<PAGE>
MAP - GOVERNMENT FUND, INC.
To Our Shareholders:
For the twelve months ending December 31, 1998, MAP-Government Fund returned
4.85% after expenses. As of December 31, 1998, the Fund's 7-day and 30-day
yields were 2.03% and 3.64% respectively.
UPDATE ON ORGANIZATIONAL DEVELOPMENTS
As we reported to you via a "sticker" supplement to your MAP-Government Fund
prospectus dated August 6, 1998, MBL Life Assurance Corporation ("MBL Life"),
the Fund's sponsor, entered into a transaction to sell substantially all of its
life insurance and annuity businesses to Anchor National Life Insurance Company,
a subsidiary of SunAmerica Inc. (the "Transaction"). The Transaction received
all necessary regulatory approvals and became effective on December 31, 1998.
In conjunction with the Transaction, MBL Life notified the Board of Directors
that it would be forced to withdraw its sponsorship of the Fund during 1999 and
that the 96% of the outstanding shares of MAP-Government Fund controlled by MBL
Life and its related entities would be withdrawn in late 1998 and early 1999.
The Fund's Board of Directors, after considering several different alternatives,
decided that the Fund could not continue to offer competitive returns to
shareholders and otherwise remain viable after these redemptions occurred. The
Board, concluding that it was in the best interests of shareholders to pursue a
liquidation of the Fund, approved a Plan of Liquidation and Dissolution (the
"Liquidation Plan") at its meeting of November 4, 1998. The Liquidation Plan was
approved by shareholders at a Special meeting on January 6, 1999.
We expect that the Fund will be liquidated prior to May 1, 1999. We again urge
all remaining shareholders to take whatever steps are necessary to redeem their
shares of MAP-Government Fund. If you need any assistance in redeeming your
shares, please call First Priority Investment Corporation, the Fund's
distributor, at 1-800-559-5535.
In conjunction with recent events, the Fund's two interested directors, William
G. Clark and I, resigned as directors in January, 1999. Both Mr. Clark and I
continue to serve as officers of the Fund, and will do our utmost to assure the
Fund's ability to pursue its plans for dissolution.
Thank you for your support of the Fund over the years. We wish you success in
pursuing new financial relationships.
Sincerely yours,
/S/ Kathleen M. Koerber
KATHLEEN M. KOERBER
PRESIDENT
February 19, 1999
<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, 1998, 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, 1998 by correspondence with the custodian, provide a reasonable
basis for the opinion expressed above.
As discussed in Note D of the notes to financial statements, the Fund's Board of
Directors has approved a Plan of Liquidation and Dissolution (the "Liquidation
Plan"). The Liquidation Plan calls for the liquidation and distribution of the
assets of the Fund to shareholders, and for the Fund to cease operations prior
to May 1, 1999.
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, New York
February 11, 1999
2
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
MAP - GOVERNMENT FUND, INC.
DECEMBER 31, 1998
<TABLE>
<S> <C>
ASSETS
Investments (cost $44,367,198).................... $44,367,198
Cash.............................................. 13,225
Receivable from distributor....................... 95,006
Receivable for Fund shares sold................... 10,000
------------
Total Assets.............................. 44,485,429
------------
LIABILITIES
Payable for Fund shares redeemed.................. 45,842
Investment advisory fee payable................... 78,334
Accounts payable and accrued expenses............. 122,019
------------
Total Liabilities......................... 246,195
------------
Net Assets................................ $44,239,234
------------
------------
NET ASSETS
Capital stock (44,239,234 shares of $.01 par value
capital stock outstanding, 2,000,000,000 shares
authorized)..................................... $ 442,392
Paid-in capital................................... 43,796,842
------------
Net Assets................................ $44,239,234
------------
------------
Net asset value, offering price and redemption
price per share
($44,239,234 DIVIDED BY 44,239,234 shares of
capital stock outstanding)...................... $1.00
------------
------------
</TABLE>
See notes to financial statements.
STATEMENT OF OPERATIONS
MAP - GOVERNMENT FUND, INC.
YEAR ENDED DECEMBER 31, 1998
<TABLE>
<S> <C> <C>
Investment Income
Interest........................................ $4,311,509
Expenses
Investment advisory fee......................... $ 315,241
Transfer agent.................................. 80,287
Custodian....................................... 77,818
Insurance expense............................... 51,458
Legal........................................... 48,067
Audit........................................... 46,367
Directors' fees................................. 13,400
Filing fees..................................... 12,921
Printing........................................ 8,111
Miscellaneous................................... 7,035
---------
660,705
Less expenses reimbursed by distributor........... (95,006) 565,699
--------- ----------
Net Investment Income......................... $3,745,810
----------
----------
</TABLE>
3
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
MAP - GOVERNMENT FUND, INC.
