AFBA Five Star Fund
100% pure no-load mutual funds
Semiannual Report
September 30, 1997
Message
To Our Shareholders
We are pleased to bring you the first AFBA Five Star Fund shareholder report
for the period from inception on June 2, 1997 through September 30, 1997. In
the future the Fund will issue two shareholder reports each year, with the
annual report containing audited financials.
At September 30, the Fund had grown to total assets of almost $6.2 million
with 1,316 shareholder accounts. Various marketing and promotional efforts are
underway, and we expect these totals to increase significantly in coming
months.
The remainder of this and future shareholder reports will be devoted to a
Portfolio Management Review, in which the Fund's investment counsel, Kornitzer
Capital Management, Inc., will discuss not only Fund performance and the
economy but also provide an in-depth look into investment philosophies,
strategies and holdings for each Fund. We recommend that shareholders read
this section carefully and retain this report for future reference.
We welcome the new investors who have joined us since inception, and look
forward to continuing our efforts to provide all of our shareholders with
consistent, favorable returns in the future.
Sincerely,
/s/C.C. Blanton
C.C. Blanton
Chairman
Portfolio Management Review
We are excited and proud to be reporting to you for the first time as
investment counsel for the AFBA Five Star Fund. Kornitzer Capital Management,
Inc. (KCM) is a research driven money management firm managing over
$1 billion in total assets. KCM was hired by AFBA for its experience and
strong track record in managing funds similar to those in the AFBA Five Star
line-up. In this first report we will try to briefly highlight some of our
unique investment philosophies and strategies for each of the funds. In future
reports we will share more detailed information about our staff, our research
and portfolio management process and individual portfolio holdings.
During these initial months our time has been spent rolling up our sleeves and
building the core holdings for each of the funds. In building these portfolios
KCM has an investment discipline for both stocks and bonds which is well
defined. The firm's approach to picking stocks is to focus on a combination of
growth and value oriented companies. For growth stocks the firm focuses on
companies that have a long history of being able to meet expectations for
their earnings. For value stocks the firm focuses on companies believed to be
coming out of industry downturns. In these cases the companies typically have
the best opportunity to beat expectations for earnings. The common
denominators for most stock holdings include: a price/earnings ratio near or
below that of the overall market, a high level of insider ownership of the
stock and companies with healthy balance sheets. All the above applies to our
stockpicking efforts in the AFBA Five Star Equity, USA Global and Balanced
Funds.
The firm's approach to investing in bonds is to focus on a combination of high
yield corporate bonds and convertible securities. High yield corporate bonds
are purchased to provide a high level of current income. Convertible
securities are purchased to provide a reasonable level of current income and
for the opportunity to realize long-term capital appreciation. High yield
corporate bonds provide an attractive opportunity for a firm like KCM because
our focus is solely on company and industry research. Convertible securities
can be particularly attractive as they provide a "get paid while you wait
strategy" for companies whose underlying stock is temporarily depressed. This
approach to investing is employed in both the AFBA Five Star High Yield and
Balanced Funds.
The following is a snapshot and comment on how each of the AFBA Five Star
Funds performed from inception to September 30, 1997.
AFBA Five Star Balanced Fund
AFBA Five Star Balanced Fund generated a total return (price change and
reinvested distributions) of 10.40% for the period from inception (June 2,
1997) to September 30, 1997. The Lipper Balanced Fund Index registered a
return of 9.79% for the same period.
Performance data contained in this report is for past periods only. Past
performance is not predictive of future performance. Investment return and
share value will fluctuate, and redemption value may be more or less than
original cost.
Investment Results - Total Return
RETURN SINCE
INCEPTION
6/2/97
AFBA FIVE STAR BALANCED FUND 10.41%
Lipper Balanced Fund Index 9.79%
Fund asset allocation decisions are driven by a philosophy which emphasizes
consistent performance and a low level of fund price volatility. The Fund's
targeted allocation would typically be in the range of 1/3 common stocks, 1/3
high yield corporate bonds and 1/3 convertible securities. Currently, the Fund
is underweighted in corporate bonds and overweighted in cash due to a short
supply of attractive high yield bonds. We refuse to reach in the current
marketplace, but feel confident in our ability to find suitable corporate
bonds over time.
AFBA Five Star Equity Fund
AFBA Five Star Equity Fund generated a total return (price change and
reinvested distributions) of 13.50% for the period from inception (June 2,
1997) to September 30, 1997. The Lipper Capital Appreciation Fund Index
registered a return of 16.64% for the same period. The Fund's underperformance
versus its peer group was largely due to its heavy cash position held while
"under construction" in the first month of operation.
