Exhibit 17(k)
(BULL LOGO)
Merrill Lynch Investment Managers
Semi-Annual Report
June 30, 2002
(BULL LOGO)
Merrill Lynch Investment Managers
- ----------------------------------------
| (GRAPHICS OMITTED)
This report is not authorized for The Corporate Fund
use as an offer of sale or a Accumulation
solicitation of an offer to buy Program, Inc.
shares of the Program unless
accompanied or preceded by the
Program's current prospectus. The
Corporate Fund 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. The
investment objective of the Program
is to provide shareholders with a
high level of current income by
investing in long- and
intermediate-term bonds that are
primarily corporate bonds or notes.
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 | #CIAP1-6/02 www.mlim.ml.com
To Our Shareholders:
- -------------------------------------------------------------------------------
For the six months ended June 30, 2002, The Corporate Fund Accumulation
Program, Inc. provided a total investment return of +2.28%, based on a change
in per share net asset value from $20.91 to $20.90, and assuming reinvestment
of $0.478 per share income dividends. (Complete performance information can be
found on page 3 of this report to shareholders.)
Market Review
Real gross domestic product (GDP) grew at a strong 6.1% annual rate for the
first quarter of 2002, with real final demand growing at a robust 2.6%. The
slower pace of inventory liquidation and the increase of another 14% in
federal outlays contributed to first quarter GDP growth. While growth was
quite strong, the labor market remained somewhat weak. Although initial and
continuing jobless claims fell in the last week of April, they remain
stubbornly high relative to recent history. The drop in durable goods orders
for March, along with the drop in the Institute for Supply Management
manufacturing index for April, suggests that business equipment spending
remains weak. The Federal Reserve Board's "beige book" paints a picture of an
economy that is expanding with scant evidence of follow through in capital
spending. With banks tightening their lending standards, the business
equipment area will take some time to recover.
Fundamental economic news became somewhat less relevant last month, as the
crisis of confidence in the very foundations of the U.S. economic system
dominated market sentiment. Much of the sell-off in the equity and corporate
bond markets through the first half of the year could be attributed to an
increasing lack of faith in corporate governance, the accounting industry,
Wall Street analysts, rating agencies and even regulatory bodies. Greater
scrutiny of corporations and their past behavior, however, is affecting not
only current valuations of the equity and bond markets but also future
business activity. There is strong evidence that corporations are continuing
to cut costs and capital spending and instead use free cash flow to reduce
their debt levels. Even as these efforts have clear positive implications in
the long run, they do come at the expense of a slowdown in business activity
and increased unemployment in the short run.
U.S. Treasury yields declined quite sharply in June, as concerns about
corporate accountability, geo-political issues and the threat of terrorism on
U.S. soil led to a "flight to quality," despite increasing evidence of an
economic recovery, worsening budget and trade deficits and a weaker dollar. It
is quite likely that the corporate market will remain under some uncertainty
for the next few months, as second-quarter earnings announcements and the
potential adverse rating agency actions run their course, not to mention the
near-certain regulatory and legislative responses. However, given the
improving fundamentals for corporates, we remain holders of corporate debt,
but with a clear bias for specific sectors and securities.
Portfolio Matters
In January 2002, we believed that we were seeing an end to the severe market
turmoil caused by the extraordinary events of 2001 including a terrorist
attack of extraordinary proportion, the nation's largest bankruptcy and
headline volatility in the safe havens of the bond market. In actuality, we
moved on to an extension of those events and the resultant worst credit market
in history.
During the first six months of 2002, we began to increase the proportion of
our lower investment-grade bonds with the hope of an improving economic cycle.
In March, GDP was strong and renewed issuance of new bonds firmed the general
tone in the marketplace. We were able to take advantage of the more
inexpensively priced new issues and enhance the yield on the portfolio.
In the second quarter of 2002, renewed pressure on energy and
telecommunications companies began to drive corporate bond investors to
higher-quality issues. The holdings in the Program rated in the BBB category
began to suffer price declines in the face of weak demand for such bonds. We
sold
1
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many of our BBB holdings in the beginning of the second quarter including
WorldCom, Inc. and Qwest Communications International Inc. as well as energy
companies such as The Williams Companies, Inc. and El Paso Corporation before
much of these companies' deterioration was evident in the marketplace. We
reinvested the proceeds of these sales in higher-rated corporate bonds,
anticipating better performance for higher-quality bonds. For the
year-to-date, spreads on banks tightened eight basis points (0.08%) and real
estate investment trusts tightened 51 basis points, while media bonds and
telecommunications issues widened 65 basis points and 154 basis points,
respectively, during the same period.
