Semiannual Report
September 30, 2000
AFBA
5Star Fund
100% pure no-load
mutual funds
MESSAGE
To Our Shareholders
We are pleased to present to you the latest semiannual report for the AFBA 5Star
Funds. We have been very satisfied with the performance of the Funds during this
recent period of market volatility and we hope that you will take a few minutes
to review this important information.
<TABLE>
<CAPTION>
Investment Results - Total Return
One Year Since Life of Fund
Ended Inception Cumulative*
AFBA 5Star Fund 9/30/00 6/3/97 to 9/30/00 9/30/00
<S> <C> <C> <C>
Balanced 21.30% 8.69% 31.98%
Equity 32.78% 14.68% 57.79%
High Yield 8.06% 3.09% 10.65%
USA Global 32.62% 15.88% 63.35%
</TABLE>
The balance of this report will be the Portfolio Management Review, in which the
Funds' investment counsel, Kornitzer Capital Management, Inc. will discuss fund
performance, stock market and economic trends, as well as other matters of
interest to our investors.
We would be very pleased to answer your questions and comments, or to provide
additional information about your investments.
Sincerely,
/s/C.C. Blanton
C.C. Blanton
Chairman
Portfolio Management Review
We want to thank all of our shareholders for their continued support of
Kornitzer Capital Management Inc. and the AFBA 5Star Mutual Funds. We are
pleased to report continued strong results. We continue to vigilantly adhere to
our investment discipline through the extreme stock market volatility and
precarious macroeconomic environment. Our conviction level has increased, as we
focus on longer-term trends and invest accordingly. We are enthusiastic about
the continued performance of the AFBA 5Star Funds and believe the future for
equity securities looks bright.
One Year Performance Chart - AFBA 5Star Balanced Fund
One Year Performance Chart - AFBA 5Star Equity Fund
With all the AFBA 5Star Funds, our strategy is to remain focused on the
longer-term trends, which we believe allows us to more easily separate
information from noise. As we identify trends that are developing with a high
degree of certainty, we believe we can be much more prescient, enabling us to
invest opportunistically. For example, we view the recent stock market
volatility, especially in the technology sector, as an opportunity to add to
existing positions and add new securities to the portfolios. In addition to our
focus on long-term trends, we pay close attention to valuation and use patience
to buy securities with favorable risk/reward characteristics. According to the
AFBA 5Star Funds' performance numbers, the strategy is working, but we refuse to
be overcome with hubris and believe a continual reevaluation of every security
in the portfolios is required. We will not allow ourselves to become complacent.
Our strategy of continual security evaluation and diversification has benefited
the AFBA 5Star Funds through the increased stock market volatility. As a result
of higher short-term interest rates, orchestrated by the Federal Reserve
Chairman Alan Greenspan, and a surge in oil prices, the economy is beginning to
decelerate. Unfortunately the above-mentioned factors have also put pressure on
corporate earnings, especially in the technology sector. The technology-heavy
Nasdaq Composite Index is down approximately 9.7% year-to-date and about 19.7%
since the end of March. From its high registered on March 10, the Nasdaq
Composite Index is down a whopping 27%. In these volatile markets our
diversification efforts have paid off handsomely and insulated the AFBA 5Star
Funds from the sell-off in high P/E stocks. Year-to-date the AFBA 5Star Balanced
Fund, Equity Fund, High Yield Fund and USA Global Fund are up 13.40%, 19.40%,
7.80% and 10.99% (price change and reinvested distributions), respectively, all
outperforming their appropriate indices.
One Year Performance Chart - AFBA 5Star USA Global Fund
One Year Performance Chart - AFBA 5Star High Yield Fund
Although the near-term stock market volatility can be challenging, we view it as
a bump in the road, and we are using it as an opportunity to buy well-managed,
financially strong companies at depressed valuation levels. Peering through all
the near-term noise, we believe the long-term future is very bright. Although
the economy is decelerating, we view this as a positive, as it is much more
likely that the Federal Open Market Committee (FOMC) will hold short-term rates
steady or begin a process of lowering rates. Regarding oil, we believe if oil
production is maintained at its current pace, oil prices will eventually begin
to fall. Lower oil prices along with stable to lower short-term interest rates
bode well for the stock market. Furthermore, a tight labor market and rising
labor costs have caused inflation fears, but productivity growth, which has
increased at an estimated 4%, has kept inflation in check. Going forward, we
believe productivity gains have become more secular as a result of continued
investment in technology, which we see as very positive for the overall economy
and stock market.