Investment Results - Total Return
RETURN SINCE
INCEPTION
6/2/97
AFBA FIVE STAR EQUITY FUND 13.50%
Lipper Capital Appreciation Fund Index 16.64%
At September 30, 1997, common stocks made up 96.7% of the portfolio. As seen
in the portfolio listing, the investments are dominated by large
capitalization stocks. The Fund's heaviest industry weightings included
technology (19%), capital goods (21%) and energy (15%).
AFBA Five Star High Yield Fund
AFBA Five Star High Yield Fund generated a total return (price change and
reinvested distributions) of 5.00% for the period from inception (June 2,
1997) to September 30, 1997. The Lipper High Current Yield Fund Index produced
a return of 6.78% for the same period.
Investment Results - Total Return
RETURN SINCE
INCEPTION
6/2/97
AFBA FIVE STAR HIGH YIELD FUND 5.00%
Lipper High Current Yield Fund Index 6.78%
Like the Balanced Fund, the High Yield Fund has been faced with a new issue
corporate bond market offering both low yields and low quality. Under this
scenario, we are proceeding very cautiously with the investment of cash
balances. We feel that in many cases high yield bond investors are not being
fairly compensated for the risks they are taking today. We have faced this
type of unfavorable corporate bond environment numerous times in the 1990's.
Over time these excesses have always been corrected. We will stand ready to
invest opportunistically for our shareholders as good values reappear.
AFBA Five Star USA Global Fund
AFBA Five Star USA Global Fund generated a total return (price change and
reinvested distributions) of 7.80% for the period from inception (June 2,
1997) to September 30, 1997. The Lipper Capital Appreciation Fund Index
produced a return of 16.64%, for the same period. This unique Fund invests
only in U.S. based companies which generate at least 40% of total revenues or
profits outside the United States.
Investment Results - Total Return
RETURN SINCE
INCEPTION
6/2/97
AFBA FIVE STAR USA GLOBAL FUND 7.80%
Lipper Capital Appreciation Fund Index 16.64%
At September 30, 1997, common stocks made up 86.7% of the portfolio. However,
similar to the Equity Fund, the USA Global Fund suffered from a high cash
position in the first few months of operation. In addition, multinational
companies have been faced with a strong rise in the U.S. dollar versus the
currencies of most major trading partners. A strong dollar causes the fear
that U.S. exports will be priced too high for foreign buyers. Despite these
near-term hurdles we remain very optimistic about the potential for this
investment concept. We believe the demand for U.S. goods and services in
rapidly developing economies throughout Asia, South America and ultimately
Eastern Europe is in the early stages of a long-term boom. The biggest
beneficiaries of these trends might well be U.S. companies, particularly those
with powerful brands and well developed overseas distribution. The AFBA Five
Star USA Global Fund was created to be a direct play on this theme.
We look forward to tracking each Fund's progress with you in future letters.
All of us on the KCM research team thank you for your confidence in our
management of the AFBA Five Star Fund. We are fully committed to your
financial success in the future.
Sincerely,
/s/John C. Kornitzer
John C. Kornitzer
President
/s/Kent W. Gasaway
Kent W. Gasaway
Sr. Vice President
/s/Tom W. Laming
Tom W. Laming
Sr. Vice President
AFBA FIVE STAR
BALANCED FUND
STATEMENT OF NET ASSETS
September 30, 1997 (unaudited)