Similarly, spreads to Treasury bonds increased more for the lower-rated
issues than for higher-quality bonds. Consequently, the Program was able to
achieve solid performance results for the six months ended June 30, 2002.
We believe that the bifurcated market in corporate bonds will continue as
legislators and business leaders struggle with the issues of corporate
governance and accounting veracity. Until we see evidence of a calming of
these concerns and greater stability to the economic recovery, we will
continue to seek the capital preservation offered by higher-quality
industries.
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
(Melinda A. Raso)
Melinda A. Raso
Vice President and Portfolio Manager
(Robert R. Peterson Jr.)
Robert R. Peterson Jr.
Vice President and Portfolio Manager
August 1, 2002
_______________________________________________________________________________
We are pleased to announce that Melinda A. Raso and Robert R. Peterson Jr. are
responsible for the day-to-day management of The Corporate Fund Accumulation
Program, Inc. Ms. Raso joined Merrill Lynch Investment Managers, L.P. (MLIM)
in 1982 and is currently Vice President and Portfolio Manager. Mr. Peterson
joined MLIM in 1989 and is Managing Director in the Taxable Fixed Income area.
_______________________________________________________________________________
2
_______________________________________________________________________________
The Corporate Fund Accumulation Program, Inc.
About Fund Performance
- -------------------------------------------------------------------------------
None of the past results shown should be considered a representation of future
performance. Performance results do not reflect the deduction of taxes that a
shareholder would pay on fund distributions or the redemption of fund shares.
Figures shown in the "Recent Performance Results" and "Average Annual Total
Return" tables assume reinvestment of all dividends and capital gains
distributions at net asset value on the payable date. Investment return and
principal value of shares will fluctuate so that shares, when redeemed, may be
worth more or less than their original cost.
_______________________________________________________________________________
Recent Performance Results
- -------------------------------------------------------------------------------
6-Month 12-Month Standardized
As of June 30, 2002 Total Return Total Return 30-Day Yield
- ---------------------------------------------------------------------------------------------------
The Corporate Fund Accumulation Program, Inc.* +2.28% +7.18% 4.53%
- ---------------------------------------------------------------------------------------------------
ML Corporate A-AAA Rated Index** +3.94 +9.43 --
- ---------------------------------------------------------------------------------------------------
*Total investment returns are based on changes in net asset values for the
periods shown, and assume reinvestment of all dividends and capital gains
distributions at net asset value on the payable date.
**This unmanaged Index is comprised of bonds rated A-AAA, of all maturities.
_______________________________________________________________________________
Average Annual Total Return
- -------------------------------------------------------------------------------
Period Covered % Return
One Year Ended 6/30/02 +7.18%
Five Years Ended 6/30/02 +6.05
Ten Years Ended 6/30/02 +6.37
3
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The Corporate Fund Accumulation Program, Inc.
Schedule of Investments as of June 30, 2002
- -------------------------------------------------------------------------------
S&P Moody's Face
Industry Rating Rating Amount Issue Value
- ---------------------------------------------------------------------------------------------------------------------------
U.S. Government Obligations
- ---------------------------------------------------------------------------------------------------------------------------
U.S. Government U.S. Treasury Bonds:
Obligations-- AAA Aaa $ 100,000 6.125% due 8/15/2007 .................................... $ 108,994
