The
Corporate
Fund
Accumulation
Program,
Inc.
Semi-Annual Report
June 30, 2000
The Corporate Fund Investment Accumulation Program is only open to
holders of units of Corporate Income Fund, International Bond Fund
and Corporate Investment Trust Fund for reinvestment of
distributions on those units. 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 Corporate Fund
Accumulation Program, Inc.
Box 9011
Princeton, NJ 08543-9011
Printed on post-consumer recycled paper
To Our Shareholders:
For the six months ended June 30, 2000, The Corporate Fund
Accumulation Program, Inc. provided a total investment return of
+2.00%, based on a change in per share net asset value from $19.77
to $19.60, and assuming reinvestment of $0.556 per share income
dividends.
Market Review
During the six-month period ended June 30, 2000, fixed-income
markets remained volatile as interest rates moved in a manner that
produced an inversion of the yield curve. The front end of the
Treasury yield curve suffered as price movement in that portion of
the curve remained under pressure when investors demanded greater
premiums to account for expected increases in the Federal Reserve
Board's overnight rates. Throughout much of the period, the forward
Federal Funds market continually reflected 50 basis points--75 basis
points (0.50%--0.75%) of expected tightening in the six-month
rolling contract. (The forward Federal Funds market provides an
indication to buyers and sellers of Federal Funds what the Federal
Funds rate is expected to be at some point in the future, while a
six-month rolling contract is an indication of what investors expect
the Federal Funds level to be in six months.) On the other hand,
long-term interest rates were favorably influenced by two separate
sets of events. Inflationary fears, which greatly influence yields
on the long end of the curve have, for the most part, been contained
as a result of the Federal Reserve Board's restrictive monetary
policy. Second, a supply imbalance, brought on by the combination of
reduced new issuance and a Treasury buy-back program, produced a
strong bid for securities in the 20-year--30-year sector.
Federal Reserve Board monetary policy remained focused on the need
to provide for a slowing in the US economy, which grew at an
alarming 7.3% in the fourth quarter of 1999. Although first quarter
growth slowed to 5.5%, the rate is still well above the Federal
Reserve Board's comfort range of 3%--3.5%. Consumer spending
continues to fuel the economic fires, although recent reports such
as new housing sales and auto purchases could arguably point to the
beginning of a higher interest rate induced slowdown. Consumers have
benefited from low unemployment rates and the wealth effect
generated from a strong stock market, although if stock market
trends mirror the uninspired results reported during the first half
of 2000, consumers may slow spending. Additionally, consumer
confidence was impacted by the dotcom sector sell-off, given the
implications that high levels of leverage (for example, margin on
their brokerage accounts and credit card debt) have on their balance
sheets. If the Federal Reserve Board's monetary policy were to
produce something greater than a soft landing, or should financial
assets experience a sustained correction in value, this would
probably translate into a weakening of the economic landscape.
Although inflation has been well contained for the most part, the
scope of the global recovery has led to fears of a rekindling of
inflation. Commodity pressures, as measured by the Commodities
Research Bureau Index, have been building since the beginning of the
year. Of prime concern has been a surge in the price of oil, spurred
on not only by the Organization of Petroleum Exporting Countries'
production limitations but also on expectations of increased demand
by recovering economies. With respect to wage inflation, whether one
evaluates wage pressures via hourly earnings, real earnings or
employment cost measures, the results have pointed to minimal
inflation. The ability to export manufacturing capacity, combined
with the high levels of productivity, has served to limit the impact
of low unemployment. Furthermore, inflation as measured by both the
producer price index and consumer price index remained well within
acceptable levels and points to a lack of pricing pressures.
Notwithstanding the inflation outlook, we expect the Federal Reserve
Board to remain focused on the need to slow economic momentum. The
Federal Reserve Board raised the Federal Funds rate by a more
aggressive 0.50% at its May Federal Open Market Committee (FOMC)
meeting. This move now puts the overnight rate at 6.50%, up 175
basis points in the past year. Given this, and combined with a clear
slowing of economic momentum, the Federal Reserve Board kept
interest rates the same at its June FOMC meeting, although future
interest rate increases are still a possibility.
On the corporate bond front, new issuance, which was minimal as the
new year started, began to pick up during the second quarter,
although aggregate levels are still below forecast expectations.
