The
Municipal
Fund
Accumulation
Program,
Inc.
FUND LOGO
Annual Report
December 31, 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 year ended December 31, 1999, The Municipal Fund
Accumulation Program, Inc.'s net annualized yield was 4.84%. The
Program's total investment return for the 12-month period ended
December 31, 1999 was -6.77%, based on a change in per share net
asset value from $18.50 to $16.35, and assuming reinvestment of
$0.788 per share income dividends and $0.153 per share capital gains
distributions.
For the six months ended December 31, 1999, The Municipal Fund
Accumulation Program Inc.'s net annualized yield was 4.72%. The
Program's total investment return for the six-month period ended
December 31, 1999 was -4.37%, based on a change in per share net
asset value from $17.50 to $16.35, and assuming reinvestment of
$0.393 per share income dividends.
The Municipal Market Environment
The combination of steady strong domestic economic growth,
improvement in foreign economies (most notably in Japan) and
increasing investor concerns regarding potential increases in US
inflation put upward pressure on bond yields throughout the six-
month period ended December 31, 1999. Continued strong US employment
growth and consumer spending were among the reasons the Federal
Reserve Board cited for raising short-term interest rates in late
June, August and November. US Treasury bond yields reacted by
climbing above 6.375% by late October and generally rising for the
remainder of the year. During the period, yields on 30-year US
Treasury bonds increased over 50 basis points (0.50%).
Long-term tax-exempt bond yields also rose during the six months
ended December 31, 1999. For much of the first half of 1999, the
municipal bond market was able to withstand much of the upward
pressure on bond yields. However, investor concerns of additional
moves by the Federal Reserve Board to moderate US economic growth
and, more importantly, the loss of the strong technical support that
the tax-exempt market enjoyed in early 1999 helped push municipal
bond yields significantly higher for the remainder of the period.
The yields on long-term tax-exempt revenue bonds rose over 60 basis
points to 6.23% by December 31, 1999, as measured by the Bond Buyer
Revenue Bond Index.
In recent months, the significant decline in new tax-exempt bond
issuance has remained a positive factor within the municipal bond
market, as it had been for much of the past year. Over the last
year, more than $225 billion in long-term municipal bonds was
issued, a decline of nearly 20% compared to the same period a year
ago. During the past six months, over $100 billion in long-term tax-
exempt bonds was underwritten, representing a decline of nearly 18%
compared to the corresponding period in 1998. Over the past three
months, approximately $55 billion in securities was issued by
municipalities nationally. This quarterly issuance also represented
a decline of over 20% when compared to the same period in 1998. It
is likely that many tax-exempt issuers accelerated their financings
in recent months or decided to postpone issuance into early 2000 to
avoid any potential Year 2000 (Y2K)-related disruptions at year-end.
Consequently, December 1999 volume of issuance of approximately $14
billion declined more than 40% compared to 1998 levels. We expect
decreased tax-exempt bond issuance to continue. Early estimates
suggest that annual tax-exempt issuance in 2000 will be in the $210
billion--$215 billion range.
Although tax-exempt bond yields are at their highest level in over
two years and have attracted significant retail investor interest,
institutional demand has declined sharply. Long-term municipal
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. In addition, the demand from
property/ casualty insurance companies has weakened as a result of
the losses, and anticipated losses, incurred as a result of the
series of damaging storms across much of the eastern United States.
Additionally, many institutional investors who were attracted to the
municipal bond market in recent years by historically attractive tax-
exempt bond yield ratios of over 90% have found other asset classes
even more attractive. Even with a reduced supply position, tax-
exempt issuers have been forced to repeatedly raise municipal bond
yields in the attempt to attract adequate demand.
The recent relative underperformance of the municipal bond market
has resulted in an opportunity for long-term investors to purchase
tax-exempt issues whose yields are nearly identical with taxable US
Treasury securities. At December 31, 1999, long-term uninsured
municipal revenue bond yields were more than 96% of comparable US
Treasury securities. In recent months, many taxable asset classes,
such as corporate bonds, mortgage-backed securities and US agency
debt, have all accelerated debt issuance. This acceleration was
initiated largely to avoid issuing securities at year-end and to
minimize any associated Y2K problems that could possibly develop.
However, this increased issuance also resulted in higher yield
levels in the various asset classes as lower bond prices became
necessary to attract sufficient investor demand. Going forward, it
is believed that the pace of non-US Government debt issuance is
likely to slow significantly. As the supply of this debt declines,
we would expect many institutional investors to return to the
municipal bond market and the attractive yield ratios available.
Looking ahead, it appears to us that long-term tax-exempt bond
yields will remain under pressure, trading in a broad range centered
near current levels. Investors are likely to remain concerned about
future action by the Federal Reserve Board. Any improvement in bond
prices will probably be contingent upon weakening in both US
employment growth and consumer spending. The over 100 basis point
rise in US Treasury bond yields seen thus far this year may
negatively impact US economic growth. The US housing market will be
among the first sectors likely to be affected, as some declines have
already been evidenced in response to higher mortgage rates. We
believe that it is also unrealistic to expect double-digit returns
in US equity markets to continue indefinitely. Much of the US
consumer's wealth is tied to recent stock market appreciation. Any
slowing in these incredible growth rates is likely to reduce
consumer spending. We believe that these factors suggest that the
worst of the recent increase in bond yields has passed and stable,
if not slightly improving, bond prices may be expected.