0.9% AAA Aaa 129,000 4.875% due 2/15/2012 .................................... 129,484
U.S. Treasury Notes:
AAA Aaa 200,000 4.375% due 5/15/2007 .................................... 202,750
AAA Aaa 45,000 5.375% due 2/15/2031 .................................... 44,065
- ---------------------------------------------------------------------------------------------------------------------------
Total U.S. Government Obligations
(Cost--$479,744)--0.9% 485,293
- ---------------------------------------------------------------------------------------------------------------------------
Corporate Bonds
- ---------------------------------------------------------------------------------------------------------------------------
Aerospace & BBB- Baa3 150,000 Northrop Grumman Corporation, 7.125% due 2/15/2011 ......... 159,759
Defense-- BBB- Baa3 250,000 Raytheon Company, 6.75% due 3/15/2018 ...................... 252,340
0.8% -----------
412,099
- ---------------------------------------------------------------------------------------------------------------------------
Automotive & BBB Baa2 100,000 Delphi Auto Systems Corporation, 6.55% due 6/15/2006 ....... 104,267
Equipment-- BBB+ Baa1 535,000 Ford Motor Company, 7.45% due 7/16/2031 .................... 498,003
1.1% -----------
602,270
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Banks & A- A2 100,000 BB&T Corporation, 6.50% due 8/01/2011 ...................... 104,612
Thrifts--19.5% A- A1 400,000 Banc One Corp., 8% due 4/29/2027 ........................... 458,693
A Aa3 603,000 Bank of America Corporation, 7.40% due 1/15/2011 ........... 660,407
A+ Aa2 500,000 The Bank of New York, 5.20% due 7/01/2007 .................. 509,768
A Aa3 800,000 Bank One Corp., 6.875% due 8/01/2006 ....................... 864,563
A+ Aa2 1,400,000 BankAmerica Corp., 5.875% due 2/15/2009 .................... 1,411,565
Citigroup Inc.:
AA- Aa1 950,000 5.70% due 2/06/2004 ..................................... 988,022
A+ Aa2 355,000 6.625% due 6/15/2032 .................................... 343,210
A A1 800,000 FleetBoston Financial Corp., 7.25% due 9/15/2005 ........... 869,975
A A1 500,000 HSBC Holding PLC, 7.50% due 7/15/2009 ...................... 557,506
A+ A1 1,160,000 J.P. Morgan Chase & Co., 6.625% due 3/15/2012 .............. 1,192,961
A A2 400,000 Mellon Financial Co., 6.875% due 3/01/2003 ................. 412,202
A- A2 500,000 Regions Financial Corporation, 6.375% due 5/15/2012 ........ 514,649
BBB+ A3 400,000 Washington Mutual Inc., 7.50% due 8/15/2006 ................ 432,665
Wells Fargo Company:
A+ Aa2 400,000 7.25% due 8/24/2005 ..................................... 435,694
A+ Aa2 900,000 5.125% due 2/15/2007 .................................... 910,583
-----------
10,667,075
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Chemicals-- BBB+ A3 500,000 Praxair Inc., 6.375% due 4/01/2012 ......................... 518,465
1.0%
- ---------------------------------------------------------------------------------------------------------------------------
Financial Ford Motor Credit Company:
Services-- BBB+ A3 615,000 7.50% due 6/15/2003 ..................................... 635,916
Captive--8.2% BBB+ A3 1,250,000 6.875% due 2/01/2006 .................................... 1,278,832
BBB+ A3 218,000 7.375% due 2/01/2011 .................................... 220,810
General Motors Acceptance Corporation:
BBB+ A2 1,033,000 6.85% due 6/17/2004 ..................................... 1,080,280
BBB+ A2 1,000,000 7.75% due 1/19/2010 ..................................... 1,058,096
BBB+ A2 181,000 8% due 11/01/2031 ....................................... 185,118
-----------
4,459,052
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Financial Countrywide Home Loan:
Services-- A A3 400,000 5.25% due 6/15/2004 ..................................... 411,182
Consumer-- A A3 1,000,000 5.625% due 5/15/2007 .................................... 1,022,561
5.4%
4
_______________________________________________________________________________
The Corporate Fund Accumulation Program, Inc.
