<PAGE>
MAP - GOVERNMENT FUND, INC.
To Our Shareholders:
PERFORMANCE
For the six months ending June 30, 1998, MAP-Government Fund returned 2.4% after
expenses. MAP-Government Fund continues to provide competitive returns to its
shareholders. As of June 30, 1998, the Fund's 7-day and 30-day yields were 4.87%
and 4.86%, respectively.
IMPORTANT ORGANIZATIONAL DEVELOPMENTS
Recently, you received a "sticker" supplement to your MAP-Government Fund
prospectus dated August 6. This notice announced the proposed sale of most of
the life insurance and annuity businesses of MAP-Government's sponsor, MBL Life
Assurance Corporation, to Anchor National Life Insurance Company, a subsidiary
of SunAmerica, Inc. The supplement also described the possible effects of that
transaction on MAP-Government, and its investment adviser and distributor, First
Priority Investment Corporation. I want to further discuss what this
announcement and related actions may mean for MAP-Government and for you as an
investor in the Fund, including the future directions currently being considered
by MAP-Government's Board of Directors.
First Priority, which is an indirectly owned subsidiary of MBL Life, is not part
of the transaction between MBL Life and SunAmerica. Consequently, First Priority
will most likely be dissolved at some point in 1999. MBL Life will also cease to
be the Fund's sponsor at the same time.
The sale of MBL Life's insurance businesses will effect a resolution to the
Mutual Benefit Life Rehabilitation. As a result, MBL Life affiliates or related
entities, which own 96 percent of the outstanding shares of MAP-Government, will
redeem those shares completely. These withdrawals will increase the Fund's
operating costs and may also reduce the Fund's yield for remaining shareholders.
To lessen this impact through the end of this year, First Priority will continue
to assume the operating expenses of the Fund (with some exceptions) to the
extent the expenses exceed .75 percent (on an annualized basis) of daily net
assets.
In light of these facts, MAP-Government's Board must consider whether it is
economically viable for the Fund to continue in the long term. The Board may
decide that the Fund should be terminated. If this occurs, the plan of
dissolution would be subject to shareholders' approval.
We will notify you of any proposed plan in a timely manner. In the meantime, we
appreciate your continued support and welcome your comments and observations.
Sincerely,
[SIGNATURE]
KATHLEEN M. KOERBER
PRESIDENT
August 10, 1998
<PAGE>
REPORT OF THE INVESTMENT ADVISER
Dear Shareholders:
Short term interest rates remained unchanged throughout the first half of 1998.
The Federal Reserve Board left the Federal Funds rate at 5.50%, where it has
been since March 1997 when the rate was increased by 25 basis points. The
Federal Discount rate was also left unchanged at 5.00%. The 90-day Treasury Bill
is currently yielding approximately 5.00%.
The U.S. economy is in its eighth year of economic expansion. The first quarter
ended with strong growth and potential for a slowing economy later in the year.
Signals of a slow-down were seen in the second quarter. Job creation slowed in
June as the unemployment rate rose to 4.5% after marking a 28 year low of 4.3%
in May. The National Association of Purchasing Managers ("NAPM") reported
manufacturing activity contracted in June after 22 consecutive months of growth.
The NAPM monthly index fell from 51.4 in May to 49.6 in June. Analysts had
expected a modest decrease to 51.2; however, June's index below 50 suggests the
outlook for U.S. manufacturers is weakening.
The U.S. Commerce Department reported revised figures for the first quarter that
indicated the U.S. economy grew at a faster rate than previously estimated.
Gross Domestic Product ("GDP") rose at a revised 5.4% (annualized) vs. the
previous estimate of 5.0%. Based on leading economic indicators in May, the
Conference Board anticipated second quarter GDP growth would exceed 3.0%
(annualized) with a slow-down in the second half of the year. The Asian crisis,
the GM strike (3 weeks old at the end of June) and a record build-up of business
inventories that occurred in the first quarter are expected to temper the
economy. As a result, some analysts were starting to forecast GDP growth in the
range of 1.5% to 2.5% (annualized) for the second quarter. Economists' opinions
remain split regarding the direction of interest rates later this year.
Given the current economic outlook, 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
August 12, 1998
2
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
MAP - GOVERNMENT FUND, INC.
