<PAGE>
MAP - GOVERNMENT FUND, INC.
To Our Shareholders:
MAP-Government Fund continues to provide competitive returns to its
shareholders. As of December 31, 1997 the Fund's 7-day and 30-day yields were
4.96% and 4.98%, respectively. The total return for the year ended December 31,
1997 was 4.97%. In the letter that follows, David James, the Fund's lead
portfolio manager, discusses some of the economic issues that affected the
Fund's performance throughout 1997 and that shape the outlook for the coming
year.
This Fund continues to offer its shareholders a variety of convenient programs,
such as automatic investing, check writing, and an exchange feature with
MAP-Equity Fund. In addition, you have easy telephone access to your account for
inquiries, withdrawals, and transfers. Please feel free to contact First
Priority Investment Corporation, the Fund's distributor, at 800-559-5535, to
request more information about these features.
The Board of Directors invites you to mail your comments and suggestions to
them, and thanks you for your continued support and confidence in the Fund.
Sincerely,
[SIGNATURE]
KATHLEEN M. KOERBER
PRESIDENT
January 31, 1998
<PAGE>
REPORT OF THE INVESTMENT ADVISER
Dear Shareholders:
During the course of 1997, the Federal Reserve Board altered short term interest
rates just once. In March, the Board tightened monetary policy, the result of
which was to increase the target Federal Funds rate 25 basis points (i.e.,
0.25%) to its current level of 5.50%. The Federal Discount rate was left
unchanged at 5.00%. The 90-day Treasury Bill currently (as of January, 1998) is
yielding approximately 5.17%.
Gross Domestic Product ("GDP") for the fourth quarter was 4.3%, indicative of
strong economic growth in the quarter. Unemployment, which reached a 27-year low
of 4.6% in November, rose slightly in December, to 4.7%. We believe these were
compelling reasons for the Federal Reserve to increase interest rates. Many
investors expected an increase in short term interest rates at the December
Federal Open Market Committee meeting. However, the economic problems that
developed in Asia left the financial markets in a vulnerable state, prompting
the Federal Reserve to refrain from monetary policy change.
Recent economic data, however, have shown some signs of a slowing economy. The
Consumer Price Index ("CPI") and The Producer Price Index ("PPI") for December
were benign. CPI rose a slight 0.1% and PPI was down 0.2%. This indicates that
there is no significant upward pressure on prices and that inflation is almost
non-existent. Durable goods orders slipped 0.2% (excluding the volatile
transportation sector). The National Association of Purchasing Managers ("NAPM")
monthly index decreased from 54.5 in November to 53.1 in December. The NAPM
index measures manufacturing growth. However, retail sales in December increased
by 0.7%.
Given the current economic outlook coupled with the financial problems in Asia,
inflation appears likely to remain low over the short run. Therefore, we feel
the appropriate investment strategy for the MAP-Government portfolio is to
maintain an average weighted maturity of 45-65 days.
Sincerely,
[SIGNATURE]
DAVID A. JAMES
FOR FIRST PRIORITY INVESTMENT
CORPORATION
January 31, 1998
2
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and
Board of Directors of
MAP - Government Fund, Inc.
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of portfolio investments, and the related statements of operations
and of changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of MAP - Government Fund, Inc. (the
"Fund") at December 31, 1997, the results of its operations for the year then
ended, the changes in its net assets for each of the two years in the period
then ended and the financial highlights for each of the five years in the period
then ended, in conformity with generally accepted accounting principles. These
financial statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Fund's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with generally accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits, which included confirmation of securities at
December 31, 1997 by correspondence with the custodian, provide a reasonable
basis for the opinion expressed above.
PRICE WATERHOUSE LLP
1177 Avenue of the Americas
New York, New York
February 9, 1998
3
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
MAP - GOVERNMENT FUND, INC.
