THE MUNICIPAL FUND
INVESTMENT ACCUMULATION PROGRAM
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Shares of
Common Stock Prospectus dated April 28, 1994
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THE PROGRAM
The Municipal Fund Accumulation Program, Inc. (the "Program") is an open-end
management investment company whose primary investment objective is to obtain
tax-exempt income through investment in a diversified portfolio of state,
municipal and public authority bonds not less than 75% of which will at the time
of acquisition be rated "A" or better and all of which will at the time of
acquisition be rated "BBB" or better by Standard & Poor's Corporation or "Baa"
or better by Moody's Investors Service, Inc., the interest on which Bonds is
exempt from all federal income tax under existing law in the opinion of
recognized bond counsel to the issuing governmental authorities. The Program
intends to qualify to pay "exempt-interest" dividends as permitted by the Tax
Reform Act of 1986. Such dividends reflecting tax-exempt interest received by
the Program will be tax-exempt in the hands of the Shareholders, except possibly
where such Shareholder might be deemed to be a "substantial user," as defined in
the Internal Revenue Code, or subject to alternative minimum tax. Such dividends
may, however, be subject to state and local taxes. Any capital gain realized on
Shares of the Program is, however, subject to tax (see "Taxes and Distributions"
below). The Shares of the Program are redeemable at any time at the net asset
value next determined after the receipt of the redemption request, which value
may be more or less than the amount paid for the Shares. Shares in any
Shareholder's account which has a value of less than $500 may be involuntarily
redeemed if reinvestment of distributions on Units is discontinued. See
"Redemption of Shares and Exchange Privilege" below.
Shares of the Program are offered hereby without sales charge to the
holders of Units of certain series of Defined Asset Funds--Municipal Investment
Trust Fund and Liberty Street Trust described below under the caption "The
Program" in order to provide a means for the automatic reinvestment of
distributions of interest income, capital gains and principal on such Units in
Shares of the Program on the Terms and Conditions of Participation set forth
herein. The address of the Program is Box 9011, Princeton, New Jersey
08543-9011, and its telephone number is (609) 282-2000.
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INVESTMENT ADVISER
FUND ASSET MANAGEMENT, L.P.
ADMINISTRATORS
MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED
PRUDENTIAL SECURITIES INCORPORATED
DEAN WITTER REYNOLDS INC.
SMITH BARNEY SHEARSON INC.
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This Prospectus sets forth in concise form the information about the Program
that a prospective investor should know before investing in the Program.
Investors should read and retain this Prospectus for future reference.
Additional information about the Program has been filed with the Securities and
Exchange Commission in a Statement of Additional Information, dated April 28,
1994, and is available upon request and without charge, by calling or writing
the Program at the address and telephone number set forth above. The Statement
of Additional Information is hereby incorporated by reference into this
Prospectus.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURI-TIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<PAGE>
FEE TABLE
<TABLE> <CAPTION>
SHAREHOLDER TRANSACTION EXPENSES:
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<S> <C> <C>
Maximum Sales Charge Imposed on Purchases........................................................ None
Deferred Sales Charge............................................................................ None
Sales Charge Imposed on Dividend Reinvestments................................................... None
Redemption Fee................................................................................... None
Exchange Fee..................................................................................... None
ANNUAL PROGRAM OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
FOR THE YEAR ENDED DECEMBER 31, 1993:
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Management Fees.................................................................................. 0.50%(a)
12b-1 Fees....................................................................................... None
Other Expenses
Transfer Agency and Custodian Fees.................................................. .30%
Other Fees.......................................................................... .06%
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Total Other Expenses................................................................... 0.36%
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Total Program Operating Expenses................................................................. 0.86%
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---------
</TABLE>
<TABLE> <CAPTION>
EXAMPLE:
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<S> <C> <C> <C> <C>
CUMULATIVE EXPENSES PAID FOR THE PERIOD OF:
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1 YEAR 3 YEARS 5 YEARS 10 YEARS
----------- --------- --------- ---------
An investor would pay the following
expenses on a $1,000 investment, assuming
an operating expense ratio of 0.86% and a
5% annual return throughout the periods... $ 8.78 $ 27.44 $ 47.68 $ 106.08
</TABLE>
The foregoing Fee Table is intended to assist investors in understanding
the costs and expenses that a Shareholder in the Program will bear directly or
indirectly.
The Example set forth above assumes reinvestment of all dividends and
distributions and utilizes a 5% annual rate of return as mandated by Securities
and Exchange Commission regulations. The Example should not be considered a
representation of past or future expenses or annual rates of return and actual
expenses or annual rates of return may be more or less than those assumed for
purposes of the Example.
- ------------
(a) See "Management of the Program -- Advisory and Administration Arrangements"
on page 9.
2
<PAGE>
FINANCIAL HIGHLIGHTS
The financial information in the table below has been audited in
conjunction with the annual audits of the financial statements of the Program by
Deloitte & Touche, independent auditors. Financial statements for the year ended
December 31, 1993 and the independent auditors' report thereon are included in
the Statement of Additional Information.
The following per share data and ratios have been derived from information
provided in the financial statements:
<TABLE> <CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
-------------------------------------------------------------------------------------------------
1993 1992 1991 1990 1989 1988 1987 1986 1985
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<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET
ASSET VALUE:
PER SHARE OPERATING
PERFORMANCE:
Net asset value, beginning
of period................ $ 18.93 $ 18.63 $ 17.83 $ 18.09 $ 17.76 $ 17.44 $ 18.69 $ 17.71 $ 16.12
--------- --------- --------- --------- --------- --------- --------- --------- ---------
Investment income--net.... 1.09 1.15 1.23 1.30 1.31 1.33 1.37 1.43 1.48
Realized and unrealized
gain (loss) on
investments--net.......... 1.11 .30 .80 (.26) .33 .27 (1.19) .98 1.59
--------- --------- --------- --------- --------- --------- --------- --------- ---------
Total from investment
operations................ 2.20 1.45 2.03 1.04 1.64 1.60 .18 2.41 3.07
--------- --------- --------- --------- --------- --------- --------- --------- ---------
Less dividends and
distributions:
Investment income--net... (1.09) (1.15) (1.23) (1.30) (1.31) (1.28) (1.43) (1.43) (1.48)
Realized gain on
investments--net.......... (.25) -- -- -- -- -- -- -- --
--------- --------- --------- --------- --------- --------- --------- --------- ---------
Total dividends and
distributions............. (1.34) (1.15) (1.23) (1.30) (1.31) (1.28) (1.43) (1.43) (1.48)
--------- --------- --------- --------- --------- --------- --------- --------- ---------
Net asset value, end of
period.................... $ 19.79 $ 18.93 $ 18.63 $ 17.83 $ 18.09 $ 17.76 $ 17.44 $ 18.69 $ 17.71
--------- --------- --------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- --------- --------- ---------
TOTAL INVESTMENT RETURN:
Based on net asset value
per share................ 11.99% 8.08% 11.83% 6.03% 9.61% 9.48% 1.12% 14.16% 19.95%
--------- --------- --------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- --------- --------- ---------
RATIOS TO AVERAGE NET
ASSETS:
Expenses, net of
reimbursement............. .86% .88% .91% .97% 1.04% 1.02% 1.05% 1.07% 1.09%
--------- --------- --------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- --------- --------- ---------
Expenses.................. .86% .88% .91% .97% 1.04% 1.02% 1.05% 1.13% 1.22%
--------- --------- --------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- --------- --------- ---------
Investment income--net.... 5.52% 6.15% 6.76% 7.23% 7.25% 7.53% 7.66% 7.83% 8.80%
--------- --------- --------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- --------- --------- ---------
SUPPLEMENTAL DATA:
Net assets, end of period
(in thousands)........... $ 639,588 $ 536,952 $ 435,224 $ 359,291 $ 319,641 $ 288,274 $ 269,598 $ 249,787 $ 196,656
--------- --------- --------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- --------- --------- ---------
Portfolio turnover........ 23% 24% 36% 20% 41% 46% 21% 38% 37%
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<CAPTION>
1984
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INCREASE (DECREASE) IN NET
ASSET VALUE:
PER SHARE OPERATING
PERFORMANCE:
Net asset value, beginning
of period................ $ 16.25
---------
Investment income--net.... 1.49
Realized and unrealized
gain (loss) on
investments--net.......... (.13)
---------
Total from investment
operations................ 1.36
---------
Less dividends and
distributions:
Investment income--net... (1.49)
Realized gain on
investments--net.......... --
---------
Total dividends and
distributions............. (1.49)
---------
Net asset value, end of
period.................... $ 16.12
---------
---------
TOTAL INVESTMENT RETURN:
Based on net asset value
per share................ 8.86%
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---------
RATIOS TO AVERAGE NET
ASSETS:
Expenses, net of
reimbursement............. 1.11%
---------
---------
Expenses.................. 1.28%
---------
---------
Investment income--net.... 9.22%
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SUPPLEMENTAL DATA:
Net assets, end of period
(in thousands)........... $ 155,029
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---------
Portfolio turnover........ 43%
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<CAPTION>
</TABLE>
Further information about the Program's performance is contained in the
Program's Annual Report, which can be obtained, without charge, upon request.
3
<PAGE>
THE PROGRAM
IN GENERAL--The primary investment objective of the Program is to obtain
tax-exempt income through investment in a diversified portfolio (the
"Portfolio") of interest bearing long-and intermediate-term state, municipal and
public authority bonds, the interest on which is, in the opinion of bond counsel
to the issuing authorities, exempt from federal income tax (see "Investment
Objectives and Policies"). This investment objective is a fundamental policy of
the Program.
Defined Asset Funds--Municipal Investment Trust Fund and Liberty Street
Trust (the "Unit Trust Funds") consist of a number of different unit investment
trusts holding portfolios of state, municipal and public authority bonds. The
Program has been formed to facilitate reinvestment of distributions on units
(the "Units") of the various series of the Unit Trust Funds. Since the Program
is an open-end investment company, the shares of capital stock, $.0l par value,
of the Program (the "Shares") are redeemable by the holder at the net asset
value next determined after the receipt of the redemption request in proper
form.
TERMS AND CONDITIONS OF PARTICIPATION--All persons who are or who become
registered holders of Units of series of the Unit Trust Funds offering a
reinvestment option are eligible to participate in the Program and are herein
called "Holders." Holders include brokers or nominees of banks and other
financial institutions which are or become registered holders of Units. Such
eligibility is subject lo the terms and conditions of participation (the "Terms
and Conditions") set forth under this caption.
Distributions on Units of series of the Unit Trust Funds offering a
reinvestment option will be paid in cash unless Holders elect to reinvest such
distributions in the Program by sending a notice in writing to the Program
Agent. Each Holder participating in the Program will receive a copy of the
current Program prospectus (this "Prospectus") and a form of notice of election;
a Holder not participating in the Program may request a copy of the Prospectus.
The notice of election accompanying this Prospectus may be used by Holders of
Units to elect to participate in the Program or to change a previous election.
Notice of any change in the basis of participation or of election to participate
in the Program must be received by the Program Agent in writing at least ten
days prior to the Record Day for the first distribution to which such notice is
to apply.
Under these Terms and Conditions, both distributions of interest income and
distributions of capital gains, if any, and principal (or either such type of
distribution) on Units of Holders participating in the Program will be invested
without sales charge in Shares. Holders who are participating in the Program and
whose Units are therefore subject to these Terms and Conditions are herein
called "Shareholders." The Bank of New York (110 Washington Street, New York,
New York 10286) will act as the program agent (the "Agent") for the
Shareholders. All securities, cash and other similar assets of the Program will
be held by the Agent as custodian. The Agent also acts as the Program's dividend
disbursing agent, transfer agent and registrar and performs certain other
services for the Program.
Under these Terms and Conditions, each distribution of interest income and
capital gains, if any, and principal on a Shareholder's Units, will, on the date
of such distribution, automatically be received by the Agent on behalf of such
Shareholder and applied to purchase Shares at net asset value, without sales
charge. In the case of Holders of Units whose distributions of principal are
being invested in the Program, the proceeds of redemption or payment at maturity
of securities held in the unit investment trust represented by the Holder's
Units will be invested in Shares, rather than being distributed in cash to the
Holder. Net interest income, after expenses, received by the Program on
obligations in its portfolio will be distributed by the Program monthly and net
realized capital gains, if any, will be distributed at least annually. Such
distributions will be reinvested automatically in Shares of the
4
<PAGE>
Program unless the Shareholder elects, by written notice to the Agent, not to
have such distributions reinvested in Shares (see "Taxes and Distributions").
The Program has qualified and intends to continue to qualify (1) for the
tax treatment applicable to "regulated investment companies" under the Internal
Revenue Code of 1986, as amended (the "Code") and (ii) to pay "exempt-interest"
dividends as permitted under the Code. Pursuant to such qualification, if the
Program distributes to Shareholders (without regard to designated capital gains
distributions) an amount equal to or in excess of the sum of 90% of its
investment company taxable income and 90% of its net tax-exempt interest income,
such "exempt-interest" dividends reflecting tax-exempt interest received by the
Program will be tax-exempt in the hands of Shareholders, except possibly where a
Shareholder might be deemed to be a "substantial user," as defined in the Code,
or subject to alternative minimum tax. The Program will not be subject to
federal income tax on such part of its net capital gains, if any, as it
distributes to Shareholders, although it may be subject to certain state and
local taxes. For these purposes, any capital gains of the Program which are
reinvested are considered to have been distributed (see "Taxes and
Distributions").
In addition to their right to redeem their Shares and receive a payment
equal to the net asset value thereof (see "Redemption of Shares and Exchange
Privilege"), Shareholders may at any time, by so notifying the Agent in writing
(the Agent will deliver a copy of such notice to the trustee for the respective
series of the Unit Trust Funds), elect to (1) terminate their participation in
the Program and thereafter receive all distributions on their Units in cash,
(ii) terminate their participation in part as to distributions of capital gains
and principal on their Units and thereafter receive distributions in cash out of
the principal accounts for the respective series or (iii) terminate their
participation in part as to distributions of interest on their Units and
thereafter receive future distributions in cash out of the interest accounts for
the respective series.
All the costs of establishing, administering and offering the Program and
these Terms and Conditions are borne by the Program subject to the limitation on
expenses referred to in the Statement of Additional Information under
"Investment Advisory Agreement." The administrators of the Program (the
"Administrators") are Merrill Lynch, Pierce, Fenner & Smith Incorporated
("Merrill Lynch"), Prudential Securities Incorporated ("Prudential"), Dean
Witter Reynolds Inc. ("Dean Witter"), and Smith Barney Shearson Inc. ("Smith
Barney Shearson"), which are current sponsors of Unit Trust Funds. The
investment adviser to the Program (the "Adviser") is Fund Asset Management,
L.P., Box 9011, Princeton, New Jersey 08543-9011, a registered investment
adviser and an affiliate of Merrill Lynch. The Adviser receives as annual
compensation, payable monthly, for its services in connection with the Program a
fee of 0.5% of the average net assets of the Program. The Administrators receive
from the Adviser as annual compensation, payable monthly, for their services in
connection with the Program a fee of 0.2% of the average net assets of the
Program (see "Management of the Program--Advisory and Administration
Arrangements"). Reference is made to the Statement of Additional Information
which contains a more complete description of the advisory and administration
arrangements of the Program.
The Agent will mail to each Shareholder a report of each transaction
undertaken for such Shareholder in receiving distributions on Units and
purchasing Shares. Distributions on Units which are applied to purchase Shares
are considered to have been distributed to Shareholders for federal income tax
purposes, and all taxes which are payable in respect to such distributions must
be paid by Shareholders regardless of participation in the Program.
On tender for redemption of any or all of his Shares, a Shareholder will be
entitled to receive within seven days a payment representing the net asset value
of the Shares (including fractional Shares),
5
<PAGE>
provided that such right of redemption may be suspended or postponed under
certain circumstances described under "Redemption of Shares and Exchange
Privilege."
If the Holder is a broker or a nominee of a bank or another financial
institution, the trustee and Agent will apply these Terms and Conditions on the
basis of the respective numbers of Units certified from time to time by such
Holder to be the total numbers of Units registered in such Holder's name and
held for the accounts of beneficial owners who are to participate in the
Program, upon the several bases of participation offered by the Program at the
time. It is anticipated, however, that, due to administrative problems connected
with Units held in "street name" other than by Merrill Lynch, such Units will be
registered in the names of the beneficial owners thereof unless such owners
elect not to participate in the Program.
Merrill Lynch or its nominee holds in its name Program Shares for the
accounts of customers whose Unit Trust Series are held in Merrill Lynch accounts
and who elect to reinvest in the Program. These Shares may be transferred to an
account in the customer's name with the Agent upon request. Merrill Lynch
maintains records identifying the names and addresses of these customers and
their Share balances, and will be compensated for these services by the Agent at
the Agent's sole expense. During the year ended December 31, 1993, the Agent
paid Merrill Lynch $644,109.24 for these services.
Experience may indicate that changes in these Terms and Conditions are
desirable or that this offering should be terminated. Such changes may be made
or this offering may be terminated at the direction of the Board of Directors of
the Program (the "Board") without notice to any Shareholder. The Board may at
any time appoint a substitute Agent or an additional agent to act for the
Program.
INVESTMENT OBJECTIVES AND POLICIES
The primary investment objective of the Program is to obtain tax-exempt
income through investment in the Portfolio, which is comprised of interest
bearing long-and intermediate-term state, municipal and public authority bonds
(including private activity bonds), the interest on which is, in the opinion of
bond counsel to the issuing authorities, exempt from federal income tax (herein
called "Bonds"), considering the following factors, among others:
(i) the quality of the Bonds, (a) not less than 75% of which
(determined on the basis of current value) will at the time of acquisition
be rated "A" or better by Standard & Poor's Corporation ("Standard &
Poor's") or Moody's Investors Service, Inc. ("Moody's") and all of which
will at such time be rated "BBB" or better by Standard & Poor's or "Baa" or
better by Moody's (under current market and other conditions, the Board has
determined that all of the Bonds in which the Program invests will at the
time of acquisition be rated "A" or better by either of such rating
agencies). (See "Description of Bond Ratings" in the Statement of
Additional Information for a description of the rating categories);
(ii) the yield and price of the Bonds relative to other Bonds of
comparable quality and maturity; and
(iii) the diversification of the Bonds as to purpose of issue and
location of issuer, taking into account the availability in the market of
issues which meet the Program's quality, rating, yield and price criteria.
Also included within the general category of Bonds are participation
certificates in a lease, an installment purchase contract or a conditional sales
contract (hereinafter collectively called "lease obligations") entered into by a
state or political subdivision to finance the acquisition or construction of
equipment, land or facilities. Although lease obligations do not constitute
general obligations of the
6
<PAGE>
issuer for which the lessee's unlimited taxing power is pledged, a lease
obligation is frequently backed by the lessee's covenant to budget for,
appropriate and make the payments due under the lease obligation. However,
certain lease obligations contain "non-appropriation" clauses which provide that
the lessee has no obligation to make lease or installment purchase payments in
future years unless money is appropriated for such purpose on a yearly basis.
Although "non-appropriation" lease obligations are secured by the leased
property, disposition of the property in the event of foreclosure might prove
difficult. These securities represent a relatively new type of financing that
has not yet developed the depth of marketability associated with more
conventional securities. Certain investments in lease obligations may be
illiquid. The Program may not invest in illiquid lease obligations if such
investments, together with all other illiquid investments, would exceed 15% of
the Program's net assets. The Program may, however, invest without regard to
such limitation in lease obligations which the Adviser, pursuant to guidelines
which have been adopted by the Board of Directors and subject to the supervision
of the Board, determines to be liquid. The Adviser will deem lease obligations
liquid if they are publicly offered and have received an investment grade rating
of Baa or better by Moody's, or BBB or better by Standard & Poor's. Unrated
lease obligations, or those rated below investment grade, will be considered
liquid if the obligations come to the market through an underwritten public
offering and at least two dealers are willing to give competitive bids. In
reference to the latter, the Adviser must, among other things, also review the
credit worthiness of the municipality obligated to make payment under the lease
obligation and make certain specified determinations based on such factors as
the existence of a rating or credit enhancement such as insurance, the frequency
of trades or quotes for the obligation and the willingness of dealers to make a
market in the obligation.