We look forward to reviewing all the AFBA Funds with you in future letters. All
of us on the KCM research team thank you for your confidence in our management
of the AFBA 5Star Funds. As fellow shareholders 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
<TABLE>
<CAPTION>
Investment Results -- Total Return
Since
Nine Months One Year Inception
Ended Ended 6/3/97 to
9/30/00 9/30/00 9/30/00
<S> <C> <C> <C>
AFBA 5STAR
BALANCED FUND 13.40% 21.30% 8.69%
Lipper Balanced
Fund Index 3.76% 11.11% 11.89%
AFBA 5STAR
EQUITY FUND 19.40% 32.78% 14.68%
Lipper Multi-Cap Core
Fund Index 4.58% 21.84% 17.42%
AFBA 5STAR
HIGH YIELD FUND 7.80% 8.06% 3.09%
Lipper High Yield Bond
Fund Index -2.68% -0.06% 2.97%
AFBA 5STAR
USA GLOBAL FUND 10.99% 32.62% 15.88%
Lipper Global
Fund Index -3.25% 19.18% 13.79%
</TABLE>
<TABLE>
<CAPTION>
AFBA 5STAR
Balanced Fund
SCHEDULE OF INVESTMENTS
September 30, 2000 (unaudited)
<S> <C> <C>
SHARES COMPANY MARKET VALUE
Common Stocks-- 62.52%
CONSUMER CYCLICAL-- 11.48%
11,000 Argosy Gaming Co.* $ 199,375
5,000 Barnes & Noble, Inc.* 98,437
8,500 Carnival Corp. 209,313
10,000 Elcor Corp. 145,000
5,000 Ethan Allen Interiors, Inc. 141,562
5,000 Ford Motor Co. 126,562
7,000 ServiceMaster (The) Co. 69,125
8,000 Strayer Education, Inc. 175,000
1,164,374
CONSUMER STAPLES-- 2.43%
2,500 McDonald's Corp. 75,469
2,250 PepsiCo, Inc. 103,500
1,000 Procter & Gamble Co. 67,000
245,969
ENERGY -- 1.83%
20,000 Frontier Oil Corp.* 147,500
11,524 Southern Mineral Corp. 38,173
185,673
FINANCIAL-- 14.38%
6,000 American Express Co. 364,500
1,000 Amvescap 110,875
3,500 Bank of America Corp. 183,313
3,500 Fleet Boston Financial Corp. 136,500
2,500 PNC Bank Corp. 162,500
8,000 Stilwell Financial, Inc. 348,000
1,000 Union Planters Corp. 33,063
3,000 Washington Mutual, Inc. 119,438
1,458,189
HEALTH CARE-- 9.17%
4,000 Abbott Laboratories 190,250
2,000 American Home Products Corp. 113,125
2,000 Bristol Myers Squibb 114,250
1,000 Johnson & Johnson 93,937
2,500 Merck & Company, Inc. 186,094
5,000 Schering-Plough Corp. 232,500
930,156
TECHNOLOGY -- 19.23%
3,500 Analog Devices, Inc.* 288,969
2,000 Applied Materials, Inc.* 118,625
12,000 Atmel Corp.* 182,250
3,000 Cisco Systems, Inc.* 165,750
6,000 Compaq Computer Corp. 165,480
4,000 Intel Corp. 166,250
2,500 Micron Technology, Inc. 115,000
2,000 Microsoft Corp.* 120,500
5,250 Motorola, Inc. 148,312
3,000 National Semiconductor Corp.* 120,750
3,000 Scientific-Atlanta, Inc. 190,875
3,500 Wind River Systems, Inc.* 167,781
1,950,542
TRANSPORTATION & SERVICES-- 2.27%
3,000 FEDEX Corp.* 133,020
4,000 Southwest Airlines Co. 97,000
230,020
UTILITIES-- 1.73%
2,000 Enron Corp. 175,250
Total Common Stocks 6,340,173
(Cost $5,376,487)
Convertible Preferred Stocks-- 3.93%
8,000 Bethlehem Steel Corp. 98,000
10,000 ICO Holdings, Inc. 120,000
2,000 Kmart Financing I 62,250
4,000 Tesoro Petroleum Corp. 42,000
2,500 TXI Capital Trust I 76,719
Total Convertible Preferred Stocks 398,969
(Cost $601,501)
FACE
AMOUNT DESCRIPTION MARKET VALUE
Corporate Bonds-- 22.15%
$ 75,000 Adelphia Communications Corp., 9.875% due 3-1-07 $ 70,875
200,000 Argosy Gaming Co., 10.75% due 6-1-09 210,250
150,000 Callon Petroleum Co., 10.125% due 9-15-02 144,750
65,000 Callon Petroleum, 10.25% due 9-15-04 62,725
15,000 Exide Corp., 10.00% due 4-15-05 11,475
40,000 Fairchild Semiconductor Corp., 10.125% due 3-15-07 40,200
175,000 Frontier Oil Corp., 9.125% due 2-15-06 158,375
5,000 Frontier Oil Corp., 11.75% due 11-15-09 5,100
30,000 Giant Industries, Inc., 9.75% due 11-15-03 29,775
125,000 HS Resources, Inc., 9.875% due 12-1-03 126,250
60,000 ICO Holdings, Inc., 10.375% due 6-1-07 58,200
100,000 Interface, Inc., 7.30% due 4-1-08 86,500
25,000 Kaiser Aluminum & Chemical Corp., 12.75% due 2-1-03 23,125
30,000 Key Energy Services, 14.00% due 1-15-09 34,275
50,000 Luigino's, Inc., 10.00% due 2-1-06 39,750
25,000 Mandalay Resort Group, 6.75% due 7-15-03 23,500
35,000 Mandalay Resort Group, 10.25% due 8-1-07 36,269
50,000 Mastec, Inc., 7.75% due 2-1-08 47,750
25,000 McDermott International, 9.375% due 3-15-02 21,424
60,000 MGM Grand, Inc., 9.75% due 6-1-07 62,400
25,000 Nortek, Inc., 9.875% due 3-1-04 24,250
25,000 Neuvo Energy Co., 9.50% due 6-1-08 25,125
50,000 Park Place Entertainment Corp., 8.875% due 9-15-08 49,750
225,000 Pilgrim's Pride Corp., 10.875% due 8-1-03 227,250
