Exhibit 17(j)
(BULL LOGO)
Merrill Lynch Investment Managers
Annual Report
December 31, 2001
(BULL LOGO)
Merrill Lynch Investment Managers
- ----------------------------------
| (GRAPHICS OMITTED)
The Corporate Fund
This report is not authorized for Accumulation
use as an offer of sale or a Program, Inc.
solicitation of an offer to buy
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 www.mlim.ml.com
recycled paper | #CIAP1-12/01
To Our Shareholders:
- -------------------------------------------------------------------------------
Market Review
As we entered 2001, it seemed almost inconceivable that the US economy would
enter a recession given the strong performance of the economy in 1999 and
2000. In fact in the United States, growth was as strong as 5.6% in the second
quarter of 2000 and 4.1% for the year while global growth was a solid 4.6%.
However, as the US economy slowed, corporations began to dramatically cut
capital investment and a series of events began to unfold, which led to
massive corporate restructurings. This restructuring resulted in corporations
acting aggressively to reduce costs and improve margins. Business inventories
were reduced by $125 billion in the first three quarters of the year and the
unemployment rate rose from 3.9% to 5.8%. The manufacturing sector also
continued to deteriorate as The National Association of Purchasing Managers
Index declined to 39.82 at October 31, 2001. In addition, business and
consumer confidence plunged and retail sales also showed huge declines. As the
year came to a close, some of these indicators have rebounded off their lows.
In response to the economy's weakness, both the Federal Reserve Board and
Congress implemented an unprecedented double dose of monetary and fiscal
stimulus. As the economy slowed and officially entered a recession in March,
according to the National Bureau of Economic Research, the Federal Reserve
Board implemented a program of monetary easing that lowered the Federal Fund
overnight lending rate from 6.5% to 1.75%. As expected, the aggressive easing
led to a dramatic steepening of the yield curve as two-year Treasury rates
plunged more than 200 basis points (2.00%) from 5.15% to 3%, while the 30-year
Treasury bond ended up virtually unchanged from beginning year levels (5.44%
to 5.47%). Surprisingly, the housing market held up very well as demand for
new and existing homes remained strong throughout the year. With the benchmark
10-year Treasury note dropping approximately 80 basis points from the start of
the year, mortgage rates followed suit, thereby providing the consumer with
the financial impetus to seek out home ownership. Congress also reacted
remarkably quickly in passing a tax cut to be phased in over six years and a
tax rebate that injected $40 billion into consumers' pockets. Congress also
implemented a $65 billion ($15 billion to the airline industry and $50 billion
to general business) emergency relief package after the tragic events of
September 11 to those industries directly affected by the terrorist attacks.
This fiscal policy shift, along with the weak economy, has caused the
government to become a net borrower as opposed to a net lender.
On the international front, the story was similar to the United States
although the jury is still out on whether the United Kingdom and Eurozone
countries will be able to avoid a recession. At December 31, 2001, growth
slowed from 2.9% to 2.1% and from 3.4% to 1.5%, respectively, for the regions.
In the Eurozone, interest rates were reduced by 150 basis points and in the
United Kingdom, rates were reduced by 200 basis points, which has helped
temper the extent to which their economies have declined. However, critics
have argued that their policy response was not as aggressive as it should have
been and may have only served to put off the recessionary environment. Japan
continues to be mired in a recession as structural reforms in their banking
system have yet to take place and a more immediate threat continues to be
deflation. In the end, global economic weakness will only serve to make the US
recovery that much more difficult as export growth will be curtailed.
Fiscal Year in Review
During the 12-month period ended December 31, 2001, the Program had a total
return of +8.32% compared to +10.86% for the Merrill Lynch Corporate A-AAA
Rated Index. The Program's performance compared to the benchmark was
negatively impacted as a result of the Program's allocation to the BBB segment
of the investment-grade corporate market. (Complete performance information
can be found on pages 3 and 4 of this report to shareholders.)
1
- -------------------------------------------------------------------------------
With respect to security-specific issues, we added to positions in several
sectors including energy-related industries, real estate investment trusts,
electric and gas utilities, defense contractors, life insurers, cable/media
companies, telecommunications and domestic banks. In all cases, these sectors
possessed strong relative value attributes, and we were either positive on the
outlook for that sector and/or had a favorable view on the prevailing
operating picture with respect to interest margins and cash flows factors.
However, we continued to liquidate some of our positions in several industries
including consumer finance companies, railroads, non-discount retailers, auto
manufacturers, hotel and lodging and airlines. For these sectors, we believe
operating margins will remain under pressure, which in turn will weaken cash
flow positions. Those sectors we continued to avoid for the most part included
property and casualty insurers, tobacco, metals and mining, auto part
manufacturers and gaming and leisure.
While the corporate market was riddled with issuers experiencing ratings
downgrades and deteriorating credit fundamentals, the Program was able to
avoid the majority of negative credit events during the year. Unfortunately,
the Program did have a position in Nortel Networks Corporation, which suffered
price erosion following the considerable difficulties that Internet providers
faced during 2001. Although we had eliminated the majority of the Program's
airline exposure prior to September 11 as a result of our concern relative to
general business conditions within the industry, we chose to maintain our
holdings in Southwest Airlines Co. given its strong operating track record and
financial strength. The terrorist events of September 11 exacted a significant
toll on the industry and Southwest Airlines has shared in that suffering as
well. Although our bonds did not drop in price as sharply as other airline
bonds, prevailing spreads warrant that we hold onto our securities in
anticipation of an eventual turnaround.