An investment in the Program should be made with an understanding of the
risks which an investment in fixed-rate long-and intermediate-term debt
obligations may entail, including the risk that the value of the Portfolio, and
hence the net asset value of the Shares, will decline with increases in interest
rates. Interest rates and, thus, the value of fixed rate debt obligations have
fluctuated substantially in recent periods and may continue to do so in the
future. Investors are referred to the Statement of Additional Information for a
discussion of certain risks associated with investing in such obligations.
The yields on Bonds are dependent on a variety of factors, including
general money market conditions, general conditions of the municipal bond
market, size of a particular offering, the maturity of the obligation and rating
of the issue. The ratings of Moody's and Standard & Poor's represent their
opinions as to the quality of the Bonds which they undertake to rate. It should
be emphasized, however, that ratings are general and are not absolute standards
of quality. Consequently, Bonds with the same maturity, coupon and rating may
have different yields, while Bonds of the same maturity and coupon with
different ratings may have the same yield.
While the Program will invest the proceeds of the sale of its Shares (and
other cash proceeds such as those generated by redemptions, maturities or sales
of Portfolio securities) as promptly as possible, some short period of time may
elapse between the time the Program receives such proceeds and the time such
proceeds are invested by the Program. However, the Program reserves the right to
extend such period for defensive purposes. During such period such proceeds may
be held in cash or invested in temporary investments (principally state,
municipal and public authority notes and bonds) that have credit
characteristics, in the opinion of the Adviser, similar to those provided for
other Portfolio securities and the interest income on which is, in the opinion
of counsel to the issuing authorities, exempt from federal income tax. The
Program will not invest in short-term obligations other than those on which the
interest income is, in the opinion of counsel to the issuing authorities, exempt
from federal income tax.
7
<PAGE>
The fact that a Bond may cease to be rated or that its rating may be
reduced below the ratings referred to above will not require that it be
eliminated from the Portfolio but will be considered by the Adviser in
determining whether it should be retained or sold.
A portion of the Program's assets may be invested in Bonds rated BBB by
Standard & Poor's or Baa by Moody's. Although Bonds rated BBB by Standard &
Poor's normally exhibit adequate protection parameters, they entail a greater
degree of risk and are of a more speculative nature than obligations rated in
the higher categories. Therefore, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay interest and
repay principal for debt obligations in this category than in higher rated
categories. Bonds rated Baa by Moody's are also speculative in nature and entail
greater risks than those rated in the higher categories. Although interest
payments and principal security may appear adequate for the present, certain
protective elements may be lacking or may be characteristically unreliable over
any great length of time. See "Description of Bond Ratings" in the Statement of
Additional Information for a description of rating categories.
At the time that Bonds are originally issued, opinions relating to the
validity of such Bonds and to the exemption of interest thereon from federal
income taxes are rendered by counsel to the respective issuing authorities.
Neither the Program nor the Adviser nor the Administrators nor the Agent, nor
their counsel, will make any review of the proceedings relating to the issuance
of the Bonds or the basis for such opinions.
The ability of the Program to purchase Bonds otherwise considered to be
desirable investments will be limited by prohibitions under the Investment
Company Act of 1940 against the Program's purchasing Bonds from affiliates of
the Adviser or, except in the limited circumstances permitted under the
applicable rules of the Securities and Exchange Commission, from underwriting
accounts for new issues of Bonds in which affiliates of the Adviser are involved
as an underwriter. (See Portfolio Transactions".)
The Investment Company Act of 1940 requires a statement of the policies of
investment companies with respect to concentration in the securities of any
industry or industries. The Program does not intend to concentrate its
investments in the obligations of any one state.
The Program may not be an appropriate investment medium for entities which
are "substantial users" of facilities financed by "private activity bonds" or
for investors who are "related persons" thereof within the meaning of Section
147(a) of the Code.
From time to time, proposals have been introduced before Congress for the
purpose of restricting or eliminating the federal income tax exemption for
interest on Bonds or for making available to municipal issuers alternative
sources of funds or credit which might result in substantial amounts of
financing being made available from other sources--such as the issuance of
taxable bonds accompanied by a partial federal subsidy of interest payments
thereon. Similar proposals may be advanced in the future. If these proposals or
similar proposals were to be enacted, the availability of Bonds for investment
by the Program and the value of the Program's Portfolio would be affected.
Additionally, the Program would reevaluate its investment objectives and
policies and consider changes in the structure of the Program, subject to any
applicable requirement for Shareholder approval. See "Taxes and Distributions"
for a discussion of the effects of recent legislation on investments in
tax-exempt securities.
Forward Commitments. The Program may purchase Bonds on a forward commitment
basis and may purchase or sell such securities for delayed delivery. These
transactions occur when securities are purchased or sold by the Program with
payment and delivery taking place in the future to secure what is considered an
advantageous yield and price to the Program at the time of entering into the
transaction. The Program will maintain a segregated account with its custodian
of cash or liquid, high grade
8
<PAGE>
municipal securities in an aggregate equal at all times to the amount of its
commitments in connection with such delayed delivery and purchase transactions.
The value of the security on the delivery date may be more or less than its
purchase price due to fluctuating interest rates.
INVESTMENT RESTRICTIONS
The Program has adopted a number of restrictions and policies related to
the investment of its assets and its activities which are fundamental policies
and may not be changed without the approval of the holders of a majority of the
Program's outstanding voting securities. Investors are referred to the Statement
of Additional Information for a complete description of such restrictions and
policies.
MANAGEMENT OF THE PROGRAM
DIRECTORS
The Directors of the Program consist of six individuals, five of whom are
not "interested persons" of the Program as defined in the Investment Company Act
of 1940. The Directors of the Program are responsible for the overall
supervision of the operations of the Program and perform the various duties
imposed on the directors of investment companies by the Investment Company Act
of 1940. The Board of Directors elects officers of the Program annually.
The Directors of the Program and their principal employment are as follows:
<TABLE>
<S> <C>
ARTHUR ZEIKEL*--President, Director and Chief Investment Officer of the
Adviser and Merrill Lynch Asset Management since 1977. Executive Vice President of Merrill Lynch &
Co., Inc. since 1990; Executive Vice President of Merrill Lynch, Pierce, Fenner & Smith
Incorporated since 1990 and a Senior Vice President thereof from 1985 to 1990.
RONALD W. FORBES--Professor of Finance, School of Business, State University
of New York at Albany.
CYNTHIA A. MONTGOMERY--Professor, Harvard Business School.
CHARLES C. REILLY--Adjunct Professor, Columbia University Graduate School of
Business.
KEVIN A. RYAN--Professor of Education at Boston University since 1982. Founder and current Director
of the Boston University Center for the Advancement of Ethics and Character.
RICHARD R. WEST--Professor of Finance, and Dean from 1984 to 1993, New York University Leonard N.
Stern School of Business Administration.
</TABLE>
ADVISORY AND ADMINISTRATION ARRANGEMENTS
The investment adviser to the Program is Fund Asset Management, L.P.
("FAM"). The address of FAM is Box 9011, Princeton, New Jersey 08543-9011. FAM
or its affiliate, Merrill Lynch Asset Management, L.P. ("MLAM"), acts as the
investment adviser for more than 90 other registered investment companies.
Effective January 1, 1994, FAM was reorganized as a Delaware limited
partnership. FAM (the general partner of which is Princeton Services, Inc., a
wholly-owned subsidiary of Merrill Lynch & Co., Inc.) is itself a wholly-owned
subsidiary of Merrill Lynch & Co., Inc. and has its principal place of business
at 800 Scudders Mill Road, Plainsboro, New Jersey 08536. Prior to the
reorganization, the
- ------------
* Interested person, as defined in the Investment Company of 1940, of the
Program.
9
<PAGE>
Adviser was a Delaware corporation known as Fund Asset Management, Inc., which
was incorporated in 1976. The reorganization did not result in a change to the
Adviser's management or personnel, nor did the reorganization cause any adverse
change to the Adviser's financial condition. Fund Asset Management, Inc. was a
wholly-owned subsidiary of Merrill Lynch Investment Management, Inc., which did
business as Merrill Lynch Asset Management. MLAM was a wholly-owned subsidiary
of Merrill Lynch & Co., Inc. prior to its reorganization, which was similar to
that of FAM, and continues to be after its reorganization.
FAM, subject to the general supervision of the Program's Board of
Directors, manages the Portfolio of the Program in accordance with its
investment objectives and policies and furnishes to the Program investment
advice. In addition, FAM together with the Administrators of the Program are
responsible for the overall management of the Program's business affairs. The
Administrators are Merrill Lynch, of which FAM is an affiliate, Prudential, Dean
Witter and Shearson Lehman. The Administrators perform certain management
services necessary for the operation of the Program and provide all the office
space, facilities and necessary personnel for such services. For the performance
of these services, FAM pays the Administrators an aggregate monthly fee at the
annual rate of 0.2% of the Program's average daily net assets. The fee so
payable by the Adviser will be allocated among the Administrators in the
following respective percentages: Merrill Lynch, 48%; Prudential, 21%; Dean
Witter, 21%; and Smith Barney Shearson, 10%. The Administrators have also
undertaken to reimburse the Adviser in proportion to such monthly fee for the
purpose of the Adviser's reimbursement of the Program. The Adviser's
reimbursement obligations are described more fully in the Statement of
Additional Information.
For the year ended December 31, 1993, FAM received advisory fees from the
Program in the amount of $2,960,370, representing 0.50% of the Program's average
net assets.
The Program is obligated to pay certain expenses incurred in its
operations, including, among other things, the investment advisory fee, legal
and auditing fees, fees and expenses of unaffiliated Directors, custodian and
transfer agency fees, accounting and pricing costs, and certain of the costs of
printing proxy statements, shareholder reports, prospectuses and statements of
additional information. For the year ended December 31, 1993, the Program's
total expenses were $5,111,264 (representing 0.86% of its average net assets).
None of the Program's investment advisory fees were reimbursed by FAM.
Zita C. Millett has served as the Program's Portfolio Manager since June
1977, and is primarily responsible for the Program's day-to-day management. She
has served as Vice President of MLAM since 1979.
REDEMPTION OF SHARES AND EXCHANGE PRIVILEGE
Redemption. Shareholders have the right to redeem their Shares at net asset
value by surrendering the certificates therefor properly endorsed with the
signatures guaranteed by an "eligible guarantor institution" as such term is
defined by Rule 17Ad-15 of the Securities Exchange Act of 1934, the existence
and validity of which may be verified by the Agent through the use of industry
publications, together with a request for redemption at the office of the Agent,
The Bank of New York, 110 Washington Street, New York, New York 10286. If
certificates have not been issued, only delivery of the request for redemption
(with signature guaranteed as set forth above) is required. The Program has
arranged, however, for an exemption from the signature guarantee requirement for
redemptions involving less than $ 5,000 on the date of receipt by the Agent of
all the necessary documents where the proceeds are to be reinvested through one
of the Administrators in units of Municipal Investment Trust Fund, The
Government Securities Income Fund, The Corporate Income Fund, The Equity Income
10
<PAGE>
Fund or The International Bond Fund (the "Unit Trust") which are to be
registered in the names of the registered owners of the Shares. This exemption
may be reduced or eliminated without prior notice. A guarantee of each
Shareholder's signature is required for all redemptions, regardless of the
amount involved, where the proceeds are to be paid to Shareholders or where the
units of the Unit Trusts to be purchased are to be registered in names different
from those of the registered owners of the Shares.
The redemption price will be the net asset value next determined after
either (i) the certificates are tendered for redemption or (ii) if no
certificates have been issued, a request for redemption is received in good
order as set forth above. The price received upon redemption may be more or less
than the amount paid by the Shareholder depending on the net asset value of the
Shares at the time of redemption. Payment of the redemption price must be made
within seven days after proper tender unless further postponement is permissible
under the Investment Company Act of 1940, by reason of closing of or restriction
of trading on the New York Stock Exchange, or other emergency, as explained in
the Statement of Additional Information.
Any of the Administrators may accept orders from dealers with whom they
have satisfactory agreements for the repurchase of Shares held by Holders.
Repurchase orders received by the dealer prior to 4:00 P.M. on any business day
and transmitted by the Administrator prior to the close of its business day
(4:00 P.M. New York City time) are redeemed at the price determined as of 4:00
P.M. on such day. Repurchase orders received after 4:00 P.M. on any business day
are redeemed at a price determined as of 4:00 P.M. on the next business day. It
is the responsibility of the dealers to transmit orders so that they will be
received by the Administrator prior to its close of business. This repurchase
arrangement is discretionary and may be withdrawn. There is no additional charge
by the Program for repurchases.
Under certain circumstances, the Program reserves the right to redeem
Shares in accounts of less than $500 upon 30 days' notice. For further
information, see the Statement of Additional Information, "Redemption of
Shares."
Exchange Privilege. Shareholders who have owned Shares for least 60 days
have an exchange privilege (the "Exchange Privilege") with shares of The
Corporate Fund Accumulation Program, Inc. (the "Other Program"). Shares with an
aggregate net asset value of at least $1,000 are required to qualify for the
Exchange Privilege. Exchanges between the Program and the Other Program will be
at their respective net asset values. The investment objectives of the Other
Program differ from those of the Program, and Shareholders should obtain a
currently effective prospectus for the Other Program before effecting any
exchange.
Exercise of the Exchange Privilege is treated as a sale for federal income
tax purposes and, depending on the circumstances, a short-or long-term capital
gain or loss may be realized. The exchange privilege is available only to
Shareholders residing in states where the Other Program is qualified for sale. A
non-corporate Shareholder of the Program who exercises the Exchange Privilege
may be required to certify to the Other Program his Social Security Number or
Taxpayer Identification Number and that he is not subject to the backup
withholding tax if he wishes to avoid a 31% backup withholding tax on
distributions made to him by the Other Program.
This Exchange Privilege may be modified or terminated at any time. The
Program reserves the right to limit the number of times an investor may exercise
the Exchange Privilege. To exercise the Exchange Privilege, a Shareholder should
contact one of the Administrators, who will advise the Program and the Other
Program of the exchange, or the Shareholder may write to the Agent requesting
that the exchange be effected. Such letter must be signed exactly as the account
is registered with signatures guaranteed by a member firm of a national or
regional stock exchange or any commercial bank or trust company. Shareholders
with Shares for which certificates have not been issued may exercise the
Exchange Privilege by wire through their securities dealers. The Program
reserves the right to require a properly completed Exchange Application.
11
<PAGE>
TAXES AND DISTRIBUTIONS
The Program has qualified and intends to continue to qualify for the
special tax treatment applicable to "regulated investment companies" under the
Code. If the Program qualifies as a "regulated investment company" and makes
distributions to Shareholders (without regard to designated capital gain
dividends) in an amount equal to or exceeding the sum of 90% of its investment
company taxable income and 90% of its net interest income from tax-exempt
obligations, it will not be subject to federal income tax on such part of its
net ordinary income or net realized capital gains, if any, as it distributes to
Shareholders. The Program expects to distribute monthly substantially all of its
net interest income, after expenses. Net realized capital gains, if any, will be
distributed at least annually. Such distributions of net interest income and net
realized capital gains will be reinvested in additional Shares in the Program
unless the Shareholder elects to receive such distributions in cash.
Distributions of net interest income to be reinvested in additional Shares, or
to be received in cash if elected, will be made on the 15th day of the month, or
on the next succeeding business day if the 15th falls on a holiday or weekend,
for the accounts of Shareholders of record on the preceding business day of such
month.
A 4% non-deductible excise tax is imposed on a regulated investment
company, such as the Program, if the company does not distribute to its
shareholders an amount equal to at least 98% of the investment company's
ordinary income for the calendar year, plus at least 98% of the company's
capital gain net income for the one-year period ending on October 31 of such
calendar year. In addition, an amount equal to any of the investment company's
undistributed ordinary income or capital gain net income from the previous
calendar year must also be distributed to avoid the excise tax. The excise tax
is imposed on the amount by which a company does not meet the foregoing
distribution requirements. The excise tax will not, however, apply to the
tax-exempt income of a regulated investment company, such as the Program, that
pays "exempt-interest" dividends. In addition, if the Program has taxable income
that would be subject to the excise tax, the Program intends to distribute such
income so as to avoid payment of the excise tax.
The Program intends to qualify to pay "exempt-interest" dividends as
defined in the Code. If it so qualifies, dividends or any part thereof (other
than any short-or long-term capital gain distributions) paid by the Program
which are attributable to interest on tax-exempt obligations and are designated
by the Program as exempt-interest dividends in a written notice mailed to the
Program's Shareholders within 60 days after the close of its taxable year may be
treated by Shareholders for all purposes as items of interest excludable from
their gross income under Section 103(a) of the Code. However, a Shareholder is
advised to consult his tax adviser with respect to whether exempt-interest
dividends are excludable under Section 103(a) if received by a Shareholder who
would be treated as a "substantial user" under Section 147(a)(1) of the Code if
such Shareholder held the tax-exempt obligations directly. A Shareholder may not
deduct interest on indebtedness incurred or continued to purchase or carry
Shares to the extent attributable to exempt-interest dividends.
Distributions to Shareholders of net short-term capital gains, if any,
including distributions which are reinvested in additional Shares in the
Program, will generally be taxable as ordinary income. Distributions reflecting
net long-term capital gains (designated as such by the Program) will be taxable
to Shareholders as long-term capital gains regardless of the Shareholders'
holding period of the Shares. The Tax Reform Act of 1986 (the "1986 Act")
eliminated the distinction between long-and short-term capital gains for taxable
years starting after 1987; both are now taxable at a maximum rate of 28% to
individual Shareholders and 34% for corporate Shareholders. If a Shareholder
receives a capital gain dividend and has held Shares of the Program for six
months or less, any loss on the sale of such Shares shall, to the extent of the
capital gain dividends paid on such shares, be treated as a long-term capital
12
<PAGE>
loss. If the Shareholder receives an exempt-interest dividend on Shares and
holds those Shares for six months or less, any loss on the sale of such Shares
shall, to the extent of the amount of such exempt interest dividend, be
disallowed.
Some Shareholders may be subject to a 31% withholding on reportable
dividends, capital gains distributions and redemption payments ("backup
withholding"). Backup withholding is not required with respect to dividends
representing "exempt-interest." Generally, Shareholders subject to backup
withholding will be those for whom a certified Taxpayer Identification Number
("TIN") is not on file with the Program, or who, to the Program's knowledge,
have furnished an incorrect TIN or with respect to whom the Internal Revenue
Service has advised the Program that there must be backup withholding. When
establishing an account, an investor must certify under penalties of perjury
that the TIN is correct and that he is not subject to backup withholding.
The recipient of tax-exempt income is required to report such income on his
federal income tax return. The disclosure of such amount is for informational
purposes only.
A Shareholder may be subject to alternative minimum tax to the extent the
Program holds private activity bonds and a corporate Shareholder's alternative
minimum taxable income may be increased to the extent of exempt interest
dividends received from the Program. The Program expects that it may hold
private activity bonds; however, an individual shareholder filing a joint return
who (with his or her spouse) does not have any tax preference items subject to
the alternative minimum tax other than income received from the Program derived
from private activity bonds would have to receive more than $40,000 of such
income from the Program before becoming subject to the alternative minimum tax.