75,000 Plains Resources, Inc., 10.25% due 3-15-06 76,500
200,000 Republic Group, Inc., 9.50% due 7-15-08 201,250
50,000 Rogers Communications, Inc., 9.125% due 1-15-06 50,250
75,000 Specialty Retailers, Inc., 9.00% due 7-15-07 937
25,000 Triton Energy Ltd. Co., 9.25% due 4-15-05 25,531
300,000 United Refining Co., 10.75% due 6-15-07 199,500
100,000 Williams Communication, 10.875% due 10-1-09 92,000
235,000 Wiser Oil Co., 9.50% due 5-15-07 191,525
Total Corporate Bonds 2,456,836
(Cost $2,336,423)
Convertible Corporate Bonds-- 8.21%
30,000 Allwaste, Inc., 7.25% due 6-1-14 2,400
150,000 Exide Corp., 2.90% due 12-15-05 70,500
200,000 HMT Technology Corp., 5.75% due 1-15-04 85,000
155,000 Intevac, Inc., 6.50% due 3-1-04 77,694
9,000 Kerr McGee Corp., 7.50% due 5-15-14 8,876
155,000 Key Energy Group, Inc., 5.00% due 9-15-04 127,875
150,000 Lomak Petroleum, Inc., 6.00% due 2-1-07 102,375
10,000 Moran Energy, Inc., 8.75% due 1-15-08 9,000
10,000 OHM Corp., 8.00% due 10-1-06 8,612
50,000 Southern Mineral Corp., 6.875% due 10-01-07 17,500
125,000 Sunrise Assisted Living, Inc., 5.50% due 6-15-02 112,031
Total Convertible Corporate Bonds 621,863
(Cost $1,061,889)
Repurchase Agreement-- 1.53%
$ 155,000 UMB Bank, n.a., 5.95% due 10-2-00
(Collateralized by U.S. Treasury Notes,
6.125% due 12-31-01 with a value of $161,647) $ 155,000
(Cost $155,000)
Total Investments-- 98.34% 9,972,841
(Cost $9,531,300)
Other assets less liabilities-- 1.66% 168,669
Total Net Assets-- 100.00% $ 10,141,510
</TABLE>
The identified cost of investments owned at September 30, 2000, was the same for
federal income tax and book purposes.
Net unrealized appreciation for federal income tax purposes was $441,541, which
is comprised of unrealized appreciation of $1,422,067 and unrealized
depreciation of $980,526.
*Non-income producing security
See accompanying Notes to Financial Statements.
<TABLE>
<CAPTION>
AFBA 5Star
Equity Fund
SCHEDULE OF INVESTMENTS
September 30, 2000 (unaudited)
<S> <C> <C>
SHARES COMPANY MARKET VALUE
Common Stocks-- 97.86%
CAPITAL GOODS-- 2.88%
8,700 Tyco International Ltd. $ 451,313
CONSUMER CYCLICAL-- 14.69%
4,200 Apollo Group, Inc.* 167,475
19,500 Barnes & Noble, Inc.* 383,906
23,600 Carnival Corp. 581,150
2,500 DeVry, Inc.* 94,062
8,400 Elcor Corp. 121,800
15,300 Ethan Allen Interiors, Inc. 433,181
7,400 Fairfield Communities, Inc.* 74,925
5,500 ITT Educational Services, Inc.* 149,188
30,000 ServiceMaster (The) Co. 296,250
2,301,937
CONSUMER STAPLES-- 9.44%
9,000 McDonald's Corp. 271,688
12,800 PepsiCo, Inc. 588,800
16,500 Sara Lee Corp. 335,156
10,700 Viad Corp. 284,219
1,479,863
ENERGY-- 2.22%
5,800 Royal Dutch Petroleum Co. 347,637
FINANCIAL-- 18.77%
8,400 Allstate Corp. 291,900
11,700 American Express Co. 710,775
8,100 Bank of America Corp. 424,238
11,800 Fleet Boston Financial Corp. 460,200
3,300 Northern Trust Corp. 293,287
7,900 PNC Bank Corp. 513,500
4,600 Wilmington Trust Corp. 246,675
2,940,575
HEALTH CARE-- 12.83%
12,600 Abbott Laboratories 599,287
4,500 Johnson & Johnson 422,719
6,900 Merck & Company, Inc. 513,619
10,200 Schering-Plough Corp. 474,300
2,009,925
TECHNOLOGY-- 25.80%
5,700 Analog Devices, Inc.* 470,606
28,600 Atmel Corp.* 434,363
12,700 Cisco Systems, Inc.* 701,675
13,300 Diebold, Inc. 353,281
7,100 Microsoft Corp.* 427,775
8,500 Scientific-Atlanta, Inc. 540,813
12,500 Sungard Data Systems, Inc.* 535,156
12,100 Wind River Systems, Inc.* 580,044
4,043,713
TRANSPORTATION & SERVICES-- 6.59%
11,700 FEDEX Corp.* 518,778
21,200 Southwest Airlines Co. 514,100
1,032,878
UTILITIES-- 4.64%
8,300 Enron Corp. 727,287
Total Common Stocks 15,335,128
(Cost $12,115,688)
FACE
AMOUNT DESCRIPTION MARKET VALUE
Repurchase Agreement-- 2.11%
$ 330,000 UMB Bank, n.a., 5.95% due 10-2-00
(Collateralized by U.S. Treasury Notes,
6.125% due 12-31-01 with a value of $343,756) $ 330,000
(Cost $330,000)
Total Investments-- 99.97% 15,665,128
(Cost $12,445,688)
Other assets less liabilities-- 0.03% 5,384
Total Net Assets-- 100.00% $ 15,670,512
</TABLE>
The identified cost of investments owned at September 30, 2000, was the same for
federal income tax and book purposes.
Net unrealized appreciation for federal income tax purposes was $3,219,440,
which is comprised of unrealized appreciation of $3,722,455 and unrealized
depreciation of $503,015.
*Non-income producing security
See accompanying Notes to Financial Statements.
