The
Municipal
Fund
Accumulation
Program,
Inc.
Semi-Annual Report
June 30, 1995
This report is not authorized for use as an offer of sale or a
solicitation of an offer to buy shares of the Program unless
accompanied or preceded by the Program's current prospectus. Past
performance results shown in this report should not be considered a
representation of future performance. Investment return and
principal value of shares will fluctuate so that shares, when
redeemed, may be worth more or less than their original cost.
<PAGE>
The Municipal Fund
Accumulation Program, Inc.
Box 9011
Princeton, NJ 08543-9011
To Our Shareholders:
For the six months ended June 30, 1995, The Municipal Fund
Accumulation Program, Inc.'s net annualized yield was 5.54%. Total
investment return for the Program for the six-month period ended
June 30, 1995 was +8.50%, based on the change in per share net asset
value from $17.51 to $18.48, and assuming reinvestment of $0.508 per
share income dividends.
The Municipal Market
The municipal bond market performed well over most of the six-month
period ended June 30, 1995. Given signs of a weakening domestic
economy and continuing low inflation, interest rates, in general,
significantly declined during the reporting period. As measured by
the Bond Buyer Revenue Bond Index, non-insured tax-exempt revenue
bond yields declined almost 70 basis points (0.70%) to 6.20% over
the last six months. Municipal bond yields declined over 100 basis
points from their recent highs last November and are lower than they
were a year ago. However, US Treasury bond yields, exhibited a far
more extensive decline during the period, falling over 125 basis
points to end the June period at 6.62%.
Municipal bonds have underperformed US Treasury securities for a
number of reasons. The record highs of the US equity market have
continued to attract retail investors seeking further capital gains.
Investor demand has also diminished in recent months by the "sticker
shock" effect that periodically affects the municipal bond market.
Investors who had become accustomed to purchasing tax-exempt
securities yielding in the 6.50%--7.00% range six or seven months
ago, have demonstrated understandable reluctance to purchase similar
securities at current levels. The strong fundamental structure of
the municipal bond market, however, suggests that such hesitancy may
prove costly.
<PAGE>
However, the major reason for the tax-exempt market's recent
underperformance was the concerns regarding the implication for
municipal bonds' tax-advantage resulting from various proposed tax-
law changes (for example flat-tax, value-added tax and national
sales tax) that have reduced investor demand for tax-exempt
products. Such concerns are likely to quickly recede as investors
realize that such, if any, changes are unlikely to be enacted before
late 1996 at the earliest. Also, long-term investors will recall
1986 when similar tax proposals were made and municipal bonds
initially rose to at least 100% of taxable yields. Tax-exempt bond
yields quickly declined as investors' fears proved to be unfounded.
The municipal bond market's strong technical position has diminished
somewhat in recent months. New-issue supply over the last six months
has totaled approximately $69 billion, or a decline of over 25%
versus the corresponding period in 1994. In recent months, however,
municipalities issued approximately $40 billion in new securities,
which represents only a 3% decline versus the same period a year
earlier. Investor demand has remained muted in recent months despite
significant funds available to investors in recent months. By the
end of July investors, both individual and institutional, are
expected to receive as much as $80 billion from tax-exempt bond
maturities, coupon payments and the proceeds of early bond
redemptions. Little new money has entered the municipal market in
recent months, largely in response to the factors mentioned above.
Consequently, much of the technical support the municipal market
enjoyed earlier this year has evaporated, causing municipal bond
yields to decline at a slower rate than their taxable counterparts.
Their recent relative underperformance has made municipal bonds
particularly attractive to long-term investors. Tax-exempt bonds
currently yield well over 90% of US Treasury securities. In some
instances, A-rated, long-term revenue bonds have yielded almost 95%
of US Treasury bonds. Analysts usually consider municipal bonds
yielding over 82% of US Treasury securities to be historically
attractive. With inflation-adjusted, "real" after-tax equivalent tax-
exempt yields of over 6.50%, municipal securities appear to
represent considerable value.
<PAGE>
Portfolio Strategy
The Municipal Fund Accumulation Program entered the six-month period
ended June 30, 1995 defensively postured because of the extreme
volatility that plagued the fixed-income markets during the past
year. However, since early 1995 we have become more positive on the
market's prospects for several reasons. First, we saw signs of an
apparent US economic slowdown just as inflationary pressures were
reaching critical levels, thus reducing concern among fixed-income
investors. At the same time, municipal issuance continued to plunge,
exacerbating an already troublesome situation and propelling
municipals to outperform Treasury securities during most of the June
period.
Initially, we reacted to the changing environment by reducing cash
reserves to near zero by early 1995 and then maintaining a fully
invested posture for the balance of the June period. We restructured
the Program's portfolio, attempting to gain a more aggressive stance
in the marketplace by selectively selling par bonds with limited
room for price appreciation and replacing them with discount coupon
bonds. As credit quality of the Program's portfolio mix is always of
primary concern, we remain invested in securities of which 77% are
rated AA or better by at least one of the major rating services.
However, recent concerns over tax reform caused the municipal market
to considerably lag its taxable counterpart. Therefore, long-term
tax-exempt yields are at historically inexpensive levels and, to the
extent they remain so, we intend to position the Program somewhat
more aggressively and thereby better enable it to more fully capture
the value inherent in the current market.
