The
Municipal
Fund
Accumulation
Program,
Inc.
Annual Report
December 31, 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.
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
<PAGE>
To Our Shareholders:
For the year ended December 31, 1995, The Municipal Fund
Accumulation Program, Inc.'s net annualized yield was 5.29%. Total
investment return for the Program for the 12-month period ended
December 31, 1995 was +15.88%, based on the change in per share net
asset value from $17.51 to $19.22, and assuming reinvestment of
$1.005 per share income dividends.
For the six months ended December 31, 1995, The Municipal Fund
Accumulation Program, Inc.'s net annualized yield was 5.25%. Total
investment return for the Program for the six-month period ended
December 31, 1995 was +6.80%, based on the change in per share net
asset value from $18.48 to $19.22, and assuming reinvestment of
$0.497 per share income dividends.
The Municipal Market
The municipal bond market rallied strongly over the three months
ended December 31, 1995. Long-term, tax-exempt revenue bond yields,
as measured by the Bond Buyer Revenue Bond Index, declined over 55
basis points (0.55%) to end the December quarter at 5.71%. Continued
weak economic conditions coupled with low inflation fostered a very
positive environment for almost all fixed-income products throughout
most of the December quarter. Long-term US Treasury bond yields also
fell approximately 65 basis points to 5.95%. Both US Treasury and
long-term tax-exempt bond yields are now at their lowest levels in
the past two years.
Given the difficulties that the municipal bond market had to contend
with for much of 1995, its performance over recent months was
especially impressive. Various tax reform proposals made the future
tax advantage of municipal bonds uncertain. This has, at a minimum,
reduced the overall demand for tax-exempt securities. At the same
time, as municipal bond yields declined, tax-exempt authorities
rushed to issue debt at near historic low yield levels. During the
three months ended December 31, 1995, over $85 billion in municipal
securities were underwritten, an increase of almost 20% compared to
the same three-month period ended December 31, 1994. However, as
early 1995 issuance was significantly reduced, 1995 annual issuance
of approximately $160 billion remained about 5% below 1994 issuance.
Tax-exempt bond yields declined throughout the three-month period
ended December 31, 1995 despite investor uncertainty and increased
supply pressures.
<PAGE>
It is also important to note that it is likely that the municipal
market will regain much of the technical support it enjoyed earlier
in 1995. The 1995 issuance remained significantly below levels
underwritten in 1993 when over $290 billion in long-term tax-exempt
securities were issued. Also, municipal investors were expected to
receive over $25 billion in bond maturities, coupon income and early
redemptions on January 1, 1996. This $25 billion is almost twice the
average monthly issuance for 1995. We believe that the amount of
outstanding municipal securities will continue to decline throughout
1996 and into early 1997. As the uncertainties surrounding
"proposed" tax reform are resolved in 1996, the tax-exempt bond
market renewed technical position should provide a large measure of
stability to municipal bond prices.
Many of the features that made tax-exempt products attractive
throughout 1995 remain available. Long-term, A-rated municipal
revenue bonds continue to yield well over 90% of comparable US
Treasury bond yields. Historically, analysts have considered yields
in excess of 82% attractive for long-term investors. Currently
available tax-exempt bond yields continue to generate taxable
equivalent yields in excess of 8.50%. While the uncertainties
regarding potential changes in current tax law remain, it appears
that the long-term municipal investor is being well compensated for
the present instability.
Looking ahead, it may be unreasonable to expect to duplicate the
double-digit returns produced by most tax-exempt products in 1995.
Current municipal bond yield levels would make such duplication
difficult. Municipal bond yields would have to decline to levels not
seen since the 1960s in order to generate such significant returns
in the coming years. While the current economic environment may
still justify additional declines in interest rates, it may be
prudent to expect some period of consolidation before the interest
rate decline resumes. Tax-exempt bond market performance in 1996 is
likely to be generated more by maximizing current income and
minimizing credit risk than by significant interest rate declines.
Fortunately, the current municipal bond market allows the long-term
investor to purchase high-quality tax-exempt securities at
historically attractive yield levels.
Fiscal Year in Review
During the past 12 months, the municipal bond market was extremely
volatile. As measured by the Bond Buyer Revenue Bond Index, long-
term tax-exempt bond yields ranged from a high of 6.94% on January
5, 1995 to a low of 5.65% on December 7, 1995. At December 31, 1995,
the Index was near the low for the period, yielding 5.71%. After
rising sharply for most of 1994, long-term interest rates rallied
significantly during 1995 as the US economy nearly slowed to a halt.
This slowdown in economic growth initially caused the Federal
Reserve Board to stop tightening monetary policy early in 1995. Once
the magnitude of the slowdown became apparent, the Federal Reserve
Board decreased the Federal Funds rate to 5.50%.