Investor appetite for investment-grade corporate bonds was somewhat
uninspired, given the intent of Federal Reserve Board policy and the
lack of liquidity being provided by the market makers. As a result,
yield spreads trended toward historical highs during this period,
despite a strong business environment and record levels of corporate
profitability. Toward the end of the six-month period, and led by
the compression in swap spreads (that is, the difference in basis
points at which an AA-rated bank could issue debt relative to a
similar maturity Treasury security), corporate bond spreads narrowed
as investors perceived the Federal Reserve Board may be nearing the
end of the push to raise short-term interest rates. This, combined
with the very attractive absolute yields, has encouraged some new
money to flow into this sector, a trend we believe may continue as
we move into the second half of the year. As a result, yield spreads
on corporate securities have narrowed.
Portfolio Matters
With respect to investment strategy, we remained committed to the
bigger, more liquid issues and emphasized higher coupon bonds. As
part of our liquidity strategy, we attempted to consolidate industry
holdings into the benchmark issues. Although this came at modest
yield concessions, this strategy seems to have worked as the
smaller, less liquid transactions significantly underperformed
global transactions. During the first quarter of 2000, our
investment strategy shifted to incorporate a more barbelled approach
rather than a bulleted approach, given prevailing Federal Reserve
Board monetary policy and the technical factors influencing the
longer end of the curve. We reduced the Program's exposure in the
two-year--five-year sector in favor of short-term floating rate
securities and cash. Additionally, we increased the Program's expo-
sure at the longer end of the curve, although corporate exposure was
focused in the ten-year sector, with 30-year exposure emphasizing
Treasury securities and agency issues with a spread to US Treasury
issues. With regard to our corporate strategy, we believed the ten-
year sector offered greater relative value given the flatness of the
ten-year--30-year corporate credit curve. However, by the middle of
the second quarter, we shifted our investment strategy to
incorporate a more bulleted portfolio approach. Looking forward, we
recommitted some assets out of cash and the 30-year sector and back
into the two-year--ten-year sector of the yield curve. During the
early part of the six-month period, we reduced the Program's
allocation to BBB-rated issues by 3%, given our belief that this
sector was likely to underperform A-rated issues in the near term.
However, our recent strategy has incorporated a greater emphasis on
benchmark BBB-rated issues given our belief that the Federal Reserve
Board is moving toward a neutral monetary policy.
With respect to security specific issues, the Program held an
overweighted position in real estate investment trusts, railroads,
energy-related issuers, airlines, life insurers, retailers and
defense contractors. During the later part of the period, we began
to reduce the Program's holdings in retailers and airlines, while
adding to our holdings in defense contractors. Furthermore, we
brought our overweighting in the finance sector to a market neutral
position, using the proceeds to bring our underweighted position in
the industrial sector also to a market neutral position. Going
forward, we intend to continue to look to reverse an overweighting
we had in the overall finance sector, with reallocation back to the
industrial sector. Spreads for industrials have become very
attractive to us, and we want to be in a position to benefit from
any cyclical upswing that may occur in that sector.
In Conclusion
We appreciate your investment in The Corporate Fund Accumulation
Program, Inc., and we look forward to assisting you with your
investment needs in the months and years ahead.
Sincerely,
(Terry K. Glenn)
Terry K. Glenn
President and Director
(Christopher G. Ayoub)
Christopher G. Ayoub
Senior Vice President and Portfolio Manager
August 10, 2000
The Corporate Fund Accumulation Program, Inc.
Average Annual Total Return
Period Covered % Return
Year Ended 6/30/00 +1.81%
Five Years Ended 6/30/00 +4.73
Ten Years Ended 6/30/00 +6.84
<TABLE>
The Corporate Fund Accumulation Program, Inc.
