The
Municipal
Fund
Accumulation
Program,
Inc.
Semi-Annual Report
June 30, 1996
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.
Statements and other information herein are as dated and are subject
to change.
The Municipal Fund
Accumulation Program, Inc.
Box 9011
Princeton, NJ 08543-9011
To Our Shareholders:
For the six months ended June 30, 1996, The Municipal Fund
Accumulation Program, Inc.'s net annualized yield was 5.38%. Total
investment return for the Program for the six-month period ended
June 30, 1996 was -1.48%, based on a change in per share net asset
value from $19.22 to $18.44, and assuming reinvestment of $0.495 per
share income dividends.
<PAGE>
The Municipal Market Environment
Investor concerns that the economic growth seen thus far in the
first half of 1996 would result in the return of significant
inflationary pressures triggered a dramatic rise in interest rates
over the last six months. While economic growth in 1996 was much
stronger than in late 1995, few signs of renewed inflation asserted
themselves. This led to a volatile, upward movement in bond yields.
As economic indicators supporting strong economic growth emerged,
particularly in the robust employment growth seen in April and June,
bond yields rose. A continuing benign inflationary environment
moderated some of this increase in bond yields, causing bond yields
to fluctuate by as much as 20 basis points (0.20%) on a weekly
basis. As measured by the Bond Buyer Revenue Bond Index, yields on
uninsured, A-rated tax-exempt revenue bonds increased almost 50
basis points in the last six months to 6.20% by June 30, 1996. US
Treasury bond yields demonstrated similar, albeit greater,
volatility over the last six months. During the first half of 1996,
US Treasury bond yields rose over 90 basis points to 6.88%. During
the last six months, the municipal bond market reversed the trend
seen throughout much of 1995 and significantly outperformed US
Treasury securities.
The municipal bond market's recent outperformance was largely the
result of two principal factors. First, and perhaps more important,
much of the earlier concern regarding proposed changes in Federal
income tax codes and their effect on the tax treatment of tax-exempt
bond income dissipated. As the negative revenue impact of the
various proposals, such as the flat-tax, became apparent, the
likelihood of immediate reform quickly diminished. When the Kemp
Commission dealing with Federal income tax reform released its
findings early in 1996, the obvious need for reform was highlighted.
However, no specific recommendations of a flat-tax, value-added tax
or any other specific reform were made. Consequently, fears of
losing the favored tax treatment of municipal bond income declined
even further. As a percentage of Treasury bond yields, tax-exempt
bond yield ratios quickly declined from 95% to approximately 90%.
The second major factor leading to the municipal bond market's
recent outperformance was the return of a more favorable technical
environment. Over the past six months, approximately $90 billion in
municipal securities were issued, an increase of over 25% versus the
comparable period a year earlier. However, over the last three
months new tax-exempt bond underwritings totaled approximately $48
billion, an increase of 15% versus the same period in 1995. This
relative decline in bond issuance can be expected to continue as
bond issuance historically declines during the summer months. Also,
bond issuance dedicated toward refinancing higher-couponed debt fell
in response to higher interest rates.
<PAGE>
At the same time, investor demand remained consistently strong. With
nominal new issue yields above 6%, retail investor interest was
steady. Additionally, investors were expected to receive over $50
billion this June and July in assets derived from coupon income,
bond maturities, and proceeds from early redemptions. Annual new
bond issuance declined in recent years and is expected to remain
below levels seen in the early 1990s. Consequently, as the higher-
couponed bonds issued in the early-to-mid 1980s were redeemed at
their first optional call date, the total number of outstanding tax-
exempt bonds declined. This combination of a declining net supply
and significant amounts of new assets helped maintain investor
demand in recent months.
It is unlikely that the municipal bond market will continue to
significantly outperform US Treasury securities in the near future.
The tax-exempt bond market's recent performance led to the yield
ratio between taxable and tax-exempt securities falling from in
excess of 90% to approximately 85%. While historically still very
attractive, some institutional investors, particularly short-term
traders, began to view the tax-exempt bond market's recent
outperformance as an opportunity to sell a relatively expensive
asset. However, to the long-term investor, such a sale would
represent the loss of an attractively priced asset which may not be
easily replaced given the relative scarcity of municipal bonds under
present supply conditions.
Looking ahead, no clear consensus for the direction of interest
rates currently exists. Perhaps, the primary focus going forward
will be the extent to which the increase in interest rates seen thus
far in 1996 will negatively impact future economic growth. Should
growth slow in the interest rate sensitive sectors of the economy,
like housing, auto, and consumer spending, as many economists assert
is likely, then bond yields are likely to decline. Under such a
scenario, the municipal bond market's performance is likely to
closely mirror that of the US Treasury bond market.
Portfolio Strategy
We entered the six-month period ended June 30, 1996 very optimistic
that interest rates would decline. This optimism was based on our
belief that the economy was slowing and that advances on a balanced
Federal budget agreement would be beneficial to fixed-income
markets. To take advantage of this anticipated decline in interest
rates, the Fund's cash reserves were reduced to a minimum level in
late 1995 with a corresponding increase in duration. This strategy
benefited the portfolio's performance as long-term interest rates
declined significantly through the end of January 1996. Through mid-
January, the economy appeared sluggish enough that the Federal
Reserve Board lowered the Federal Funds rate by 0.50% to 5.25%, and
the markets priced in further easings of monetary policy.