SHARES COMPANY MARKET VALUE
COMMON STOCKS - 38.71%
Basic Materials - 1.88%
200 Aluminum Company of America 16,400
Capital Goods - 3.72%
400 Ingersoll-Rand Co. 17,225
100 Rockwell International Corp. 6,294
200 York International Corp. 8,950
32,469
Consumer Cyclical - 11.44%
600 Chrysler Corp. 22,087
300 Dillard's, Inc., Cl. A 13,144
200 Federal Express Corp. 16,000
200 Goodyear Tire & Rubber Co. 13,750
1,000 Modine Manufacturing Co. 34,875
99,856
Consumer Staples - 3.70%
1,000 Pilgrim's Pride Corp. 14,875
1,000 Dial Corp. 17,437
32,312
Energy - 5.52%
300 Enron Corp. 11,550
500 McDermott International, Inc. 18,250
500 United Meridian Corp. 18,375
48,175
Financial - 5.47%
300 Allstate Corp. 24,113
200 Chase Manhattan Corp. 23,600
47,713
Technology - 6.25%
200 Intel Corp. 18,463
200 Motorola, Inc. 14,375
600 Seagate Technology, Inc. 21,675
54,513
Transportation & Services - 0.73%
200 Southwest Airlines Co. 6,387
TOTAL COMMON STOCKS 337,825
CONVERTIBLE PREFERRED STOCKS - 7.82%
1,022 Fedders Corp. Cl. A (non-voting) 6,068
200 ICO, Inc., dep. shrs.
repstg. 1/4 pfd. cv. 5,138
200 K mart Financing I,
7.750% tr. cv. pfd. secs. 11,700
300 Loral Space & Communications Ltd.,
Series C 17,925
300 McDermott International, Inc.,
Series A 10,875
600 Snyder Oil Corp., dep. shrs.
repstg. 1/4 pfd. cv. 16,575
TOTAL CONVERTIBLE PREFERRED STOCKS 68,281
FACE
AMOUNT DESCRIPTION MARKET VALUE
CORPORATE BONDS - 9.50%
$ 30,000 Argosy Gaming Co.,
13.25% 1st. mtg. note, due 6-1-04 30,225
5,000 Giant Industries, Inc.,
9.75% gtd. sr. sub. note, due 11-15-03 5,219
5,000 HS Resources, Inc.,
9.875% sr. sub. note, due 12-1-03 5,219
20,000 K mart Corp.,
8.25% note, due 1-1-22 19,300
5,000 Maxus Energy Corp.,
9.875% note, due 10-15-02 5,250
5,000 Nortek, Inc.,
9.875% sr. sub. note, due 3-1-04 5,168
5,000 Pilgrim's Pride Corp.,
10.875% sr. sub. note, due 8-1-03 5,275
5,000 United Refining Co.,
10.75% sr. note, Series A, due 6-15-07 5,175
2,000 Wainoco Oil Corp.,
12.00% sr. note, due 8-1-02 2,080
TOTAL CORPORATE BONDS 82,911
FACE
AMOUNT DESCRIPTION MARKET VALUE
TOTAL CONVERTIBLE CORPORATE BONDS - 21.83%
5,000 Air & Water Technologies Corp.,
8.00% sub. deb., due 5-15-15 3,981
30,000 Allwaste, Inc.,
7.25% sub. deb., due 6-1-14 30,225
15,000 HMT Technology Corp.,
5.75% sub. note, due 1-15-04 14,250
10,000 Integrated Device Technology, Inc.,
5.50% sub. note, due 6-1-02 8,600
30,000 Intevac, Inc.,
6.50% sub. note, due 3-1-04 28,106
10,000 Moran Energy Inc.,
8.75% sub. deb., due 1-15-08 9,825
10,000 OHM Corp.,
8.00% sub. deb., due 10-1-06 9,688
10,000 Oryx Energy Co.,
7.50% sub. deb., due 5-15-14 10,088
23,000 Rohr Industries, Inc.,
7.00% sub. deb., due 10-1-12 22,827
5,000 Swift Energy Co.,
6.25% sub. note, due 11-15-06 5,512
40,000 Wainoco Oil Corp.,
7.75% sub. deb., due 6-1-14 38,250
10,000 Weston (Roy F.), Inc.,
7.00% sub. deb., due 4-15-02 9,138
TOTAL CONVERTIBLE CORPORATE BONDS 190,490
REPURCHASE AGREEMENT - 25.21%
220,000 UMB Bank n.a., 5.30%, due 10-1-97
(Collateralized by U.S. Treasury Notes,
5.00%, due 1-31-99) 220,000
TOTAL INVESTMENTS - 103.07% $ 899,507
Other assets less liabilities - (3.07%) (26,789)
TOTAL NET ASSETS - 100.00%
(equivalent to $11.03 per share;
10,000,000 shares of $1.00 par value
capital shares authorized;
79,094 shares outstanding) $ 872,718
See accompanying Notes to Financial Statements.
