THE MUNICIPAL
FUND
ACCUMULATION
PROGRAM, INC.
[GRAPHIC OMITTED: The Municipal Fund Accumulation Program, Inc.
repeated several times]
Semi-Annual Report
June 30, 1997
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
[RECYCLE LOGO]
Printed on post-consumer recycled paper
To Our Shareholders:
For the six months ended June 30, 1997, The Municipal Fund Accumulation
Program, Inc.'s net annualized yield was 5.17%. Total investment return
for the Program for the six-month period ended June 30, 1997 was +2.65%,
based on a change in per share net asset value from $18.85 to $18.86,
and assuming reinvestment of $0.481 per share income dividends.
The Municipal Market Environment
The combination of continued low, if not diminishing, inflation and
moderating economic growth allowed tax-exempt bond yields to move lower
during the six months ended June 30, 1997. Interest rates initially had
continued to rise in early 1997 in response to investor concerns that
the Federal Reserve Board would initiate a series of interest rate
increases to ensure that the economic growth seen at the end of 1997
would slacken before any inflationary pressures could be triggered. As
measured by the Bond Buyer Revenue Bond Index, tax-exempt revenue bond
yields rose approximately 20 basis points (0.20%) by early April 1997.
However, as economic growth continued to slow and concerns of ongoing
interest rate increases by the Federal Reserve Board abated, bond yields
fell for the remainder of the six-month period ended June 30, 1997. By
the end of June, tax-exempt bond yields had fallen to 5.78%, a decline
of almost 15 basis points over the last six months. US Treasury bond
yields exhibited a similar pattern of rising and falling over the last
six months. However, US Treasury bond yields rose nearly 15 basis points
over the last six months to 6.78% at the end of June 1997.
The municipal bond market's performance in recent months has been even
more impressive given that there has been a noticeable deterioration in
the strong technical position that had supported much of the tax-exempt
bond market's performance in recent quarters. Over the last six months,
municipalities issued over $90 billion in new long-term securities, an
increase of approximately 2% compared to the first six months of 1996.
However, during the last three months, over $55 billion in long-term
municipal bonds was underwritten, an increase of nearly 10% versus the
same period a year ago. The recent decline in municipal bond yields has
led many issuers to accelerate their financing plans to take advantage
of current low interest rates. Over $21 billion in long-term tax-exempt
bonds was issued in June 1997, an increase of over 15% versus the June
1996 issuance. Additionally, the state of New Jersey issued $2.8 billion
in taxable municipal debt in June. This added to an already heavy supply
position.
Fortunately, investor demand has remained very positive thus far in
1997. Property and casualty insurance companies have continued to be
very active in the 15-year -- 20-year maturity sector. Also, municipal
investors continue to receive significant cash flows from tax-exempt
bond maturities, coupon income and the proceeds from advanced and
current refundings. In January 1997, investors received over $20 billion
in such assets. In the months of June and July, investors are expected
to receive over $50 billion in such payments. It is likely that, despite
the continued allure of the domestic equity market, much of these assets
have been and will be reinvested in tax-advantaged products suggesting
that investor demand will remain strong going forward.
Additionally, in recent months much of the new bond issuance was
dominated by a number of larger issues. These included $350 million in
New York Municipal Assistance Corp. bonds, $1 billion in New York City
general obligation bonds, $930 million in Port Authority of New York and
New Jersey issues, $565 million in Puerto Rico Building Authority
issues, $600 million in state of California bonds, $256 million in Los
Angeles Metropolitan Transportation Authority issues, $350 million in
Orange County, Florida sales tax revenue bonds and $300 million in state
of Florida bonds. These and other bond issues typically have been
underwritten in states with high state income taxes and consequently
generally were issued at yields that were relatively unattractive to
residents in other states. This scenario has tended to offset the recent
increase in supply as general market investors have ignored much of this
specialty-state supply in favor of higher-yielding issues.
The present economic situation remains nearly ideal. The domestic
economy continues to grow steadily with little, if any, sign of a
resurgence in inflation. Recent economic growth generated considerable
unexpected tax revenues for the Federal government. Forecasts for the
1997 Federal fiscal deficit were reduced to under $100 billion, a level
not seen since the early 1980s. Such a reduced Federal deficit enhances
the prospect of a balanced Federal budget. All these factors support a
scenario of steady, or even falling, interest rates in the coming years.
Present annual estimates of future municipal bond issuance remain
centered around $175 billion for all of 1997, indicating that the recent
increase in supply should return to the levels seen earlier this year.
This may ensure that tax-exempt products remain an attractive investment
alternative throughout 1997.