<PAGE>
We altered the Program's portfolio strategy during the past 12
months as investor sentiment changed. The Program entered the year
defensively postured and maintained that outlook through early 1995.
However, as evidence of a stagnant economy emerged early in 1995,
our investment strategy became more constructive. We reduced cash
reserves to a minimum and restructured holdings to extend the
average maturity and lower the average coupon of the portfolio. This
entailed selling par bonds, which have little upside potential, and
buying discount coupon bonds. These moves made the Program more
responsive to changes in interest rates. Therefore, the Program
generated a positive total return and an attractive current yield
for its shareholders.
In Conclusion
We appreciate your ongoing interest in The Municipal Fund
Accumulation Program, Inc., and we look forward to assisting you
with your financial needs in the months and years to come.
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
February 2, 1996
We are pleased to announce that William M. Petty is responsible for
the day-to-day management of The Municipal Fund Accumulation
Program, Inc. Mr. Petty has been employed by Merrill Lynch Asset
Management, L.P. (an affiliate of the Fund's investment adviser)
since 1993 as Vice President and was Assistant Vice President from
1992 to 1993. Prior thereto, he was employed by J. J. Kenny
Municipal Bond Brokers as a Municipal Bond Broker from 1990 to 1992.
<PAGE>
The Municipal Fund Accumulation Program, Inc.
Total Return Based on a $10,000 Investment
A line graph depicting the growth of an investment in The
Municipal Fund Accumulation Program, Inc. compared to growth
of an investment in the Lehman Brothers General Municipal Bond
Index. Beginning and ending values are:
12/85 12/95
The Municipal Fund Accumulation
Program, Inc.*++ $10,000 $21,557
Lehman Brothers General Municipal
Bond Index++++ $10,000 $24,201
[FN]
*Assuming transaction costs and other operating expenses,
including advisory fees.
++The Municipal Fund Accumulation Program, Inc. invests in
long- and intermediate-term state, municipal and public
authority bonds (including private activity bonds), the
interest on which is exempt from Federal income tax.
++++This unmanaged Index consists of revenue bonds, general
obligation bonds and insured bonds.
Past performance is not predictive of future performance.
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
William M. Petty--Vice President
Gerald M. Richard--Treasurer
Susan B. Baker--Secretary
<PAGE>
Custodian and Transfer Agent
The Bank of New York
110 Washington Street
New York, New York 10286
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 December 31, 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 Refunding Bonds, 8% due
1.4% 10/01/2015 $ 2,166
AAA Aaa 5,000 Huntsville, Alabama, Health Care Authority Revenue Bonds
(Health Care Facilities), Series B, 6.625% due 6/01/2023 (c) 5,548
Arizona-- A A1 6,500 Phoenix, Arizona, Civic Improvement Corporation, Wastewater
1.0% System, Lease Revenue Refunding Bonds, 4.75% due 7/01/2023 5,937
Arkansas-- AAA NR* 2,625 Arkansas State Development Finance Authority, S/F Mortgage
0.5% Revenue Bonds, Series C, 6.60% due 7/01/2017 (g) 2,793
<PAGE>
California-- California HFA, Home Mortgage Revenue Bonds, AMT:
9.5% AA- Aa 3,000 Series A, 7.70% due 8/01/2030 3,187
AA- Aa 4,985 Series F-1, 7% due 8/01/2026 5,301
A A1 2,500 California State, GO, UT, 6.25% due 9/01/2012 2,786
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 9,032
A- A 5,000 (Secretary of State), 6.75% due 12/01/2012 5,471
AAA Aaa 4,000 (Various University of California Projects), 6.40%
due 12/01/2016 (e) 4,328
A A1 2,500 California State Various Purpose Bonds, 6.25% due 10/01/2019 2,755
AAA Aaa 2,000 Los Angeles County, California, COP (Correctional Facilities
Project), 6.50% due 9/01/2013 (c) 2,142
AA- A1 5,260 Los Angeles County, California, Transportation Commission Sales
Tax, Revenue Refunding Bonds, Series B, 6.50% due 7/01/2013 5,633
AAA Aaa 1,250 M-S-R Public Power Agency, California, Revenue Refunding Bonds
(San Juan Project), 6.75% due 7/01/2020 (c) 1,518
AAA Aaa 4,500 Pioneers Memorial Hospital District, California, Refunding,
GO, UT, 6.50% due 10/01/2024 (e) 4,946
AA Aa 2,000 San Francisco, California, City and County Public Utilities
Commission, Water Revenue Refunding Bonds, 8% due 11/01/2011 2,182
AAA Aaa 5,025 Stockton, California, COP, Revenue Bonds (Wastewater Treatment
Plant Expansion), Series A, 6.80% due 9/01/2024 (d) 5,703
</TABLE>
<TABLE>
The Municipal Fund Accumulation Program, Inc.