In Conclusion
We appreciate your ongoing interest in The Municipal Fund Investment
Accumulation Program, and we look forward to serving your investment
needs and objectives in the months and years to come.
Sincerely,
(Arthur Zeikel)
Arthur Zeikel
President
(Vincent R. Giordano)
Vincent R. Giordano
Senior Vice President and Portfolio Manager
July 31, 1995
<PAGE>
Portfolio Abbreviations
To simplify the listings of The Municipal Fund Accumulation Program,
Inc.'s portfolio holdings in the Schedule of Investments, we have
abbreviated the names of many of the securities according to the
list below.
AMT Alternative Minimum Tax (subject to)
COP Certificate of Participation
EDA Economic Development Authority
GO General Obligation Bonds
HFA Housing Finance Agency
IDA Industrial Development Authority
PCR Pollution Control Revenue Bonds
S/F Single-Family
UT Unlimited Tax
VRDN Variable Rate Demand Notes
<TABLE>
The Municipal Fund Accumulation Program, Inc.
Schedule of Investments as of June 30, 1995 (in Thousands)
<CAPTION>
S&P Moody's Face Value
State Rating Rating Amount Issue (Note 1a)
<S> <S> <S> <C> <S> <C>
Alabama-- AA A1 $ 2,000 Birmingham, Alabama, Crossover Revenue Refunding Bonds,
1.3% 8% due 10/01/2015 $ 2,180
AAA Aaa 5,000 Huntsville, Alabama, Health Care Authority Revenue Bonds,
(Health Care Facilities), Series B, 6.625% due 6/01/2023 (c) 5,231
Arizona-- A1 P1 2,000 Maricopa County, Arizona, Pollution Control Corp., PCR, Refunding
0.8% (Arizona Public Service Co.), VRDN, Series F, 4.50% due 5/01/2029 (g) 2,000
AA Aa 2,500 Salt River Project, Arizona, Agriculture Improvement and Power
District, Electric Systems Revenue Refunding Bonds, Series D, 5.75%
due 1/01/2019 2,410
Arkansas-- AAA NR* 2,625 Arkansas State Development Finance Authority, S/F Mortgage Revenue
0.5% Bonds, Series C, 6.60% due 7/01/2017 (i) 2,730
<PAGE>
California-- California HFA, Home Mortgage Revenue Bonds, AMT:
12.1% AA- Aa 3,000 Series A, 7.70% due 8/01/2030 3,182
AA- Aa 4,985 Series F-1, 7% due 8/01/2026 5,202
AA Aa 3,000 California State, Department of Water Resources, Water System
Revenue Refunding Bonds (Central Valley Project), Series L,
5.875% due 12/01/2025 2,859
A A1 2,500 California State, GO, UT, 6.25% due 9/01/2012 2,643
California State Public Works Board, Lease Revenue Bonds, Series A:
A- A 8,000 (Department of Corrections Monterey County--Soledad II), 6.875%
due 11/01/2014 8,401
A- A 5,000 (Secretary of State), 6.75% due 12/01/2012 5,186
AAA Aaa 4,000 California State Public Works Board, Lease Revenue Bonds (Various
Universities of California Projects), Series A, 6.40% due
12/01/2016 (e) 4,096
A A 2,500 California State Various Purpose Bonds, 6.25% due 10/01/2019 2,683
Los Angeles, California, Wastewater System Revenue Bonds (c):
AAA Aaa 3,300 AMT, Series B, 5.70% due 6/01/2023 3,145
AAA Aaa 4,000 Refunding, Series A, 5.70% due 6/01/2020 3,821
AAA Aaa 2,000 Los Angeles County, California, COP (Correctional Facilities
Project), 6.50% due 9/01/2013 (c) 2,080
AAA Aaa 5,500 Los Angeles County, California, Metropolitan Transportation
Authority, Sales Tax Revenue Refunding Bonds (Proposition A),
Series A, 5% due 7/01/2021 (d) 4,761
AA- A1 5,260 Los Angeles County, California, Transportation Commission Sales
Tax, Revenue Refunding Bonds, Series B, 6.50% due 7/01/2013 5,322
AAA Aaa 1,250 M-S-R Public Power Agency, California, Revenue Refunding Bonds
(San Juan Project), 6.75% due 7/01/2020 (c) 1,379
AAA Aaa 4,500 Pioneers Memorial Hospital District, California, Refunding, GO, UT,
6.50% due 10/01/2024 (e) 4,712
AA Aa 2,000 San Francisco, California, City and County Public Utilities
Commission, Water Revenue Refunding Bonds, 8% due 11/01/2011 2,194
AAA Aaa 5,025 Stockton, California, COP, Revenue Bonds (Wastewater Treatment
Plant Expansion), Series A, 6.80% due 9/01/2024 (d) 5,401
</TABLE>
<TABLE>
The Municipal Fund Accumulation Program, Inc.
