG1/NR 5.15* 1/1/20 1,000,000 1,000,000
Illinois Health Facilities Authority Revenue,
Series B (St. Luke's Medical Center)........... VMIG1/A-1+ 2.85* 11/15/23 500,000 500,000
Illinois State Toll Highway Authority, Toll
Highway Priority Refunding Revenue, Series B... VMIG1/A-1+ 3.85* 1/1/10 1,000,000 1,000,000
------------
12,560,000
------------
INDIANA -- 1.0%
Indiana Municipal Power Agency, Series A (Agency
Power Supply System Revenue)................... VMIG1/A-1+ 3.95* 1/1/18 1,000,000 1,000,000
------------
KENTUCKY -- 0.5%
Kentucky Asset Project Notes..................... MIG1/SP1+ 3.50 11/1/99 500,000 502,223
------------
LOUISIANA -- 1.5%
Louisiana State Offshore Terminal Authority
(Loop)......................................... NR/A-1+ 4.00* 9/1/08 820,000 820,000
Plaquemines Port Harbor & Term District (Chevron
Pipe Line Co.)................................. P-1/Aa 3.85* 9/1/08 685,000 685,219
------------
1,505,219
------------
</TABLE>
Continued
17
<PAGE> 18
<TABLE>
<CAPTION>
MOODY'S/S&P AMORTIZED
RATINGS MATURITY PRINCIPAL COST
(UNAUDITED) RATE DATE AMOUNT (NOTE 2)
---------------- ---- -------- ---------- ------------
<S> <C> <C> <C> <C> <C>
MUNICIPAL BONDS, CONTINUED:
MASSACHUSETTS -- 1.0%
Massachusetts Municipal Wholesale Electrical
Corp., Power Supply System Revenue, Series C... VMIG1/A-1+ 3.90%* 7/1/19 $1,000,000 $ 1,000,000
------------
MICHIGAN -- 5.2%
Michigan Municipal Bond Authority, Series D-1.... NR/SP1+ 4.25 8/27/99 500,000 502,106
Michigan State Hospital Finance Authority
Revenue, Series A (St. Mary Hospital of Livonia
Project)....................................... VMIG1/A-1 3.95* 7/1/17 1,900,000 1,900,000
Michigan Strategic Fund, Ltd. Obligation......... P-1/A-1+ 3.75* 9/1/30 500,000 500,000
University of Michigan Hospital, Revenue Bond,
Series A....................................... VMIG1/A-1+ 5.15* 12/1/19 400,000 400,000
University of Michigan Hospital, Revenue Bond,
Series A-2..................................... VMIG1/A-1+ 5.15* 12/1/24 2,000,000 2,000,000
------------
5,302,106
------------
NEVADA -- 1.8%
Clark County Airport Improvement Revenue, Series
A-1............................................ VMIG1/A-1+ 3.85* 7/1/25 1,900,000 1,900,000
------------
NEW HAMPSHIRE -- 1.9%
State Housing Finance Authority, Multi-Family
Revenues (EQR Bond Partnership)................ VMIG1/NR 4.25* 9/15/26 1,400,000 1,400,000
Stratford County Transportation Revenue, Bond
Anticipation Notes............................. NR/NR 4.30 4/15/99 594,516 595,014
------------
1,995,014
------------
NEW JERSEY -- 1.0%
New Jersey Transportation Funding Authority
Revenue, Series A.............................. NR/NR 4.50 6/15/99 500,000 501,845
South Jersey Transportation, Bond Anticipation
Notes.......................................... NR/NR 2.95 11/3/99 500,000 500,000
------------
1,001,845
------------
NEW MEXICO -- 2.7%
New Mexico, Tax & Revenue Anticipation Notes..... MIG1/SP1+ 4.25 6/30/99 500,000 501,547
University of New Mexico (University Revenue).... VMIG1/A-1+ 3.85* 6/1/06 2,300,000 2,300,000
------------
2,801,547
------------
</TABLE>
Continued
18
<PAGE> 19
<TABLE>
<CAPTION>
MOODY'S/S&P AMORTIZED
RATINGS MATURITY PRINCIPAL COST
(UNAUDITED) RATE DATE AMOUNT (NOTE 2)
---------------- ---- -------- ---------- ------------
<S> <C> <C> <C> <C> <C>
MUNICIPAL BONDS, CONTINUED:
NEW YORK -- 4.3%
Municipal Assistance Corporation for New York
City, Revenue Bond, Subseries K-1.............. VMIG1/A-1+ 3.80%* 7/1/08 $ 500,000 $ 500,000
New York City Cultural Research Revenue (American
Museum of Natural History)..................... VMIG1/A-1+ 3.80* 4/1/21 2,000,000 2,000,000
New York State Local Government Assistance Corp.