Schedule of Investments as of June 30, 2002 (continued)
- -------------------------------------------------------------------------------
S&P Moody's Face
Industry Rating Rating Amount Issue Value
- ---------------------------------------------------------------------------------------------------------------------------
Corporate Bonds (continued)
- ---------------------------------------------------------------------------------------------------------------------------
Financial Household Financial Corporation:
Services-- A A2 $1,200,000 6.50% due 1/24/2006 ..................................... $ 1,226,863
Consumer A A2 100,000 7.875% due 3/01/2007 .................................... 106,657
(concluded) A A2 200,000 6.75% due 5/15/2011 ..................................... 196,845
-----------
2,964,108
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Financial BBB+ A2 260,000 AT&T Capital Corporation, 6.60% due 5/15/2005 .............. 247,782
Services-- A+ A3 130,000 Boeing Capital Corporation, 7.10% due 9/27/2005 ............ 140,663
Other--17.1% BBB+ A2 750,000 CIT Group Inc., 7.375% due 4/02/2007 ....................... 750,079
BBB- Baa2 121,000 Capital One Bank, 6.50% due 7/30/2004 ...................... 122,222
AA- Aa3 250,000 Credit Suisse First Boston Inc., 6.125% due 11/15/2011 ..... 245,588
AAA Aaa 520,000 General Electric Capital Corporation, 6.75% due 3/15/2032 .. 510,782
Goldman Sachs Group, Inc.:
A+ A1 700,000 7.625% due 8/17/2005 .................................... 767,136
A+ A1 300,000 6.875% due 1/15/2011 .................................... 311,023
AA- A1 250,000 International Lease Finance Corporation, 5.50%
due 6/07/2004 .............................................. 257,698
Lehman Brothers Holdings, Inc.:
A A2 600,000 6.625% due 4/01/2004 .................................... 629,370
A A2 400,000 7% due 2/01/2008 ........................................ 428,211
A A2 709,000 7.875% due 8/15/2010 .................................... 776,655
BBB Baa2 500,000 MBNA America Bank NA, 6.625% due 6/15/2012 ................. 502,382
A+ A1 1,000,000 Mellon Funding Corporation, 4.875% due 6/15/2007 ........... 1,006,373
AA- Aa3 900,000 Morgan Stanley, Dean Witter, Discover & Co., 7.125%
due 1/15/2003 .............................................. 923,625
AA- Aa1 1,000,000 Salomon Smith Barney Holdings, 5.875% due 3/15/2006 ........ 1,045,095
Texaco Capital Inc.:
AA Aa3 100,000 8.625% due 6/30/2010 .................................... 119,276
AA Aa3 50,000 8.625% due 11/15/2031 ................................... 64,505
A+ A1 500,000 Verizon Global Funding Corporation, 6.75% due 12/01/2005 ... 518,225
-----------
9,366,690
- ---------------------------------------------------------------------------------------------------------------------------
Foods--3.4% A A2 250,000 Coca-Cola Enterprises, 6.125% due 8/15/2011 ................ 257,454
A- A2 230,000 Kraft Foods Inc., 4.625% due 11/01/2006 .................... 229,140
A A1 670,000 Pepsi Bottling Holdings Inc., 5.625% due 2/17/2009 (a) ..... 680,788
BBB Baa3 650,000 Tyson Foods, Inc., 6.625% due 10/01/2004 ................... 677,643
-----------
1,845,025
- ---------------------------------------------------------------------------------------------------------------------------
Forest BBB Baa2 250,000 Weyerhaeuser Company, 5.95% due 11/01/2008 ................. 252,637
Products--0.5%
- ---------------------------------------------------------------------------------------------------------------------------
Industrial-- Anheuser-Busch Companies Inc.:
Consumer A+ A1 380,000 7.50% due 3/15/2012 ..................................... 437,117
Goods--5.1% A+ A1 250,000 6% due 11/01/2041 ....................................... 233,297
A- A3 1,000,000 Kohl's Corporation, 6.30% due 3/01/2011 .................... 1,031,509
AA Aa2 1,000,000 Wal-Mart Stores, Inc., 6.875% due 8/10/2009 ................ 1,098,479
-----------
2,800,402
- ---------------------------------------------------------------------------------------------------------------------------
Industrial-- Atlantic Richfield Company:
Energy--2.6% AA+ Aa1 100,000 5.90% due 4/15/2009 ..................................... 103,824
AA+ Aa1 60,000 8.44% due 2/21/2012 ..................................... 72,473
Conoco Inc.:
BBB+ Baa1 180,000 5.90% due 4/15/2004 ..................................... 187,467
BBB+ Baa1 100,000 6.95% due 4/15/2029 ..................................... 102,198
A+ A1 130,000 Consolidated Edison Inc., 7.15% due 12/01/2009 ............. 142,102
BBB Baa2 47,000 Duke Energy Field Services, 8.125% due 8/16/2030 ........... 48,889
BBB- Baa3 200,000 Ocean Energy Inc., 7.25% due 10/01/2011 .................... 209,848
5
_______________________________________________________________________________
The Corporate Fund Accumulation Program, Inc.