The foregoing is a general and abbreviated summary of the applicable
provisions of the Code and Treasury Regulations currently in effect. For
complete provisions, reference should be made to the pertinent Code sections and
the Treasury Regulations promulgated thereunder. The Code and these Regulations
are subject to change by legislative or administrative action. The Statement of
Additional Information sets forth additional information regarding other tax
aspects of an investment in the Program.
STATE AND LOCAL TAXES--The exemption of interest income (including
exempt-interest dividends) for federal income tax purposes does not necessarily
result in exemption under the income or other tax laws of any state or local
taxing authority. Each Shareholder is advised to consult his own tax adviser in
this regard.
State and local taxing authorities may enact legislation which may require
the Program to withhold a portion of dividends paid or credited to Shareholders.
PORTFOLIO TRANSACTIONS
The Program will follow a policy that it will place securities transactions
with a broker or dealer only if it expects to obtain the most favorable prices
and executions of orders. Transactions in debt securities are generally made
through securities dealers acting as principals, although the Program may
purchase or sell such securities in brokerage transactions and affiliates of the
Adviser may act as brokers therein if the Program expects thereby to obtain the
most favorable price and execution. The Program has obtained an exemptive order
permitting it to engage in certain principal transactions involving high quality
short-term municipal Bonds. The Adviser is responsible for making Portfolio
investment decisions on behalf of the Program and effecting Portfolio
transactions with or through securities dealers, subject to the general
supervision of the officers and directors of the Program.
13
<PAGE>
ADDITIONAL INFORMATION
NET ASSET VALUE
The net asset value per Share of the Program is determined by dividing the
net assets of the Program by the number of its outstanding Shares. The net
assets of the Program are its gross assets less its liabilities as determined in
accordance with generally accepted accounting principles. The Program has made
arrangements with Kenny S&P Evaluation Services, a division of Kenny Information
Systems Inc. ("Kenny") to furnish to the Program and the Agent, on each day that
the New York Stock Exchange is open for trading immediately after the
declaration of dividends, estimated values (as of 4:00 P.M.) of Portfolio
securities for purposes of computation of net asset value of Shares. The Board
has examined the methods to be used by Kenny in estimating the value of
Portfolio securities and believes that such methods will reasonably and fairly
approximate the price at which Portfolio securities may be sold and will result
in a good faith determination of the fair value of such securities; however,
there is no assurance that the Portfolio securities can be sold at the prices at
which they are valued. For information concerning the method used by Kenny to
value Portfolio securities, see "Net Asset Value" in the Statement of Additional
Information.
PERFORMANCE DATA
The Program may from time to time include its average annual total return
and yield in advertisements or information furnished to present or prospective
shareholders. Both total return and yield figures are based on the Program's
historical performance and are not intended to indicate future performance.
Average annual total return and yield are determined in accordance with formulas
specified by the Securities and Exchange Commission.
Average annual total return quotations for the specified periods will be
computed by finding the average annual compounded rates of return (based upon
net investment income and any capital gains or losses on portfolio investments
over such periods) that would equate the initial amount invested to the
redeemable value of such investments at the end of each period. Average annual
total return will be computed assuming all dividends and distributions are
reinvested and taking into account all applicable recurring and nonrecurring
expenses.
Yield quotations will be computed based on a 30-day period by dividing the
net income earned during the period based on the yield to maturity of each
security held by the Program by the average daily number of shares outstanding
during the period that were entitled to receive dividends times the maximum
offering price per share on the last day of the period.
The Program's average annual total return and yield will vary depending
upon market conditions, the securities comprising the Program's Portfolio, the
Program's operating expenses and the amount of net capital gains or losses
realized by the Program during the period. An investment in the Program will
fluctuate and an investor's shares, when redeemed, may be worth more or less
than their original cost.
On occasion, the Program may compare its performance to that of the
Standard & Poor's 500 Composite Stock Price Index, the Value Line Composite
Index, the Dow Jones Industrial Average, or performance data published by Lipper
Analytical Services, Inc., Morningstar Publications, Inc., Money Magazine, U.S.
News & World Report, Business Week, CDA Investment Technology, Inc., Forbes
Magazine and Fortune Magazine. From time to time, the Program may include the
Program's Morningstar risk-adjusted performance ratings in advertisements or
supplemental sales literature. As with other performance data, performance
comparisons should not be considered representative of the Program's relative
performance for any future period.
14
<PAGE>
ORGANIZATION OF THE PROGRAM
The Program, an open-end diversified management investment company
registered under the Investment Company Act of 1940, was incorporated in
Maryland on October 11, 1976. When issued, the Shares of the Program will be
fully paid and non-assessable, have no preference, pre-emptive, conversion,
exchange or similar rights and will be freely transferable.
The Program does not intend to hold meetings of shareholders unless under
the Investment Company Act of 1940 shareholders are required to act on any of
the following matters: (i) election of directors; (ii) approval of an investment
advisory agreement; (iii) approval of a distribution agreement; and (iv)
ratification of selection of independent accountants. Shares do not have
cumulative voting rights, and the holders of more than 50% of the Shares of the
Program voting for the election of directors can elect all of the directors of
the Program if they choose to do so and in such event the holders of the
remaining Shares would not be able to elect any directors.
For further information concerning the organization of the Program, see the
Statement of Additional Information.
INDEPENDENT AUDITORS
Deloitte & Touche, Princeton, New Jersey, has been selected as the
independent auditors of the Program and is responsible for auditing the annual
financial statements of the Program.
CUSTODIAN, TRANSFER AND DIVIDEND DISBURSING AGENT
The Bank of New York, New York, New York, acts as Custodian of the
Program's assets and as its Transfer Agent and Dividend Disbursing Agent.
LEGAL COUNSEL
Rogers & Wells, New York, New York, is counsel for the Program and passes
upon legal matters for the Program in connection with the Shares offered by this
Prospectus.
REPORTS TO SHAREHOLDERS
The fiscal year of the Program ends on December 31 of each year. The
Program will send to its Shareholders at least semi-annually reports showing the
Program's Portfolio and other information. An annual report containing financial
statements, audited by independent auditors, will be sent to Shareholders each
year.
ADDITIONAL INFORMATION
This Prospectus does not contain all the information included in the
Registration Statement filed with the Securities and Exchange Commission under
the Securities Act of 1933 and the Investment Company Act of 1940, with respect
to the securities offered hereby, certain portions of which have been omitted
pursuant to the rules and regulations of the Securities and Exchange Commission.
The Statement of Additional Information, dated April 28, 1994, which forms
a part of the Registration Statement, is incorporated by reference into this
Prospectus. The Statement of Additional Information may be obtained without
charge as provided on the cover page of this Prospectus. The Registration
Statement, including the exhibits filed therewith, may be examined at the office
of the Securities and Exchange Commission in Washington, D.C.
15
<PAGE>
AUTHORIZATION FOR INVESTMENT IN THE MUNICIPAL FUND ACCUMULATION
PROGRAM, INC.
IF YOU WOULD LIKE TO PARTICIPATE IN THE MUNICIPAL FUND INVESTMENT ACCUMULATION
PROGRAM, YOU MUST COMPLETE, SIGN AND RETURN THIS CARD.
PLEASE DO NOT RETURN THIS CARD IF YOU ARE ALREADY A PARTICIPANT, UNLESS YOU WISH
TO CHANGE YOUR REINVESTMENT OPTION.
Unit Trust Series as shown on account statement or certificate: (please print on
the line below)
- --------------------------------------------------------------------------------
I hereby acknowledge receipt of the prospectus of The Municipal Fund
Accumulation Program, Inc. (the "Program") and authorize the Trustee of the
Series designated above to pay distributions on my Units as indicated below
(distributions to be reinvested in the Program will be paid for my account to
The Bank of New York as Program Agent):
Principal distributions (including / / in cash / / reinvested in the Program
capital gains) (check one):
Interest distributions (check one): / / in cash / / reinvested in the Program
My name (please print)
---------------------------------------------
My address (please print) ---------------------------------------------
street
---------------------------------------------
city, state, zip code
The account number for my units
---------------------------------------------
---------------------------------------------
(Registered Holder Signature)
-------------------------------------------
(Registered Holder Signature)
(Two signatures required if joint tenancy)
Date , 19
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This page is a self-mailer. Please complete the information above, cut
along the dotted line, fold along the line on the reverse side, tape,
and mail with the Trustee's address displayed on the outside.
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NO POSTAGE
NECESSARY
IF MAILED
IN THE
UNITED STATES
---------------------
---------------------
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---------------------
BUSINESS REPLY MAIL
FIRST CLASS PERMIT NO. 6665 NEW YORK, N.Y.
POSTAGE WILL BE PAID BY ADDRESSEE
INVESTMENT ACCUMULATION PROGRAM (MITF)
THE BANK OF NEW YORK
UNIT INVESTMENT TRUST DEPARTMENT
P.O. BOX 974
WALL STREET STATION
NEW YORK, N.Y. 10268-0974
- --------------------------------------------------------------------------------
(FOLD ALONG THIS LINE.)
<PAGE>
THE MUNICIPAL FUND INVESTMENT ACCUMULATION PROGRAM
PRINCIPAL OFFICE OF THE FUND
Box 9011
Princeton, New Jersey 08543-9011
(609) 282-2000
INVESTMENT ADVISER
Fund Asset Management, L.P.
Box 9011
Princeton, New Jersey 08543-9011
(609) 282-2000
CUSTODIAN, TRANSFER AND DIVIDEND DISBURSING AGENT
The Bank of New York
110 Washington Street
New York, New York 10286
LEGAL COUNSEL
Rogers & Wells
200 Park Avenue
New York, New York 10166
INDEPENDENT AUDITORS
Deloitte & Touche
117 Campus Drive
Princeton, New Jersey 08540
<PAGE>
----------------------------------------------------
PROSPECTUS
----------------------------------------------------
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO
MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS,
AND ANY INFORMATION OR REPRESENTATION NOT CONTAINED
HEREIN MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE PROGRAM. THIS PROSPECTUS DOES NOT CONSTITUTE AN
OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY,
SECURITIES IN ANY STATE TO ANY PERSON TO WHOM IT IS
NOT LAWFUL TO MAKE SUCH OFFER IN SUCH STATE.
----------------------------------------------------
INDEX
----------------------------------------------------
PAGE
-----------
FEE TABLE...................................... 2
FINANCIAL HIGHLIGHTS........................... 3
THE PROGRAM.................................... 4
INVESTMENT OBJECTIVES AND POLICIES............. 6
MANAGEMENT OF THE PROGRAM...................... 9
REDEMPTION OF SHARES AND EXCHANGE PRIVILEGE.... 10
TAXES AND DISTRIBUTIONS........................ 12
PORTFOLIO TRANSACTIONS......................... 13
ADDITIONAL INFORMATION......................... 14
- -----------------------------------------------
THE
MUNICIPAL
FUND
INVESTMENT
ACCUMULATION
PROGRAM
- -----------------------------------------------
PROSPECTUS DATED APRIL 28, 1994
- -----------------------------------------------
BOX 9011
PRINCETON, NEW JERSEY 08543-9011
(609) 282-2000
<PAGE>
THE MUNICIPAL FUND
INVESTMENT ACCUMULATION PROGRAM
- ---------------------------------------------------------------------------
Shares of Statement of Additional Information
Common Stock Dated April 28, 1994
- ----------------------------------------------------------------------------
The Municipal Fund Accumulation Program, Inc. (the "Program") is an
open-end management investment company whose primary objective is to obtain
tax-exempt income through investment in a diversified portfolio (the
"Portfolio") of state, municipal and public authority bonds. Shares of the
Program are offered without sales charge to the holders of Units of certain
series of Unit Investment Trusts described in the Prospectus in order to provide
a means for the automatic reinvestment of distributions of interest or dividend
income and capital gains and principal on such Units in Shares of the Program on
the Terms and Conditions of Participation set forth in the Prospectus. The
address of the Program is Box 9011, Princeton, New Jersey 08543-9011, and its
telephone number is (609) 282-2000.
------------------------
INVESTMENT ADVISER
FUND ASSET MANAGEMENT, L.P.
ADMINISTRATORS
MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED
PRUDENTIAL SECURITIES INCORPORATED
DEAN WITTER REYNOLDS INC.
SMITH BARNEY SHEARSON INC.
------------------------
This Statement of Additional Information of the Program is not a prospectus
and should be read in conjunction with the Prospectus of the Program (the
"Prospectus") dated April 28, 1994, which has been filed with the Securities and
Exchange Commission and can be obtained without charge by calling or by writing
the Program at the above telephone number or address. This Statement of
Additional Information has been incorporated by reference into the Prospectus.
<PAGE>
INVESTMENT OBJECTIVES AND POLICIES
The primary investment objective of the Program is to obtain tax-exempt
income through investment in a diversified portfolio of interest bearing long-
and intermediate-term state, municipal and public authority bonds, the interest
on which is, in the opinion of bond counsel to the issuing authorities, exempt
from federal income tax ("Municipal Bonds" or "Bonds"). Reference is made to
"Investment Objectives and Policies" in the Prospectus for a discussion of the
investment objectives and policies of the Program.
MUNICIPAL BONDS--The Tax Reform Act of 1986 (the "1986 Act") made
substantial changes to the rules regarding the tax treatment of state and local
government bonds. Among other changes, the 1986 Act narrowed the scope of state
and local government bonds which qualify for exemption, and introduced the
concept of "private activity bonds" to replace the prior law concept of
"industrial development bonds." In addition to investing in Bonds which are
subject to the new rules under the 1986 Act and subsequent legislation, the
Program holds and will continue to hold Bonds, including industrial development
bonds, which were issued prior to the 1986 Act and which continue to be
tax-exempt.
The types of Bonds which may be purchased for the Portfolio include debt
obligations issued to obtain funds for various public purposes, including, among
other purposes, the construction of a wide range of public facilities such as
airports, bridges, highways, housing, hospitals, mass transportation, schools,
street and water and sewer works. Other such public purposes include the
refunding of outstanding obligations and obtaining funds for general operating
expenses and lending to other public institutions and facilities. In addition,
certain types of private activity bonds are issued by or on behalf of public
authorities to obtain funds to provide privately-operated housing facilities,
airport, public transit, port or parking facilities, air or water pollution
control facilities and certain local facilities for water supply, gas,
electricity, or sewage or solid waste disposal. Such obligations are included
within the types of Bonds which may be acquired by the Program if the interest
paid thereon is exempt from federal income tax in the opinion of counsel for the
issuing governmental authority. Other types of private activity bonds, the
proceeds of which are used for the acquisition, construction, reconstruction or
improvement of privately-operated manufacturing facilities, may also qualify for
such tax exemption, although the current federal tax laws place substantial
limitations on the size of such issues.
The two principal classifications of Bonds which may be acquired for the
Portfolio are "general obligation" and "revenue" Bonds. General obligation Bonds
are secured by the issuer's pledge of its faith, credit and taxing power for the
payment of principal and interest. Revenue Bonds are payable only from the
revenues derived from a particular facility or class of facilities or, in some
cases, from the proceeds of a special excise or other specific revenue source.
Private activity bonds are in most cases revenue Bonds and do not generally
constitute the pledge of the credit of the issuer of such Bonds. There are, of
course, variations in the security of Bonds, both within a particular
classification and between classifications, depending on numerous factors. The
Portfolio may also include "moral obligation" Bonds. If an issuer of moral
obligation Bonds is unable to meet its obligations, the repayment of such Bonds
becomes a moral commitment but not a legal obligation of the state or
municipality in question.
As discussed in the Prospectus, investment in Municipal Bonds may entail
certain risks. Litigation challenging the validity under state constitutions of
present systems of financing public education has been initiated in a number of
states. Decisions in some states have been reached holding such school financing
in violation of state constitutions. In addition, legislation to effect changes
in public school financing has been introduced in a number of states. The
Program is unable to predict the outcome of the pending litigation and
legislation in this area and what effect, if any, resulting changes in the
sources
2
<PAGE>
of funds, including proceeds from property taxes applied to the support of
public schools, may have on any school Bonds which may be in the Portfolio.
Certain of the Bonds in the Portfolio may be bonds of issuers (including
California issuers) who rely in whole or in part on ad valorem real property
taxes as a source of revenue. An amendment to the constitution of the State of
California approved in 1978, commonly referred to as "Proposition 13," provides
for strict limitations on such ad valorem real property taxes and has had a
significant impact on the taxing powers of local governments and on the
financial conditions of school districts and local governments in California. As
of the date hereof, none of the Bonds in the Portfolio and none of the ratings
thereof have been directly affected by Proposition 13, but there is no assurance
that there will be no such adverse effects in the future. Similar proposals, in
the form of state legislative proposals or voter initiatives, to limit ad
valorem real property taxes have been introduced in various other states. It is
not possible at this time to predict the final impact of Proposition 13, or of
similar future legislative or constitutional measures, on school districts and
local governments or on their abilities to make future payments on their
outstanding debt obligations.
Forward Commitments. Municipal Bonds may be purchased or sold on a delayed
delivery basis or may be purchased on a forward commitment basis at fixed
purchase terms with periods of up to 45 days between the commitment and
settlement dates. The purchase will be recorded on the date the Program enters
into the commitment and the value of the security will thereafter be reflected
in the calculation of the Program's net asset value. The value of the security
on the delivery date may be more or less than its purchase price. A separate
account of the Program will be established with The Bank of New York (110
Washington Street, New York, New York 10286), the custodian (the "Custodian")
and agent (the "Agent") for the Program, consisting of cash or liquid high-grade
Municipal Bonds having a market value at all times until the delivery date at
least equal to the amount of its commitment in connection with such delayed
delivery and purchase transactions. Although the Program will generally enter
into forward commitments with the intention of acquiring securities for its
Portfolio, the Program may dispose of a commitment prior to settlement if the
investment adviser to the Program, Fund Asset Management, L.P. (the "Adviser")
deems it appropriate to do so. There can, of course, be no assurance that the
judgments upon which these techniques are based will be accurate or that such
techniques when applied will be effective. The Program will enter into forward
commitment or delayed delivery arrangements only with respect to securities in
which it may otherwise invest as described under "Investment Objectives and
Policies" in the Prospectus.
PORTFOLIO MANAGEMENT AND TURNOVER RATE--The Program will attempt to attain
its investment objectives by careful initial selection of Bonds with a view to
holding them for investment. However, the Program reserves the right to sell
Portfolio securities whenever it deems such action advisable to maintain
competitive yields or to protect capital in the event the business of an issuer
has deteriorated or, in the opinion of the Adviser, is likely to deteriorate or
when the period of time to maturity on Portfolio securities has shortened to
such an extent as to make it undesirable, in the opinion of the Adviser, to
retain such securities in the Portfolio or when it believes that it is desirable
for defensive purposes and in anticipation of a rise in interest rates to sell
Portfolio securities and invest the proceeds temporarily in short-term
obligations which have credit characteristics, in the opinion of the Adviser,
similar to those provided for other Portfolio securities and the interest income
on which is, in the opinion of counsel to the issuing authorities, exempt from
federal income tax. Portfolio turnover rate is calculated by dividing the lesser
of purchases or sales (not including purchases or sales of short-term
obligations and subsequent reinvestments in Bonds as described above) of
Portfolio securities for the year by the monthly average value of Portfolio
securities. For the years ended December 31, 1993 and 1992, the portfolio
turnover rates were 23% and 24%, respectively.
3
<PAGE>
INVESTMENT RESTRICTIONS
The following investment restrictions are deemed fundamental policies of
the Program and may be changed only by the vote of the lesser of (1) the holders
of 67% of the Program's outstanding voting securities present at a meeting if
the holders of more than 50% of such outstanding voting securities are present
in person or by proxy or (2) the holders of more than 50% of the Program's
outstanding voting securities.
