The
Corporate
Fund
Accumulation
Program
Inc.
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 Corporate 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 Corporate Fund
Accumulation Program, Inc. provided a total investment return of
- -3.14%, based on a change in per share net asset value from $21.62
to $19.77, and assuming reinvestment of $1.181 per share income
dividends. For the six months ended December 31, 1999, the Program
had a total investment return of -0.18%, based on a change in per
share net asset value from $20.45 to $19.77, and assuming
reinvestment of $0.645 per share income dividends.
Market Review
During the year ended December 31, 1999, the fixed-income markets
were very volatile as interest rates developed a trend toward
significantly higher levels. For example, the 30-year US Treasury
bond, which began the period at 5.10%, was approximately 6.50% by
year-end. Market expectations that the Federal Reserve Board would
move to tighten monetary policy in the face of inflationary fears
and strong economic growth worldwide, led to the rise in Treasury
yields. Although inflationary pressures have been relatively well
contained because of significant improvements in productivity, gross
domestic product (GDP) growth and the correlating effect it has had
on the labor market prompted the Federal Reserve Board to raise
interest rates by 0.75% during the period. For all intent, this
shift in monetary policy served to reverse the accommodative policy
that was implemented during the financial crises of 1998.
Despite the second quarter slowdown in GDP growth to 1.8%, economic
activity remained extremely robust throughout most of 1999, as
highlighted by the strong rebound in third quarter GDP to 5.7%.
Consumer spending continued to lead the way, although recent reports
related to housing and auto purchases are beginning to show the
effect of higher interest rates. Consumers continued to benefit from
low unemployment rates and the wealth effect generated from a strong
stock market, although most of the gains have been limited to only a
few sectors with performance in many of the established industries
lagging. Overseas, Asian countries at the heart of the crises in
1998 continued to recover.
This global recovery has at times led to fears of a rekindling of
inflation. Commodities, such as copper, aluminum, plywood and other
building materials, as well as chemicals gained in price. More
importantly, oil prices surged, spurred on mainly by an agreement by
the Organization of Petroleum Exporting Countries to limit
production, but also on expectations of increased demand by
recovering economies. Wage inflation continued to be of concern
given the level of unemployment that the economy has achieved.
However, inflation as measured by both the price producer index and
consumer price index remains well within acceptable levels for the
most part, with productivity measurements still extremely favorable.
Beyond the gain in interest rates, the market environment was still
being influenced by a flight from quality. This is in stark reversal
of the flight-to-quality trades we saw in the third quarter of 1998.
On the corporate bond front, by mid-year, underwriting activity
increased significantly as issuers sought to get their funding
programs in before the final quarter of 1999. Corporate yield
spreads relative to US Treasury securities, which began 1999 on a
positive trend, widened across all sectors during the period from
May through September. However, since late September, corporate
yield spreads tightened following a sooner-than-expected drop in new
underwriting activity. Furthermore, investors began to pump new
money into the investment-grade sector given the higher yields and
strong relative value attributes. With respect to sector
performance, Yankee or foreign issues outperformed the domestic
issues and bonds rated BBB outperformed those rated A or better on
both a price and total return basis.
Fiscal Year in Review
Our investment strategy for the Program, relative to the unmanaged
benchmark Merrill Lynch US Corporate A--AAA Rated Index, remained
somewhat conservative given the outlook for higher interest rates
and wider yield spreads. From a duration perspective, we maintained
a duration that was modestly shorter (0.15 years--0.25 years) than
the Index. Initially, it was our strategy to bring duration closer
to the Index when the yields would climb closer to the high end of
the expected range. By early August, we began to reallocate a
portion of assets away from corporate bonds and into cash and
Treasury issues, in preparation for year-end liquidity needs.
Initially, we shifted approximately 10% of the Program's holdings
into this sector, although improved fundamentals within the
investment-grade market prompted a partial reallocation back into
high-grade, large benchmark issues. By December 31, 1999,
allocations to cash and Treasury issues were brought down to about
5%.