<PAGE>
February brought the beginning of a reversal in the trend of lower
interest rates. By late February, signs of a strengthening economy
began to undermine investor confidence in the fixed-income market.
In March an unexpectedly strong employment report seemed to confirm
a surge in the growth of the US economy, and yields rose rapidly.
Prior to the back up in yields, the Fund's cash reserves were
gradually increased while its duration was decreased. This strategy
enabled the Fund to be less sensitive to the sharp back up in yields
experienced in the fixed-income markets.
Looking ahead, we remain cautious on long-term interest rates. This
stance is warranted as economic releases so far in 1996 continued to
show strength while inflationary pressures appeared in the form of
higher commodity prices. However, with the swift increase in yields
this year, we recently decreased the Fund's cash reserves by
purchasing long-term securities at attractive yields, since we
believe that the supply of municipal issues will be very thin in the
future. We will maintain a cautious approach to the markets until a
clearer direction for interest rates emerges during the balance of
the year.
Sincerely,
(Arthur Zeikel)
Arthur Zeikel
President
(Vincent R. Giordano)
Vincent R. Giordano
Senior Vice President
(William M. Petty)
William M. Petty
Vice President and Portfolio Manager
<PAGE>
July 31, 1996
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 Certificates of Participation
DATES Daily Adjustable Tax-Exempt Securities
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, 1996 (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 Refunding Bonds, 8% due
1.3% 10/01/2015 $ 2,129
AAA Aaa 5,000 Huntsville, Alabama, Health Care Authority, Revenue Bonds
(Health Care Facilities), Series B, 6.625% due 6/01/2023 (c) 5,353
Arizona-- A A1 11,500 Phoenix, Arizona, Civic Improvement Corporation, Wastewater
1.7% System, Lease Revenue Refunding Bonds, 4.75% due 7/01/2023 9,636
Arkansas-- AAA NR* 3,125 Arkansas State Development Finance Authority, S/F Mortgage
0.6% Revenue Bonds, Series C, 6.60% due 7/01/2017 (g) 3,251
<PAGE>
California-- AA- Aa 4,985 California HFA, Home Mortgage Revenue Bonds, AMT, Series F-1,
7.7% 7% due 8/01/2026 5,251
A A1 2,500 California State, GO, UT, 6.25% due 9/01/2012 2,667
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 8,759
A- A 5,000 (Secretary of State), 6.75% due 12/01/2012 5,384
AAA Aaa 4,000 (Various University of California Projects), 6.40% due
12/01/2016 (e) 4,154
AAA Aaa 2,000 Los Angeles County, California, COP (Correctional Facilities
Project), 6.50% due 9/01/2013 (c) 2,086
AA- A1 5,260 Los Angeles County, California, Transportation Commission
Sales Tax, Revenue Refunding Bonds, Series B, 6.50% due
7/01/2013 5,483
AAA Aaa 1,250 M-S-R Public Power Agency, California, Revenue Refunding Bonds
(San Juan Project), 6.75% due 7/01/2020 (c) 1,413
AA Aa 2,000 San Francisco, California, City and County Public Utilities
Commission, Water Revenue Refunding Bonds, 8% due 11/01/2011 2,143
AAA Aaa 5,025 Stockton, California, COP, Revenue Bonds (Wastewater Treatment
Plant Expansion), Series A, 6.80% due 9/01/2024 (d) 5,454
Colorado-- AA NR* 2,865 Colorado, HFA, S/F Mortgage Program Revenue Bonds, AMT,
3.0% Series D-3, 7.20% due 8/01/2023 (k) 2,963
AA Aa 2,940 Colorado Springs, Colorado, Utilities Revenue Refunding Bonds,
Series A, 6.50% due 11/15/2015 3,112
AAA Aaa 2,500 Denver, Colorado, City and County Airport Revenue Bonds,
Series A, 5.50% due 11/15/2025 (c) 2,379
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) 5,340
AAA Aaa 2,500 Garfield, Pitkin and Eagle Counties, Colorado, Roaring Fork
School District No. 1, UT, 6.60% due 6/15/2004 (b)(c) 2,774
</TABLE>
<TABLE>
The Municipal Fund Accumulation Program, Inc.
