The
Municipal
Fund
Accumulation
Program,
Inc.
Semi-Annual Report
June 30, 1999
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
Printed on post-consumer recycled paper
To Our Shareholders:
For the six-month period ended June 30, 1999, The Municipal Fund
Accumulation Program, Inc.'s net annualized yield was 4.63%. The
Program's total investment return for the six-month period ended
June 30, 1999 was -2.52%, based on a change in per share net asset
value from $18.50 to $17.50, and assuming reinvestment of $0.395 per
share income dividends and $0.153 per share capital gains
distributions. (Additional performance information can be found on
page 3 of this report to shareholders.)
The Municipal Market Environment
Long-term bond yields moved higher during the first six months of
1999. US Treasury bond yields rose throughout the period as the US
economy continued to exhibit considerable strength. An above-trend
inflationary report in May coupled with the May announcement by the
Federal Reserve Board that it was considering increasing short-term
interest rates in order to slow domestic economic growth also
contributed to pushing US Treasury bond yields to an 18-month high
of over 6.10%. The Federal Reserve Board's return to a neutral
policy after the expected increase in short-term interest rates of
25 basis points (0.25%) in late June allowed long-term US Treasury
bond yields to decline and close the six-month period ended June 30,
1999 at 5.96%. During the same period, the yield on long-term US
Treasury securities rose almost 90 basis points.
For much of early 1999, long-term tax-exempt bond yields remained
essentially unchanged. However, in May and June municipal bond
yields eventually followed taxable bond yields higher. As measured
by the Bond Buyer Revenue Bond Index, long-term tax-exempt revenue
bond yields rose more than 35 basis points to end the six-month
period at 5.61%, their highest level in 20 months.
The strong technical position that the tax-exempt bond market has
enjoyed in recent quarters has continued. Municipal investors are
expected to have received as much as $40 billion in June and early
July from coupon income, bond maturities and the proceeds from early
bond redemptions. The receipt of these assets has coincided with a
significant decline in new bond issuance. Over the last six months,
over $115 billion in new long-term tax-exempt bonds were issued, a
decline of 22% as compared to the first six months of 1998. During
the quarter ended June 30, 1999, less than $60 billion in securities
were issued by US municipalities, a decline of nearly 25% versus the
June 30, 1998 quarter. New-issue volume of $22 billion for the month
of June 1999 was 28% lower than June 1998's issuance and the lowest
June production since 1996. The combination of reduced issuance and
seasonally high reinvestment has produced a very positive
supply/demand function for the municipal bond market.
Prior to May 1999, this positive technical position had enabled the
tax-exempt bond market to outperform its taxable counterpart. This
resulted in a decline of the yield ratio between taxable and tax-
exempt bonds. At the end of 1998, long-term uninsured revenue bond
yields were in excess of 100% of US Treasury bond yields, far
greater than their recent historic range of 85%--88%. However, by
early May, tax-exempt revenue bond yield ratios had declined to
nearly 90%. Given the rapid rise in municipal bond yields in recent
weeks, this ratio has risen again to nearly 95%. The recent period
of volatility has created additional opportunities for long-term
investors to purchase tax-exempt bonds at historically attractive
yields relative to US Treasury securities.
While the Federal Reserve Board announced that it has no immediate
bias toward raising short-term interest rates, it is clear that
additional US economic growth will result in further action by the
Federal Reserve Board. However, additional action by the central
bank, coupled with the increases in bond yields seen in recent
months, is likely to significantly impact US economic growth. A
slowing in US growth by late summer, especially given the continued
lack of inflationary pressures, could enable the Federal Reserve
Board to avoid additional interest rate adjustments. Without the
potential for further Federal Reserve Board action, we would expect
interest rates to stabilize at current levels or begin a modest
decline.
Portfolio Strategy
For the six months ended June 30, 1999, we sought to sustain an
appealing level of tax-exempt income for The Municipal Fund
Accumulation Program, Inc.'s shareholders. During the period, our
strategy was to remain invested in the highest-yielding bonds that
could be purchased without sacrificing the Program's credit quality.
Unfortunately, during the six-month period, tax-exempt interest
rates increased by about 35 basis points, causing the net asset
value of the Program to decline. However, it also created an
opportunity for us to reinvest proceeds received from the bonds that
were sold in a lower interest rate environment at a higher interest
rate, thereby enhancing the Program's income.
Looking ahead, we believe that the interest rate backup has been
excessive relative to the level of inflation evident in the economy.
Therefore, with interest rates at what we believe to be attractive
levels, we expect to invest the remainder of the Program's cash
reserves to seek to enhance yields to shareholders before interest
rates return to the lower levels consistent with the current
inflationary environment.