DECEMBER 31, 1997
<TABLE>
<S> <C>
ASSETS
Investments (cost $78,149,288).................... $78,149,288
Interest receivable............................... 56,222
Cash.............................................. 310,478
Receivable for Fund shares sold................... 2,633,949
Prepaid expense and other......................... 10,657
------------
Total Assets.............................. 81,160,594
------------
LIABILITIES
Payable for Fund shares redeemed.................. 192,506
Investment advisory fee payable................... 94,549
Accounts payable and accrued expenses............. 21,686
------------
Total Liabilities......................... 308,741
------------
Net Assets................................ $80,851,853
------------
------------
NET ASSETS
Capital stock (80,851,853 shares of $.01 par value
capital stock outstanding, 2,000,000,000 shares
authorized)..................................... $ 808,518
Paid-in capital................................... 80,043,335
------------
Net Assets................................ $80,851,853
------------
------------
Net asset value, offering price and redemption
price per share
($80,851,853 DIVIDED BY 80,851,853 shares of
capital stock outstanding)...................... $1.00
------------
------------
</TABLE>
See notes to financial statements.
STATEMENT OF OPERATIONS
MAP - GOVERNMENT FUND, INC.
YEAR ENDED DECEMBER 31, 1997
<TABLE>
<S> <C>
Investment Income
Interest........................................ $5,199,129
----------
Expenses
Investment advisory fee......................... 378,340
Custodian....................................... 58,452
Transfer agent.................................. 53,005
Filing Fees..................................... 27,855
Audit........................................... 25,100
Insurance expense............................... 17,638
Directors' fees................................. 8,300
Legal........................................... 8,207
Miscellaneous................................... 6,450
Printing........................................ 6,237
----------
589,584
----------
Net Investment Income......................... $4,609,545
----------
----------
</TABLE>
4
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
MAP - GOVERNMENT FUND, INC.
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1997 1996
------------- ---------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS
Net investment income.................................................... $ 4,609,545 $ 4,624,856
------------- ---------------
Net Increase in Net Assets Resulting from Operations................... 4,609,545 4,624,856
------------- ---------------
FROM DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income..................................... (4,609,545) (4,624,856)
------------- ---------------
FROM CAPITAL SHARE TRANSACTIONS
Net increase (decrease) in net assets from capital share transactions.... (28,902,885) 28,729,858
------------- ---------------
Net Increase (Decrease) in Net Assets.................................. (28,902,885) 28,729,858
NET ASSETS
Beginning of year........................................................ 109,754,738 81,024,880
------------- ---------------
End of year.............................................................. $ 80,851,853 $ 109,754,738
------------- ---------------
------------- ---------------
</TABLE>
See notes to financial statements.
5
<PAGE>
SCHEDULE OF PORTFOLIO INVESTMENTS
MAP - GOVERNMENT FUND, INC.