Schedule of Investments as of June 30, 2002 (continued)
- -------------------------------------------------------------------------------
S&P Moody's Face
Industry Rating Rating Amount Issue Value
- ---------------------------------------------------------------------------------------------------------------------------
Corporate Bonds (continued)
- ---------------------------------------------------------------------------------------------------------------------------
Industrial-- BBB Baa1 $ 360,000 Progress Energy Inc., 5.85% due 10/30/2008 ................. $ 362,554
Energy BBB+ A3 160,000 Teco Energy Inc., 7% due 5/01/2012 ......................... 167,796
(concluded) -----------
1,397,151
- ---------------------------------------------------------------------------------------------------------------------------
Industrial-- Alcan Inc.:
Manufacturing-- A- A2 500,000 6.45% due 3/15/2011 ..................................... 523,295
1.1% A- A2 65,000 7.25% due 3/15/2031 ..................................... 70,222
-----------
593,517
- ---------------------------------------------------------------------------------------------------------------------------
Industrial-- A+ A1 640,000 First Data Corporation, 6.75% due 7/15/2005 ................ 690,324
Services-- BBB- Baa3 460,000 News America Inc., 7.25% due 5/18/2018 ..................... 434,638
3.2% BBB+ Baa1 200,000 Time Warner Entertainment, 7.25% due 9/01/2008 ............. 200,915
A- A3 410,000 Viacom Inc., 7.875% due 7/30/2030 .......................... 445,225
-----------
1,771,102
- ---------------------------------------------------------------------------------------------------------------------------
Insurance-- A+ A1 1,000,000 Allstate Corp., 6.75% due 5/15/2018 ........................ 1,009,909
6.4% AA- Aa3 1,000,000 Chubb Corporation, 6% due 11/15/2011 ....................... 1,012,010
A+ A2 230,000 John Hancock Financial Services, 5.625% due 12/01/2008 ..... 234,114
A A2 1,240,000 MetLife Inc., 6.125% due 12/01/2011 ........................ 1,265,232
-----------
3,521,265
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Medical--1.1% Tenet Healthcare Corporation:
BBB Baa3 300,000 5.375% due 11/15/2006 ................................... 303,173
BBB Baa3 320,000 6.875% due 11/15/2031 ................................... 315,006
-----------
618,179
- ---------------------------------------------------------------------------------------------------------------------------
Oil--0.9% A- Baa1 500,000 Murphy Oil Corporation, 6.375% due 5/01/2012 ............... 509,631
- ---------------------------------------------------------------------------------------------------------------------------
Real Estate BBB+ Baa1 310,000 EOP Operating LP, 7.375% due 11/15/2003 .................... 324,331
Investment BBB Baa2 500,000 New Plan Excel Realty Trust, 7.40% due 9/15/2009 ........... 509,761
Trust--4.2% BBB+ Baa1 940,000 Prologis Trust, 7% due 10/01/2003 .......................... 973,126
BBB Baa1 500,000 Simon Property Group LP, 7% due 6/15/2008 .................. 504,197
-----------
2,311,415
- ---------------------------------------------------------------------------------------------------------------------------
Special AA Aa2 1,000,000 Principal Life Global, 6.25% due 2/15/2012 (a) ............. 1,024,738
Services--1.9%
- ---------------------------------------------------------------------------------------------------------------------------
Supranational-- A A2 575,000 Corp Andina de Fomento, 6.875% due 3/15/2012 (a) ........... 589,845
1.1%
- ---------------------------------------------------------------------------------------------------------------------------
Transporta- AAA Aaa 500,000 Continental Airlines, 6.563% due 2/15/2012 ................. 520,640
tion--2.8% Southwest Airlines Co.:
A Baa1 630,000 8% due 3/01/2005 ........................................ 690,387
A Baa1 300,000 7.875% due 9/01/2007 .................................... 338,691
-----------
1,549,718
- ---------------------------------------------------------------------------------------------------------------------------
Utilities-- A A2 300,000 Alltel Corporation, 7% due 7/01/2012 ....................... 299,334
Communi- AA- Aa3 400,000 Ameritech Capital Funding, 6.45% due 1/15/2018 ............. 396,501
cations--4.8% A+ Aa3 300,000 BellSouth Corporation, 6% due 10/15/2011 ................... 303,264
A+ A2 1,170,000 GTE Corporation, 6.84% due 4/15/2018 ....................... 1,076,795
AA- Aa3 200,000 SBC Communications Inc., 6.25% due 3/15/2011 ............... 204,757
BBB- Baa3 400,000 Sprint Capital Corporation, 5.70% due 11/15/2003 ........... 355,448
-----------
2,636,099
- ---------------------------------------------------------------------------------------------------------------------------
Utilities-- A A1 260,000 Mississippi Power, 6.05% due 5/01/2003 ..................... 266,472
Electric--2.2% South Carolina Electric & Gas:
A A1 590,000 7.50% due 6/15/2005 ..................................... 642,600
A A1 260,000 6.70% due 2/01/2011 ..................................... 274,186
-----------
1,183,258
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6
_______________________________________________________________________________
The Corporate Fund Accumulation Program, Inc.