In Conclusion
We appreciate your ongoing interest in The Municipal Fund Investment
Accumulation Program, Inc., and we look forward to assisting you
with your financial needs in the months and years to come.
Sincerely,
(Terry K. Glenn)
Terry K. Glenn
President and Director
(Vincent R. Giordano)
Vincent R. Giordano
Senior Vice President
(Roberto Roffo)
Roberto Roffo
Vice President and Portfolio Manager
August 6, 1999
After more than 20 years of service, Arthur Zeikel recently retired
as Chairman of Merrill Lynch Asset Management, L.P. (MLAM). Mr.
Zeikel served as President of MLAM from 1977 to 1997 and as Chairman
since December 1997. Mr. Zeikel is one of the country's most
respected leaders in asset management and presided over the growth
of Merrill Lynch's asset management business. During his tenure,
client assets under management grew from $300 million to over $500
billion. Mr. Zeikel will remain on The Municipal Fund Accumulation
Program, Inc.'s Board of Directors. We are pleased to announce that
Terry K. Glenn has been elected President and Director of the
Program. Mr. Glenn has held the position of Executive Vice President
of MLAM since 1983.
Mr. Zeikel's colleagues at MLAM join the Program's Board of
Directors in wishing him well in his retirement from Merrill Lynch
and are pleased that he will continue as a member of the Program's
Board of Directors.
The Municipal Fund Accumulation Program, Inc.
Average Annual Total Return
Period Covered % Return
Year Ended 6/30/99 +0.60%
Five Years Ended 6/30/99 +5.68
Ten Years Ended 6/30/99 +6.33
Past performance is not indicative of future results.
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
EDA Economic Development Authority
GO General Obligation Bonds
HDA Housing Development Authority
HFA Housing Finance Agency
IDA Industrial Development Authority
PCR Pollution Control Revenue Bonds
S/F Single-Family
VRDN Variable Rate Demand Notes
<TABLE>
The Municipal Fund Accumulation Program, Inc.
Schedule of Investments as of June 30, 1999 (in Thousands)
<CAPTION>
S&P Moody's Face Value
State Rating Rating Amount Issue (Note 1a)
<S> <S> <S> <C> <S> <C>
California-- AA- Aa2 $ 4,325 California HFA, Home Mortgage Revenue Bonds, AMT, Series F-1,
5.8% 7% due 8/01/2026 (c) $ 4,630
AAA Aaa 1,535 California State, GO, Refunding, 4.25% due 10/01/2026 (e) 1,253
California State Public Works Board, Lease Revenue Bonds:
A A1 2,300 (California State University), Series C, 5.40% due 10/01/2022 2,274
A Aaa 4,000 (Department of Corrections), Series A, 6.875% due 11/01/2004 (g) 4,555
Dublin, California, Joint Unified School District, GO, Series E
(b)(i):
NR* Aaa 1,055 5.25% due 8/01/2017 384
NR* Aaa 1,915 5.35% due 8/01/2019 614
NR* Aaa 1,000 5.35% due 8/01/2020 302
NR* Aaa 2,305 5.40% due 8/01/2021 655
NR* Aaa 2,305 5.40% due 8/01/2023 582
AAA Aaa 1,250 M-S-R Public Power Agency, California, Revenue Refunding Bonds
(San Juan Project), Series D, 6.75% due 7/01/2020 (e)(f) 1,444
A+ A2 1,835 Modesto, California, Irrigation District, COP, Refunding and
Capital Improvements, Series B, 5.30% due 7/01/2022 1,777
AAA Aaa 1,000 Mojave, California, Water Agency, GO, Refunding (Improvement
District--Morongo Basin), 5.80% due 9/01/2022 (b) 1,033
AAA NR* 1,345 Rohnert Park, California, COP (Capital Facilities Project), 5%
due 7/01/2024 (a) 1,273
AAA Aaa 2,000 San Diego, California, Public Facilities Financing Authority,
Sewer Revenue Bonds, Series B, 5% due 5/15/2016 (b) 1,945
AAA Aaa 4,000 Tustin, California, Unified School District, Special Tax
Refunding Bonds (Community Facilities District No. 88-1), 4.375%
due 9/01/2019 (d) 3,484
AAA Aaa 2,000 Walnut, California, Improvement Agency, Tax Allocation Refunding
Bonds, Series A, 4.75% due 9/01/2018 (e) 1,849
Connecticut-- AA Aa2 3,825 Connecticut State, HFA, Housing Mortgage Revenue Refunding
0.8% Bonds (Finance Program), Sub-Series B-1, 6.125% due 5/15/2018 4,023
Georgia-- A1 VMIG1++ 3,300 Bartow County, Georgia, Development Authority, PCR, Refunding
3.1% (Georgia Power Company Plant-Bowen Project), VRDN, 4% due
3/01/2024 (h) 3,300
A A3 10,460 Georgia Municipal Electric Authority, Power Revenue Refunding
Bonds, Series Y, 6.50% due 1/01/2017 11,673
Illinois-- AAA Aaa 5,000 Chicago, Illinois, Board of Education, GO (Chicago School Reform
2.1% Project), Series A, 5.25% due 12/01/2030 (a) 4,789
AAA Aa3 5,000 Illinois Development Finance Authority Revenue Bonds (Presbyterian
Home Lake Project), Series B, 6.40% due 9/01/2031 (d) 5,463
</TABLE>
<TABLE>
The Municipal Fund Accumulation Program, Inc.