Portfolio Strategy
During the six months ended June 30, 1997, we slowly shifted The
Municipal Fund Accumulation Program, Inc. from the aggressive posture we
adopted toward the end of the first quarter of 1997 to a more neutral
structure, largely on the belief that the significant decline in yields
was not justified relative to the lingering strength in the economy.
While it is our opinion that interest rates are not in danger of rising
substantially, we believe they probably will not decline substantially
either. To that end, our strategy will concentrate on seeking to enhance
tax-exempt income for our shareholders while trying to mute any price
volatility. This strategy will be implemented by keeping the portfolio
fully invested while selling longer-duration bonds and replacing them
with shorter-duration bonds with larger coupons to seek to enhance
income.
Looking forward, we anticipate maintaining the Program's neutral
position until there is evidence that the economy is either going to
slow substantially or that it is going to heat up once again. We will
seek to continue to accomplish any restructuring without compromising
the Program's strong credit quality and diversification.
Sincerely,
/S/ARTHUR ZEIKEL
Arthur Zeikel
President
/S/VINCENT R. GIORDANO
Vincent R. Giordano
Senior Vice President
/S/ROBERTO ROFFO
Roberto Roffo
Portfolio Manager
August 5, 1997
Effective June 3, 1997, we are pleased to announce that Roberto Roffo is
responsible for the day-to-day management of The Municipal Fund
Accumulation Program, Inc. Mr. Roffo has been employed by Merrill Lynch
Asset Management, L.P. (an affiliate of the Fund's investment adviser)
since 1996 as Vice President and since 1992 as a Portfolio Manager.
<TABLE>
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The Municipal Fund Accumulation Program, Inc.
Schedule of Investments as of June 30, 1997 (in Thousands)
S&P Moody's Face Value
State Rating Rating Amount Issue (Note 1a)
<S> <C> <C> <C> <C> <C>
Alabama -- AA Aa3 $2,000 Birmingham, Alabama, Crossover Refunding Bonds, 8% due
2.3% 10/01/2015 $2,060
AAA Aaa 5,000 Huntsville, Alabama, Health Care Authority Revenue Bonds
(Health Care Facilities), Series B, 6.625% due 6/01/2023 (c) 5,516
AAA Aaa 4,500 Jefferson County, Alabama, Sewer Revenue Refunding Bonds,
Series A, 5.375% due 2/01/2027 (d) 4,383
Arizona -- AAA Aaa 1,920 Maricopa County, Arizona, School District No. 14 (Creighton
0.4% Project of 1995), UT, Series D, 5.30% due 7/01/2009 (i) 1,960
Arkansas -- AAA NR* 3,125 Arkansas State Development Finance Authority, S/F Mortgage
0.6% Revenue Bonds (Mortgage-Backed Securities Program), Series C,
6.60% due 7/01/2017 (g) 3,310
California -- AA- Aa 4,955 California HFA, Home Mortgage Revenue Bonds, AMT, Series F-1,
7.0% 7% due 8/01/2026 5,286
California State Public Works Board, Lease Revenue Bonds,
Series A (b):
A Aaa 8,000 (Department of Corrections, Monterey County -- Soledad II),
6.875% due 11/01/2004 9,332
AAA Aaa 4,000 (Various University of California Projects), 6.40% due
12/01/2002 (e) 4,469
AAA Aaa 2,000 Los Angeles County, California, COP (Correctional
Facilities Project), 6.50% due 9/01/2000 (b)(c) 2,173
AA- A1 5,260 Los Angeles County, California, Transportation Commission,
Sales Tax Revenue Refunding Bonds, Series B, 6.50% due
7/01/2013 5,589
AAA Aaa 1,250 M-S-R Public Power Agency, California, Revenue Refunding
Bonds (San Juan Project), 6.75% due 7/01/2020 (a)(c) 1,452
AAA Aaa 3,500 San Diego, California, Public Facilities Financing Authority,
Sewer Revenue Bonds, Series A, 5.25% due 5/15/2027 (d) 3,333
AAA Aaa 5,025 Stockton, California, Revenue Bonds (Wastewater Treatment