The Program will not:
(1) invest in securities or other investments other than Bonds and
temporary investments, the interest on which is, in the opinion of counsel
to the issuing authorities, exempt from federal income tax (see "Investment
Objectives and Policies" in the Prospectus);
(2) purchase securities on margin (but the Program may obtain such
short-term credits as may be necessary for the clearance of purchases and
sales of securities), make short sales of securities, maintain a short
position or write or purchase put or call options;
(3) borrow money, except from banks as a temporary measure for
emergency purposes, where such borrowings would not exceed 5% of its total
assets (taken at current value);
(4) pledge assets except to secure indebtedness permitted by (3)
above, with pledged assets to be no more than 10% of its total net assets
(taken at current value);
(5) purchase any security if as a result (a) more than 5% of the
Program's total assets (taken at current value) would be invested in
securities of the issuer thereof (other than securities issued or
guaranteed by the United States government) or (b) the Program would hold
more than 10% of any class of securities of the issuer thereof other than
securities issued or guaranteed by the United States government (taking all
debt issued as a single class) or more than 10% of the voting securities of
the issuer thereof;
(6) invest for the purpose of exercising control or management of any
company;
(7) invest in securities of other investment companies, except as
part of a merger, consolidation, purchase of assets or similar transaction
approved by the Program's Shareholders;
(8) make investments in oil, gas or other mineral exploration
programs, commodities, commodity contracts or real estate, although the
Program may invest in securities secured by real estate or interests
therein or issued by companies, including real estate investment trusts,
which deal in real estate or interests therein;
(9) act as an underwriter except as it may be deemed such in a sale
of restricted securities;
(10) participate on a joint (or joint and several) basis in any
trading account in securities (the "bunching" of orders for the sale or
purchase of Portfolio securities with other funds or accounts advised or
sponsored by the Adviser or any of its affiliates to reduce brokerage
commissions or otherwise to achieve the best overall execution not being
considered participation in a trading account in securities);
(11) purchase or retain securities of an issuer if, to the knowledge
of the Program, an officer or director of the Program or the Adviser owns
beneficially more than 1/2 of 1% of such shares or securities of such
issuer and all such directors and officers owning more than 1/2 of 1% of
such shares or securities together own more than 5% of such shares or
securities; or
(12) make loans, except through the purchase of debt obligations.
4
<PAGE>
Except in the case of the restriction set forth in clause (11), the
foregoing percentages will apply at the time of the purchase of a security and
shall not be considered violated unless an excess or deficiency occurs or exists
immediately after and as a result of a purchase of such security.
For purposes of the investment restrictions set forth in clause (8), the
term "exploration programs" includes oil, gas or other mineral leases, as well
as exploration programs.
INVESTMENT ADVISORY AGREEMENT
INVESTMENT ADVISORY AGREEMENT--Pursuant to an Investment Advisory Agreement
(the "Agreement") the Adviser has agreed, subject at all times to the Board, to
(1) manage the Portfolio of the Program in accordance with its investment
objectives and policies and furnish to the Program investment advice and (2) (a)
assist in supervising all aspects of the Program's operations including
coordinating all matters relating to the functions of the Agent, Custodian and
other parties performing operational functions for the Program; (b) provide the
Program, at the Adviser's expense, with the services of such persons competent
to perform such administrative and clerical functions as are necessary in order
to provide effective administration of the Program, including duties in
connection with Shareholder relations, reports, redemption requests and account
adjustments and the maintenance of certain non-accounting Program books and
records; (c) provide the Program, at the Adviser's expense, with adequate office
space and related services; (d) supervise and administer the operation of the
Exchange Privilege referred to in "Redemption of Shares and Exchange Privilege"
in the Program's Prospectus; and (e) to the extent required by then current
federal securities laws, regulations thereunder or interpretations thereof, pay
for the printing of all Program prospectuses used in connection with the
distribution and sale of the Shares (a regulation permits investment companies
to pay such expenses only when an agreement to that effect has been approved by
shareholders and subject to various other conditions). In return the Program has
agreed to pay a fee each month to the Adviser at the annual rate of 0.5% of the
value of the Program's average daily net assets from the beginning of the year
to the end of such month.
The Program pays all the other costs and expenses incurred in connection
with its organization and operations, including: fees of the Program Agent,
Transfer Agent, Custodian and dividend disbursing agent; costs of printing and
mailing stock certificates, shareholder reports, proxy materials and (except to
the extent borne by the Adviser or the Administrators) prospectuses and
statements of additional information; legal and auditing fees; costs and
expenses of the sale, issue and redemption of its Shares (including fees and
expenses of registering the Shares under federal and state securities laws);
fees and expenses of unaffiliated directors; costs of accounting and pricing
services (including the daily calculation of net asset value); interest,
brokerage costs, insurance and taxes. Accounting services are provided for the
Program by the Adviser, and the Program reimburses the Adviser for its costs in
connection with such services. For the year ended December 31, 1993, such
reimbursement amounted to $57,282. Under current requirements of certain states
in which the Shares were registered for sale in this offering, the Adviser must
reimburse the Program for advisory fees received by it from the Program to the
extent that the Program's expenses (including the advisory fee but excluding
interest, taxes, brokerage fees and extraordinary expenses) exceed in any fiscal
year 2.5% of the Program's first $30,000,000 of average daily net assets, 2.0%
of average daily net assets in excess of $30,000,000 but not exceeding
$100,000,000 and 1.5% of average daily net assets above $100,000,000 for such
fiscal year. No fee payment will be made to the Adviser during any fiscal year
which would cause such expenses to exceed the foregoing expense limitations
applicable at the time of such payment, and any required reimbursements will be
made promptly at the end of such fiscal year. For the years ended
5
<PAGE>
December 31, 1991, 1992 and 1993, the advisory fees paid by the Program to the
Adviser aggregated $1,953,297, $2,356,026 and $2,960,370, respectively, none of
which was reimbursed by the Adviser.
The Agreement provides that the use of the name "The Municipal Fund
Investment Accumulation Program" by the Program is non-exclusive and that the
Adviser may allow other persons, including other investment companies, to use
the name. The name may also be withdrawn by the Adviser, in which event the
Adviser has agreed to present the question of continuing the Agreement to a vote
of the Shareholders.
The Agreement will continue from year to year if approved at least annually
either (i) by a vote of a majority of the Program's Shares or (ii) by the Board
and, in each case, by the vote of a majority of those directors who are not
parties to the Agreement or interested persons of any such party cast in person
at a meeting called for the purpose of voting on such approval. It was most
recently approved by Shareholders on June 5, 1987 and by the Board (including
all of the non-interested directors) on March 16, 1994. The Agreement provides
that the Adviser shall have no liability to the Program or any Shareholder for
any error of judgment, mistake of law or any loss arising out of any investment,
or for any other act or omission in the performance by the Adviser of its duties
under the Agreement, except for liability resulting from willful misfeasance,
bad faith or gross negligence on the Adviser's part or from reckless disregard
by the Adviser of its obligations and duties under the Agreement. The Agreement
automatically terminates upon its assignment, is terminable, without penalty, by
the Board or by vote of the holders of a majority of the Shares on 60 days'
notice to the Adviser and by the Adviser on 90 days' notice to the Program. The
Adviser's right to terminate could operate to the disadvantage of or work a
hardship on the Program.
THE ADVISER--Effective January 1, 1994, the Adviser, was reorganized as a
Delaware limited partnership. FAM (the general partner of which is Princeton
Services Inc., a wholly-owned subsidiary of Merrill Lynch & Co., Inc.) is itself
a wholly-owned subsidiary of Merrill Lynch & Co., Inc. and has its principal
place of business at 800 Scudders Mill Road, Plainsboro, New Jersey 08536.
Merrill Lynch & Co., Inc. has its principal place of business at 250 Vesey
Street, New York, New York, 10281. Prior to the reorganization, the Adviser was
a Delaware corporation known as Fund Asset Management, Inc., which was
incorporated in 1976. The reorganization did not result in a change to the
Adviser's management or personnel, nor did the reorganization cause any adverse
change to the Adviser's financial condition. Fund Asset Management, Inc. was a
wholly-owned subsidiary of Merrill Lynch Investment Management, Inc., which did
business as Merrill Lynch Asset Management. Merrill Lynch Asset Management, L.P.
was a wholly-owned subsidiary of Merrill Lynch & Co., Inc. prior to its
reorganization, which was similar to that of FAM, and continues to be after its
reorganization.
The Agreement is non-exclusive, and the Adviser, as well as certain of its
affiliates, is in the business of furnishing investment advice to individuals,
institutional clients and other investment companies, including other investment
accumulation programs. The fees charged to these clients vary in accordance with
the type of client and services rendered. Merrill Lynch, an affiliate of the
Adviser, is engaged in the underwriting, securities and commodities brokerage
business and is a member organization of the New York Stock Exchange, Inc.,
other major securities exchanges and commodity exchanges, and the National
Association of Securities Dealers, Inc. Merrill Lynch Asset Management, L.P.
("MLAM"), an affiliate of the Adviser, is an indirect wholly-owned subsidiary of
Merrill Lynch & Co., Inc. and is engaged in the investment advisory business.
Securities held by the Program may also be held by other funds or accounts
for which the Adviser acts as adviser or by its investment advisory clients. If
purchases or sales of securities for the Program or other funds or accounts for
which it acts or for their clients arise for consideration at or about the same
6
<PAGE>
time, the Adviser will attempt, subject to applicable laws and regulations, to
allocate equitably portfolio transactions among the Program and the portfolios
of its other investment funds or accounts whenever decisions are made to
purchase or sell securities for the Program and one or more of such other funds
or accounts simultaneously. In making such allocations, the main factors to be
considered will be the respective investment objectives of the Program and such
other funds and accounts, the relative size of the portfolio holdings of the
same or comparable securities, the availability of cash for investment by the
Program and such other funds and accounts, the size of investments held by the
Program and such other funds and accounts, and opinions of the persons
responsible for recommending investments to the Program and such other funds and
accounts. While this procedure could have a detrimental effect on the price and
amount of the securities available to the Program from time to time, it is the
opinion of the Board that the benefits available from the Adviser's organization
will outweigh any disadvantage that may arise from exposure to simultaneous
transactions. To the extent that transactions on behalf of more than one client
of the Adviser during the same period may increase the demand for securities
being purchased or the supply of securities being sold, there may be an adverse
effect on price.
ADMINISTRATION AGREEMENT--The Adviser has entered into an agreement (the
"Administration Agreement") with the Administrators for the performance by them,
at their expense, on behalf of the Adviser of the administrative functions
described in clause (2) of the first paragraph under "Investment Advisory
Agreement" which the Adviser is obligated to perform and has agreed to pay to
the Administrators an aggregate monthly fee at the annual rate of 0.2% of the
value of the Program's average daily net assets from the beginning of the year
to the end of such month. The fee so payable by the Adviser will be allocated
among the Administrators in the following respective percentages: Merrill Lynch,
48%; Prudential, 21%; Dean Witter, 21%; and Smith Barney Shearson, 10%. In order
to comply with the expense limitation requirements described above under the
caption "Investment Advisory Agreement," the Administrators have undertaken to
reimburse the Adviser in proportion to such monthly fee for the purpose of the
Adviser's reimbursement of the Program in the manner described under such
caption.
Merrill Lynch has been appointed by the other Administrators as agent for
purposes of taking any action under the Administration Agreement with respect to
the Program by power of attorney executed by such Administrators and filed with
the Program and the Agent. Provision is also made under the Administration
Agreement that if the Administrators are unable to agree in respect to action to
be taken jointly by them thereunder and cannot agree as to which Administrators
shall continue to act as Administrators, then Merrill Lynch shall continue to
act as sole Administrator. Similarly, if one or more of the Administrators fail
to perform their duties under the Administration Agreement or become incapable
of acting or become bankrupt or if their affairs are taken over by public
authorities, then each such Administrator shall be automatically discharged
under the Administration Agreement, and the remaining Administrators shall act
as sole Administrators. In addition, the Administration Agreement is terminable,
without penalty, by the Adviser on 60 days' notice to the Administrators and by
the Administrators, acting as a group, on 90 days' notice to the Adviser. The
Administrators' right to terminate could operate to the disadvantage of or work
a hardship on the Program.
The Administration Agreement is non-exclusive, and the Administrators, as
well as their affiliates, may furnish similar administrative services to other
clients, including other investment accumulation programs. The fees charged to
these clients may vary in accordance with the type of client and services
rendered. Each of the Administrators has acted as sponsor of a number of series
of the Corporate Income Fund, the Municipal Income Fund, the Municipal
Investment Trust Fund, Liberty Street Trust (Corporate Monthly Payment Series or
Municipal Monthly Payment Series) or the International Bond Fund and other
series of these unit investment trust investment companies and proposes to act
in the
7
<PAGE>
future as a sponsor of new series thereof. Each of the Administrators has also
acted as principal underwriter and managing underwriter of other investment
companies. Each Administrator, in addition to participating as a member of
various selling groups or as an agent of other investment companies, executes
orders on behalf of investment companies for the purchase and sale of securities
of such companies and sells securities to such companies in its capacity as
broker or dealer in securities.
DIRECTORS AND OFFICERS
Responsibility for the Program's management rests with the Board, which
meets at least quarterly to oversee the implementation of the Program's
investment policies and which must approve the renewal of the Agreement. Listed
below are the directors and officers of the Program (who also serve in similar
capacities in other open-end management investment companies for which Fund
Asset Management, L.P. or MLAM is investment adviser), their addresses and
principal occupations during the past five years.
<TABLE> <CAPTION>
NAME CAPACITY ADDRESS
- ------------------------------ ---------------------------------------- ---------------------------------------
<S> <C> <C>
Arthur Zeikel* President and Director(1) 800 Scudders Mill Road
Plainsboro, New Jersey
08536
</TABLE>
Occupation: President, Director and Chief Investment Officer of the Adviser
since 1977; President of MLAM since 1977 and Director and Chief Investment
Officer since 1976; Executive Vice President of Merrill Lynch & Co., Inc.
and Merrill Lynch since 1990 and Senior Vice President from 1985 to 1990;
President and Director of Princeton Services, Inc. since 1993; and
Director of Merrill Lynch Funds Distributor, Inc.
<TABLE>
<S> <C> <C>
Ronald W. Forbes Director(1) 1400 Washington Avenue
Albany, New York 12222
</TABLE>
Occupation: Professor of Finance, School of Business, State University of
New York at Albany since 1989 and Associate Professor prior thereto;
Member, Task Force on Municipal Securities Markets, Twentieth Century
Fund; Consultant, Public Finance Banking, Smith Barney Shearson Brothers,
Inc.].
<TABLE>
<S> <C> <C>
Cynthia A. Montgomery Director(1) Harvard Business School
Soldiers Field Road
Boston, Massachusetts 02163
</TABLE>
Occupation: Professor, Harvard Business School, since 1989; Associate
Professor, J.L. Kellog Graduate School of Management, Northwestern
University from 1985 to 1989; Assistant Professor, Graduate School of
Business Administration, The University of Michigan, from 1979 to 1985;
Director, UNUM Corporation.
<TABLE>
<S> <C> <C>
Charles C. Reilly Director(1) 91 Hampton Harbor Road
Hampton Bays, New York
11946
</TABLE>
Occupation: Adjunct Professor, Columbia University Graduate School of
Business since 1990; Adjunct Professor, Wharton School, University of
Pennsylvania during 1990; President and Chief Investment Officer of Verus
Capital, Inc. from 1979 to 1990; Senior Vice President of Arnhold and S.
Bleichroeder, Inc. from 1973 to 1990.
<TABLE>
<S> <C> <C>
Kevin A. Ryan Director(1) 127 Commonwealth Avenue
Chestnut Hill, Massachusetts
02167
</TABLE>
Occupation: Professor of Education at Boston University since 1982. Founder
and current Director of The Boston University Center for Advancement of
Ethics and Character. Formerly taught on the faculties of the University
of Chicago, Stanford University and The Ohio State University.
8
<PAGE>
<TABLE> <CAPTION>
NAME CAPACITY ADDRESS
- ------------------------------ ---------------------------------------- ---------------------------------------
<S> <C> <C>
Richard R. West Director(1) 482 Tepi Drive
Southbury, Connecticut
06488
</TABLE>
Occupation: Professor of Finance and Dean from 1984 to 1993 New York
University Leonard N. Stern School of Business Administration; Professor
of Finance at the Amos Tuck School of Business Administration, Dartmouth
College, from 1976 to 1984 and Dean from 1976 to 1983. Director, Vornado
Realty Trust (real estate holding company), Bowne & Co., Inc. (printer),
Alexander's, Inc. (department stores) and Smith-Corona Corporation
(manufacturer of typewriters and word processors).
<TABLE>
<S> <C> <C>
Terry K. Glenn* Executive Vice President 800 Scudders Mill Road
Plainsboro, New Jersey
08536
</TABLE>
Occupation: Executive Vice President of the Adviser and MLAM since 1983;
President of Merrill Lynch Funds Distributor, Inc. since 1986 and Director
thereof since 1991; President of Princeton Administrators, Inc. since
1988; Director of Financial Data Services, Inc. since 1985; Executive Vice
President and Director of Princeton Services since 1993.
<TABLE>
<S> <C> <C>
Vinceton R. Giordano* Senior Vice President 800 Scudders Mill Road
Plainsboro, New Jersey
08536
</TABLE>
Occupation: Senior Vice President of the Adviser and MLAM since 1984 and
Vice President from 1980 to 1984; Portfolio Manager of MLAM since 1977.
<TABLE>
<S> <C> <C>
Donald C. Burke* Vice President(1) 800 Scudder Mill Road
Plainsboro, New Jersey
08536
</TABLE>
Occupation: Vice President of MLAM and the Adviser since 1990; employee of
Deloitte & Touche from 1982 to 1990.
<TABLE>
<S> <C> <C>
Zita C. Millett* Vice President(1) 800 Scudders Mill Road
Plainsboro, New Jersey
08536
</TABLE>
Occupation: Vice President of MLAM since 1979 and Senior Municipal Bond
Portfolio Manager for MLAM since 1977.
<TABLE>
<S> <C> <C>
Gerald M. Richard* Treasurer(1) 800 Scudders Mill Road
Plainsboro, New Jersey
08536
</TABLE>
Occupation: Senior Vice President and Treasurer of MLAM and the Adviser
since 1984; Vice President of Merrill Lynch Funds Distributor, Inc. since
1981 and Treasurer since 1984; Senior Vice President and Treasurer of
Princeton Services since 1993.
<TABLE>
<S> <C> <C>
Susan B. Baker* Secretary(1) 800 Scudders Mill Road
Plainsboro, New Jersey
08536
</TABLE>
Occupation: Vice President of MLAM since 1993; attorney associated with the
Adviser and MLAM since 1987; attorney in private practice from 1985 to
1987.
- ---------------
* Interested person, as defined in the Investment Company Act of 1940, of
the Program.
(1) Each of Messrs. Zeikel and Glenn is a director or trustee and officer,
Messrs. Forbes, Reilly, Ryan, West and Ms. Montgomery are directors or trustees,
and the officers of the Program are officers, of certain other investment
companies for which the Adviser or MLAM acts as investment adviser.
9
<PAGE>
The Program has an Audit Committee consisting of all the directors of the
Program who are not interested persons of the Program.
REMUNERATION OF OFFICERS AND DIRECTORS--On March 31, 1994, shares of the
Program owned by all officers and directors of the Program as a group aggregated
less than 1/4 of 1% of the total of such shares then outstanding. The Program
pays each unaffiliated director an annual fee of $800 plus $400 per quarterly
meeting attended and an annual fee of $500 for serving on the Program's Audit
Committee, except for the Chairman of the Audit Committee who receives an annual
fee of $1,000. The Program will also pay the out-of-pocket expenses of such
directors relating to attendance at Meetings. For the year ended December 31,
1993, such fees and expenses to the five unaffiliated directors of the Program
aggregated $12,339.