<TABLE>
<CAPTION>
AFBA 5Star
High Yield Fund
SCHEDULE OF INVESTMENTS
September 30, 2000 (unaudited)
<S> <C> <C>
SHARES
OR FACE
AMOUNT COMPANY AND DESCRIPTION MARKET VALUE
Common Stocks-- 0.88%
2,093 Purina Mills, Inc.* $ 20,407
11,524 Southern Mineral Corp. 38,173
Total Common Stocks 58,580
(Cost $99,811)
Convertible Preferred Stocks-- 9.50%
5,000 Bethlehem Steel Corp. 61,250
10,000 ICO Holdings, Inc. 120,000
4,250 Kmart Financing I 132,281
3,000 Lomak Petroleum, Inc.* 65,250
5,000 Tesoro Petroleum Corp. 52,500
3,300 TXI Capital Trust I 101,269
2,000 Unocal Corp. 96,750
Total Convertible Preferred Stocks 629,300
(Cost $876,809)
Corporate Bonds-- 61.11%
$ 100,000 Adelphia Communications Corp., 9.875% due 3-1-07 94,500
200,000 Argosy Gaming Co., 10.75% due 6-1-09 210,250
75,000 Bio-Rad Laboratories, 11.625% due 2-15-07 78,938
35,000 Callon Petroleum Co., 10.00% due 12-15-01 33,775
150,000 Callon Petroleum Co., 10.125% due 9-15-02 144,750
195,000 Cliffs Drilling, 10.25% due 5-15-03 200,127
50,000 Coda Energy, Inc., 10.50% due 4-1-06 50,750
200,000 Fairchild Semiconductor Corp., 10.125% due 3-15-07 201,000
200,000 Frontier Oil Corp., 9.125% due 2-15-06 181,000
220,000 Giant Industries, Inc., 9.75% due 11-15-03 218,350
180,000 HS Resources, Inc., 9.875% due 12-1-03 181,800
100,000 ICO Holdings, Inc., 10.375% due 6-1-07 97,000
125,000 Interface, Inc., 7.30% due 4-1-08 108,125
90,000 Kaiser Aluminum & Chemical Corp., 12.75% due 2-1-03 83,250
115,000 King Pharmacy, Inc., 10.75% due 2-15-09 121,900
25,000 Kmart Corp., 9.35% due 1-2-20 22,232
44,000 Kmart Corp., 9.78% due 1-5-20 42,141
140,000 Luigino's, Inc., 10.00% due 2-1-06 111,300
50,000 Mandalay Resort Group, 6.75% due 7-15-03 47,000
50,000 Mandalay Resort Group, 10.25% due 8-1-07 51,813
75,000 Mastec, Inc., 7.75% due 2-1-08 71,625
50,000 MGM Grand, Inc., 9.75% due 6-1-07 52,000
100,000 McDermott International, 9.375% due 3-15-02 85,694
85,000 Nortek, Inc., 9.875% due 3-1-04 82,450
50,000 Nuevo Energy Co., 9.50% due 6-1-08 50,250
75,000 Park Place Entertainment, 8.875% due 9-15-08 74,625
220,000 Pilgrim's Pride Corp., 10.875% due 8-1-03 222,200
200,000 Plains Resources, Inc., 10.25% due 3-15-06 204,000
200,000 Republic Group, Inc., 9.50% due 7-15-08 201,250
50,000 Rogers Communications, Inc., 9.125% due 1-15-06 50,250
100,000 Royal Carribean Cruises Ltd., 7.50% due 10-15-27 79,942
125,000 Specialty Retailers, Inc., 9.00% due 7-15-07 1,562
50,000 Stone Container, 10.75% due 10-1-02 50,937
100,000 Triton Energy Ltd. Co., 9.25% due 4-15-05 102,125
225,000 United Refining Co., 10.75% due 6-15-07 149,625
50,000 Williams Communication, 11.70% due 8-1-08 48,000
100,000 Williams Communication, 11.875% due 8-1-10 95,500
175,000 Wiser Oil Co., 9.50% due 5-15-07 142,625
Total Corporate Bonds 4,044,661
(Cost $4,167,718)
Convertible Corporate Bonds-- 15.71%
32,000 Allwaste, Inc., 7.25% due 6-1-14 2,560
150,000 Exide Corp., 2.90% due 12-15-05 70,500
200,000 HMT Technology Corp., 5.75% due 1-15-04 85,000
85,000 Intevac, Inc., 6.50% due 3-1-04 42,606
140,000 Intevac, Inc., 6.50% due 3-1-04 70,175
63,000 Kerr McGee Corp., 7.50% due 5-15-14 62,134
200,000 Key Energy Group, Inc., 5.00% due 9-15-04 180,875
150,000 Lomak Petroleum, Inc., 6.00% due 2-1-07 102,375
210,000 Moran Energy, Inc., 8.75% due 1-15-08 189,000
122,000 OHM Corp., 8.00% due 10-1-06 105,073
50,000 Southern Mineral Corp., 6.875% due 10-1-07 17,500
125,000 Sunrise Assisted Living, Inc., 5.50% due 6-15-02 112,031
Total Convertible Corporate Bonds 1,039,829
(Cost $1,293,757)
Repurchase Agreement-- 7.02%
$ 465,000 UMB Bank, n.a., 5.95% due 10-2-00
(Collateralized by U.S. Treasury Notes,
5.50% due 12-31-00 with a value of $478,648) $ 465,000
(Cost $465,000)
Total Investments-- 94.22% 6,237,370
(Cost $6,903,095)
Other assets less liabilities-- 5.78% 382,412
Total Net Assets-- 100.00% $ 6,619,782
</TABLE>
The identified cost of investments owned at September 30, 2000, was the same for
federal income tax and book purposes.