Schedule of Investments as of June 30, 1999 (continued) (in Thousands)
<CAPTION>
S&P Moody's Face Value
State Rating Rating Amount Issue (Note 1a)
<S> <S> <S> <C> <S> <C>
Indiana-- AAA Aa3 $ 1,000 Indiana State Office Building Commission, Capital Complex Revenue
0.7% Refunding Bonds (State Office Building-II Facility), Series D,
6.90% due 7/01/2011 $ 1,142
AA NR* 1,865 Indianapolis, Indiana, Local Public Improvement Bond Bank, Revenue
Refunding Bonds, Series D, 6.75% due 2/01/2020 2,012
Louisiana-- AAA Aaa 2,900 New Orleans, Louisiana, GO, Refunding, 6.125% due 10/01/2016 (a) 3,095
0.6%
Massachu- A+ Aa3 2,760 Massachusetts State, HFA, S/F Housing Revenue Bonds, AMT,
setts--0.9% Series 38, 7.20% due 12/01/2026 2,885
AAA Aaa 1,050 Massachusetts State Health and Educational Facilities Authority,
Revenue Refunding Bonds (Northeastern University), Series E,
6.55% due 10/01/2022 (e) 1,130
A1+ VMIG1++ 300 Massachusetts State Industrial Finance Agency, PCR, Refunding
(Holyoke Water Power Company), VRDN, Series A, 3.40% due
5/01/2022 (h) 300
Michigan-- AAA Aaa 2,000 Michigan State Strategic Fund, Limited Obligation Revenue
1.1% Refunding Bonds (Detroit Edison Company), Series BB, 7% due
5/01/2021 (a) 2,420
Plymouth-Canton, Michigan, Community School District, GO:
AA+ Aa1 1,000 4.75% due 5/01/2020 904
AA+ Aa1 2,010 4.75% due 5/01/2021 1,811
Minnesota-- AA+ Aa2 3,445 Minnesota State, HFA, S/F Mortgage Revenue Bonds, AMT, Series M,
0.8% 6.70% due 7/01/2026 3,630
Montana-- AA+ Aa1 2,625 Montana State Housing Board, S/F Program, AMT, Series B-2, 6.90%
0.6% due 6/01/2025 (c) 2,712
Nevada-- AAA Aaa 2,000 Clark County, Nevada, PCR, Refunding (Nevada Power Company
0.9% Project), Series B, 6.60% due 6/01/2019 (b) 2,139
AAA Aaa 1,995 Nevada Housing Division, S/F Program, AMT, Senior Series E,
7.05% due 4/01/2027 (c) 2,123
New AAA Aaa 2,000 New Hampshire Higher Educational and Health Facilities Authority,
Hampshire-- Revenue Refunding Bonds (University System of New Hampshire),
0.4% 6.25% due 7/01/2020 (e) 2,125
New Jersey-- AAA Aaa 2,780 Black Horse Pike, New Jersey, Regional School District, GO, 4.75%
21.9% due 12/01/2016 (b) 2,627
AAA Aaa 5,000 Camden County, New Jersey, Municipal Utilities Authority, Sewer
Revenue Refunding Bonds, County Agreement, 5.20% due
7/15/2014 (b) 5,003
NR* Aaa 1,450 Essex County, New Jersey, Utilities Authority, Solid Waste Revenue
Refunding Bonds, Series A, 5% due 4/01/2022 (d) 1,403
High Bridge, New Jersey, Board of Education, GO, Refunding (d):
AAA Aaa 1,000 5% due 2/15/2023 975
AAA Aaa 1,000 5% due 2/15/2026 969
AAA NR* 1,120 Metuchen, New Jersey, School District, GO, 5.20% due 9/15/2022 (b) 1,111
AAA Aaa 1,350 Middlesex County, New Jersey, Improvement Authority, Utility
System Revenue Bonds (Perth Amboy Project), Series B, 5.30% due
9/01/2023 (a)(i) 359
AAA Aaa 1,000 Moorestown Township, New Jersey, School District, GO, 5% due
1/01/2027 (b) 954
NR* Aaa 500 Mount Holly, New Jersey, Municipal Utilities Authority, Sewer
Revenue Bonds, 4.75% due 12/01/2028 (e) 453
</TABLE>
<TABLE>
The Municipal Fund Accumulation Program, Inc.
