The
Municipal
Fund
Accumulation
Program,
Inc.
Semi-Annual Report
June 30, 2000
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. The
Municipal Fund Investment Accumulation Program is only open to
holders of units of Municipal Investment Trust Fund and Defined
Asset Funds--Municipal Insured Series for reinvestment of
distributions on those units. 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
The Municipal Fund Accumulation Program, Inc.
To Our Shareholders:
For the six months ended June 30, 2000, The Municipal Fund
Accumulation Program, Inc.'s net annualized yield was 5.07%. The
Program's total investment return for the six-month period ended
June 30, 2000 was +4.35%, based on a change in per share net asset
value from $16.35 to $16.63, and assuming reinvestment of $0.420 per
share income dividends.
The Municipal Market Environment
At the start of the year, fixed-income bond yields were initially
pushed higher as US economic growth remained robust. After growing
at a 7.3% rate during the fourth quarter of 1999 and a 4.2% annual
rate for all of 1999, first quarter of 2000 gross domestic product
growth was 5.5%. However, despite these significant growth rates,
few price measures showed any meaningful signs of future price
pressures at the consumer level, despite the lowest unemployment
rates since January 1970 and rising energy prices. With few signs of
any economic slowdown, the Federal Reserve Board continued to raise
short-term interest rates in February, March and May 2000. The
Federal Reserve Board cited both the continued growth of US
employment and the continued strength of US equity markets as
reasons for attempting to moderate US economic growth before
inflationary price increases occur. By late January 2000, US
Treasury bond yields rose more than 25 basis points (0.25%) to
6.75%. Similarly, as measured by the Bond Buyer Revenue Bond Index,
long-term, tax-exempt bond yields rose approximately 15 basis points
to 6.35%.
Since then, however, fixed-income markets have largely ignored
strong economic fundamentals and concentrated upon very positive
technical supply factors. Declining bond issuance--both current, and
more importantly, expected future issuance--helped push bond yields
lower from late-January to mid-April 2000. In late January and early
February 2000, the US Treasury announced its intention to reduce the
amounts to be auctioned in quarterly Treasury note and bond
auctions. Furthermore, budgetary surpluses allowed the US Treasury
to repurchase outstanding, higher-couponed Treasury issues,
primarily in the 15-year and longer maturity sector. Both of these
actions resulted in a significant reduction in the outstanding
supply of longer-dated maturity US Treasury debt. Domestic and
international investors quickly began to accumulate what was
expected to become a scarce commodity and bond prices quickly rose.
By mid-April 2000, US Treasury bond yields had declined more than
100 basis points to 5.67%. However, bond yields rose somewhat during
the remainder of the period as economic statistics were released
indicating that the economic strength seen in late 1999 was
continuing into early 2000. The domestic decline in long-term US
Treasury yields resulted in an inverted yield curve as short-term
and intermediate-term interest rates did not fall proportionately to
long-term interest rates as the Federal Reserve Board was expected
to continue to raise short-term interest rates. The current
inversion has had much more to do with debt reduction and Treasury
buy-backs than with market expectations of slower economic growth.
During the last six months, long-term US Treasury bond yields have
fallen almost 60 basis points to end the period at 5.90%.
Tax-exempt bond yields also have declined in recent months. The
decline has largely been in response to the rally in US Treasury
securities, as well as a continued positive technical supply
environment. States such as California and Maryland have announced
that their large current and anticipated future budget surpluses
will permit the cancellation or postponement of expected bond
issuance. Additionally, some issuers have initiated tenders to
repurchase existing debt, reducing the supply of tax-exempt bonds in
the secondary market as well. Since their recent peak in January
2000, long-term municipal bond yields have declined more than 30
basis points to finish the six-month period ended June 30, 2000 at
5.90%.
The relative underperformance of the municipal bond market in recent
months has been especially disappointing given the strong technical
position the tax-exempt bond market has enjoyed. The issuance of
long-term, tax-exempt securities has dramatically declined. During
the last year, $199 billion in new long-term municipal securities
was issued, a decline of almost 20% versus the same period a year
earlier. For the six months ended June 30, 2000, approximately $90
billion in new tax-exempt bonds was underwritten, a decline of more
than 20% compared to the same period in 1999.
Although investors received more than $30 billion in coupon
payments, bond maturities and the proceeds from early bond
redemptions during January and February, and expect to receive a
similar amount on June 1 and July 1, 2000, along with the highest
municipal bond yields in three years, overall investor demand has
diminished. Long-term municipal bond mutual funds have seen
consistent outflows in recent months as the yields of individual
securities have risen faster than those of larger, more diverse
mutual funds. Thus far this year, tax-exempt mutual funds have had
net redemptions of more than $12 billion. Also, the demand from
property and casualty insurance companies has weakened as a result
of the losses incurred from a series of damaging storms across much
of the eastern United States. Additionally, many institutional
investors who have in recent years been drawn to the municipal bond
market by historically attractive tax-exempt bond yield ratios of
more than 90% have found other asset classes even more compelling.