Plant Expansion), COP, Series A, 6.80% due 9/01/2024 (d) 5,556
Colorado -- AA NR* 2,570 Colorado HFA, S/F Program Revenue Bonds, AMT, Series D-3,
2.1% 7.20% due 8/01/2023 2,692
AAA Aaa 4,920 Douglas County, Colorado, School District No. RE1 (Douglas
and Elbert Counties Improvement), Series A, 6.50% due
12/15/2004 (b)(c) 5,525
AAA Aaa 2,500 Garfield, Pitkin and Eagle Counties, Colorado, School
District No. RE1 (Roaring Fork), UT, 6.60% due 6/15/2004
(b)(c) 2,806
Connecticut -- AAA Aaa 2,000 Connecticut State Development Authority, Water Facility,
3.3% Revenue Refunding Bonds (Connecticut Water Company
Project), 6.65% due 12/15/2020 (e) 2,210
AA Aa 3,825 Connecticut State, HFA, Housing Mortgage Revenue Bonds
(Finance Program), Sub-Series B-1, 6.125% due 5/15/2018 3,940
Connecticut State Health and Educational Facilities
Authority Revenue Bonds:
AAA Aaa 4,600 (Cherry Brook Nursing Home), 6% due 11/01/2022 (e) 4,713
AAA Aaa 3,000 (Norwalk Hospital), Series D, 6.25% due 7/01/2022 (c) 3,143
AAA Aaa 3,500 Connecticut State Special Tax Obligation Revenue Bonds,
Series B, 6.10% due 10/01/2011 (d) 3,735
District of A+ A3 6,000 District of Columbia Revenue Bonds (Howard University),
Columbia -- Series A, 7.25% due 10/01/2020 6,477
1.2%
Florida -- Florida State Board of Education, Capital Outlay
1.0% (Public Education):
AA+ Aa2 2,750 Series A, 6.10% due 6/01/2024 2,870
AAA Aaa 2,000 Series B, 6.70% due 6/01/2001 (b) 2,186
Georgia -- A+ VMIG1+ 3,100 Burke County, Georgia, Development Authority, PCR,
5.5% Refunding (Georgia Power Company -- Vogtle), Fifth
Series, VRDN, 5.60% due 9/01/2025 (h) 3,100
Metropolitan Atlanta, Georgia, Rapid Transit Authority,
Sales Tax Revenue Bonds (b):
AAA Aaa 5,000 Second Indenture, Series A, 6.90% due 7/01/2004 (c) 5,746
AA- A1 8,200 Series O, 6.55% due 7/01/2001 8,980
A+ A3 10,460 Municipal Electric Authority, Georgia, Special Obligation,
Fifth Crossover Series, Project One, 6.50% due 1/01/2017 11,615
Illinois -- Chicago, Illinois, O'Hare International Airport Revenue
2.5% Bonds:
NR* P2 400 (American Airlines), DATES, Series B, 5.50% due 12/01/2017
(h) 400
AAA Aaa 2,200 Refunding (General Airport), Second Lien, Series A, 6.375%
due 1/01/2015 (c) 2,364
AAA Aaa 4,800 Cook County, Illinois, UT, Series A, 6.60% due 11/15/2002
(b)(c) 5,365
A1+ Aa3 5,000 Illinois Development Finance Authority Revenue Bonds
(Presbyterian Home Lake), Series B, 6.40% due 9/01/2031 5,275
Indiana -- NR* Aaa 4,315 Indiana State Educational Facilities Authority Revenue Bonds
2.0% (University of Notre Dame Project), 6.70% due 3/01/2025 4,784
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 1,159
NR* A1 2,250 Indiana Transportation Finance Authority, Highway Revenue
Bonds, Series A, 8.125% due 6/01/1998 (b) 2,379
A+ NR* 1,865 Indianapolis, Indiana, Local Public Improvement Bond Bank,
Refunding, Series D, 6.75% due 2/01/2020 2,038
Louisiana -- AAA Aaa 5,000 New Orleans, Louisiana, Public Improvement Bonds, UT, 7%
1.6% due 9/01/2002 (b)(d) 5,584
AAA Aaa 2,900 New Orleans, Louisiana, Refunding, 6.125% due 10/01/2016 (e) 3,048
Maine -- 0.9% NR* Aa2 4,480 Maine State Housing Authority, Mortgage Purchase, Series D,
6.80% due 11/15/2025 4,691
Massachu- A+ A1 2,165 Massachusetts Bay Transportation Authority (Massachusetts
setts -- 9.0% Transportation System), Series C, 6.10% due 3/01/2023 2,219
A1+ VMIG1+ 1,000 Massachusetts Municipal Wholesale Electric Company, Power
Supply System Revenue Bonds, VRDN, Series C, 4.10% due
7/01/2019 (h) 1,000
AAA Aaa 9,520 Massachusetts State, HFA, M/F Housing Refunding Bonds,
Series A, 6.10% due 7/01/2015 (c) 9,771
A+ Aa 3,000 Massachusetts State, HFA, S/F Housing Revenue Bonds, AMT,
Series 38, 7.20% due 12/01/2026 3,214