Schedule of Investments as of June 30, 1999 (continued) (in Thousands)
<CAPTION>
S&P Moody's Face Value
State Rating Rating Amount Issue (Note 1a)
<S> <S> <S> <C> <S> <C>
New Jersey NR* Aaa $ 1,345 Mount Holly, New Jersey, Municipal Utilities Authority, Sewer
(concluded) Revenue Refunding Bonds, 5% due 12/01/2016 (e) $ 1,279
AAA Aaa 5,000 New Jersey EDA, Revenue Refunding Bonds (RWJ Health Care
Corporation), 6.50% due 7/01/2024 (d) 5,424
AAA Aaa 6,300 New Jersey EDA, Water Facilities Revenue Bonds (American Water
Company Inc.), AMT, Series A, 5.25% due 7/01/2038 (b) 6,102
New Jersey Health Care Facilities Financing Authority, Revenue
Refunding Bonds:
AAA Aaa 2,000 (Barnert Hospital), 4.75% due 8/01/2019 (e) 1,834
NR* Aaa 7,300 (Bayonne Hospital Obligation Group), 4.75% due 7/01/2027 (d) 6,634
AAA Aaa 1,000 (Community Medical Center/Kimball), 4.75% due 7/01/2019 (d) 921
NR* Aaa 5,130 (Saint Barnabas Health Center), Series A, 4.75% due
7/01/2028 (e) 4,655
AAA Aaa 3,000 (Saint Barnabas Health Center), Series B, 5.25% due
7/01/2013 (e) 3,006
AAA Aaa 2,000 (Saint Barnabas Health Center), Series B, 5.25% due
7/01/2018 (e) 1,982
AAA Aaa 6,370 New Jersey Sports and Exposition Authority, State Contract
Revenue Refunding Bonds, Series A, 4.50% due 3/01/2019 (e) 5,705
AAA Aaa 3,805 New Jersey State Educational Facilities Authority Revenue Bonds
(Higher Education Facilities Trust Fund), Series A, 5.125% due
9/01/2009 (a) 3,861
AA+ Aa1 3,000 New Jersey State, GO, 4.50% due 2/01/2016 2,736
AAA Aaa 12,370 New Jersey State Transit Corporation, COP, Series A, 5% due
9/15/2007 (a) 12,565
New Jersey State Transportation Trust Fund Authority,
Transportation System Revenue Bonds, Series A:
AA- Aa2 13,500 5% due 6/15/2013 13,293
AAA Aaa 3,000 4.50% due 6/15/2019 (d) 2,684
Ocean County, New Jersey, Utilities Authority, Wastewater
Revenue Refunding Bonds, Series A:
NR* Aa2 1,700 4.35% due 1/01/2011 1,580
NR* Aa2 2,005 4.45% due 1/01/2012 1,867
NR* Aa2 2,055 4.65% due 1/01/2014 1,929
AA A1 3,665 Rutgers State University, New Jersey, Revenue Bonds, Series A,
4.75% due 5/01/2029 3,331
AAA Aaa 3,650 South Jersey Transportation Authority, New Jersey, Transportation
System Revenue Refunding Bonds, 5% due 11/01/2029 (a) 3,509
AAA NR* 3,000 Sparta Township, New Jersey, School District, GO, Refunding, 5%
due 9/01/2026 (e) 2,890
Union County, New Jersey, Utilities Authority, Revenue Refunding
Bonds:
AA+ Aaa 2,035 County Deficiency, Series C-2, 5% due 6/15/2028 1,944
AAA Aaa 2,000 Senior Lease (Ogden Martin), AMT, Series A, 5% due
6/01/2014 (a) 1,934
</TABLE>
<TABLE>
The Municipal Fund Accumulation Program, Inc.