Even with a favorable supply position, tax-exempt municipal bond
yields have underperformed their taxable counterparts.
Significantly lower municipal bond yields are still likely to
require weaker US employment growth and consumer spending. The
actions taken in recent months by the Federal Reserve Board, as well
as the expected action in August 2000, will eventually slow US
economic growth. Recent declines in US new home sales are perhaps
among the first signs that consumer spending is being slowed by
higher interest rates. Until further signs develop, it is likely
that the municipal bond market's current favorable technical
position will dampen significant tax-exempt interest rate volatility
and provide a stable environment for eventual improvement in
municipal bond prices.
Portfolio Strategy
For the six months ended June 30, 2000, the Program was managed with
the intent of sustaining an appealing level of tax-exempt income for
shareholders. The focus of our portfolio strategy was to achieve the
highest possible income stream without significantly affecting the
credit quality of the Program. Unfortunately, during the past 12
months, tax-exempt interest rates increased substantially. Although
this caused the net asset value of the Program to drop, it afforded
us the opportunity to reinvest the proceeds of bonds that were
purchased in a lower interest rate environment at a higher interest
rate, thereby increasing the income of the Program. The market
correction also allowed us to restructure some high-coupon bonds for
the Program that were called away during 1998 and 1999.
Looking forward, it is our opinion that the favorable technical
position of the municipal market should temper the volatility
experienced so far. Furthermore, unless there is a more substantial
slowdown in the economy, interest rates should stay around current
levels. With interest rates remaining stable for the near term, we
anticipate generating an attractive stream of income for our
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,
(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 4, 2000
The Municipal Fund Accumulation Program, Inc.
Average Annual Total Return
Period Covered % Return
Year Ended 6/30/00 -0.20%
Five Years Ended 6/30/00 +4.15
Ten Years Ended 6/30/00 +5.75
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
HFA Housing Finance Agency
IDA Industrial Development Authority
IDB Industrial Development Board
M/F Multi-Family
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, 2000 (in Thousands)
<CAPTION>
S&P Moody's Face
State Rating Rating Amount Issue Value
<S> <S> <S> <C> <S> <C>
Alabama-- NR* Aaa $ 3,610 Alabama HFA, S/F Mortgage Revenue Refunding Bonds (College Home
1.7% Mortgage Bond Program), Series B-1, 6.65% due 10/01/2025 (j)(k) $ 3,664
BBB+ Baa1 750 Mobile, Alabama, IDB, Environmental Improvement Revenue
Refunding Bonds (International Paper Company Project), AMT,
Series A, 6.35% due 5/15/2016 746
BBB+ Baa1 2,500 Selma, Alabama, IDB, Environmental Improvement Revenue Refunding
Bonds (International Paper Company Project), AMT, Series A, 6.70%
due 2/01/2018 2,546
Arkansas-- BBB+ Baa1 1,000 Pine Bluff, Arkansas, Environmental Improvement Revenue Refunding
0.2% Bonds (International Paper Company Project), AMT, Series A, 6.70%
due 8/01/2020 1,015
California-- AA- Aa2 1,755 California HFA, Home Mortgage Revenue Bonds, AMT, Series F-1,
4.5% 7% due 8/01/2026 (c) 1,806
California Rural Home Mortgage Finance Authority, S/F Mortgage
Revenue Bonds (Mortgage Backed Securities Program), AMT,
Class 5 (j)(k):
AAA NR* 4,090 Series C, 6.75% due 3/01/2029 4,511
AAA NR* 1,725 Series D, 6.70% due 5/01/2029 1,890
AAA NR* 3,715 California Rural Home Mortgage Finance Authority, S/F Mortgage
Revenue Refunding Bonds (Mortgage Backed Securities Program),
AMT, Series A-2, 7% due 9/01/2029 (j)(k) 4,223
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) 1,417
AAA Aaa 3,600 San Francisco, California, City and County Airport Commission,
International Airport Revenue Bonds, AMT, Second Series, Issue 22,
4.70% due 5/01/2014 (a) 3,341
AAA Aaa 2,000 Walnut, California, Improvement Agency, Tax Allocation Refunding
Bonds, Series A, 4.75% due 9/01/2018 (e) 1,794
Colorado-- NR* Aa2 2,575 Colorado HFA, Revenue Bonds (S/F Program), Series B-3, 6.55% due
6.1% 10/01/2016 2,734
Colorado HFA, Revenue Refunding Bonds (S/F Program):
NR* Aa2 3,000 AMT, Senior Series A-2, 7.50% due 4/01/2031 3,365
AA Aa2 1,000 AMT, Senior Series B-2, 7.10% due 4/01/2017 1,099
AA Aa2 6,250 AMT, Senior Series B-2, 7.25% due 10/01/2031 6,923
AA Aa2 3,820 AMT, Senior Series C-2, 7.25% due 10/01/2031 (c) 4,234
NR* Aa2 1,250 Senior Series A-3, 7.35% due 10/01/2030 1,399
NR* Aa2 4,000 Senior Series C-3, 6.75% due 10/01/2021 (c) 4,296
AA Aa2 1,750 Senior Series C-3, 7.15% due 10/01/2030 (c) 1,941
</TABLE>
<TABLE>
The Municipal Fund Accumulation Program, Inc.