While corporate spreads have rebounded somewhat following the events of
September 11, we believe that additional spread compression is possible as
corporate profitability begins to marginally improve during 2002.
Additionally, given our outlook relative to the shape of the yield curve and a
shift in Federal Reserve Board monetary policy to a neutral position,
corporate securities should perform well in the coming year. Accordingly, we
will continue to invest a portion of the Program's assets in the BBB category
to take advantage of the higher yields and greater potential for price
performance.
In Conclusion
We appreciate your investment in The Corporate Fund Accumulation Program,
Inc., and we look forward to assisting you with your investment needs in the
months and years ahead.
Sincerely,
(Terry K. Glenn)
Terry K. Glenn
President and Director
(Christopher G. Ayoub)
Christopher G. Ayoub
Senior Vice President and
Portfolio Manager
February 7, 2002
2
_______________________________________________________________________________
The Corporate Fund Accumulation Program, Inc.
Important Tax Information (unaudited)
- -------------------------------------------------------------------------------
All of the net investment income distributions paid monthly by The Corporate
Fund Accumulation Program, Inc. during its taxable year ended December 31,
2001 qualify as tax-exempt interest dividends for Federal income tax purposes.
Additionally, there were no capital gain distributions paid by the Fund during
the year.
Please retain this information for your records.
_______________________________________________________________________________
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 December 31, 2001 Total Return Total Return 30-Day Yield
- ---------------------------------------------------------------------------------------------------
The Corporate Fund Accumulation Program, Inc.* + 4.80% + 8.32% 4.50%
- ---------------------------------------------------------------------------------------------------
ML Corporate A-AAA Rated Index** + 5.28 +10.86 --
- ---------------------------------------------------------------------------------------------------
*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.
3
_______________________________________________________________________________
The Corporate Fund Accumulation Program, Inc.
Total Return Based on a $10,000 Investment
- -------------------------------------------------------------------------------
A line graph illustrating the growth of a $10,000 investment in The Corporate
Fund Accumulation Program, Inc.++ compared to a similar investment in ML US
Corporate A-AAA Rated Index++++. Values illustrated are as follows :
The Coporate Fund Accumulation Program, Inc++
Date Value
December 1991 $10,000.00
December 1992 $10,686.00
December 1993 $11,990.00
December 1994 $11,297.00
December 1995 $13,562.00
December 1996 $13,791.00
December 1997 $14,936.00
December 1998 $16,167.00
December 1999 $15,659.00
December 2000 $17,101.00
December 2001 $18,524.00
ML US Corporate A-AAA Rated Index++++
Date Value
December 1991 $10,000.00
December 1992 $10,882.00
December 1993 $12,200.00
December 1994 $11,758.00
December 1995 $14,271.00
December 1996 $14,726.00
December 1997 $16,207.00
December 1998 $17,744.00
December 1999 $17,320.00
December 2000 $19,045.00
December 2001 $21,112.00
++Assuming transaction costs and other operating expenses, including
advisory fees and reimbursement of all expenses. 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 bonds rated A-AAA, of all
maturities.
Past performance is not predictive of future results.
_______________________________________________________________________________
Average Annual Total Return
- -------------------------------------------------------------------------------
Period Covered % Return
- -------------------------------------------------------------------------------
One Year Ended 12/31/01 +8.32%
- -------------------------------------------------------------------------------
Five Years Ended 12/31/01 +6.08
- -------------------------------------------------------------------------------
Ten Years Ended 12/31/01 +6.36
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4
__________________________________________________________________________________________________________________________
The Corporate Fund Accumulation Program, Inc.
Schedule of Investments as of December 31, 2001
- --------------------------------------------------------------------------------------------------------------------------
S&P Moody's Face
Industry Rating Rating Amount Issue Value
- --------------------------------------------------------------------------------------------------------------------------
Aerospace & BBB- Baa3 $ 150,000 Northop Grumman Corporation, 7.125% due 2/15/2011 .......... $ 156,591
Defense--1.7% Raytheon Company:
BBB- Baa3 250,000 6.50% due 7/15/2005 ..................................... 256,793
BBB- Baa3 250,000 6.75% due 3/15/2018 ..................................... 239,423
A+ A2 350,000 United Technology Corporation, 6.35% due 3/01/2011 ......... 355,803
-----------
1,008,610
- --------------------------------------------------------------------------------------------------------------------------
Automotive & BBB Baa2 100,000 Delphi Auto Systems Corporation, 6.55% due 6/15/2006 ....... 99,315
Equipment-- BBB+ A3 535,000 Ford Motor Company, 7.45% due 7/16/2031 .................... 490,879
1.0% -----------
590,194
- --------------------------------------------------------------------------------------------------------------------------
Banks & A- A1 400,000 Banc One Corp., 8% due 4/29/2027 ........................... 447,592
Thrifts-- A Aa3 603,000 Bank of America Corporation, 7.40% due 1/15/2011 ........... 646,802
14.2% Bank One Corp.:
A Aa3 800,000 6.875% due 8/01/2006 .................................... 851,776
A- A1 200,000 7.875% due 8/01/2010 .................................... 220,874