Net unrealized depreciation for federal income tax purposes was $665,725, which
is comprised of unrealized appreciation of $126,321 and unrealized depreciation
of $792,046.
*Non-income producing security
See accompanying Notes to Financial Statements.
<TABLE>
<CAPTION>
AFBA 5Star
USA GLOBAL Fund
SCHEDULE OF INVESTMENTS
September 30, 2000 (unaudited)
<S> <C> <C>
SHARES COMPANY MARKET VALUE
Common Stocks-- 95.72%
BASIC MATERIALS-- 3.79%
9,600 Praxair, Inc. $ 358,800
9,600 Sigma-Aldrich Corp. 316,800
675,600
CAPITAL GOODS-- 4.00%
6,800 Boeing Co. 428,400
8,300 Teleflex, Inc. 285,313
713,713
CONSUMER CYCLICAL-- 6.80%
37,100 Interface, Inc. Cl. A 295,640
10,300 Korn/Ferry International* 389,469
25,600 Lear Corp.* 526,400
1,211,509
CONSUMER STAPLES-- 19.88%
7,700 Bestfoods, Inc. 560,175
9,500 Coca-Cola Co. 523,688
12,800 Gillette Co. 395,200
18,800 McDonald's Corp. 567,525
7,100 Proctor & Gamble Co. 475,700
26,200 Sara Lee Corp. 532,187
6,500 Wrigley, (Wm.) Jr. Co. 486,687
3,541,162
FINANCIAL-- 8.20%
10,700 AFLAC, Inc. 685,469
8,100 American International Group, Inc. 775,069
1,460,538
HEALTH CARE-- 15.96%
10,800 American Home Products Corp. 610,875
11,200 Bristol-Myers Squibb Co. 639,800
6,400 Johnson & Johnson 601,200
21,600 Quintiles Transnational Corp.* 344,250
13,900 Schering-Plough Corp. 646,350
2,842,475
TECHNOLOGY-- 37.09%
6,300 Analog Devices, Inc.* 520,144
15,615 Applied Materials, Inc.* 926,165
12,800 Applied Science & Technology, Inc.* 188,800
26,300 Cadence Design System* 675,581
16,600 Cisco Systems, Inc.* 917,150
14,500 Citrix Systems, Inc.* 290,906
10,100 Dallas Semiconductor 332,038
11,100 Intel Corp. 461,343
62,300 Intevac, Inc.* 327,075
10,400 Micron Technology, Inc. 478,400
7,500 Microsoft Corp.* 451,875
9,900 Motorola, Inc. 279,675
16,400 National Semiconductor Corp.* 660,100
16,600 Western Digital Corp.* 97,525
6,606,777
Total Common Stocks 17,051,774
(Cost $14,922,216)
FACE
AMOUNT DESCRIPTION MARKET VALUE
Repurchase Agreement-- 4.27%
$ 760,000 UMB Bank, n.a., 5.95% due 10-2-00
(Collateralized by U.S. Treasury Notes,
5.50% due 12-31-00 with a value of $782,131) $ 760,000
(Cost $760,000)
Total Investments-- 99.99% 17,811,774
(Cost $15,682,216)
Other assets less liabilities-- 0.01% 1,440
Total Net Assets-- 100.00% $ 17,813,214
</TABLE>
The identified cost of investments owned at September 30, 2000, was the same for
federal income tax and book purposes.
Net unrealized appreciation for federal income tax purposes was $2,129,558,
which is comprised of unrealized appreciation of $3,083,237 and unrealized
depreciation of $953,679.
*Non-income producing security
See accompanying Notes to Financial Statements.
<TABLE>
<CAPTION>
STATEMENT OF ASSETS
AND LIABILITIES
September 30, 2000 (unaudited)
BALANCED EQUITY HIGH YIELD USA GLOBAL
FUND FUND FUND FUND
<S> <C> <C> <C> <C>
ASSETS:
Investments at cost ........... $ 9,531,300 $ 12,445,688 $ 6,903,095 $ 15,682,216
Investments at value .......... $ 9,972,841 $ 15,665,128 $ 6,237,370 $ 17,811,774
Cash .......................... 2,606 5,524 8,580 68,713
Receivables:
Investments sold ............ 194,750 -- 253,823 --
Dividends ................... 9,518 12,470 7,932 7,508
Interest .................... 73,263 108 117,419 248
Total assets .............. 10,252,978 15,683,230 6,625,124 17,888,243
LIABILITIES AND NET ASSETS:
Payables:
Management fees ............. 8,440 12,718 5,342 14,929
Investments purchased ....... 103,028 -- -- 60,100
Total liabilities ......... 111,468 12,718 5,342 75,029
NET ASSETS ....................... $ 10,141,510 $ 15,670,512 $ 6,619,782 $ 17,813,214
NET ASSETS CONSIST OF:
Capital (capital stock and
paid-in capital) ............ $ 9,462,791 $ 12,001,317 $ 7,179,503 $ 14,182,314
Accumulated undistributed net
investment income ........... 47,739 15,254 61,081 1,522
Accumulated undistributed net
realized gain from investment
transactions ................ 189,439 434,501 44,923 1,499,820
Net unrealized appreciation
(depreciation) of investments 441,541 3,219,440 (665,725) 2,129,558
NET ASSETS APPLICABLE TO
OUTSTANDING SHARES ............ $ 10,141,510 $ 15,670,512 $ 6,619,782 $ 17,813,214
Capital shares, $1.00 par value:
Authorized .................... 10,000,000 10,000,000 10,000,000 10,000,000
Outstanding ................... 867,471 1,010,176 745,891 1,102,224
NET ASSET VALUE PER SHARE ........ $ 11.69 $ 15.51 $ 8.87 $ 16.16
</TABLE>
See accompanying Notes to Financial Statements.