Schedule of Investments as of June 30, 2000 (continued) (in Thousands)
<CAPTION>
S&P Moody's Face
State Rating Rating Amount Issue Value
<S> <S> <S> <C> <S> <C>
Connecticut AA Aa2 $ 3,825 Connecticut State, HFA, Housing Mortgage Revenue Refunding Bonds
--3.8% (Finance Program), Sub-Series B-1, 6.125% due 5/15/2018 $ 3,881
AA NR* 10,045 Connecticut State Health and Educational Facilities Authority,
Revenue Refunding Bonds (Eastern Connecticut Health Network),
Series A, 6.50% due 7/01/2030 10,524
A1+ VMIG1++ 1,900 Connecticut State Special Tax Obligation Revenue Bonds,
Transportation Infrastructure, VRDN, Second Lien, Series 1,
4.75% due 12/01/2010 (h) 1,900
Florida NR* Aaa 2,375 Orange County, Florida, HFA, M/F Housing Revenue Bonds, Series A,
--0.6% 6.40% due 1/01/2031 (e) 2,441
Idaho--1.7% BBB- Baa2 7,750 Power County, Idaho, Industrial Development Corporation, Solid Waste
Disposal Revenue Bonds (FMC Corporation Project), AMT, 6.45%
due 8/01/2032 7,349
Illinois AAA NR* 7,250 Chicago, Illinois, S/F Mortgage Revenue Bonds, AMT, Series A, 7.15%
--2.1% due 9/01/2031 (j)(k) 7,974
AAA Aaa 660 Illinois Development Finance Authority Revenue Bonds, Series B,
6.40% due 9/01/2031 (d) 678
Indiana AA Aa2 1,000 Indiana State Office Building Commission, Capital Complex Revenue
--3.8% Refunding Bonds (State Office Building-II Facility), Series D, 6.90%
due 7/01/2011 1,118
BBB Baa2 10,000 Indianapolis, Indiana, Airport Authority, Special Facilities Revenue
Bonds (Federal Express Corporation Project), AMT, 7.10% due
1/15/2017 10,371
AA NR* 1,865 Indianapolis, Indiana, Local Public Improvement Bond Bank,
Revenue Refunding Bonds, Series D, 6.75% due 2/01/2020 1,966
NR* Baa2 2,500 Jasper County, Indiana, Economic Development Revenue Refunding
Bonds (Georgia Pacific Corporation Project), AMT, 6.70% due
4/01/2029 2,484
Kansas-- NR* Aaa 4,065 Sedgwick and Shawnee Counties, Kansas, S/F Revenue Bonds, AMT,
1.1% Series A-1, 6.95% due 6/01/2029 (i) 4,488
Kentucky-- BBB- Baa3 5,000 Kenton County, Kentucky, Airport Board Special Facilities, Airport
1.2% Revenue Bonds (Delta Airlines Project), AMT, Series A, 7.125% due
2/01/2021 5,041
Louisiana-- AAA Aaa 2,900 New Orleans, Louisiana, GO, Refunding, 6.125% due 10/01/2016 (a) 2,995
1.2% BBB+ Baa1 2,000 Rapides Finance Authority, Louisiana, Environmental Improvement
Revenue Bonds (International Paper Company Project), AMT, Series A,
6.55% due 11/15/2023 1,962
Massachu- AA- Aa2 9,825 Massachusetts State, Consolidated Loan, GO, Series B, 5.625% due
setts--2.4% 6/01/2018 9,847
A1+ VMIG1++ 300 Massachusetts State Industrial Finance Agency, PCR, Refunding
(Holyoke Water Power Company), VRDN, Series A, 4.60% due
5/01/2022 (h) 300
Michigan-- AAA Aaa 2,000 Michigan State Strategic Fund, Limited Obligation Revenue Refunding
0.5% Bonds (Detroit Edison Company), Series BB, 7% due 5/01/2021 (a) 2,321
Minnesota-- AA+ Aa1 3,075 Minnesota State HFA, S/F Mortgage Revenue Bonds, AMT, Series M,
0.7% 6.70% due 7/01/2026 3,154
</TABLE>
<TABLE>
The Municipal Fund Accumulation Program, Inc.