A+ Aa2 1,400,000 BankAmerica Corp., 5.875% due 2/15/2009 .................... 1,385,020
Citigroup Inc.:
AA- Aa1 950,000 5.70% due 2/06/2004 ..................................... 986,053
AA- Aa1 275,000 6.50% due 1/18/2011 ..................................... 283,297
A A1 800,000 FleetBoston Financial Corp., 7.25% due 9/15/2005 ........... 861,032
A A1 500,000 HSBC Holding PLC, 7.50% due 7/15/2009 ...................... 537,350
A A2 400,000 Mellon Financial Co., 6.875% due 3/01/2003 ................. 416,456
BBB+ A3 400,000 Washington Mutual Inc., 7.50% due 8/15/2006 ................ 431,448
Wells Fargo Company:
A+ Aa2 400,000 7.25% due 8/24/2005 ..................................... 430,220
A+ Aa2 900,000 5.90% due 5/21/2006 ..................................... 929,205
-----------
8,427,125
- --------------------------------------------------------------------------------------------------------------------------
Cable BBB- Baa3 280,000 Clear Channel Communications, 7.875% due 6/15/2005 ......... 293,168
Television Comcast Cable Communications:
Services-- BBB Baa2 150,000 6.375% due 1/30/2006 .................................... 154,306
1.2% BBB Baa2 250,000 6.75% due 1/30/2011 ..................................... 250,975
-----------
698,449
- --------------------------------------------------------------------------------------------------------------------------
Canadian BBB- Baa3 1,000,000 Abitibi Consolidated Inc., 8.55% due 8/01/2010 (2) ......... 1,046,730
Corporates*-- BBB+ Baa2 310,000 Potash Corporation of Saskatchewan, 7.75% due
2.3% 5/31/2011 (2) .............................................. 329,722
-----------
1,376,452
- --------------------------------------------------------------------------------------------------------------------------
Financial Ford Motor Credit Company:
Services-- BBB+ A2 615,000 7.50% due 6/15/2003 ..................................... 635,529
Captive--8.1% BBB+ A2 1,500,000 6.875% due 2/01/2006 .................................... 1,499,475
BBB+ A2 218,000 7.375% due 2/01/2011 .................................... 215,122
General Motors Acceptance Corporation:
BBB+ A2 1,033,000 6.85% due 6/17/2004 ..................................... 1,074,051
BBB+ A2 1,129,000 7.75% due 1/19/2010 ..................................... 1,176,858
BBB+ A2 181,000 8% due 11/01/2031 ....................................... 183,116
-----------
4,784,151
- --------------------------------------------------------------------------------------------------------------------------
Financial A A3 400,000 Countrywide Home Loan, 5.25% due 6/15/2004 ................. 407,636
Services-- Household Financial Corporation:
Consumer-- A A2 1,200,000 6.50% due 1/24/2006 ..................................... 1,233,708
3.3% A A2 100,000 7.875% due 3/01/2007 .................................... 109,179
A A2 200,000 6.75% due 5/15/2011 ..................................... 199,012
-----------
1,949,535
- --------------------------------------------------------------------------------------------------------------------------
5
__________________________________________________________________________________________________________________________
The Corporate Fund Accumulation Program, Inc.
Schedule of Investments as of December 31, 2001 (continued)
- --------------------------------------------------------------------------------------------------------------------------
S&P Moody's Face
Industry Rating Rating Amount Issue Value
- --------------------------------------------------------------------------------------------------------------------------
Financial AA- A3 $ 130,000 Boeing Capital Corporation, 7.10% due 9/27/2005 .............. $ 136,544
Services-- CIT Group Inc.:
Other-- A+ A2 700,000 5.625% due 5/17/2004 ...................................... 719,705
16.7% A+ A2 200,000 6.50% due 2/07/2006 ....................................... 207,596
Commercial Credit Co.:
AA- Aa1 400,000 6.75% due 7/01/200 ........................................ 424,168
AA- Aa1 500,000 10% due 5/15/2009 ......................................... 606,655
AA- Aa3 250,000 Credit Suisse First Boston Inc., 6.125% due 11/15/2011 ....... 244,011
General Electric Capital Corp.:
AAA Aaa 400,000 6.75% due 9/11/2003 ....................................... 424,076
AAA Aaa 400,000 7.375% due 1/19/2010 ...................................... 444,720
Goldman Sachs Group, Inc.:
A+ A1 700,000 7.625% due 8/17/2005 ...................................... 752,115
A+ A1 300,000 6.875% due 1/15/2011 ...................................... 309,216
AAA Aaa 550,000 Heller Financial Inc., 7.875% due 5/15/2003 .................. 586,058
AA- A1 250,000 International Lease Finance Corporation, 5.50%
due 6/07/2004 ................................................ 252,480
Lehman Brothers Holdings, Inc.:
A A2 600,000 6.625% due 4/01/2004 ...................................... 632,010
A A2 400,000 7% due 2/01/2008 .......................................... 418,840
A A2 709,000 7.875% due 8/15/2010 ...................................... 768,797
AA- Aa3 900,000 Morgan Stanley, Dean Witter, Discover & Co., 7.125%
due 1/15/2003 ................................................ 940,401
AA- Aa3 300,000 National Rural Utilities, 5.25% due 7/15/2004 ................ 307,059
AA- Aa1 1,000,000 Salomon Smith Barney Holdings, 5.875% due 3/15/2006 .......... 1,024,960
Texaco Capital Inc.:
AA Aa3 100,000 8.625% due 6/30/2010 ...................................... 117,473
AA Aa3 50,000 8.625% due 11/15/2031 ..................................... 64,315
A+ A1 500,000 Verizon Global Funding Corporation, 6.75% due 12/01/2005 ..... 527,220
-----------
9,908,419
- --------------------------------------------------------------------------------------------------------------------------
Foods--4.2% A A2 250,000 Coca-Cola Enterprises, 6.125% due 8/15/2011 .................. 251,210
A- A2 230,000 Kraft Foods Inc., 4.625% due 11/01/2006 ...................... 225,080
BBB- Baa3 410,000 Kroger Company, 7.50% due 4/01/2031 .......................... 426,088