Schedule of Investments as of June 30, 1996 (continued) (in Thousands)
<CAPTION>
S&P Moody's Face Value
State Rating Rating Amount Issue (Note 1a)
<S> <S> <S> <C> <S> <C>
Connecticut-- AAA Aaa $ 2,000 Connecticut State Development Authority, Water Facility,
1.6% Revenue Refunding Bonds (Connecticut Water Company Project),
6.65% due 12/15/2020 (e) $ 2,147
AAA Aaa 3,000 Connecticut State, Health and Educational Facilities Authority
Revenue Bonds (Norwalk Hospital), Series D, 6.25% due
7/01/2022 (c) 3,083
AAA Aaa 3,500 Connecticut State, Special Tax Obligation Revenue Bonds,
Series B, 6.10% due 10/01/2011 (d) 3,652
<PAGE>
District of A+ A 5,000 District of Columbia Revenue Bonds (Howard University),
Columbia-- Series A, 7.25% due 10/01/2020 5,314
1.0%
Florida-- A A 1,715 Broward County, Florida, Resource Recovery Revenue Bonds
3.2% (Broward Waste Energy-LP North), 7.95% due 12/01/2008 1,895
A1+ VMIG1++ 2,700 Dade County, Florida, Water and Sewer Systems Revenue Bonds,
VRDN, 3.30% due 10/05/2022 (d)(h) 2,700
AAA Aaa 2,000 Florida State Board of Education, Public Education Capital
Outlay Bonds, Series B, 6.70% due 6/01/2001 (b) 2,191
AAA Aaa 6,250 Florida State Division Board of Finance Department, General
Services Revenue Bonds (Department of Environmental
Preservation), Series 2000-A, 5.30% due 7/01/2004 (e) 6,391
A1 VMIG1++ 3,000 Pinellas County, Florida, Health Facilities Authority, Revenue
Refunding Bonds (Pooled Hospital Loan Program), DATES,
3.70% due 12/01/2015 (h) 3,000
A1+ VMIG1++ 1,600 Saint Lucie County, Florida, PCR, Refunding (Florida Power
and Light Company Project), VRDN, 3.70% due 1/01/2026 (h) 1,600
Georgia-- Georgia Municipal Electric Authority, Power Revenue
5.8% Refunding Bonds:
A A 3,000 Crossover, Series O, 8.125% due 1/01/2017 3,215
A+ Aaa 3,250 Series B, 8% due 1/01/1998 (b) 3,503
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) 5,460
AA- A1 8,200 Series O, 6.55% due 7/01/2020 8,620
A+ A 10,460 Municipal Electric Authority, Georgia, Special Obligation
Revenue Bonds, Fifth Crossover Series, Project One, 6.50%
due 1/01/2017 (a) 11,194
Idaho--0.4% NR* VMIG1++ 2,200 Idaho Health Facilities Authority Revenue Bonds (Saint Luke's
Regional Medical Center Project), VRDN, 3.65% due 5/01/2022 (h) 2,200
Illinois-- AAA Aaa 4,800 Cook County, Illinois, GO, UT, Series A, 6.60% due 11/15/2022 (c) 5,018
1.3% AA Aa2 1,850 Illinois Development Finance Authority, PCR, Refunding (Central
Illinois Public Service Company Project), Series B, 7.60% due
9/01/2013 2,033
Indiana-- NR* Aaa 4,315 Indiana State Educational Facilities Authority Revenue Bonds
2.1% (University of Notre Dame Project), 6.70% due 3/01/2025 4,711
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 1,132
A+ A1 2,250 Indiana Transportation Finance Authority, Highway Revenue Bonds,
Series A, 8.125% due 6/01/1998 (b) 2,453
A+ NR* 2,865 Indianapolis, Indiana, Local Public Improvement Bond Bank,
Refunding, Series D, 6.75% due 2/01/2020 3,090
<PAGE>
Kansas--1.6% AA Aa1 10,035 Johnson County, Kansas, Unified School District No. 512,
Refunding(Shawnee Mission), UT, 4.875% due 10/01/2019 8,933
</TABLE>
<TABLE>
The Municipal Fund Accumulation Program, Inc.
Schedule of Investments as of June 30, 1996 (continued) (in Thousands)
<CAPTION>
S&P Moody's Face Value
State Rating Rating Amount Issue (Note 1a)
<S> <S> <S> <C> <S> <C>
Kentucky-- A1 VMIG1++$ 2,000 Kentucky Economic Development Finance Authority Revenue Bonds
1.7% (Sisters of Charity), VRDN, 3.70% due 11/01/2020 (h) $ 2,000
NR* A 3,000 Kentucky State Turnpike Authority, Economic Development Road
Revenue Bonds, Series A, 8.25% due 7/01/1997 (b) 3,191
A+ A 4,000 Kentucky State Turnpike Authority, Resource Recovery Road
Revenue Refunding Bonds, Series A, 8% due 7/01/2003 4,228
Louisiana-- East Baton Rouge Parish, Louisiana, Sales and Use Tax,
3.1% Refunding, State Series (d):
AAA Aaa 4,085 5.50% due 2/01/2019 3,890
AAA Aaa 4,820 5.50% due 2/01/2021 4,538
AAA Aaa 5,000 New Orleans, Louisiana, Public Improvement Refunding Bonds,