Schedule of Investments as of June 30, 1999 (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-- Long Island Power Authority, New York, Electric System Revenue
42.7% Bonds, VRDN (h):
A1+ VMIG1++ $ 7,700 Sub-Series 5, 3.90% due 5/01/2033 $ 7,700
A1+ VMIG1++ 5,800 Sub-Series 7, 3.45% due 4/01/2025 (e) 5,800
AAA Aaa 6,000 Metropolitan Transportation Authority, New York, Commuter
Facilities Revenue Bonds, Series C-1, 5.375% due 7/01/2027 (b) 5,923
Metropolitan Transportation Authority, New York, Dedicated Tax
Fund Revenue Bonds, Series A:
AAA Aaa 3,000 4.75% due 4/01/2028 (b) 2,687
AAA Aaa 5,000 5% due 4/01/2029 (d) 4,660
AAA Aaa 5,605 Metropolitan Transportation Authority, New York, Transit
Facilities Revenue Bonds, Series A, 5.75% due 7/01/2021 (e) 5,788
AAA Aaa 1,310 Metropolitan Transportation Authority, New York, Transit
Facilities Revenue Refunding Bonds, Series A, 4.75% due
7/01/2024 (e) 1,180
Nassau County, New York, GO, General Improvement (a):
AAA Aaa 1,005 Series B, 5.25% due 6/01/2023 975
AAA Aaa 6,045 Series V, 5.25% due 3/01/2010 6,125
New York City, New York, GO:
A- A3 5,235 Refunding, Series F, 5.25% due 8/01/2014 5,157
A- A3 50 Series C, Sub-Series C-1, 7.50% due 8/01/2020 55
A- A3 35 Series D, 7.50% due 2/01/2019 38
AAA Aaa 4,130 New York City, New York, Health and Hospital Corporation
Revenue Refunding Bonds (Health System), Series A, 5% due
2/15/2008 (a) 4,154
New York City, New York, Municipal Water Finance Authority,
Water and Sewer System Revenue Bonds:
AAA Aaa 8,000 Refunding, Series A, 5.50% due 6/15/2023 (a) 8,026
A A1 12,955 Series B, 5.75% due 6/15/2026 13,306
AAA Aaa 1,475 Series B, 5.50% due 6/15/2027 (e) 1,482
New York City, New York, Transitional Finance Authority Revenue
Bonds, Future Tax Secured:
AA Aa3 2,000 Series A, 5% due 8/15/2017 1,914
AA Aa3 19,000 Series B, 4.50% due 11/15/2027 16,225
New York State Dormitory Authority Revenue Bonds:
AAA Aaa 3,000 (835 Schools Program), Issue 2, Series F, 5.25% due
7/01/2018 (a) 2,945
AAA Aaa 16,000 (Memorial Sloan Kettering Cancer Center), 5.50% due
7/01/2023 (e) 16,443
AAA Aaa 750 (New York University), Series A, 6% due 7/01/2019 (e) 818
A- A3 5,000 (State University Educational Facilities), Series B, 4.75%
due 5/15/2028 4,405
AAA Aaa 2,500 (State University Educational Facilities), Series B, 4.75%
due 5/15/2028 (e) 2,238
New York State Dormitory Authority, Revenue Refunding Bonds:
AAA NR* 6,535 (Consolidated City University), Series A, 5.75% due
7/01/2009 (d) 6,920
AAA NR* 3,360 (Mental Health Services Facilities), Series C, 5% due
8/15/2009 (e) 3,353
AAA NR* 3,955 (Mental Health Services Facilities), Series C, 5.125% due
8/15/2013 (e) 3,904
AAA NR* 3,315 (Mental Health Services Facilities), Series C, 5.125% due
8/15/2015 (e) 3,240
AAA Aaa 3,000 (State University Athletic Facilities), 5.25% due 7/01/2013 (e) 3,016
AAA Aaa 2,315 (Wyckoff Heights Medical Center), Series H, 5.125% due
2/15/2008 (e) 2,342
</TABLE>
<TABLE>
The Municipal Fund Accumulation Program, Inc.