Fiscal Year in Review
For the fiscal year ended December 31, 1999, we managed the Program
with the intent of sustaining an attractive level of tax-exempt
income. We accomplished this goal with a 12-month yield of 4.84%
compared to the Lipper Analytical Service's average for national
funds of 4.79%. During the 12-month period ended December 31, 1999,
we maintained a fully invested position so that the Program could
earn as much tax-exempt income as possible. Unfortunately, municipal
bond yields increased 120 basis points (1.20%) in the same 12-month
period. This substantial increase in interest rates caused the
Program's total return to be negative, but it afforded us the
ability to restructure the Program with a higher average coupon than
was available prior to the rise in interest rates.
During the latter half of the Program's fiscal year, strong economic
activity and the fear of additional increases in short-term interest
rates by the Federal Reserve Board caused long-term interest rates
to increase significantly. Even though yields on US Treasury
securities rose by about 50 basis points and yields on municipal
bonds rose by about 60 basis points, we believe there are reasons to
be optimistic going forward.
A significant amount of negative news has been built into the market
by investors. Therefore interest rates are much higher than they
should be relative to the low inflationary environment. Also, the
dramatic rise in interest rates has allowed newly issued bonds to be
created with a much higher coupon structure than what was available
when interest rates were at historic lows. As a result, our strategy
has been concentrated on selling the lower coupon bonds that were
purchased earlier in 1999 and purchasing higher coupon bonds that
enhance the tax-exempt income of the Program while at the same time
serve to limit any more interest rate volatility the Program may
experience. Looking ahead, our strategy will be to maintain a fully
invested position to seek to continue the Program's ability to pay
out a higher-than-average yield.
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
(Vincent R. Giordano)
Vincent R. Giordano
Senior Vice President
(Roberto Roffo)
Roberto Roffo
Vice President and Portfolio Manager
February 8, 2000
The Municipal Fund Accumulation Program, Inc.
Total Return Based on a $10,000 Investment
A line graph depicting the growth of an investment in the Fund
compared to growth of an investment in the Lehman Brothers General
Municipal Bond Index. Beginning and ending values are:
12/89 12/99
The Municipal Fund Accumulation
Program, Inc.*++ $10,000 $17,097
Lehman Brothers General Municipal
Bond Index++++ $10,000 $19,471
*Assuming transaction costs and other operating expenses, including
advisory fees.
++The Municipal Fund Accumulation Program, Inc. invests in long- and
intermediate-term state, municipal and public authority bonds
(including private activity bonds), the interest on which is exempt
from Federal income tax.
++++This unmanaged Index consists of revenue bonds, general obligation
bonds and insured bonds.
Past performance is not predictive of future performance.
The Municipal Fund Accumulation Program, Inc.
Average Annual Total Return
Period Covered % Return
Year Ended 12/31/99 -6.77%
Five Years Ended 12/31/99 +4.96
Ten Years Ended 12/31/99 +5.51
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
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 December 31, 1999 (in Thousands)
<CAPTION>
S&P Moody's Face
State Rating Rating Amount Issue Value
<S> <S> <S> <C> <S> <C>
Alabama-- Mobile, Alabama, Industrial Development Board, Environmental
0.9% Improvement Revenue Refunding Bonds (International Paper Company
Project), AMT:
BBB+ A3 $ 750 Series A, 6.35% due 5/15/2016 $ 736
BBB+ A3 3,250 Series B, 6.45% due 5/15/2019 3,204
Arizona-- NR* Aaa 1,200 Maricopa County, Arizona, IDA, M/F Housing Revenue Bonds
0.3% (Whispering Palms Apartments), Series A, 5.90% due 7/01/2029 (e) 1,156
Arkansas-- BBB+ A3 2,000 Camden, Arkansas, Environmental Improvement Revenue Bonds
1.7% (International Paper Company Project), AMT, Series A, 6.50% due
11/15/2023 1,969
BBB+ A3 1,000 Camden, Arkansas, PCR, Refunding (International Paper Company
Project), 5.70% due 9/01/2012 989
BBB+ A3 2,450 Pine Bluff, Arkansas, Environmental Improvement Revenue Bonds
(International Paper Company Project), AMT, Series A, 6.50% due
11/15/2023 2,403
BBB+ A3 2,000 Pine Bluff, Arkansas, Environmental Improvement Revenue Refunding
Bonds (International Paper Company Project), Series A, 6.15% due
11/15/2015 1,966
California-- AA- Aa2 2,755 California HFA, Home Mortgage Revenue Bonds, AMT, Series F-1,
3.7% 7% due 8/01/2026 (c) 2,840
AAA NR* 1,725 California Rural Home Mortgage Finance Authority, S/F Mortgage
Revenue Bonds (Mortgage Backed Securities Program), AMT, Series D,
Class 5, 6.70% due 5/01/2029 (j)(k) 1,808
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) 3,998
Dublin, California, Joint Unified School District, GO, Series E
(b)(i):
NR* Aaa 1,055 5.25% due 8/01/2017 356
NR* Aaa 1,915 5.35% due 8/01/2019 560
NR* Aaa 1,000 5.35% due 8/01/2020 273
NR* Aaa 2,305 5.40% due 8/01/2021 587
NR* Aaa 2,305 5.40% due 8/01/2023 515
Los Angeles County, California, Schools Regionalized Business
Services Certificates, COP, Pooled Financing, Series A (a)(i):
AAA Aaa 2,095 5.90% due 8/01/2020 596
AAA Aaa 1,000 5.95% due 8/01/2025 206
</TABLE>
<TABLE>
The Municipal Fund Accumulation Program, Inc.