UT, 7% due 9/01/2002 (b)(d) 5,574
AAA Aaa 3,400 New Orleans, Louisiana, Refunding, 6.125% due 10/01/2016 (e) 3,449
Maine--0.8% AA- A1 4,480 Maine State Housing Authority, Mortgage Purpose Revenue Bonds,
Series D, 6.80% due 11/15/2025 4,636
Massachu- Massachusetts State Health and Educational Facilities Authority
setts--5.0% Revenue Bonds:
A+ A1 5,900 (Brigham and Women's Hospital Issue), Series D, 6.75% due
7/01/2024 6,135
A1+ VMIG1++ 2,800 (Capital Assets Program), VRDN, Series D, 3.60% due
1/01/2035 (c)(h) 2,800
AAA Aaa 2,550 (Northeastern University), Series E, 6.55% due 10/01/2022 (c) 2,709
AAA Aaa 1,390 (University Hospital), Series C, 7.25% due 7/01/2019 (c) 1,516
A+ Aa 3,000 Massachusetts State, HFA, S/F Housing Revenue Bonds, AMT,
Series 38, 7.20% due 12/01/2026 3,170
NR* MIG1++ 4,800 Massachusetts State Industrial Finance Agency, Health Care
Facility Revenue Bonds (Beverly Enterprises, Inc.), VRDN, 3.60%
due 4/01/2009 (h) 4,800
A1+ VMIG1++ 300 Massachusetts State Industrial Finance Agency, PCR, Refunding
(Holyoke Water Power Company), VRDN, Series A, 3.10% due
5/01/2022 (h) 300
NR* NR* 4,000 Massachusetts State Industrial Finance Agency Revenue Bonds
(Newbury College Issue), VRDN, 3.40% due 6/01/2021 (h) 4,000
A1+ VMIG1++ 700 Massachusetts State, Municipal Wholesale Electric Company,
Power Supply System Revenue Bonds, VRDN, Series C, 3.05% due
7/01/2019 (h) 700
AAA Aaa 1,000 Massachusetts State Port Authority Revenue Bonds, 13% due
7/01/2013 (a) 1,642
<PAGE>
Michigan-- Michigan State Hospital Finance Authority Revenue Bonds (Henry
3.2% Ford Health Systems), Series A:
AAA Aa 1,500 7% due 7/01/2000 (b) 1,648
AA Aa 6,500 Refunding, 5.25% due 11/15/2020 5,876
AA Aa 5,000 Refunding, 5.25% due 11/15/2025 4,463
Michigan State Strategic Fund, Limited Obligation Revenue
Refunding Bonds (Detroit Edison Co. Project):
AAA Aaa 1,000 6.875% due 12/01/2021 (d) 1,074
AAA Aaa 2,000 Series BB, 7% due 5/01/2021 (e) 2,315
AAA Aaa 1,000 Series CC, 6.95% due 9/01/2021 (d) 1,075
AA Aa 1,250 Royal Oak, Michigan, Hospital Finance Authority Revenue Bonds
(William Beaumont Hospital), Series D, 6.75% due 1/01/2020 1,315
</TABLE>
<TABLE>
The Municipal Fund Accumulation Program, Inc.
Schedule of Investments as of June 30, 1996 (continued) (in Thousands)
<CAPTION>
S&P Moody's Face Value
State Rating Rating Amount Issue (Note 1a)
<S> <S> <S> <C> <S> <C>
Minnesota-- AA+ Aa $ 4,310 Minnesota State HFA, S/F Mortgage Revenue Bonds, AMT,
0.8% Series M, 6.70% due 7/01/2026 $ 4,420
Mississippi NR* P1 2,000 Perry County, Mississippi, PCR, Refunding (Leaf River Forest
- --0.4% Project), VRDN, 3.60% due 3/01/2002 (h) 2,000
Montana-- AA+ Aa 5,035 Montana State Board, S/F Housing Program, AMT, Series B-2,
1.0% 6.90% due 6/01/2025 5,247
Nevada-- AAA Aaa 2,000 Clark County, Nevada, PCR, Refunding (Nevada Power Company
1.2% Project), Series B, 6.60% due 6/01/2019 (d) 2,131
NR* NR* 2,000 Clark County, Nevada, School District Improvement Bonds,
Series A, 8% due 3/01/1998 (b) 2,159
AAA Aaa 2,240 Nevada Housing Division, S/F Housing Division Program, AMT,
Series E, 7.05% due 4/01/2027 2,346
<PAGE>
New Jersey-- Jersey City, New Jersey, GO (School District), UT:
5.4% AA A 2,900 6.65% due 2/15/2013 3,141
AA A 3,030 6.65% due 2/15/2014 3,282
AAA Aaa 5,000 New Jersey EDA, Revenue Refunding Bonds (RWJ Health Care
Corporation), 6.50% due 7/01/2024 (j) 5,257
AAA Aaa 1,000 New Jersey Health Care Facilities Financing Authority, Revenue
Refunding Bonds (Hackensack Medical Center), 6.625% due
7/01/2017 (d) 1,062
AAA Aaa 1,500 New Jersey Sports and Exposition Authority, Luxury Tax Revenue
Refunding Bonds (Convention Center), Series A, 6.25% due
7/01/2020 (c) 1,546
A+ Aa 5,000 New Jersey Sports and Exposition Authority (State Contract),
Series A, 6.50% due 3/01/2019 5,228
AAA Aaa 3,000 New Jersey State Educational Facilities Authority Revenue Bonds
(Trenton State College), Series A, 5.10% due 7/01/2021 (c) 2,723
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) 3,141