With respect to the Program's corporate holdings, we remained
committed to the bigger, more liquid issues as well as an emphasis
on issues that provided higher coupons. As part of our liquidity
strategy, we have attempted to consolidate industry holdings into
the benchmark issues. Although this came at modest yield
concessions, we believed this was the prudent course of action as a
result of Year 2000 computer uncertainties. Given the increased
supply and higher rate environment, many of the new corporate
transactions were done at larger-than-anticipated yield spread
concessions in order to attract investors. In light of the temporary
supply factor and wider spreads, we believed corporate bonds
possessed some very attractive long-term relative value attributes.
Accordingly, during the final quarter of 1999, we continued to
redirect excess assets back to corporate bonds in an effort to
enhance income.
The Program held overweighted positions in electric utilities,
finance companies, cable and media entities, retailers, energy-
related issuers, airlines and defense contractors and information
technology entities for most of the period. During the latter part
of the period, we began to reduce our holdings in defense issues,
high-end retailers, airlines and real estate investment trusts.
However, we concentrated on adding to positions in domestic banks,
supermarkets, railroads and metals/mining companies. The Program
continues to be underweighted in property and casualty insurers and
health care companies.
For the 12 months ended December 31, 1999, the Program had a total
return of -3.14% compared to a -2.39% total return for the unmanaged
benchmark Merrill Lynch US Corporate A--AAA Rated Index and a -2.57%
total return for the Lipper Corporate A Rated Group. Relative to the
Merrill Lynch US Corporate A--AAA Rated Index, the Program's
performance was favorably impacted by a 10% allocation to corporate
bonds rated BBB/Baa. During 1999, the Merrill Lynch Corporate BBB
Rated Index outperformed the Merrill Lynch US Corporate A--AAA Rated
Index by 1.56%. However, as outlined in the Program's prospectus, we
are limited with respect to our overall exposure to securities rated
less than A. As a result, on average, the Lipper group had the
advantage of a greater allocation to the BBB sector, thereby
achieving a slightly better return.
In Conclusion
Looking ahead, we have formulated an investment strategy based upon
our belief that the long-term trend will be toward lower interest
rates and a flatter yield curve as the economy slows during the
second half of 2000. With respect to corporate bonds, we are looking
for yield spread relationships to exhibit further improvement as we
proceed through the first quarter of 2000. However, in the near
term, the US Treasury market will remain under pressure with the
Federal Reserve Board likely moving short-term interest rates higher
in the coming months.
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
February 10, 2000
The Corporate Fund Accumulation Program, Inc.
Total Return Based on a $10,000 Investment
A line graph depicting the growth of an investment in the
Program compared to growth of an investment in the ML Corporate
Master Bond Index and the Merrill Lynch US Corporate A--AAA
Rated Index. Beginning and ending values are:
12/88 12/98
The Corporate Fund Accumulation
Program, Inc.*++ $10,000 $19,403
ML Corporate Master Bond Index++++ $10,000 $22,277
ML US Corporate A--AAA Rated
Index++++++ $10,000 $22,078
++Assuming transaction costs and other operating expenses,
including advisory fees. The Corporate Fund Accumulation Program, Inc.
invests in long-term and intermediate-term fixed interest-bearing
debt obligations issued primarily by corporations.
++++This unmanaged Index is comprised of all industrial bonds
rated BBB3 or higher, of all maturities.
++++++This unmanaged Index is comprised of bonds rated A--AAA,
of all maturities.
Past performance is not predictive of future performance.
The Corporate Fund Accumulation Program, Inc.
Average Annual Total Return
Period Covered % Return
Year Ended 12/31/99 -3.14%
Five Years Ended 12/31/99 +6.75
Ten Years Ended 12/31/99 +6.85
<TABLE>
The Corporate Fund Accumulation Program, Inc.
