-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, FHeCidmhhqHdd6V0og3GOuaFELE7jEzVXzvkRq2j9tviNoCoTyh/FwbHuajsC9TW KfDgr4F2pEsyxGk5rwbrBQ== 0000900092-97-000031.txt : 19970222 0000900092-97-000031.hdr.sgml : 19970222 ACCESSION NUMBER: 0000900092-97-000031 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19961231 FILED AS OF DATE: 19970220 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: CORPORATE FUND ACCUMULATION PROGRAM INC CENTRAL INDEX KEY: 0000024858 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] IRS NUMBER: 132895756 STATE OF INCORPORATION: NJ FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: N-30D SEC ACT: 1940 Act SEC FILE NUMBER: 811-02642 FILM NUMBER: 97540432 BUSINESS ADDRESS: STREET 1: P O BOX 9011 CITY: PRINCETON STATE: NJ ZIP: 08543 BUSINESS PHONE: 6092823319 FORMER COMPANY: FORMER CONFORMED NAME: CORPORATE FUND INVESTMENT ACCUMULATION P DATE OF NAME CHANGE: 19771115 N-30D 1 ANNUAL REPORT The Corporate Fund Accumulation Program, Inc. 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 To Our Shareholders: For the year ended December 31, 1996, The Corporate Fund Accumulation Program, Inc. provided a total investment return of +1.69%, based on a change in per share net asset value from $21.59 to $20.69, and assuming reinvestment of $1.228 per share income dividends. For the six-month period ended December 31, 1996, The Corporate Fund Accumulation Program, Inc. provided a total investment return of +4.59%, based on a change in per share net asset value from $20.42 to $20.69, and assuming reinvestment of $0.654 per share income dividends. The Environment Bond prices fluctuated during the summer months in a swirl of speculation about the course of inflation. This volatility was caused by the release of economic data which seemed inconclusive with regard to future growth prospects. Then the Federal Reserve Board's decision in late September not to raise short-term interest rates was interpreted by investors as a sign that the economy was slowing down enough on its own so that inflation would not be a problem. Bond prices began to rise as third quarter data was released. However, Federal Reserve Board Chairman Alan Greenspan raised concerns on December 5, 1996 when he suggested that there was an "irrational exuberance" in US financial markets, implying that the levels of both stock and bond prices were not consistent with economic data. Within two weeks after his remarks, the stock market dropped more than 200 points and there was a corresponding increase of 20 basis points (0.20%) in the bellwether long-term US Treasury bond. However, a review of the underlying economic and political conditions that normally influence the behavior of stock and bond prices seems to justify the investor optimism that prevailed in the fall. For example, the Federal Reserve Board's monetary policy remained unchanged during the six-month period ended December 31, 1996, contrary to widespread expectations during the summer that there would be a monetary tightening. The tightening did not occur because it became apparent that the economy was slowing on its own from the rapid pace of the second quarter, when gross domestic product (GDP) jumped to 4.7% from the 2.0% pace of the first quarter. Third quarter GDP dropped back to 2.1%. Meanwhile, inflation remained subdued. In addition, the US dollar gained in value, implying less inflation and continued foreign investment in US securities. Stock and bond prices improved by year-end, but without the enthusiasm that had been characterized throughout the fall. Fiscal Year in Review The acceleration of