A A1 670,000 Pepsi Bottling Holdings Inc., 5.625% due 2/17/2009 (a) ....... 665,469
BBB Baa2 250,000 Safeway Inc., 6.50% due 3/01/2011 ............................ 254,758
BBB Baa3 650,000 Tyson Foods Inc., 6.625% due 10/01/2004 (a) .................. 667,570
-----------
2,490,175
- --------------------------------------------------------------------------------------------------------------------------
Forest A- A3 250,000 Weyerhaeuser Company, 5.95% due 11/01/2008 (a) ............... 243,516
Products--
0.4%
- --------------------------------------------------------------------------------------------------------------------------
Gas BBB Baa2 103,000 The Coastal Corporation, 6.50% due 6/01/2008 ................. 99,909
Transmission BBB+ A3 280,000 Consolidated Natural Gas, 5.375% due 11/01/2006 .............. 275,663
- --0.6% -----------
375,572
- --------------------------------------------------------------------------------------------------------------------------
Industrial-- Anheuser-Busch Companies Inc.:
Consumer A+ A1 380,000 7.50% due 3/15/2012 ....................................... 426,991
Goods-- A+ A1 250,000 6% due 11/01/2041 ......................................... 231,387
7.4% A- A3 1,000,000 Kohl's Corporation, 6.30% due 3/01/2011 ...................... 1,011,095
A Baa1 1,000,000 Tyco International Group SA, 6.125% due 1/15/2009 ............ 985,300
Wal-Mart Stores, Inc.:
AA Aa2 1,000,000 6.875% due 8/10/2009 ...................................... 1,072,160
AA Aa2 550,000 7.55% due 2/15/2030 ....................................... 634,997
-----------
4,361,930
- --------------------------------------------------------------------------------------------------------------------------
Industrial-- A- A3 95,000 Apache Corporation, 7.625% due 7/01/2019 ..................... 102,186
Energy--3.3% Atlantic Richfield Company:
AA+ Aa1 100,000 5.90% due 4/15/2009 ....................................... 99,750
AA+ Aa1 60,000 8.44% due 2/21/2012 ....................................... 71,228
6
__________________________________________________________________________________________________________________________
The Corporate Fund Accumulation Program, Inc.
Schedule of Investments as of December 31, 2001 (continued)
- --------------------------------------------------------------------------------------------------------------------------
S&P Moody's Face
Industry Rating Rating Amount Issue Value
- --------------------------------------------------------------------------------------------------------------------------
Industrial-- BBB+ Baa1 $ 100,000 Burlington Resources Inc., 6.68% due 2/15/2011 ............... $ 99,085
Energy Conoco Inc.:
(concluded) BBB+ Baa1 180,000 5.90% due 4/15/2004 ....................................... 185,945
BBB+ Baa1 100,000 6.95% due 4/15/2029 ....................................... 101,773
A+ A1 130,000 Consolidated Edison Inc., 7.15% due 12/01/2009 ............... 136,081
BBB Baa2 47,000 Duke Energy Field Services, 8.125% due 8/16/2030 ............. 48,051
BBB Baa2 29,000 El Paso Energy Corporation, 8.05% due 10/15/2030 ............. 29,737
BBB- Baa2 260,000 FirstEnergy Corp., 6.45% due 11/15/2011 ...................... 254,553
BBB- Baa3 200,000 Ocean Energy Inc., 7.25% due 10/01/2011 ...................... 206,000
BBB Baa1 360,000 Progress Energy Inc., 5.85% due 10/30/2008 ................... 351,576
BBB Baa2 250,000 Williams Companies, Inc., 7.625% due 7/15/2019 ............... 247,138
-----------
1,933,103
- --------------------------------------------------------------------------------------------------------------------------
Industrial-- Candia Corp.:
Manufacturing A- A2 500,000 6.45% due 3/15/2011 ....................................... 507,870
- --1.7% A- A2 65,000 7.25% due 3/15/2031 ....................................... 68,639
A+ A1 200,000 IBM Corporation, 5.375% due 2/01/2009 ........................ 195,216
BBB- Baa2 200,000 Martin Marietta Corp., 7.375% due 4/15/2013 .................. 206,208
-----------
977,933
- --------------------------------------------------------------------------------------------------------------------------
Industrial-- AOL Time Warner Inc.:
Services-- BBB+ Baa1 200,000 6.125% due 4/15/2006 ...................................... 204,616
4.6% BBB+ Baa1 310,000 7.625% due 4/15/2031 ...................................... 328,070
A+ A1 640,000 First Data Corporation, 6.75% due 7/15/2005 .................. 677,248
BBB- Baa3 460,000 News America Inc., 7.25% due 5/18/2018 ....................... 441,890
BBB+ Baa2 360,000 Tele-Communications Inc., 8.25% due 1/15/2003 ................ 373,964
BBB+ Baa1 200,000 Time Warner Entertainment, 7.25% due 9/01/2008 ............... 213,038
A- A3 410,000 Viacom Inc., 7.875% due 7/30/2030 ............................ 452,620
-----------
2,691,446
- --------------------------------------------------------------------------------------------------------------------------
Insurance-- A+ A1 1,000,000 Allstate Corp., 6.75% due 5/15/2018 .......................... 978,130
2.6% A+ A1 230,000 John Hancock Financial Services, 5.625% due 12/01/2008 ....... 226,786
MetLife Inc.:
A A1 90,000 5.25% due 12/01/2006 ...................................... 89,848
A A1 240,000 6.125% due 12/01/2011 ..................................... 237,950
-----------
1,532,714
- --------------------------------------------------------------------------------------------------------------------------
Medical-- AAA Aaa 200,000 Bristol-Myers Squibb, 4.75% due 10/01/2006 ................... 198,066
1.3% Tenet Healthcare Corporation (a):
BBB Baa3 300,000 5.375% due 11/15/2006 ..................................... 293,434
BBB Baa3 320,000 6.875% due 11/15/2031 ..................................... 294,485
-----------
785,985
- --------------------------------------------------------------------------------------------------------------------------
Metals--0.3% Alcoa Inc.:
A+ A1 105,000 2.28% due 12/06/2004 ...................................... 104,975