Schedule of Investments December 31, 1999
<CAPTION>
S&P Moody's Face
Industry Rating Rating Amount Issue Value
<S> <S> <S> <C> <S> <C>
US Government Obligations
US AAA Aaa $1,000,000 US Treasury Bonds, 5.25% due 2/15/2029 $ 826,870
Government US Treasury Notes:
Obligations-- AAA Aaa 500,000 6.25% due 10/31/2001 500,080
5.0% AAA Aaa 850,000 5.875% due 11/15/2004 833,399
AAA Aaa 500,000 6% due 8/15/2004 492,185
AAA Aaa 500,000 6% due 8/15/2009 484,375
Total US Government Obligations
(Cost 3,221,365)--5.0% 3,136,909
Sovereign Bonds & Notes
Yankee AA- Aa3 500,000 Province of Manitoba, 5.50% due 10/01/2008 (1) 442,440
Sovereigns++-- A+ A2 500,000 Province of Quebec, 8.80% due 4/15/2003 (1) 525,545
1.5%
Total Sovereign Bonds & Notes (Cost 1,029,901)--1.5% 967,985
Corporate Bonds & Notes
Asset-Backed AA+ Aa3 1,000,000 Continental Airlines, 7.056% due 9/15/2009 950,600
Securities**--
1.5%
Banks & A+ Aa2 1,000,000 BankAmerica Corporation, 7.125% due 5/12/2005 988,280
Thrifts-- A A1 1,500,000 Chase Manhattan Corporation, 7.25% due 6/01/2007 1,479,045
15.8% A A1 400,000 First Chicago Corp., 8.875% due 3/15/2002 414,120
A A1 2,000,000 First Interstate/Wells Fargo Company, 9.90% due 11/15/2001 2,096,380
BBB+ a2 750,000 Fleet Capital Trust II, 7.92% due 12/11/2026 689,918
A A2 1,000,000 HSBC Americas Inc., 7% due 11/01/2006 963,690
A A1 1,000,000 HSBC Holdings PLC, 7.50% due 7/15/2009 988,020
A- a2 1,000,000 Mellon Capital II, 7.995% due 1/15/2027 947,410
Merita Bank Ltd.:
A- A2 500,000 6.50% due 1/15/2006 472,835
A- A2 1,000,000 6.50% due 4/01/2009 912,980
-----------
9,952,678
Electronic A+ A1 400,000 Motorola Inc., 7.50% due 5/15/2025 391,868
Components--
0.6%
Financial A+ A1 1,000,000 Ford Motor Credit Co., 7.75% due 3/15/2005 1,018,460
Services-- A A2 1,000,000 General Motors Acceptance Corp., 9% due 10/15/2002 1,047,570
Captive--3.3% -----------
2,066,030
Financial Associates Corporation of North America:
Services-- AA- Aa3 500,000 7.40% due 5/15/2006 501,190
Consumer-- AA- Aa3 1,000,000 6.95% due 11/01/2018 923,130
3.8% A+ A2 1,000,000 Equitable Life Assurance Society of the US, 7.70% due
12/01/2015 (b) 978,243
-----------
2,402,563
</TABLE>
<TABLE>
The Corporate Fund Accumulation Program, Inc.