Schedule of Investments as of December 31, 1999 (continued) (in Thousands)
<CAPTION>
S&P Moody's Face
State Rating Rating Amount Issue Value
<S> <S> <S> <C> <S> <C>
California AAA Aaa $ 1,250 M-S-R Public Power Agency, California, Revenue Refunding Bonds
(concluded) (San Juan Project), Series D, 6.75% due 7/01/2020 (e)(f) $ 1,387
AAA NR* 1,345 Rohnert Park, California, COP (Capital Facilties Project), 5% due
7/01/2024 (a) 1,160
AAA Aaa 2,000 Walnut, California, Improvement Agency, Tax Allocation Refunding
Bonds, Series A, 4.75% due 9/01/2018 (e) 1,710
Colorado-- AAA Aaa 3,995 Pueblo County, Colorado, School District Number 70, Pueblo Rural,
0.9% GO, 6% due 12/01/2019 (b) 4,023
Connecticut-- AA Aa2 3,825 Connecticut State, HFA, Housing Mortgage Revenue Refunding
0.9% Bonds (Finance Program), Sub-Series B-1, 6.125% due 5/15/2018 3,864
Florida-- NR* VMIG1++ 1,000 Jacksonville, Florida, Health Facilities Authority, Hospital
2.2% Revenue Refunding Bonds (Genesis Rehabilitation Hospital), VRDN,
4.40% due 5/01/2021 (h) 1,000
A1+ VMIG1++ 1,500 Jacksonville, Florida, PCR, Refunding (Florida Power & Light
Co. Project), VRDN, 4% due 5/01/2029 (h) 1,500
A1+ VMIG1++ 2,100 Manatee County, Florida, PCR, Refunding (Florida Power and Light
Company Project), VRDN, 4.30% due 9/01/2024 (h) 2,100
AAA Aaa 7,850 Miami-Dade County, Florida, Special Obligation Revenue Bonds,
Sub-Series B, 6.40% due 10/01/2031 (e)(i) 1,080
A1+ VMIG1++ 3,900 Saint Lucie County, Florida, PCR, Refunding (Florida Power and
Light Company Project), VRDN, 4.30% due 1/01/2026 (h) 3,900
Idaho-- BBB- Baa2 7,750 Power County, Idaho, Industrial Development Corporation, Solid
1.7% Waste Disposal Revenue Bonds (FMC Corporation Project), AMT,
6.45% due 8/01/2032 7,238
Illinois-- AAA Aa3 660 Illinois Development Finance Authority Revenue Bonds, Series
1.9% B, 6.40% due 9/01/2031 (d) 661
A1+ VMIG1++ 7,400 Illinois Health Facilities Authority, Revenue Refunding Bonds
(University of Chicago Hospitals), VRDN, 4.80% due 8/01/2026 (e)(h) 7,400
Indiana-- AAA Aa2 1,000 Indiana State Office Building Commission, Capital Complex Revenue
1.8% Refunding Bonds (State Office Building-II Facility), Series D,
6.90% due 7/01/2011 1,112
AA NR* 1,865 Indianapolis, Indiana, Local Public Improvement Bond Bank, Revenue
Refunding Bonds, Series D, 6.75% due 2/01/2020 1,929
A1 VMIG1++ 4,800 Jasper County, Indiana, PCR, Refunding (Northern Indiana Public
Service), VRDN, Series C, 4.55% due 4/01/2019 (h) 4,800
Kansas-- NR* Aaa 4,065 Sedgwick and Shawnee Counties, Kansas, S/F Revenue Bonds, AMT,
1.0% Series A-1, 6.95% due 6/01/2029 (l) 4,378
Louisiana-- AAA Aaa 1,000 New Orleans, Louisiana, Aviation Board Revenue Refunding Bonds
1.4% (Passenger Facilities Charge), Series A-2, 6% due 9/01/2019 (d) 981
AAA Aaa 2,900 New Orleans, Louisiana, GO, Refunding, 6.125% due 10/01/2016 (a) 2,946
BBB+ A3 2,000 Rapides Finance Authority, Louisiana, Environmental Improvement
Revenue Bonds (International Paper Company Project), AMT, Series A,
6.55% due 11/15/2023 1,969
Massachu- A1+ VMIG1++ 300 Massachusetts State Industrial Finance Agency, PCR, Refunding
setts--0.4% (Holyoke Water Power Company), VRDN, Series A, 5.20% due
5/01/2022 (h) 300
AAA Aaa 1,700 Massachusetts State Water Resource Authority Revenue Bonds,
Series A, 4.75% due 8/01/2027 (d) 1,362
</TABLE>
<TABLE>
The Municipal Fund Accumulation Program, Inc.