Schedule of Investments as of June 30, 2000 (continued) (in Thousands)
<CAPTION>
S&P Moody's Face
State Rating Rating Amount Issue Value
<S> <S> <S> <C> <S> <C>
Mississippi BBB+ Baa1 $ 1,700 Warren County, Mississippi, Environmental Improvement
--0.4% Revenue Refunding Bonds (International Paper Company Project),
AMT, Series B, 6.75% due 8/01/2021 $ 1,720
Montana-- NR* A2 6,000 Montana State Higher Education, Student Assistance Corporation,
1.6% Student Loan Revenue Refunding Bonds, AMT, Sub-Series B, 6.40%
due 12/01/2032 6,190
AA+ Aa1 635 Montana State Housing Board, S/F Program, AMT, Series B-2, 6.90%
due 6/01/2025 (c) 641
Nevada-- Elko, Nevada, GO (Airport Improvement), AMT, Series B (e):
0.7% AAA Aaa 165 6.10% due 10/01/2014 171
AAA Aaa 245 6.30% due 10/01/2019 253
AAA Aaa 320 6.75% due 10/01/2024 339
AAA Aaa 225 7% due 10/01/2029 241
AAA Aaa 1,760 Nevada Housing Division, S/F Program, AMT, Senior Series E, 7.05%
due 4/01/2027 (c) 1,824
New Manchester, New Hampshire, Housing and Redevelopment Authority
Hampshire-- Revenue Bonds, Series A:
2.4% A Baa3 4,180 6.75% due 1/01/2013 4,418
A Baa3 2,235 6.75% due 1/01/2014 2,354
A Baa3 1,250 6.75% due 1/01/2015 1,311
AAA Aaa 2,000 New Hampshire Higher Educational and Health Facilities Authority,
Revenue Refunding Bonds (University System of New Hampshire),
6.25% due 7/01/2020 (e) 2,046
New Jersey-- AAA Aaa 2,780 Black Horse Pike, New Jersey, Regional School District, GO,
14.9% 4.75% due 12/01/2016 (b) 2,530
AAA Aaa 1,580 Monmouth County, New Jersey, Improvement Authority, Revenue
Refunding Bonds (Pooled Governmental Loan), 4.90% due
12/01/2018 (a) 1,435
AAA Aaa 1,000 Moorestown Township, New Jersey, School District, GO, 5% due
1/01/2027 (b) 902
NR* Aaa 500 Mount Holly, New Jersey, Municipal Utilities Authority, Sewer
Revenue Bonds, 4.75% due 12/01/2028 (e) 427
NR* Aaa 1,345 Mount Holly, New Jersey, Municipal Utilities Authority, Sewer
Revenue Refunding Bonds, 5% due 12/01/2016 (e) 1,264
AAA Aaa 4,000 New Brunswick, New Jersey, Housing Authority, Lease Revenue
Refunding Bonds, 4.625% due 7/01/2024 (b) 3,393
New Jersey EDA, Revenue Refunding Bonds:
AAA Aaa 2,250 (Educational Testing Service), Series A, 4.75% due 5/15/2018 (e) 1,999
AAA Aaa 5,000 (RWJ Health Care Corporation), 6.50% due 7/01/2024 (d) 5,343
AAA Aaa 3,680 New Jersey EDA, State Lease Revenue Bonds (State Office Buildings
Projects), 6% due 6/15/2016 (a) 3,858
New Jersey Health Care Facilities Financing Authority, Revenue
Refunding Bonds:
AAA Aaa 2,000 (Cathedral Health Services), 5.25% due 8/01/2021 (c)(e) 1,877
AAA Aaa 1,000 (Community Medical Center/ Kimball), 4.75% due 7/01/2019 (d) 872
AAA Aaa 1,650 (Saint Barnabas Health Center), Series B, 5.25% due 7/01/2013 (e) 1,635
AAA Aaa 6,000 (Virtua Health Issue), 4.50% due 7/01/2028 (d) 4,842
AAA Aaa 5,000 New Jersey Sports and Exposition Authority, State Contract Revenue
Refunding Bonds, Series A, 4.50% due 3/01/2019 (e) 4,262
</TABLE>
<TABLE>
The Municipal Fund Accumulation Program, Inc.