Massachusetts State Health and Educational Facilities
Authority Revenue Bonds:
AA- A1 5,900 (Brigham and Women's Hospital Issue), Series D, 6.75% due
7/01/2024 6,353
A1+ VMIG1+ 500 (Capital Assets Program), VRDN, Series D, 3.90% due
1/01/2035 (c)(h) 500
AAA Aaa 2,550 (Northeastern University), Series E, 6.55% due 10/01/2022 (c) 2,779
AAA Aaa 1,390 (University Hospital), Series C, 7.25% due 7/01/2019 (c) 1,507
A1+ VMIG1+ 300 Massachusetts State Industrial Finance Agency, PCR, Refunding
(Holyoke Water Power Company), VRDN, Series A, 3.85% due
5/01/2022 (h) 300
Massachusetts State Port Authority Revenue Bonds:
AAA Aaa 1,000 13% due 7/01/2013 (a) 1,681
AA- Aa 6,750 Series B, 6% due 7/01/2023 6,942
Massachusetts State Water Resource Authority, General
Revenue Bonds:
AAA Aaa 7,055 Refunding, Series B, 5% due 3/01/2022 (c) 6,435
AAA Aaa 1,520 Refunding, Series B, 5% due 3/01/2022 (e) 1,386
AAA Aaa 3,500 Series A, 6% due 8/01/2020 (c) 3,612
Michigan -- AAA Aa2 1,500 Michigan State Hospital Finance Authority Revenue Bonds
1.5% (Henry Ford Health Systems), Series A, 7% due 7/01/2000 (b) 1,639
Michigan State Strategic Fund, Limited Obligation Revenue
Refunding Bonds (Detroit Edison Company):
AAA Aaa 1,000 (Pollution Project), 6.875% due 12/01/2021 (d) 1,096
AAA Aaa 2,000 Series BB, 7% due 5/01/2021 (e) 2,409
AAA Aaa 1,000 Series CC, 6.95% due 9/01/2021 (d) 1,095
NR* P1 600 Michigan State Strategic Fund, PCR, Refunding (Consumers
Power Project), VRDN, Series A, 4.05% due 4/15/2018 (h) 600
AA Aaa 1,250 Royal Oak, Michigan, Hospital Finance Authority, Hospital
Revenue Bonds (William Beaumont Hospital), Series D, 6.75% due
1/01/2001 (b) 1,367
Minnesota -- AA+ Aa2 4,075 Minnesota State, HFA, S/F Mortgage, AMT, Series M, 6.70% due
0.8% 7/01/2026 4,282
Montana -- AA+ Aa2 4,910 Montana State Housing Board, S/F Program, AMT, Series B-2,
1.0% 6.90% due 6/01/2025 5,177
Nevada -- AAA Aaa 2,000 Clark County, Nevada, PCR, Refunding (Nevada Power Company
1.3% Project), Series B, 6.60% due 6/01/2019 (d) 2,173
NR* NR* 2,000 Clark County, Nevada, School District (School Improvement),
Series A, 8% due 3/01/1998 (b) 2,093
AAA Aaa 2,240 Nevada Housing Division, S/F Program, AMT, Series E,
7.05% due 4/01/2027 2,375
New AAA Aaa 2,000 New Hampshire Higher Educational and Health Facilities
Hampshire -- Authority, Revenue Refunding Bonds (University System of
0.4% New Hampshire), 6.25% due 7/01/2020 (c) 2,124
New Jersey -- AAA Aaa 5,790 Casino Reinvestment Development Authority, New Jersey,
8.4% Parking Fee Revenue Bonds, Series A, 5.25% due 10/01/2024 (i) 5,636
AAA Aaa 4,670 Highland Park, New Jersey, Refunding (School District), UT,
5.125% due 2/15/2025 (c) 4,451
Jersey City, New Jersey, GO (School District), UT (b):
AA A3 2,900 6.65% due 2/15/2002 3,211
AA A3 3,030 6.65% due 2/15/2002 3,354
AAA Aaa 5,000 New Jersey EDA, Revenue Refunding Bonds (RWJ Health Care
Corporation), 6.50% due 7/01/2024 (i) 5,427
AAA Aaa 1,000 New Jersey Health Care Facilities Financing Authority,
Revenue Refunding Bonds (Hackensack Medical Center), 6.625%
due 7/01/2017 (d) 1,074
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) 1,596
A+ Aa 5,000 New Jersey Sports and Exposition Authority (State Contract),
Series A, 6.50% due 3/01/2019 5,348
AAA Aaa 8,750 New Jersey State Educational Facilities Authority, Revenue
Refunding Bonds (University of Medicine and Dentistry),
Series B, 5.25% due 12/01/2021 (e) 8,440
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) 3,180
AA A1 2,500 Rutgers State University, New Jersey, Refunding (State
University of New Jersey), Series A, 6.50% due 5/01/2018 2,686
New York -- AAA Aaa 6,220 Metropolitan Transportation Authority, New York, Commuter