job creation which became evident in February 1996 adversely impacted interest rates throughout the first half of the fiscal year ended December 31, 1996. The bond rally of 1995 came to a halt with the February job growth figure, as measured by the bellwether 30-year Treasury yield, jumping from below 6.0% to over 6.6% in the first quarter of 1996. We shortened the average portfolio maturity of the Program from 10.8 years to 8.8 years during this period as a defensive move. The Program had a total return of -2.8% in the first quarter, compared with the unmanaged Merrill Lynch Corporate Master Index's return of -4.4%. As interest rates continued to climb above 7.0% by the beginning of the summer, we brought the average portfolio maturity of the Program to 8.2 years. We accomplished this by raising cash reserves and trading into Treasury securities. As bond prices fluctuated over the summer months, we moved to a market neutral position by extending the Program's average maturity and reducing its cash position. We also remained underweighted in the utility sector and overweighted in industrial and Yankee issues. The total return on the Program improved to +1.3% by October 31, 1996, compared to +1.2% for the Merrill Lynch Corporate Master Index. For the 12-month period ended December 31, 1996 the Program's total return was +1.7%, compared with +2.3% for the Merrill Lynch Corporate Master Index. Looking ahead, we believe that markets have a way of self- correcting. Although inflation remains at a low level, we believe that the current level of bond prices fully reflects the positive factors which characterized the economy in the December quarter. Without significant additional good news, we believe that the market is in a trading range which justifies a conservative strategy. In Conclusion We appreciate your ongoing interest in The Corporate Fund Accumulation Program, Inc., and we look forward to sharing our investment strategy with you in our upcoming semi-annual report to shareholders. Sincerely, (Arthur Zeikel) Arthur Zeikel President (Jay C. Harbeck) Jay C. Harbeck Vice President and Portfolio Manager January 31, 1997 As of December 31, 1996, N. John Hewitt retired as Senior Vice President of the Program. His colleagues at Merrill Lynch Asset Management, L.P. join the Program's Board of Directors in wishing Mr. Hewitt well in his retirement. 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 The Corporate Fund Accumulation Program, Inc. compared to growth of an investment in the ML COAO Corporate Master Bond Index. Beginning and ending values are: 12/86 12/96 The Corporate Fund Accumulation Program, Inc.*++ $10,000 $20,905 ML COAO Corporate Master Bond Index++++ $10,000 $24,133 [FN] *Assuming transaction costs and other operating expenses, including advisory fees. ++The Corporate Fund Accumulation Program, Inc. invests in long- 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. Past performance is not predictive of future performance. The Corporate Fund Accumulation Program, Inc. Schedule of Investments December 31, 1996