Schedule of Investments as of December 31, 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-- AA NR* $ 2,980 Colorado, HFA, S/F Mortgage Program Revenue Bonds, AMT,
2.5% Series D-3, 7.20% due 8/01/2023 $ 3,125
AA Aa 2,940 Colorado Springs, Colorado, Utilities Revenue Refunding Bonds,
Series A, 6.50% due 11/15/2015 3,213
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) 5,609
AAA Aaa 2,500 Garfield, Pitkin and Eagle Counties, Colorado, Roaring Ford
School District No. 1, UT, 6.60% due 6/15/2004 (b)(c) 2,877
Connecticut AAA Aaa 2,000 Connecticut State Development Authority, Water Facility, Revenue
- --1.1% Refunding Bonds (Connecticut Water Co. Project), 6.65% due
12/15/2020 (e) 2,230
AA Aa 790 Connecticut State, HFA, Housing Mortgage Finance Program Bonds,
Series B-1, Sub-Series B-1, 7.55% due 11/15/2008 829
AAA Aaa 3,500 Connecticut State, Special Tax Obligation Revenue Bonds, Series B,
6.10% due 10/01/2011 (d) 3,776
<PAGE>
District of A1 VMIG1++ 2,600 District of Columbia Revenue Bonds (American Association
Columbia-- Advancement of Science-Issue Project), VRDN, 5.05% due
1.3% 10/01/2022 (h) 2,600
AA- A 5,000 District of Columbia Revenue Bonds (Howard University),
Series A, 7.25% due 10/01/2020 5,468
Florida-- A A 1,715 Broward County, Florida, Resource Recovery Revenue Bonds
0.7% (Broward Waste Energy-LP North), 7.95% due 12/01/2008 1,942
AA Aa 2,000 Florida State Board of Education, Public Education Capital
Outlay Bonds, Series B, 6.70% due 6/01/2001 (b) 2,252
Georgia-- Georgia Municipal Electric Authority, Power Revenue Bonds:
7.2% A A 3,000 Crossover Refunding, Series O, 8.125% due 1/01/2017 3,270
A+ Aaa 3,250 Refunding, Series B, 8% due 1/01/1998 (b) 3,564
AA+ Aaa 2,000 Georgia State, GO, Series B, 6.30% due 3/01/2010 2,274
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) 5,730
AA- A1 8,200 Series O, 6.55% due 7/01/2020 8,932
AAA Aaa 6,100 Municipal Electric Authority of Georgia, Project One,
Sub-Series A, 6.50% due 1/01/2026 (e) 6,659
A+ A 10,460 Municipal Electric Authority, Georgia, Special Obligation
Revenue Bonds, Fifth Crossover Series, Project One,
6.50% due 1/01/2017 (a) 11,845
Illinois-- AA- Aa3 4,500 Chicago, Illinois, Gas Supply Revenue Refunding Bonds
4.9% (The Peoples Gas Light), Series A, 6.10% due 6/01/2025 4,615
AAA Aaa 4,800 Cook County, Illinois, GO, UT, Series A, 6.60% due
11/15/2022 (c) 5,312
AA Aa2 1,850 Illinois Development Finance Authority, PCR, Refunding
(Central Illinois Public Service Company Project),
Series B, 7.60% due 9/01/2013 2,063
A1+ VMIG1++ 1,800 Illinois Health Facilities Authority Revenue Bonds
(Northwestern Memorial Hospital), VRDN, 5%
due 8/15/2025 (h) 1,800
AAA Aaa 15,000 Illinois State Bonds, Refunding, UT, 5.25%
due 12/01/2020 (d) 14,743
</TABLE>
<PAGE>
<TABLE>
The Municipal Fund Accumulation Program, Inc.