Schedule of Investments as of June 30, 1995 (continued) (in Thousands)
<CAPTION>
S&P Moody's Face Value
State Rating Rating Amount Issue (Note 1a)
<S> <S> <S> <C> <S> <C>
Colorado-- Colorado Springs, Colorado, Utilities Revenue Refunding Bonds,
5.5% Series A:
AA Aa $ 2,940 6.50% due 11/15/2015 $ 3,093
AA Aa 9,250 5.125% due 11/15/2023 8,198
AA NR* 3,110 Colorado, HFA, S/F Mortgage Program Revenue Bonds, AMT,
Series D-3, 7.20% due 8/01/2023 3,231
AAA Aaa 7,725 Denver, Colorado, City and County Apartments, Revenue Bonds,
Series A, 5.70% due 11/15/2025 (c) 7,299
AAA Aaa 5,000 Douglas County, Colorado, School District No. 1 (Douglas and Elbert
Counties Improvement Project), Series A, 6.50% due 12/15/2016 (c) 5,308
AAA Aaa 2,500 Garfield, Pitkin and Eagle Counties, Colorado, School District
No. 1, UT, 6.60% due 12/15/2014 (c) 2,675
<PAGE>
Connecticut-- AAA Aaa 2,000 Connecticut State Development Authority, Water Facility, Revenue
1.3% Refunding Bonds (Connecticut Water Co. Project), 6.65%
due 12/15/2020 (e) 2,142
AA Aa 1,430 Connecticut State, HFA, Housing Mortgage Finance Program Bonds,
Series B-1, Sub-Series B-1, 7.55% due 11/15/2008 1,495
AAA Aaa 3,500 Connecticut State, Special Tax Obligation Revenue Bonds, Series B,
6.10% due 10/01/2011 (d) 3,603
Florida-- A A 1,750 Broward County, Florida, Resource Recovery Revenue Bonds
0.9% (Broward Waste Energy--LP North), 7.95% due 12/01/2008 1,922
AAA Aaa 1,000 Escambia County, Florida, Utilities Authority, Utility System
Revenue Bonds, Series A, 9.60% due 1/01/1996 (b)(c) 1,049
AA Aa 2,000 Florida State Board of Education, Public Education Capital Outlay
Bonds, Series B, 6.70% due 6/01/2022 2,123
Georgia-- Georgia Municipal Electric Authority, Power Revenue Bonds:
7.5% A+ A 3,000 Crossover Refunding, Series O, 8.125% due 1/01/2017 3,290
A+ Aaa 3,250 Refunding, Series B, 8% due 1/01/1998 (b) 3,602
AAA Aaa 2,000 Series EE, 5.50% due 1/01/2026 (e) 1,866
AA+ Aaa 2,000 Georgia State, GO, Series B, 6.30% due 3/01/2010 2,164
Metropolitan Atlanta, Georgia, Rapid Transit Authority, Sales Tax
Revenue Bonds:
AAA Aaa 5,000 (Second Indenture), Series A, 6.90% due 7/01/2020 (c) 5,478
AA- A1 8,200 Series O, 6.55% due 7/01/2020 8,557
AAA Aaa 6,100 Municipal Electric Authority of Georgia, Project--1, Sub-Series A,
6.50% due 1/01/2026 (e) 6,374
A+ A 10,460 Municipal Electric Authority, Georgia, Special Obligation Revenue
Bonds, Fifth Crossover Series, Project One, 6.50% due 1/01/2017 (a) 10,906
Illinois-- AA- Aa3 5,500 Chicago, Illinois, Gas Supply Revenue Refunding Bonds (The Peoples
2.8% Gas Light), Series A, 6.10% due 6/01/2025 5,389
AAA Aaa 4,800 Cook County, Illinois, GO, UT, Series A, 6.60% due 11/15/2022 (c) 5,046
Illinois Development Finance Authority, PCR, Refunding:
A1+ NR* 2,800 (Amoco Oil Project), VRDN, 4.20% due 11/01/2012 (g) 2,800
AA Aa2 1,850 (Central Illinois Public Services Company), Series B, 7.60% due
9/01/2013 2,049
</TABLE>
<PAGE>
<TABLE>
The Municipal Fund Accumulation Program, Inc.