Revenue, Series A.............................. VMIG1/A-1+ 3.90* 4/1/22 1,400,000 1,400,000
Schenectady New York City School District........ NR/NR 3.36 6/30/99 475,000 475,897
------------
4,375,897
------------
NORTH CAROLINA -- 5.4%
North Carolina Educational Facilities, Finance
Agency Revenue, Series B (Duke University)..... VMIG1/A-1+ 3.95* 12/1/21 1,700,000 1,700,000
Union, North Carolina, PCR (Square D), Revenue
Bonds.......................................... VMIG1/NR 4.00* 3/1/03 2,400,000 2,400,000
University of North Carolina Chapel Hill
Foundation (Certification of Participation).... VMIG1/NR 4.05* 10/1/09 1,500,000 1,500,000
------------
5,600,000
------------
OREGON -- 0.5%
Multnomah County School District, Tax & Revenue
Anticipation Notes............................. MIG1/SP1+ 4.25 6/30/99 500,000 501,426
------------
PENNSYLVANIA -- 6.0%
Allegheny County Hospital Development Authority
Revenue, Series B (Children's Hospital
Pittsburgh).................................... VMIG1/A-1 3.60* 12/1/15 700,000 700,000
Delaware Valley Regulatory Financing Authority,
Local Government Revenue....................... VMIG1/A-1+ 3.90* 8/1/16 1,000,000 1,000,000
Delaware Valley Regulatory Financing Authority,
Local Government Revenue, Series A............. VMIG1/A-1+ 3.90* 12/1/19 2,000,000 2,000,000
North Umberland Industrial Development Authority
Revenue (Merck Project)........................ NR/A-1+ 4.25* 10/1/22 2,000,000 2,000,000
Philadelphia, Tax & Revenue Anticipation Notes... MIG1/SP1+ 4.25 6/30/99 500,000 501,461
------------
6,201,461
------------
</TABLE>
Continued
19
<PAGE> 20
<TABLE>
<CAPTION>
MOODY'S/S&P AMORTIZED
RATINGS MATURITY PRINCIPAL COST
(UNAUDITED) RATE DATE AMOUNT (NOTE 2)
---------------- ---- -------- ---------- ------------
<S> <C> <C> <C> <C> <C>
MUNICIPAL BONDS, CONTINUED:
SOUTH CAROLINA -- 1.0%
South Carolina Jobs Economic Development
Authority, Hospital Facilities Revenue......... NR/A-1+ 3.85%* 2/15/28 $1,000,000 $ 1,000,000
------------
TEXAS -- 2.0%
Hockley County PCR (Amoco Project)............... P-1/A-1+ 3.00* 5/1/99** 500,000 500,238
Texas State, Series A58.......................... VMIG1/A-1+ 5.35* 8/31/99 1,000,000 1,000,000
Tom Green County Health Facilities Development
Corp., Health Facilities Revenue (Universal
Health Services)............................... NR/A-1+ 4.00* 12/1/15 600,000 600,000
------------
2,100,238
------------
UTAH -- 1.0%
Intermountain Power Authority, Series............ VMIG1/A-1+ 3.30 3/15/99** 1,000,000 1,000,000
------------
WASHINGTON -- 1.9%
Washington State, Series 96B, GO................. VMIG1/A-1+ 4.05* 6/1/20 2,000,000 2,000,000
------------
</TABLE>
Continued
20
<PAGE> 21
<TABLE>
<CAPTION>
MOODY'S/S&P AMORTIZED
RATINGS MATURITY PRINCIPAL COST
(UNAUDITED) RATE DATE AMOUNT (NOTE 2)
---------------- ---- -------- ---------- ------------
<S> <C> <C> <C> <C> <C>
MUNICIPAL BONDS, CONTINUED:
WISCONSIN -- 3.2%
Kenosha Wisconsin University, GO, Tax & Revenue
Anticipation Notes............................. MIG1/NR 3.38% 9/28/99 $ 500,000 $ 500,000
La Cross Wisconsin, PCR (Dairyland Power
Cooperative)................................... VMIG1/A-1+ 5.10* 9/1/14 1,300,000 1,300,000
Stoughton Wisconsin Area School District......... NR/NR 3.25 10/29/99 950,000 950,000
Wisconsin State, Operating Notes................. MIG1/SP1+ 4.50 6/15/99 500,000 502,097
------------
3,252,097
------------
Total Municipal Bonds (Cost $75,121,641)........... 75,121,641
------------
Total Investments (Cost $102,043,559)
(a) -- 99.2%..................................... 102,043,559
------------
Other assets in excess of liabilities -- 0.8%...... 777,373
------------
Total Net Assets -- 100.0%......................... $102,820,932
============
</TABLE>
- - ---------------
(a) Cost for federal income tax and financial reporting purposes are the same.
* Floating or adjustable rate security. The coupon rate shown on floating or
adjustable rates securities represents the rate at December 31, 1998.
** Put and demand features exist allowing the fund to require the repurchase of
the investment within variable time periods ranging from daily, weekly,
monthly or semi-annually. Maturity date reflects the next put date for these
securities. For all other securities held by the Portfolio, maturity date
reflects final maturity date.
GO = General Obligation
NR = Not rated
PCR = Pollution Control Revenue
- - ---------------
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, 1998
- - --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investments in securities, at amortized cost.............. $102,043,559
Cash...................................................... 421,338
Interest receivable....................................... 546,791
Prepaid expenses and other assets......................... 25,988
------------
Total assets................................................ 103,037,676