Schedule of Investments June 30, 2000
<CAPTION>
S&P Moody's Face
Industry Rating Rating Amount Issue Value
<S> <S> <S> <C> <S> <C>
US Government Obligations
US Government AAA Aaa $1,250,000 US Treasury Bonds, 6.125% due 8/15/2029 $ 1,262,500
Obligations-- US Treasury Notes:
6.1% AAA Aaa 500,000 6.25% due 10/31/2001 498,435
AAA Aaa 1,800,000 6.125% due 12/31/2001 1,791,288
Total US Government Obligations
(Cost--$3,530,529)--6.1% 3,552,223
Corporate Bonds & Notes
Asset-Backed AA+ Aa3 1,000,000 Continental Airlines, 7.056% due 3/15/2011 937,670
Securities**--
1.6%
Banks & A+ Aa2 1,000,000 Bank of America, 7.125% due 5/12/2005 972,600
Thrifts--17.6% AA- Aa2 1,000,000 Citigroup Inc., 5.80% due 3/15/2004 953,390
A- A1 400,000 First Chicago Corp., 8.875% due 3/15/2002 408,624
A Aa3 2,000,000 First Interstate/Wells Fargo Company, 9.90% due 11/15/2001 2,066,300
A A2 1,000,000 First National Bank of Boston, 7.375% due 9/15/2006 976,360
BBB+ a2 750,000 Fleet Capital Trust II, 7.92% due 12/11/2026 651,847
A A1 1,000,000 HSBC Holdings PLC, 7.50% due 7/15/2009 980,470
A A2 1,000,000 HSBC USA Inc., 7% due 11/01/2006 955,210
A- a1 1,000,000 Mellon Capital II, 7.995% due 1/15/2027 903,530
Merita Bank Ltd.:
A- A1 500,000 6.50% due 1/15/2006 472,045
A- A1 1,000,000 6.50% due 4/01/2009 908,290
-----------
10,248,666
Financial A A2 1,000,000 Ford Motor Credit Company, 7.50% due 3/15/2005 995,050
Services-- A A2 1,000,000 General Motors Acceptance Corp., 9% due 10/15/2002 1,030,330
Captive--3.5% -----------
2,025,380
Financial A+ Aa3 500,000 Associates Corporation of North America, 7.40% due
Services-- 5/15/2006 493,895
Consumer--
0.8%
Financial BBB+ A3 750,000 ERP Operating LP, 7.125% due 10/15/2017 645,150
Services-- A+ A1 1,000,000 Goldman Sachs Group Inc., 7.50% due 1/28/2005 992,430
Other--7.7% A A3 500,000 Lehman Brothers, 7.625% due 6/01/2006 488,100
A A3 500,000 Lehman Brothers Holdings, Inc., 8.25% due 6/15/2007 499,655
AA- Aa3 800,000 Morgan Stanley Group, 8.33% due 1/15/2007 823,136
BBB+ Baa1 1,000,000 PaineWebber Group Inc., 8.875% due 3/15/2005 1,029,080
-----------
4,477,551
</TABLE>
<TABLE>
The Corporate Fund Accumulation Program, Inc.
Schedule of Investments (continued) June 30, 2000
<CAPTION>
S&P Moody's Face
Industry Rating Rating Amount Issue Value
<S> <S> <S> <C> <S> <C>
Corporate Bonds & Notes (continued)
Industrial-- A+ A1 $1,000,000 Anheuser-Busch Companies Inc., 7.50% due 3/15/2012 $ 996,420
Consumer BBB Baa1 1,500,000 Dillard's, Inc., 6.08% due 8/01/2010 (a) 1,495,620
Goods-- A A2 386,520 Disney Custom Repackaged Asset Vehicle-403, 6.85% due
15.9% 1/10/2007 (b)** 381,998
AAA Aaa 2,000,000 Johnson & Johnson, 8.72% due 11/01/2024 2,151,780
A+ A1 1,125,000 May Department Stores Company, 10.625% due 11/01/2010 1,357,020
A A2 1,000,000 Phillip Morris Companies, Inc., 9% due 1/01/2001 1,002,610
A- A3 2,000,000 Sears, Roebuck & Co., 6.25% due 1/15/2004 1,893,720
-----------
9,279,168
Industrial-- AA+ Aa1 1,500,000 BP America Inc., 9.375% due 11/01/2000 1,510,965
Energy--5.7% A- A3 1,000,000 Burlington Resources, 7.375% due 3/01/2029 927,660
A- A3 1,000,000 Conoco Inc., 6.95% due 4/15/2029 909,040
-----------
3,347,665
Industrial-- A+ A1 1,000,000 Chrysler Corp., 7.45% due 3/01/2027 959,530
Manufactur- A+ A1 2,000,000 DaimlerChrysler North America Holdings Corp., 7.75% due
ing--9.9% 6/15/2005 2,017,400
A+ A1 400,000 Motorola Inc., 7.50% due 5/15/2025 399,320
A A2 2,000,000 Textron Inc., 6.375% due 7/15/2004 1,907,440
A+ A2 500,000 United Technologies Corporation, 6.625% due 11/15/2004 491,125
-----------
5,774,815
Industrial-- A A2 1,000,000 Computer Sciences Corp., 6.25% due 3/15/2009 876,080
Services--
1.5%
Transporta- A- A3 1,000,000 Southwest Airlines Co., 7.875% due 9/01/2007 1,000,070
tion--1.7%
Utilities-- AA- A1 500,000 AT&T Corporation, 6% due 3/15/2009 444,605
Communica- AA- Aa3 500,000 Ameritech Capital Funding, 6.45% due 1/15/2018 429,795
tion--7.3% A+ Aa3 2,000,000 GTE California, Inc., 8.07% due 4/15/2024 1,874,960
A- A2 500,000 Vodafone Airtouch PLC, 7.875% due 2/15/2030 (b) 489,364
A- A3 1,000,000 WorldCom, Inc., 8.25% due 5/15/2010 1,025,810
-----------
4,264,534
</TABLE>
<TABLE>
The Corporate Fund Accumulation Program, Inc.