A+ A1 84,000 6% due 1/15/2012 .......................................... 83,391
-----------
188,366
- --------------------------------------------------------------------------------------------------------------------------
Pipelines-- BBB Baa2 550,000 El Paso Corporation, 7% due 5/15/2011 ........................ 537,389
0.9%
- --------------------------------------------------------------------------------------------------------------------------
Real Estate BBB+ Baa1 490,000 Avalonbay Communities, Real Estate Investment
Investment Trusts (REITS), 6.625% due 9/15/2011 ......................... 477,451
Trust--3.3% EOP Operating LP:
BBB+ Baa1 310,000 7.375% due 11/15/2003 ..................................... 325,937
BBB+ Baa1 160,000 7.75% due 11/15/2007 ...................................... 170,854
BBB+ Baa1 940,000 Prologis Trust, 7% due 10/01/2003 ............................ 976,209
-----------
1,950,451
- --------------------------------------------------------------------------------------------------------------------------
7
__________________________________________________________________________________________________________________________
The Corporate Fund Accumulation Program, Inc.
Schedule of Investments as of December 31, 2001 (concluded)
- --------------------------------------------------------------------------------------------------------------------------
S&P Moody's Face
Industry Rating Rating Amount Issue Value
- --------------------------------------------------------------------------------------------------------------------------
Transportation Southwest Airlines Co.:
- --1.6% A Baa1 $ 630,000 8% due 3/01/2005 .......................................... $ 659,238
A Baa1 300,000 7.875% due 9/01/2007 ...................................... 307,347
-----------
966,585
- --------------------------------------------------------------------------------------------------------------------------
Utilities-- BBB+ A3 600,000 AT&T Corporation, 6% due 3/15/2009 ........................... 570,642
Communi- AA- Aa3 400,000 Ameritech Capital Funding, 6.45% due 1/15/2018 ............... 395,080
cations--9.0% A+ Aa3 300,000 BellSouth Corporation, 6% due 10/15/2011 ..................... 298,641
A+ A2 300,000 GTE Corporation, 6.84% due 4/15/2018 ......................... 298,938
Qwest Capital Funding:
BBB+ Baa1 210,000 7% due 8/03/2009 .......................................... 203,973
BBB+ Baa1 800,000 7.90% due 8/15/2010 ....................................... 813,870
AA- Aa3 200,000 SBC Communications Inc., 6.25% due 3/15/2011 ................. 203,600
BBB+ Baa1 400,000 Sprint Capital Corporation, 5.70% due 11/15/2003 ............. 409,852
A+ Aa2 1,000,000 Verizon of Pennsylvania, 5.65% due 11/15/2011 ................ 960,590
WorldCom, Inc.:
BBB+ A3 500,000 8% due 5/15/2006 .......................................... 536,800
BBB+ A3 100,000 7.50% due 5/15/2011 ....................................... 102,408
BBB+ A3 500,000 8.25% due 5/15/2031 ....................................... 527,215
-----------
5,321,609
- --------------------------------------------------------------------------------------------------------------------------
Utilities-- BBB+ Baa1 260,000 Dominion Resources Inc., 8.125% due 6/15/2010 ................ 284,625
Electric--2.5% A A1 260,000 Mississippi Power, 6.05% due 5/01/2003 ....................... 264,285
South Carolina Electric & Gas:
A A1 590,000 7.50% due 6/15/2005 ....................................... 634,775
A A1 260,000 6.70% due 2/01/2011 ....................................... 263,666
-----------
1,447,351
- --------------------------------------------------------------------------------------------------------------------------
Yankee A A1 200,000 BSCH Issuances Ltd., 7.625% due 9/14/2010 (1) ................ 210,386
Corporates*-- A- Baa1 400,000 British Telecom PLC, 8.375% due 12/15/2010 (3) ............... 441,944
4.7% BBB+ A3 300,000 Daimler-Chrysler NA Holdings, 6.40% due 5/15/2006 (2) ........ 299,598
A- A3 200,000 Deutsche Telekom International Finance, 7.75% due
6/15/2005 (3) ................................................ 214,058
BBB+ Baa1 100,000 France Telecom, 8.50% due 3/01/2031 (a)(3) ................... 114,161
BBB+ Baa2 400,000 Korea Development Bank, 7.125% due 4/22/2004 (1) ............. 422,132
A A2 200,000 Norsk Hydro A/S, 6.36% due 1/15/2009 (2) ..................... 200,208
A+ A2 200,000 Telefonica Europe BV, 7.35% due 9/15/2005 (3) ................ 210,614
A A2 607,000 Vodafone Group PLC, 7.75% due 2/15/2010 (3) .................. 664,562
-----------
2,777,663
- --------------------------------------------------------------------------------------------------------------------------
Total Corporate Bonds & Notes (Cost--$56,854,839)--96.9% ..... 57,324,723
- --------------------------------------------------------------------------------------------------------------------------
Short-Term Securities
- --------------------------------------------------------------------------------------------------------------------------
Repurchase 1,045,000 UBS Warburg Corp. LLC, purchased on 12/31/2001 to yield
Agreements**--1.7% 1.70% to 1/02/2002 ........................................... 1,045,000
- --------------------------------------------------------------------------------------------------------------------------
Total Short-Term Securities (Cost--$1,045,000)--1.7% ......... 1,045,000
- --------------------------------------------------------------------------------------------------------------------------
Total Investments (Cost--$57,899,839)--98.6% ................. 58,369,723
Other Assets Less Liabilities--1.4% .......................... 809,131
-----------
Net Assets--100.0% ........................................... $59,178,854
===========
- --------------------------------------------------------------------------------------------------------------------------
*Corresponding industry groups for foreign bonds:
(1)Financial institution.