NET ASSET VALUE
The net asset value per Share of the Program is determined by dividing the
net assets of the Program by the number of its outstanding Shares. The net
assets of the Program are its gross assets less its liabilities as determined in
accordance with generally accepted accounting principles. It is the ultimate
responsibility of the Board to establish standards for the valuation of the
Portfolio securities for purposes of determining net asset value of the Program.
The Program has made arrangements with Kenny S&P Evaluation Services, a division
of Kenny Information Systems, Inc., 65 Broadway, New York, New York 10006
("Kenny"), to furnish to the Program and the Agent, on each day that the New
York Stock Exchange is open for trading immediately after the declaration of
dividends, estimated values (as of 4:00 P.M.) of Portfolio securities for
purposes of computation of net asset value of the Shares. The New York Stock
Exchange is not open for trading on the following holidays: New Year's Day,
President's Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day, and Christmas Day. The Board has examined the methods to be
used by Kenny in estimating the value of Portfolio securities and believes that
such methods will reasonably and fairly approximate the price at which Portfolio
securities may be sold and will result in a good faith determination of the fair
value of such securities; however, there is no assurance that the Portfolio
securities can be sold at the prices at which they are valued.
Due to the nature of the secondary market for Municipal Bonds it is
unlikely that current last sale transactions or unsolicited bids will be
regularly available for most of the securities in the Portfolio. The method used
by Kenny to value such Portfolio securities is to obtain "quotes" on comparable
securities of comparable quality and to value such Portfolio securities
similarly. These values are not bids or actual last sale prices but are
estimates of the price at which Kenny believes the Program could sell such
Portfolio securities.
Portfolio securities with respect to which a last sale transaction is
available will be valued by Kenny at such last sales transaction unless in its
judgment such last sale transaction does not fairly and accurately represent the
price at which such Portfolio securities may be sold. If there are current
unsolicited bids outstanding for Portfolio securities with respect to which
there are no such last sale transactions, Kenny will value such Portfolio
securities within the range of bid and asked prices it considers best to
represent the price at which such Portfolio securities can be sold in light of
the then existing circumstances, unless in its judgment such range does not
fairly and accurately represent the range in which such Portfolio securities may
be sold.
REDEMPTION OF SHARES
The right of redemption may be suspended during any period when the New
York Stock Exchange is closed, other than customary weekend and holiday
closings; when trading on such Exchange is restricted or an emergency exists, in
each case as determined by rules and regulations of the Securities
10
<PAGE>
and Exchange Commission; or during any period when the Securities and Exchange
Commission has by order permitted such suspension.
The Program has elected to be obligated to pay in cash redemptions during
any 90-day period for any one Shareholder up to the lesser of $250,000 or 1% of
the Program's net asset value. Payments in excess of such amount will normally
be made in cash. If, however, the Board determines that liquidation of the
Program's holdings is impracticable or that such payment in cash would be
adverse to the interests of the remaining Shareholders, such payment may be made
in whole or in part in Portfolio securities. The value of any Portfolio
securities distributed in payment for tendered Shares will be deemed to be their
value used in determining the net asset value of the Shares at the time they
were tendered for redemption. If securities rather than cash are distributed,
the Shareholder will incur brokerage charges or their equivalent in dealer
markdowns in liquidating these securities.
Due to the high cost of maintaining Shareholder accounts of less than $500,
the Program reserves the right to redeem Shares in any account for their then
current net asset value (which will be paid promptly to the Shareholder), if at
any time the total investment of such Shareholder does not have a net asset
value of at least $500 due to Shareholder redemptions and the Shareholder owns
no Units or has elected that no distributions on any Units owned by such
Shareholder be invested in Shares. Before any such redemption is effected, the
Shareholder will be given 30 days' notice, during which period he will be
entitled to elect to have distributions on Units owned by such Shareholder
invested in Shares or to purchase Shares to bring his account up to a net asset
value of $500 and thereby avoid such redemption.
TAXES AND DISTRIBUTIONS
Reference is made to "Taxes and Distributions" on page 12 of the
Prospectus.
Distributions to Shareholders of net investment income and net short-term
capital gains, if any, including distributions which are reinvested in
additional Shares in the Program, will generally be taxable as ordinary income.
Such distributions will constitute dividends for federal income tax purposes,
but, since no portion will arise from dividends, it is anticipated that such
distributions will not qualify for the 70% dividends-received deduction for
corporations.
Distributions of long-term capital gains (designated as such by the
Program) will be taxable to Shareholders as long-term capital gains at a maximum
rate of 28% for non-corporate Shareholders and a maximum rate of 34% for
corporate Shareholders, regardless of the length of time a Shareholder has held
his Shares. In the event of the redemption of Shares, gain, if any, reflecting
accrued but undistributed net interest income thereon may be subject to taxation
as (depending on the length of time the Shareholder has held the redeemed
Shares) long-or short-term capital gains.
No later than 60 days after the end of each calendar year, the Program will
send to Shareholders a written notice required by the Internal Revenue Code of
1986, as amended (the "Code") designating the amount of its dividends which
constitute "exempt-interest dividends," the amount which is taxable as ordinary
income and the amount which is taxable as long-term capital gain.
Every person required to file a tax return must disclose on such return the
amount of exempt-interest dividends received from the Program during the taxable
year. The disclosure of such amount is for informational purposes only. In
addition, with respect to a Shareholder who receives exempt-interest dividends
on shares held for less than six months, any loss on the sale or exchange of
such shares will, to the extent of the amount of such exempt-interest dividends,
be disallowed.
Interest income with respect to certain tax-exempt bonds, known as "private
activity bonds," is a preference item for purposes of the corporate and
individual alternative minimum tax. To the extent
11
<PAGE>
that the Program invests in private activity bonds, Shareholders will have
preference items attributable to their proportionate shares of the interest
income received by the Program from such bonds. In addition, for purposes of
calculating the corporate alternative minimum tax, a corporation is required to
increase its alternative minimum taxable income by 75% of the amount by which
adjusted current earnings exceed alternative minimum taxable income (determined
without regard to this provision or net operating losses). Under this provision,
interest income from tax-exempt bonds held by the Program would increase the
alternative minimum taxable income of corporate Shareholders.
Any dividend declared by the Program in October, November or December of
any year and made payable to Shareholders of record in such month will be deemed
to be received on December 31 of such year if actually paid during the following
January.
A deductible environmental tax is imposed on a corporation's alternative
minimum taxable income (computed without regard to either the alternative tax
net operating loss deduction or the environmental tax deduction) at a rate of
$12 per $10,000 (0.12%) of alternative minimum taxable income in excess of
$2,000,000. The tax will be imposed even if the corporation is not required to
pay an alternative minimum tax because the corporation's regular income tax
liability exceeds its minimum tax liability. The Program is not subject to the
tax. The tax is imposed on the Program's corporate Shareholders, however, and
exempt-interest dividends paid by the Program that create alternative minimum
tax preferences for corporate Shareholders will be subject to the tax.
The foregoing is a general and abbreviated summary of the applicable
provisions of the Code and Treasury Regulations currently in effect. For the
complete provisions, reference should be made to the pertinent Code sections and
the Treasury Regulations promulgated thereunder. The Code and these Regulations
are subject to change by legislative or administrative action. See "Taxes and
Distributions" in the Prospectus for information as to state and local taxes.
PORTFOLIO TRANSACTIONS
While there is no undertaking or agreement to do so, the Adviser may
allocate securities transactions among various dealers on the basis of
supplementary statistical and research information and price quotation and other
services furnished to the Program or the Adviser. Such statistical and research
information may be used by the Adviser in providing investment advice for all of
the accounts which it manages, and it is not possible to relate the benefits of
such information to any particular account. The Adviser is able to fulfill its
obligations to furnish a continuous investment program to the Program without
such information from dealers. However, the Adviser considers access to such
information to be an important element of financial management. While such
information is considered useful, its value is not determinable and the Adviser
does not feel that such information reduces its expenses. In implementing the
above policies, the Program will not offset brokerage commissions paid to the
affiliates of the Adviser, if any, against advisory fees payable to the Adviser,
nor will it attempt to offset brokerage commissions payable to other brokers
which effect Portfolio transactions for the Program. The Board has considered
the propriety of seeking such offsets and has determined that it is in the best
interest of the Program not to seek such offsets at this time and that it will
reconsider this determination in the future at least annually. The Program may
effect Portfolio transactions conducted on an agency basis through affiliates of
the Adviser provided that, in the judgment of the Adviser, more favorable prices
or executions are not obtainable elsewhere.
Under the Investment Company Act of 1940, persons affiliated with the
Program are prohibited from dealing with the Program as a principal in the
purchase and sale of securities for the Program unless such trading is permitted
by an exemptive order issued by the Securities and Exchange Commission. The
Program has obtained an exemptive order permitting it to engage in certain
principal
12
<PAGE>
transactions involving high quality short-term tax-exempt securities. During the
years ended December 31, 1991, 1992 and 1993, the Program did not purchase
Municipal Bonds in principal transactions pursuant to the exemptive order.
Affiliated persons of the Program may serve as broker in over-the-counter
transactions conducted on an agency basis. Also, under the Investment Company
Act of 1940, the Program may not purchase Municipal Bonds from any underwriting
syndicate of which Merrill Lynch is a member except pursuant to an exemptive
order or rules adopted by the Securities and Exchange Commission.
PERFORMANCE DATA
The Program may from time to time include its average annual total return
and yield in advertisements or information furnished to present or prospective
shareholders. Set forth below is the Program's average annual total return
information for the periods indicated:
<TABLE> <CAPTION>
YEAR ENDED 5-YEAR PERIOD ENDED 10-YEAR PERIOD ENDED
DECEMBER 31, 1993 DECEMBER 31, 1993 DECEMBER 31, 1993
------------------ --------------------- ---------------------
<S> <C> <C> <C>
Average Annual
Total Return (a).................... 11.99% 9.48% 10.01%
</TABLE>
- ------------
(a) Average annual total return quotations for the specified periods are
computed by finding the average annual compounded rates of return (based upon
net investment income and any capital gains or losses on portfolio investments
over such periods) that would equate the initial amount invested to the
redeemable value of such investment at the end of each period. Average annual
total return is computed assuming all dividends and distributions are reinvested
and taking into account all applicable recurring and nonrecurring expenses.
The Program may supplement this Statement of Additional Information with
yield quotations to comply with certain regulations issued by the Securities and
Exchange Commission with respect to the advertisement of performance. Yield
quotations will be computed based on a 30-day period by dividing the net income
earned during the period based on the yield to maturity of each security held by
the Program by the average daily number of shares outstanding during the period
that were entitled to receive dividends times the maximum offering price per
share on the last day of the period.
GENERAL INFORMATION
DESCRIPTION OF SHARES--The Program is authorized to issue a total of
50,000,000 shares of $.01 par value each. There is no limitation on the sales
charge, if any, at which the Shares may be offered or the types of investors to
whom offerings may be made. Shares are fully paid and non-assessable when
issued, have no pre-emptive, conversion or exchange rights and are transferable
without restriction. Each Share entitles the holder to one vote at all meetings
of shareholders. Cumulative voting is not permitted. Thus the holders of more
than 50% of the Shares voting for the election of the Directors can elect all of
the Directors of the Program if they choose to do so and in such event the
holders of the remaining Shares would not be able to elect any Directors.
Holders of Shares are entitled to participate equally in dividends and
distributions, and, in addition, in the event of the distribution or liquidation
of the Program the holders of Shares will be entitled to participate equally in
any assets of the Program. Unless requested to do so by a Shareholder, the
Program will not ordinarily issue certificates representing Shares but will
instead establish for each Shareholder through the Agent an account under which
such Shares are held for safekeeping.
13
<PAGE>
AUDITORS AND FINANCIAL STATEMENTS--Deloitte & Touche, independent auditors
for the Program, have audited the statement of assets and liabilities, including
the schedule of investments, of the Program as of December 31, 1993 and the
related statements of operations for the year then ended and of changes in net
assets for the years ended December 31, 1993 and 1992 and the financial
highlights for each of the years in the five-year period ended December 31, 1993
as stated in their report appearing herein, and such financial statements have
been included herein in reliance upon such report given upon the authority of
that firm as experts in accounting and auditing. The Program will issue to
Shareholders semi-annual and annual reports containing financial statements
including information relating to net asset value per share and income and
expense.
LEGAL COUNSEL--Rogers & Wells, New York, New York, is counsel for the
Program.
DESCRIPTION OF BOND RATINGS*
STANDARD & POOR'S--AAA--Bonds rated AAA have the highest rating assigned by
Standard & Poor's. Capacity to pay interest and repay principal is extremely
strong.
AA--Bonds rated AA have a very strong capacity to pay interest and repay
principal and differ from the higher rated issues only in small degree.
A--Bonds rated A have a strong capacity to pay interest and repay principal
although they are somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than bonds in higher rated categories.
BBB--Bonds rated BBB are regarded as having an adequate capacity to pay
interest and repay principal. Whereas they normally exhibit adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
bonds in this category than in higher rated categories.
BB--B--CCC--CC--Bonds rated BB, B, CCC and CC are regarded, on balance, as
predominantly speculative with respect to capacity to pay interest and repay
principal in accordance with the terms of the obligation. BB indicates the
lowest degree of speculation and CC the highest degree of speculation. While
such bonds will likely have some quality and protective characteristics, these
are outweighed by large uncertainties or major risk exposures to adverse
conditions.
C--the rating C is reserved for income bonds on which no interest is being
paid.
D--Bonds rated D are in default, and payment of interest and/or repayment
of principal is in arrears.
NR--indicates that no rating has been requested, that there is insufficient
information on which to base a rating, or that S&P does not rate a particular
type of bond as a matter of policy.
Plus (+) or minus (-): The ratings from "AA" to "B" may be modified by the
addition of a plus or minus sign to show relative standing within the major
rating categories.
Provisional Ratings. The letter "p" indicates that the rating is
provisional. A provisional rating assumes the successful completion of the
project being financed by the bonds being rated and indicates that payment of
debt service requirements is largely or entirely dependent upon the successful
and timely completion of the project. This rating, however, while addressing
credit quality subsequent to completion of the project, makes no comment on the
likelihood of, or the risk of default upon failure of, such completion. The
investor should exercise his own judgment with respect to such likelihood and
risk.
- ------------
* As described by the rating companies themselves.
14
<PAGE>
MOODY'S--Aaa--Bonds which are rated Aaa are judged to be of the best
quality. They carry the smallest degree of investment risk and are generally
referred to as "gilt edge." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized are
most unlikely to impair the fundamentally strong position of such issues.
Aa--Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known as
high grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long term risks appear somewhat larger than in Aaa securities.
A--Bonds which are rated A possess many favorable investment attributes and
are to be considered as upper medium grade obligations. Factors giving security
to principal and interest are considered adequate but elements may be present
which suggest a susceptibility to impairment sometime in the future.
Baa--Bonds which are rated Baa are considered medium grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
Ba--Bonds which are rated Ba are judged to have speculative elements; their
future cannot be considered as well assured. Often the protection of interest
and principal payments may be very moderate and thereby not well safeguarded
during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class.
B--Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
Caa--Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest.
Ca--Bonds which are rated Ca represent obligations which are speculative in
a high degree. Such issues are often in default or have other marked
shortcomings.
C--Bonds which are rated C are the lowest rated class of bonds and issues
so rated can be regarded as having extremely poor prospects of ever attaining
any real investment standing.
Note: Moody's applies numerical modifiers 1, 2 and 3 in each generic rating
classification from Aa to B. The modifier 1 indicates that the company ranks in
the higher end of its generic rating category, the modifier 2 indicates a
mid-range ranking; and the modifier 3 indicates that the company ranks in the
lower end of its generic rating category.
CON.( . . . )--Bonds for which the security depends upon the completion of
some act or the fulfillment of some condition are rated conditionally. These are
bonds secured by (a) earnings of projects under construction, (b) earnings of
projects unseasoned in operation experience, (c) rentals which begin when
facilities are completed, or (d) payments to which some other limiting condition
attaches. Parenthetical rating denotes probable credit stature upon completion
of construction or elimination of basis of condition.
15
<PAGE>
THE BOARD OF DIRECTORS AND SHAREHOLDERS,
THE MUNICIPAL FUND ACCUMULATION PROGRAM, INC.:
We have audited the accompanying statement of assets and liabilities, including
the schedule of investments, of the Municipal Fund Accumulation Program, Inc. as
of December 31, 1993, the related statements of operations for the year then
ended and changes in net assets for each of the years in the two-year period
then ended, and financial high lights for each of the years in the five-year
period then ended. These financial statements and the financial highlights are
the responsibility of the Program's management. Our responsibility is to express
an opinion on these financial statements and the financial highlights based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and the financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned at December
31, 1993 by correspondence with the custodian. An audit also includes assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of the Municipal Fund
Accumulation Program, Inc. as of December 31, 1993, the results of its
operations, the changes in its net assets, and the financial highlights for the
respective stated periods in conformity with generally accepted accounting
principles.
DELOITTE & TOUCHE
Princeton, New Jersey
February 4, 1994
16
<PAGE>
Independent Auditors' Report
The Board of Directors and Shareholders, The Municipal Fund
Accumulation Program, Inc.:
We have audited the accompanying statement of assets and
liabilities, including the schedule of investments, of The
Municipal Fund Accumulation Program, Inc. as of December 31,
1993, the related statements of operations for the year then
ended and changes in net assets for each of the years in the
two-year period then ended, and financial highlights for each
of the years in the five-year period then ended. These financial
statements and the financial highlights are the responsibility
of the Program's management. Our responsibility is to express
an opinion on these financial statements and the financial
highlights based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements and the financial highlights are free
of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the
financial statements. Our procedures included confirmation of
securities owned at December 31, 1993 by correspondence with the
custodian. An audit also includes assessing the accounting
principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, such financial statements and financial highlights
present fairly, in all material respects, the financial position
of The Municipal Fund Accumulation Program, Inc. as of December 31,
1993, the results of its operations, the changes in its net assets,
and the financial highlights for the respective stated periods in
conformity with generally accepted accounting principles.
/s/ Deloitte & Touche
Deloitte & Touche
Princeton, New Jersey
February 4, 1994
<PAGE>
<TABLE> <CAPTION>
The Municipal Fund Accumulation Program, Inc.