Schedule of Investments (concluded) June 30, 2000
<CAPTION>
S&P Moody's Face
Industry Rating Rating Amount Issue Value
<S> <S> <S> <C> <S> <C>
Corporate Bonds & Notes (concluded)
Utilities-- A A3 $1,000,000 Duke Capital Corp., 7.50% due 10/01/2009 $ 985,160
Electric--6.6% AA- A1 1,000,000 PG&E Corp., 7.25% due 8/01/2026 874,120
A- A3 500,000 Pennsylvania Power & Light Co., 6.125% due 5/01/2006 (a) 494,820
A A1 500,000 South Carolina Electric & Gas, 7.50% due 6/15/2005 501,370
A A2 1,000,000 Virginia Electric & Power Co., 8.625% due 10/01/2024 981,190
-----------
3,836,660
Yankee BBB Baa3 1,000,000 AT&T Canada Inc., 7.65% due 9/15/2006 (2) 994,350
Corporates*-- A A2 1,000,000 Ford Capital BV, 9.50% due 6/01/2010 (1) 1,095,940
11.5% A+ A1 1,500,000 Grand Metropolitan Investment Corp., 9% due 8/15/2011 (1) 1,629,000
A+ A2 2,000,000 Hydro-Quebec, 7.375% due 2/01/2003 (2) 2,001,620
A- A3 1,000,000 Israel Electric Corp. Ltd., 7.75% due 3/01/2009 (2)(b) 967,724
-----------
6,688,634
Total Corporate Bonds & Notes
(Cost--$54,640,804)--91.3% 53,250,788
Short-Term Securities
Repurchase 507,000 Warburg Dillon Read LLC, purchased on
Agreements ***--0.9% 6/30/2000 to yield 6.55% to 7/03/2000 507,000
Total Short-Term Securities (Cost--$507,000)--0.9% 507,000
Total Investments (Cost--$58,678,333)--98.3% 57,310,011
Other AssetsLess Liabilities--1.7% 984,261
-----------
Net Assets--100.0% $58,294,272
===========
*Corresponding industry groups for foreign bonds:
(1)Financial institution.
(2)Industrial; other.
**Subject to principal paydowns.
***Repurchase Agreements are fully collateralized by US Government
Obligations.
(a)Floating rate note.
(b)The security may be offered and sold to "qualified institutional
buyers" under Rule 144A of the Securities Act of 1933.
See Notes to Financial Statements.
</TABLE>
<TABLE>
The Corporate Fund Accumulation Program, Inc.
Statement of Assets and Liabilities as of June 30, 2000
<S> <C> <C>
Assets:
Investments, at value (identified cost--$58,678,333) $ 57,310,011
Cash 860
Receivables:
Interest $ 1,143,742
Capital shares sold 196 1,143,938
------------
Prepaid registration fees and other assets 47,528
------------
Total assets 58,502,337
------------
Liabilities:
Payables:
Capital shares redeemed 43,109
Investment adviser 22,270 65,379
------------
Accrued expenses and other liabilities 142,686
------------
Total liabilities 208,065
------------
Net Assets $ 58,294,272
============
Net Assets Consist of:
Common Stock, $.01 par value, 50,000,000 shares authorized $ 29,745
Paid-in capital in excess of par 62,522,948
Undistributed investment income--net 149,524
Accumulated realized capital losses on investments--net (3,039,623)
Unrealized depreciation on investments--net (1,368,322)
------------
Net Assets--Equivalent to $19.60 per share based on 2,974,495 shares outstanding $ 58,294,272
============
See Notes to Financial Statements.