<TABLE>
<CAPTION>
STATEMENTS
OF OPERATIONS
Six Months Ended September 30, 2000 (unaudited)
BALANCED EQUITY HIGH YIELD USA GLOBAL
FUND FUND FUND FUND
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends .............................$ 58,403 $ 73,917 $ 41,448 $ 55,586
Interest .............................. 156,144 18,448 261,153 34,836
Foreign tax withheld .................. -- (1,096) -- --
214,547 91,269 302,601 90,422
EXPENSES:
Management fees ....................... 46,176 69,992 28,437 82,802
Registration fees ..................... 11,418 11,418 11,094 11,418
Total expenses before
reimbursement .................... 57,594 81,410 39,531 94,220
Less: expense reimbursement ......... 7,435 5,395 8,644 4,280
Net expenses ........................ 50,159 76,015 30,887 89,940
Net investment income ............... 164,388 15,254 271,714 482
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain (loss) from
investment transactions ............... (117,341) 437,928 (79,891) 90,867
Net unrealized appreciation
(depreciation) during the
period on investments ................. 238,445 304,129 174,926 (888,402)
Net gain (loss) on investments ...... 121,104 742,057 95,035 (797,535)
Net increase (decrease) in net assets
resulting from operations .........$ 285,492 $ 757,311 $ 366,749 $(797,053)
</TABLE>
See accompanying Notes to Financial Statements.
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES
IN NET ASSETS
BALANCED FUND EQUITY FUND
SIX MONTHS ENDED SIX MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30,
2000 Year Ended 2000 Year Ended
(unaudited) MARCH 31, 2000 (unaudited) MARCH 31, 2000
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income $ 164,388 $ 252,592 $ 15,254 $ 13,800
Net realized gain (loss) from
investment transactions (117,341) 334,307 437,928 459,123
Net unrealized appreciation during
the period on investments 238,445 534,088 304,129 2,161,418
Net increase in net assets
resulting from operations 285,492 1,120,987 757,311 2,634,341
DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income (132,964) (257,872) -- (21,830)
Net realized gain from
investment transactions -- (19,074) -- --
Total distributions to
shareholders (132,964) (276,946) -- (21,830)
CAPITAL SHARE TRANSACTIONS:*
Shares sold 1,588,977 3,336,887 2,056,602 3,886,088
Reinvested distributions 132,479 273,992 -- 21,723
1,721,456 3,610,879 2,056,602 3,907,811
Shares repurchased (181,093) (1,343,491) (218,491) (767,413)
Net increase from capital
share transactions 1,540,363 2,267,388 1,838,111 3,140,398
Net increase in net assets 1,692,891 3,111,429 2,595,422 5,752,909
Net assets:
Beginning of period 8,448,619 5,337,190 13,075,090 7,322,181
End of period $ 10,141,510 $ 8,448,619 $ 15,670,512 $ 13,075,090
Undistributed net investment
income at end of period $ 47,739 $ 16,315 $ 15,254 $ --
*Fund share transactions:
Shares sold 136,531 316,314 139,074 309,972
Reinvested distributions 11,199 25,976 -- 1,776
147,730 342,290 139,074 311,748
Shares repurchased (15,685) (129,175) (14,861) (60,177)
Net increase in fund shares 132,045 213,115 124,213 251,571
</TABLE>
See accompanying Notes to Financial Statements.
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES
IN NET ASSETS
HIGH YIELD FUND USA GLOBAL FUND
SIX MONTHS ENDED SIX MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
2000 Year Ended 2000 Year Ended
(unaudited) MARCH 31, 2000 (unaudited) MARCH 31, 2000
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income $ 271,714 $ 428,039 $ 482 $ 2,962
Net realized gain (loss) from
investment transactions (79,891) 127,117 90,867 1,639,549
Net unrealized appreciation
(depreciation) during the period
on investments 174,926 (386,909) (888,402) 2,558,228
Net increase (decrease) in
net assets resulting from
operations 366,749 168,247 (797,053) 4,200,739
DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income (246,320) (408,599) -- (15,043)
Net realized gain from investment
transactions -- -- -- --
Total distributions
to shareholders (246,320) (408,599) -- (15,043)
CAPITAL SHARE TRANSACTIONS:*
Shares sold 1,338,602 1,448,835 3,832,567 5,280,939
Reinvested distributions 245,293 403,565 -- 14,959
1,583,895 1,852,400 3,832,567 5,295,898
Shares repurchased (109,778) (578,709) (273,616) (264,457)
Net increase from capital
share transactions 1,474,117 1,273,691 3,558,951 5,031,441
Net increase in net assets 1,594,546 1,033,339 2,761,898 9,217,137
Net assets:
Beginning of period 5,025,236 3,991,897 15,051,316 5,834,179
End of period $ 6,619,782 $ 5,025,236 $ 17,813,214 $ 15,051,316
Undistributed net investment
income at end of period $ 61,081 $ 35,687 $ 1,522 $ 1,040
Fund share transactions:
Shares sold 154,088 156,684 228,171 382,916
Reinvested distributions 28,168 45,484 -- 1,199
182,256 202,168 228,171 384,115
Shares repurchased (12,717) (63,573) (16,585) (20,839)
Net increase in fund shares 169,539 138,595 211,586 363,276
</TABLE>
See accompanying Notes to Financial Statements.