Schedule of Investments as of December 31, 1993 (in Thousands)
S&P Moody's Face Value
Rating Rating Amount Issue (Note 1a)
<S> <C> <C> <C> <C>
Alabama--0.4%
AA A1 $ 2,000 City of Birmingham, Alabama, General Obigation Refunding Bonds, Series 1988,
8% due 10/01/2015 $ 2,307
Alaska--0.1%
A+ Aa1 690 Alaska Housing Finance Corporation, Insured Mortgage Program Refunding Bonds,
1990 First Series, 7.80% due 12/01/2030 734
Arizona--2.1%
AA Aa 2,000 Salt River Project, Arizona, Agricultural Improvement and Power District,
Electric System Revenue Bonds, Series 1991-A, 6.50% due 1/01/2022 2,185
AA Aa 1,000 Salt River Project, Arizona, Agricultural Improvement and Power District,
Electric System Revenue Bonds, Series 1992-A, 6.20% due 1/01/2012 1,078
AA Aa 5,000 Salt River Project, Arizona, Agricultural Improvement and Power District,
Electric System Revenue Bonds, Series 1992-A, 5.50% due 1/01/2028 4,939
AA Aa 2,000 Salt River Project, Arizona, Agricultural Improvement and Power Di strict,
Electric System Revenue Bonds, Series 1992-C, 6.25% due 1/01/2019 2,168
AA Aa 3,000 Salt River Project, Arizona, Agricultural Improvement and Power District,
Electric System Revenue Refunding Bonds, Series 1993-B, 5.25% due 1/01/2019 2,959
California--12.3%
AA Aa 765 California Department of Veterans' Affairs, Home Purchase Revenue Bonds, Series 1984-A,
10.50% due 8/01/2010 792
AA Aa 1,500 California Department of Water Resources, Water System Revenue Bonds
(Central Valley Project), Series L, 5.50% due 12/01/2023 1,493
AA Aa 2,000 California Department of Water Resources, Water System Revenue
Bonds (Central Valley Project), Series L, 5.875% due 12/01/2025 2,056
AA- Aa 145 California Health Facilities Financing Authority, Stanford University Hospital
Revenue Bonds, Series 1991-A, 6.50% due 11/01/2020 156
A+ A1 1,000 Contra Costa Transportation Authority, California, Sales Tax Revenue
Bonds (Limited Tax Bonds), Series 1991-A, 6.875% due 3/01/2007 1,153
AA Aa 1,000 Los Angeles, California, Department of Water and Power, Electric Plant
Revenue Bonds, 7.125% due 5/15/2030 1,167
AA Aa 1,000 Los Angeles, California, Department of Water and Power, Electric Plant
Revenue Bonds, Second Issue, 6.75% due 12/15/2029 1,145
AA Aa 10,000 Los Angeles, California, Department of Water and Power, Electric Plant
Revenue Refunding Bonds, 5.375% due 9/01/2023 9,817
AAA Aaa 7,000 Los Angeles (City of), California, Wastewater System Revenue Refunding
Bonds, Series 1993-D, 5.20% due 11/01/2021 (d) 6,824
AAA Aaa 2,000 Los Angeles County, California, Certificates of Participation (Correctional
Facilities Project), 6.50% due 9/01/2013 (c) 2,172
AAA Aaa 1,000 Los Angeles County, California, Metropolitan Transportation Authority,
Sales Tax Revenue Refunding Bonds, Proposition A, Series A, 5% due 7/01/2021 (d) 953
AAA Aaa 2,500 Los Angeles County, California, Transportation Commission Sales Tax
Revenue Bonds, Series 1991-A, 6.75% due 7/01/2018 (b)(d) 2,931
AAA Aaa 1,000 Los Angeles County, California, Transportation Commission Sales Tax
Revenue Refunding Bonds, Series 1988-A, 8% due 7/01/2018 (b) 1,186
AAA Aaa 1,125 M-S-R Public Power Agency, California, Revenue Bonds (San Juan
Project), Series B, 6.50% due 7/01/2017 (c) 1,242
AAA Aaa 1,250 M-S-R Public Power Agency, California, Revenue Bonds (San Juan
Project), Series D, 6.75% due 7/01/2020 (c) 1,511
AA Aa 5,000 Metropolitan Water District of Southern California, Water Revenue Bonds,
Issue of 1992, 5.50% due 7/01/2019 5,036
AAA Aaa 5,000 Metropolitan Water District of Southern California, Water Works, General
Obligation Bonds, Series G, 6.50% due 3/01/2012 5,552
AA Aa 2,000 Metropolitan Water District of Southern California, Water Works Revenue
Bonds, Issue of 1992, 5% due 7/01/2020 1,899
</TABLE>
<PAGE>
<TABLE> <CAPTION>
The Municipal Fund Accumulation Program, Inc.
Schedule of Investments as of December 31, 1993 (continued) (in Thousands)
<CAPTION>
S&P Moody's Face Value
Rating Rating Amount Issue (Note 1a)
<S> <C> <C> <C> <C>
California (concluded)
A- A1 $ 2,000 San Diego (City of), California, Public Facilities Financing Authority, Sewer
Revenue Bonds, Series 1993-A, 5.25% due 5/15/2020 $ 1,920
AA Aa 2,000 San Francisco, California, City and County Public Utility Commission, Water
Revenue Refunding Bonds, Series 1987, 8% due 11/01/2011 2,318
AA Aa 2,400 Southern California Public Power Authority, Power Project Revenue
Refunding Bonds (Palo Verde Project), Series 1993-A, 5% due 7/01/2015 2,296
AAA Aaa 8,000 Southern California Public Power Authority, Transmission Project Revenue
Refunding Subordinated Bonds, Series 1993-A, 5% due 7/01/2022 (c) 7,615
AA- Aa 3,750 Southern California Public Power Authority, Transmission Project Revenue
Refunding Subordinated Crossover Bonds (Southern Transmission Project),
5.50% due 7/01/2020 3,698
A+ Aa 5,000 State of California, General Obligation Bonds, 6.25% due 9/01/2012 5,577
A+ Aa 2,000 State of California, General Obligation Refunding Bonds, 5.15% due 10/01/2019 1,917
A+ Aa 2,500 State of California, Various Purpose General Obligation Bonds, 6.25% due 10/01/2019 2,863
AAA Aaa 2,000 University of California, Housing Revenue Bonds, Group A, Series X,
7.60% due 11/01/2018 (b)(c) 2,258
AAA Aaa 1,000 University of California Revenue Bonds, Series 1989-B, Multi-Purpose
Project, 6.75% due 9/01/2023 (b)(e) 1,151
Colorado--0.5%
AA Aa 3,125 Colorado Springs (City of), Colorado, Utilities System Revenue Refunding
Bonds, Series 1991-A, 6.50% due 11/15/2015 3,458
Connecticut--2.4%
AA Aa 3,000 Connecticut Housing Finance Authority, Housing Mortgage Finance
Program Bonds, Series 1990-B, Sub-Series B-1, 7.55% due 11/15/2008 3,291
AA Aa 1,250 Connecticut Housing Finance Authority, Housing Mortgage Finance
Program Bonds, Series 1992-A, 5.85% due 11/15/2016 1,283
AA Aa 1,200 Connecticut Housing Finance Authority, Housing Mortgage Finance
Program Bonds, Series 1993-A, 6.20% due 5/15/2014 1,273
AAA NR 1,400 Connecticut State, Special Tax Obligation Revenue Bonds, Transportation
Infrastructure Purposes, Series 1991-A, 6.75% due 6/01/2011 (b) 1,646
AA- A1 4,000 Connecticut State, Special Tax Obligation Revenue Bonds, Transportation
Infrastructure Purposes, Series 1993-C, 5% due 10/01/2013 3,926
AA- A1 1,000 Connecticut State, Special Tax Obligation Revenue Refunding Bonds, Transportation
Infrastructure Purposes, Series 1993-A, 5.375% due 9/01/2008 1,035
AA- Aa 1,000 State of Connecticut, General Obligation Refunding Bonds, Series E, 5% due 3/15/2010 992
AA- Aa 2,000 State of Connecticut, General Obligation Refunding Bonds, Series 1993-A,
5.60% due 11/15/2010 2,092
Florida--6.3%
NR Aaa 1,000 Broward County, Florida, General Obligation Bonds (Environmentally
Sensitive Lands Project), Series 1989, 6.90% due 7/01/2009 (b) 1,121
A A 1,800 Broward County, Florida, Resource Recovery Revenue Bonds, Series 1984
(North Project), 7.95% due 12/01/2008 2,056
A A 885 Broward County, Florida, Resource Recovery Revenue Bonds, Series 1984
(South Project), 7.95% due 12/01/2008 1,011
AAA Aaa 1,000 Escambia County Utility Authority, Florida, Utilities System Revenue Bonds,
Series 1985-A, 9.60% due 1/01/2015 (b)(c) 1,139
AAA Aaa 1,000 Florida Municipal Power Agency, Revenue Refunding Bonds, (Stanton Project),
Series 1991, 6% due 10/01/2015 (c) 1,052
AAA Aaa 3,000 Florida Municipal Power Agency, Revenue Bonds, (Stanton II Project),
6% due 10/01/2027 (b)(e) 3,386
AA Aa 1,000 Florida State Board of Education, Public Education Capital Outlay Bonds,
Series 1992-C, 5.85% due 6/01/2018 1,044
</TABLE>
<PAGE>
<TABLE> <CAPTION>
The Municipal Fund Accumulation Program, Inc.
Schedule of Investments as of December 31, 1993 (continued) (in Thousands)
S&P Moody's Face Value
Rating Rating Amount Issue (Note 1a)
<S> <C> <C> <C> <C>
Florida (concluded)
AA Aa $ 2,400 Florida State Board of Education, Public Education Capital Outlay Bonds,
Series 1992-C, 5.875% due 6/01/2023 $ 2,507
AA Aa 2,500 Florida State Board of Education, Public Education Capital Outlay
Refunding Bonds, Series 1989-A, 6% due 6/01/2025 2,602
AA UR* 2,000 Jacksonville, Florida, Electric Authority, Bulk Power Supply System Revenue Bonds
(Scherer 4 Project), Issue One, Series 1991-A, 6.75% due 10/01/2021 (b) 2,322
AA Aa1 1,000 Jacksonville, Florida, Electric Authority Revenue Bonds (Saint John's
River Power Park System), Series 7, 8.875% due 10/01/2010 1,109
AA Aa1 10,000 Jacksonville, Florida, Electric Authority Revenue Refunding Bonds
(Saint John's River Power Park System), Issue 2, Series 1993-9, 5.25% due 10/01/2021 9,770
AAA Aaa 1,000 Orange County, Florida, Tourist Development Tax Revenue Bonds,
Series 1992-B, 6% due 10/01/2021 (e) 1,058
AA- Aa 3,000 Orlando, Florida, Utilities Commission Water and Electric Subordinated
Revenue Refunding Bonds, Series 1993-A, 5.25% due 10/01/2023 2,938
A A2 3,000 Saint Lucie County, Florida, Pollution Control Revenue Bonds (Florida
Power and Light Company Project), Series 1984, 11% due 10/01/2019 3,263
A A2 1,500 Saint Lucie County, Florida, Pollution Control Revenue Bonds (Florida
Power and Light Company Project), Series 1985, 10% due 4/01/2020 1,639
AAA Aaa 2,000 State of Florida, Department of Transportation, Turnpike Revenue Bonds,
Series 1989-A, 7.60% due 7/01/2014 (b)(c) 2,367
Georgia--4.2%
AAA Aa 2,000 Atlanta (City of), Georgia, Water and Sewage Revenue Bonds,
Series 1985, 9.50% due 1/01/2008 (b) 2,179
AA- A3 2,000 Development Authority of Burke County, Georgia, Pollution Control Revenue Bonds
(Oglethorpe Power Corporation/Vogtle Project), Series 1984, 10.625% due 1/01/2004 2,053
AA- A3 2,000 Development Authority of Burke County, Georgia, Pollution Control Revenue Bonds
(Oglethorpe Power Corporation/Vogtle Project), Series 1984-B, 10.50% due 1/01/2014 (b) 2,040
AA- A3 3,000 Development Authority of Burke County, Georgia, Pollution Control Revenue Bonds
(Oglethorpe Power Corporation/Vogtle Project), Series 1985-B, 9.875% due 1/01/2010 3,232
AA- Aaa 3,250 Municipal Electric Authority of Georgia, General Power Revenue Bonds,
Series 1988-B, 8% due 1/01/2008 (b) 3,798
AA- A1 1,000 Municipal Electric Authority of Georgia, Power Revenue Bonds, Series T,
6.50% due 1/01/2025 1,060
AA- A1 1,000 Municipal Electric Authority of Georgia, Power Revenue Bonds, Series V,
6.60% due 1/01/2018 1,164
AA- A1 4,750 Municipal Electric Authority of Georgia, Special Obligation Refunding
Bonds, Project 1, Fifth Crossover Series 1992, 6.50% due 1/01/2017 5,468
AA- A1 3,000 Municipal Electric Authority of Georgia, Special Obligation Refunding
Bonds, Second Crossover Series 1988, 8.125% due 1/01/2017 3,477
AA+ Aaa 2,000 State of Georgia, General Obligation Bonds, Series 1992-B, 6.30% due 3/01/2010 2,308
Illinois--1.8%
A+ A1 500 Chicago (City of), Illinois, Chicago-O'Hare International Airport Revenue
Bonds, Series 1984-A and B, 10.625% due 1/01/2015 549
A+ A1 500 Chicago (City of), Illinois, Chicago-O'Hare International Airport Revenue
Bonds, Series 1985-A, 8.50% due 1/01/2006 (b) 510
A+ A1 3,300 Chicago (City of), Illinois, Chicago-O'Hare International Airport Revenue
Refunding Bonds, Senior Lien, Series 1993-A, 5% due 1/01/2016 3,115
</TABLE>
<PAGE>
<TABLE> <CAPTION>
The Municipal Fund Accumulation Program, Inc.
Schedule of Investments as of December 31, 1993 (continued) (in Thousands)
S&P Moody's Face Value
Rating Rating Amount Issue (Note 1a)
<S> <C> <C> <C> <C>
Illinois (concluded)
AA Aa2 $ 1,850 Illinois Development Finance Authority, Pollution Control Revenue Refunding Bonds
(Central Illinois Public Services Company Project), Series 1990-B, 7.60% due 9/01/2013 $ 2,106
A+ A1 5,000 Illinois Toll Highway Authority, Toll Highway Priority Revenue Bonds,
Series 1992-A, 6.375% due 1/01/2015 5,405
Indiana--1.8%
A+ A1 1,000 Indiana State Office Building Commission, Capital Complex Revenue Bonds (State Office
Building II Facility Refunding), Series 1990-D, 6.90% due 7/01/2011 1,170
A+ A1 1,000 Indiana State Office Building Commission, Correctional Facilities Program
Revenue Bonds, Series 1991, 6.375% due 7/01/2016 1,087
A+ A1 250 Indiana Transportation Finance Authority, Highway Revenue Bonds,
Series 1988-A, 8% due 6/01/2008 (b) 295
A+ A1 2,250 Indiana Transportation Finance Authority, Highway Revenue Bonds,
Series 1988-A, 8.125% due 6/01/2011 (b) 2,665
AA+ Aaa 5,000 Indianapolis, Indiana, Local Public Improvement Bond Bank (City
Guaranteed), Series A, 5.90% due 1/10/2014 5,286
AA- Aa2 1,000 Petersburg (City of), Indiana, Pollution Control Revenue Bonds (Indianapolis Power and
Light Company), Series 1985, 9.625% due 9/01/2012 1,112
Kentucky--2.5%
AA Aa2 2,000 Jefferson County, Kentucky, Pollution Control Revenue Bonds (Louisville Gas and
Electric Company Project), Series 1993-B, 5.625% due 8/15/2019 2,033
AAA Aaa 1,250 Kentucky Housing Corporation, Housing Revenue Bonds (Federally Insured or Guaranteed
Mortgage Loans), Series 1993-B, 5.40% due 7/01/2014 1,239
AAA NR 1,000 Kentucky Turnpike Authority, Economic Development Road Revenue
Bonds, Series 1986-A, 7.875% due 1/01/2004 (b) 1,124
AAA NR 3,000 Kentucky Turnpike Authority, Economic Development Road Revenue
Bonds, Series 1987-A, 8.25% due 7/01/2007 (b) 3,494
AAA Aaa 2,000 Kentucky Turnpike Authority, Economic Development Road Revenue Refunding Bonds
(Revitalization Projects), Series 1993, 5.50% due 7/01/2008 (e) 2,100
A+ A 4,000 Kentucky Turnpike Authority, Resource Recovery Road Revenue Bonds,
Series 1987-A, 8% due 7/01/2003 4,589
AAA Aaa 1,250 Kentucky Turnpike Authority, Toll Road Refunding Revenue Bonds, Series
1984-A, 10.75% due 7/01/2010 (b) 1,341
Louisiana--0.2%
NR Aa2 1,000 West Feliciana Parish, Louisiana, Pollution Control Revenue Bonds (Gulf Coast
Utilities Company Project) (Letter of Credit-Bankers' Trust Company), Series 1984-A,
10.625% due 5/01/2014 1,085
Maryland--0.4%
AA1 Aaa 2,000 Maryland Health and Higher Educational Facilities Authority Revenue Bonds (The John
Hopkins Hospital Issue), Series 1990, 7% due 7/01/2023 (b) 2,345
Massachusetts--1.0%
AAA Aaa 1,250 Commonwealth of Massachusetts, General Obligation Bonds, Consolidated Loan,
Series 1984-B, 10.75% due 6/01/2004 (b) 1,326
A+ A 1,000 Commonwealth of Massachusetts, General Obligation Refunding Bonds, Series 1993-A,
5.25% due 2/01/2008 1,008
A+ Aa 1,000 Massachusetts Health and Educational Facilities Authority Revenue Bonds,
Brigham and Womens' Hospital Issue, Series D, 6.75% due 7/01/2024 1,107
AAA Aaa 1,000 Massachusetts Housing Finance Agency, Housing Revenue Bonds, Series 1984-B,
10.375% due 12/01/2009 (c) 1,073
AAA Aaa 1,000 Massachusetts Port Authority Revenue Bonds, Series 1982, 13% due 7/01/2013 (a) 1,746
</TABLE>
<PAGE>
<TABLE> <CAPTION>
The Municipal Fund Accumulation Program, Inc.
Schedule of Investments as of December 31, 1993 (continued) (in Thousands)
S&P Moody's Face Value
Rating Rating Amount Issue (Note 1a)
<S> <C> <C> <C> <C>
Michigan--2.9%
AAA Aaa $ 1,000 Grand Rapids (City of), Michigan, Water Supply System Improvement
Revenue Bonds, Series 1990, 7.25% due 1/01/2020 (b)(d) $ 1,178
AAA Aaa 750 Grand Rapids (City of), Michigan, Water Supply System Revenue
Refunding Bonds, Series 1991, 6.50% due 1/01/2015 (d) 823
AA Aa 1,500 Michigan State Hospital Finance Authority, Hospital Revenue Bonds
(Henry Ford Health System), Series 1990-A, 7% due 7/01/2010 1,670
AA Aa 2,000 Michigan State Hospital Finance Authority, Hospital Revenue Refunding
Bonds (Henry Ford Health System), 5.75% due 9/01/2017 2,048
AAA Aaa 2,000 Michigan Strategic Fund, Limited Obligation Revenue Refunding Bonds (The Detroit
Edison Company Pollution Control Bonds Project), Collateralized Series 1991-BB,
7% due 5/01/2021 (e) 2,484
AAA Aaa 1,000 Michigan Strategic Fund, Limited Obligation Revenue Refunding Bonds (The Detroit
Edison Company Pollution Control Bonds Project), Collateralized Series 1991-CC,
6.95% due 9/01/2021 (d) 1,134
AAA Aaa 1,000 Michigan Strategic Fund, Limited Obligation Revenue Refunding Bonds (The Detroit
Edison Company Pollution Control Bonds Project), Collateralized Series 1991-DD,
6.875% due 12/01/2021 (d) 1,136
AA Aa 2,000 Regents of University of Michigan, Hospital Revenue Refunding Bonds,
Series 1993-A, 5.75% due 12/01/2012 2,041
AA Aa 1,250 Royal Oak (City of), Michigan, Hospital Finance Authority, Hospital
Revenue Bonds (William Beaumont Hospital), Series D, 6.75% due 1/01/2020 1,385
AAA Aaa 2,000 Saint Clair County, Michigan, Economic Development Corporation, Pollution Control
Revenue Refunding Bonds (Detroit Edison Company Project), Collateralized Series
1992-DD, 6.05% due 8/01/2024 (e) 2,122
AAA Aaa 2,250 Wyandotte (City of), County of Wayne, State of Michigan, 1987 Electric Revenue
and Revenue Refunding Bonds, 7.875% due 10/01/2017 (b)(e) 2,609
Minnesota--2.0%
AA+ NR 750 Minnesota Public Utilities Authority, Water Pollution Control Revenue Bonds,
Series 1990-A, 7.10% due 3/01/2012 862
AAA Aaa 1,600 Southern Minnesota Municipal Power Agency, Power Supply System
Revenue Bonds, Series 1984-B, 11% due 1/01/2016 (b) 1,783
AAA Aaa 5,000 Southern Minnesota Municipal Power Agency, Power Supply System
Revenue Bonds, Series 1988-A, 8.125% due 1/01/2018 (b) 5,851
A+ A1 2,000 Southern Minnesota Municipal Power Agency, Power Supply System
Revenue Bonds, Series 1989-A, 6% due 1/01/2013 2,069
A+ A1 2,000 Southern Minnesota Municipal Power Agency, Power Supply System
Revenue Refunding Bonds, Series A, 5.75% due 1/01/2018 2,069
Nebraska--0.5%
AA NR 2,000 Omaha, Nebraska, Public Power District, Electric Revenue Bonds,
Series 1992-A, 6.50% due 2/01/2017 (b) 2,304
AA Aa 1,200 Omaha, Nebraska, Public Power District, Electric Revenue Bonds,
Series 1993-C, 5.50% due 2/01/2017 1,212
Nevada--0.4%
NR NR 2,000 Clark County School District, Nevada, General Obligation (Limited Tax),
School Improvement Bonds, Series 1988-A, 8% due 3/01/2008 (b) 2,344
New Jersey--5.3%
AA- Aa 2,500 New Jersey Economic Development Authority, Trenton Office Complex
Revenue Bonds, Series 1989, 6% due 6/15/2012 2,637
AA+ Aa1 3,000 New Jersey General Obligation Refunding Bonds, Series D, 6% due 2/15/2013 3,229
AAA Aaa 1,000 New Jersey Health Care Facilities Financing Authority Revenue Bonds
(Hackensack Medical Center), 6.625% due 7/01/2017 (d) 1,118
AA- A1 2,900 New Jersey Highway Authority (Garden State Parkway), Parkway
Revenue Refunding Bonds, Series 1992, 6% due 1/01/2016 3,044
AAA Aaa 175 New Jersey Housing and Mortgage Finance Agency, Home Buyer
Revenue Bonds, Series 1990-E, 7.65% due 10/01/2016 (c) 183
</TABLE>
<PAGE>
<TABLE>
The Municipal Fund Accumulation Program, Inc.