Schedule of Investments as of June 30, 1995 (continued) (in Thousands)
<CAPTION>
S&P Moody's Face Value
State Rating Rating Amount Issue (Note 1a)
<S> <S> <S> <C> <S> <C>
Indiana-- NR* Aaa $ 4,315 Indiana State Educational Facilities Authority Revenue Bonds
1.7% (University of Notre Dame Project), 6.70% due 3/01/2025 $ 4,624
A+ A1 1,000 Indiana State Office Building Commission, Capital Complex Revenue
Refunding Bonds (State Office Building-II Facility), Series D,
6.90% due 7/01/2011 1,100
A+ A1 2,250 Indiana Transportation Finance Authority, Highway Revenue Bonds,
Series A, 8.125% due 6/01/1998 (b) 2,529
AA- Aa2 1,000 Petersburg, Indiana, PCR (Indianapolis Power and Light Company),
9.625% due 9/01/2012 1,029
Kentucky-- NR* A 3,000 Kentucky Turnpike Authority, Economic Development Road Revenue
1.4% Bonds, Series A, 8.25% due 7/01/1997 3,291
A+ A 4,000 Kentucky Turnpike Authority, Resource Recovery Road Revenue
Refunding Bonds, Series A, 8% due 7/01/2003 4,335
Louisiana-- AAA Aaa 5,000 New Orleans, Louisiana, Public Improvement Bonds, UT,
1.0% 7% due 9/01/2019 (d) 5,470
Maine--0.8% AA- A1 4,480 Maine State Housing Authority, Mortgage Purpose Revenue Bonds,
Series D, 6.80% due 11/15/2025 4,630
Massachu- A+ A1 15,500 Massachusetts Bay Transportation Authority, General Transportation
setts--5.5% System, Series B, 5.875% due 3/01/2019 14,915
Massachusetts State Health and Educational Facilities Authority
Revenue Bonds:
A+ Aa 5,900 (Brigham and Women's Hospital Issue), Series D, 6.75% due 7/01/2024 6,099
AAA Aaa 2,550 (Northeastern University), Series E, 6.55% due 10/01/2022 (c) 2,706
AAA Aaa 1,390 (University Hospital), Series C, 7.25% due 7/01/2019 (c) 1,530
A+ Aa 3,000 Massachusetts State, HFA, S/F Housing Revenue Bonds, AMT,
Series 38, 7.20% due 12/01/2026 3,177
AAA Aaa 1,000 Massachusetts State Port Authority Revenue Bonds, 13% due
7/01/2013 (a) 1,723
Michigan-- AA Aa 1,500 Michigan State Hospital Finance Authority Revenue Bonds,
1.3% (Henry Ford Health Systems), Series A, 7% due 7/01/2010 1,604
Michigan State Strategic Fund, Limited Obligation Revenue Refunding
Bonds (Detroit Edison Co. Project):
AAA Aaa 1,000 6.875% due 12/01/2021 (d) 1,077
AAA Aaa 2,000 Series BB, 7% due 5/01/2021 (e) 2,284
AAA Aaa 1,000 Series CC, 6.95% due 9/01/2021 (d) 1,079
AA Aa 1,250 Royal Oak, Michigan, Hospital Finance Authority Revenue Bonds,
(William Beaumont Hospital), Series D, 6.75% due 1/01/2020 1,295
Minnesota-- A+ Aa 4,350 Minnesota State HFA, S/F Mortgage Revenue Bonds, AMT, Series M,
1.8% 6.70% due 7/01/2026 4,482
AAA Aaa 5,000 Southern Minnesota Municipal Power Agency, Power Supply System
Revenue Bonds, Series A, 8.125% due 1/01/1998 (b) 5,556
Montana-- AA+ Aa 5,300 Montana State Board, S/F Housing Program, AMT, Series B-2, 6.90%
1.0% due 6/01/2025 5,503
<PAGE>
Nevada--1.2% AAA Aaa 2,000 Clark County, Nevada, PCR, Refunding (Nevada Power Co. Project),
Series B, 6.60% due 6/01/2019 (d) 2,085
NR* NR* 2,000 Clark County, Nevada, School District Improvement Bonds, Series A,
8% due 3/01/1998 (b) 2,224
AAA Aaa 2,295 Nevada, S/F Housing Division Program, AMT, Series E,
7.05% due 4/01/2027 2,397
</TABLE>
<TABLE>
The Municipal Fund Accumulation Program, Inc.
Schedule of Investments as of June 30, 1995 (continued) (in Thousands)
<CAPTION>
S&P Moody's Face Value
State Rating Rating Amount Issue (Note 1a)
<S> <S> <S> <C> <S> <C>
New Jersey-- Jersey City, New Jersey, GO (School District), UT:
5.8% AA A $ 2,900 6.65% due 2/15/2013 $ 3,073
AA A 3,030 6.65% due 2/15/2014 3,196
AAA Aaa 5,000 New Jersey EDA, Revenue Refunding Bonds (RWJ Health Care
Corporation), 6.50% due 7/01/2024 (h) 5,286
AAA Aaa 1,000 New Jersey Health Care Facilities, Financing Authority Revenue
Refunding Bonds (Hackensack Medical Center), 6.625% due
7/01/2017 (d) 1,061
New Jersey Sports and Exposition Authority Revenue Bonds,
Series A:
A+ Aa 5,000 (State Contract), 6.50% due 3/01/2019 5,242
AAA Aaa 1,500 Refunding (Convention Center Luxury Tax), 6.25% due 7/01/2020 (c) 1,537
AAA Aaa 5,000 New Jersey State Educational Facilities Authority Revenue Bonds
(Princeton University), Series A, 6% due 7/01/2024 5,028
AAA Aaa 3,000 New Jersey State Housing and Mortgage Finance Agency Revenue
Bonds (Home Buyer), Series L, 6.65% due 10/01/2014 (c) 3,178
A A 2,000 New Jersey State Turnpike Authority, Turnpike Revenue Refunding
Bonds, Series A, 6.75% due 1/01/2008 2,158
AA A1 2,500 Rutgers State University, New Jersey, Revenue Refunding Bonds
(State University of New Jersey), Series A, 6.50% due 5/01/2018 2,635
<PAGE>
New York-- New York City, New York, GO, UT:
17.4% A- Aaa 3,000 Series A, 8% due 8/15/2001 (b) 3,575
A- Baa1 3,000 Series C, Sub-Series C-1, 7.50% due 8/01/2020 3,218
A- Baa1 2,000 Series D, 7.50% due 2/01/2016 2,160
A- Baa1 2,500 Series D, 7.50% due 2/01/2019 2,674
New York State Dormitory Authority Revenue Bonds:
AA Aa 1,000 (Cornell University), Series A, 7.375% due 7/01/2030 1,107
BBB+ Baa1 3,250 Refunding (State University Educational Facilities), Series B, 7%
due 5/15/2016 3,388
AAA Aa 1,000 (Saint Vincent's Hospital and Medical Center), 7.40% due
8/01/2030 (f) 1,100
New York State Environmental Facilities Corporation, PCR, State
Water Revolving Fund:
A Aa 1,425 Series A, 7% due 6/15/2012 1,543
A Aa 1,800 Series A, 7.50% due 6/15/2012 2,001
AA- Aaa 500 Series B, 7.50% due 3/15/2011 546
New York State Local Government Assistance Corporation
Revenue Bonds:
A A 9,000 Refunding, Series C, 5.50% due 4/01/2018 8,350
A A 11,650 Series A, 6.875% due 4/01/2019 12,580
A A 5,000 Series A, 6.50% due 4/01/2020 5,197
New York State Medical Care Facilities Finance Agency Revenue Bonds:
AAA Aaa 1,515 (Mental Health Services Facilities Improvements), Series A, 7.80%
due 2/15/1999 (b) 1,713
BBB+ Baa1 640 (Mental Health Services Facilities Improvements), Series A, 7.80%
due 2/15/2019 713
BBB+ Baa1 600 (Mental Health Services Facilities Improvements), Series B, 7.875%
due 8/15/2020 651
AAA Aaa 3,500 (New York Hospital Mortgage), Series A, 6.80% due 8/15/2024 (e)(f) 3,768
</TABLE>
<TABLE>
The Municipal Fund Accumulation Program, Inc.