Schedule of Investments as of December 31, 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
1.9% (University of Notre Dame Project), 6.70% due 3/01/2025 $ 4,824
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 1,173
A+ A1 2,250 Indiana Transportation Finance Authority, Highway Revenue
Refunding Bonds, Series A, 8.125% due 6/01/1998 (b) 2,503
A+ NR* 2,865 Indianapolis, Indiana, Local Public Improvement Bond Bank,
Refunding, Series D, 6.75% due 2/01/2020 3,139
Kentucky-- A1+ VMIG1++ 2,000 Kentucky Economic Development Finance Authority Revenue Bonds
1.6% (Sisters of Charity), VRDN, 4.20% due 1/02/1996 (h) 2,000
NR* A 3,000 Kentucky Turnpike Authority, Economic Development Road Revenue
Bonds, Series A, 8.25% due 7/01/1997 (b) 3,252
A+ A 4,000 Kentucky Turnpike Authority, Resource Recovery Road Revenue
Refunding Bonds, Series A, 8% due 7/01/2003 4,293
Louisiana-- AAA Aaa 5,000 New Orleans, Louisiana, Public Improvement Refunding Bonds,
1.0% UT, 7% due 9/01/2002 (b)(d) 5,763
Maine-- AA- A1 4,480 Maine State Housing Authority, Mortgage Purpose Revenue Bonds,
0.8% Series D, 6.80% due 11/15/2025 4,716
Massachu- A+ A1 6,000 Massachusetts Bay Transportation Authority, General
setts--5.4% Transportation System, UT, Series B, 5.875% due 3/01/2019 6,133
Massachusetts State Health and Educational Facilities
Authority Revenue Bonds:
A+ A1 5,900 (Brigham and Women's Hospital Issue), Series D, 6.75%
due 7/01/2024 6,292
AAA Aaa 2,550 (Northeastern University), Series E, 6.55% due
10/01/2022 (c) 2,802
AAA Aaa 1,390 (University Hospital), Series C, 7.25% due 7/01/2019 (c) 1,559
A+ Aa 3,000 Massachusetts State, HFA, S/F Housing Revenue Bonds, AMT,
Series 38, 7.20% due 12/01/2026 3,210
A1+ VMIG1++ 700 Massachusetts State, Municipal Wholesale Electric Company,
Power Supply System Revenue Bonds, VRDN, Series C, 3.875% due
12/27/1995 700
AAA Aaa 1,000 Massachusetts State Port Authority Revenue Bonds, 13% due
7/01/2013(a) 1,749
A+ Aa 4,035 Massachusetts State Water Pollution Abatement Trust Revenue
Bonds (MWRA Loan Program), Series A, 5% due 8/01/2014 (c) 3,928
AAA Aaa 5,000 Massachusetts State Water Reservation Authority Bonds, Series B,
5% due 12/01/2025 (c) 4,762
<PAGE>
Michigan-- Michigan State Hospital Finance Authority Revenue Bonds
3.8% (Henry Ford Health Systems), Series A:
AA Aa 1,500 7% due 7/01/2000 (b) 1,696
AA Aa 6,500 Refunding, 5.25% due 11/15/2020 6,328
AA Aa 3,000 Refunding, 5.25% due 11/15/2025 2,876
Michigan State Strategic Fund, Limited Obligation Revenue
Refunding Bonds (Detroit Edison Co. Project):
AAA Aaa 1,000 6.875% due 12/01/2021 (d) 1,119
AAA Aaa 2,000 Series BB, 7% due 5/01/2021 (e) 2,502
AAA Aaa 1,000 Series CC, 6.95% due 9/01/2021 (d) 1,112
AA Aa 1,250 Royal Oak, Michigan, Hospital Finance Authority Revenue Bonds
(William Beaumont Hospital), Series D, 6.75% due 1/01/2020 1,345
NR* VMIG1++ 5,000 University of Michigan, University Hospital Revenue Bonds,
VRDN, Series A, 5% due 12/01/2027 (h) 5,000
</TABLE>
<TABLE>
The Municipal Fund Accumulation Program, Inc.
Schedule of Investments as of December 31, 1995 (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 $ 4,485
Missis-- NR* P1 5,000 Jackson County, Mississippi, Port Facility Revenue
- -sippi Refunding Bonds(Chevron USA, Inc. Project), VRDN, 4.95%
1.0% due 6/01/2023 (h) 5,000
NR* P1 500 Perry County, Mississippi, PCR, Refunding (Leaf River
Forest Project), VRDN, 4.95% due 3/01/2002 (h) 500
Montana-- AA+ Aa 5,210 Montana State Board, S/F Housing Program, AMT, Series B-2,
0.9% 6.90% due 6/01/2025 5,500
Nevada-- AAA Aaa 2,000 Clark County, Nevada, PCR, Refunding (Nevada Power Co.