Schedule of Investments as of December 31, 1999 (continued) (in Thousands)
<CAPTION>
S&P Moody's Face
State Rating Rating Amount Issue Value
<S> <S> <S> <C> <S> <C>
Michigan-- AAA Aaa $ 2,500 Anchor Bay, Michigan, School District, GO, School Building and
2.8% Site, Series I, 6% due 5/01/2029 (b) $ 2,471
AAA Aaa 4,715 Michigan State Hospital Finance Authority, Revenue Refunding
Bonds (Mercy Mount Clemens), Series A, 6% due 5/15/2014 (e) 4,782
AAA Aaa 2,000 Michigan State Strategic Fund, Limited Obligation Revenue
Refunding Bonds (Detroit Edison Company), Series BB, 7% due
5/01/2021 (a) 2,253
Plymouth-Canton, Michigan, Community School District, GO:
AA+ Aa1 1,000 4.75% due 5/01/2020 823
AA+ Aa1 2,010 4.75% due 5/01/2021 1,646
Minnesota-- AA+ Aa2 3,210 Minnesota State, HFA, S/F Mortgage Revenue Bonds, AMT, Series M,
0.7% 6.70% due 7/01/2026 3,253
Mississippi-- NR* P1 2,000 Perry County, Mississippi, PCR, Refunding (Leaf River Forest
0.5% Project), VRDN, 4.50% due 3/01/2002 (h) 2,000
Montana-- NR* A2 6,000 Montana State Higher Education, Student Assistance Corporation,
1.5% Student Loan Revenue Refunding Bonds, AMT, Sub-Series B, 6.40%
due 12/01/2032 5,928
AA+ Aa1 695 Montana State Housing Board, S/F Program, AMT, Series B-2, 6.90%
due 6/01/2025 (c) 707
Nevada-- Elko, Nevada, GO (Airport Improvement), AMT, Series B (e):
0.7% AAA Aaa 165 6.10% due 10/01/2014 167
AAA Aaa 245 6.30% due 10/01/2019 247
AAA Aaa 320 6.75% due 10/01/2024 327
AAA Aaa 225 7% due 10/01/2029 233
AAA Aaa 1,860 Nevada Housing Division, S/F Program, AMT, Senior Series E, 7.05%
due 4/01/2027 (c) 1,921
New Hamp- AAA Aaa 2,000 New Hampshire Higher Educational and Health Facilities Authority,
shire--0.5% Revenue Refunding Bonds (University System of New Hampshire),
6.25% due 7/01/2020 (e) 2,004
New Jersey-- AAA Aaa 2,780 Black Horse Pike, New Jersey, Regional School District, GO, 4.75%
21.4% due 12/01/2016 (b) 2,428
AAA Aaa 2,700 Camden County, New Jersey, Municipal Utilities Authority, Sewer
Revenue Refunding Bonds, County Agreement, 5.20% due 7/15/2014 (b) 2,590
NR* Aaa 1,450 Essex County, New Jersey, Utilities Authority, Solid Waste Revenue
Refunding Bonds, Series A, 5% due 4/01/2022 (d) 1,258
High Bridge, New Jersey, Board of Education, GO, Refunding (d):
AAA Aaa 1,000 5% due 2/15/2023 885
AAA Aaa 1,000 5% due 2/15/2026 869
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) 316
AAA Aaa 5,200 Middlesex County, New Jersey, Improvement Authority, Utility System
Revenue Refunding Bonds (Perth Amboy Franchise Project), Series A,
5% due 9/01/2029 (a) 4,423
AAA Aaa 1,580 Monmouth County, New Jersey, Improvement Authority, Revenue
Refunding Bonds (Pooled Governmental Loan), 4.90% due
12/01/2018 (a) 1,378
AAA Aaa 1,000 Moorestown Township, New Jersey, School District, GO, 5% due
1/01/2027 (b) 858
</TABLE>
<TABLE>
The Municipal Fund Accumulation Program, Inc.
Schedule of Investments as of December 31, 1999 (continued) (in Thousands)
<CAPTION>
S&P Moody's Face
State Rating Rating Amount Issue Value
<S> <S> <S> <C> <S> <C>
New Jersey NR* Aaa $ 500 Mount Holly, New Jersey, Municipal Utilities Authority, Sewer
(concluded) Revenue Bonds, 4.75% due 12/01/2028 (e) $ 408
NR* Aaa 1,345 Mount Holly, New Jersey, Municipal Utilities Authority, Sewer
Revenue Refunding Bonds, 5% due 12/01/2016 (e) 1,224
AAA Aaa 4,000 New Brunswick, New Jersey, Housing Authority, Lease Revenue
Refunding Bonds, 4.625% due 7/01/2024 (b) 3,248
BBB- NR* 2,000 New Jersey EDA, First Mortgage Revenue Refunding Bonds (Fellowship
Village), Series A, 5.50% due 1/01/2025 1,671
AAA Aaa 2,975 New Jersey EDA, Natural Gas Facilities, Revenue Refunding Bonds
(NUI Corporation Projects), AMT, Series A, 5.70% due 6/01/2032 (e) 2,787
New Jersey EDA, Revenue Refunding Bonds:
AAA Aaa 2,250 (Educational Testing Service), Series A, 4.75% due 5/15/2018 (e) 1,920
AAA Aaa 5,000 (RWJ Health Care Corporation), 6.50% due 7/01/2024 (d) 5,173
AAA Aaa 6,800 New Jersey EDA, Water Facilities Revenue Bonds (American Water