Schedule of Investments as of June 30, 2000 (continued) (in Thousands)
<CAPTION>
S&P Moody's Face
State Rating Rating Amount Issue Value
<S> <S> <S> <C> <S> <C>
New Jersey AA+ Aa1 $ 7,000 New Jersey State, GO, 4.50% due 2/01/2016 $ 6,156
(concluded) AAA Aaa 1,500 New Jersey State Housing and Mortgage Finance Agency, M/F Housing
Revenue Refunding Bonds, Series B, 6.25% due 11/01/2026 (d) 1,540
New Jersey State Transit Corporation, COP (Federal Transit
Administration Grants), Series A (a):
AAA Aaa 1,600 6.125% due 9/15/2014 1,700
AAA Aaa 1,000 6.125% due 9/15/2015 1,058
Ocean County, New Jersey, Utilities Authority, Wastewater Revenue
Refunding Bonds, Series A:
NR* Aa1 1,700 4.35% due 1/01/2011 1,551
NR* Aa1 2,005 4.45% due 1/01/2012 1,825
NR* Aa1 2,055 4.65% due 1/01/2014 1,866
Randolph Township, New Jersey, School District, GO (b):
AAA Aaa 1,000 5% due 8/01/2017 934
AAA Aaa 1,000 5% due 8/01/2018 925
South Jersey Transportation Authority, New Jersey, Transportation
System Revenue Refunding Bonds (a):
AAA Aaa 3,350 5% due 11/01/2016 3,159
AAA Aaa 2,000 5% due 11/01/2017 1,867
AAA Aaa 2,000 5% due 11/01/2018 1,849
Union County, New Jersey, Utilities Authority, Senior Lease Revenue
Refunding Bonds (Ogden Martin Project), AMT, Series A (a):
AAA Aaa 1,270 5.375% due 6/01/2019 1,209
AAA Aaa 1,340 5.375% due 6/01/2020 1,271
AAA Aaa 1,265 Wall Township, New Jersey, School District, GO, 4.50% due
7/15/2019 (d) 1,076
New Mexico A1+ NR* 900 Eddy County, New Mexico, PCR, Refunding (IMC Fertilizer Inc. Project),
--0.2% VRDN, 4.60% due 2/01/2003 (h) 900
New York BBB+ Baa1 1,600 Essex County, New York, IDA, Environmental Improvement Revenue
--17.2% Bonds (International Paper Company Project), AMT, Series A, 6.45%
due 11/15/2023 1,582
AA Aa3 11,250 New York City, New York, City Municipal Water Finance Authority,
Water and Sewer System Revenue Refunding Bonds, Series B, 6.50%
due 6/15/2031 12,109
AA Aa3 8,500 New York City, New York, City Transitional Finance Authority Revenue
Bonds, Future Tax Secured, Series B, 6% due 11/15/2010 9,128
New York City, New York, GO, Refunding, Series A:
A- A3 3,080 6.50% due 5/15/2017 3,307
A- A3 10,075 6.25% due 5/15/2026 10,385
A NR* 1,500 New York State Dormitory Authority, Lease Revenue Bonds (State
University Dormitory Facilities), Series A, 6.25% due 7/01/2020 1,564
AAA Aaa 750 New York State Dormitory Authority Revenue Bonds (New York
University), Series A, 6% due 7/01/2019 (e) 790
New York State Dormitory Authority, Revenue Refunding Bonds:
NR* A1 3,745 (Concord Nursing Home Inc.), 6.25% due 7/01/2016 3,888
NR* A1 2,500 (Concord Nursing Home Inc.), 6.50% due 7/01/2029 2,575
BBB+ Baa1 3,000 (Mount Sinai Health), Series A, 6.50% due 7/01/2016 3,177
BBB+ Baa1 2,500 (Mount Sinai Health), Series A, 6.625% due 7/01/2019 2,637
BBB+ Baa1 6,500 (Mount Sinai Health), Series A, 6.50% due 7/01/2025 6,709
</TABLE>
<TABLE>
The Municipal Fund Accumulation Program, Inc.