------------
LIABILITIES
Dividends payable......................................... 122,042
Accrued expenses and other payables:
Advisory fees........................................... 9,452
Administration fees..................................... 5,671
Distribution fees....................................... 40,645
Directors' fees......................................... 489
Other................................................... 38,445
------------
Total liabilities........................................... 216,744
------------
NET ASSETS.................................................. $102,820,932
============
Shares Outstanding ($0.001 par value, 3 billion shares
authorized):.............................................. 102,818,676
============
Net Asset Value, Offering Price and Redemption Price per
Share..................................................... $1.00
=====
COMPOSITION OF NET ASSETS
Shares of common stock, at par............................ $ 102,819
Additional paid-in capital................................ 102,715,856
Undistributed net investment income....................... 940
Accumulated net realized gains............................ 1,317
------------
Net Assets.................................................. $102,820,932
============
</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, 1998
- - --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Interest.................................................... $3,974,783
Expenses
Advisory fees............................................. $ 113,647
Administration fees....................................... 113,647
Special management services fees.......................... 113,647
Distribution fees......................................... 681,887
Accounting fees........................................... 30,012
Transfer agent fees and expenses.......................... 22,168
Directors' fees........................................... 4,753
Other expenses............................................ 82,646
----------
Total expenses before fee waivers....................... 1,162,407
Less: Fee waivers....................................... (357,277)
----------
Total Expenses.............................................. 805,130
----------
Net Investment Income....................................... 3,169,653
REALIZED GAINS ON INVESTMENT TRANSACTIONS
Net realized gains on investment transactions............. 3,211
----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........ $3,172,864
==========
</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 Year Ended
December 31, December 31,
1998 1997
------------ ------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations
Net investment income..................................... $ 3,169,653 $ 2,676,436
Net realized gains (losses) on investment transactions.... 3,211 (954)
------------- -------------
Net increase in net assets resulting from operations.... 3,172,864 2,675,482
------------- -------------
Dividends to shareholders from net investment income........ (3,169,653) (2,676,436)
------------- -------------
Capital Share Transactions
Proceeds from shares issued............................... 547,622,475 492,981,689
Dividends reinvested...................................... 3,105,194 2,390,128
Cost of shares redeemed................................... (551,308,528) (472,381,555)
------------- -------------
Net increase (decrease) in net assets from capital share
transactions.......................................... (580,859) 22,990,262
------------- -------------
Total Increase (Decrease) in Net Assets..................... (577,648) 22,989,308
NET ASSETS
Beginning of period....................................... 103,398,580 80,409,272
------------- -------------
End of period............................................. $102,820,932 $ 103,398,580
============= =============
SHARE TRANSACTIONS
Issued.................................................... 547,622,475 492,981,689
Reinvested................................................ 3,105,194 2,390,128
Redeemed.................................................. (551,308,528) (472,381,555)
------------- -------------
Change in shares.......................................... (580,859) 22,990,262
============= =============
</TABLE>
- - ---------------
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, 1998
- - --------------------------------------------------------------------------------
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 sixteen 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 (collectively the "Portfolios"). The
Money Market Portfolio's investment objective is to provide investors with as
high a level of current income as is consistent with the preservation of capital
and the maintenance of liquidity 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.