Company Inc.), AMT, Series A, 5.25% due 7/01/2038 (b) 5,818
New Jersey Health Care Facilities Financing Authority, Revenue
Refunding Bonds:
AAA Aaa 2,000 (Barnert Hospital), 4.75% due 8/01/2019 (c)(e) 1,681
AAA Aaa 2,000 (Cathedral Health Services), 5.25% due 8/01/2021 (c)(e) 1,803
AAA Aaa 1,000 (Community Medical Center/Kimball), 4.75% due 7/01/2019 (d) 841
AAA Aaa 5,000 (Meridian Health System Obligation Group), 5.375% due 7/01/2024 (d) 4,551
AAA Aaa 2,650 (Saint Barnabas Health Center), Series B, 5.25% due 7/01/2013 (e) 2,574
NR* Aaa 5,130 (Saint Barnabas Medical Center), Series A, 4.75% due 7/01/2028 (e) 4,128
AAA Aaa 6,370 New Jersey Sports and Exposition Authority, State Contract Revenue
Refunding Bonds, Series A, 4.50% due 3/01/2019 (e) 5,186
AA+ Aa1 3,000 New Jersey State, GO, 4.50% due 2/01/2016 2,538
AA+ Aa1 10,000 New Jersey State, GO, Refunding, Series D, 6% due 2/15/2011 10,673
New Jersey State Transportation Trust Fund Authority,
Transportation System Revenue Bonds, Series A:
AA- Aa2 3,500 5% due 6/15/2013 3,308
AAA Aaa 5,000 5% due 6/15/2018 (d) 4,464
Ocean County, New Jersey, Utilities Authority, Wastewater Revenue
Refunding Bonds, Series A:
NR* Aa2 1,700 4.35% due 1/01/2011 1,515
NR* Aa2 2,005 4.45% due 1/01/2012 1,777
NR* Aa2 2,055 4.65% due 1/01/2014 1,804
Randolph Township, New Jersey, School District, GO (b):
AAA Aaa 1,000 5% due 8/01/2017 906
AAA Aaa 1,000 5% due 8/01/2018 898
South Brunswick Township, New Jersey, Board of Education, GO (b):
AAA Aaa 1,930 5.625% due 12/01/2012 1,971
AAA Aaa 1,990 5.625% due 12/01/2013 2,016
AAA Aaa 2,000 Union County, New Jersey, Utilities Authority, Revenue Refunding
Bonds, Senior Lease (Ogden Martin), AMT, Series A, 5% due
6/01/2014 (a) 1,850
AAA Aaa 1,265 Wall Township, New Jersey, School District, GO, 4.50% due
7/15/2019 (d) 1,033
New Mexico-- A1+ NR* 400 Eddy County, New Mexico, PCR, Refunding (IMC Fertilizer Inc.
0.1% Project), VRDN, 5.40% due 2/01/2003 (h) 400
</TABLE>
<TABLE>
The Municipal Fund Accumulation Program, Inc.
Schedule of Investments as of December 31, 1999 (continued) (in Thousands)
<CAPTION>
S&P Moody's Face
State Rating Rating Amount Issue Value
<S> <S> <S> <C> <S> <C>
New York-- Buffalo, New York, GO, General Improvement, Series D (d):
24.8% AAA Aaa $ 1,960 5.75% due 12/01/2011 $ 2,022
AAA Aaa 1,905 5.75% due 12/01/2012 1,954
BBB+ A3 1,600 Essex County, New York, IDA, Environmental Improvement Revenue
Bonds (International Paper Company Project), AMT, Series A, 6.45%
due 11/15/2023 1,587
AAA Aaa 1,500 Metropolitan Transportation Authority, New York, Commuter
Facilities Revenue Refunding Bonds, Series B, 4.75% due
7/01/2026 (b) 1,217
AAA Aaa 5,000 Metropolitan Transportation Authority, New York, Dedicated Tax
Fund Revenue Bonds, Series A, 5% due 4/01/2029 (d) 4,203
AAA Aaa 2,000 Nassau County, New York, IDA, Civic Facility Revenue Refunding
Bonds (Hofstra University Project), 5% due 7/01/2023 (e) 1,715
New York City, New York, City Health and Hospital Corporation,
Revenue Refunding Bonds (Health System), Series A:
AAA Aaa 4,130 5% due 2/15/2008 (a) 4,084
BBB- Baa3 8,090 5.25% due 2/15/2017 7,134
New York City, New York, City Transitional Finance Authority
Revenue Bonds, Future Tax Secured:
AA Aa3 2,000 Series A, 5% due 8/15/2017 1,771
AA Aa3 6,000 Series B, 4.50% due 11/15/2027 4,593
AA Aa3 4,925 Series C, 4.75% due 5/01/2023 4,037
AAA Aaa 1,000 New York State Dormitory Authority, Hospital Revenue Bonds
(New York Hospital Medical Center), 5.55% due 8/15/2029 (a)(c) 920
New York State Dormitory Authority Revenue Bonds (e):
AAA Aaa 750 (New York University), Series A, 6% due 7/01/2019 763
AAA Aaa 1,400 (State University Educational Facilities), Series B, 4.75%
due 5/15/2028 1,128
New York State Dormitory Authority, Revenue Refunding Bonds:
AAA Aaa 3,000 (State University Athletic Facilities), 5.25% due 7/01/2013 (e) 2,903
A A3 5,000 (State University Educational Facilities), 5% due 5/15/2014 4,520
A A3 3,700 (State University Educational Facilities), 5% due 5/15/2015 3,299