Schedule of Investments (continued) December 31, 1999
<CAPTION>
S&P Moody's Face
Industry Rating Rating Amount Issue Value
<S> <S> <S> <C> <S> <C>
Corporate Bonds & Notes (continued)
Financial BBB+ A3 $ 750,000 ERP Operating LP, 7.125% due 10/15/2017 $ 654,675
Services-- AAA Aaa 900,000 Florida Windstorm Under, 7.125% due 2/25/2019 (b) 825,969
Other--8.5% Lehman Brothers Holdings, Inc.:
A A3 500,000 7.125% due 9/15/2003 491,900
A A3 500,000 7.625% due 6/01/2006 496,030
A+ Aa3 1,000,000 Morgan Stanley, Dean Witter, 7.125% due 1/15/2003 999,210
A+ Aa3 800,000 Morgan Stanley Group, 8.33% due 1/15/2007 839,104
BBB+ Baa1 1,000,000 PaineWebber Group Inc., 8.875% due 3/15/2005 1,049,450
-----------
5,356,338
Industrial-- A+ A1 1,000,000 Anheuser-Busch Companies Inc., 6.50% due 1/01/2028 869,480
Consumer--
1.4%
Industrial-- BBB Baa1 1,500,000 Dillard's, Inc., 6.08% due 8/01/2010 (a) 1,492,950
Consumer A A2 407,138 Disney Custom Repackaged Asset Vehicle-403, 6.85% due
Goods--13.3% 1/10/2007 (b)** 399,606
AAA Aaa 2,000,000 Johnson & Johnson, 8.72% due 11/01/2024 2,188,600
A+ A1 1,125,000 May Department Stores Company, 10.625% due 11/01/2010 1,387,800
A A2 1,000,000 Phillip Morris Companies, Inc., 9% due 1/01/2001 1,013,800
A- A3 2,000,000 Sears, Roebuck & Co., 6.25% due 1/15/2004 1,898,280
-----------
8,381,036
Industrial-- AA+ Aa1 1,500,000 BP America Inc., 9.375% due 11/01/2000 1,532,970
Energy-- A- A3 1,000,000 Burlington Resources, 7.375% due 3/01/2029 935,610
6.1% AA- Aa3 500,000 Dresser Industries, Inc., 7.60% due 8/15/2096 477,095
A- A3 1,000,000 Murphy Oil Corporation, 7.05% due 5/01/2029 898,770
-----------
3,844,445
Industrial-- A+ A1 500,000 Chrysler Corp., 7.45% due 3/01/2027 484,505
Manufacturing-- NR* NR* 700,000 Jones Apparel Group, 7.875% due 6/15/2006 679,625
5.7% A A2 2,000,000 Textron Inc., 6.375% due 7/15/2004 1,928,640
A+ A2 500,000 United Technologies Corporation, 6.625% due 11/15/2004 491,020
-----------
3,583,790
Industrial-- A A2 1,000,000 Computer Sciences Corp., 6.25% due 3/15/2009 909,300
Services--
1.4%
Transporta- A- A3 1,000,000 Southwest Airlines Co., 7.875% due 9/01/2007 998,870
tion--1.6%
Utilities-- AA- A1 500,000 AT&T Corporation, 6% due 3/15/2009 453,560
Communica- AA+ Aa3 500,000 Ameritech Capital Funding, 6.45% due 1/15/2018 441,130
tions--6.0% AA- A2 2,000,000 GTE California, Inc., 8.07% due 4/15/2024 1,940,100
AA- Aa3 1,000,000 Pacific Bell, 6.875% due 8/15/2006 972,070
-----------
3,806,860
Utilities-- A- A3 1,500,000 Detroit Edison Company, 7.22% due 8/01/2002 1,497,135
Electric-- A A3 500,000 Duke Capital Corp., 7.50% due 10/01/2009 494,180
6.9% AA- A1 1,000,000 PG&E Corp., 7.25% due 8/01/2026 903,300
A- A3 500,000 Pennsylvania Power & Light Co., 6.125% due 5/01/2006 (a) 496,275
A A2 1,000,000 Virginia Electric & Power Co., 8.625% due 10/01/2024 1,004,300
-----------
4,395,190
</TABLE>
<TABLE>
The Corporate Fund Accumulation Program, Inc.
Schedule of Investments (concluded) December 31, 1999
<CAPTION>
S&P Moody's Face
Industry Rating Rating Amount Issue Value
<S> <S> <S> <C> <S> <C>
Corporate Bonds & Notes (concluded)
Yankee AA- Aa3 $1,000,000 ABN-AMRO Bank NV (Chicago), 7% due 4/01/2008 (2) $ 958,760
Corporates++-- BBB+ Baa3 1,000,000 Fairfax Financial Holdings Ltd., 7.375% due 4/15/2018 (2) 792,280
11.9% A+ A1 1,000,000 Ford Capital BV, 9.50% due 6/01/2010 (2) 1,123,940
A+ A1 1,500,000 Grand Metropolitan Investment Corp., 9% due 8/15/2011 (2) 1,667,370
A+ A2 2,000,000 Hydro-Quebec, 7.375% due 2/01/2003 (3) 2,011,440
A- A3 1,000,000 Israel Electric Corp. Ltd., 7.75% due 3/01/2009 (3)(b) 966,896
------------
7,520,686
Total Corporate Bonds & Notes
(Cost $57,225,459)--87.8% 55,429,734
Short-Term Securities
Repurchase 2,581,000 Warburg Dillon Read LLC, purchased on 12/31/1999 to yield
Agreements***--4.1% 2.70% to 1/03/2000 2,581,000
Total Short-Term Securities
(Cost--$2,581,000)--4.1% 2,581,000
Total Investments(Cost--$64,057,725)--98.4% 62,115,628
Other Assets Less Liabilities--1.6% 1,034,793
------------
Net Assets-- 100.0% $ 63,150,421
============
*Not Rated.