AFBA FIVE STAR
EQUITY FUND
STATEMENT OF NET ASSETS
September 30, 1997 (unaudited)
SHARES COMPANY MARKET VALUE
COMMON STOCKS - 96.72%
Basic Materials - 8.06%
600 Air Products & Chemicals, Inc. 49,762
600 Aluminum Company of America 49,200
400 Eastman Chemical Co. 24,800
1,100 Georgia Gulf Corp. 33,687
100 Praxair, Inc. 5,174
800 Sigma Aldrich Corp. 26,350
188,973
Capital Goods - 20.70%
800 Boeing Co. 43,550
1,400 Cincinnati Milacron, Inc. 37,625
600 Cummins Engine, Inc. 46,838
200 Eaton Corp. 18,475
700 General Motors Corp. Cl. H 46,288
1,200 Ingersoll-Rand Co. 51,675
100 Lockheed Martin Corp. 10,663
100 Northrop Grumman Corp. 12,138
800 Rockwell International Corp. 50,350
600 Sunstrand Corp. 34,575
1,200 TRW, Inc. 65,850
500 United Technologies Corp. 40,500
600 York International Corp. 26,850
485,377
Consumer Cyclical - 6.84%
1,300 CompUSA, Inc. 45,500
300 Dillard's, Inc. Cl. A 13,144
1,100 Federal Express Corp. 88,000
200 Goodyear Tire & Rubber Co. 13,750
160,394
Consumer Staples - 8.52%
500 CPC International, Inc. 46,312
800 Dial Corp. 13,950
1,000 McDonald's Corp. 47,625
900 Sara Lee Corp. 46,350
600 Tupperware Corp. 16,875
1,500 Viad Corp. 28,594
199,706
Energy - 14.70%
400 Amoco Corp. 38,550
500 British Petroleum PLC Sh F ADR 45,406
700 Chevron Corp. 58,231
900 Coastal Corp. 55,125
900 Enron Corp. 34,650
700 Schlumberger, Ltd. 58,931
1,300 Triton Energy Ltd. 53,869
344,762
Financial - 7.46%
800 Allstate Corp. 64,300
300 Chase Manhattan Corp. 35,400
400 Chubb Corp. 28,425
300 Golden West Financial Corp. Delaware 26,925
100 Hartford Financial Services Group, Inc. 8,300
200 PMI Group, Inc. 11,463
174,813
Health Care - 6.84%
1,200 Allergan, Inc. 43,425
400 Johnson & Johnson 23,050
700 Merck & Company, Inc. 69,956
400 Pfizer, Inc. 24,025
160,456
Technology - 18.86%
600 A T & T Corp. 26,587
1,100 AMP, Inc. 58,919
400 Bay Networks, Inc. 15,450
400 Best Software, Inc. 5,200
300 Cisco Systems, Inc. 21,919
400 Computer Sciences Corp. 28,300
500 Dallas Semiconductor Corp. 22,375
600 Diebold, Inc. 28,425
1,200 Hewlett-Packard Co. 83,475
100 Intel Corp. 9,231
700 Loral Space & Communications, Ltd. 14,437
300 Melita International Corp. 3,525
100 Motorola, Inc. 7,187
1,300 National Semiconductor Corp. 53,300
500 Network Solutions, Inc. Cl. A 10,875
400 Pitney Bowes Inc. 33,275
400 Scientific-Atlanta, Inc. 9,050
300 Seagate Technology 10,838
442,368
Transportation & Services - 4.74%
1,400 Southwest Airlines Co. 44,712
300 ProBusiness Services, Inc. 16,369
800 Union Pacific Corp. 50,100
111,181
TOTAL COMMON STOCKS 2,268,030
FACE
AMOUNT DESCRIPTION MARKET VALUE
REPURCHASE AGREEMENT - 3.62%
$ 85,000 UMB Bank n.a., 5.30%, due 10-1-97
(Collateralized by U.S. Treasury Notes,
5.00%, due 1-31-99) 85,000
TOTAL INVESTMENTS - 100.34% $ 2,353,030
Other assets less liabilities - (0.34%) (8,059)
TOTAL NET ASSETS - 100.00%
(equivalent to $11.37 per share;
10,000,000 shares of $1.00 par value
capital shares authorized;
206,178 shares outstanding) $ 2,344,971
See accompanying Notes to Financial Statements.
AFBA FIVE STAR
HIGH YIELD FUND
STATEMENT OF NET ASSETS
September 30, 1997 (unaudited)