JUNE 30, 1998 (UNAUDITED)
<TABLE>
<S> <C>
ASSETS
Investments (cost $79,482,195).................... $79,482,195
Cash.............................................. 48,208
Receivable for Fund shares sold................... 226,205
Prepaid expense and other......................... 6,311
------------
Total Assets.............................. 79,762,919
------------
LIABILITIES
Payable for Fund shares redeemed.................. 16,965
Investment advisory fee payable................... 77,130
Accounts payable and accrued expenses............. 31,119
------------
Total Liabilities......................... 125,214
------------
Net Assets................................ $79,637,705
------------
------------
NET ASSETS
Capital stock (79,637,705 shares of $.01 par value
capital stock outstanding, 2,000,000,000 shares
authorized)..................................... $ 796,377
Paid-in capital................................... 78,841,328
------------
Net Assets................................ $79,637,705
------------
------------
Net asset value, offering price and redemption
price per share
($79,637,705 DIVIDED BY 79,637,705 shares of
capital stock outstanding)...................... $1.00
------------
------------
</TABLE>
See notes to financial statements.
STATEMENT OF OPERATIONS
MAP - GOVERNMENT FUND, INC.
SIX MONTHS ENDED JUNE 30, 1998 (UNAUDITED)
<TABLE>
<S> <C>
Investment Income
Interest........................................ $2,116,895
----------
Expenses
Investment advisory fee......................... 152,036
Transfer agent.................................. 29,186
Custodian....................................... 28,635
Filing fees..................................... 13,928
Audit........................................... 13,634
Insurance expense............................... 6,959
Printing........................................ 4,276
Directors' fees................................. 4,000
Legal........................................... 3,057
Miscellaneous................................... 822
----------
256,533
----------
Net Investment Income......................... $1,860,362
----------
----------
</TABLE>
3
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
MAP - GOVERNMENT FUND, INC.
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
JUNE 30, DECEMBER 31,
1998 1997
------------- ---------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS
Net investment income.................................................... $ 1,860,362 $ 4,609,545
------------- ---------------
Net Increase in Net Assets Resulting from Operations................... 1,860,362 4,609,545
FROM DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income..................................... (1,860,362) (4,609,545)
FROM CAPITAL SHARE TRANSACTIONS
Net decrease in net assets from capital share transactions............... (1,214,148) (28,902,885)
------------- ---------------
Net Decrease in Net Assets............................................. (1,214,148) (28,902,885)
NET ASSETS
Beginning of period...................................................... 80,851,853 109,754,738
------------- ---------------
End of period............................................................ $ 79,637,705 $ 80,851,853
------------- ---------------
------------- ---------------
</TABLE>
See notes to financial statements.
4
<PAGE>
SCHEDULE OF PORTFOLIO INVESTMENTS
MAP - GOVERNMENT FUND, INC.
JUNE 30, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL VALUE
- ---------- -----------
<C> <S> <C>
FEDERAL FARM CREDIT BANK (8.6%)
$ 635,000 5.40%, due July 9, 1998.................................................... $ 634,238
1,498,000 5.29%, due July 20, 1998................................................... 1,493,822
970,000 5.50%, due July 23, 1998................................................... 966,740
1,009,000 5.27%, due August 3, 1998.................................................. 1,004,126
787,000 5.48%, due August 4, 1998.................................................. 782,927
2,000,000 5.43%, due November 16, 1998............................................... 1,958,370
-----------
6,840,223
-----------
FEDERAL HOME LOAN BANK BOARD (22.3%)
510,000 5.41%, due July 6, 1998.................................................... 509,617
1,295,000 5.39%, due July 8, 1998.................................................... 1,293,643
400,000 5.45%, due July 10, 1998................................................... 399,455
605,000 5.40%, due July 22, 1998................................................... 603,094
479,000 5.45%, due July 22, 1998................................................... 477,477
1,407,000 5.40%, due July 24, 1998................................................... 1,402,146
820,000 5.38%, due July 29, 1998................................................... 816,569
2,000,000 5.27%, due August 7, 1998.................................................. 1,989,167
1,100,000 5.27%, due August 12, 1998................................................. 1,093,237
1,047,000 5.40%, due August 20, 1998................................................. 1,039,148
885,000 5.38%, due August 21, 1998................................................. 878,255
830,000 5.44%, due August 28, 1998................................................. 822,726
1,000,000 5.33%, due September 16, 1998.............................................. 988,600
530,000 5.45%, due September 16, 1998.............................................. 523,822
500,000 5.38%, due September 18, 1998.............................................. 494,097
1,175,000 5.34%, due September 23, 1998.............................................. 1,160,360
710,000 5.40%, due October 14, 1998................................................ 698,818
590,000 5.35%, due November 12, 1998............................................... 578,251
1,165,000 5.35%, due November 12, 1998............................................... 1,141,800
435,000 5.36%, due November 13, 1998............................................... 426,257
390,000 5.35%, due November 25, 1998............................................... 381,480
-----------
17,718,019
-----------
</TABLE>
5
<PAGE>
SCHEDULE OF PORTFOLIO INVESTMENTS -- CONTINUED
MAP - GOVERNMENT FUND, INC.