Schedule of Investments as of December 31, 1993 (continued) (in Thousands)
<CAPTION>
S&P Moody's Face Value
Rating Rating Amount Issue (Note 1a)
<S> <C> <C> <C> <C>
New Jersey (concluded)
A+ NR $ 2,000 New Jersey Housing and Mortgage Finance Agency, Housing Revenue
Refunding Bonds, Series 1992-1, 6.60% due 11/01/2014 $ 2,152
AA+ Aa1 1,000 New Jersey State General Obligation Bonds, 6.30% due 8/01/2007 1,113
AA+ Aa1 2,000 New Jersey State General Obligation Refunding Bonds, Series D, 6% due 2/15/2011 2,250
A A 1,500 New Jersey Turnpike Authority, Turnpike Revenue Bonds, Series 1992-A, 6.20% due 1/01/2018 1,612
A A 10,000 New Jersey Turnpike Authority, Turnpike Revenue Bonds, Series C, 6.50% due 1/01/2016 11,794
A A 2,000 New Jersey Turnpike Authority, Turnpike Revenue Refunding Bonds, Series 1991-A
6.75% due 1/01/2008 2,263
AAA Aaa 1,030 New Jersey Turnpike Authority, Turnpike Revenue Refunding Bonds, Series C,
6.25% due 1/01/2010 (e) 1,114
AA A1 1,000 Rutgers, The State University of New Jersey, General Obligation
Refunding Bonds, Series 1992-A, 6.50% due 5/01/2018 1,105
New Jersey & Pennsylvania--0.4%
AAA Aaa 1,100 Delaware River Port Authority, Revenue Refunding Bonds, Series 1989,
7.375% due 1/01/2007 (e) 1,262
AAA Aaa 1,250 Delaware River Port Authority, Revenue Refunding Bonds, Series 1989,
6.50% due 1/01/2008 (e) 1,341
New Mexico--0.3%
AA A1 1,000 Albuquerque (City of), New Mexico, Joint Water and Sewer System,
Revenue Bonds, Series 1990-A, 6% due 7/01/2015 1,035
AA A1 1,000 Albuquerque (City of), New Mexico, Joint Water and Sewer System,
Revenue Refunding Bonds, Series 1984, 10.625% due 7/01/2002 1,068
New York--18.6%
AA- Aa 975 Municipal Assistance Corporation for the City of New York Revenue
Bonds, Series 59, 6.50% due 7/01/2007 1,047
AA- Aa 1,000 Municipal Assistance Corporation for the City of New York Revenue
Bonds, Series 61, 6.875% due 7/01/2007 1,103
AA- Aa 2,000 Municipal Assistance Corporation for the City of New York Revenue
Bonds, Series 62, 6.75% due 7/01/2006 2,198
A- Aaa 3,000 New York (City of), New York, General Obligation Bonds, Series 1992-A, 8% due 8/15/2021 (b) 3,754
A- Baa1 1,500 New York (City of), New York, General Obligation Bonds, Series 1992-B, 7% due 2/01/2018 1,678
AAA Aaa 2,500 New York (City of), New York, General Obligation Bonds, Series 1992-C,
6.625% due 8/01/2012 (c) 2,796
A- Baa1 3,000 New York (City of), New York, General Obligation Bonds, Series 1992-C,
7.50% due 8/01/2020 3,495
A- Baa1 2,000 New York (City of), New York, General Obligation Bonds, Series 1992-D,
7.50% due 2/01/2016 2,318
A- Baa1 3,000 New York (City of), New York, General Obligation Bonds, Series D, 7.50% due 2/01/2019 3,475
AA Aa 1,000 New York State Dormitory Authority, Cornell University Revenue Bonds,
Series 1990-A, 7.375% due 7/01/2030 1,170
AAA Aaa 1,500 New York State Dormitory Authority, Fordham University Revenue Bonds,
Series 1990, 7.20% due 7/01/2015 (e) 1,742
AAA Aaa 1,395 New York State Dormitory Authority, New York University, Insured
Revenue Bonds, Series 1991, 6% due 7/01/2015 (d) 1,512
AAA Aa 1,000 New York State Dormitory Authority, Saint Vincent's Hospital and Medical Center of New
York, Mortgage Revenue Bonds, Series 1991, 7.40% due 8/01/2030 (f) 1,162
BBB+ Baa1 3,250 New York State Dormitory Authority, State University Educational Facilities Revenue
Bonds, Series 1990-B, 7% due 5/15/2016 3,694
</TABLE>
<PAGE>
<TABLE> <CAPTION>
The Municipal Fund Accumulation Program, Inc.
Schedule of Investments as of December 31, 1993 (continued) (in Thousands)
S&P Moody's Face Value
Rating Rating Amount Issue (Note 1a)
<S> <C> <C> <C> <C>
New York (continued)
BBB+ Aaa $ 1,060 New York State Dormitory Authority, State University Educational Facilities
Revenue Bonds, Series 1990-C, 7% due 5/15/2018 $ 1,243
BBB+ Baa1 940 New York State Dormitory Authority, State University Educational Facilities
Revenue Bonds, Series 1990C, 7% due 5/15/2018 (b) 1,103
A Aa 1,800 New York State Environmental Facilities Corporation, State Water Pollution Control,
Revolving Fund Revenue Bonds (New York City Municipal Water Finance Authority Project),
Series 1990-A, 7.50% due 6/15/2012 2,112
A Aa 1,425 New York State Environmental Facilities Corporation, State Water Pollution Control,
Revolving Fund Revenue Bonds (New York City Municipal Water Finance Authority Project),
Series 1991-A, 7% due 6/15/2012 1,650
AA- Aa 500 New York State Environmental Facilities Corporation, State Water Pollution Control,
Revolving Fund Revenue Bonds (Pooled Loan Issue), Series 1990-B, 7.50% due 3/15/2011 578
A A 9,000 New York State, Local Government Assistance Corporation, Revenue
Bonds, Series A, 6.50% due 4/01/2020 9,799
A Aaa 1,000 New York State, Local Government Assistance Corporation, Revenue
Bonds, Series B, 7.375% due 4/01/2012 (b) 1,206
AAA Aaa 2,000 New York State, Local Government Assistance Corporation, Revenue
Bonds, Series 1991-B, 7% due 4/01/2021 (b) 2,337
A A 5,000 New York State, Local Government Assistance Corporation, Revenue
Bonds, Series 1991-C, 7% due 4/01/2016 (b) 5,916
A A 2,000 New York State, Local Government Assistance Corporation, Revenue
Bonds, Series 1992-A, 6.875% due 4/01/2019 2,280
A A 1,000 New York State, Local Government Assistance Corporation, Revenue
Bonds, Series 1993-D, 5% due 4/01/2023 941
A A 2,000 New York State, Local Government Assistance Corporation, Revenue
Refunding Bonds, Series 1993-E, 5.25% due 4/01/2016 1,971
AA Aa 4,500 New York State Medical Care Facilities Finance Agency, Hospital and
Nursing Home, Mortgage Revenue Bonds, Series 1989-A, 7.25% due 2/15/2024 (f) 5,057
BBB+ Baa1 2,155 New York State Medical Care Facilities Finance Agency, Mental Health
Services, Facilities Improvement Revenue Bonds, Series 1989-A, 7.80% due 2/15/2019 2,456
BBB+ Baa1 1,985 New York State Medical Care Facilities Finance Agency, Mental Health Services, Facilities
Improvement Revenue Bonds, Series 1990-B, 7.875% due 8/15/2020 2,349
BBB+ Baa1 1,000 New York State Medical Care Facilities Finance Agency, Mental Health Services, Facilities
Improvement Revenue Bonds, Series 1991-A, 7.75% due 8/15/2011 1,215
AA Aa 6,140 New York State Power Authority, General Purpose Revenue Bonds,
Series V, 8% due 1/01/2017 7,052
AA- Aa 2,000 New York State Power Authority, General Purpose Revenue Bonds,
Series W, 6.50% due 1/01/2008 2,280
AA- Aa 1,750 New York State Power Authority, General Purpose Revenue Bonds,
Series Z, 6.50% due 1/01/2019 1,939
AA- Aa 8,000 New York State Power Authority, General Purpose and Revenue
Refunding Bonds, Series CC, 5.25% due 1/01/2018 7,989
AAA Aaa 1,000 Triborough Bridge and Tunnel Authority, General Purpose Revenue Bonds,
Series O, 7.70% due 1/01/2019 (b) 1,177
A+ Aaa 2,000 Triborough Bridge and Tunnel Authority, General Purpose Revenue Bonds,
Series R, 7.375% due 1/01/2016 (b) 2,361
A+ Aaa 3,000 Triborough Bridge and Tunnel Authority, General Purpose Revenue Bonds,
Series S, 7% due 1/01/2021(b) 3,525
</TABLE>
<PAGE>
<TABLE> <CAPTION>
The Municipal Fund Accumulation Program, Inc.
Schedule of Investments as of December 31, 1993 (continued) (in Thousands)
S&P Moody's Face Value
Rating Rating Amount Issue (Note 1a)
<S> <C> <C> <C> <C>
New York (concluded)
A+ Aa $ 5,100 Triborough Bridge and Tunnel Authority, General Purpose Revenue Bonds, Series X,
6.625% due 1/01/2012 $ 6,009
A+ Aa 2,000 Triborough Bridge and Tunnel Authority, General Purpose Revenue
Bonds, Series X, 6.50% due 1/01/2019 2,177
A+ Aa 2,500 Triborough Bridge and Tunnel Authority, General Purpose Revenue
Bonds, Series Y, 6% due 1/01/2012 2,763
A+ Aa 5,000 Triborough Bridge and Tunnel Authority, General Purpose Revenue
Refunding Bonds, Series A, 5% due 1/01/2012 4,895
A- A1 3,125 Triborough Bridge and Tunnel Authority, Special Obligation Refunding
Bonds, Series 1991-B, 6.875% due 1/01/2015 3,574
New York & New Jersey--1.9%
AA- A1 1,750 Port Authority of New York and New Jersey, Consolidated Revenue
Bonds, 69th Series, 7.125% due 6/01/2025 2,019
AA- A1 1,825 Port Authority of New York and New Jersey, Consolidated Revenue
Bonds, 78th Series A, 6.50% due 4/15/2011 2,022
AA- A1 4,000 Port Authority of New York and New Jersey, Consolidated Revenue
Bonds, 83rd Series, 6.375% due 10/15/2017 4,419
AA- A1 2,000 Port Authority of New York and New Jersey, Consolidated Revenue
Refunding Bonds, 87th Series, 5.25% due 7/15/2018 1,984
AA- A1 2,000 Port Authority of New York and New Jersey, Consolidated Revenue
Refunding Bonds, 87th Series, 5.25% due 7/15/2021 1,980
North Carolina--2.6%
AA Aa 2,000 Charlotte-Mecklenburg, North Carolina Hospital Authority, Healthcare
System Revenue Bonds, 6.25% due 1/01/2020 2,144
A- A 1,000 North Carolina Eastern Municipal Power Agency, Power System Revenue
Bonds, Series 1989-A, 6.50% due 1/01/2024 1,037
A- A 670 North Carolina Eastern Municipal Power Agency, Power System Revenue
Refunding Bonds, Series 1991-A, 6.50% due 1/01/2018 759
A- Aaa 1,330 North Carolina Eastern Municipal Power Agency, Power System Revenue
Refunding Bonds, Series 1991-A, 6.50% due 1/01/2018 (a) 1,581
AAA Aaa 1,500 North Carolina Municipal Power Agency No. 1, Catawba Electric Revenue
Bonds, 6% due 1/01/2011 (c) 1,648
A A 6,975 North Carolina Municipal Power Agency No. 1, Catawba Electric Revenue
Bonds, Series 1992, 6.25% due 1/01/2017 7,444
AAA Aaa 2,000 North Carolina Municipal Power Agency No. 1, Catawba Electric Revenue
Bonds, Series 1992, 5.75% due 1/01/2020 (c) 2,045
Ohio--4.1%
AAA Aaa 1,750 Cleveland (City of), Ohio, Waterworks Improvement, First Mortgage
Revenue Bonds, Series F 1992-A, 6.50% due 1/01/2021 (b)(e) 2,027
AAA Aaa 8,650 Hamilton (City of), Ohio, Electric System Mortgage Revenue Refunding
Bonds, Series 1992-A, 6% due 10/15/2023 (d) 9,326
AAA Aaa 3,000 Hamilton (City of), Ohio, Electric System Revenue Bonds, Series 1988B,
8% due 10/15/2022 (b)(d) 3,575
AAA Aaa 2,000 Ohio Building Authority, State Correctional Facilities, Revenue Refunding
Bonds, Series 1985-B, 9.75% due 9/01/2012 (b) 2,213
AAA Aaa 500 Ohio Building Authority, State Facilities Revenue Bonds (Columbus State
Office Building), Series 1985-A, 9.625% due 10/01/2005 (b) 569
AAA Aaa 2,150 Ohio Water Development Authority, Pure Water Revenue Refunding and
Improvement Bonds, 6% due 12/01/2008 (e) 2,368
AAA NR 550 Ohio Water Development Authority, Revenue Refunding and Improvement
Bonds, Series R, 8% due 12/01/2018 625
AAA Aaa 2,210 Ohio Water Development Authority, Safe Water Refunding and Improvement, Water Development
Revenue Refunding Bonds, Series 1985, 9.25% due 12/01/2012 (b)(e) 2,461
</TABLE>
<PAGE>
<TABLE> <CAPTION>
The Municipal Fund Accumulation Program, Inc.
Schedule of Investments as of December 31, 1993 (continued) (in Thousands)
S&P Moody's Face Value
Rating Rating Amount Issue (Note 1a)
<S> <C> <C> <C> <C>
Ohio (concluded)
AAA Aaa $ 175 Ohio Water Development Authority, Water Development Revenue
Refunding and Improvement Bonds, Series 1985, 9.375% due 12/01/2018 (e) $ 194
AAA Aaa 525 Ohio Water Development Authority, Water Development Revenue Refunding and
Improvement Bonds, Series 1985, 9.375% due 12/01/2018 (b)(e) 586
AAA Aaa 2,000 Toledo, Ohio, Sewer System Mortgage Revenue Refunding Bonds,
Series 1988-B, 7.75% due 11/15/2017 (c) 2,329
Oklahoma--0.6%
AAA Aaa 1,305 Oklahoma Municipal Power Authority, Power Supply System Revenue Bonds, Series 1990-A,
6.25% due 1/01/2023 (c) 1,418
A+ A1 710 Oklahoma Turnpike Authority, First Senior Revenue Bonds, Series 1989, 6% due 1/01/2022 739
A+ NR 1,290 Oklahoma Turnpike Authority, First Senior Revenue Bonds, Series 1989, 6% due 1/01/2022 (a) 1,503
Pennsylvania--1.0%
AA- A1 2,000 Commonwealth of Pennsylvania, General Obligation Bonds, 3rd
Series 1991-A, 6.50% due 11/15/2011 2,187
AAA Aaa 2,000 Pennsylvania Turnpike Commission, Turnpike Revenue Bonds, Series
1989-K, 7.625% due 12/01/2009 (b) 2,402
AAA Aaa 2,000 Pennsylvania Turnpike Commission, Turnpike Revenue Refunding Bonds,
Series 1992-P, 6% due 12/01/2017 (e) 2,123
Puerto Rico--1.4%
AAA NR 2,000 Commonwealth of Puerto Rico, Public Improvement Bonds of 1990
(General Obligation Bonds), 7.70% due 7/01/2020 (b) 2,434
AAA NR 2,000 Puerto Rico Highway and Transportation Authority, Highway Revenue
Bonds, Series S, 6.625% due 7/01/2018 (b) 2,345
A NR 1,000 Puerto Rico Highway and Transportation Authority, Highway Revenue
Bonds, Series T, 6.625% due 7/01/2018 1,104
AA NR 1,495 Puerto Rico Housing Finance Corporation, Multi-Family Mortgage
Revenue Bonds, Portfolio A, Series I, 7.50% due 4/01/2022 1,606
AAA Aaa 1,125 Puerto Rico Housing Finance Corporation, Single-Family Mortgage
Revenue Bonds, Series C, 6.85% due 10/15/2023 1,218
South Carolina--4.9%
AAA Aaa 2,000 North Charleston, South Carolina, Sewer District Revenue
Refunding Bonds, Series 1992-A, 6% due 7/01/2018 (c) 2,095
AAA Aaa 2,600 Piedmont Municipal Power Agency, South Carolina, Electric Revenue
Bonds, Series 1984, 11% due 1/01/2025 (b) 2,898
AAA Aaa 1,675 Piedmont Municipal Power Agency, South Carolina, Electric Revenue
Refunding Bonds, Series 1991, 6.25% due 1/01/2018 (d) 1,778
AAA Aaa 3,000 Piedmont Municipal Power Agency, South Carolina, Electric Revenue
Refunding Bonds, Series 1991, 6.75% due 1/01/2019 (d) 3,622
AAA Aaa 1,000 Piedmont Municipal Power Agency, South Carolina, Electric Revenue
Refunding Bonds, Series 1991, 6.25% due 1/01/2021 (d) 1,145
AAA Aaa 1,000 Piedmont Municipal Power Agency, South Carolina, Electric Revenue
Refunding Bonds, Series 1991-A, 6.50% due 1/01/2014 (d) 1,169
AAA Aaa 1,000 South Carolina Public Service Authority Electric System Expansion Revenue Bonds (Santee
Cooper), Series 1991-D, 6.50% due 7/01/2024 (b)(e) 1,154
A+ UR* 4,200 South Carolina Public Service Authority, Electric System Expansion Revenue Bonds (Santee
Cooper), Series 1991-D, 6.625% due 7/01/2031 (b) 4,908
AAA Aaa 12,500 South Carolina Public Service Authority, Electric System Expansion Revenue Refunding
Bonds (Santee Cooper), Series 1993-A, 5.50% due 7/01/2021 (c) 12,551
Tennessee--0.3%
AAA Aaa 1,000 Metropolitan Nashville Airport Authority, Tennessee Airport Improvement
Revenue Refunding Bonds, Series 1991-C, 6.60% due 7/01/2015 (d) 1,110
A+ A1 875 Tennessee Housing Development Agency, Homeownership Program
Revenue Bonds, Series 1987-E, 8.50% due 7/01/2016 917
</TABLE>
<PAGE>
<TABLE> <CAPTION>
The Municipal Fund Accumulation Program, Inc.