SHARES COMPANY MARKET VALUE
CONVERTIBLE PREFERRED STOCKS - 8.13%
1,022 Fedders Corp. Cl. A (non-voting) $ 6,068
200 ICO, Inc., deb. shrs.
repstg. 1/4 pfd. cv. 5,138
200 K mart Financing I, 7.750% tr.
cv. pfd. secs. 11,700
300 Loral Space & Communications Ltd.,
Series C 17,925
500 McDermott International, Inc.,
Series A 18,125
200 Snyder Oil Corp., dep. shrs.
repstg. 1/4 pfd. cv. 5,525
TOTAL CONVERTIBLE PREFERRED STOCKS 64,481
FACE
AMOUNT DESCRIPTION MARKET VALUE
CORPORATE BONDS - 10.46%
$ 30,000 Argosy Gaming Co.,
13.25% 1st. mtg. note, due 6-1-04 30,225
5,000 Giant Industries, Inc.,
9.75% gtd. sr. sub. note, due 11-15-03 5,219
5,000 HS Resources, Inc.,
9.875% sr. sub. note, due 12-1-03 5,219
20,000 K mart Corp.,
8.25% note, due 1-1-22 19,300
5,000 Maxus Energy Corp.,
9.875% note, due 10-15-02 5,250
5,000 Nortek, Inc.,
9.875% sr. sub. note, due 3-1-04 5,168
5,000 Pilgrim's Pride Corp.,
10.875% sr. sub. note, due 8-1-03 5,275
5,000 United Refining Co.,
10.75% sr. note, Series A, due 6-15-07 5,175
2,000 Wainoco Oil Corp.,
12.00% sr. note, due 8-1-02 2,080
TOTAL CORPORATE BONDS 82,911
TOTAL CONVERTIBLE CORPORATE BONDS - 25.24%
5,000 Air & Water Technologies Corp.,
8.00% sub. deb., due 5-15-15 3,981
32,000 Allwaste, Inc.,
7.25% sub. deb., due 6-1-14 32,240
15,000 HMT Technology Corp.
5.75% sub. note, due 1-15-04 14,250
15,000 Integrated Device Technology, Inc.,
5.50% sub. note, due 6-1-02 12,900
30,000 Intevac, Inc.,
6.50% sub. note, due 3-1-04 28,106
10,000 Moran Energy Inc.,
8.75% sub. deb., due 1-15-08 9,825
10,000 OHM Corp.,
8.00% sub. deb., due 10-1-06 9,688
10,000 Oryx Energy Co.,
7.50% sub. deb., due 5-15-14 10,087
15,000 Rohr Industries, Inc.,
7.00% sub. deb., due 10-1-12 14,888
5,000 Swift Energy Co.,
6.25% sub. note, due 11-15-06 5,512
16,000 UNC, Inc.,
7.50% sub. deb., due 3-31-06 16,060
35,000 Wainoco Oil Corp.,
7.75% sub. deb., due 6-1-14 33,469
10,000 Weston (Roy F.), Inc.,
7.00% sub. deb., due 4-15-02 9,138
TOTAL CONVERTIBLE CORPORATE BONDS 200,144
REPURCHASE AGREEMENT - 59.28%
470,000 UMB Bank n.a., 5.30%, due 10-1-97
(Collateralized by U.S. Treasury Notes,
8.25%, due 7-15-98) 470,000
TOTAL INVESTMENTS - 103.11% $ 817,536
Other assets less liabilities - (3.11%) (24,687)
TOTAL NET ASSETS - 100.00%
(equivalent to $10.50 per share;
10,000,000 shares of $1.00 par value
capital shares authorized;
75,522 shares outstanding) $ 792,849
See accompanying Notes to Financial Statements.
AFBA FIVE STAR
USA GLOBAL FUND
STATEMENT OF NET ASSETS
September 30, 1997 (unaudited)
SHARES COMPANY MARKET VALUE
Common Stocks - 86.69%
Basic Materials - 7.13%
600 Air Products & Chemicals, Inc. $ 49,763
900 Aluminum Company of America 73,800
600 Praxair, Inc. 30,713
154,276
Capital Goods - 21.56%
100 Applied Materials, Inc. 9,525
800 Boeing Co. 43,550
1,600 Cincinnati Milacron, Inc. 43,000
700 Cummins Engine, Inc. 54,644
1,300 Ingersoll-Rand Co. 55,981
1,000 Rockwell International Corp. 62,937
1,500 Teleflex, Inc. 51,937
1,100 TRW, Inc. 60,362
600 United Technologies Corp. 48,600
800 York International Corp. 35,800
466,336
Consumer Cyclical - 6.15%
300 Goodyear Tire & Rubber Co. 20,625
900 Interface, Inc. 26,212
900 Lear Corp. 44,325
1,200 Modine Manufacturing Co. 41,850
133,012
Consumer Staples - 10.59%
400 Coca-Cola Co. 24,375
600 CPC International, Inc. 55,575
1,100 McDonald's Corp. 52,388
1,000 Sara Lee Corp. 51,500
600 Wrigley, (Wm.) Jr. Co. 45,188
229,026
Energy - 5.93%
800 Mobil Corp. 59,200
300 Pride International, Inc. 10,200
600 Schlumberger, Ltd. 50,513
200 Triton Energy Ltd. 8,288
128,201
Financial - 6.48%
1,100 AFLAC, Inc. 59,675
650 American International Group, Inc. 67,072
100 Citicorp 13,394
140,141
Health Care - 8.28%
500 Allergan, Inc. 18,094
600 Bristol Myers-Squibb Co. 49,650
800 Johnson & Johnson 46,100
400 Pfizer, Inc. 24,025
800 Schering-Plough Corp. 41,200