1.2% Project), Series B, 6.60% due 6/01/2019 (d) 2,176
NR* NR* 2,000 Clark County, Nevada, School District Improvement Bonds,
Series A, 8% due 3/01/1998 (b) 2,201
AAA Aaa 2,295 Nevada Housing Development, S/F Housing Division Program, AMT,
Series E, 7.05% due 4/01/2027 2,443
<PAGE>
New Jersey-- Jersey City, New Jersey, GO (School District), UT:
5.9% AA A 2,900 6.65% due 2/15/2013 3,219
AA A 3,030 6.65% due 2/15/2014 3,364
AAA Aaa 5,000 New Jersey EDA, Revenue Refunding Bonds (RWJ Health Care
Corporation), 6.50% due 7/01/2024 5,556
AAA Aaa 1,000 New Jersey Health Care Facilities, Financing Authority Revenue
Refunding Bonds (Hackensack Medical Center), 6.625% due
7/01/2017 (d) 1,106
New Jersey Sports and Exposition Authority Revenue Bonds,
Series A:
AAA Aaa 1,500 Refunding (Convention Center Luxury Tax), 6.25% due
7/01/2020 (c) 1,609
A+ Aa 5,000 (State Contract), 6.50% due 3/01/2019 5,427
AAA Aaa 5,000 New Jersey State Educational Facilities Authority Revenue Bonds
(Princeton University), Series A, 6% due 7/01/2024 5,242
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) 3,212
BBB+ Baa1 2,000 New Jersey State Turnpike Authority, Turnpike Revenue Refunding
Bonds, Series A, 6.75% due 1/01/2008 2,189
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 2,736
New York-- New York City, New York, GO, UT:
18.9% BBB+ Aaa 3,000 Series A, 8% due 8/15/2001(b) 3,605
BBB+ Baa1 3,000 Series C, Sub-Series C-1, 7.50% due 8/01/2020 3,371
BBB+ Baa1 2,000 Series D, 7.50% due 2/01/2016 2,233
BBB+ Baa1 2,500 Series D, 7.50% due 2/01/2019 2,791
AAA VMIG1++ 4,200 New York City, New York, Municipal Water Finance Authority,
Water and Sewer System Revenue Bonds, VRDN, Series C, 4.75%
due 1/02/1996 (d)(h) 4,200
New York State Dormitory Authority Revenue Bonds:
AA Aa 1,000 (Cornell University), Series A, 7.375% due 7/01/2030 1,127
BBB+ Baa1 3,250 Refunding (State University Educational Facilities),
Series B, 7% due 5/15/2016 3,529
AAA Aa 1,000 (Saint Vincent's Hospital and Medical Center),
7.40% due 8/01/2030 (f) 1,140
New York State Environmental Facilities Corporation,
PCR, State Water Revolving Fund:
A Aa 1,425 Series A, 7% due 6/15/2012 1,595
A Aa 1,800 Series A, 7.50% due 6/15/2012 2,014
AA- Aaa 500 Series B, 7.50% due 3/15/2011 548
</TABLE>
<PAGE>
<TABLE>
The Municipal Fund Accumulation Program, Inc.
Schedule of Investments as of December 31, 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 New York State Local Government Assistance Corporation
(concluded) Revenue Bonds:
A A $ 11,650 Series A, 6.875% due 4/01/2019 $ 13,085
A A 5,000 Series A, 6.50% due 4/01/2020 5,428
A A 5,000 Series D, 5% due 4/01/2023 4,712
A A 5,000 New York State, Local Government Assistance Corporation,
Series A, 5.25% due 4/01/2019 4,846
New York State Medical Care Facilities Finance Agency Revenue
Bonds (Mental Health Services Facility Improvements):
AAA Aaa 1,515 Series A, 7.80% due 2/15/1999 (b) 1,712
BBB+ Baa1 640 Series A, 7.80% due 2/15/2019 714
BBB+ Baa1 600 Series B, 7.875% due 8/15/2020 677
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) 3,997
AA- Aa 13,750 New York State Power Authority, General Purpose Revenue
Refunding Bonds, Series Z, 6.50% due 1/01/2019 14,935
AA- NR* 6,140 New York State Power Authority, Refunding, Series V, 8% due
1/01/1998 (b) 6,733
AAA VMIG1++ 5,200 New York State Thruway Authority, General Revenue Bonds, VRDN,
3.60% due 12/07/1995 (d)(h) 5,200
A- A1 5,325 Triborough Bridge and Tunnel Authority, New York, Refunding
(Special Obligations), Series B, 6.875% due 1/01/2015 5,867
Triborough Bridge and Tunnel Authority, New York, Revenue Bonds
(General Purpose), Series X:
A+ Aa 5,100 6.625% due 1/01/2012 5,947
A+ Aa 9,575 6.50% due 1/01/2019 10,342
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) 15,070
2.6%
North BBB+ Aaa 1,330 North Carolina Eastern Municipal Power Agency, Power
Carolina-- System Revenue Refunding Bonds, Series A, 6.50%
0.9% due 1/01/2018 (a) 1,606
AAA Aaa 3,000 North Carolina Municipal Power Agency No. 1, Revenue Refunding
Bonds (Catawba Electric), 6% due 1/01/2011 (c) 3,292
Ohio--1.9% NR* VMIG1++ 2,100 Cuyahoga County, Ohio, Hospital Revenue Improvement Bonds
(Cleveland University Hospital), VRDN, 4.95% due 1/01/2016 (h) 2,100
AAA Aaa 3,000 Hamilton, Ohio, Electric System Mortgage Revenue Bonds, Series B,
8% due 10/15/1998 (b)(d) 3,372
A1+ VMIG1++ 4,600 Ohio State Air Quality Development Authority, Revenue Refunding
Bonds(Cincinnati Gas & Electric), VRDN, Series B, 4.935%
due 9/01/2030 (h) 4,600
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) 863
<PAGE>
Oregon-- AAA Aaa 8,100 Oregon Health Sciences University Revenue Bonds, Series A, 5.75%
0.6% due 7/01/2021 (c)(i) 2,040
AAA Aaa 1,505 Oregon State Department Administrative Services, COP, Series A,
5.50% due 11/01/2020 (c) 1,518
</TABLE>
<TABLE>
The Municipal Fund Accumulation Program, Inc.