(2)Industrial; other.
(3)Telecommunications.
**Repurchase Agreements are fully collateralized by US Government
Obligations.
(a)The security may be offered and sold to "qualified institutional
buyers" under Rule 144A of the Securities Act of 1933.
Ratings of issues shown have not been audited by Deloitte & Touche LLP.
See Notes to Financial Statements.
8
__________________________________________________________________________________________________________________________
The Corporate Fund Accumulation Program, Inc.
Statement of Assets and Liabilities as of December 31, 2001
- --------------------------------------------------------------------------------------------------------------------------
Assets:
Investments, at value (identified cost--$57,899,839) .................................. $ 58,369,723
Interest receivable ................................................................... 1,108,711
Prepaid registration fees and other assets ............................................ 101,983
------------
Total assets .......................................................................... 59,580,417
------------
Liabilities:
Payables:
Capital shares redeemed ............................................................. $ 213,652
Custodian bank ...................................................................... 60,877
Investment adviser .................................................................. 24,941 299,470
------------
Accrued expenses ...................................................................... 102,093
------------
Total liabilities ..................................................................... 401,563
------------
Net Assets ............................................................................ $ 59,178,854
============
Net Assets Consist of:
Common Stock, $.01 par value, 50,000,000 shares authorized ............................ $ 28,299
Paid-in capital in excess of par ...................................................... 59,572,847
Undistributed investment income--net .................................................. $ 7
Accumulated realized capital losses on investments--net ............................... (892,183)
Unrealized appreciation on investments--net ........................................... 469,884
------------
Total accumulated losses--net ......................................................... (422,292)
------------
Net Assets--Equivalent to $20.91 per share based on 2,829,872 shares outstanding ...... $ 59,178,854
============
See Notes to Financial Statements.
9
__________________________________________________________________________________________________________________________
The Corporate Fund Accumulation Program, Inc.
Statement of Operations for the Year Ended December 31, 2001
- --------------------------------------------------------------------------------------------------------------------------
Investment Income:
Interest .............................................................................. $ 3,797,780
Expenses:
Investment advisory fees .............................................................. $ 297,308
Transfer agent fees ................................................................... 215,475
Professional fees ..................................................................... 62,782
Printing and shareholder reports ...................................................... 42,915
Accounting services ................................................................... 29,546
Registration fees ..................................................................... 26,326
Custodian fees ........................................................................ 15,929
Directors' fees and expenses .......................................................... 11,894
Pricing services ...................................................................... 11,080
Other ................................................................................. 10,033
------------
Total expenses ........................................................................ 723,288
------------
Investment income--net ................................................................ 3,074,492
------------
Realized & Unrealized Gain (Loss) on Investments--Net:
Realized gain on investments--net ..................................................... 2,507,016
Change in unrealized appreciation on investments--net ................................. (804,930)
------------
Net Increase in Net Assets Resulting from Operations .................................. $ 4,776,578
============
See Notes to Financial Statements.
10
________________________________________________________________________________________________________________________
The Corporate Fund Accumulation Program, Inc.
Statements of Changes in Net Assets
- ------------------------------------------------------------------------------------------------------------------------
For the Year Ended
December 31,
------------------------------
Increase (Decrease) in Net Assets: 2001 2000
- ------------------------------------------------------------------------------------------------------------------------
Operations:
Investment income--net ................................................................ $ 3,074,492 $ 3,627,080
Realized gain (loss) on investments--net .............................................. 2,507,016 (1,608,099)
Change in unrealized appreciation/depreciation on investments--net .................... (804,930) 3,216,911
------------- -------------
Net increase in net assets resulting from operations .................................. 4,776,578 5,235,892
------------- -------------
Dividends to Shareholders:
Dividends to shareholders from investment income--net ................................. (3,074,485) (3,626,900)
------------- -------------
Capital Share Transactions:
Net decrease in net assets resulting from capital share transactions .................. (1,490,014) (5,792,638)
------------- -------------
Net Assets:
Total increase (decrease) in net assets ............................................... 212,079 (4,183,646)
Beginning of year ..................................................................... 58,966,775 63,150,421
------------- -------------
End of year* .......................................................................... $ 59,178,854 $ 58,966,775
============= =============
- ------------------------------------------------------------------------------------------------------------------------
*Undistributed investment income--net ................................................. $ 7 $ --
============= =============
- ------------------------------------------------------------------------------------------------------------------------
See Notes to Financial Statements.