DECEMBER 31, 1997
<TABLE>
<CAPTION>
PRINCIPAL VALUE
- ---------- -----------
<C> <S> <C>
FEDERAL FARM CREDIT BANK (10.5%)
$1,765,000 5.47%, due January 22, 1998................................................ $ 1,759,368
172,000 5.47%, due January 30, 1998................................................ 171,242
1,873,000 5.53%, due February 18, 1998............................................... 1,859,190
490,000 5.56%, due March 2, 1998................................................... 485,459
1,825,000 5.46%, due March 13, 1998.................................................. 1,805,348
520,000 5.50%, due May 19, 1998.................................................... 509,037
2,000,000 5.43%, due November 16, 1998............................................... 1,903,768
-----------
8,493,412
-----------
FEDERAL HOME LOAN BANK BOARD (31.0%)
1,505,000 5.38%, due January 7, 1998................................................. 1,503,651
2,000,000 5.42%, due January 9, 1998................................................. 1,997,591
1,000,000 5.75%, due January 9, 1998................................................. 1,000,000
1,475,000 5.48%, due January 13, 1998................................................ 1,472,306
1,470,000 5.42%, due January 14, 1998................................................ 1,467,123
3,005,000 5.48%, due January 23, 1998................................................ 2,994,937
1,190,000 5.45%, due February 4, 1998................................................ 1,183,875
2,120,000 5.47%, due February 4, 1998................................................ 2,109,048
1,000,000 5.41%, due February 6, 1998................................................ 994,590
1,875,000 5.49%, due February 6, 1998................................................ 1,864,706
1,015,000 5.52%, due February 18, 1998............................................... 1,007,536
700,000 5.46%, due February 20, 1998............................................... 694,692
1,205,000 5.58%, due March 4, 1998................................................... 1,193,420
1,135,000 5.39%, due March 6, 1998................................................... 1,124,124
2,000,000 5.55%, due March 18, 1998.................................................. 1,976,567
1,900,000 5.39%, due March 20, 1998.................................................. 1,877,811
630,000 5.41%, due March 20, 1998.................................................. 622,615
-----------
25,084,592
-----------
FEDERAL HOME LOAN MORTGAGE CORP. (24.6%)
2,225,000 5.37%, due January 2, 1998................................................. 2,224,668
2,265,000 5.39%, due January 6, 1998................................................. 2,263,304
250,000 5.79%, due January 12, 1998................................................ 249,558
180,000 5.46%, due January 21, 1998................................................ 179,454
1,150,000 5.46%, due January 23, 1998................................................ 1,146,163
440,000 5.49%, due January 23, 1998................................................ 438,524
1,000,000 5.49%, due January 30, 1998................................................ 995,582
1,275,000 5.48%, due February 11, 1998............................................... 1,267,043
950,000 5.49%, due February 11, 1998............................................... 944,060
1,700,000 5.49%, due February 13, 1998............................................... 1,688,852
930,000 5.53%, due February 23, 1998............................................... 922,429
3,340,000 5.44%, due March 6, 1998................................................... 3,307,698
1,360,000 5.61%, due March 6, 1998................................................... 1,346,436
1,010,000 5.61%, due March 10, 1998.................................................. 999,297
530,000 5.62%, due March 10, 1998.................................................. 524,374
1,415,000 5.52%, due March 11, 1998.................................................. 1,400,029
-----------
19,897,471
-----------
</TABLE>
6
<PAGE>
SCHEDULE OF PORTFOLIO INVESTMENTS -- CONTINUED
MAP - GOVERNMENT FUND, INC.
DECEMBER 31, 1997
<TABLE>
<CAPTION>
PRINCIPAL VALUE
- ---------- -----------
<C> <S> <C>
FEDERAL NATIONAL MORTGAGE ASSOCIATION (29.3%)
$1,848,000 5.41%, due January 5, 1998................................................. $ 1,846,889
360,000 5.79%, due January 8, 1998................................................. 359,595
370,000 5.50%, due January 12, 1998................................................ 369,378
1,870,000 5.41%, due January 14, 1998................................................ 1,866,347
775,000 5.45%, due January 20, 1998................................................ 772,771
305,000 5.44%, due January 21, 1998................................................ 304,078
1,250,000 5.53%, due January 21, 1998................................................ 1,246,160
1,940,000 5.48%, due January 22, 1998................................................ 1,933,798
1,565,000 5.48%, due February 5, 1998................................................ 1,556,662
1,500,000 5.48%, due February 6, 1998................................................ 1,491,780
700,000 5.55%, due February 10, 1998............................................... 695,683
1,750,000 5.62%, due February 10, 1998............................................... 1,739,072
1,760,000 5.53%, due February 25, 1998............................................... 1,745,130
1,435,000 5.59%, due March 3, 1998................................................... 1,421,420
1,000,000 5.61%, due March 10, 1998.................................................. 989,403
1,460,000 5.60%, due March 17, 1998.................................................. 1,442,967
375,000 5.63%, due March 20, 1998.................................................. 370,426
350,000 5.48%, due March 23, 1998.................................................. 345,685
1,330,000 5.54%, due March 25, 1998.................................................. 1,313,012
1,375,000 5.58%, due March 27, 1998.................................................. 1,356,884
520,000 5.63%, due April 24, 1998.................................................. 510,819
-----------
23,677,959
-----------
STUDENT LOAN MARKETING ASSOCIATION (1.3%)
1,000,000 5.74%, due January 27, 1998................................................ 995,854
-----------
TOTAL INVESTMENTS (96.7%) (cost $78,149,288)(1)............................ $78,149,288
-----------
-----------
</TABLE>
- ---------
(1) Also represents cost for federal income tax purposes.