Schedule of Investments as of June 30, 1995 (continued) (in Thousands)
<CAPTION>
S&P Moody's Face Value
State Rating Rating Amount Issue (Note 1a)
<S> <S> <S> <C> <S> <C>
New York AA- Aa $13,750 New York State Power Authority, General Purpose Revenue Refunding
(concluded) Bonds, Series Z, 6.50% due 1/01/2019 $ 14,436
AA- NR* 6,140 New York State Power Authority, Revenue Refunding Bonds, Series V,
8% due 1/01/1998 (b) 6,807
Triborough Bridge and Tunnel Authority, New York, Revenue Bonds
(General Purpose), Series X:
A+ Aa 5,100 6.625% due 1/01/2012 5,583
A+ Aa 9,575 6.50% due 1/01/2019 10,020
A- A1 5,325 Triborough Bridge and Tunnel Authority, New York (Special
Obligations), Revenue Refunding Bonds, Series B, 6.875% due
1/01/2015 5,742
<PAGE>
New York & AA- A1 12,750 Port Authority of New York and New Jersey, Consolidated Revenue
New Jersey-- Bonds, 72nd Series, 7.35% due 10/01/2027 14,319
2.6%
North A- Aaa 1,330 North Carolina Eastern Municipal Power Agency, Power System
Carolina--0.9% Revenue Refunding Bonds, Series A, 6.50% due 1/01/2018 (a) 1,451
AAA Aaa 3,000 North Carolina Municipal Power Agency No. 1, Revenue Refunding
Bonds (Catawba Electric), 6% due 1/01/2011 (c) 3,086
Ohio--0.9% AAA Aaa 3,000 Hamilton, Ohio, Electric System Mortgage Revenue Bonds, Series B,
8% due 10/15/1998 (b)(d) 3,398
AAA NR* 350 Ohio State Water Development Authority, Revenue Refunding and
Improvement Bonds, 8% due 12/01/2000 (b) 382
AAA Aaa 775 Toledo, Ohio, Sewer System, Revenue Refunding Bonds, Series B,
7.75% due 11/15/2017 (c) 862
Pennsylvania-- AAA Aaa 2,500 Altoona, Pennsylvania, City Authority Water Revenue Bonds,
2.0% Series A, 6.50% due 11/01/2019 (d) 2,606
AAA Aaa 4,000 Montgomery County, Pennsylvania, IDA, PCR, Refunding (Philadelphia
Electric Company), Series B, 6.70% due 12/01/2021 (c) 4,278
AAA Aaa 3,355 North Penn, Pennsylvania, Water Authority Revenue Bonds, 7%
due 11/01/2004 (b) (d) 3,844
Puerto Rico-- AAA NR* 2,000 Puerto Rico Commonwealth, Public Improvement, GO, 7.70%
0.4% due 7/01/2000 (b) 2,314
Rhode Island-- AAA Aaa 2,500 Rhode Island Port Authority and Economic Development Corporation,
0.5% Revenue Refunding Bonds (Shepard Building Project), Series B,
6.75% due 6/01/2025 (e) 2,655
South Piedmont Municipal Power Agency, South Carolina, Electric Revenue
Carolina--1.0% Refunding Bonds (d):
AAA Aaa 3,000 6.75% due 1/01/2019 3,298
AAA Aaa 2,210 Series A, 6.50% due 1/01/2014 2,371
Tennessee-- AA Aa 3,020 Metropolitan Government Nashville and Davidson Counties,
0.5% Tennessee, Multi-Purpose Improvement, UT, 5.70% due 5/15/2025 2,870
</TABLE>
<PAGE>
<TABLE>
The Municipal Fund Accumulation Program, Inc.