14.9% Facilities Revenue Bonds, Series A, 5.75% due 7/01/2021 (c) 6,282
AAA Aaa 1,800 Metropolitan Transportation Authority, New York, Transportation
Facilities Revenue Bonds, Series A, 5.875% due 7/01/2027 (c) 1,842
New York City, New York, GO, UT:
BBB+ Aaa 3,000 Series A, 8% due 8/15/2001 (b) 3,446
BBB+ Aaa 2,820 Series C, Sub-Series C-1, 7.50% due 8/01/2002 (b) 3,249
BBB+ Baa1 180 Series C, Sub-Series C-1, 7.50% due 8/01/2020 201
BBB+ Aaa 2,240 Series D, 7.50% due 2/01/2002 (b) 2,553
BBB+ Baa1 180 Series D, 7.50% due 2/01/2016 199
BBB+ Aaa 1,820 Series O, 7.50% due 2/01/2002 (b) 2,075
BBB+ Baa1 260 Series O, 7.50% due 2/01/2019 288
New York State Dormitory Authority Revenue Bonds:
AA Aa 1,000 (Cornell University), Series A, 7.375% due 7/01/2030 1,097
BBB+ Baa1 3,250 Refunding (State University Educational Facilities), Series B,
7% due 5/15/2016 3,471
AAA Aa2 1,000 (Saint Vincent Hospital and Medical Center), 7.40% due
8/01/2030 (f) 1,100
New York State Environmental Facilities Corporation, PCR,
State Water Revolving Fund (New York City Municipal Water),
Series A:
A Aa2 1,425 7% due 6/15/2012 1,564
A- Aa2 2,720 Refunding, 5.875% due 6/15/2014 2,804
A- A2 1,520 New York State, GO, UT, 6.25% due 6/15/2024 1,584
New York State Local Government Assistance Corporation,
Series A:
A Aaa 11,650 6.875% due 4/01/2002 (b) 13,066
A A3 5,000 6.50% due 4/01/2020 5,341
New York State Medical Care Facilities Finance Agency Revenue
Bonds, Series A:
AAA Aaa 1,000 (Mental Health Services Facilities), 6% due 2/15/2025 (c) 1,029
AAA Aaa 1,515 (Mental Health Services Facilities Improvement), 7.80% due
2/15/1999 (b) 1,630
AAA Aaa 3,500 (New York Hospital Mortgage), 6.80% due 8/15/2024 (e)(f) 3,860
New York State Mortgage Agency Revenue Bonds (Homeowner
Mortgage):
NR* Aa2 3,750 Refunding, Series 61, 5.80% due 10/01/2017 3,813
NR* Aa2 2,440 Series 66, 5.60% due 10/01/2017 2,425
A+ Aa 9,575 Triborough Bridge and Tunnel Authority, New York, General
Purpose Revenue Bonds, Series X, 6.50% due 1/01/2019 10,369
A- A1 5,325 Triborough Bridge and Tunnel Authority, New York, Special
Obligation Refunding Bonds, Series B, 6.875% due 1/01/2015 5,815
New York & AA- A1 12,750 Port Authority of New York and New Jersey, Consolidated Bonds,
New Jersey -- 72nd Series, 7.35% due 10/01/2002 (b) 14,581
2.7%
North BBB Aaa 1,330 North Carolina Eastern Municipal Power Agency, Power System
Carolina -- Revenue Refunding Bonds, Series A, 6.50% due 1/01/2018 (a) 1,516
2.4% AA- Aa3 1,000 Pitt County, North Carolina, Refunding (Pitt County Memorial
Hospital), 5.25% due 12/01/2021 956
A1+ NR* 2,800 Raleigh-Durham, North Carolina, Airport Authority, Special
Facility Revenue Refunding Bonds (American Airlines), VRDN,
Series A, 4.10% due 11/01/2015 (h) 2,800
University of North Carolina, Hospital Revenue Bonds (Chapel
Hill University):
AA Aa3 6,620 5.25% due 2/15/2026 6,296
AA Aa3 1,000 (Board of Governors), 6% due 2/15/2024 1,018
Ohio -- 0.6% AAA Aaa 3,000 Hamilton, Ohio, Electric System Mortgage Revenue Bonds,
Series B, 8% due 10/15/1998 (b)(d) 3,210
Oregon -- 2.8% AAA Aaa 14,850 Oregon Health Sciences, University Revenue Bonds, Series A,
5.83% due 7/01/2021 (c)(j) 3,869
AA Aa2 6,500 Oregon State Board of Higher Education, Series A, 6% due
8/01/2026 6,748
AAA Aaa 4,345 Oregon State Department of Administrative Services, COP,
Series A, 5.80% due 5/01/2024 (e) 4,406
Pennsylvania -- Allegheny County, Pennsylvania, Hospital Development Authority
4.7% Revenue Bonds (c):
AAA Aaa 2,750 (Children's Hospital of Pittsburgh), 5.30% due 7/01/2026 2, 601
AAA Aaa 4,000 Refunding (University of Pittsburgh Health Center), Series A,