The percentage shown for each investment category is the total value of that
category expressed as a percentage of the net assets of the Fund.
See notes to financial statements.
7
<PAGE>
NOTES TO FINANCIAL STATEMENTS
MAP - GOVERNMENT FUND, INC.
NOTE A -- SIGNIFICANT ACCOUNTING POLICIES
MAP - Government Fund, Inc. (the "Fund") is an open-end management investment
company registered under the Investment Company Act of 1940, as amended.
Significant accounting policies of the Fund are as follows:
INVESTMENTS: Investments are valued at amortized cost which approximates market
value. Under this method, securities are initially valued at cost on their
acquisition date and their subsequent value is calculated based on such initial
value and assuming a constant accretion of purchase discount or amortization of
any purchase premium to maturity. Security transactions are recorded on the date
of purchase or sale. Interest is accrued daily. Realized gains and losses on
investment transactions are determined on the basis of identified cost.
FEDERAL INCOME TAXES: The Fund does not provide for federal income taxes since
it intends to continue to qualify as a "regulated investment company" under the
Internal Revenue Code and to maintain this qualification by distributing each
year substantially all of its net investment income and net realized capital
gains, if any, to its shareholders.
DIVIDENDS: The Fund declares dividends daily from net investment income and net
realized capital gains, if any, and distributes such dividends monthly.
ESTIMATES: The preparation of financial statements in accordance with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts and disclosures in the financial
statements. Actual results could differ from those estimates.
NOTE B -- INVESTMENT ADVISORY AND SERVICE AGREEMENTS
The Fund has investment advisory, service and distribution agreements with First
Priority Investment Corporation ("FPIC"). FPIC is a wholly-owned subsidiary of
MBLLAC Holding Corporation, a wholly-owned subsidiary of MBL Life Assurance
Corporation ("MBL Life"). Under the investment advisory agreement, the Fund pays
FPIC a periodic fee at the annual rate of .40% of the first $300,000,000 of the
Fund's net assets, .35% of the next $400,000,000 of such value and .30% of such
value in excess of $700,000,000. The fee is computed and accrued daily and paid
quarterly. Under the terms of the service agreement, FPIC reimburses MBL Life
for services provided in connection with FPIC's obligations under the investment
advisory agreement.
The compensation of each disinterested director in 1997 was paid by the Fund at
the rate of $400 per meeting attended, plus an annual retainer of $900.
Aggregate fees paid during the year to the Fund's disinterested directors
amounted to $8,300. Two of the directors of the Fund and all officers of the
Fund are either officers or employees of MBL Life. The compensation of the
directors and officers and any employees of the Fund affiliated with FPIC is
paid by the affiliated entities.