AAA Aaa 2,315 (Wyckoff Heights Medical Center), Series H, 5.125% due
2/15/2008 (e) 2,301
AAA NR* 3,000 New York State Energy Research and Development Authority, PCR (New
York State Electric and Gas Co. Project), AMT, Series A, 6.15% due
7/01/2026 (e) 2,971
AAA Aaa 4,000 New York State Energy Research and Development Authority, PCR,
Refunding (Central Hudson Gas and Electric), Series A, 5.45% due
8/01/2027 (a) 3,637
NR* Aa2 10,000 New York State Mortgage Agency Revenue Bonds, Homeowner
Mortgage, AMT, Series 88, 6.25% due 4/01/2030 9,905
AAA Aaa 5,000 New York State Thruway Authority, Highway and Bridge Trust Fund
Revenue Bonds, Series C, 5.25% due 4/01/2014 (b) 4,775
AAA Aaa 2,295 New York State Urban Development Corporation Revenue Bonds
(Correctional Facilities Service Contract), Series B, 4.75% due
1/01/2028 (a) 1,852
A- Baa1 2,930 New York State Urban Development Corporation, Revenue Refunding
Bonds (Correctional Capital Facilities), 5.50% due 1/01/2018 2,702
AA NR* 2,285 Oneida County, New York, IDA Revenue Bonds (Civic Facility--Faxton
Hospital), Series C, 6.625% due 1/01/2015 2,414
Port Authority of New York and New Jersey, Consolidated Revenue
Bonds, 116th Series (b):
AAA Aaa 5,805 4.50% due 10/01/2018 4,757
AAA Aaa 10,000 4.25% due 10/01/2026 7,474
AAA Aaa 2,800 4.375% due 10/01/2033 2,074
</TABLE>
<TABLE>
The Municipal Fund Accumulation Program, Inc.
Schedule of Investments as of December 31, 1999 (continued) (in Thousands)
S&P Moody's Face
State Rating Rating Amount Issue Value
<S> <S> <S> <C> <S> <C>
New York AAA Aaa $ 5,000 Port Authority of New York and New Jersey, Special Obligation
(concluded) Revenue Bonds (JFK International Air Terminal), AMT, Series 6,
6.25% due 12/01/2010 (e) $ 5,358
Suffolk County, New York, GO, Series A (b):
AAA Aaa 930 4.75% due 8/01/2022 765
AAA Aaa 945 4.75% due 8/01/2023 774
A+ Aa3 3,575 Triborough Bridge and Tunnel Authority, New York, General Purpose
Revenue Refunding Bonds, Series X, 6.50% due 1/01/2019 3,712
AAA Aaa 5,000 Triborough Bridge and Tunnel Authority, New York, Special
Obligation Revenue Refunding Bonds, Series A, 4.75% due
1/01/2024 (e) 4,103
North North Carolina Eastern Municipal Power Agency, Power System
Carolina-- Revenue Refunding Bonds:
3.1% AAA Aaa 1,330 Series A, 6.50% due 1/01/2018 (f) 1,440
A NR* 4,440 Series D, 6.70% due 1/01/2019 4,569
North Carolina Municipal Power Agency Number 1, Catawba Electric
Revenue Refunding Bonds, Series B:
BBB+ Baa1 5,000 6.50% due 1/01/2020 4,891
A NR* 2,500 6.50% due 1/01/2020 2,527
Oregon-- NR* Aa2 10,000 Oregon State Housing and Community Services Department, Mortgage
2.5% Revenue Bonds (S/F Mortgage Program), AMT, Series M, 6.20% due
7/01/2028 10,028
BBB+ Baa2 750 Oregon State Solid Waste Disposal Facilities, Economic Development
Revenue Bonds (USG Corporation Project), AMT, Series 192, 6.40% due
12/01/2029 724
South Piedmont Municipal Power Agency, South Carolina, Electric Revenue
Carolina-- Refunding Bonds (b):
1.3% AAA Aaa 3,000 6.75% due 1/01/2019 3,287
AAA Aaa 1,890 Series A, 6.50% due 1/01/2014 2,041
AAA Aaa 320 Series A, 6.50% due 1/01/2014 (f) 351
Tennessee-- AAA Aaa 21,000 Metropolitan Government of Nashville and Davidson County,
4.7% Tennessee, Health and Education Facilities Board, Revenue Refunding
Bonds (Ascension Health Credit), Series A, 6% due 11/15/2030 (a) 20,382
Texas-- BBB Baa2 5,000 Alliance Airport Authority Inc., Texas, Special Facilites
11.3% Revenue Bonds (Federal Express Corporation Project), AMT,
6.375% due 4/01/2021 4,781
AAA Aaa 5,330 Austin, Texas, Revenue Bonds (Town Lake Community Events Center
Venue), 6.20% due 11/15/2029 (b) 5,371
AAA Aaa 5,455 Brownsville, Texas, Independent School District, GO, 4.75% due
8/15/2023 4,437
AAA Aaa 4,395 Carrollton, Texas, Independent School District, GO, 4.625% due
2/15/2019 3,589
AAA Aaa 3,585 Conroe, Texas, Independent School District, GO, Refunding and
Schoolhouse, 5.30% due 2/15/2020 3,256
</TABLE>
<TABLE>
The Municipal Fund Accumulation Program, Inc.