S&P Moody's Face Value Industry Rating Rating Amount Issue Cost (Note 1a) US Government Obligations US Government US Treasury Notes: Obligations-- AAA Aaa $2,000,000 6.25% due 8/31/2000 $ 2,013,626 $ 2,007,500 3.9% AAA Aaa 1,000,000 7.875% due 8/15/2001 1,079,910 1,065,940 Total US Government Obligations--3.9% 3,093,536 3,073,440 Corporate Bonds & Notes Banks & A+ A1 2,000,000 BankAmerica Corp., 7.125% due 5/12/2005 1,975,735 2,015,080 Thrifts--18.1% A- A2 1,500,000 Chase Manhattan Bank Corp., 8.65% due 2/13/1999 1,558,680 1,570,035 A+ A1 1,000,000 Citicorp., 8.80% due 2/01/2000 1,000,000 1,001,950 BBB+ A3 2,000,000 First Interstate Bancorp, 9.90% due 11/15/2001 2,261,189 2,263,940 BBB+ A1 1,250,000 First Union Capital, 7.85% due 1/01/2027+++ 1,247,825 1,247,825 AA- Aa2 1,000,000 JPM Capital Trust, 7.54% due 1/15/2027 1,000,000 977,290 A A2 1,000,000 NationsBank Corp., 7.50% due 2/15/1997 999,945 1,001,870 Norwest Corp.: AA- Aa3 1,000,000 6.25% due 4/15/1999 997,476 1,000,800 A+ A1 2,000,000 6.625% due 3/15/2003 2,009,741 1,965,300 AA+ Aa2 1,000,000 Wachovia Bank, 6.55% due 6/09/1997 999,893 1,004,260 ----------- ----------- 14,050,484 14,048,350 Financial A+ A1 1,000,000 Ford Motor Credit Co., 7.75% due 3/15/2005 999,251 1,041,450 Services-- General Motors Acceptance Corp.: Captive--3.3% A- A3 1,000,000 6.625% due 10/01/2002 998,519 993,550 A- A3 500,000 7.40% due 9/01/2025 496,146 494,470 ----------- ----------- 2,493,916 2,529,470 Financial A+ A1 1,000,000 American General Finance Corp., 7.70% due Services-- 11/15/1997 996,707 1,013,400 Consumer-- AA- Aa3 1,000,000 Associates Corp. of North America, 5.25% 9.6% due 9/01/1998 983,553 985,390 A+ Aa3 2,000,000 CIT Group Holdings, Inc., 5.764% due 2/28/1997++ 1,999,919 2,000,100 A A2 1,000,000 Commercial Credit Corp., 6% due 4/15/2000 980,005 984,580 Equitable Life Assurance Society of the US+++: A A2 500,000 6.95% due 12/01/2005 473,549 490,490 A A2 1,000,000 7.70% due 12/01/2015 993,233 999,580 A+ A2 1,000,000 Transamerica Finance Corp., 6.80% due 3/15/1999 999,880 1,010,520 ----------- ----------- 7,426,846 7,484,060 Financial Bear Stearns Companies, Inc.: Services-- A A2 1,000,000 6.75% due 5/01/2001 997,270 1,002,370 Other--9.8% A A2 500,000 6.70% due 8/01/2003 462,318 491,995 Dean Witter, Discover & Co.: A A2 2,000,000 6.75% due 8/15/2000 1,994,537 2,014,500 A A2 1,000,000 6.30% due 1/15/2006 996,022 944,672 BBB+ Baa1 1,000,000 PaineWebber Group Inc., 8.875% due 3/15/2005 996,662 1,084,620 A+ A1 2,000,000 Travelers Corp. (The), 7.875% due 5/15/2025 2,027,424 2,088,980 ----------- ----------- 7,474,233 7,627,137
The Corporate Fund Accumulation Program, Inc. Schedule of Investments (continued) December 31, 1996
S&P Moody's Face Value Industry Rating Rating Amount Issue Cost (Note 1a) Corporate Bonds & Notes (continued) Industrial-- A+ A1 $2,000,000 Bass America, Inc., 6.625% due 3/01/2003 $ 1,921,497 $ 1,970,460 Consumer A A2 500,000 Disney Enterprises Inc.***, 6.85% due Goods--9.3% 1/10/2007+++ 499,666 499,645 AAA Aaa 2,000,000 Johnson & Johnson Co., 8.72% due 11/01/2024 2,018,823 2,225,360 A A2 1,125,000 May Department Stores Company (The), 10.625% due 11/01/2010 1,343,562 1,455,975 A A2 1,000,000 Philip Morris Companies, Inc., 9% due 1/01/2001 1,014,891 1,075,870 ----------- ----------- 6,798,439 7,227,310 Industrial-- A- A1 500,000 Dresser Industries, Inc., 7.60% due 8/15/2096 498,551 510,465 Energy--0.7% Industrial-- Lockheed Martin Corp.: Other--2.6% BBB+ A3 1,000,000 6.625% due 6/15/1998 999,905 1,007,710 BBB+ A3 1,000,000 6.55% due 5/15/1999 999,620 1,004,670 ----------- ----------- 1,999,525 2,012,380 Industrial-- A- A2 1,000,000 Columbia/HCA Healthcare Corp., 7.75% due Services--1.3% 7/15/2036 992,373 1,019,500 Transportation-- Southwest Airlines Co.: 3.4% A- A3 1,500,000 9.40% due 7/01/2001 1,695,629 1,630,500 A- A3 1,000,000 7.875% due 9/01/2007 994,729 1,032,790 ----------- ----------- 2,690,358 2,663,290 Utilities-- GTE Corporation: Communica- BBB+ A3 500,000 9.10% due 6/01/2003 549,358 557,745 tions--5.3% BBB+ A3 1,000,000 10.30% due 11/15/2017 1,077,727 1,082,450 AAA Aaa 500,000 Indiana Bell Telephone Co., Inc., 7.30% due 