Certain MBL Life subsidiaries, affiliates and entities involved in the
rehabilitation of MBL Life also invest in the Fund. As of December 31, 1997 such
direct investments amounted to 77,115,261 shares and represented 95% of the
Fund. It is anticipated that a significant portion or all of these shares will
be redeemed within the next twelve months. The impact of these redemptions on
the continuing operations of the Fund and its expense ratio (expenses as a
percentage of average net assets) cannot be determined at this time. However,
effective December 24, 1997 FPIC notified the Fund that it agreed to bear total
annual operating
8
<PAGE>
NOTE B -- INVESTMENT ADVISORY AND SERVICE AGREEMENTS -- CONTINUED
expenses of the Fund (including the investment advisory fee but excluding taxes,
interest, brokerage commissions, and extraordinary expenses) that exceed .75% of
the Fund's average daily net asset value. FPIC has agreed to limit the Fund's
expenses in this manner through December 31, 1998. However, should events occur
which result in a change in control of FPIC, there is no assurance that the
expense limitation described above would remain in place.
NOTE C -- CAPITAL STOCK
A summary of capital share transactions, at $1.00 per share, follows:
<TABLE>
<CAPTION>
Year Ended Year Ended
December 31, 1997 December 31, 1996
----------------- -----------------
<S> <C> <C>
Shares sold.................................. 86,183,937 174,649,911
Shares issued in reinvestment of income
dividends and capital gain distributions... 4,589,664 4,942,746
----------------- -----------------
90,773,601 179,592,657
Shares repurchased........................... (119,676,486) (150,862,799)
----------------- -----------------
Net increase (decrease)...................... (28,902,885) 28,729,858
----------------- -----------------
----------------- -----------------
</TABLE>
- --------------------------------------------------------------------------------
9
<PAGE>
FINANCIAL HIGHLIGHTS
MAP - GOVERNMENT FUND, INC.
Selected data for each share of capital stock outstanding throughout the years
indicated:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------------------
1997 1996 1995 1994 1993
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of
Year............................. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Net investment income.............. 0.049 0.048 0.052 0.035 0.025
Dividends from net investment
income........................... (0.049) (0.048) (0.052) (0.035) (0.025)
-------- -------- -------- -------- --------
Net Asset Value, End of Year....... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
Total Return....................... 4.97% 4.87% 5.17% 3.53% 2.49%
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
Ratios/Supplemental Data:
Net Assets, End of Year
(thousands)...................... $80,852 $109,755 $81,025 $89,518 $55,008
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
Ratio of Expenses to Average Net
Assets(1)........................ 0.62% 0.62% 0.69% 0.73% 0.74%
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
Ratio of Net Investment Income to
Average Net Assets(1)............ 4.86% 4.76% 5.17% 3.53% 2.49%
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
</TABLE>
See notes to financial statements.
(1) Without reimbursement by adviser, the ratio of expenses to average net
assets would have been 0.75% and 0.87%, and the ratio of net investment
income to average net assets would have been 3.51% and 2.36% for the years
ended December 31, 1994 and 1993, respectively. (See Note B of the notes to
financial statements.)
10
<PAGE>
MAP - GOVERNMENT FUND, INC.
520 Broad Street
Newark, New Jersey 07102-3111
1-800-559-5535
FUND DIRECTORS
William G. Clark
Horace J. DePodwin
Herbert M. Groce, Jr.
Kathleen M. Koerber
Jerome M. Scheckman
INVESTMENT ADVISER
and
DISTRIBUTOR
First Priority Investment Corporation
520 Broad Street
Newark, New Jersey 07102-3111
1-800-559-5535
CUSTODIAN and TRANSFER AGENT
State Street Bank & Trust Co.
P.O. Box 8500
Boston, Massachusetts 02266-8500
1-800-343-0529
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
1177 Avenue of the Americas
New York, New York 10036
THIS REPORT HAS BEEN PREPARED FOR THE SHAREHOLDERS OF THE FUND. IT IS NOT
AUTHORIZED FOR OTHER DISTRIBUTION UNLESS PRECEDED OR ACCOMPANIED BY A CURRENT
PROSPECTUS, WHICH INCLUDES ADDITIONAL INFORMATION ABOUT THE FUND.
[LOGO]
MAP -
Government
Fund, Inc.
ANNUAL REPORT
DECEMBER 31, 1997
FS-631 (2-98)
---------------------------------------------