Schedule of Investments as of December 31, 1999 (concluded) (in Thousands)
<CAPTION>
S&P Moody's Face
State Rating Rating Amount Issue Value
<S> <S> <S> <C> <S> <C>
Texas BBB- Baa1 $10,000 Dallas-Fort Worth, Texas, International Airport Facilities,
(concluded) Improvement Corporation Revenue Bonds (American Airlines
Inc.), AMT, 6.375% due 5/01/2035 $ 9,414
NR* Aaa 4,490 Edcouch Elsa, Texas, Independent School District, GO, 4.75% due
8/15/2022 3,668
AAA Aaa 9,750 North Texas Thruway Authority, Dallas, North Thruway System
Revenue Bonds, 4.75% due 1/01/2029 (b) 7,765
AAA Aaa 4,700 Sabine River Authority, Texas, PCR, Refunding (Texas Utilities
Electric Company Project), 6.55% due 10/01/2022 (b) 4,759
AA Aa1 1,790 Texas State, GO, Veterans' Housing Assistance Fund II, AMT,
Series A, 7% due 12/01/2025 1,854
Virginia-- AA Aa2 4,500 Henrico County, Virginia, IDA, Public Facility Lease Revenue
2.1% Bonds, 7% due 8/01/2005 (g) 5,024
Virginia State, HDA, Commonwealth Mortgage Revenue Bonds:
AA+ Aa1 1,620 Series C, Sub-Series C-3, 6% due 1/01/2017 1,588
AA+ Aa1 2,500 Series D, Sub-Series D-1, 6.10% due 1/01/2019 2,513
Washington-- AAA Aaa 3,000 Tacoma, Washington, Refuse Utility Revenue Bonds, 7% due
0.8% 12/01/2004 (a)(g) 3,333
Wyoming-- BBB- Baa2 3,000 Sweetwater County, Wyoming, Solid Waste Disposal Revenue Bonds
0.7% (FMC Corporation Project), AMT, Series A, 7% due 6/01/2024 3,020
Total Investments (Cost--$440,390)--98.3% 424,931
Other Assets Less Liabilities--1.7% 7,502
--------
Net Assets--100.0% $432,433
========
(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 December 31, 1999.
(i)Represents a zero coupon bond; the interest rate shown is the
effective yield at the time of purchase by the Program.
(j)FNMA/GNMA Collateralized.
(k)FHLMC Collateralized.
(l)GNMA Collateralized.
*Not Rated.
++Highest short-term rating by Moody's Investors Service, Inc.
Ratings of issues shown have not been audited by Deloitte & Touche
LLP.
See Notes to Financial Statements.
</TABLE>
<TABLE>
<CAPTION>
The Municipal Fund Accumulation Program, Inc.
Statement of Assets and Liabilities As of December 31, 1999
<S> <C> <C>
Assets:
Investments, at value (identified cost--$440,389,977) $424,930,912
Cash 102,166
Receivables:
Interest $ 7,222,890
Securities sold 981,604 8,204,494
------------
Prepaid registration fees and other assets 39,770
------------
Total assets 433,277,342
------------
Liabilities:
Payables:
Capital shares redeemed 270,718
Investment adviser 209,284 480,002
------------
Accrued expenses and other liabilities 364,513
------------
Total liabilities 844,515
------------
Net Assets $432,432,827
============
Net Assets Consist of:
Common Stock, $.01 par value, 100,000,000 shares authorized $ 264,530
Paid-in capital in excess of par 466,402,446
Undistributed investment income--net 1,084,047
Accumulated realized capital losses on investments--net (15,597,870)
Accumulated distributions in excess of realized capital gains on investments--net (4,261,261)
Unrealized depreciation on investments--net (15,459,065)
------------
Net Assets:
Equivalent to $16.35 per share based on 26,453,020 shares outstanding $432,432,827
============
See Notes to Financial Statements.
</TABLE>
<TABLE>
<CAPTION>
The Municipal Fund Accumulation Program, Inc.
Statement of Operations For the Year Ended December 31, 1999
<S> <C> <C>
Investment Income:
Interest and premium and discount earned $ 25,265,190
Expenses:
Investment advisory fees $ 2,401,143
Transfer agent fees 1,059,578
Accounting services 106,600
Professional fees 64,523
Custodian fees 47,203
Printing and shareholder reports 42,721
Registration fees 35,286
Pricing services 15,902
Directors' fees and expenses 8,929
Other 11,724
------------
Total expenses 3,793,609
------------
Investment income--net 21,471,581
------------
Realized & Unrealized Loss on Investments:
Realized loss on investments--net (19,842,225)
Change in unrealized appreciation/depreciation on investments--net (34,398,394)
------------
Net Decrease in Net Assets Resulting from Operations $(32,769,038)
============
See Notes to Financial Statements.
</TABLE>
<TABLE>
The Municipal Fund Accumulation Program, Inc.
Statements of Changes in Net Assets
<CAPTION>
For the Year Ended
December 31,
1999 1998
<S> <C> <C>
Increase (Decrease) in Net Assets:
Operations:
Investment income--net $ 21,471,581 $ 24,332,175
Realized gain (loss)on investments--net (19,842,225) 23,368,181
Change in unrealized appreciation/depreciation on investments--net (34,398,394) (19,855,581)
------------ ------------
Net increase (decrease) in net assets resulting from operations (32,769,038) 27,844,775
------------ ------------
Dividends & Distributions to Shareholders:
Investment income--net (21,584,231) (24,377,474)
Realized gain on investments--net -- (23,103,998)
In excess of realized gain on investments--net (4,261,261) --
------------ ------------
Net decrease in net assets resulting from dividends and distributions to
shareholders (25,845,492) (47,481,472)
------------ ------------
Capital Share Transactions:
Net increase (decrease) in net assets resulting from capital share transactions (34,535,705) 1,624,537
------------ ------------
Net Assets:
Total decrease in net assets (93,150,235) (18,012,160)
Beginning of year 525,583,062 543,595,222
------------ ------------
End of year* $432,432,827 $525,583,062
============ ============
*Undistributed investment income--net $ 1,084,047 $ 1,196,697
============ ============
See Notes to Financial Statements.