8/15/2026 499,156 507,420 AA Aa3 2,000,000 Southwestern Bell Telecommunications, Inc., 6.125% due 3/01/2000 2,005,040 1,987,160 ----------- ----------- 4,131,281 4,134,775 Utilities-- A+ A1 3,000,000 Georgia Power Co., 6.125% due 9/01/1999 2,984,583 2,983,140 Electric--6.5% AA- A1 1,000,000 Northern States Power Co., 7.125% due 7/01/2025 1,060,533 980,060 A A2 1,000,000 Virginia Electric & Power Co., 8.625% due 10/01/2024 982,136 1,081,898 ----------- ----------- 5,027,252 5,045,098 Utilities-- AA- A1 2,000,000 Consolidated Natural Gas Co., 8.75% due Gas--2.7% 6/01/1999 2,066,183 2,103,400 Yankee BBB+ A3 1,000,000 Bangkok Bank Public Company Ltd., 7.25% due Corporates*-- 9/15/2005 (b)+++ 992,080 977,740 14.4% AA- Aa3 1,500,000 CRA Finance Ltd., 6.50% due 12/01/2003 (c) 1,372,879 1,461,585 A A3 1,000,000 China Light & Power Company, Ltd., 7.50% due 4/15/2006 (b) 994,061 1,008,320 A+ A2 1,000,000 Grand Metropolitan Investment Corp., 8.625% due 8/15/2001 (b) 1,017,379 1,079,190 A+ A1 1,000,000 Ford Capital B.V., 9.50% due 6/01/2010 (e) 1,100,107 1,187,660
The Corporate Fund Accumulation Program, Inc. Schedule of Investments (concluded) December 31, 1996
S&P Moody's Face Value Industry Rating Rating Amount Issue Cost (Note 1a) Corporate Bonds & Notes (concluded) Yankee BBB+ A3 $1,000,000 HSBC Americas Inc., 7% due 11/01/2006 (b) $ 991,731 $ 987,200 Corporates* A+ A1 1,000,000 Petroliam Nasional Berhad, 6.875% (concluded) due 7/01/2003+++ 990,862 1,001,430 Pohang Iron & Steel Industries (d): A+ A2 1,000,000 7.375% due 5/15/2005 1,016,050 1,013,710 A+ A2 1,000,000 7.125% due 11/01/2006 998,889 997,270 A A2 1,500,000 Western Mining, 7.25% due 11/15/2013 (c) 1,518,938 1,486,425 ----------- ----------- 10,992,976 11,200,530 Yankee BBB A3 1,000,000 People's Republic of China, 6.625% due Sovereign*-- 1/15/2003 (a) 995,250 980,830 4.6% Province of Quebec (a): A+ A2 2,000,000 7.50% due 7/15/2002 2,035,231 2,060,800 A+ A2 500,000 8.80% due 4/15/2003 557,013 550,305 ----------- ----------- 3,587,494 3,591,935 Total Corporate Bonds & Notes--91.6% 70,229,911 71,197,700 Short-Term Securities Repurchase 1,286,000 UBS Securities Funding, Inc., purchased on Agreements** 12/31/1996 to yield 6.75% to 1/02/1997 1,286,000 1,286,000 - --1.7% Total Short-Term Securities--1.7% 1,286,000 1,286,000 Total Investments--97.2% $74,609,447 75,557,140 =========== Other Assets Less Liabilities--2.8% 2,191,281 ----------- Net Assets--100.0% $77,748,421 =========== *Corresponding industry groups for foreign bonds which are denominated in US dollars: (a)Government entity. (b)Financial institution. (c)Industrial; mining. (d)Industrial; steel. (e)Industrial; other. **Repurchase Agreements are fully collateralized by US Government & Agency Obligations. ***Formerly The Walt Disney Company. ++Floating Rate Note. +++Restricted security as to resale. The value of the Program's investment in restricted securities was approximately $5,217,000, representing 6.7% of net assets. Acquisition Value Issue Date Cost (Note 1a) Bangkok Bank Public Company Ltd., 7.25% due 9/15/2005 9/22/1995 $ 992,080 $ 977,740 Disney Enterprises Inc., 6.85% due 1/10/2007 12/18/1996 499,666 499,645 Equitable Life Assurance Society of the US: 6.95% due 12/01/2005 10/17/1996 473,549 490,490 7.70% due 12/01/2015 6/11/1996 993,233 999,580 First Union Capital, 7.85% due 1/01/2027 1/27/1996 1,247,825 1,247,825 Petroliam Nasional Berhad, 6.875% due 7/01/2003 7/25/1995 990,862 1,001,430 Total $5,197,215 $5,216,710 ========== ========== Ratings of issues shown have not been audited by Deloitte & Touche LLP. See Notes to Financial Statements.