</TABLE>
<TABLE>
The Corporate 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 $ 2,185,807
Expenses:
Investment advisory fees $ 149,813
Transfer agent fees 83,275
Accounting services 31,153
Printing and shareholder reports 22,338
Professional fees 22,011
Registration fees 13,764
Custodian fees 5,547
Directors' fees and expenses 4,877
Pricing services 2,485
Other 1,985
------------
Total expenses 337,248
------------
Investment income--net 1,848,559
------------
Realized & Unrealized Gain (Loss) on Investments--Net:
Realized loss on investments--net (1,248,523)
Change in unrealized depreciation on investments--net 573,775
------------
Net Increase in Net Assets Resulting from Operations $ 1,173,811
============
See Notes to Financial Statements.
</TABLE>
<TABLE>
The Corporate Fund Accumulation Program, Inc.
Statements of Changes in Net Assets
<CAPTION>
For the Six For the
Months Ended Year Ended
Increase (Decrease) in Net Assets: June 30, 2000 Dec. 31, 1999
<S> <C> <C>
Operations:
Investment income--net $ 1,848,559 $ 3,841,503
Realized loss on investments--net (1,248,523) (832,984)
Change in unrealized appreciation/depreciation on investments--net 573,775 (5,216,080)
------------ ------------
Net increase (decrease) in net assets resulting from operations 1,173,811 (2,207,561)
------------ ------------
Dividends to Shareholders:
Investment income--net (1,698,855) (3,841,598)
In excess of investment income--net -- (180)
------------ ------------
Net decrease in net assets resulting from dividends to shareholders (1,698,855) (3,841,778)
------------ ------------
Capital Share Transactions:
Net decrease in net assets resulting from capital share transactions (4,331,105) (1,931,117)
------------ ------------
Net Assets:
Total decrease in net assets (4,856,149) (7,980,456)
Beginning of period 63,150,421 71,130,877
------------ ------------
End of period* $ 58,294,272 $ 63,150,421
============ ============
*Undistributed (accumulated distributions in excess of) investment income--net $ 149,524 $ (180)
============ ============
See Notes to Financial Statements.
</TABLE>
<TABLE>
The Corporate Fund Accumulation Program, Inc.
Financial Highlights
<CAPTION>
For the Six
The following per share data and ratios have been derived Months
from information provided in the financial statements. Ended
June 30, For the Year Ended December 31,
Increase (Decrease) in Net Asset Value: 2000++ 1999++ 1998++ 1997 1996
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period $ 19.77 $ 21.62 $ 21.13 $ 20.69 $ 21.59
-------- -------- -------- -------- --------
Investment income--net .60 1.17 1.19 1.22 1.23
Realized and unrealized gain (loss) on investments--net (.21) (1.84) .50 .44 (.90)
-------- -------- -------- -------- --------
Total from investment operations .39 (.67) 1.69 1.66 .33
-------- -------- -------- -------- --------
Less dividends:
Investment income--net (.56) (1.18) (1.20) (1.22) (1.23)
In excess of investment income--net -- --++++ -- -- --
-------- -------- -------- -------- --------
Total dividends (.56) (1.18) (1.20) (1.22) (1.23)
-------- -------- -------- -------- --------
Net asset value, end of period $ 19.60 $ 19.77 $ 21.62 $ 21.13 $ 20.69
======== ======== ======== ======== ========
Total Investment Return:
Based on net asset value per share 2.00%+++ (3.14%) 8.24% 8.30% 1.69%
======== ======== ======== ======== ========
Ratios to Average Net Assets:
Expenses 1.12%* 1.11% 1.00% .99% 1.12%
======== ======== ======== ======== ========
Investment income--net 6.15%* 5.69% 5.60% 5.84% 5.84%
======== ======== ======== ======== ========
Supplemental Data:
Net assets, end of period (in thousands) $ 58,294 $ 63,150 $ 71,131 $ 72,381 $ 77,748
======== ======== ======== ======== ========
Portfolio turnover 54% 61% 66% 90% 77%
======== ======== ======== ======== ========
++Based on average shares outstanding.
++++Amount is less than $.01 per share.
+++Aggregate total investment return.
*Annualized.
See Notes to Financial Statements.
</TABLE>
The Corporate Fund Accumulation Program, Inc.