BBB+ Baa1 2,000 New Jersey State Turnpike Authority, Turnpike Revenue Refunding
Bonds, Series A, 6.75% due 1/01/2008 2,125
AA A1 2,500 Rutgers State University, New Jersey, Refunding (State
University of New Jersey), Series A, 6.50% due 5/01/2018 2,621
New Mexico-- A1+ P1 2,900 Hurley, New Mexico, PCR (Kennecott Santa Fe), VRDN, 3.60% due
1.5% 12/01/2015 (h) 2,900
AAA Aaa 5,000 Los Alamos County, New Mexico, Utility System Revenue Refunding
Bonds, Series A, 6% due 7/01/2009 (j) 5,154
New York-- New York City, New York, GO, UT:
15.8% BBB+ Aaa 3,000 Series A, 8% due 8/15/2001 (b) 3,481
BBB+ Baa1 3,000 Series C, Sub-Series C-1, 7.50% due 8/01/2020 3,312
BBB+ Baa1 2,000 Series D, 7.50% due 2/01/2016 2,179
BBB+ Baa1 2,500 Series D, 7.50% due 2/01/2019 2,745
AAA Aaa 11,000 New York City, New York, Municipal Water Finance Authority,
Water and Sewer System Revenue Bonds, Series F, 5.50% due
6/15/2023 (c) 10,431
New York State Dormitory Authority Revenue Bonds:
AAA Aaa 3,000 (City University Systems Consolidation), Third Generation,
Series 1, 5.375% due 7/01/2025 (e) 2,812
AA Aa 1,000 (Cornell University), Series A, 7.375% due 7/01/2030 1,110
BBB+ Baa1 3,250 Refunding (State University Educational Facilities),
Series B, 7% due 5/15/2016 3,438
AAA Aa 1,000 (Saint Vincent Hospital and Medical Center), 7.40% due
8/01/2030 (f) 1,110
</TABLE>
<PAGE>
<TABLE>
The Municipal Fund Accumulation Program, Inc.
Schedule of Investments as of June 30, 1996 (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 New York State Environmental Facilities Corporation, PCR,
(concluded) State Water Revolving Fund:
A Aa $ 1,425 (New York City Municipal), Series A, 7% due 6/15/2012 $ 1,558
A Aa 1,800 Series A, 7.50% due 6/15/2012 1,982
AA- Aa 500 Series B, 7.50% due 3/15/2011 541
New York State Local Government Assistance Corporation,
Series A:
A A 11,650 6.875% due 4/01/2019 12,835
A A 5,000 6.50% due 4/01/2020 5,191
New York State Medical Care Facilities Finance Agency Revenue
Bonds (Mental Health Services Facilities Improvements):
AAA Aaa 1,515 Series A, 7.80% due 2/15/1999 (b) 1,672
BBB+ Baa1 640 Series A, 7.80% due 2/15/2019 697
BBB+ Baa1 600 Series B, 7.875% due 8/15/2020 671
AAA Aaa 3,500 New York State Medical Care Facilities Finance Agency Revenue
Bonds (New York Hospital Mortgage), Series A, 6.80% due
8/15/2024 (e)(f) 3,788
AA- NR* 6,140 New York State Power Authority, Refunding, Series V, 8% due
1/01/1998 (b) 6,623
A- A1 5,325 Triborough Bridge and Tunnel Authority, New York, Refunding
(Special Obligations), Series B, 6.875% due 1/01/2015 5,803
Triborough Bridge and Tunnel Authority, New York, Revenue
Bonds (General Purpose), Series X:
A+ Aa 5,100 6.625% due 1/01/2012 5,651
A+ Aa 9,575 6.50% due 1/01/2019 10,115
New York & AA- A1 12,750 Port Authority of New York and New Jersey, Consolidated
New Jersey-- Revenue Bonds, 72nd Series, 7.35% due 10/01/2002 (b) 14,594
2.6%
North AAA Aaa 3,725 New Hanover County, North Carolina, Hospital Revenue Bonds
Carolina-- (New Hanover Regional Medical Center Project), 5.75% due
1.5% 10/01/2026 (e) 3,654
BBB+ Aaa 1,330 North Carolina Eastern Municipal Power Agency, Power System
Revenue Refunding Bonds, Series A, 6.50% due 1/01/2018 (a) 1,475
AAA Aaa 3,000 North Carolina Municipal Power Agency No. 1, Revenue Refunding
Bonds (Catawba Electric), 6% due 1/01/2011 (c) 3,138
Ohio--0.8% AAA Aaa 3,000 Hamilton, Ohio, Electric System Mortgage Revenue Bonds,
Series B, 8% due 10/15/1998 (b)(d) 3,298
AAA NR* 105 Ohio State Water Development Authority, Revenue Refunding and
Improvement Bonds, 8% due 12/01/2000 (b) 111
AAA Aaa 775 Toledo, Ohio, Sewer System, Revenue Refunding Bonds, Series B,
7.75% due 11/15/2017 (c) 845
<PAGE>
Oregon--1.6% AAA Aaa 9,850 Oregon Health Sciences University Revenue Bonds, Series A,
5.75% due 7/01/2021 (c)(i) 2,259
AA- Aa 6,500 Oregon State Board of Higher Education, Series A, 6% due
8/01/2026 6,580
</TABLE>
<TABLE>
The Municipal Fund Accumulation Program, Inc.