5.625% due 4/01/2027 3,937
AAA Aaa 2,500 Altoona, Pennsylvania, City Authority, Water Revenue Bonds,
Series A, 6.50% due 11/01/2019 (d) 2,747
A1+ P1 6,400 Delaware County, Pennsylvania, IDA, PCR (BP Oil Inc. Project),
UPDATES, 5.50% due 12/01/2009 (h) 6,400
A1+ NR* 2,100 Geisinger, Pennsylvania, Health System Authority Revenue Bonds,
VRDN, Series B, 5.50% due 7/01/2022 (h) 2,100
A- NR* 2,500 Montgomery County, Pennsylvania, IDA, Retirement Community
Revenue Bonds (Adult Communities Total Services), Series B,
5.75% due 11/15/2017 2,472
AAA Aaa 3,355 North Penn, Pennsylvania, Water Authority, Water Revenue Bonds,
7% due 11/01/2004 (b)(d) 3,867
AA Aa3 1,000 Upper Saint Clair Township, Pennsylvania, School District,
Refunding Bonds, UT, 5.20% due 7/15/2027 957
Rhode AAA Aaa 2,500 Rhode Island Port Authority and Economic Development Corporation,
Island -- 0.5% Revenue Refunding Bonds (Shepard Building Project), Series B,
6.75% due 6/01/2025 (e) 2,774
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 3,492
AAA Aaa 1,890 Series A, 6.50% due 1/01/2014 2,132
AAA Aaa 320 Series A, 6.50% due 1/01/2014 (a) 360
Tennessee -- AA Aa 1,000 Metropolitan Government, Nashville and Davidson County,
0.2% Tennessee, UT, 6.125% due 5/15/2019 1,044
Texas -- 7.1% AAA Aaa 2,000 Austin, Texas, Utility Systems, Combined Revenue Refunding
Bonds, Prior Lien, 6.50% due 5/15/2001 (b)(e) 2,185
AAA Aaa 2,000 Brazos River Authority, Texas, Revenue Refunding Bonds (Houston
Light and Power Company), Series B, 6.375% due 4/01/2012 (c) 2,163
Harris County, Texas, Health Facilities Development Corporation,
Hospital Revenue Bonds:
AAA Aaa 2,870 (Hermann Hospital Project), 6.375% due 10/01/2024 (c) 3,040
A1+ NR* 6,300 (Methodist Hospital), VRDN, 5.50% due 12/01/2025 (h) 6,300
AAA NR* 1,250 Harris County, Texas, Toll Road Sub-Lien, Revenue Refunding
Bonds, UT, 8.125% due 8/01/1998 (b) 1,330
AAA Aaa 3,315 Houston, Texas, Water and Sewer System, Revenue Refunding Bonds,
Junior Lien, Series C, 5.75% due 12/01/2015 (c) 3,372
AAA Aaa 5,100 Round Rock, Texas, Refunding, 5.80% due 8/15/2021 (d) 5,170
AAA Aaa 4,700 Sabine River Authority, Texas, PCR, Refunding (Texas Utilities
Electric Company Project), 6.55% due 10/01/2022 (d) 5,115
AAA Aaa 5,300 San Antonio, Texas, Water Revenue Refunding Bonds, 6.50%
due 5/15/2010 (c) 5,775
AA Aa 1,000 Texas State, Refunding (Veterans' Land), UT, 6.50% due
12/01/2021 1,065
AA Aa 2,155 Texas State Veterans' Housing Assistance Fund II, AMT, UT,
Series A, 7% due 12/01/2025 2,292
Utah -- 0.4% AAA Aaa 2,500 Utah County, Utah, Hospital Revenue Bonds (IHC Health
Services, Inc.), 5.25% due 8/15/2026 (c) 2,336
Virginia -- AA Aa 4,500 Henrico County, Virginia, IDA, Public Facility Lease Revenue
3.1% Bonds (Henrico County Regional Jail Project), 7% due 8/01/2013 5,084
Virginia State, HDA, Commonwealth Mortgage:
AA+ Aa1 1,620 Series C, Sub-Series C-3, 6% due 1/01/2017 1,657
AA+ Aa1 2,500 Series D, Sub-Series D-1, 6.10% due 1/01/2019 2,572
AA+ Aa1 6,775 Virginia State, HDA, M/F Housing, Series B, 5.95% due
5/01/2016 6,897
Washington -- AA+ Aa1 4,000 Seattle, Washington, Refunding, 6.50% due 3/01/2017 4,217
1.5% AAA Aaa 3,000 Tacoma, Washington, Refuse Utility Revenue Bonds, 7% due
12/01/2004 (b)(e) 3,484
Wisconsin -- Wisconsin Housing and EDA, Home Ownership Revenue Bonds,
2.6% Series 1:
AA Aa 1,000 6.75% due 9/01/2015 1,048
AA Aa 4,990 6.75% due 9/01/2017 5,227
AAA Aaa 2,000 Wisconsin Public Power System Inc., Power Supply System
Revenue Bonds, Series A, 7.40% due 7/01/2000 (b)(e) 2,210
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) 5,393
Wyoming -- A1 VMIG1+ 2,100 Sweetwater County, Wyoming, PCR, Refunding (PacificCorp.