**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.
++Corresponding industry groups for foreign bonds:
(1)Government entity.
(2)Financial institution.
(3)Industrial; other.
Ratings of issues shown have not been audited by Deloitte & Touche LLP.
See Notes to Financial Statements.
</TABLE>
<TABLE>
The Corporate Fund Accumulation Program, Inc.
Statement of Assets and Liabilities as of December 31, 1999
<S> <C> <C>
Assets:
Investments, at value (identified cost--$64,057,725) $ 62,115,628
Interest receivable 1,227,902
Prepaid registration fees and other assets 47,528
------------
Total assets 63,391,058
------------
Liabilities:
Payables:
Capital shares redeemed $ 97,846
Investment adviser 30,242
Dividends 275 128,363
------------
Accrued expenses and other liabilities 112,274
------------
Total liabilities 240,637
------------
Net Assets $ 63,150,421
============
Net Assets Consist of:
Common Stock, $.01 par value, 50,000,000 shares authorized $ 31,949
Paid-in capital in excess of par 66,851,849
Accumulated distributions in excess of investment income--net (180)
Accumulated realized capital losses on investments--net (1,791,100)
Unrealized depreciation on investments--net (1,942,097)
------------
Net Assets--Equivalent to $19.77 per share based on 3,194,874 shares outstanding $ 63,150,421
============
See Notes to Financial Statements.
</TABLE>
<TABLE>
The Corporate 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 $ 4,588,799
Expenses:
Investment advisory fees $ 337,564
Transfer agent fees 196,489
Professional fees 62,884
Printing and shareholder reports 53,121
Accounting services 40,381
Registration fees 26,828
Custodian fees 12,194
Directors' fees and expenses 9,114
Pricing fees 4,457
Other 4,264
------------
Total expenses 747,296
------------
Investment income--net 3,841,503
------------
Realized & Unrealized Loss on Investments--Net:
Realized loss on investments--net (832,984)
Change in unrealized appreciation/depreciation on investments--net (5,216,080)
------------
Net Decrease in Net Assets Resulting from Operations $ (2,207,561)
============
See Notes to Financial Statements.
</TABLE>
<TABLE>
The Corporate Fund Accumulation Program, Inc.
Statements of Changes in Net Assets
<CAPTION>
For the Year Ended
December 31,
Increase (Decrease) in Net Assets: 1999 1998
<S> <C> <C>
Operations:
Investment income--net $ 3,841,503 $ 3,988,778
Realized gain (loss) on investments--net (832,984) 803,278
Change in unrealized appreciation/depreciation on investments--net (5,216,080) 851,467
------------ ------------
Net increase (decrease) in net assets resulting from operations (2,207,561) 5,643,523
------------ ------------
Dividends & Distributions to Shareholders:
Investment income--net (3,841,598) (3,988,781)
In excess of investment income--net (180) --
------------ ------------
Net decrease in net assets resulting from dividends and
distributions to shareholders (3,841,778) (3,988,781)
------------ ------------
Capital Share Transactions:
Net decrease in net assets resulting from capital share transactions (1,931,117) (2,904,537)
------------ ------------
Net Assets:
Total decrease in net assets (7,980,456) (1,249,795)
Beginning of year 71,130,877 72,380,672
------------ ------------
End of year* $ 63,150,421 $ 71,130,877
============ ============
<FN>
*Undistributed (accumulated distributions in excess of) investment income--net $ (180) $ 95
============ ============
See Notes to Financial Statements.