The Corporate Fund Accumulation Program, Inc. Statement of Assets and Liabilities as of December 31, 1996 Assets: Investments, at value (identified cost--$74,609,447) (Note 1a) $ 75,557,140 Receivables: Securities sold $ 2,295,713 Interest 1,327,512 Capital shares sold 13,496 3,636,721 ------------ Prepaid registration fees and other assets (Note 1d) 138,626 ------------ Total assets 79,332,487 ------------ Liabilities: Payables: Securities purchased 1,249,188 Capital shares redeemed 58,672 Investment adviser (Note 2) 34,134 1,341,994 ------------ Accrued expenses and other liabilities 242,072 ------------ Total liabilities 1,584,066 ------------ Net Assets $ 77,748,421 ============ Net Assets Consist of: Common Stock, $.01 par value, 50,000,000 shares authorized $ 37,576 Paid-in capital in excess of par 78,529,617 Accumulated realized capital losses on investments--net (Note 5) (1,766,465) Unrealized appreciation on investments--net 947,693 ------------ Net Assets--Equivalent to $20.69 per share based on 3,757,574 shares outstanding $ 77,748,421 ============ See Notes to Financial Statements.
The Corporate Fund Accumulation Program, Inc. Statement of Operations for the Year Ended December 31, 1996 Investment Income (Note 1c): Interest and premium and discount earned $ 5,655,919 Expenses: Investment advisory fees (Note 2) $ 405,367 Transfer agent fees 253,609 Printing and shareholder reports 70,744 Registration fees (Note 1d) 50,992 Professional fees 44,942 Accounting services (Note 2) 35,910 Custodian fees 22,720 Directors' fees and expenses 15,936 Pricing fees 4,591 Other 4,388 ------------ Total expenses 909,199 ------------ Investment income--net 4,746,720 ------------ Realized & Unrealized Gain (Loss) on Investments--Net (Notes 1c & 3): Realized gain on investments--net 1,212,168 Change in unrealized appreciation on investments--net (4,788,096) ------------ Net Increase in Net Assets Resulting from Operations $ 1,170,792 ============ See Notes to Financial Statements.
The Corporate Fund Accumulation Program, Inc. Statements of Changes in Net Assets
For the Year Ended Dec. 31, Increase (Decrease) in Net Assets: 1996 1995 Operations: Investment income--net $ 4,746,720 $ 5,184,782 Realized gain on investments--net 1,212,168 1,240,812 Change in unrealized appreciation/depreciation on investments--net (4,788,096) 8,819,279 ------------ ------------ Net increase in net assets resulting from operations 1,170,792 15,244,873 ------------ ------------ Dividends to Shareholders (Note 1e): Investment income--net (4,746,847) (5,184,682) ------------ ------------ Net decrease in net assets resulting from dividends to shareholders (4,746,847) (5,184,682) ------------ ------------ Capital Share Transactions (Note 4): Net decrease in net assets resulting from capital share transactions (4,077,674) (7,545,314) ------------ ------------ Net Assets: Total increase (decrease) in net assets (7,653,729) 2,514,877 Beginning of year 85,402,150 82,887,273 ------------ ------------ End of year* $ 77,748,421 $ 85,402,150 ============ ============ *Undistributed investment income--net $ -- $ 100 ============ ============ See Notes to Financial Statements.
The Corporate Fund Accumulation Program, Inc. Financial Highlights
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: 1996 1995 1994 1993 1992 Per Share Operating Performance: Net asset value, beginning of year $ 21.59 $ 19.14 $ 21.55 $ 21.22 $ 21.76 -------- -------- -------- -------- -------- Investment income--net 1.23 1.28 1.18 1.31 1.46 Realized and unrealized gain (loss) on investments--net (.90) 2.45 (2.41) 1.24 (.03) -------- -------- -------- -------- -------- Total from investment operations .33 3.73 (1.23) 2.55 1.43 -------- -------- -------- -------- -------- Less dividends and distributions: Investment income--net (1.23) (1.28) (1.18) (1.29) (1.47) Realized gain on investments--net -- -- -- (.93) (.50) -------- -------- -------- -------- -------- Total dividends and distributions (1.23) (1.28) (1.18) (2.22) (1.97) -------- -------- -------- -------- -------- Net asset value, end of year $ 20.69 $ 21.59 $ 19.14 $ 21.55 $ 21.22 ======== ======== ======== ======== ======== Total Investment Return: Based on net asset value per share 1.69% 20.05% (5.78%) 12.20% 6.86% ======== ======== ======== ======== ======== Ratios to Average Net Assets: Expenses 1.12% 1.01% 1.10% 1.08% 1.12% ======== ======== ======== ======== ======== Investment income--net 5.84% 6.23% 5.80% 5.74% 6.72% ======== ======== ======== ======== ======== Supplemental Data: Net assets, end of year (in thousands) $ 77,748 $ 85,402 $ 82,887 $115,367 $ 90,892 ======== ======== ======== ======== ======== Portfolio turnover 77% 104% 122% 132% 65% ======== ======== ======== ======== ======== See Notes to Financial Statements.