JUNE 30, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL VALUE
- ---------- -----------
<C> <S> <C>
FEDERAL HOME LOAN MORTGAGE CORP. (35.7%)
$ 600,000 5.48%, due July 1, 1998.................................................... $ 600,000
480,000 5.41%, due July 2, 1998.................................................... 479,928
1,013,000 5.43%, due July 2, 1998.................................................... 1,012,847
1,715,000 5.40%, due July 7, 1998.................................................... 1,713,456
900,000 5.39%, due July 9, 1998.................................................... 898,922
1,000,000 5.42%, due July 13, 1998................................................... 998,193
730,000 5.42%, due July 14, 1998................................................... 728,571
825,000 5.41%, due July 15, 1998................................................... 823,264
1,400,000 5.39%, due July 17, 1998................................................... 1,396,646
433,000 5.43%, due July 27, 1998................................................... 431,302
690,000 5.40%, due July 29, 1998................................................... 687,102
830,000 5.41%, due July 30, 1998................................................... 826,386
1,709,000 5.40%, due July 31, 1998................................................... 1,701,309
615,000 5.45%, due July 31, 1998................................................... 612,207
1,950,000 5.25%, due August 4, 1998.................................................. 1,940,331
1,400,000 5.44%, due August 4, 1998.................................................. 1,392,807
1,155,000 5.43%, due August 6, 1998.................................................. 1,148,728
850,000 5.40%, due August 11, 1998................................................. 844,777
485,000 5.42%, due August 11, 1998................................................. 482,006
850,000 5.39%, due August 13, 1998................................................. 844,528
1,000,000 5.43%, due August 27, 1998................................................. 991,403
1,475,000 5.43%, due August 28, 1998................................................. 1,462,108
1,155,000 5.44%, due August 31, 1998................................................. 1,144,353
765,000 5.42%, due September 4, 1998............................................... 757,514
684,000 5.43%, due September 8, 1998............................................... 676,881
945,000 5.43%, due September 25, 1998.............................................. 932,753
1,355,000 5.41%, due September 30, 1998.............................................. 1,336,470
385,000 5.42%, due September 30, 1998.............................................. 379,725
778,000 5.51%, due September 30, 1998.............................................. 767,164
465,000 5.37%, due October 1, 1998................................................. 458,619
-----------
28,470,300
-----------
</TABLE>
6
<PAGE>
SCHEDULE OF PORTFOLIO INVESTMENTS -- CONTINUED
MAP - GOVERNMENT FUND, INC.
JUNE 30, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL VALUE
- ---------- -----------
<C> <S> <C>
FEDERAL NATIONAL MORTGAGE ASSOCIATION (33.2%)
$1,000,000 5.35%, due July 6, 1998.................................................... $ 999,257
560,000 5.41%, due July 10, 1998................................................... 559,243
486,000 5.48%, due July 14, 1998................................................... 485,038
783,000 5.40%, due July 15, 1998................................................... 781,356
1,090,000 5.39%, due July 16, 1998................................................... 1,087,552
973,000 5.41%, due July 21, 1998................................................... 970,076
1,580,000 5.43%, due July 23, 1998................................................... 1,574,762
600,000 5.48%, due July 27, 1998................................................... 597,625
1,000,000 5.41%, due July 28, 1998................................................... 995,942
444,000 5.43%, due July 30, 1998................................................... 442,058
534,000 5.40%, due August 5, 1998.................................................. 531,196
680,000 5.45%, due August 5, 1998.................................................. 676,397
725,000 5.44%, due August 7, 1998.................................................. 720,946
1,102,000 5.40%, due August 10, 1998................................................. 1,095,388
1,040,000 5.45%, due August 14, 1998................................................. 1,033,072
1,440,000 5.44%, due August 18, 1998................................................. 1,429,555
1,035,000 5.41%, due August 24, 1998................................................. 1,026,609
505,000 5.33%, due September 1, 1998............................................... 500,364
1,000,000 5.33%, due September 8, 1998............................................... 989,784
953,000 5.41%, due September 11, 1998.............................................. 942,689
895,000 5.38%, due September 23, 1998.............................................. 883,765
1,000,000 5.43%, due September 24, 1998.............................................. 987,179
480,000 5.42%, due September 25, 1998.............................................. 473,785
465,000 5.43%, due September 28, 1998.............................................. 458,764
638,000 5.43%, due September 28, 1998.............................................. 629,435
744,000 5.39%, due September 29, 1998.............................................. 733,975
1,190,000 5.43%, due October 6, 1998................................................. 1,172,589
1,000,000 5.38%, due October 16, 1998................................................ 984,009
1,000,000 5.40%, due November 9, 1998................................................ 980,350
1,100,000 5.36%, due November 23, 1998............................................... 1,076,252
650,000 5.35%, due December 7, 1998................................................ 634,641
-----------
26,453,653
-----------
TOTAL INVESTMENTS (99.8%) (cost $79,482,195)(1)............................ $79,482,195
-----------
-----------
</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. (UNAUDITED)
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 is paid by the Fund at the rate
of $400 per meeting attended, plus an annual retainer of $1,200. Aggregate fees
paid during the period to the Fund's disinterested directors amounted to $2,600.