0.4% Projects), VRDN, 4.15% due 11/01/2024 (e)(h) 2,100
Total Investments (Cost -- $484,472) -- 97.8% 519,194
Other Assets Less Liabilities -- 2.2% 11,909
--------
Net Assets -- 100.0% $531,103
========
(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 June 30, 1997.
(i) FSA Insured.
(j) 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.
See Notes to Financial Statements.
</TABLE>
<TABLE>
<CAPTION>
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.
<S> <C> <C> <C>
AMT Alternative Minimum Tax (subject to) M/F Multi-Family
COP Certificates of Participation PCR Pollution Control Revenue Bonds
DATES Daily Adjustable Tax-Exempt Securities S/F Single-Family
EDA Economic Development Authority UPDATES Unit Priced Demand Adjustable
GO General Obligation Bonds Tax-Exempt Securities
HDA Housing Development Authority UT Unlimited Tax
HFA Housing Finance Agency VRDN Variable Rate Demand Notes
IDA Industrial Development Authority
</TABLE>
<TABLE>
<CAPTION>
Statement of Assets and Liabilities As of June 30, 1997
<S> <C> <C>
Assets:
Investments, at value (identified cost -- $484,471,880) (Note 1a) $519,194,488
Cash 912,063
Receivables:
Securities sold $10,177,500
Interest 9,372,330
Capital shares sold 290 19,550,120
-------------
Prepaid registration fees and other assets (Note 1d) 45,761
-------------
Total assets 539,702,432
-------------
Liabilities:
Payables:
Securities purchased 7,352,505
Capital shares redeemed. 353,673
Investment adviser (Note 2) 211,188 7,917,366
-------------
Accrued expenses and other liabilities 681,965
-------------
Total liabilities 8,599,331
-------------
Net Assets $531,103,101
=============
Net Assets Consist of:
Common Stock, $0.01 par value, 100,000,000 shares authorized $281,670
Paid-in capital in excess of par 496,856,303
Undistributed investment income -- net 1,049,145
Accumulated realized capital losses on investments -- net (Note 5) (1,806,625)
Unrealized appreciation on investments -- net 34,722,608
-------------
Net Assets:
Equivalent to $18.86 per share based on 28,167,005 shares outstanding $531,103,101
=============
See Notes to Financial Statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of Operations For the Six Months Ended June 30, 1997
<S> <C> <C>
Investment Income (Note 1c):
Interest and premium and discount earned $15,628,525
Expenses:
Investment advisory fees (Note 2) $1,323,194
Transfer agent fees 552,407
Printing and shareholder reports 42,603
Accounting services (Note 2) 39,233
Registration fees (Note 1d) 38,875
Custodian fees 25,902
Professional fees 22,148
Pricing services 11,827
Directors' fees and expenses 8,821
Other 5,640
-------------
Total expenses 2,070,650
-------------
Investment income -- net 13,557,875
Realized & Unrealized Gain (Loss) on Investments (Notes 1c & 3):
Realized gain on investments -- net 3,738,642
Change in unrealized appreciation on investments -- net (3,601,869)
-------------
Net Increase in Net Assets Resulting from Operations $13,694,648
=============
See Notes to Financial Statements.