Schedule of Investments as of June 30, 2000 (continued) (in Thousands)
<CAPTION>
S&P Moody's Face
State Rating Rating Amount Issue Value
<S> <S> <S> <C> <S> <C>
New York AAA Aaa $ 2,000 New York State Energy Research and Development Authority, PCR,
(concluded) Refunding (Central Hudson Gas and Electric), Series A, 5.45% due
8/01/2027 (a) $ 1,910
AA NR* 2,285 Oneida County, New York, IDA Revenue Bonds (Civic Facility-Faxton
Hospital), Series C, 6.625% due 1/01/2015 2,473
Port Authority of New York and New Jersey, Consolidated Revenue
Bonds, 116th Series (b):
AAA Aaa 720 4.50% due 10/01/2018 618
AAA Aaa 5,800 4.25% due 10/01/2026 4,533
Suffolk County, New York, GO, Series A (b):
AAA Aaa 930 4.75% due 8/01/2022 802
AAA Aaa 945 4.75% due 8/01/2023 812
A+ Aa3 3,575 Triborough Bridge and Tunnel Authority, New York, General Purpose
Revenue Refunding Bonds, Series X, 6.50% due 1/01/2019 3,706
North North Carolina Eastern Municipal Power Agency, Power System
Carolina-- Revenue Refunding Bonds:
3.2% AAA Aaa 1,330 Series A, 6.50% due 1/01/2018 (f) 1,476
A Baa3 4,440 Series D, 6.70% due 1/01/2019 4,568
North Carolina Municipal Power Agency Number 1, Catawba Electric
Revenue Refunding Bonds, Series B:
BBB+ Baa1 5,000 6.50% due 1/01/2020 5,011
A NR* 2,500 6.50% due 1/01/2020 2,527
Ohio--0.4% A1+ VMIG1++ 1,600 Cuyahoga County, Ohio, Hospital Revenue Bonds (The Cleveland
Clinic), VRDN, Series D, 4.60% due 1/01/2026 (h) 1,600
Oklahoma-- A1+ VMIG1++ 7,100 Oklahoma State Industries Authority, Revenue Refunding Bonds
1.7% (Integris Baptist), VRDN, Series B, 4.55% due 8/15/2029 (e)(h) 7,100
Oregon-- NR* Aa2 10,000 Oregon State Housing and Community Services Department, Mortgage
2.6% Revenue Bonds (S/F Mortgage Program), AMT, Series M, 6.20% due
7/01/2028 10,069
BBB+ Baa1 750 Oregon State Solid Waste Disposal Facilities, Economic Development
Revenue Bonds (USG Corporation Project), AMT, Series 192, 6.40%
due 12/01/2029 741
Pennsyl- BBB+ Baa1 7,000 Pennsylvania Economic Development Financing Authority, Solid Waste
vania--1.5% Disposal Revenue Bonds (USG Corporation Project), AMT, 6% due
6/01/2031 6,322
South Piedmont Municipal Power Agency, South Carolina, Electric Revenue
Carolina-- Refunding Bonds (b):
1.4% AAA Aaa 3,000 6.75% due 1/01/2019 3,392
AAA Aaa 320 Series A, 6.50% due 1/01/2014 (f) 358
AAA Aaa 1,890 Series A, 6.50% due 1/01/2014 (f) 2,092
Texas--12.2% AAA Aaa 5,330 Austin, Texas, Revenue Bonds (Town Lake Community Events Center
Venue), 6.20% due 11/15/2029 (b) 5,504
Dallas-Fort Worth, Texas, International Airport Facilities, Improvement
Corporation Revenue Bonds, AMT:
BBB- Baa1 10,000 (American Airlines, Inc.), 7.25% due 11/01/2030 10,143
BBB- Baa3 2,200 (Delta Air Lines Inc.), 7.125% due 11/01/2026 2,207
NR* Aaa 4,490 Edcouch Elsa, Texas, Independent School District, GO, 4.75% due
8/15/2022 3,849
</TABLE>
<TABLE>
The Municipal Fund Accumulation Program, Inc.