NOTES TO FINANCIAL
STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES:
The AFBA 5Star Fund, Inc. (the Fund), a Maryland corporation, is registered
under the Investment Company Act of 1940, as amended, as a diversified open-end
management investment company with the following series: AFBA 5Star Balanced
Fund, AFBA 5Star Equity Fund, AFBA 5Star High Yield Fund and AFBA 5Star USA
Global Fund. Each series, in effect, represents a separate fund. The Fund is
required to account for the assets of each series separately and to allocate
general liabilities of the Fund to each series based on the net asset value of
each series. The following is a summary of significant accounting policies
consistently followed by the Fund in the preparation of its financial
statements.
A. Investment 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 in good faith by the Board of Directors. Securities with
maturities of 60 days or less when acquired or subsequently within 60 days of
maturity are valued at amortized cost, which approximates market value.
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. The Equity Fund
designates $804 as long-term capital gain dividends.
C. Options -- In order to produce incremental earnings and protect gains, the
Fund may write covered call options on portfolio securities. When a Fund writes
an option, an amount equal to the premium received by the Fund is reflected as
an asset and an equivalent liability. The amount of the liability is
subsequently marked to market to reflect the current market value of the option
written. If an option which a Fund has written either expires on its stipulated
expiration date or if a Fund enters into a closing purchase transaction, the
Fund realizes a gain (or loss if the cost of a closing purchase transaction
exceeds the premium received when the option was written) without regard to any
unrealized gain or loss on the underlying security and the liability related to
such option is extinguished. If a call option which the Fund has written is
exercised, the Fund realizes a capital gain or loss from the sale of the
underlying security and the proceeds from such sale are increased by the premium
originally received. The primary risks associated with the use of options are an
imperfect correlation between the change in market value of the securities held
by the Fund and the price of the option, the possibility of an illiquid market,
and the inability of the counterparty to meet the terms of the contract. There
were no outstanding covered call options or transactions in call options written
as of September 30, 2000.
D. Expense Limitation-- Jones & Babson, Inc., the underwriter and distributor of
the Fund, has voluntarily agreed to pay certain expenses of the Fund so that the
total annual operating expenses of a portfolio will not exceed 1.08% of its
average daily net assets. Jones & Babson, Inc. may be reimbursed by the Fund for
such expenses at a later date if such reimbursement does not cause a portfolio's
expenses to exceed the expense limitation percentage noted above. E. Investment
Transactions and Investment Income -- Security transactions are accounted for on
the date the securities are purchased or sold. Dividend income is recorded on
the ex-dividend date. Interest income is recognized on the accrual basis and
includes accretion of market discounts. Premiums on debt securities are not
amortized. Realized gains and losses from investment transactions and unrealized
appreciation and depreciation of investments are reported on the identified cost
basis.
F. Distributions to Shareholders -- Distributions to shareholders are recorded
on the ex-dividend date. Distributions are determined in accordance with income
tax regulations, which may differ from accounting principles generally accepted
in the United States. These differences are primarily due to differing
treatments for deferral of post October and wash sale losses.
G. Use of Estimates -- The preparation of financial statements in conformity
with accounting principles generally accepted in the United States requires
management to make estimates and assumptions that affect the amounts reported in
the financial statements and accompanying notes. Actual results could differ
from such estimates.
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.
<TABLE>
<CAPTION>
3. INVESTMENT TRANSACTIONS:
Investment transactions for the period ended September 30, 2000, (excluding
maturities of short-term commercial notes and repurchase agreements) were as
follows:
<S> <C>
Balanced Fund
Purchases $ 3,679,348
Proceeds from sales 2,118,986
Equity Fund
Purchases $ 3,872,108
Proceeds from sales 1,953,738
High Yield Fund
Purchases $ 2,095,560
Proceeds from sales 1,036,620
USA Global Fund
Purchases $ 5,341,865
Proceeds from sales 893,071
</TABLE>
This report has been prepared for the information of the Shareholders of the
AFBA 5Star 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 by calling the Fund at 1-800-243-9865.
Distributors: Jones & Babson, Inc., Kansas City, Missouri
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
Condensed data for a share of capital stock outstanding throughout the period.
BALANCED FUND
For the six month FOR THE PERIOD
period ended Years Ended FROM June 3, 1997
September 30, 2000 MARCH 31, (inception)
(unaudited) 2000 1999 to March 31, 1998
<S> <C> <C> <C> <C>
Net asset value,
beginning of period $ 11.49 $ 10.22 $ 11.39 $ 10.01
Income from investment operations:
Net investment income (0.20) 0.41 0.42 0.25
Net gains on securities
(both realized and unrealized) 0.17 1.32 (1.17) 1.40
Total from investment operations (0.03) 1.73 (0.75) 1.65
Less distributions:
Dividends from net investment
income 0.23 (0.43) (0.40) (0.23)
Distributions from capital gains -- (0.03) (0.02) (0.04)
Total distributions 0.23 (0.46) (0.42) (0.27)
Net asset value, end of period $ 11.69 $ 11.49 $ 10.22 $ 11.39
Total return* 3.12% 17.39% (6.53%) 16.64%
Ratios/Supplemental Data
Net assets, end of period
(in millions) $ 10,142 $ 8 $ 5 $ 2
Ratio of expenses to average
net assets** 1.08% 1.08% 1.08% 1.08%
Ratio of net investment income
to average net assets** 3.55% 4.01% 4.76% 4.06%
Ratio of expenses to average
net assets before voluntary
expense reimbursement** 1.24% 1.19% 1.33% 1.10%
Ratio of net investment income to
average net assets before
voluntary expense reimbursement** 1.08% 3.90% 4.51% 4.04%
Portfolio turnover rate 23% 44% 53% 57%
</TABLE>
*Total return not annualized for periods less than one full year
**Annualized for periods less than one full year
See accompanying Notes to Financial Statements.