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1998 1997
------------- ---------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS
Net investment income.................................................... $ 3,745,810 $ 4,609,545
------------- ---------------
Net Increase in Net Assets Resulting from Operations................... 3,745,810 4,609,545
FROM DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income..................................... (3,745,810) (4,609,545)
FROM CAPITAL SHARE TRANSACTIONS
Net decrease in net assets from capital share transactions............... (36,612,619) (28,902,885)
------------- ---------------
Net Decrease in Net Assets............................................. (36,612,619) (28,902,885)
NET ASSETS
Beginning of year........................................................ 80,851,853 109,754,738
------------- ---------------
End of year.............................................................. $ 44,239,234 $ 80,851,853
------------- ---------------
------------- ---------------
</TABLE>
See notes to financial statements.
4
<PAGE>
SCHEDULE OF PORTFOLIO INVESTMENTS
MAP - GOVERNMENT FUND, INC.
DECEMBER 31, 1998
<TABLE>
<CAPTION>
PRINCIPAL VALUE
- ---------- -----------
<C> <S> <C>
FEDERAL FARM CREDIT BANK (3.5%)
$1,070,000 5.07%, due January 6, 1999................................................. $ 1,069,247
500,000 5.30%, due March 29, 1999.................................................. 493,596
-----------
1,562,843
-----------
FEDERAL HOME LOAN BANK BOARD (29.4%)
1,075,000 5.37%, due January 4, 1999................................................. 1,074,520
1,037,000 5.35%, due January 6, 1999................................................. 1,036,229
1,075,000 5.15%, due January 7, 1999................................................. 1,074,077
1,540,000 5.36%, due January 8, 1999................................................. 1,538,395
775,000 5.15%, due January 11, 1999................................................ 773,891
745,000 5.16%, due January 11, 1999................................................ 743,932
1,360,000 4.83%, due January 13, 1999................................................ 1,357,810
430,000 5.37%, due January 13, 1999................................................ 429,230
1,000,000 5.37%, due January 15, 1999................................................ 997,914
3,000,000 4.75%, due January 20, 1999................................................ 2,992,479
1,000,000 5.37%, due January 22, 1999................................................ 996,868
-----------
13,015,345
-----------
FEDERAL HOME LOAN MORTGAGE CORP. (48.6%)
1,205,000 5.01%, due January 4, 1999................................................. 1,204,498
1,750,000 5.12%, due January 4, 1999................................................. 1,749,253
472,000 5.13%, due January 4, 1999................................................. 471,799
1,502,000 4.90%, due January 6, 1999................................................. 1,500,978
2,799,000 5.10%, due January 6, 1999................................................. 2,797,017
978,000 5.39%, due January 7, 1999................................................. 977,121
3,294,000 4.55%, due January 8, 1999................................................. 3,291,086
414,000 4.90%, due January 8, 1999................................................. 413,606
699,000 5.14%, due January 8, 1999................................................. 698,301
1,595,000 5.16%, due January 8, 1999................................................. 1,593,400
558,000 5.20%, due January 8, 1999................................................. 557,436
1,060,000 4.79%, due January 15, 1999................................................ 1,058,025
719,000 5.05%, due January 15, 1999................................................ 717,588
669,000 5.10%, due January 15, 1999................................................ 667,673
1,350,000 5.04%, due January 22, 1999................................................ 1,346,031
925,000 5.08%, due January 22, 1999................................................ 922,259
1,510,000 5.33%, due January 22, 1999................................................ 1,505,305
-----------
21,471,376
-----------
FEDERAL NATIONAL MORTGAGE ASSOCIATION (18.8%)
150,000 5.10%, due January 4, 1999................................................. 149,936
382,000 5.40%, due January 7, 1999................................................. 381,656
1,050,000 4.77%, due January 8, 1999................................................. 1,049,026
1,023,000 4.79%, due January 8, 1999................................................. 1,022,047
1,300,000 5.10%, due January 8, 1999................................................. 1,298,711
4,425,000 5.08%, due January 15, 1999................................................ 4,416,258
-----------
8,317,634
-----------
TOTAL INVESTMENTS (100.3%) (cost $44,367,198)(1)........................... 44,367,198
LIABILITIES IN EXCESS OF OTHER ASSETS (-0.3%).............................. (127,964)
-----------
NET ASSETS (100.0%)........................................................ $44,239,234
-----------
-----------
</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.
5
<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
Subchapter M of the Internal Revenue Code 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 year to the Fund's disinterested directors amounted to $11,600.
The officers of the Fund are either officers or employees of MBL Life. The
compensation of the officers and any employees of the Fund affiliated with FPIC
is paid by the affiliated entities.