</TABLE>
<TABLE>
<CAPTION>
The Municipal Fund Accumulation Program, Inc. For the Six For the
Statements of Changes in Net Assets Months Ended Year Ended
June 30, 1997 Dec. 31, 1996
<S> <C> <C>
Increase (Decrease) in Net Assets:
Operations:
Investment income -- net $13,557,875 $29,149,276
Realized gain (loss) on investments -- net 3,738,642 (696,677)
Change in unrealized appreciation on investments -- net (3,601,869) (10,598,099)
------------- -------------
Net increase in net assets resulting from operations 13,694,648 17,854,500
------------- -------------
Dividends to Shareholders (Note 1e):
Investment income -- net (13,751,110) (29,051,296)
------------- -------------
Net decrease in net assets resulting from dividends to shareholders (13,751,110) (29,051,296)
------------- -------------
Capital Share Transactions (Note 4):
Net decrease in net assets resulting from capital share transactions (20,689,837) (18,632,382)
------------- -------------
Net Assets:
Total decrease in net assets (20,746,299) (29,829,178)
Beginning of period 551,849,400 581,678,578
------------- -------------
End of period* $531,103,101 $551,849,400
============= =============
*Undistributed investment income -- net $1,049,145 $1,242,380
============= =============
See Notes to Financial Statements.
</TABLE>
<TABLE>
<CAPTION>
Financial Highlights
For the
Six
The following per share data and ratios have been derived Months
from information provided in the financial statements. Ended
June 30, For the Year Ended December 31,
Increase (Decrease) in Net Asset Value: 1997 1996 1995 1994 1993
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period $18.85 $19.22 $17.51 $19.79 $18.93
--------- --------- --------- --------- ---------
Investment income -- net .48 .98 1.01 1.03 1.09
Realized and unrealized gain (loss) on investments -- net .01 (.37) 1.71 (2.28) 1.11
--------- --------- --------- --------- ---------
Total from investment operations .49 .61 2.72 (1.25) 2.20
--------- --------- --------- --------- ---------
Less dividends and distributions:
Investment income -- net (.48) (.98) (1.01) (1.03) (1.09)
Realized gain on investments -- net -- -- -- -- (.25)
--------- --------- --------- --------- ---------
Total dividends and distributions (.48) (.98) (1.01) (1.03) (1.34)
--------- --------- --------- --------- ---------
Net asset value, end of period $18.86 $18.85 $19.22 $17.51 $19.79
========= ========= ========= ========= =========
Total Investment Return:
Based on net asset value per share 2.65%+ 3.36% 15.88% (6.44%) 11.93%
========= ========= ========= ========= =========
Ratios to Average Net Assets:
Expenses .78%* .83% .86% .89% .86%
========= ========= ========= ========= =========
Investment income -- net 5.12%* 5.18% 5.40% 5.54% 5.52%
========= ========= ========= ========= =========
Supplemental Data:
Net assets, end of period (in thousands) $531,103 $551,849 $581,679 $537,197 $639,588
========= ========= ========= ========= =========
Portfolio turnover 39% 72% 56% 61% 23%
========= ========= ========= ========= =========
* 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.
(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.
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, 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.
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, and/or ML & Co.
3. Investments:
Purchases and sales of investments, excluding short-term securities, for
the six months ended June 30, 1997 were $199,977,636 and $234,762,507,
respectively.
Net realized and unrealized gains as of June 30, 1997 were as follows:
Realized Unrealized
Gains Gains
Long-term investments $3,738,642 $34,722,608
------------- -------------
Total $3,738,642 $34,722,608
============= =============
As of June 30, 1997, net unrealized appreciation for Federal income tax
purposes aggregated $34,722,608, of which $34,777,227 related to
appreciated securities and $54,619 related to depreciated securities.
The aggregate cost of investments at June 30, 1997 for Federal income
tax purposes was $484,471,880.
4. Capital Share Transactions:
Transactions in capital shares were as
follows:
For the Six Months Dollar
Ended June 30, 1997 Shares Amount
Shares sold 1,747,978 $32,667,590
Shares issued to
shareholders in
reinvestment of
dividends
639,252 11,972,379
------------- -------------
Total issued 2,387,230 44,639,969
Shares redeemed (3,491,935) (65,329,806)
------------- -------------
Net decrease (1,104,705) $(20,689,837)
============= =============
For the Year Ended Dollar
December 31, 1996 Shares Amount
Shares sold 5,183,981 $96,872,802
Shares issued to
shareholders in
reinvestment of
dividends 1,471,903 27,416,058
------------- -------------
Total issued 6,655,884 124,288,860
Shares redeemed (7,650,329) (142,921,242)
------------- -------------
Net decrease (994,445) $(18,632,382)
============= =============
5. Capital Loss Carryforward:
As of December 31, 1996, the Program had a net capital loss carryforward
of approximately $5,549,000, of which $4,849,000 expires in 2002 and
$700,000 expires in 2004. This amount will be available to offset like
amounts of any future taxable gains.
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, NY 10286
