Note - Significant Accounting Policies:
Organization - AFBA Five Star Fund, Inc. (the Company) was organized as a Maryland corporation on January
9, 1997 and is registered under the Investment Company Act of 1940, as amended, as a diversified, open-end
management investment company with the following series: AFBA Five Star Balanced Fund, AFBA Five Star
Equity Fund, AFBA Five Star USA Global Fund and AFBA Five Star High Yield Fund. Shares outstanding for
each series on May 16, 1997 were issued to AFBA Investment Management Company, the Company's
investment manager (Manager). The costs of organization will be paid by the Manager and Jones & Babson,
Inc., the Company's administrator and distributor.
Management Fees - the Manager will charge each series a fee based on an annual rate of one percent (l.00%) of
average daily net assets of the particular series from which the Manager pays Kornitzer Capital Management,
Inc., which serves as investment counsel, (the Adviser) a fee of one-third of one percent (0.33%) of average
daily net assets and Jones & Babson an administrative services fee of one-third of one percent (0.33%) of
average daily net assets. The Manager or Jones & Babson will pay all other operating expenses of the series
except the cost of acquiring and disposing of portfolio securities, the taxes, if any, imposed directly on the
Company and the shares of its series and the cost of qualifying the series' shares for sale in any jurisdiction.
Certain officers and directors of the Company are also officers or directors or both of the Manager, Jones &
Babson or the Adviser.
AFBA Five Star Balanced Fund, Inc.
Income Statement & Statement of Assets and Liabilities
October 31, 1997
Income Statement From 4/01/97
Dividends $ 1,509.26