179,069
Technology - 20.57%
1,200 AMP, Inc. 64,275
900 Analog Devices, Inc. 30,150
400 Bay Networks, Inc. 15,450
200 Boston Scientific Corp. 11,037
600 Cisco Systems, Inc. 43,837
200 Dallas Semiconductor Corp. 8,950
700 Hewlett-Packard Co. 48,694
1,100 HMT Technology Corp. 17,256
1,600 Integrated Device Technology, Inc. 19,300
200 Intel Corp. 18,462
200 Intevac, Inc. 2,825
100 Microsoft Corp. 13,231
500 Motorola, Inc. 35,937
1,300 National Semiconductor Corp. 53,300
550 Oracle Systems Corp. 20,041
1,000 Seagate Technology 36,125
400 Technology Modeling Associates, Inc. 6,125
444,995
TOTAL COMMON STOCKS 1,875,056
FACE
AMOUNT DESCRIPTION MARKET VALUE
REPURCHASE AGREEMENT - 13.17%
$ 285,000 UMB Bank n.a., 5.30%, due 10-1-97
(Collateralized by U.S. Treasury Notes,
5.00%, due 1-31-99) 285,000
TOTAL INVESTMENTS - 99.86% $ 2,160,056
Other assets less liabilities - 0.14% 2,934
TOTAL NET ASSETS - 100.00%
(equivalent to $10.84 per share;
10,000,000 shares of $1.00 par value
capital shares authorized;
199,496 shares outstanding) $ 2,162,990
See accompanying Notes to Financial Statements.
STATEMENT OF ASSETS
AND LIABILITIES
Period from June 2, 1997 (inception)
to September 30, 1997 (unaudited)
<TABLE>
<CAPTION>
BALANCED EQUITY HIGH YIELD USA GLOBAL
FUND FUND FUND FUND
</CAPTION>
<S> <C> <C> <C> <C>
ASSETS:
Investments, at value (identified cost
$866,350, $2,236,792, $807,472, and
$2,104,677, respectively) $ 899,507 $ 2,353,030 $ 817,536 $ 2,160,056
Cash 1,832 14,854 695 9,078
Dividends receivable 495 2,692 240 867
Interest receivable 6,912 - 7,373 -
Total assets 908,746 2,370,576 825,844 2,170,001
LIABILITIES AND NET ASSETS:
Payable for investments purchased 36,028 25,605 32,995 7,011
Total liabilities 36,028 25,605 32,995 7,011
NET ASSETS $ 872,718 $ 2,344,971 $ 792,849 $ 2,162,990
NET ASSETS CONSIST OF:
Capital (capital stock and paid-in capital) $ 831,964 $ 2,210,647 $ 776,941 $ 2,102,293
Accumulated undistributed income:
Undistributed net investment income 4,776 5,530 5,785 5,054
Accumulated net realized gain on
investment transactions 2,821 12,556 59 264
Net unrealized appreciation in value
of investments 33,157 116,238 10,064 55,379
NET ASSETS APPLICABLE TO OUTSTANDING SHARES $ 872,718 $ 2,344,971 $ 792,849 $ 2,162,990
Capital shares, $1.00 par value
Authorized 10,000,000 10,000,000 10,000,000 10,000,000
Outstanding 79,094 206,178 75,522 199,496
NET ASSET VALUE PER SHARE $ 11.03 $ 11.37 $ 10.50 $ 10.84
</TABLE>
See accompanying Notes to Financial Statements.
STATEMENTS
OF OPERATIONS
Period from June 2, 1997 (inception)
to September 30, 1997 (unaudited)
<TABLE>
<CAPTION>
BALANCED EQUITY HIGH YIELD USA GLOBAL
FUND FUND FUND FUND
</CAPTION>
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Income:
Dividends $ 1,101 $ 4,638 $ 660 $ 2,621
Interest 4,846 4,564 6,194 5,932
5,947 9,202 6,854 8,553
Expenses (Note 2):
Management fees 1,171 3,672 1,069 3,499
Registration fees and expenses - - - -
1,171 3,672 1,069 3,499
Net investment income 4,776 5,530 5,785 5,054
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Realized gain from investment transactions
(excluding repurchase agreements):
Proceeds from sales of investments 40,416 65,402 7,069 48,258
Cost of investments sold 37,595 52,846 7,010 47,994
Net realized gain from sales of investments 2,821 12,556 59 264
Gain from option contracts written - - - -
Net realized gain from investment transactions 2,821 12,556 59 264
Unrealized appreciation on investments:
Beginning of period - - - -
End of period 33,157 116,238 10,064 55,379
Increase in net unrealized appreciation
on investments 33,157 116,238 10,064 55,379
Net gain on investments 35,978 128,794 10,123 55,643
Increase in net assets resulting
from operations $ 40,754 $134,324 $ 15,908 $ 60,697
</TABLE>
See accompanying Notes to Financial Statements.