Schedule of Investments as of December 31, 1995 (continued) (in Thousands)
<CAPTION>
S&P Moody's Face Value
State Rating Rating Amount Issue (Note 1a)
<S> <S> <S> <C> <S> <C>
Penn- AAA Aaa $ 10,000 Allegheny County, Pennsylvania, Hospital Development
sylvania-- Authority Revenue Bonds (Health Center-University of
3.7% Pittsburgh Medical Center), 5.375% due 12/01/2025 (c) $ 9,868
AAA Aaa 2,500 Altoona, Pennsylvania, City Authority, Water Revenue Bonds,
Series A, 6.50% due 11/01/2019 (d) 2,760
AAA Aaa 4,000 Montgomery County, Pennsylvania, IDA, PCR, Refunding
(Philadelphia Electric Company), Series B, 6.70% due
12/01/2021 (c) 4,416
AAA Aaa 3,355 North Penn, Pennsylvania, Water Authority Revenue Bonds,
7% due 11/01/2004 (b)(d) 3,975
Puerto AAA NR* 2,000 Puerto Rico Commonwealth, Public Improvement, GO, 7.70%
Rico-- due 7/01/2000 (b) 2,328
0.4%
Rhode AAA Aaa 2,500 Rhode Island Port Authority and Economic Development
Island-- Corporation, Revenue Refunding Bonds (Shepard Building Project),
0.5% Series B, 6.75% due 6/01/2025 (e) 2,826
South Piedmont Municipal Power Agency, South Carolina, Electric Revenue
Carolina-- Refunding Bonds (d):
1.0% AAA Aaa 3,000 6.75% due 1/01/2019 3,604
AAA Aaa 2,210 Series A, 6.50% due 6/01/1995 2,562
Texas-- AAA Aaa 2,000 Austin, Texas, Combined Utility Systems Revenue Refunding Bonds,
8.5% Prior Lien, 6.50% due 5/15/2011 (e) 2,194
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) 2,168
Harris County, Texas, Health Facilities Development Corporation
Hospital Revenue Bonds:
AAA Aaa 2,870 (Hermann Hospital Project), 6.375% due 10/01/2024 (c) 3,086
A1+ NR* 3,000 (Methodist Hospital), VRDN, 5% due 12/01/2025 (h) 3,000
A1+ VMIG1++ 5,000 Harris County, Texas, Health Facilities Development
Corporation, Special Facilities Revenue Bonds (Texas
Medical Center Project), VRDN, 4.95% due 2/15/2022 (h) 5,000
Harris County, Texas, Toll Road Sub-Lien, Refunding, UT:
AA- Aa 3,000 6.75% due 8/01/2014 3,319
<PAGE> AAA NR* 1,250 8.125% due 8/01/1998 (b) 1,400
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 3,207
AAA Aaa 4,700 Sabine River Authority, Texas, PCR, Refunding (Texas Utilities
Electric Company Project), 6.55% due 10/01/2022 (d) 5,136
AAA Aaa 5,300 San Antonio, Texas, Water Revenue Refunding Bonds, 6.50% due
5/15/2010 (c) 5,848
AAA Aaa 2,000 Texas Municipal Power Agency Revenue Bonds, 14.625%
due 3/01/1997 (b) 2,245
AA Aaa 1,000 Texas State, Refunding (Veterans Land), UT, 6.50% due 12/01/2021 1,077
AAA Aaa 7,000 Texas State Turnpike Authority, Dallas, North Thruway Revenue
Bonds (President George Bush Turnpike), 5% due 1/01/2025 (d) 6,726
AA Aa 2,200 Texas State Veterans Housing Assistance, Fund II, AMT, UT,
Series A, 7% due 12/01/2025 2,288
AAA Aa 2,000 Texas Water Development Board, Water Revenue Bonds (State
Revolving Fund-Senior Lien), 6% due 7/15/2013 2,099
</TABLE>
<TABLE>
The Municipal Fund Accumulation Program, Inc.