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.
NOTE C -- RELATED PARTY TRANSACTIONS
As of June 30, 1998, MBL Life and certain related entities (the "MBL Entities")
owned 76,163,687, or 96% of the outstanding shares of the Fund.
8
<PAGE>
NOTE C -- RELATED PARTY TRANSACTIONS -- CONTINUED
On July 15, 1998, MBL Life entered into an agreement with Anchor National Life
Insurance Company, a subsidiary of SunAmerica, Inc., for the purchase of the
individual life and individual and group annuity businesses of MBL Life (the
"Acquisition"). In accordance with the Plan of Rehabilitation of The Mutual
Benefit Life Insurance Company (the predecessor in interest to MBL Life), the
Acquisition is subject to certain judicial and regulatory approvals. Assuming
that the necessary approvals are obtained, it is currently anticipated that the
Acquisition will effect a resolution to the proceedings associated with the Plan
of Rehabilitation.
In connection with the resolution of the proceedings associated with the Plan of
Rehabilitation, the MBL Entities will no longer retain their respective
interests in the Fund. Redemptions of Fund shares by the MBL Entities will cause
the Fund's ratio of expenses to average net assets to increase. However, FPIC
has agreed to assume the operating expenses of the Fund (excluding taxes,
interest, brokerage commissions and extraordinary expenses) to the extent such
daily expenses exceed .75% (on an annualized basis) of the Fund's daily net
assets through December 31, 1998.
Under the terms of the Acquisition, MBL Life's interest in FPIC will not be
included in the assets that are transferred to Anchor National. At the present
time, it is anticipated that FPIC will begin the process of terminating all
business operations at some point in time after the Closing.
In any event, the Board of Directors of the Fund is considering alternatives
with regard to the Fund, including the possible liquidation and dissolution of
the Fund. Among the factors being taken into account is whether, as a result of
the planned redemption of Fund shares by the MBL Entities, the Fund can continue
to operate in an economically viable manner.
NOTE D -- CAPITAL STOCK
A summary of capital share transactions, at $1.00 per share, follows:
<TABLE>
<CAPTION>
Six Months
Ended Year Ended
June 30, 1998 December 31, 1997
----------------- -----------------
<S> <C> <C>
Shares sold.................................. 21,804,304 86,183,937
Shares issued in reinvestment of income
dividends and capital gain distributions... 1,857,965 4,589,664
----------------- -----------------
23,662,269 90,773,601
Shares repurchased........................... (24,876,417) (119,676,486)
----------------- -----------------
Net decrease................................. (1,214,148) (28,902,885)
----------------- -----------------
----------------- -----------------
</TABLE>
- --------------------------------------------------------------------------------
9
<PAGE>
FINANCIAL HIGHLIGHTS
MAP - GOVERNMENT FUND, INC.
(UNAUDITED)
Selected data for each share of capital stock outstanding throughout the periods
indicated:
<TABLE>
<CAPTION>
SIX
MONTHS
ENDED YEAR ENDED DECEMBER 31,
JUNE 30, --------------------------------------------
1998 1997 1996 1995 1994
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of
Period........................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Net investment income.............. 0.024 0.049 0.048 0.052 0.035
Dividends from net investment
income........................... (0.024) (0.049) (0.048) (0.052) (0.035)
-------- -------- -------- -------- --------
Net Asset Value, End of Period..... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
Total Return....................... 2.44% 4.97% 4.87% 5.17% 3.53%
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
Ratios/Supplemental Data:
Net Assets, End of Period
(thousands)...................... $79,638 $80,852 $109,755 $81,025 $89,518
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
Ratio of Expenses to Average Net
Assets(1)........................ 0.33% 0.62% 0.62% 0.69% 0.73%
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
Ratio of Net Investment Income to
Average Net Assets(1)............ 2.41% 4.86% 4.76% 5.17% 3.53%
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
</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 the ratio of net investment income to
average net assets would have been 3.51% for the year ended December 31,
1994. (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
PricewaterhouseCoopers 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.
SEMIANNUAL REPORT
JUNE 30, 1998
FS-631 (8-98)
---------------------------------------------