NOTE C -- RELATED PARTY TRANSACTIONS
As of December 31, 1998, MBL Life and certain related entities (the "MBL
Entities") owned 44,091,041 shares, or 99.7% of the outstanding shares of the
Fund.
On December 31, 1998, MBL Life sold substantially all of its general account
life insurance and annuity business to SunAmerica Inc. (the "Acquisition"). The
Acquisition along with the Order of the Superior Court of New Jersey approving
the transaction, effected a resolution to the proceedings associated with the
Plan
6
<PAGE>
NOTE C -- RELATED PARTY TRANSACTIONS -- CONTINUED
of Rehabilitation of the Mutual Benefit Life Insurance Company (the "Plan"). The
Rehabilitation Period will end on June 30, 1999.
In connection with the resolution of the proceedings associated with the Plan,
subsequent to June 30, 1998 the MBL Entities redeemed 32,072,646 shares of the
Fund. Subsequent to December 31, 1998, MBL Entities have or are in the process
of redeeming their remaining investment in the Fund.
In anticipation of the increase in the Fund's ratio of expenses to average net
assets resulting from the MBL Entities' redemptions, FPIC agreed to assume the
operating expenses of the Fund (excluding taxes, interest, brokerage
commissions, and extraordinary expenses) to the extent such daily expenses
exceeded .75% (on an annualized basis) of the Fund's daily net assets through
December 31, 1998. For the year ended December 31, 1998, such reimbursement
amounted to $95,006.
NOTE D -- PLAN OF LIQUIDATION AND DISSOLUTION
The Fund's Board of Directors, after considering several different alternatives,
decided that the relatively small size of the Fund, after the redemptions by the
MBL Entities, will not ultimately produce the benefits for shareholders of a
viable and competitive mutual fund. The Board concluded that the liquidation of
the Fund and distribution of the proceeds thereof to the shareholders would be
in the best interests of shareholders. On November 4, 1998 the Board approved a
Plan of Liquidation and Dissolution (the "Liquidation Plan"). The Liquidation
Plan was approved by shareholders at a Special Meeting on January 6, 1999. The
Liquidation Plan calls for the sale of all the Fund's portfolio securities with
the proceeds to be applied to the payment of all existing debts and obligations
of the Fund. Any remaining assets will be distributed among its remaining
shareholders. It is currently anticipated that the liquidating distributions
will be paid to remaining shareholders prior to May 1, 1999.
The Fund has included in its December 31, 1998 financial statements an estimate
of those expenses it expects to incur in carrying out the Liquidation Plan.
NOTE E -- CAPITAL STOCK
A summary of capital share transactions, at $1.00 per share, follows:
<TABLE>
<CAPTION>
Year Ended Year Ended
December 31, 1998 December 31, 1997
----------------- -----------------
<S> <C> <C>
Shares sold.................................. 57,527,783 86,183,937
Shares issued in reinvestment of income
dividends and capital gain distributions... 3,725,745 4,589,664
----------------- -----------------
61,253,528 90,773,601
Shares repurchased........................... (97,866,147) (119,676,486)
----------------- -----------------
Net decrease................................. (36,612,619) (28,902,885)
----------------- -----------------
----------------- -----------------
</TABLE>
- --------------------------------------------------------------------------------
7
<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,
--------------------------------------------------------
1998 1997 1996 1995 1994
-------- -------- -------- -------- --------
<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.............. 0.047 0.049 0.048 0.052 0.035
Dividends from net investment
income........................... (0.047) (0.049) (0.048) (0.052) (0.035)
-------- -------- -------- -------- --------
Net Asset Value, End of Year....... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
Total Return....................... 4.85% 4.97% 4.87% 5.17% 3.53%
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
Ratios/Supplemental Data:
Net Assets, End of Year
(thousands)...................... $44,239 $80,852 $109,755 $81,025 $89,518
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
Ratio of Expenses to Average Net
Assets(1)........................ 0.72% 0.62% 0.62% 0.69% 0.73%
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
Ratio of Net Investment Income to
Average Net Assets(1)............ 4.75% 4.86% 4.76% 5.17% 3.53%
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
</TABLE>
(1) Without reimbursement by distributor, the ratio of expenses to average net
assets would have been 0.84% and 0.75%, and the ratio of net investment
income to average net assets would have been 4.63% and 3.51% for the years
ended December 31, 1998 and December 31, 1994, respectively (see Note C of
the notes to financial statements).
See notes to financial statements.
8
<PAGE>
MAP - GOVERNMENT FUND, INC.
520 Broad Street
Newark, New Jersey 07102-3111
1-800-559-5535
FUND DIRECTORS
Horace J. DePodwin
Herbert M. Groce, Jr.
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.
ANNUAL REPORT
DECEMBER 31, 1998
FS-631 (2-99)
---------------------------------------------