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 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) 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 (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. (d) Prepaid registration fees--Prepaid registration fees are charged to expense as the related shares are issued. (e) Dividends to shareholders--Dividends from net investment income are declared and paid monthly. Distributions of capital gains are recorded on the ex-dividend dates. 2. Investment Advisory Agreement and Transactions with Affiliates: The Program has entered into an Investment Advisory Agreement with Fund Asset Management, L.P. ("FAM") The general partner of FAM is Princeton Services, Inc. ("PSI"), an indirect wholly-owned subsidiary of Merrill Lynch & Co., Inc. ("ML & Co."), which is the limited partner. FAM is responsible for the management of the Program's portfolio and provides the necessary personnel, facilities, equipment and certain other services necessary to the operations of the Program. For such services, the Program pays a monthly fee of 0.50%, on an annual basis, of the value of the Program's average daily net assets. FAM has entered into an Administrative Agreement with Merrill Lynch, Pierce, Fenner & Smith Inc. ("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 0.20%, on an annual basis, of the Program's average daily net assets. The Corporate Fund Accumulation Program, Inc. Notes to Financial Statements (concluded) During the year ended December 31, 1996, the Program paid Merrill Lynch Security Pricing Service, an affiliate of MLPF&S, $3,118 for security price quotations to compute the net assets 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, MLPF&S, and/or ML & Co. 3. Investments: Purchases and sales of investments, excluding short-term securities, for the year ended December 31, 1996 were $59,233,081 and $62,940,819, respectively. Net realized and unrealized gains as of December 31, 1996 were as follows: Realized Unrealized Gains Gains Long-term investments $1,212,168 $ 947,693 ---------- ---------- Total $1,212,168 $ 947,693 ========== ========== As of December 31, 1996, net unrealized appreciation for Federal income tax purposes aggregated $947,693 of which $1,334,352 related to appreciated securities and $386,659 related to depreciated securities. The aggregate cost of investments at December 31, 1996 for Federal income tax purposes was $74,609,447. 4. Capital Share Transactions: Transactions in capital shares were as follows: For the Year Ended Dollar December 31, 1996 Shares Amount Shares sold 943,053 $ 19,538,783 Shares issued to shareholders in reinvestment of dividends 221,170 4,567,096 ------------ ------------ Total issued 1,164,223 24,105,879 Shares redeemed (1,362,008) (28,183,553) ------------ ------------ Net decrease (197,785) $ (4,077,674) ============ ============ For the Year Ended Dollar December 31, 1995 Shares Amount Shares sold 691,078 $ 14,241,386 Shares issued to shareholders in reinvestment of dividends 236,055 4,837,718 ------------ ------------ Total issued 927,133 19,079,104 Shares redeemed (1,302,627) (26,624,418) ------------ ------------ Net decrease (375,494) $ (7,545,314) ============ ============ 5. Capital Loss Carryforward: At December 31, 1996, the Program had a net capital loss carryforward of approximately $1,766,000, all of which expires in 2002. This amount will be available to offset like amounts of any future taxable gains. 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, 1996, 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, 1996 by correspondence with the custodian and brokers. 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, 1996, the results of its operations, and 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 3, 1997 Officers and Directors Arthur Zeikel--President and Director Ronald W. Forbes--Director Cynthia A. Montgomery--Director Charles C. Reilly--Director Kevin A. Ryan--Director Richard R. West--Director Terry K. Glenn--Executive Vice President N. John Hewitt--Senior Vice President Donald C. Burke--Vice President Jay C. Harbeck--Vice President Gerald M. Richard--Treasurer Susan B. Baker--Secretary Custodian and Transfer Agent The Bank of New York 90 Washington Street New York, New York 10286 -----END PRIVACY-ENHANCED MESSAGE-----