Schedule of Investments as of June 30, 2000 (concluded) (in Thousands)
<CAPTION>
S&P Moody's Face
State Rating Rating Amount Issue Value
<S> <S> <S> <C> <S> <C>
Texas AA NR* $ 3,500 Gregg County, Texas, Health Facilities Development Corporation,
(concluded) Hospital Revenue Bonds (Good Shepherd Medical Center Project),
6.375% due 10/01/2025 $ 3,547
A1+ NR* 1,000 Harris County, Texas, Health Facilities Development Corporation,
Hospital Revenue Refunding Bonds (Methodist Hospital), VRDN,
4.60% due 12/01/2025 (h) 1,000
A+ Baa2 7,350 Matagorda County, Texas, Port of Bay City Authority Revenue Bonds
(Hoechst Celanese Corp. Project), AMT, 6.50% due 5/01/2026 7,214
AAA Aaa 4,700 Sabine River Authority, Texas, PCR, Refunding (Texas Utilities
Electric Company Project), 6.55% due 10/01/2022 (b) 4,859
NR* Aaa 8,000 South Plains, Texas, Housing Finance Corporation, S/F Mortgage
Revenue Bonds, AMT, Series A, 7.30% due 9/01/2031 (j) 8,877
AA Aa1 1,790 Texas State, GO, Veterans' Housing Assistance Fund II, AMT, Series A,
7% due 12/01/2025 1,872
AAA Aaa 2,305 Webster, Texas, GO, Certificates of Obligation, Series A, 6% due
3/01/2021 (d) 2,353
Utah--1.1% A1c VMIG1++ 4,600 Emery County, Utah, PCR, Refunding (Pacificorp Projects), VRDN,
4.70% due 11/01/2024 (a)(h) 4,600
Virginia AA Aa2 4,500 Henrico County, Virgina, IDA, Public Facility Lease Revenue Bonds,
--1.2% 7% due 8/01/2013 (g) 5,005
Washington-- AAA Aaa 3,000 Tacoma, Washington, Refuse Utility Revenue Bonds, 7% due
0.8% 12/01/2004 (a)(g) 3,308
West AAA Aaa 6,050 West Virginia State Housing Development Fund, Housing Finance
Virginia-- Revenue Bonds, Series A, 6.20% due 5/01/2018 6,181
1.5%
Wyoming-- BBB- Baa2 5,000 Sweetwater County, Wyoming, Solid Waste Disposal Revenue Bonds
1.2% (FMC Corporation Project), AMT, Series A, 7% due 6/01/2024 5,028
Puerto Rico-- Puerto Rico Industrial Tourist Educational, Medical and Environmental
2.0% Control Facilities Revenue Bonds (Hospital de la Concepcion), Series A:
AA Aa2 4,000 6.125% due 11/15/2025 4,115
AA Aa2 4,220 6.125% due 11/15/2030 4,331
Total Investments (Cost--$413,497)--99.8% 420,725
Other Assets Less Liabilities--0.2% 779
--------
Net Assets--100.0% $421,504
========
(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, 2000.
(i)GNMA Collateralized.
(j)FNMA/GNMA Collateralized.
(k)FHLMC Collateralized.
*Not Rated.
++Highest short-term rating by Moody's Investors Service, Inc.
See Notes to Financial Statements.
</TABLE>
<TABLE>
The Municipal Fund Accumulation Program, Inc.
Statement of Assets and Liabilities As of June 30, 2000
<S> <C> <C>
Assets:
Investments, at value (identified cost--$413,497,124) $420,724,970
Cash 52,328
Interest receivable 7,475,625
Prepaid registration fees and other assets 39,770
------------
Total assets 428,292,693
------------
Liabilities:
Payables:
Securities purchased $ 5,884,544
Capital shares redeemed 359,052
Investment adviser 160,261 6,403,857
------------
Accrued expenses 384,403
------------
Total liabilities 6,788,260
------------
Net Assets $421,504,433
============
Net Assets Consist of:
Common Stock, $.01 par value, 100,000,000 shares authorized $ 253,413
Paid-in capital in excess of par 448,199,183
Undistributed investment income--net 1,004,350
Accumulated realized capital losses on investments--net (30,919,098)
Accumulated distributions in excess of realized gains on investments--net (4,261,261)
Unrealized appreciation on investments--net 7,227,846
------------
Net Assets:
Equivalent to $16.63 per share based on 25,341,301 shares outstanding $421,504,433
============
See Notes to Financial Statements.
</TABLE>
<TABLE>
The Municipal Fund Accumulation Program, Inc.
Statement of Operations For the Six Months Ended June 30, 2000
<S> <C> <C>
Investment Income:
Interest and premium and discount earned $ 12,394,405
Expenses:
Investment advisory fees $ 1,050,717
Transfer agent fees 477,632
Printing and shareholder reports 34,933
Accounting services 28,264
Professional fees 20,828
Custodian fees 20,133
Registration fees 16,229
Pricing services 9,489
Directors' fees and expenses 4,766
Other 6,495
------------
Total expenses 1,669,486
------------
Investment income--net 10,724,919
------------
Realized & Unrealized Gain (Loss) on Investments:
Realized loss on investments--net (15,321,228)
Change in unrealized appreciation/depreciation on investments--net 22,686,911
------------
Net Increase in Net Assets Resulting from Operations $ 18,090,602
============
See Notes to Financial Statements.