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 (GAAP). 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
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.
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, is accrued daily.
C) Repurchase Agreements
The Portfolios may purchase instruments from financial institutions, such
as banks and broker-dealers, subject to the seller's agreement to repurchase
them at an agreed upon time and price ("repurchase agreements"). The seller
under a repurchase agreement is required to maintain the value of the collateral
at not less than the repurchase price. Default by the seller would, however,
expose the Portfolios to possible loss because of adverse market action or delay
in connection with the disposition of the underlying obligations. Risks may
arise from the potential inability of
Continued
25
<PAGE> 26
counterparties to honor the terms of the repurchase agreements. Accordingly, the
Portfolios could receive less than the carrying value upon the sale of the
underlying collateral securities.
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 and gains to shareholders.
Therefore, no federal income tax provision is required.
At December 31, 1998, the Money Market Portfolio had capital loss
carryovers of approximately $891,312 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.
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 federal income tax regulations which may differ
from GAAP. These "book/tax" differences are either considered temporary or
permanent in nature. To the extent these differences are permanent in nature,
such amounts are reclassified within the composition of net assets based on
their federal tax-basis treatment; temporary differences do not require
reclassification. As of December 31, 1998 a reclassification was made in the Tax
Free Money Market Portfolio to increase undistributed net investment income and
decrease accumulated net realized gain by $940. Distributions to shareholders
which exceed net investment income and net realized capital gains for financial
reporting purposes but not for tax purposes are reported as distributions in
excess of net investment income or net realized gains. To the extent they exceed
net investment income and net realized gains for tax purposes, they are reported
as distributions of capital.
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.
Continued
26
<PAGE> 27
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, 1998, BISYS waived fees of
$47,448 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 collectively waived
$1,328,616 for the Money Market Portfolio and $113,647 for the Tax Free Money
Market Portfolio for the year ended December 31, 1998, 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 to certain services provided by such firms,
including personal services relating to shareholder accounts and services
related to the maintenance of such shareholder accounts. For the year ended
December 31, 1998, CSC waived fees of $110,436 for the Money Market Portfolio
and $196,182 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
the Fund.
NOTE 4 -- CONCENTRATION OF CREDIT RISK
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, 1998 (as a
percentage of total investments):
<TABLE>
<S> <C>
Commercial Paper................... 27.3%
General Obligation................. 3.4%
Revenue Bonds:
Utilities........................ 18.9%
Health........................... 18.1%
Education........................ 16.5%
Transportation................... 4.4%
Housing.......................... 4.0%
Other............................ 7.4%
--------
100.0%
========
</TABLE>
The issuers' abilities to meet their obligations may be affected by domestic
and foreign economic, regional and political developments.