STATEMENTS OF CHANGES
IN NET ASSETS
Period from June 2, 1997 (inception)
to September 30, 1997 (unaudited)
<TABLE>
<CAPTION>
BALANCED EQUITY HIGH YIELD USA GLOBAL
FUND FUND FUND FUND
</CAPTION>
<S> <C> <C> <C> <C>
INCREASE IN NET ASSETS FROM OPERATIONS:
Net investment income $ 4,776 $ 5,530 $ 5,785 $ 5,054
Net realized gain from investment transactions 2,821 12,556 59 264
Unrealized appreciation of investments during
the period 33,157 116,238 10,064 55,379
Net increase in net assets resulting
from operations 40,754 134,324 15,908 60,697
INCREASE FROM CAPITAL SHARE TRANSACTIONS:*
Proceeds from shares sold 832,002 2,210,678 777,023 2,123,248
Net asset value of shares issued for reinvestment
of distributions - - - -
832,002 2,210,678 777,023 2,123,248
Cost of shares repurchased (38) (31) (82) (20,955)
Net increase from capital share transactions 831,964 2,210,647 776,941 2,102,293
Total increase in net assets 872,718 2,344,971 792,849 2,162,990
NET ASSETS:
Beginning of period - - - -
End of period (including undistributed
net investment income of $4,776,
$5,530, $5,785, and $5,054, respectively) $ 872,718 $2,344,971 $ 792,849 $2,162,990
*Shares issued and repurchased:
Number of shares sold 79,097 206,181 75,530 201,448
Number of shares issued for reinvestment
of distributions - - - -
Number of shares repurchased (3) (3) (8) (1,952)
Net increase 79,094 206,178 75,522 199,496
</TABLE>
See accompanying Notes to Financial Statements.
NOTES TO FINANCIAL
STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES:
The Fund is registered under the Investment Company Act of 1940, as amended,
as a diversified open-end management investment company of the series type.
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements.
A. Security Valuation - Corporate stocks, bonds and options traded on a
national securities exchange or national market are valued at the latest sales
price thereof, or if no sale was reported on that date, the mean between the
closing bid and asked price is used.
Securities which are traded over-the-counter are priced at the mean between
the latest bid and asked price. Securities not currently traded are valued at
fair value as determined by the Board of Directors.
B. Federal and State Taxes - The Fund complied with the requirements of the
Internal Revenue Code applicable to regulated investment companies and
therefore, no provision for federal or state tax is required.
C. Other - Security transactions are accounted for on the date the securities
are purchased or sold. Dividend income and distributions to shareholders are
recorded on the ex-dividend date. Realized gains and losses from investment
transactions and unrealized appreciation and depreciation of investments are
reported on the identified cost basis.
2. MANAGEMENT FEES:
Management fees were paid to AFBA Investment Management Company at the rate of
1% per annum of the average daily net asset values of the Fund for services
which include administration, and all other operating expenses of the Fund
except the cost of acquiring and disposing of portfolio securities, the taxes,
if any, imposed directly on the Fund and its shares and the cost of qualifying
the Funds' shares for sale in any jurisdiction. Certain officers and/or
directors of the Fund are also officers and/or directors of Jones & Babson,
Inc.
3. INVESTMENT TRANSACTIONS:
Investment transactions for the period from June 2, 1997 (inception) to
September 30, 1997, (excluding maturities of short-term commercial notes and
repurchase agreements) are as follows:
Balanced Fund
Purchases $ 683,945
Proceeds from sales 40,416
Equity Fund
Purchases $ 2,204,638
Proceeds from sales 65,402
High Yield Fund
Purchases $ 344,481
Proceeds from sales 7,069
USA Global Fund
Purchases $ 1,867,671
Proceeds from sales 48,258
This report has been prepared for the information of the Shareholders of the
AFBA Five Star Fund, and is not to be construed as an offering of the shares
of the Fund. Shares of the Fund are offered only by the Prospectus, a copy of
which may be obtained from Jones & Babson, Inc.