11
________________________________________________________________________________________________________________________
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: 2001 2000 1999 1998 1997
- ------------------------------------------------------------------------------------------------------------------------
Per Share Operating Performance:
Net asset value, beginning of year ...................... $ 20.34 $ 19.77 $ 21.62 $ 21.13 $ 20.69
--------- --------- --------- --------- ---------
Investment income--net .................................. 1.08++ 1.21++ 1.17++ 1.19++ 1.22
Realized and unrealized gain (loss) on investments--net . .57 .58 (1.84) .50 .44
--------- --------- --------- --------- ---------
Total from investment operations ........................ 1.65 1.79 (.67) 1.69 1.66
--------- --------- --------- --------- ---------
Less dividends:
Investment income--net ................................ (1.08) (1.22) (1.18) (1.20) (1.22)
In excess of investment income--net ................... -- -- --++++ -- --
--------- --------- --------- --------- ---------
Total dividends ......................................... (1.08) (1.22) (1.18) (1.20) (1.22)
--------- --------- --------- --------- ---------
Net asset value, end of year ............................ $ 20.91 $ 20.34 $ 19.77 $ 21.62 $ 21.13
========= ========= ========= ========= =========
Total Investment Return:
Based on net asset value per share ...................... 8.32% 9.21% (3.14%) 8.24% 8.30%
========= ========= ========= ========= =========
Ratios to Average Net Assets:
Expenses ................................................ 1.22% 1.10% 1.11% 1.00% .99%
========= ========= ========= ========= =========
Investment income--net .................................. 5.17% 6.16% 5.69% 5.60% 5.84%
========= ========= ========= ========= =========
Supplemental Data:
Net assets, end of year (in thousands) .................. $ 59,179 $ 58,967 $ 63,150 $ 71,131 $ 72,381
========= ========= ========= ========= =========
Portfolio turnover ...................................... 227% 127% 61% 66% 90%
========= ========= ========= ========= =========
++Based on average shares outstanding.
++++Amount is less than $.01 per share.
See Notes to Financial Statements.
12
_______________________________________________________________________________
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.
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 US Government securities
pursuant to repurchase agreements. Under such agreements, the counterparty
agrees to repurchase the security at a mutually agreed upon time and price.
The Program takes possession of the underlying securities, marks to market
such securities and, if necessary, receives additions to such securities daily
to ensure that the contract is fully collateralized. If the seller defaults
and the fair value of the collateral declines, liquidation of the collateral
of the Program may be delayed or limited.
(c) Income taxes--It is the Program's policy to comply with the requirements
of the Internal Revenue Code applicable to regulated investment companies and
to distribute substantially all of its taxable income to its shareholders.
Therefore, no Federal income tax provision is required.
(d) Security transactions and investment income--Security transactions are
recorded on the dates the transactions are entered into (the trade dates).
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.
(g) Custodian bank--The Program recorded an amount payable to the custodian
bank reflecting an overnight overdraft which resulted from a failed trade
which settled the next day.
13
_______________________________________________________________________________
The Corporate Fund Accumulation Program, Inc.
Notes to Financial Statements (continued)
- -------------------------------------------------------------------------------
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.
FAM has entered into an Administrative Agreement with Merrill Lynch, Pierce,
Fenner & Smith Incorporated ("MLPF&S"), 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 year ended December 31, 2001, the Program paid Merrill Lynch Security
Pricing Service, an affiliate of MLPF&S, $6,538 for security price quotations
to compute the net asset value of the Program.
Prior to January 1, 2001, FAM provided accounting services to the Program at
its cost and the Program reimbursed FAM for these services. FAM continues to
provide certain accounting services to the Program. The Program reimburses FAM
at its cost for such services. For the year ended December 31, 2001, the
Program reimbursed FAM an aggregate of $5,169 for the above-described
services. The Program entered into an agreement with State Street Bank and
Trust Company ("State Street"), effective January 1, 2001, pursuant to which
State Street provides certain accounting services to the Program. The Program
pays a fee for these services.
3. Investments:
Purchases and sales of investments, excluding short-term securities, for the
year ended December 31, 2001 were $130,179,634 and $128,837,524, respectively.
Net realized gains for the year ended December 31, 2001 and net unrealized
gains as of December 31, 2001 were as follows:
- -------------------------------------------------------------------------------
Realized Unrealized
Gains Gains
- -------------------------------------------------------------------------------
Long-term investments ............................. $ 2,507,016 $ 469,884
----------- -----------
Total ............................................. $ 2,507,016 $ 469,884
=========== ===========
- -------------------------------------------------------------------------------
As of December 31, 2001, net unrealized appreciation for Federal income tax
purposes aggregated $460,232, of which $861,792 related to appreciated
securities and $401,560 related to depreciated securities. The aggregate cost
of investments at December 31, 2001 for Federal income tax purposes was
$57,909,491.
4. Capital Share Transactions:
Transactions in capital shares were as follows:
- -------------------------------------------------------------------------------
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)
=========== =============
- -------------------------------------------------------------------------------
14
_______________________________________________________________________________
The Corporate Fund Accumulation Program, Inc.