Schedule of Investments as of December 31, 1995 (concluded) (in Thousands)
<CAPTION>
S&P Moody's Face Value
State Rating Rating Amount Issue (Note 1a)
<S> <S> <S> <C> <S> <C>
Utah-- A1+ VMIG1++ $ 4,000 Emery County, Utah, PCR, Refunding (Pacificorp Projects),
1.8% VRDN, 5% due 11/01/2024 (e)(h) $ 4,000
AA- Aa 1,000 Intermountain Power Agency, Utah, Power Supply Revenue
Refunding Bonds, Series D, 8.625% due 7/01/2021 1,081
AA Aa 5,000 Salt Lake City, Utah, Hospital Revenue Refunding Bonds
(IHC Hospital Inc.), 6.25% due 2/15/2023 5,139
Virginia-- AAA Aaa 4,700 Alexandria, Virginia, IDA, PCR, Refunding (Potomac Electric
5.4% Project), 5.375% due 2/15/2024 (c) 4,686
AA Aa 4,500 Henrico County, Virginia, IDA, Public Facility, Lease Revenue
Bonds (Henrico County Regional Jail Project), 7% due 8/01/2013 5,271
AAA Aaa 20,500 Upper Occoquan, Virginia, Sewer Authority, Regional Revenue
Bonds, Series A, 4.75% due 7/01/2029 (c) 18,726
AAA Aaa 2,750 Virginia State Transportation Board, Transportation Contract
Revenue Bonds (Rate 28 Project), 7.80% due 3/01/1998(b) 3,021
Washington-- AA+ Aa1 4,000 Seattle, Washington, Refunding Bonds, 6.50% due 3/01/2017 4,298
1.7% AAA Aaa 3,000 Tacoma, Washington, Refuse Utility Revenue Bonds, 7% due
12/01/2019 (e) 3,467
AA Aa 2,000 Washington State, GO, Series A, 6.75% due 2/01/2015 2,379
<PAGE>
Wisconsin-- Wisconsin Housing, EDA, Home Ownership Revenue Bonds, Series 1:
2.4% AA Aa 1,000 6.75% due 9/01/2015 1,055
AA Aa 4,990 6.75% due 9/01/2017 5,240
AAA Aaa 2,000 Wisconsin Public Power Incorporated System, Power Supply
System Revenue Bonds, Series A, 7.40% due 7/01/2000 (b)(e) 2,298
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) 5,403
Total Investments (Cost--$560,091)--104.7% 609,013
Liabilities in Excess of Other Assets--(4.7%) (27,334)
--------
Net Assets--100.0% $581,679
========
<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
prevailing market rates. The interest rate shown is the rate in
effect at December 31, 1995.
(i)Represents a zero coupon bond; the interest rate shown is the
effective yield at the time of purchase by the Program.
*Not Rated.
++Highest short-term rating by Moody's Investors Service, Inc.
Ratings of issues shown have not been audited by Deloitte & Touche LLP.
See Notes to Financial Statements.
</TABLE>
<TABLE>
The Municipal Fund Accumulation Program, Inc.
Statement of Assets and Liabilities As of December 31, 1995
<S> <C> <C>
Assets:
Investments, at value (identified cost--$560,090,701) (Note 1a) $609,013,277
Cash 3,137,223
Receivables:
Interest $ 10,449,447
Securities sold 1,110,517
Capital shares sold 65 11,560,029
------------
Prepaid registration fees and other assets (Note 1d) 41,532
------------
Total assets 623,752,061
------------
<PAGE>
Liabilities:
Payables:
Securities purchased 41,084,670
Capital shares redeemed. 245,699
Investment adviser (Note 2) 228,100 41,558,469
------------
Accrued expenses and other liabilities 515,014
------------
Total liabilities 42,073,483
------------
Net Assets $581,678,578
============
Net Assets Consist of:
Common Stock, $0.01 par value, 100,000,000 shares authorized $ 302,662
Paid-in capital in excess of par 536,157,531
Undistributed investment income--net 1,144,400
Accumulated realized capital losses on investments--net (Note 5) (4,848,591)
Unrealized appreciation on investments--net 48,922,576
------------
Net Assets:
Equivalent to $19.22 per share based on 30,266,155 shares outstanding $581,678,578
============
</TABLE>
<TABLE>
The Municipal Fund Accumulation Program, Inc.
Statement of Operations For the Year Ended December 31, 1995
<S> <C> <C>
Investment Income (Note 1c):
Interest and premium and discount earned $ 35,004,215
Expenses:
Investment advisory fees (Note 2) $ 2,794,839
Transfer agent fees 1,628,376
Printing and shareholder reports 135,333
Accounting services (Note 2) 71,292
Registration fees (Note 1d) 61,815
Custodian fees 50,269
Professional fees 41,344
Pricing services 19,278
Directors' fees and expenses 15,943
Other 11,657
------------
Total expenses 4,830,146
------------
Investment income--net 30,174,069
<PAGE>
Realized & Unrealized Gain on Investments (Notes 1c & 3):
Realized gain on investments--net 8,961,659
Change in unrealized appreciation on investments--net 43,539,828
------------
Net Increase in Net Assets Resulting from Operations $ 82,675,556
============
See Notes to Financial Statements.