27
<PAGE> 28
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,
1998 1997 1996 1995 1994
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD............................... $ 0.9992 $ 0.9991 $ 0.9986 $ 0.9975 $ 0.9999
---------- ---------- ---------- -------- --------
Income from investment operations
Net investment income................ 0.0465 0.0467 0.0462 0.0512 0.0340
Net realized gains (losses) on
investment transactions............ 0.0002 0.0001 0.0005 0.0011 (0.0024)
---------- ---------- ---------- -------- --------
Total from investment operations..... 0.0467 0.0468 0.0467 0.0523 0.0316
---------- ---------- ---------- -------- --------
Dividends to shareholders from net
investment income.................... (0.0465) (0.0467) (0.0462) (0.0512) (0.0340)
---------- ---------- ---------- -------- --------
Net change in net asset value......... 0.0002 0.0001 0.0005 0.0011 (0.0024)
---------- ---------- ---------- -------- --------
NET ASSET VALUE, END OF PERIOD........ $ 0.9994 $ 0.9992 $ 0.9991 $ 0.9986 $ 0.9975
========== ========== ========== ======== ========
Total Return.......................... 4.75% 4.77% 4.72% 5.24% 3.45%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's).... $1,387,903 $1,151,012 $1,007,265 $779,011 $458,092
Ratio of expenses to average net
assets............................. 0.93% 0.95% 0.88% 0.85% 0.94%
Ratio of net investment income to
average net assets................. 4.64% 4.68% 4.65% 5.14% 3.47%
Ratio of expenses to average net
assets *........................... 1.04% 1.06% 1.01% 1.03% 1.12%
</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 ratio would have been as indicated.
See Notes to Financial Statements.
28
<PAGE> 29
THE INFINITY MUTUAL FUNDS, INC.
CORRESPONDENT CASH RESERVES TAX FREE MONEY MARKET PORTFOLIO
- - --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE PERIOD
YEAR ENDED FROM OCTOBER 7,
--------------------------- 1996 THROUGH
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1998 1997 1996*
------------ ------------ ----------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD........................ $ 1.0000 $ 1.0000 $ 1.0000
-------- -------- --------
Income from investment operations
Net investment income..................................... 0.0279 0.0286 0.0100
-------- -------- --------
Total from investment operations.......................... 0.0279 0.0286 0.0100
-------- -------- --------
Dividends to shareholders from net investment income........ (0.0279) (0.0286) (0.0100)
-------- -------- --------
Net change in net asset value............................... -- -- --
-------- -------- --------
NET ASSET VALUE, END OF PERIOD.............................. $ 1.0000 $ 1.0000 $ 1.0000
======== ======== ========
Total Return................................................ 2.83% 2.90% 0.66%(a)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's)......................... $102,821 $103,399 $ 80,409
Ratio of expenses to average net assets................... 0.71% 0.78% 0.74%(b)
Ratio of net investment income to average net assets...... 2.79% 2.86% 2.80%(b)
Ratio of expenses to average net assets **................ 1.02% 1.18% 1.20%(b)
</TABLE>
- - ---------------
* Period from commencement of operations.
** During the period, certain fees and expenses were voluntarily waived and/or
reimbursed. If such voluntary reductions and/or reimbursements had not
occurred, the ratio would have been as indicated.
(a) Not annualized.
(b) Annualized.
See Notes to Financial Statements.
29
<PAGE> 30
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, 1998, 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, 1998, by confirmation with the custodian, correspondence with
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. -- The Correspondent Cash Reserves as of December 31, 1998, 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 LLP
Columbus, Ohio
February 3, 1999
30
<PAGE> 31
CORRESPONDENT CASH
--------------------------------------------
RESERVES
--------------------------------------------
- - ---------------------------------------------------
THE INFINITY MUTUAL FUNDS, INC.
3435 Stelzer Road
Columbus, OH 43219
- - ---------------------------------------------------
INVESTMENT ADVISER
MITCHELL HUTCHINS ASSET MANAGEMENT INC.
1285 Avenue of the Americas
New York, NY 10019
- - ---------------------------------------------------
ADMINISTRATOR AND DISTRIBUTOR
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 LLP
Two Nationwide Plaza
Columbus, OH 43215
This report is not authorized for distribution to prospective investors unless
preceded or accompanied by a current prospectus.
CORRESPONDENT CASH
--------------------------------------------
RESERVES
--------------------------------------------
LOGO
ANNUAL REPORT
------------------
DECEMBER 31, 1998
(LOGO)
COICCRD98A 2/99