Schedule of Investments as of June 30, 1995 (continued) (in Thousands)
<CAPTION>
S&P Moody's Face Value
State Rating Rating Amount Issue (Note 1a)
<S> <S> <S> <C> <S> <C>
Texas--8.5% AAA Aaa $ 2,000 Austin, Texas, Combined Utility Systems Revenue Refunding Bonds,
Prior Lien, 6.50% due 5/15/2011 (e) $ 2,096
AAA Aaa 2,000 Brazos River Authority, Texas, Revenue Refunding Bonds (Collateral-
Houston Light and Power Co.), Series B, 6.375% due 4/01/2012 (c) 2,061
Harris County, Texas, Health Facilities Development Corporation,
Hospital Revenue Bonds:
AAA Aaa 2,870 (Hermann Hospital Project), 6.375% due 10/01/2024 (c) 2,940
A1+ NR* 3,000 (Methodist Hospital), VRDN, 4.50% due 12/01/2025 (g) 3,000
A1+ NR* 2,400 (Saint Luke's Episcopal Hospital), VRDN, Series D, 4.50% due
2/15/2016 (g) 2,400
Harris County, Texas, Toll Road Sub-Lien, Revenue Refunding
Bonds, UT:
AAA NR* 1,250 8.125% due 8/01/1998 (b) 1,413
AA+ Aa 3,000 6.75% due 8/01/2014 3,176
AA+ Aa 5,000 Series A, 6.50% due 8/15/2015 5,248
AA Aa2 3,000 Lower Neches Valley Authority, Texas, Industrial Development
Corporation, Sewer Facilities Revenue Bonds (Mobil Oil Refining
Corp., Project), AMT, 6.40% due 3/01/2030 2,987
AAA Aaa 4,700 Sabine River Authority, Texas, PCR, Refunding (Collateral--Texas
Utilities Electric Company Project), 6.55% due 10/01/2022 (d) 4,911
AAA Aaa 5,300 San Antonio, Texas, Water Revenue Refunding Bonds, 6.50%
due 5/15/2010 (c) 5,645
AAA Aaa 2,000 Texas Municipal Power Agency Revenue Bonds, 14.625%
due 3/01/1997 (b) 2,338
AA Aa 1,000 Texas State, Refunding (Veterans Land), UT, 6.50% due 12/01/2021 1,035
AA Aa 6,500 Texas State, Veterans Housing Assistance, Fund II, AMT, UT,
Series A, 7% due 12/01/2025 6,785
AAA Aa 2,000 Texas Water Development Board Revenue Bonds (State
Revolving Fund--Senior Lien), 6% due 7/15/2013 2,029
Utah--2.8% Intermountain Power Agency, Utah, Power Supply Revenue
Refunding Bonds:
AA Aa 4,125 Series A, 5.50% due 7/01/2020 3,834
AA Aa 1,000 Series D, 8.625% due 7/01/2021 1,089
AA Aa 5,500 Series G, 9.375% due 7/01/1995 (a)(b)(j) 5,611
AA Aa 5,000 Salt Lake City, Utah, Hospital Revenue Refunding Bonds
(IHC Hospital Inc.), 6.25% due 2/15/2023 5,003
<PAGE>
Virginia-- AAA Aaa 4,475 Hanover County, Virginia, IDA, Hospital Revenue Bonds
2.1% (Memorial Regional Medical Center Project), 5.50% due 8/15/2025 (c) 4,124
AA Aa 4,500 Henrico County, Virgina, IDA, Public Facility Lease Revenue Bonds
(Henrico County Regional Jail Project), 7% due 8/01/2013 4,958
AAA Aaa 2,750 Virginia State Transportation Board, Transportation Contract
Revenue Bonds (Rate 28 Project) 7.80% due 3/01/1998 (b) 3,047
</TABLE>
<TABLE>
The Municipal Fund Accumulation Program, Inc.
Schedule of Investments as of June 30, 1995 (concluded) (in Thousands)
<CAPTION>
S&P Moody's Face Value
State Rating Rating Amount Issue (Note 1a)
<S> <S> <S> <C> <S> <C>
Washington-- AA+ Aa1 $ 4,000 Seattle, Washington, Refunding Bonds, 6.50% due 3/01/2017 $ 4,130
2.4% AAA Aaa 3,000 Tacoma, Washington, Refuse Utility Revenue Bonds, 7%
due 12/01/2019 (e) 3,420
AAA Aaa 4,245 Tacoma, Washington, Sewer Revenue Bonds, Series B, 5.625%
due 12/01/2013 (d) 4,115
AA Aa 2,000 Washington State, GO, Series A, 6.75% due 2/01/2015 2,201
Wisconsin-- Wisconsin Housing, EDA, Home Ownership Revenue Bonds, Series 1:
2.4% AA Aa 1,000 6.75% due 9/01/2015 1,039
AA Aa 4,990 6.75% due 9/01/2017 5,146
AAA Aaa 2,000 Wisconsin Public Power Incorporated System, Power Supply System
Revenue Bonds, Series A, 7.40% due 7/01/2000 (b)(e) 2,277
AAA Aaa 5,000 Wisconsin State Health and Educational Facilities Authority,
Revenue Bonds (Children's Hospital of Wisconsin Inc. Project),
6.50% due 3/15/2021 (d) 5,191
Total Investments (Cost--$518,126)--98.6% 548,270
Other Assets Less Liabilities--1.4% 7,589
--------
Net Assets--100.0% $555,859
========
<FN>
(a)Escrowed to maturity.
(b)Prerefunded issues.