Schedule of Investments as of June 30, 1996 (continued) (in Thousands)
<CAPTION>
S&P Moody's Face Value
State Rating Rating Amount Issue (Note 1a)
<S> <S> <S> <C> <S> <C>
Pennsylvania AAA Aaa $ 2,500 Altoona, Pennsylvania, City Authority, Water Revenue Bonds,
- --3.7% Series A, 6.50% due 11/01/2019 (d) $ 2,639
Emmaus, Pennsylvania, General Authority Revenue Bonds,
VRDN (h):
A1 NR* 1,000 Sub-Series B-12, 3.25% due 3/01/2024 1,000
A1 NR* 1,900 Sub-Series D-12, 3.35% due 3/01/2024 1,900
AAA Aaa 4,000 Montgomery County, Pennsylvania, IDA, PCR, Refunding
(Philadelphia Electric Company), Series B, 6.70% due
12/01/2021 (c) 4,263
AAA Aaa 3,355 North Penn, Pennsylvania, Water Authority Revenue Bonds, 7%
due 11/01/2004 (b)(d) 3,831
A1+ VMIG1++ 2,000 Philadelphia, Pennsylvania, Hospitals and Higher Education
Facilities Authority, Hospital Revenue Bonds (Children's
Hospital Project), VRDN, Series A, 3.70% due 3/01/2027 (h) 2,000
AAA Aaa 5,000 Philadelphia, Pennsylvania, School District, Series B, 5.50%
due 9/01/2025 (e) 4,726
Puerto Rico AAA NR* 2,000 Puerto Rico Commonwealth, Public Improvement, GO, 7.70% due
- --0.4% 7/01/2000 (b) 2,262
Rhode Island AAA Aaa 2,500 Rhode Island Port Authority and Economic Development
- --0.5% Corporation, Revenue Refunding Bonds (Shepard Building Project),
Series B, 6.75% due 6/01/2025 (e) 2,696
South Piedmont Municipal Power Agency, South Carolina, Electric
Carolina Revenue Refunding Bonds (d):
- --1.1% AAA Aaa 3,000 6.75% due 1/01/2019 3,358
AAA Aaa 2,210 Series A, 6.50% due 1/01/2014 2,418
<PAGE>
Texas--6.0% AAA Aaa 2,000 Austin, Texas, Combined Utility Systems, Revenue Refunding
Bonds, Prior Lien, 6.50% due 5/15/2011 (e) 2,101
AAA Aaa 2,000 Brazos River Authority, Texas, Revenue Refunding Bonds
(Houston Light and Power Co.), Series B, 6.375% due 4/01/2012 (c) 2,092
Harris County, Texas, Health Facilities Development Corporation,
Hospital Revenue Bonds:
AAA Aaa 2,870 (Hermann Hospital Project), 6.375% due 10/01/2024 (c) 2,972
A1+ NR* 2,000 (Methodist Hospital), VRDN, 3.70% due 12/01/2025 (h) 2,000
Harris County, Texas, Toll Road Sub-Lien, Revenue Refunding
Bonds, UT:
AAA NR* 1,250 8.125% due 8/01/1998 (b) 1,371
AA Aa 3,000 6.75% due 8/01/2014 3,222
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 3,048
Sabine River Authority, Texas, PCR, Refunding (Texas Utilities
Electric Company Project):
AAA Aaa 4,700 6.55% due 10/01/2022 (d) 4,993
A1 VMIG1++ 600 VRDN, Series A, 3.65% due 3/01/2026 (e)(h) 600
AAA Aaa 5,300 San Antonio, Texas, Water Revenue Refunding Bonds, 6.50% due
5/15/2010 (c) 5,616
AAA Aaa 2,000 Texas Municipal Power Agency Revenue Bonds, 14.625% due
3/01/1997 (b) 2,144
AA Aa 1,000 Texas State, Refunding (Veterans Land), UT, 6.50% due 12/01/2021 1,040
AA Aa 2,155 Texas State Veterans' Housing Assistance Fund II, AMT, UT,
Series A, 7% due 12/01/2025 2,245
</TABLE>
<TABLE>
The Municipal Fund Accumulation Program, Inc.