Notes to Financial Statements
1. Significant Accounting Policies:
The Corporate 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 on the
basis of prices furnished by one or more pricing services which
determine prices for normal, institutional-size trading units. In
certain circumstances, portfolio securities are valued at the last
sale price on the exchange that is the primary market for such
securities, or the last quoted bid price for those securities for
which the over-the-counter market is the primary market or for
listed securities in which there were no sales during the day.
Obligations with remaining maturities of sixty days or less are
valued at amortized cost, which approximates market value, unless
this method no longer produces fair valuations. Securities for which
there exist no price quotations or valuations and all other assets
are valued at fair value as determined in good faith by or on behalf
of the Board of Directors of the Program.
(b) Repurchase agreements--The Program invests in US Government
securities pursuant to repurchase agreements. Under such agreements,
the counterparty agrees to repurchase the security at a mutually
agreed upon time and price. The Program takes possession of the
underlying securities, marks to market such securities and, if
necessary, receives additions to such securities daily to ensure
that the contract is fully collateralized. If the seller defaults
and the fair value of the collateral declines, liquidation of the
collateral of the Program may be delayed or limited.
(c) 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.
(d) Security transactions and investment income--Security
transactions are recorded on the dates the transactions are entered
into (the trade dates). Interest income (including 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.
(e) Prepaid registration fees--Prepaid registration fees are charged
to expense as the related shares are issued.
(f) Dividends 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 net
investment income 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.
The Corporate Fund Accumulation Program, Inc.
Notes to Financial Statements (continued)
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.
FAM has entered into an Administrative Agreement with Merrill Lynch,
Pierce, Fenner & Smith Incorporated ("MLPF&S"), 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.
For the six months ended June 30, 2000, the Program paid Merrill
Lynch Security Pricing Service, an affiliate of MLPF&S, $2,741 for
security price quotations to compute the net asset value of the
Program.
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 $31,098,977 and
$33,074,383, respectively.
Net realized losses for the six months ended June 30, 2000 and net
unrealized losses as of June 30, 2000 were as follows:
Realized Unrealized
Losses Losses
Long-term investments $(1,248,523) $(1,368,322)
----------- -----------
Total $(1,248,523) $(1,368,322)
=========== ===========
As of June 30, 2000, net unrealized depreciation for Federal income
tax purposes aggregated $1,368,322, of which $372,428 related to
appreciated securities and $1,740,750 related to depreciated
securities. The aggregate cost of investments at June 30, 2000 for
Federal income tax purposes was $58,678,333.
4. Capital Share Transactions:
Transactions in capital shares were as follows:
For the Six Months Dollar
Ended June 30, 2000 Shares Amount
Shares sold 123,477 $ 2,423,403
Shares issued to share-
holders in reinvestment of
dividends 80,646 1,576,377
----------- ------------
Total issued 204,123 3,999,780
Shares redeemed (424,502) (8,330,885)
----------- ------------
Net decrease (220,379) $ (4,331,105)
=========== ============
For the Year Ended Dollar
December 31, 1999 Shares Amount
Shares sold 582,428 $ 12,100,729
Shares issued to share-
holders in reinvestment of
dividends 174,464 3,576,975
----------- ------------
Total issued 756,892 15,677,704
Shares redeemed (852,690) (17,608,821)
----------- ------------
Net decrease (95,798) $ (1,931,117)
=========== ============
The Corporate Fund Accumulation Program, Inc.
Notes to Financial Statements
5. Short-Term Borrowings:
On December 3, 1999, the Fund, along with certain other funds
managed by FAM, entered into a one-year, unsecured $1,000,000,000
credit agreement with The Bank of New York and certain other
institutions party thereto. The funds may borrow money for temporary
or emergency purposes to fund shareholder redemptions. The agreement
bears interest at the Federal Funds rate plus .50%. The Fund did not
borrow from the facility during the six months ended June 30, 2000.
6. Capital Loss Carryforward:
At December 31, 1999, the Program had a net capital loss
carryforward of approximately $1,590,000, of which $958,000 expires
in 2002 and $632,000 expires in 2007. This amount will be available
to offset like amounts of any future taxable gains.
The Corporate Fund Accumulation Program, Inc.
Notes to Financial Statements (concluded)
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
Christopher G. Ayoub--Senior Vice President
Joseph T. Monagle Jr.--Senior Vice President
Donald C. Burke--Vice President and
Treasurer
Ira P. Shapiro--Secretary
Custodian and Transfer Agent
The Bank of New York
90 Washington Street
New York, NY 10286