Schedule of Investments as of June 30, 2002 (concluded)
- -------------------------------------------------------------------------------
S&P Moody's Face
Industry Rating Rating Amount Issue Value
- ---------------------------------------------------------------------------------------------------------------------------
Corporate Bonds (concluded)
- ---------------------------------------------------------------------------------------------------------------------------
Yankee A A1 $ 200,000 BSCH Issuances Ltd., 7.625% due 9/14/2010 (1) .............. $ 219,284
Corporates*-- A- Baa1 400,000 British Telecom PLC, 8.375% due 12/15/2010 (3) ............. 435,279
2.1% BBB+ A3 300,000 Daimler-Chrysler NA Holdings, 6.40% due 5/15/2006 (2) ...... 311,478
A A2 200,000 Norsk Hydro A/S, 6.36% due 1/15/2009 (2) ................... 206,836
-----------
1,172,877
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Total Corporate Bonds
(Cost--$51,672,255)--96.5% 52,766,618
- ---------------------------------------------------------------------------------------------------------------------------
Short-Term Securities
- ---------------------------------------------------------------------------------------------------------------------------
Repurchase 650,000 UBS Warburg Corp. LLC, purchased on 6/28/2002 to yield
Agreements**--1.2% 1.90% to 7/01/2002 ......................................... 650,000
- ---------------------------------------------------------------------------------------------------------------------------
Total Short-Term Securities
(Cost--$650,000)--1.2% ..................................... 650,000
- ---------------------------------------------------------------------------------------------------------------------------
Total Investments (Cost--$52,801,999)--98.6% ............... 53,901,911
Other Assets Less Liabilities--1.4% ........................ 787,925
-----------
Net Assets--100.0% ......................................... $54,689,836
===========
- ---------------------------------------------------------------------------------------------------------------------------
*Corresponding industry groups for foreign bonds:
(1)Financial institution.
(2)Industrial; other.
(3)Telecommunications.
**Repurchase Agreements are fully collateralized by U.S. Government
Obligations.
(a)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.
7
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The Corporate Fund Accumulation Program, Inc.
Statement of Assets and Liabilities as of June 30, 2002
- -------------------------------------------------------------------------------
Assets:
Investments, at value (identified cost--$52,801,999) ................................ $ 53,901,911
Cash ................................................................................ 592
Interest receivable ................................................................. 896,874
Prepaid registration fees and other assets .......................................... 42,137
-------------
Total assets ........................................................................ 54,841,514
-------------
Liabilities:
Payables:
Capital shares redeemed ........................................................... $ 43,516
Investment adviser ................................................................ 21,057 64,573
-------------
Accrued expenses .................................................................... 87,105
-------------
Total liabilities ................................................................... 151,678
-------------
Net Assets $ 54,689,836
=============
Net Assets Consist of:
Common Stock, $.01 par value, 50,000,000 shares authorized .......................... $ 26,167
Paid-in capital in excess of par .................................................... 55,144,340
Undistributed investment income--net ................................................ $ 79,048
Accumulated realized capital losses on investments--net ............................. (1,659,631)
Unrealized appreciation on investments--net ......................................... 1,099,912
-------------
Total accumulated losses--net ....................................................... (480,671)
-------------
Net Assets--Equivalent to $20.90 per share based on 2,616,738 shares outstanding .... $ 54,689,836
=============
See Notes to Financial Statements.
8
_______________________________________________________________________________
The Corporate Fund Accumulation Program, Inc.
Statement of Operations for the Six Months Ended June 30, 2002
- -------------------------------------------------------------------------------
Investment Income:
Interest ............................................................................ $ 1,674,509
Expenses:
Investment advisory fees ............................................................ $ 138,373
Transfer agent fees ................................................................. 67,803
Printing and shareholder reports .................................................... 24,925
Professional fees ................................................................... 22,369
Accounting services ................................................................. 21,239
Registration fees ................................................................... 8,904
Pricing services .................................................................... 7,747
Directors' fees and expenses ........................................................ 6,302
Custodian fees ...................................................................... 5,420
Other ............................................................................... 3,966
-------------
Total expenses ...................................................................... 307,048
-------------
Investment income--net .............................................................. 1,367,461
-------------
Realized & Unrealized Gain (Loss) on Investments--Net:
Realized loss on investments--net ................................................... (767,448)
Change in unrealized appreciation on investments--net ............................... 630,028
-------------
Total realized and unrealized loss on investments--net .............................. (137,420)
-------------
Net Increase in Net Assets Resulting from Operations ................................ $ 1,230,041
=============
See Notes to Financial Statements.