Schedule of Investments as of June 30, 1999 (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 A A2 $ 1,415 New York State, GO, 6.25% due 6/15/2024 $ 1,518
(concluded) A A2 4,580 New York State, GO, Refunding, Series A, 5% due 3/15/2011 4,530
AAA Aaa 3,500 New York State Medical Care Facilities Finance Agency Revenue
Bonds (New York Hospital Mortgage), Series A, 6.80% due
2/15/2005 (a)(c)(g) 3,944
NR* Aa2 4,750 New York State Mortgage Agency, Revenue Refunding Bonds, AMT,
Series 82, 5.65% due 4/01/2030 4,743
AAA Aaa 2,750 New York State Thruway Authority, Highway and Bridge Trust Fund
Revenue Bonds, Series A, 5% due 4/01/2009 (b) 2,757
AAA Aaa 1,295 New York State Urban Development Corporation Revenue Bonds
(Correctional Facilities Service Contract), Series B, 4.75% due
1/01/2028 (a) 1,160
New York State Urban Development Corporation, Revenue Refunding
Bonds:
AAA NR* 3,000 (Correctional Facilities), 5% due 1/01/2019 (d) 2,858
A A2 2,000 Sub Lien, Corporation Purpose, 5.50% due 7/01/2022 1,996
NR* Aaa 1,595 North Hempstead, New York, GO, Series B, 5.25% due 3/01/2009 (b) 1,627
Port Authority of New York and New Jersey, Consolidated Revenue
Bonds, 116th Series (b):
AAA Aaa 5,805 4.50% due 10/01/2018 5,162
AAA Aaa 12,800 4.375% due 10/01/2033 10,666
Suffolk County, New York, Series A (b):
AAA Aaa 930 4.75% due 8/01/2022 837
AAA Aaa 945 4.75% due 8/01/2023 848
AAA Aaa 1,940 Syracuse, New York, Housing Authority, Mortgage Revenue Bonds
(Loretto Rest), Series A, 5.70% due 8/01/2027 (a)(c) 2,001
Triborough Bridge and Tunnel Authority, New York, General Purpose
Revenue Bonds:
A+ Aa3 4,575 Refunding, Series X, 6.50% due 1/01/2019 4,853
A+ Aa3 15,800 Series B, 5.20% due 1/01/2027 15,164
North AAA Aaa 1,330 North Carolina Eastern Municipal Power Agency, Power System
Carolina-- Revenue Refunding Bonds, Series A, 6.50% due 1/01/2018 (f) 1,533
0.3%
Pennsyl- Altoona, Pennsylvania, City Water Authority, Revenue Refunding
vania--3.2% Bonds, Series A (b):
AAA NR* 2,460 6.50% due 11/01/2004 (g) 2,735
AAA Aaa 40 6.50% due 11/01/2019 44
Delaware River Port Authority of Pennsylvania and New Jersey,
Revenue Refunding Bonds, Series B (a):
AAA Aaa 5,090 5.25% due 1/01/2006 5,270
AAA Aaa 3,000 5.25% due 1/01/2009 3,082
AAA Aaa 4,000 Erie, Pennnsylvania, City School District, GO, Series A, 5.75%
due 5/01/2006 (e)(g) 4,254
</TABLE>
<TABLE>
The Municipal Fund Accumulation Program, Inc.
Schedule of Investments as of June 30, 1999 (concluded) (in Thousands)
<CAPTION>
S&P Moody's Face Value
State Rating Rating Amount Issue (Note 1a)
<S> <S> <S> <C> <S> <C>
South Piedmont Municipal Power Agency, South Carolina, Electric Revenue
Carolina-- Refunding Bonds (b):
1.2% AAA Aaa $ 3,000 6.75% due 1/01/2019 $ 3,503
AAA Aaa 1,890 Series A, 6.50% due 1/01/2014 2,137
AAA Aaa 320 Series A, 6.50% due 1/01/2014 (f) 365
Texas--8.2% AAA Aaa 2,000 Brazos River Authority, Texas, Revenue Refunding Bonds (Houston
Light and Power Company), Series B, 6.375% due 4/01/2012 (e) 2,140
AAA Aaa 5,455 Brownsville, Texas, Independent School District, GO, 4.75% due
8/15/2023 4,908
AAA Aaa 4,395 Carrollton, Texas, Independent School District, GO, 4.625% due
2/15/2019 3,929
AAA Aaa 3,585 Conroe, Texas, Independent School District, GO, Refunding and
Schoolhouse, 5.30% due 2/15/2020 3,530
NR* Aaa 4,490 Edcouch Elsa, Texas, Independent School District, GO, 4.75% due
8/15/2022 4,049
A1+ NR* 4,400 Harris County, Texas, Health Facilities Development Corporation,
Hospital Revenue Refunding Bonds (Methodist Hospital), VRDN, 4%
due 12/01/2025 (h) 4,400
AAA Aaa 10,000 Matagorda County, Texas, Navigation District Number 1 Revenue
Refunding Bonds (Reliant Energy Inc.), Series A, 5.25% due
6/01/2026 (a) 9,603
AAA Aaa 4,700 Sabine River Authority, Texas, PCR, Refunding (Texas Utilities
Electric Company Project), 6.55% due 10/01/2022 (b) 5,007
AA Aa1 1,790 Texas State, GO, Veterans' Housing Assistance Fund II, AMT,
Series A, 7% due 12/01/2025 1,913
Virginia-- AA Aa2 4,500 Henrico County, Virgina, IDA, Public Facility Lease Revenue Bonds,
2.0% 7% due 8/01/2013 5,055
Virginia State, HDA, Commonwealth Mortgage Revenue Bonds:
AA+ Aa1 1,620 Series C, Sub-Series C-3, 6% due 1/01/2017 1,678
AA+ Aa1 2,500 Series D, Sub-Series D-1, 6.10% due 1/01/2019 2,621
Washington-- AAA Aaa 3,000 Tacoma, Washington, Refuse Utility Revenue Bonds, 7% due
0.7% 12/01/2004 (a)(g) 3,411
Total Investments (Cost--$475,269)--98.0% 471,899
Other Assets Less Liabilities--2.0% 9,515
--------
Net Assets--100.0% $481,414
========
<FN>
(a)AMBAC Insured.