(c)MBIA Insured.
(d)FGIC Insured.
(e)AMBAC Insured.
(f)FHA Insured.
(g)The interest rate is subject to change periodically based upon
prevailing market rates. The interest rates shown is the rate in
effect at June 30, 1995.
(h)FSA Insured.
(i)GNMA/FNMA Collateralized.
(j)FNMA Insured.
*Not Rated.
<PAGE>
See Notes to Financial Statements.
</TABLE>
<TABLE>
The Municipal Fund Accumulation Program, Inc.
Statement of Assets and Liabilities As of June 30, 1995
<S> <C> <C>
Assets:
Investments, at value (identified cost--$518,125,591) (Note 1a) $548,270,258
Cash 2,864,184
Receivables:
Interest $ 11,471,082
Securities sold 6,666,289
Capital shares sold 8,549 18,145,920
------------
Prepaid registration fees and other assets (Note 1d) 14,053
------------
Total assets 569,294,415
------------
Liabilities:
Payables:
Securities purchased 11,716,289
Capital shares redeemed. 875,560
Investment adviser (Note 2) 231,253 12,823,102
------------
Accrued expenses and other liabilities 612,093
------------
Total liabilities 13,435,195
------------
Net Assets $555,859,220
============
Net Assets Consist of:
Common Stock, $0.01 par value, 100,000,000 shares authorized $ 300,789
Paid-in capital in excess of par 532,767,132
Undistributed investment income--net 1,237,362
Accumulated realized capital losses on investments--net (8,590,730)
Unrealized appreciation on investments--net 30,144,667
------------
<PAGE>
Net Assets:
Equivalent to $18.48 per share based on 30,078,931 shares outstanding $555,859,220
============
See Notes to Financial Statements.
</TABLE>
<TABLE>
The Municipal Fund Accumulation Program, Inc.
Statement of Operations For the Six Months Ended June 30, 1995
<S> <C> <C>
Investment Income (Note 1c):
Interest and premium and discount earned $ 17,795,973
Expenses:
Investment advisory fees (Note 2) $ 1,389,717
Transfer agent fees 852,943
Printing and shareholder reports 61,409
Accounting services (Note 2) 37,163
Registration fees (Note 1d) 30,492
Custodian fees 27,104
Professional fees 23,187
Pricing services 12,599
Directors' fees and expenses 8,047
Other 5,823
------------
Total expenses 2,448,484
------------
Investment income--net 15,347,489
Realized & Unrealized Gain on Investments (Notes 1c & 3):
Realized gain on investments--net 5,219,519
Change in unrealized appreciation on investments--net 24,761,919
------------
Net Increase in Net Assets Resulting from Operations $ 45,328,927
============
</TABLE>
<TABLE>
<CAPTION>
For the Six For the
The Municipal Fund Accumulation Program, Inc. Months Ended Year Ended
Statements of Changes in Net Assets June 30, 1995 Dec. 31, 1994
<S> <C> <C>
Increase (Decrease) in Net Assets:
<PAGE>
Operations:
Investment income--net $ 15,347,489 $ 32,078,217
Realized gain (loss) on investments--net 5,219,519 (13,810,250)
Change in unrealized appreciation on investments--net . 24,761,919 (59,047,712)
------------ ------------
Net increase (decrease) in net assets resulting from operations 45,328,927 (40,779,745)
------------ ------------
Dividends to Shareholders (Note 1e):
Investment income--net (15,393,993) (32,226,191)
------------ ------------
Net decrease in net assets resulting from dividends to shareholders (15,393,993) (32,226,191)
------------ ------------
Capital Share Transactions (Note 4):
Net decrease in net assets resulting from capital share transactions (11,272,295) (29,385,788)
------------ ------------
Net Assets:
Total increase (decrease) in net assets 18,662,639 (102,391,724)
Beginning of period 537,196,581 639,588,305
------------ ------------
End of period* $555,859,220 $537,196,581
============ ============
<FN>
*Undistributed investment income--net $ 1,237,362 $ 1,283,866
============ ============
See Notes to Financial Statements.
</TABLE>
<TABLE>
The Municipal Fund Accumulation Program, Inc.
Financial Highlights
<CAPTION>
The following per share data and ratios have been derived
from information provided in the financial statements. For the Six
Months Ended For the Year Ended December 31,
Increase (Decrease) in Net Asset Value: June 30, 1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period $ 17.51 $ 19.79 $ 18.93 $ 18.63 $ 17.83
-------- -------- -------- -------- --------
Investment income--net .51 1.03 1.09 1.15 1.23
Realized and unrealized gain (loss) on investments--net .97 (2.28) 1.11 .30 .80
-------- -------- -------- -------- --------
Total from investment operations 1.48 (1.25) 2.20 1.45 2.03
-------- -------- -------- -------- --------
<PAGE>
Less dividends and distributions:
Investment income--net (.51) (1.03) (1.09) (1.15) (1.23)
Realized gain on investments--net -- -- (.25) -- --
-------- -------- -------- -------- --------
Total dividends and distributions (.51) (1.03) (1.34) (1.15) (1.23)
-------- -------- -------- -------- --------
Net asset value, end of period $ 18.48 $ 17.51 $ 19.79 $ 18.93 $ 18.63
======== ======== ======== ======== ========
Total Investment Return:
Based on net asset value per share 8.50%++ (6.44%) 11.99% 8.08% 11.83%
======== ======== ======== ======== ========
Ratios to Average Net Assets:
Expenses .88%* .89% .86% .88% .91%
======== ======== ======== ======== ========
Investment income--net 5.52%* 5.54% 5.52% 6.15% 6.76%
======== ======== ======== ======== ========
Supplemental Data:
Net assets, end of period (in thousands) $555,859 $537,197 $639,588 $536,952 $435,224
======== ======== ======== ======== ========
Portfolio turnover 29% 61% 23% 24% 36%
======== ======== ======== ======== ========
<FN>
*Annualized.