Schedule of Investments as of December 31, 1993 (continued) (in Thousands)
S&P Moody's Face Value
Rating Rating Amount Issue (Note 1a)
<S> <C> <C> <C> <C>
Texas--7.5%
AAA Aaa $ 2,000 Austin (City of), Texas, Combined Utility Systems Revenue Bonds, Series
1989-X, 6.25% due 11/15/2019 (c) $ 2,157
AAA Aaa 4,000 Austin (City of), Texas, Combined Utility Systems Revenue Refunding
Bonds, Series 1985-A, 10.25% due 11/15/2012 (b) 4,593
A A 2,000 Austin (City of), Texas, Combined Utility Systems Revenue Refunding
Bonds, Series 1986, 6% due 5/15/2015 2,030
AAA Aaa 2,000 Austin (City of), Texas, Combined Utility Systems Revenue Refunding
Bonds, Series 1991, 6.50% due 5/15/2011 (e) 2,202
AAA Aaa 2,000 Austin (City of), Texas, Combined Utility Systems Revenue Refunding
Bonds, Series 1993-B, 5.25% due 5/15/2018 (c) 1,970
AAA Aaa 600 Austin (City of), Texas, Water, Sewer and Electric Revenue Refunding
Bonds, Series 1982, 14.25% due 11/15/2006 (b) 796
AA+ Aa1 1,000 Board of Regents of The University of Texas System, Permanent University
Fund Refunding Bonds, Series 1991, 6.50% due 7/01/2011 1,094
AA+ Aa1 1,000 Board of Regents of The University of Texas System, Permanent University
Fund Refunding Bonds, Series A, 6.25% due 7/01/2013 1,077
AAA Aaa 2,000 Colorado River Municipal Water District, Water Transmission Facilities
Project, Texas, Series 1991-A, 6.625% due 1/01/2021 (b)(e) 2,262
AAA Aaa 1,000 Dallas County, Texas, General Obligation Bonds, 6.50% due 8/15/2008 (g) 1,095
AAA NR 1,250 Harris County, Texas, Toll Road Unlimited Tax and Subordinate Lien, Revenue Refunding
Bonds, Series 1988, 8.125% due 8/01/2015 (b) 1,488
AAA Aaa 1,000 Houston (City of), Texas, Water and Sewer System Junior Lien, Revenue
Refunding Bonds, Series 1991-C, 6.375% due 12/01/2017 (e) 1,092
A A 1,000 Houston (City of), Texas, Water and Sewer System Prior Lien, Revenue
Refunding Bonds, Series 1991-B, 6.75% due 12/01/2008 1,128
A A 1,000 Houston (City of), Texas, Water and Sewer System Prior Lien, Revenue
Refunding Bonds, Series 1992-B, 6.375% due 12/01/2014 1,088
AAA Aaa 5,000 Lower Colorado River Authority of Texas, Junior Lien Revenue Refunding Bonds,
Fifth Supplemental Series, 5.25% due 1/01/2015 (c) 4,950
AAA Aaa 5,000 Lower Colorado River Authority of Texas, Junior Lien Revenue Refunding
Bonds, Series 1992, 6% due 1/01/2017 (e) 5,226
AAA Aaa 250 Lower Colorado River Authority of Texas, Priority Revenue Refunding
Bonds, Series 1991-A, 6% due 1/01/2015 (e) 260
AAA Aaa 2,000 Lower Colorado River Authority of Texas, Priority Revenue Refunding
Bonds, Series 1991-B, 6% due 1/01/2015 (e) 2,081
AAA Aaa 3,000 San Antonio (City of), Texas, Water System Revenue Refunding Bonds,
6.50% due 5/15/2010 (c) 3,329
AAA Aaa 2,000 San Antonio (City of), Texas, Water System Revenue Refunding Bonds,
Series 1992, 6% due 5/15/2016 (c) 2,100
AA Aa 1,000 State of Texas, Veterans Land General Obligation Refunding Bonds, 6.50% due 12/01/2021 1,086
AAA Aaa 2,000 Texas Municipal Power Agency Revenue Bonds, Series 1982, 14.625% due 9/01/2012 (b) 2,646
AAA Aa 2,000 Texas Water Development Board, State Revolving Fund, Senior Lien
Revenue Bonds, Series 1992, 6% due 7/15/2013 2,118
</TABLE>
<PAGE>
<TABLE> <CAPTION>
The Municipal Fund Accumulation Program, Inc.
Schedule of Investments as of December 31, 1993 (concluded) (in Thousands)
S&P Moody's Face Value
Rating Rating Amount Issue (Note 1a)
<S> <C> <C> <C> <C>
Utah--2.2%
AA Aa $ 5,500 Intermountain Power Agency, Utah, Power Supply Revenue Refunding
Bonds, Series 1985-G, 9.375% due 7/01/2018 $ 6,067
AA Aa 1,000 Intermountain Power Agency, Utah, Power Supply Revenue Refunding
Bonds, Series 1987-D, 8.625% due 7/01/2021 1,154
AA Aa 5,000 Intermountain Power Agency, Utah, Power Supply Revenue Refunding
Bonds, Series 1993-A, 5.50% due 7/01/2020 4,972
AA Aa 2,000 Intermountain Power Agency, Utah, Power Supply Revenue Refunding
Bonds, Series A, 5% due 7/01/2023 1,880
Virginia--1.3%
AA Aa 1,500 Commonwealth Transportation Board, Commonwealth of Virginia, Transportation
Contract Revenue Bonds (Northern Virginia Transportation District Program),
Series 1993-C, 5.25% due 5/15/2019 1,473
AAA Aaa 2,750 Commonwealth Transportation Board, Commonwealth of Virginia, Transportation Contract
Revenue Bonds, Series 1988, 7.80% due 3/01/2016 (b) 3,198
AA+ Aa 2,000 Virginia Housing Development Authority, Commonwealth Mortgage Bonds, Series 1988-B1 Issue,
7.80% due 7/01/2017 2,177
AA Aa 1,360 Virginia Public School Authority, School Financing Revenue Bonds (1987
Resolution), Series 1992-B, 5.75% due 1/01/2013 1,420
Washington--1.1%
AA Aa 2,000 Washington (State of), General Obligation Bonds, Series A, 6% due 3/01/2016 (g) 2,067
AA Aa 2,500 Washington (State of), General Obligation Bonds (Various Purpose), Series 1993-B,
5.50% due 5/01/2018 2,537
AA Aa 2,000 Washington (State of), General Obligation Refunding Bonds, Series R-92A,
6.25% due 9/01/2009 2,143
Wisconsin--2.1%
A+ Aa 895 Wisconsin Housing and Economic Development Authority, Home
Ownership Revenue Bonds, Series 1987-A, 8.375% due 9/01/2017 895
AA Aa 1,000 Wisconsin Housing and Economic Development Authority, Home
Ownership Revenue Bonds, Series 1992-1, 6.75% due 9/01/2015 1,075
AAA Aaa 2,000 Wisconsin Public Power Incorporated System, Power Supply System
Revenue Bonds, Series 1990-A, 7.40% due 7/01/2020 (b)(e) 2,396
AAA Aaa 3,750 Wisconsin Public Power Incorporated System, Power Supply System
Revenue Bonds, Series 1991-A, 6.875% due 7/01/2021 (b)(e) 4,431
AAA Aaa 2,500 Wisconsin Public Power Incorporated System, Power Supply System
Revenue Refunding Bonds, Series 1993-A, 5.25% due 7/01/2021 (e) 2,443
AA Aaa 2,000 Wisconsin (State of), General Obligation Bonds, Series 1992-A, 6.30%
due 5/01/2012 (b) 2,271
Total Investments (Cost--$558,496)--97.4% 622,927
Other Assets Less Liabilities--2.6% 16,661
--------
Net Assets--100.0% $639,588
========
<PAGE>
<FN>
(a) Escrowed to maturity.
(b) Prerefunded issues.
(c) MBIA Insured.
(d) FGIC Insured.
(e) AMBAC Insured.
(f) FHA Insured.
(g) Unlimited Tax.
*Under Review.
Ratings of issues shown have not been audited by Deloitte & Touche.
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
The Municipal Fund Accumulation Program, Inc.
Statement of Assets and Liabilities As of December 31, 1993
<S> <C> <C>
Assets:
Investments, at value (identified cost--$558,496,175) (Note 1a) $622,926,635
Cash 3,936,848
Interest receivable 14,099,780
Prepaid registration fees and other assets (Note 1d) 7,895
------------
Total assets 640,971,158
------------
Liabilities:
Payables:
Capital shares redeemed $ 473,624
Investment adviser (Note 2) 266,520
Distributions to shareholders (Note 1e) 237,836 977,980
------------
Accrued expenses and other liabilities 404,873
------------
Total liabilities 1,382,853
------------
Net Assets $639,588,305
============
Net Assets Consist of:
Common Stock, $.01 par value, 50,000,000 shares authorized $ 323,144
Paid-in capital in excess of par 573,402,861
Undistributed investment income--net 1,431,840
Unrealized appreciation on investments--net 64,430,460
------------
Net Assets:
Equivalent to $19.79 net asset value per share based on
32,314,413 shares outstanding $639,588,305
============
</TABLE>
<PAGE>
<TABLE>
The Municipal Fund Accumulation Program, Inc.
Statement of Operations
For the Year Ended December 31, 1993
<S> <C> <C>
Investment Income (Note 1c):
Interest and amortization of premium and discount earned $ 37,815,497
Expenses:
Investment advisory fees (Note 2) $ 2,960,370
Transfer agent fees 1,751,073
Printing and shareholder reports 122,446
Registration fees (Note 1d) 60,839
Accounting services (Note 2) 57,282
Custodian fees 51,823
Professional fees 51,490
Pricing services 34,808
Directors' fees and expenses 12,339
Other 8,794
------------
Total expenses 5,111,264
------------
Investment income--net 32,704,233
------------
Realized & Unrealized Gain on Investments--Net (Notes 1c & 3):
Realized gain on investments--net 8,819,734
Change in unrealized appreciation on investments--net 24,407,096
------------
Net Increase in Net Assets Resulting from Operations $ 65,931,063
============
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE> <CAPTION>
The Municipal Fund Accumulation Program, Inc.
Statements of Changes in Net Assets
For the Year Ended Dec. 31,
Increase (Decrease) in Net Assets: 1993 1992
<S> <C> <C>
Operations:
Investment income--net $ 32,704,233 $ 29,046,094
Realized gain on investments--net 8,819,734 4,505,955
Change in unrealized appreciation on investments--net 24,407,096 3,426,467
------------ ------------
Net increase in net assets resulting from operations 65,931,063 36,978,516
------------ ------------
Dividends & Distributions to Shareholders (Note 1e):
Investment income--net (32,611,400) (28,816,631)
Realized gain on investments--net (8,089,293) --
------------ ------------
Net decrease in net assets resulting from dividends and distributions to shareholders (40,700,693) (28,816,631)
------------ ------------
Capital Share Transactions (Note 4):
Net increase in net assets derived from capital share transactions 77,405,763 93,565,849
------------ ------------
Net Assets:
Total increase in net assets 102,636,133 101,727,734
Beginning of year 536,952,172 435,224,438
------------ ------------
End of year* $639,588,305 $536,952,172
============ ============
<FN>
*Undistributed investment income--net $ 1,431,840 $ 1,339,007
============ ============
</TABLE>
<PAGE>
<TABLE> <CAPTION>
The Municipal Fund Accumulation Program, Inc.
Financial Highlights
For the Year Ended December 31,
1993 1992 1991 1990 1989
The following per share data and ratios have been derived
from information provided in the financial statements.
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of year $ 18.93 $ 18.63 $ 17.83 $ 18.09 $ 17.76
-------- -------- -------- -------- --------
Investment income--net 1.09 1.15 1.23 1.30 1.31
Realized and unrealized gain (loss) on investments--net 1.11 .30 .80 (.26) .33
-------- -------- -------- -------- --------
Total from investment operations 2.20 1.45 2.03 1.04 1.64
-------- -------- -------- -------- --------
Less dividends and distributions:
Investment income--net (1.09) (1.15) (1.23) (1.30) (1.31)
Realized gain on investments--net (.25) -- -- -- --
-------- -------- -------- -------- --------
Total dividends and distributions (1.34) (1.15) (1.23) (1.30) (1.31)
-------- -------- -------- -------- --------
Net asset value, end of year $ 19.79 $ 18.93 $ 18.63 $ 17.83 $ 18.09
======== ======== ======== ======== ========
Total Investment Return:
Based on net asset value per share 11.99% 8.08% 11.83% 6.03% 9.61%
======== ======== ======== ======== ========
Ratios to Average Net Assets:
Expenses .86% .88% .91% .97% 1.04%
======== ======== ======== ======== ========
Investment income--net 5.52% 6.15% 6.76% 7.23% 7.25%
======== ======== ======== ======== ========
Supplemental Data:
Net assets, end of year (in thousands) $639,588 $536,952 $435,224 $359,291 $319,641
======== ======== ======== ======== ========
Portfolio turnover 23% 24% 36% 20% 41%
======== ======== ======== ======== ========
See Notes to Financial Statements.
</TABLE>
<PAGE>
The Municipal Fund Accumulation Program, Inc.
Notes to Financial Statements
1. Significant Accounting Policies:
The Municipal Fund Accumulation Program, Inc. (the "Program") is
registered under the Investment Company Act of 1940 as a
diversified, open-end investment management company. The following
is a summary of significant accounting policies followed by the
Program.
(a) Valuation of securities--Portfolio securities are valued by
the Program's pricing agent, Kenny S&P Evaluation Services. These
values are not necessarily bids or actual last sales prices, but
are estimates of the price at which the pricing agent believes
the Program could sell such portfolio securities. The Board of
Directors has examined the methods to be used by the Program's
pricing agent in estimating the value of Portfolio securities and
believes that such methods will reasonably and fairly approximate
the price at which Portfolio securities may be sold and will
result in a good faith determination of the fair value of such
securities.
(b) Income taxes--It is the Program's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated
investment companies and to distribute substantially all of its
taxable income to its shareholders. Therefore, no Federal income
tax provision is required.
(c) Security transactions and investment income--Security
transactions are recorded on the dates the transactions are
entered into (the trade dates). Interest income (net of
amortization of premium and discount) is recognized on the
accrual basis. Realized gains and losses on security transactions
are determined on the identified cost basis.
(d) Prepaid registration fees--Prepaid registration fees are
charged to expense as the related shares are issued.
(e) Dividends and distributions to shareholders--Dividends from
net investment income are declared and paid monthly. Distributions
of capital gains are recorded on the ex-dividend dates.
2. Investment Advisory Agreement and Transactions with
Affiliates:
The Program has entered into an Investment Advisory Agreement
with Fund Asset Management, Inc. ("FAMI"), a wholly-owned
subsidiary of Merrill Lynch Investment Management, Inc. ("MLIM"),
which is an indirect, wholly-owned subsidiary of Merrill Lynch &
Co., Inc., whereby FAMI provides investment management and
certain other services to the Program. For its services, the
Program pays a monthly fee equal to 0.50%, on an annual basis, of
the value of the Program's average daily net assets. The
Investment Advisory Agreement obligates FAMI to reimburse the
Program to the extent that the Program's expenses (including
advisory fees, but excluding interest, taxes, brokerage fees and
extraordinary items) exceed 2.5% of the Program's first $30
million of average daily net assets, 2.0% in excess of $30
million but not exceeding $100 million of average daily net
assets, and 1.5% of the average daily net assets in excess of
$100 million. No fee payment will be made to the Adviser during
any fiscal year which would cause such expenses to exceed the
foregoing expense limitations applicable at the time of such
payment and any required reimbursements will be made promptly at
the end of such fiscal year.
<PAGE>
Effective January 1, 1994, the investment advisory business of
FAMI reorganized from a corporation to a limited partnership.The
general partner of FAMI is Princeton Services, Inc., an indirect
wholly-owned subsidiary of Merrill Lynch & Co.
FAMI has entered into an Administrative Agreement with Merrill
Lynch, Pierce, Fenner & Smith Inc. ("MLPF&S"), Prudential
Securities, Inc., Dean Witter Reynolds, Inc. and Shearson Lehman
Brothers, Inc. (the "Administrators"), whereby the Administrators
perform certain administrative duties on behalf of FAMI.
The Administrators receive a monthly fee from FAMI equal to
0.20%, on an annual basis, of the Program's average daily net
assets and have agreed to reimburse FAMI for a portion of the
reimbursement of expenses to the Program, as described above,
required to be made by FAMI.
Accounting services are provided to the Program by FAMI at cost.
Certain officers and/or directors of the Program are officers
and/or directors of FAMI, MLIM, MLPF&S, and/or Merrill Lynch &
Co., Inc.
Notes to Financial Statements (concluded)
3. Investments:
Purchases and sales of investments, excluding shortterm
securities, for the year ended December 31, 1993 were
$196,466,137 and $132,906,322, respectively.
Net realized and unrealized gains as of December 31, 1993 were as
follows:
Realized Unrealized
Gains Gains
Long-term investments $ 8,819,734 $64,430,460
----------- -----------
Total $ 8,819,734 $64,430,460
=========== ===========
As of December 31, 1993, net unrealized appreciation for Federal
income tax purposes aggregated $64,430,460, of which $64,578,524
related to appreciated securities and $148,064 related to
depreciated securities. The aggregate cost of investments at
December 31, 1993 for Federal income tax purposes was
$558,496,175.
<PAGE>
4. Capital Share Transactions:
Transactions in capital shares were as follows:
For the Year Ended Dollar
December 31, 1993 Shares Amount
Shares sold 10,957,746 $215,246,276
Shares issued to shareholders
in reinvestment of dividends
and distributions 1,998,028 39,298,500
----------- ------------
Total issued 12,955,774 254,544,776
Shares redeemed (9,010,119) (177,139,013)
----------- ------------
Net increase 3,945,655 $ 77,405,763
=========== ============
For the Year Ended Dollar
December 31, 1992 Shares Amount
Shares sold 11,315,402 $211,365,455
Shares issued to shareholders
in reinvestment of dividends 1,496,530 27,883,080
----------- ------------
Total issued 12,811,932 239,248,535
Shares redeemed (7,799,800) (145,682,686)
----------- ------------
Net increase 5,012,132 $ 93,565,849
=========== ============
5. Capital Loss Carryforward:
Expired capital loss carryforward in the amount of $13,751,527
has been reclassified to paid-in capital in excess of par.
<PAGE>
- ----------------------------------------------------
STATEMENT OF ADDITIONAL
INFORMATION
- ----------------------------------------------------
INDEX
- ----------------------------------------------------
PAGE
-----------
Investment Objectives and Policies........... 2
Investment Restrictions...................... 4
Investment Advisory Agreement................ 5
Directors and Officers....................... 8
Net Asset Value.............................. 10
Redemption of Shares......................... 10
Taxes and Distributions...................... 11
Portfolio Transactions....................... 12
Performance Data............................. 13
General Information.......................... 13
Description of Bond Ratings.................. 14
Independent Auditors' Report................. 16
Financial Statements......................... 17
- ----------------------------------------------------
THE
MUNICIPAL
FUND
INVESTMENT
ACCUMULATION
PROGRAM
- ----------------------------------------------------
STATEMENT OF ADDITIONAL INFORMATION
DATED APRIL 28, 1994
----------------------------------------------------
BOX 9011
PRINCETON, NEW JERSEY 08543-9011
(609) 282-2000