(b)FGIC Insured.
(c)FHA Insured.
(d)FSA Insured.
(e)MBIA Insured.
(f)Escrowed to maturity.
(g)Prerefunded.
(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, 1999.
(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.
See Notes to Financial Statements.
</TABLE>
<TABLE>
<CAPTION>
The Municipal Fund Accumulation Program, Inc.
Statement of Assets and Liabilities As of June 30, 1999
<S> <C> <C>
Assets:
Investments, at value (identified cost--$475,268,675) (Note 1a) $471,899,376
Cash 103,297
Receivables:
Securities sold $ 15,758,104
Interest 8,252,443 24,010,547
------------
Prepaid registration fees and other assets (Note 1d) 41,488
------------
Total assets 496,054,708
------------
Liabilities:
Payables:
Securities purchased 13,925,539
Capital shares redeemed. 213,177
Investment adviser (Note 2) 199,758 14,338,474
------------
Accrued expenses and other liabilities 302,237
------------
Total liabilities 14,640,711
------------
Net Assets $481,413,997
============
Net Assets Consist of:
Common Stock, $0.01 par value, 100,000,000 shares authorized $ 275,162
Paid-in capital in excess of par 484,444,484
Undistributed investment income--net 879,622
Accumulated realized capital losses on investments--net (815,972)
Unrealized depreciation on investments--net (3,369,299)
------------
Net Assets:
Equivalent to $17.50 per share based on 27,516,152 shares outstanding $481,413,997
============
See Notes to Financial Statements.
</TABLE>
<TABLE>
<CAPTION>
The Municipal Fund Accumulation Program, Inc.
Statement of Operations For the Six Months Ended June 30, 1999
<S> <C> <C>
Investment Income (Note 1c):
Interest and premium and discount earned $ 12,666,272
Expenses:
Investment advisory fees (Note 2) $ 1,242,298
Transfer agent fees 526,056
Accounting services (Note 2) 60,450
Printing and shareholder reports 45,459
Custodian fees 25,923
Professional fees 21,124
Registration fees (Note 1d) 20,767
Pricing services 8,173
Directors' fees and expenses 4,560
Other 4,967
------------
Total expenses 1,959,777
------------
Investment income--net 10,706,495
------------
Realized & Unrealized Loss on Investments (Notes 1c & 3):
Realized loss on investments--net (799,067)
Change in unrealized appreciation/depreciation on investments--net (22,308,628)
------------
Net Decrease in Net Assets Resulting from Operations $(12,401,200)
============
See Notes to Financial Statements.