</TABLE>
<TABLE>
For the Six For the
The Municipal Fund Accumulation Program, Inc. Months Ended Year Ended
Statements of Changes in Net Assets June 30, 2000 Dec. 31, 1999
Increase (Decrease) in Net Assets:
<S> <C> <C>
Operations:
Investment income--net $ 10,724,919 $ 21,471,581
Realized loss on investments--net (15,321,228) (19,842,225)
Change in unrealized appreciation/depreciation on investments--net 22,686,911 (34,398,394)
------------ ------------
Net increase (decrease) in net assets resulting from operations 18,090,602 (32,769,038)
------------ ------------
Dividends &Distributions to Shareholders:
Investment income--net (10,804,616) (21,584,231)
In excess of realized gain on investments--net -- (4,261,261)
------------ ------------
Net decrease in net assets resulting from dividends and distributions to
shareholders (10,804,616) (25,845,492)
------------ ------------
Capital Share Transactions:
Net decrease in net assets resulting from capital share transactions (18,214,380) (34,535,705)
------------ ------------
Net Assets:
Total decrease in net assets (10,928,394) (93,150,235)
Beginning of period 432,432,827 525,583,062
------------ ------------
End of period* $421,504,433 $432,432,827
============ ============
*Undistributed investment income--net $ 1,004,350 $ 1,084,047
============ ============
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: 2000 1999 1998 1997 1996
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period $ 16.35 $ 18.50 $ 19.22 $ 18.85 $ 19.22
-------- -------- -------- -------- --------
Investment income--net .42 .79 .88 .96 .98
Realized and unrealized gain (loss) on investments--net .28 (2.00) .12 .56 (.37)
-------- -------- -------- -------- --------
Total from investment operations .70 (1.21) 1.00 1.52 .61
-------- -------- -------- -------- --------
Less dividends and distributions:
Investment income--net (.42) (.79) (.88) (.96) (.98)
Realized gain on investments--net -- -- (.84) (.19) --
In excess of realized gain on investments--net -- (.15) -- -- --
-------- -------- -------- -------- --------
Total dividends and distributions (.42) (.94) (1.72) (1.15) (.98)
-------- -------- -------- -------- --------
Net asset value, end of period $ 16.63 $ 16.35 $ 18.50 $ 19.22 $ 18.85
======== ======== ======== ======== ========
Total Investment Return:
Based on net asset value per share 4.35%++ (6.77%) 5.35% 8.29% 3.36%
======== ======== ======== ======== ========
Ratios to Average Net Assets:
Expenses .79%* .79% .76% .72% .83%
======== ======== ======== ======== ========
Investment income--net 5.09%* 4.47% 4.54% 5.05% 5.18%
======== ======== ======== ======== ========
Supplemental Data:
Net assets, end of period (in thousands) $421,504 $432,433 $525,583 $543,595 $551,849
======== ======== ======== ======== ========
Portfolio turnover 83% 222% 178% 131% 72%
======== ======== ======== ======== ========
<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 accounting
principles generally accepted in the United States of America, 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. Distributions
in excess of realized capital gains are due primarily to differing
tax treatments for post-October losses.
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 .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, Inc. (the
"Administrators"), whereby the Administrators perform certain
administrative duties on behalf of FAM. The Administrators receive a
monthly fee from FAM equal to .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, 2000 were $330,575,808 and
$336,095,931, respectively.
Net realized losses for the six months ended June 30, 2000 and net
unrealized gains as of June 30, 2000 were as follows:
Realized Unrealized
Losses Gains
Long-term securities $(15,321,228) $ 7,227,846
------------ ------------
Total $(15,321,228) $ 7,227,846
============ ============
As of June 30, 2000, net unrealized appreciation for Federal income
tax purposes aggregated $7,227,846, of which $10,175,544 related to
appreciated securities and $2,947,698 related to depreciated
securities. The aggregate cost of investments at June 30, 2000 for
Federal income tax purposes was $413,497,124.
4. Capital Share Transactions:
Transactions in capital shares were as follows:
For the Six Months Dollar
Ended June 30, 2000 Shares Amount
Shares sold 931,942 $ 15,286,596
------------ ------------
Shares issued to share-
holders in reinvestment
of dividends 609,156 9,958,320
------------ ------------
Total issued 1,541,098 25,244,916
Shares redeemed (2,652,817) (43,459,296)
------------ ------------
Net decrease (1,111,719) $(18,214,380)
============ ============
For the Year Ended Dollar
December 31, 1999 Shares Amount
Shares sold 2,711,407 $ 47,183,870
Shares issued to share-
holders in reinvestment
of dividends and
distributions 1,365,678 24,039,420
------------ ------------
Total issued 4,077,085 71,223,290
Shares redeemed (6,041,008) (105,758,995)
------------ ------------
Net decrease (1,963,923) $(34,535,705)
============ ============
5. Capital Loss Carryforward:
At December 31, 1999, the Fund had a net capital loss carryforward
of approximately $13,974,000, all of which expires in 2007. This
amount will be available to offset like amounts of any future
taxable gains.
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