AFBA Five Star Fund
AFBA Five Star Balanced Fund
AFBA Five Star Equity Fund
AFBA Five Star High Yield Fund
AFBA Five Star USA Global Fund
AFBA
Five Star
Fund
AFBA Investment Management Company
909 N. Washington Street
Alexandria, Virginia 22314
1-800-243-9865
Shareholder Inquiries 1-888-578-2733
JB17E-1
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0001030802
<NAME> AFBA FIVE STAR FUND INC
<SERIES>
<NUMBER> 1
<NAME> AFBA FIVE STAR BALANCED FUND
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-END> SEP-30-1997
<INVESTMENTS-AT-COST> 866350
<INVESTMENTS-AT-VALUE> 899507
<RECEIVABLES> 7407
<ASSETS-OTHER> 1832
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 908746
<PAYABLE-FOR-SECURITIES> 36028
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 36028
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 831964
<SHARES-COMMON-STOCK> 79094
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 4776
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 2821
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 33157
<NET-ASSETS> 872718
<DIVIDEND-INCOME> 1101
<INTEREST-INCOME> 4846
<OTHER-INCOME> 0
<EXPENSES-NET> 1171
<NET-INVESTMENT-INCOME> 4776
<REALIZED-GAINS-CURRENT> 2821
<APPREC-INCREASE-CURRENT> 33157
<NET-CHANGE-FROM-OPS> 40754
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 79097
<NUMBER-OF-SHARES-REDEEMED> 3
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 872718
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1171
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1171
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 11.03
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0001030802
<NAME> AFBA FIVE STAR FUND INC
<SERIES>
<NUMBER> 2
<NAME> AFBA FIVE STAR EQUITY FUND
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-END> SEP-30-1997
<INVESTMENTS-AT-COST> 2236792
<INVESTMENTS-AT-VALUE> 2353030
<RECEIVABLES> 2692
<ASSETS-OTHER> 14854
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 2370576
<PAYABLE-FOR-SECURITIES> 25605
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 25605
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 2210647
<SHARES-COMMON-STOCK> 206178
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 5530
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 12556
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 116238
<NET-ASSETS> 2344971
<DIVIDEND-INCOME> 4638
<INTEREST-INCOME> 4564
<OTHER-INCOME> 0
<EXPENSES-NET> 3672
<NET-INVESTMENT-INCOME> 5530
<REALIZED-GAINS-CURRENT> 12556
<APPREC-INCREASE-CURRENT> 116238
<NET-CHANGE-FROM-OPS> 134324
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 206181
<NUMBER-OF-SHARES-REDEEMED> 3
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 2344971
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 3672
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 3672
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 11.37
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0001030802
<NAME> AFBA FIVE STAR FUND INC
<SERIES>
<NUMBER> 3
<NAME> AFBA FIVE STAR HIGH YIELD FUND
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-END> SEP-30-1997
<INVESTMENTS-AT-COST> 807472
<INVESTMENTS-AT-VALUE> 817536
<RECEIVABLES> 7613
<ASSETS-OTHER> 695
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 825844
<PAYABLE-FOR-SECURITIES> 32995
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 32995
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 776941
<SHARES-COMMON-STOCK> 75522
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 5785
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 59
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 10064
<NET-ASSETS> 792849
<DIVIDEND-INCOME> 660
<INTEREST-INCOME> 6194
<OTHER-INCOME> 0
<EXPENSES-NET> 1069
<NET-INVESTMENT-INCOME> 5785
<REALIZED-GAINS-CURRENT> 59
<APPREC-INCREASE-CURRENT> 10064
<NET-CHANGE-FROM-OPS> 15908
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 75530
<NUMBER-OF-SHARES-REDEEMED> 7
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 792849
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1069
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1069
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.50
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0001030802
<NAME> AFBA FIVE STAR FUND INC
<SERIES>
<NUMBER> 4
<NAME> AFBA FIVE STAR USA GLOBAL FUND
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-END> SEP-30-1997
<INVESTMENTS-AT-COST> 2104677
<INVESTMENTS-AT-VALUE> 2160056
<RECEIVABLES> 867
<ASSETS-OTHER> 9078
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 2170001
<PAYABLE-FOR-SECURITIES> 7011
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 7011
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 2102293
<SHARES-COMMON-STOCK> 199496
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 5054
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 264
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 55379
<NET-ASSETS> 2162990
<DIVIDEND-INCOME> 2621
<INTEREST-INCOME> 5932
<OTHER-INCOME> 0
<EXPENSES-NET> 3499
<NET-INVESTMENT-INCOME> 5054
<REALIZED-GAINS-CURRENT> 264
<APPREC-INCREASE-CURRENT> 55379
<NET-CHANGE-FROM-OPS> 60697
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 201448
<NUMBER-OF-SHARES-REDEEMED> 1952
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 2162990
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 3499
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 3499
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.84
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