</TABLE>
<TABLE>
The Corporate 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 $ 21.62 $ 21.13 $ 20.69 $ 21.59 $ 19.14
-------- -------- -------- -------- --------
Investment income--net 1.17 1.19 1.22 1.23 1.28
Realized and unrealized gain (loss) on investments--net (1.84) .50 .44 (.90) 2.45
-------- -------- -------- -------- --------
Total from investment operations (.67) 1.69 1.66 .33 3.73
-------- -------- -------- -------- --------
Less dividends and distributions:
Investment income--net (1.18) (1.20) (1.22) (1.23) (1.28)
In excess of investment income--net --++++ -- -- -- --
-------- -------- -------- -------- --------
Total dividends and distributions (1.18) (1.20) (1.22) (1.23) (1.28)
-------- -------- -------- -------- --------
Net asset value, end of year $ 19.77 $ 21.62 $ 21.13 $ 20.69 $ 21.59
======== ======== ======== ======== ========
Total Investment Return:
Based on net asset value per share (3.14%) 8.24% 8.30% 1.69% 20.05%
======== ======== ======== ======== ========
Ratios to Average Net Assets:
Expenses 1.11% 1.00% .99% 1.12% 1.01%
======== ======== ======== ======== ========
Investment income--net 5.69% 5.60% 5.84% 5.84% 6.23%
======== ======== ======== ======== ========
Supplemental Data:
Net assets, end of year (in thousands) $ 63,150 $ 71,131 $ 72,381 $ 77,748 $ 85,402
======== ======== ======== ======== ========
Portfolio turnover 61% 66% 90% 77% 104%
======== ======== ======== ======== ========
++Based on average shares outstanding.
++++Amount is less than $.01 per share.
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 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 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 exists 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 counterparty
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
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.
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 Corporate Fund Accumulation Program, Inc.
Notes to Financial Statements (concluded)
FAM has entered into an Administrative Agreement with Merrill Lynch,
Pierce, Fenner & Smith Incorporated ("MLPF&S"), Prudential
Securities, Inc., Dean Witter Reynolds Inc., and Smith Barney, Inc.
(the "Administrators"), whereby the Administrators perform certain
administrative duties on behalf of FAM. The Administrators receive a
monthly fee from FAM equal to .20%, on an annual basis, of the
Program's average daily net assets.
During the year ended December 31, 1999, the Program paid Merrill
Lynch Security Pricing Service, an affiliate of MLPF&S, $3,622 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 year ended December 31, 1999 were $39,383,387 and
$42,426,424, 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 investments $ (832,984) $(1,942,097)
---------- -----------
Total $ (832,984) $(1,942,097)
========== ===========
As of December 31, 1999, net unrealized depreciation for Federal
income tax purposes aggregated $1,948,618, of which $385,762 related
to appreciated securities and $2,334,380 related to depreciated
securities. The aggregate cost of investments at December 31, 1999
for Federal income tax purposes was $64,064,246.
4. Capital Share Transactions:
Transactions in capital shares were as follows:
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)
=========== ============
For the Year Ended Dollar
December 31, 1998 Shares Amount
Shares sold 561,726 $ 11,965,648
Shares issued to share-
holders in reinvestment of
dividends 173,288 3,700,826
----------- ------------
Total issued 735,014 15,666,474
Shares redeemed (869,838) (18,571,011)
----------- ------------
Net decrease (134,824) $ (2,904,537)
=========== ============
5. 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.
<AUDIT-REPORT>
The Corporate Fund Accumulation Program, Inc.
Independent Auditors' Report
The Board of Directors and Shareholders,
The Corporate Fund Accumulation
Program, Inc.:
We have audited the accompanying statement of assets and
liabilities, including the schedule of investments, of The Corporate
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
the 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 Corporate 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 7, 2000
</AUDIT-REPORT>
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