</TABLE>
<TABLE>
<CAPTION>
For the Six For the
The Municipal Fund Accumulation Program, Inc. Months Ended Year Ended
Statements of Changes in Net Assets June 30, 1999 Dec. 31, 1998
<S> <C> <C>
Increase (Decrease) in Net Assets:
Operations:
Investment income--net $ 10,706,495 $ 24,332,175
Realized gain (loss) on investments--net (799,067) 23,368,181
Change in unrealized appreciation/depreciation on investments--net (22,308,628) (19,855,581)
------------ ------------
Net increase (decrease) in net assets resulting from operations (12,401,200) 27,844,775
------------ ------------
Dividends & Distributions to Shareholders (Note 1e):
Investment income--net (11,023,570) (24,377,474)
Realized gain on investments--net (4,261,260) (23,103,998)
------------ ------------
Net decrease in net assets resulting from dividends and distributions to
shareholders (15,284,830) (47,481,472)
------------ ------------
Capital Share Transactions (Note 4):
Net increase (decrease) in net assets resulting from capital share transactions (16,483,035) 1,624,537
------------ ------------
Net Assets:
Total decrease in net assets (44,169,065) (18,012,160)
Beginning of period 525,583,062 543,595,222
------------ ------------
End of period* $481,413,997 $525,583,062
============ ============
<FN>
*Undistributed investment income--net $ 879,622 $ 1,196,697
============ ============
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: 1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period $ 18.50 $ 19.22 $ 18.85 $ 19.22 $ 17.51
-------- -------- -------- -------- --------
Investment income--net .39 .88 .96 .98 1.01
Realized and unrealized gain (loss) on investments--net (.84) .12 .56 (.37) 1.71
-------- -------- -------- -------- --------
Total from investment operations (.45) 1.00 1.52 .61 2.72
-------- -------- -------- -------- --------
Less dividends and distributions:
Investment income--net (.40) (.88) (.96) (.98) (1.01)
Realized gain on investments--net (.15) (.84) (.19) -- --
-------- -------- -------- -------- --------
Total dividends and distributions (.55) (1.72) (1.15) (.98) (1.01)
-------- -------- -------- -------- --------
Net asset value, end of period $ 17.50 $ 18.50 $ 19.22 $ 18.85 $ 19.22
======== ======== ======== ======== ========
Total Investment Return:
Based on net asset value per share (2.52%)++ 5.35% 8.29% 3.36% 15.88%
======== ======== ======== ======== ========
Ratios to Average Net Assets:
Expenses .79%* .76% .72% .83% .86%
======== ======== ======== ======== ========
Investment income--net 4.31%* 4.54% 5.05% 5.18% 5.40%
======== ======== ======== ======== ========
Supplemental Data:
Net assets, end of period (in thousands) $481,414 $525,583 $543,595 $551,849 $581,679
======== ======== ======== ======== ========
Portfolio turnover 126% 178% 131% 72% 56%
======== ======== ======== ======== ========
<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. The Program's
financial statements are prepared in accordance with generally
accepted accounting principles, which may require the use of
management accruals and estimates. 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.
The Municipal Fund Accumulation Program, Inc.
Notes to Financial Statements (concluded)
FAM has entered into an Administrative Agreement with Merrill Lynch,
Pierce, Fenner & Smith Incorporated, Prudential Securities, Inc.,
Dean Witter Reynolds Inc., and Salomon Smith Barney (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, 1999 were $613,058,299 and
$641,620,636, respectively.
Net realized losses for the six months ended June 30, 1999 and net
unrealized losses as of June 30, 1999 were as follows:
Realized Unrealized
Losses Losses
Long-term securities $ (799,067) $ (3,369,299)
----------- ------------
Total $ (799,067) $ (3,369,299)
=========== ============
As of June 30, 1999, net unrealized depreciation for Federal income
tax purposes aggregated $3,369,299, of which $9,028,671 related to
appreciated securities and $12,397,970 related to depreciated
securities. The aggregate cost of investments at June 30, 1999 for
Federal income tax purposes was $475,268,675.
4. Capital Share Transactions:
Transactions in capital shares were as follows:
For the Six Months Dollar
Ended June 30, 1999 Shares Amount
Shares sold 1,192,737 $ 21,670,237
Shares issued to share-
holders in reinvestment
of dividends and
distributions 783,927 14,252,180
------------ ------------
Total issued 1,976,664 35,922,417
Shares redeemed (2,877,455) (52,405,452)
------------ ------------
Net decrease (900,791) $(16,483,035)
============ ============
For the Year Ended Dollar
December 31, 1998 Shares Amount
Shares sold 3,320,005 $ 63,415,487
Shares issued to share-
holders in reinvestment
of dividends and
distributions 2,354,774 44,384,091
------------ ------------
Total issued 5,674,779 107,799,578
Shares redeemed (5,547,023) (106,175,041)
------------ ------------
Net increase 127,756 $ 1,624,537
============ ============
Officers and Directors
Terry K. Glenn--President and Director
Ronald W. Forbes--Director
Cynthia A. Montgomery--Director
Charles C. Reilly--Director
Kevin A. Ryan--Director
Richard R. West--Director
Arthur Zeikel--Director
Vincent R. Giordano--Senior Vice President
Kenneth A. Jacob--Vice President
Roberto Roffo--Vice President
Donald C. Burke--Vice President and
Treasurer
William E. Zitelli--Secretary
Custodian and Transfer Agent
The Bank of New York
101 Barclay Street
New York, NY 10007
Gerald M. Richard, Treasurer of The Municipal Fund Accumulation
Program, Inc. has recently retired. His colleagues at Merrill Lynch
Asset Management, L.P. join the Fund's Board of Directors in wishing
Mr. Richard well in his retirement.