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
Condensed data for a share of capital stock outstanding throughout the period.
EQUITY FUND
For the six month FOR THE PERIOD
period ended Years Ended FROM June 3, 1997
September 30, 2000 MARCH 31, (inception)
(unaudited) 2000 1999 to March 31, 1998
<S> <C> <C> <C> <C>
Net asset value,
beginning of period $ 14.76 $ 11.54 $ 11.77 $ 10.01
Income from investment operations:
Net investment income 0.02 0.02 0.05 0.06
Net gains on securities
(both realized and unrealized) 0.73 3.23 (0.22) 1.81
Total from investment operations 0.75 3.25 (0.17) 1.87
Less distributions:
Dividends from net
investment income -- (0.03) (0.06) (0.05)
Distributions from capital gains -- -- -- (0.06)
Total distributions -- (0.03) (0.06) (0.11)
Net asset value, end of period $ 15.51 $ 14.76 $ 11.54 $ 11.77
Total return* 5.08% 28.22% (1.43%) 18.81%
Ratios/Supplemental Data
Net assets, end of period
(in millions) $ 16 $ 13 $ 7 $ 4
Ratio of expenses to average
net assets** 1.08% 1.08% 1.08% 1.04%
Ratio of net investment income
to average net assets** 0.22% 0.15% 0.61% 0.94%
Ratio of expenses to average
net assets before voluntary
expense reimbursement** 1.16% 1.13% 1.23% --
Ratio of net investment income
to average net assets
before voluntary expense
reimbursement** (0.51%) 0.10% 0.46% --
Portfolio turnover rate 14% 31% 64% 76%
</TABLE>
*Total return not annualized for periods less than one full year
**Annualized for periods less than one full year
See accompanying Notes to Financial Statements.
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
Condensed data for a share of capital stock outstanding throughout the period.
HIGH YIELD FUND
For the six month FOR THE PERIOD
period ended Years Ended FROM June 3, 1997
September 30, 2000 MARCH 31, (inception)
(unaudited) 2000 1999 to March 31, 1998
<S> <C> <C> <C> <C>
Net asset value,
beginning of period $ 8.72 $ 9.12 $ 10.62 $ 10.01
Income from investment operations:
Net investment income (0.51) 0.80 0.60 0.34
Net gains on securities
(both realized and unrealized) 0.13 (0.42) (1.49) 0.59
Total from investment operations (0.38) 0.38 (0.89) 0.93
Less distributions:
Dividends from net
investment income 0.53 (0.78) (0.58) (0.32)
Distributions from capital gains -- -- (0.03) --
Total distributions 0.53 (0.78) (0.61) (0.32)
Net asset value, end of period $ 8.87 $ 8.72 $ 9.12 $ 10.62
Total return* 5.97% 4.28% (8.45%) 9.37%
Ratios/Supplemental Data
Net assets, end of period
(in millions) $ 7 $ 5 $ 4 $ 1
Ratio of expenses to average
net assets** 1.08% 1.08% 1.08% 1.08%
Ratio of net investment income
to average net assets** 9.51% 9.27% 7.47% 5.51%
Ratio of expenses to average
net assets before voluntary
expense reimbursement** 1.38% 1.26% 1.46% 1.11%
Ratio of net investment income
to average net assets
before voluntary expense
reimbursement** 3.93% 9.09% 7.09% 5.48%
Portfolio turnover rate 19% 34% 11% 31%
</TABLE>
*Total return not annualized for periods less than one full year
**Annualized for periods less than one full year
See accompanying Notes to Financial Statements.
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
Condensed data for a share of capital stock outstanding throughout the period.
USA GLOBAL FUND
For the six month FOR THE PERIOD
period ended Years Ended FROM June 3, 1997
September 30, 2000 MARCH 31, (inception)
(unaudited) 2000 1999 to March 31, 1998
<S> <C> <C> <C> <C>
Net asset value,
beginning of period $ 16.90 $ 11.06 $ 11.17 $ 10.01
Income from investment operations:
Net investment income -- 0.01 0.05 0.07
Net gains on securities
(both realized and unrealized) (0.74) 5.86 (0.11) 1.14
Total from investment operations (0.74) 5.87 (0.06) 1.21
Less distributions:
Dividends from net
investment income -- (0.03) (0.05) (0.05)
Distributions from capital gains -- -- -- --
Total distributions -- (0.03) (0.05) (0.05)
Net asset value, end of period $ 16.16 $ 16.90 $ 11.06 $ 11.17
Total return* (4.38%) 53.11% (0.52%) 12.16%
Ratios/Supplemental Data
Net assets, end of period
(in millions) $ 18 $ 15 $ 6 $ 3
Ratio of expenses to average
net assets** 1.08% 1.08% 1.08% 1.04%
Ratio of net investment income
to average net assets** 0.01% 0.03% 0.67% 1.07%
Ratio of expenses to average
net assets before voluntary
expense reimbursement** 1.13% 1.13% 1.30% --
Ratio of net investment income
to average net assets
before voluntary expense
reimbursement** (0.59%) (0.02%) 0.45% --
Portfolio turnover rate 5% 36% 19% 42%
</TABLE>
*Total return not annualized for periods less than one full year
**Annualized for periods less than one full year
See accompanying Notes to Financial Statements.
AFBA 5Star FundSM
AFBA 5Star Balanced Fund
AFBA 5Star Equity Fund
AFBA 5Star High Yield Fund
AFBA 5Star USA Global Fund
AFBA 5Star Fund
AFBA Investment Management Company
909 N. Washington Street
Alexandria, Virginia 22314
1-800-243-9865
www.afba.com
Shareholder Inquiries 1-888-578-2733