</TABLE>
<TABLE>
For the Year
The Municipal Fund Accumulation Program, Inc Ended December 31,
Statements of Changes in Net Assets 1995 1994
Increase (Decrease) in Net Assets:
<S> <C> <C>
Operations:
Investment income--net $ 30,174,069 $ 32,078,217
Realized gain (loss) on investments--net 8,961,659 (13,810,250)
Change in unrealized appreciation on investments--net 43,539,828 (59,047,712)
------------ ------------
Net increase (decrease) in net assets resulting from operations 82,675,556 (40,779,745)
------------ ------------
Dividends to Shareholders (Note 1e):
Investment income--net (30,313,535) (32,226,191)
------------ ------------
Net decrease in net assets resulting from dividends to shareholders (30,313,535) (32,226,191)
------------ ------------
Capital Share Transactions (Note 4):
Net decrease in net assets resulting from capital share transactions (7,880,024) (29,385,788)
------------ ------------
Net Assets:
Total increase (decrease) in net assets 44,481,997 (102,391,724)
Beginning of year 537,196,581 639,588,305
------------ ------------
End of year* $581,678,578 $537,196,581
============ ============
<FN>
*Undistributed investment income--net $ 1,144,400 $ 1,283,866
============ ============
</TABLE>
<PAGE>
<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 Year Ended December 31,
--------------------------------------------------
Increase (Decrease) in Net Asset Value: 1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of year $ 17.51 $ 19.79 $ 18.93 $ 18.63 $ 17.83
-------- -------- -------- -------- --------
Investment income--net 1.01 1.03 1.09 1.15 1.23
Realized and unrealized gain (loss) on investments--net 1.71 (2.28) 1.11 .30 .80
-------- -------- -------- -------- --------
Total from investment operations 2.72 (1.25) 2.20 1.45 2.03
-------- -------- -------- -------- --------
Less dividends and distributions:
Investment income--net (1.01) (1.03) (1.09) (1.15) (1.23)
Realized gain on investments--net -- -- (.25) -- --
-------- -------- -------- -------- --------
Total dividends and distributions (1.01) (1.03) (1.34) (1.15) (1.23)
-------- -------- -------- -------- --------
Net asset value, end of year $ 19.22 $ 17.51 $ 19.79 $ 18.93 $ 18.63
======== ======== ======== ======== ========
Total Investment Return:
Based on net asset value per share 15.88% (6.44%) 11.99% 8.08% 11.83%
======== ======== ======== ======== ========
Ratios to Average Net Assets:
Expenses .86% .89% .86% .88% .91%
======== ======== ======== ======== ========
Investment income--net 5.40% 5.54% 5.52% 6.15% 6.76%
======== ======== ======== ======== ========
Supplemental Data:
Net assets, end of year (in thousands) $581,679 $537,197 $639,588 $536,952 $435,224
======== ======== ======== ======== ========
Portfolio turnover 56% 61% 23% 24% 36%
======== ======== ======== ======== ========
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 management investment 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 ("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.
<PAGE>
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 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 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.
The Municipal Fund Accumulation Program, Inc.
Notes to Financial Statements (concluded)
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 year ended December 31, 1995 were $301,073,953 and
$316,811,917, respectively.
<PAGE>
Net realized and unrealized gains as of
December 31, 1995 were as follows:
Realized Unrealized
Gains Gains
Long-term securities $8,961,659 $48,922,576
---------- -----------
Total $8,961,659 $48,922,576
========== ===========
As of December 31, 1995, net unrealized appreciation for
Federal income tax purposes aggregated $48,922,576, of
which $48,938,844 related to appreciated securities and $16,268
related to depreciated securities. The aggregate cost of investments
at December 31, 1995 for Federal income tax purposes was
$560,090,701.
4. Capital Share Transactions:
Transactions in capital shares were as follows:
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)
=========== =============
For the Year Ended Dollar
December 31, 1995 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 increase (1,631,204) $ (29,385,788)
=========== =============
<PAGE>
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.
<AUDIT-REPORT>
The Municipal Fund Accumulation Program, Inc.
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, 1995, 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, 1995 by correspondence with the custodian and brokers. 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,
1995, 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 LLP
Princeton, New Jersey
February 2, 1996
</AUDIT-REPORT>
<PAGE>
The Municipal Fund Accumulation Program, Inc.
Important Tax Information
All of the net investment income distributions paid monthly by The
Municipal Fund Accumulation Program, Inc. during its taxable year
ended December 31, 1995 qualify as tax-exempt interest dividends for
Federal income tax purposes. Additionally, there were no capital
gains distributions paid by the Program during the year.
Please retain this information for your records.