9
_______________________________________________________________________________
The Corporate Fund Accumulation Program, Inc.
Statements of Changes in Net Assets
- -------------------------------------------------------------------------------
For the Six For the
Months Ended Year Ended
Increase (Decrease) in Net Assets: June 30, 2002 Dec. 31, 2001
- --------------------------------------------------------------------------------------------------------------------------
Operations:
Investment income--net .............................................................. $ 1,367,461 $ 3,074,492
Realized gain (loss) on investments--net ............................................ (767,448) 2,507,016
Change in unrealized appreciation on investments--net ............................... 630,028 (804,930)
------------- -------------
Net increase in net assets resulting from operations ................................ 1,230,041 4,776,578
------------- -------------
Dividends to Shareholders:
Dividends to shareholders from investment income--net ............................... (1,288,420) (3,074,485)
------------- -------------
Capital Share Transactions:
Net decrease in net assets resulting from capital share transactions ................ (4,430,639) (1,490,014)
------------- -------------
Net Assets:
Total increase (decrease) in net assets ............................................. (4,489,018) 212,079
Beginning of period ................................................................. 59,178,854 58,966,775
------------- -------------
End of period* ...................................................................... $ 54,689,836 $ 59,178,854
============= =============
- --------------------------------------------------------------------------------------------------------------------------
*Undistributed investment income--net ............................................... $ 79,048 $ 7
============= =============
- --------------------------------------------------------------------------------------------------------------------------
See Notes to Financial Statements.
10
_______________________________________________________________________________
The Corporate Fund Accumulation Program, Inc.
Financial Highlights
- -------------------------------------------------------------------------------
The following per share data and ratios For the Six
have been derived from information Months
provided in the financial statements. Ended For the Year Ended December 31,
June 30, ------------------------------------------------
Increase (Decrease) in Net Asset Value: 2002 2001 2000 1999 1998
- ------------------------------------------------------------------------------------------------------------------------
Per Share Operating Performance:
Net asset value, beginning of period ..................... $ 20.91 $ 20.34 $ 19.77 $ 21.62 $ 21.13
-------- -------- -------- -------- --------
Investment income--net++ .50 1.08 1.21 1.17 1.19
Realized and unrealized gain (loss) on investments--net .. (.03) .57 .58 (1.84) .50
-------- -------- -------- -------- --------
Total from investment operations ......................... .47 1.65 1.79 (.67) 1.69
-------- -------- -------- -------- --------
Less dividends:
Investment income--net ................................. (.48) (1.08) (1.22) (1.18) (1.20)
In excess of investment income--net .................... -- -- -- --++++ --
-------- -------- -------- -------- --------
Total dividends .......................................... (.48) (1.08) (1.22) (1.18) (1.20)
-------- -------- -------- -------- --------
Net asset value, end of period ........................... $ 20.90 $ 20.91 $ 20.34 $ 19.77 $ 21.62
======== ======== ======== ======== ========
Total Investment Return:
Based on net asset value per share ....................... 2.28%+++ 8.32% 9.21% (3.14%) 8.24%
======== ======== ======== ======== ========
Ratios to Average Net Assets:
Expenses ................................................. 1.11%* 1.22% 1.10% 1.11% 1.00%
======== ======== ======== ======== ========
Investment income--net ................................... 4.94%* 5.17% 6.16% 5.69% 5.60%
======== ======== ======== ======== ========
Supplemental Data:
Net assets, end of period (in thousands) ................. $ 54,690 $ 59,179 $ 58,967 $ 63,150 $ 71,131
======== ======== ======== ======== ========
Portfolio turnover ....................................... 49% 227% 127% 61% 66%
======== ======== ======== ======== ========
*Annualized.
++Based on average shares outstanding.
++++Amount is less than $.01 per share.
+++Aggregate total investment return.
See Notes to Financial Statements.
11
_______________________________________________________________________________
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
conformity 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 investments--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 U.S. 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).
Realized gains and losses on security transactions are determined on the
identified cost basis. Interest income is recognized on the accrual 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.