Schedule of Investments as of June 30, 1996 (continued) (in Thousands)
<CAPTION>
S&P Moody's Face Value
State Rating Rating Amount Issue (Note 1a)
<S> <S> <S> <C> <S> <C>
Utah--1.0% AA- Aa $ 1,000 Intermountain Power Agency, Utah, Power Supply Revenue
Refunding Bonds, Series D, 8.625% due 7/01/2021 $ 1,056
NR* P1 4,700 Salt Lake County, Utah, PCR, Refunding (Service Station
Holdings Project), VRDN, 3.60% due 2/01/2008 (h) 4,700
Vermont-- AA NR* 5,000 Vermont Educational and Health Buildings, Financing Agency
0.8% Revenue Bonds (Middlebury College Project), 5.375% due
11/01/2026 4,628
Virginia-- AA Aa 4,500 Henrico County, Virginia, IDA, Public Facility, Lease Revenue
3.0% Bonds (Henrico County Regional Jail Project), 7% due 8/01/2013 4,952
AAA Aaa 10,000 Upper Occoquan, Virginia, Sewer Authority, Regional Sewer
Revenue Bonds, Series A, 5% due 7/01/2025 (c) 8,763
AAA Aaa 2,750 Virginia State Transportation Board, Transportation Contract
Revenue Bonds (Rate 28 Project), 7.80% due 3/01/1998 (b) 2,967
<PAGE>
Washington-- AA+ Aa1 4,000 Seattle, Washington, Refunding Bonds, 6.50% due 3/01/2017 4,138
1.7% AAA Aaa 3,000 Tacoma, Washington, Refuse Utility Revenue Bonds, 7% due
12/01/2019 (e) 3,324
AA Aa 2,000 Washington State, GO, Series A, 6.75% due 2/01/2015 2,240
Wisconsin-- Wisconsin Housing and EDA, Home Ownership Revenue Bonds,
2.4% Series 1:
AA Aa 1,000 6.75% due 9/01/2015 1,038
AA Aa 4,990 6.75% due 9/01/2017 5,164
AAA Aaa 2,000 Wisconsin Public Power System Inc., Power Supply System
Revenue Bonds, Series A, 7.40% due 7/01/2000 (b)(e) 2,228
AAA Aaa 5,000 Wisconsin State Health and Educational Facilities Authority,
Revenue Bonds (Children's Hospital of Wisconsin Inc. Project),
6.50% due 8/15/2021 (d) 5,212
Total Investments (Cost--$517,359)--98.3% 545,439
Other Assets Less Liabilities--1.7% 9,267
--------
Net Assets--100.0% $554,706
========
<FN>
(a)Escrowed to maturity.
(b)Prerefunded.
(c)MBIA Insured.
(d)FGIC Insured.
(e)AMBAC Insured.
(f)FHA Insured.
(g)GNMA/FNMA Collateralized.
(h)The interest rate is subject to change periodically based upon
the prevailing market rate. The interest rate shown is the rate in
effect at June 30, 1996.
(i)Represents a zero coupon bond; the interest rate shown is the
effective yield at the time of purchase by the Program.
(j)FSA Insured.
(k)Federal Guarantee.
*Not Rated.
++Highest short-term rating by Moody's Investors Service, Inc.
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
The Municipal Fund Accumulation Program, Inc.
Statement of Assets and Liabilities As of June 30, 1996
<S> <C> <C>
Assets:
Investments, at value (identified cost--$517,359,104) (Note 1a) $545,438,586
Cash 229,726
Receivables:
Interest $ 10,361,318
Securities sold 3,772,280 14,133,598
------------
Prepaid registration fees and other assets (Note 1d) 43,104
------------
Total assets 559,845,014
------------
Liabilities:
Payables:
Securities purchased 3,572,844
Capital shares redeemed. 807,389
Investment adviser (Note 2) 208,127 4,588,360
------------
Accrued expenses and other liabilities 550,825
------------
Total liabilities 5,139,185
------------
Net Assets $554,705,829
============
Net Assets Consist of:
Common Stock, $0.01 par value, 100,000,000 shares authorized $ 300,792
Paid-in capital in excess of par 532,614,366
Undistributed investment income--net 849,957
Accumulated realized capital losses on investments--net (Note 5) (7,138,768)
Unrealized appreciation on investments--net 28,079,482
------------
Net Assets:
Equivalent to $18.44 per share based on 30,079,244 shares outstanding $554,705,829
============
<PAGE>
See Notes to Financial Statements.
</TABLE>
<TABLE>
The Municipal Fund Accumulation Program, Inc.
Statement of Operations For the Six Months Ended June 30, 1996
<S> <C> <C>
Investment Income (Note 1c):
Interest and premium and discount earned $ 16,871,878
Expenses:
Investment advisory fees (Note 2) $ 1,399,652
Transfer agent fees 747,110
Printing and shareholder reports 61,648
Registration fees (Note 1d) 32,092
Accounting services (Note 2) 31,178
Custodian fees 25,332
Professional fees 21,421
Pricing services 10,345
Directors' fees and expenses 7,921
Other 5,623
------------
Total expenses 2,342,322
------------
Investment income--net 14,529,556
Realized & Unrealized Loss on Investments (Notes 1c & 3):
Realized loss on investments--net (2,290,177)
Change in unrealized appreciation on investments--net (20,843,094)
------------
Net Decrease in Net Assets Resulting from Operations $ (8,603,715)
============
</TABLE>
<TABLE>
The Municipal Fund Accumulation Program, Inc.