</TABLE>
<TABLE>
The Municipal Fund Accumulation Program, Inc.
Financial Highlights
<CAPTION>
The following per share data and ratios have been derived
from information provided in the financial statements.
For the Year Ended December 31,
Increase (Decrease) in Net Asset Value: 1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of year $ 18.50 $ 19.22 $ 18.85 $ 19.22 $ 17.51
-------- -------- -------- -------- --------
Investment income--net .79 .88 .96 .98 1.01
Realized and unrealized gain (loss) on investments--net (2.00) .12 .56 (.37) 1.71
-------- -------- -------- -------- --------
Total from investment operations (1.21) 1.00 1.52 .61 2.72
-------- -------- -------- -------- --------
Less dividends and distributions:
Investment income--net (.79) (.88) (.96) (.98) (1.01)
Realized gain on investments--net -- (.84) (.19) -- --
In excess of realized gain on investments--net (.15) -- -- -- --
-------- -------- -------- -------- --------
Total dividends and distributions (.94) (1.72) (1.15) (.98) (1.01)
-------- -------- -------- -------- --------
Net asset value, end of year $ 16.35 $ 18.50 $ 19.22 $ 18.85 $ 19.22
======== ======== ======== ======== ========
Total Investment Return:
Based on net asset value per share (6.77%) 5.35% 8.29% 3.36% 15.88%
======== ======== ======== ======== ========
Ratios to Average Net Assets:
Expenses .79% .76% .72% .83% .86%
======== ======== ======== ======== ========
Investment income--net 4.47% 4.54% 5.05% 5.18% 5.40%
======== ======== ======== ======== ========
Supplemental Data:
Net assets, end of year (in thousands) $432,433 $525,583 $543,595 $551,849 $581,679
======== ======== ======== ======== ========
Portfolio turnover 222% 178% 131% 72% 56%
======== ======== ======== ======== ========
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. 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 (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 year ended December 31, 1999 were $1,026,144,633 and
$1,072,474,317, respectively.
Net realized losses for the year ended December 31, 1999 and net
unrealized losses as of December 31, 1999 were as follows:
Realized Unrealized
Losses Losses
Long-term securities $(19,842,225) $(15,459,065)
------------ ------------
Total $(19,842,225) $(15,459,065)
============ ============
As of December 31, 1999, net unrealized depreciation for Federal
income tax purposes aggregated $15,519,390, of which $3,042,871
related to appreciated securities and $18,562,261 related to
depreciated securities. The aggregate cost of investments at
December 31, 1999 for Federal income tax purposes was $440,450,302.
4. Capital Share Transactions:
Transactions in capital shares were as follows:
For the Year Ended Dollar
December 31, 1999 Shares Amount
Shares sold 2,711,407 $ 47,183,870
------------ ------------
Shares issued to shareholders
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)
============ ============
For the Year Ended Dollar
December 31, 1998 Shares Amount
Shares sold 3,320,005 $ 63,415,487
------------ ------------
Shares issued to shareholders
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
============ ============
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.
<AUDIT-REPORT>
The Municipal Fund Accumulation Program, Inc.
Independent Auditors' Report
The Board of Directors and Shareholders,
The Municipal Fund Accumulation
Program, Inc.:
We have audited the accompanying statement of assets and
liabilities, including the schedule of investments, of The Municipal
Fund Accumulation Program, Inc. as of December 31, 1999, the related
statements of operations for the year then ended and changes in net
assets for each of the years in the two-year period then ended, and
financial highlights for each of the years in the five-year period
then ended. These financial statements and the financial highlights
are the responsibility of the Program's management. Our
responsibility is to express an opinion on these financial
statements and the financial highlights based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial
statements and the financial highlights are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements.
Our procedures included confirmation of securities owned at December
31, 1999 by correspondence with the custodian. An audit also
includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide
a reasonable basis for our opinion.
In our opinion, such financial statements and financial highlights
present fairly, in all material respects, the financial position of
The Municipal Fund Accumulation Program, Inc. as of December 31,
1999, the results of its operations, the changes in its net assets,
and the financial highlights for the respective stated periods in
conformity with generally accepted accounting principles.
Deloitte & Touche LLP
Princeton, New Jersey
February 11, 2000
</AUDIT-REPORT>
The Municipal Fund Accumulation Program, Inc.
Important Tax Information (unaudited)
All of the net investment income distributions paid monthly by The
Municipal Fund Accumulation Program, Inc. during its taxable year
ended December 31, 1999 qualify as tax-exempt interest dividends for
Federal income tax purposes. Additionally, the Program distributed
$.153485 per share of long-term capital gains to shareholders of
record on April 14, 1999. The entire distribution is subject to the
20% tax rate.
Please retain this information for your records.
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