++Aggregate total investment return.
See Notes to Financial Statements.
</TABLE>
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 management investment company. These unaudited
financial statements reflect all adjustments which are, in the
opinion of management, necessary to a fair statement of the results
for the interim period presented. All such adjustments are of a
normal recurring nature. The following is a summary of significant
accounting policies followed by the Program.
<PAGE>
(a) Valuation of securities--Portfolio securities are valued by the
Program's pricing agent, Kenny S&P Evaluation Services ("Kenny").
The method used by Kenny to value the Program's securities is to
obtain "quotes" on comparable securities of comparable quality and
to value such Program securities similarly. These values are not
necessarily bids or actual last sale 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
with Affiliates:
The Program has entered into an Investment Advisory Agreement with
Fund Asset Management, L.P. ("FAM"). The general partner of FAM is
Princeton Services, Inc. ("PSl"), an indirect wholly-owned
subsidiary of Merrill Lynch & Co., Inc. ("ML & Co."), which is the
limited partner.
<PAGE>
FAM is responsible for the management of the Program's portfolio and
provides the necessary personnel, facilities, equipment and certain
other services necessary to the operations of the Program. For such
services, the Program pays a monthly fee of 0.50%, on an annual
basis, of the value of the Program's average daily net assets. The
Investment Advisory Agreement obligates FAM to reimburse the Program
to the extent the Program's expenses (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% of the next $70
million of average daily net assets, and 1.5% of the average daily
net assets in excess thereof. 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.
FAM has entered into an Administrative Agreement with Merrill Lynch,
Pierce, Fenner & Smith Inc. ("MLPF&S"), Prudential Securities, Inc.,
Dean Witter Reynolds Inc., and Smith Barney Shearson, Inc. (the
"Administrators"), whereby the Administrators perform certain
administrative duties on behalf of FAM.
The Municipal Fund Accumulation Program, Inc.
Notes to Financial Statements (concluded)
The Administrators receive a monthly fee from FAM equal to 0.20%, on
an annual basis, of the Program's average daily net assets and have
agreed to reimburse FAM for a portion of the reimbursement of
expenses to the Program as described above, required to be made by
FAM.
Accounting services are provided to the Program by FAM at cost.
Certain officers and/or directors of the Program are officers and/or
directors of FAM, PSI, MLPF&S, and/or ML & Co.
3. Investments:
Purchases and sales of investments, excluding short-term securities,
for the six months ended June 30, 1995 were $156,037,545 and
$174,527,073, respectively.
Net realized and unrealized gains as of June 30, 1995 were as
follows:
Realized Unrealized
Gains Gains
Long-term securities $5,219,519 $30,144,667
---------- -----------
Total $5,219,519 $30,144,667
========== ===========
<PAGE>
As of June 30, 1995, net unrealized appreciation for Federal income
tax purposes aggregated $30,144,667, of which $31,566,533 related to
appreciated securities and $1,421,866 related to depreciated
securities. The aggregate cost of investments at June 30, 1995 for
Federal income tax purposes was $518,125,591.
4. Capital Share Transactions:
Transactions in capital shares were as follows:
For the Six Months Ended Dollar
June 30, 1995 Shares Amount
Shares sold 2,478,158 $ 45,120,684
Shares issued to shareholders
in reinvestment of dividends 799,509 14,621,617
----------- ------------
Total issued 3,277,667 59,742,301
Shares redeemed (3,881,945) (71,014,596)
----------- ------------
Net decrease (604,278) $(11,272,295)
=========== ============
For the Year Ended Dollar
December 31, 1994 Shares Amount
Shares sold 7,126,473 $131,603,572
Shares issued to shareholders
in reinvestment of dividends 1,681,732 30,840,576
----------- ------------
Total issued 8,808,205 162,444,148
Shares redeemed (10,439,409) (191,829,936)
----------- ------------
Net decrease (1,631,204) $(29,385,788)
=========== ============
5. Capital Loss Carryforward:
As of December 31, 1994, the Program had a net capital loss
carryforward of approximately $6,600,000, all of which expires in
2002. This amount will be available to offset like amounts of any
future taxable gains.
<PAGE>
Officers and Directors
Arthur Zeikel--President and Director
Ronald W. Forbes--Director
Cynthia A. Montgomery--Director
Charles C. Reilly--Director
Kevin A. Ryan--Director
Richard R. West--Director
Terry K. Glenn--Executive Vice President
Vincent R. Giordano--Senior Vice President
Donald C. Burke--Vice President
Kenneth A. Jacob--Vice President
Gerald M. Richard--Treasurer
Susan B. Baker--Secretary
Custodian and Transfer Agent
The Bank of New York
110 Washington Street
New York, New York 10286