Statements of Changes in Net Assets
<CAPTION>
For the Six For the
Months Ended Year Ended
June 30, December 31,
Increase (Decrease) in Net Assets: 1996 1995
<S> <C> <C>
Operations:
Investment income--net $ 14,529,556 $ 30,174,069
Realized gain (loss) on investments--net (2,290,177) 8,961,659
Change in unrealized appreciation on investments--net (20,843,094) 43,539,828
------------ ------------
Net increase (decrease) in net assets resulting from operations (8,603,715) 82,675,556
------------ ------------
<PAGE>
Dividends to Shareholders (Note 1e):
Investment income--net (14,823,999) (30,313,535)
------------ ------------
Net decrease in net assets resulting from dividends to shareholders (14,823,999) (30,313,535)
------------ ------------
Capital Share Transactions (Note 4):
Net decrease in net assets resulting from capital share transactions (3,545,035) (7,880,024)
------------ ------------
Net Assets:
Total increase (decrease) in net assets (26,972,749) 44,481,997
Beginning of period 581,678,578 537,196,581
------------ ------------
End of period* $554,705,829 $581,678,578
============ ============
<FN>
*Undistributed investment income--net $ 849,957 $ 1,144,400
============ ============
See Notes to Financial Statements.
</TABLE>
<TABLE>
The Municipal Fund Accumulation Program, Inc.
Financial Highlights
<CAPTION>
For the
The following per share data and ratios have been derived Six Months
from information provided in the financial statements. Ended
June 30, For the Year Ended December 31,
Increase (Decrease) in Net Asset Value: 1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period $ 19.22 $ 17.51 $ 19.79 $ 18.93 $ 18.63
-------- -------- -------- -------- --------
Investment income--net .48 1.01 1.03 1.09 1.15
Realized and unrealized gain (loss) on investments--net (.77) 1.71 (2.28) 1.11 .30
-------- -------- -------- -------- --------
Total from investment operations (.29) 2.72 (1.25) 2.20 1.45
Less dividends and distributions: -------- -------- -------- -------- --------
Investment income--net (.49) (1.01) (1.03) (1.09) (1.15)
Realized gain on investments--net -- -- -- (.25) --
-------- -------- -------- -------- --------
Total dividends and distributions (.49) (1.01) (1.03) (1.34) (1.15)
-------- -------- -------- -------- --------
Net asset value, end of period $ 18.44 $ 19.22 $ 17.51 $ 19.79 $ 18.93
======== ======== ======== ======== ========
<PAGE>
Total Investment Return:
Based on net asset value per share (1.48%)+++ 15.88% (6.44%) 11.93% 8.08%
======== ======== ======== ======== ========
Ratios to Average Net Assets:
Expenses .83%* .86% .89% .86% .88%
======== ======== ======== ======== ========
Investment income--net 5.18%* 5.40% 5.54% 5.52% 6.15%
======== ======== ======== ======== ========
Supplemental Data:
Net assets, end of period (in thousands) $554,706 $581,679 $537,197 $639,588 $536,952
======== ======== ======== ======== ========
Portfolio turnover 36% 56% 61% 23% 24%
======== ======== ======== ======== ========
<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.
(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.
<PAGE>
(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, L.P. ("FAM"). The general partner of FAM is
Princeton Services, Inc. ("PSI"), an indirect wholly-owned
subsidiary of Merrill Lynch & Co., Inc. ("ML & Co."), which is the
limited partner.
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 FAM
during any fiscal year which would cause such expenses to exceed the
foregoing expense limitations applicable at the time of such
payment.
The Municipal Fund Accumulation Program, Inc.
Notes to Financial Statements (concluded)
<PAGE>
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 performcertain
administrative duties on behalf of FAM.
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, 1996 were $192,057,321 and
$228,056,478, respectively.
Net realized and unrealized gains (losses) as of June 30, 1996 were
as follows:
Realized Unrealized
Losses Gains
Long-term investments $(2,290,177) $28,079,482
----------- -----------
Total $(2,290,177) $28,079,482
=========== ===========
As of June 30, 1996, net unrealized appreciation for Federal income
tax purposes aggregated $28,079,482, of which $30,425,291 related to
appreciated securities and $2,345,809 related to depreciated
securities. The aggregate cost of investments at June 30, 1996 for
Federal income tax purposes was $517,359,104.
4. Capital Share Transactions:
Transactions in capital shares were as follows:
For the Six Months Ended Dollar
June 30, 1996 Shares Amount
<PAGE>
Shares sold 2,597,480 $ 48,626,528
Shares issued to
shareholders in
reinvestment of dividends 753,127 14,014,666
------------ ------------
Total issued 3,350,607 62,641,194
Shares redeemed (3,537,518) (66,186,229)
------------ ------------
Net decrease (186,911) $ (3,545,035)
============ ============
For the Year Ended Dollar
December 31, 1995 Shares Amount
Shares sold 5,353,884 $ 98,802,679
Shares issued to
shareholders in
reinvestment of dividends 1,553,919 28,721,772
------------ ------------
Total issued 6,907,803 127,524,451
Shares redeemed (7,324,857) (135,404,475)
------------ ------------
Net decrease (417,054) $ (7,880,024)
============ ============
5. Capital Loss Carryforward:
As of December 31, 1995, the Program had a net capital loss
carryforward of approximately $4,849,000, all of which expires in
2002. This amount will be available to offset like amounts of any
future taxable gains.
The Municipal Fund Accumulation Program, Inc.
Officers and Directors
<PAGE>
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
William M. Petty--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