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
12
_______________________________________________________________________________
The Corporate Fund Accumulation Program, Inc.
Notes to Financial Statements (continued)
- -------------------------------------------------------------------------------
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"), a subsidiary of ML & Co., Prudential
Securities, Inc., Morgan Stanley Dean Witter 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.
For the six months ended June 30, 2002, the Program paid Merrill Lynch
Security Pricing Service, an affiliate of MLPF&S, $3,096 for security price
quotations to compute the net asset value of the Program.
For the six months ended June 30, 2002, the Fund reimbursed FAM $2,013 for
certain accounting services.
3. Investments:
Purchases and sales of investments, excluding short-term securities, for the
six months ended June 30, 2002 were $26,917,326 and $30,740,474, respectively.
Net realized losses for the six months ended June 30, 2002 and net unrealized
gains as of June 30, 2002 were as follows:
- -------------------------------------------------------------------------------
Realized Unrealized
Losses Gains
- -------------------------------------------------------------------------------
Long-term investments ......................... $ (767,448) $ 1,099,912
----------- -----------
Total ......................................... $ (767,448) $ 1,099,912
=========== ===========
- -------------------------------------------------------------------------------
As of June 30, 2002, net unrealized appreciation for Federal income tax
purposes aggregated $1,099,912, of which $1,384,511 related to appreciated
securities and $284,599 related to depreciated securities. The aggregate cost
of investments at June 30, 2002 for Federal income tax purposes was
$52,801,999.
4. Capital Share Transactions:
Transactions in capital shares were as follows:
- -------------------------------------------------------------------------------
For the Six Months Dollar
Ended June 30, 2002 Shares Amount
- -------------------------------------------------------------------------------
Shares sold ................................... 90,370 $ 1,881,383
Shares issued to shareholders
in reinvestment of dividends .................. 57,398 1,191,123
------------- -------------
Total issued .................................. 147,768 3,072,506
Shares redeemed ............................... (360,902) (7,503,145)
------------- -------------
Net decrease .................................. (213,134) $ (4,430,639)
============= =============
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
For the Year Ended Dollar
December 31, 2001 Shares Amount
- -------------------------------------------------------------------------------
Shares sold............................. 336,128 $ 6,961,715
Shares issued to shareholders
in reinvestment of dividends............ 138,199 2,855,145
------------- -------------
Total issued............................ 474,327 9,816,860
Shares redeemed......................... (544,209) (11,306,874)
------------- -------------
Net decrease............................ (69,882) $ (1,490,014)
============= =============
- -------------------------------------------------------------------------------
5. Short-Term Borrowings:
The Program, along with certain other funds managed by FAM and its affiliates,
is a party to a $1,000,000,000 credit agreement with Bank One, N.A. and
certain other lenders. The Program may borrow under the credit agreement to
fund shareholder redemptions and for other lawful purposes other than for
leverage. The Program may borrow up to the maximum amount allowable under the
Program's current prospectus and statement of additional information, subject
to various other legal, regulatory or contractual limits.
13
_______________________________________________________________________________
The Corporate Fund Accumulation Program, Inc.
Notes to Financial Statements (continued)
- -------------------------------------------------------------------------------
The Program pays a commitment fee of .09% per annum based on the Program's pro
rata share of the unused portion of the credit agreement. Amounts borrowed
under the credit agreement bear interest at a rate equal to, at each fund's
election, the Federal Funds rate plus .50% or a base rate as determined by
Bank One, N.A. On November 30, 2001, the credit agreement was renewed for one
year under the same terms. The Program did not borrow under the credit
agreement during the six months ended June 30, 2002.
6. Capital Loss Carryforward:
On December 31, 2001, the Program had a net capital loss carryforward of
$882,531, all of which expires in 2008. This amount will be available to
offset like amounts of any future taxable gains.
7. Subsequent Event:
On July 15, 2002, an ordinary income dividend of $.077302 was declared. The
dividend was paid on July 15, 2002, to shareholders of record on July 15,
2002.
14
_______________________________________________________________________________
The Corporate Fund Accumulation Program, Inc.
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
Roscoe S. Suddarth--Director
Richard R. West--Director
Edward D. Zinbarg--Director
Robert R. Peterson Jr.--Vice President
Melinda Raso--Vice President
Donald C. Burke--Vice President and Treasurer
David Clayton--Secretary
Custodian and Transfer Agent
The Bank of New York
90 Washington Street
New York, NY 10286
15