Notes to Financial Statements (concluded)
- -------------------------------------------------------------------------------
For the Year Ended Dollar
December 31, 2000 Shares Amount
- -------------------------------------------------------------------------------
Shares sold............................. 256,146 $ 5,080,657
Shares issued to shareholders
in reinvestment of dividends............ 170,746 3,365,439
----------- -------------
Total issued............................ 426,892 8,446,096
Shares redeemed......................... (722,012) (14,238,734)
----------- -------------
Net decrease............................ (295,120) $ (5,792,638)
=========== =============
- -------------------------------------------------------------------------------
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. The Progam 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
year ended December 31, 2001.
6. Distributions to Shareholders:
On January 15, 2002, an ordinary income dividend of $.041523 was declared. The
dividend was paid on January 15, 2002, to shareholders of record on January
15, 2002.
The tax character of distributions paid during the fiscal years ended December
31, 2001 and December 31, 2000 was as follows:
- -------------------------------------------------------------------------------
12/31/2001 12/31/2000
- -------------------------------------------------------------------------------
Distributions paid from:
Ordinary income .............................. $ 3,074,485 $ 3,626,900
----------- -------------
Total taxable distributions ..................... $ 3,074,485 $ 3,626,900
=========== =============
- -------------------------------------------------------------------------------
As of December 31, 2001, the components of accumulated losses on a tax basis
were as follows:
- -------------------------------------------------------------------------------
Undistributed ordinary income--net............... $ 7
Undistributed long-term capital gains--net....... --
-------------
Total undistributed earnings--net................ 7
Capital loss carryforward........................ (882,531)*
Unrealized gains--net............................ 460,232**
-------------
Total accumulated losses--net.................... $ (422,292)
=============
- -------------------------------------------------------------------------------
*On December 31, 2001, the Program had a net capital loss carryforward of
approximately $882,531, all of which expires in 2008. This amount will be
available to offset like amounts of any future taxable gains.
**The difference between book-basis and tax-basis net unrealized gains is
attributable primarily to the tax deferral of losses on wash sales.
15
_______________________________________________________________________________
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, 2001, 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
presented. 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 auditing standards generally
accepted in the United States of America. 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, 2001 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, 2001, the results of its
operations, the changes in its net assets, and the financial highlights for
the respective stated periods in conformity with accounting principles
generally accepted in the United States of America.
Deloitte & Touche LLP
New York, New York
February 12, 2002
16
_______________________________________________________________________________________________________________________
The Corporate Fund Accumulation Program, Inc.
Officers and Directors
- -----------------------------------------------------------------------------------------------------------------------
Number
of Portfolios
in Fund Other
Complex Director-
Position(s) Length Overseen ships
Held of Time by Held by
Name, Address & Age with Fund Served Principal Occupation(s) during Past 5 Years Director Director
- -----------------------------------------------------------------------------------------------------------------------
Interested Director
- -----------------------------------------------------------------------------------------------------------------------
Terry K. Glenn* President 1999 to Chairman, Americas Region since 2001, and 196 None
800 Scudders Mill Road and present Executive Vice President since 1983 of Fund
Plainsboro, NJ 08536 Director Asset Management ("FAM") and Merrill Lynch
Age: 61 Investment Managers, L.P. ("MLIM"); President
of Merrill Lynch Mutual Funds since 1999;
President of FAM Distributors, Inc. ("FAMD")
since 1986 and Director thereof since 1991;
Executive Vice President and Director of
Princeton Services, Inc. ("Princeton Services")
since 1993; President of Princeton,
Administrators, L.P. since 1988; Director of
Financial Data Services, Inc., since 1985.
- -----------------------------------------------------------------------------------------------------------------------
*Mr. Glenn is a director, trustee or member of an advisory board of certain other investment companies for which FAM or
MLIM acts as investment adviser. Mr. Glenn is an "interested person," as described in the Investment Company Act, of
each Fund based on his positions as Chairman (Americas Region) and Executive Vice President of FAM and MLIM; President
of FAMD; Executive Vice President of Princeton Services; and President of Princeton Administrators, L.P. The Director's
term is unlimited.
- -----------------------------------------------------------------------------------------------------------------------
Number
of Portfolios
in Fund Other
Complex Director-
Position(s) Length Overseen ships
Held of Time by Held by
Name, Address & Age with Fund Served* Principal Occupation(s) during Past 5 Years Director Director
- -----------------------------------------------------------------------------------------------------------------------
Independent Directors
- -----------------------------------------------------------------------------------------------------------------------
Ronald W. Forbes Director 1977 to Professor Emeritus of Finance, School of 57 None
1400 Washington Avenue present Business, State University of New York at
Albany, NY 12222 Albany since 2000 and Professor thereof
Age: 61 from 1989 to 2000.
- -----------------------------------------------------------------------------------------------------------------------
Cynthia A. Montgomery Director 1995 to Professor, Harvard Business School since 1989. 57 Unum
Harvard Business School present Provident
Soldiers Field Road Corpora-
Boston, MA 02163 tion;
Age: 49 Newell
Rubber-
maid Inc.
- -----------------------------------------------------------------------------------------------------------------------
Charles C. Reilly Director 1990 to Self-employed financial consultant since 1990. 57 None
9 Hampton Harbor Road present
Hampton Bays, NY 11946
Age: 70
- -----------------------------------------------------------------------------------------------------------------------
Kevin A. Ryan Director 1992 to Founder and currently Director Emeritus of The 57 Charter
127 Commonwealth Ave. present Boston University Center for the Advancement of Education
Chestnut Hill, MA 02467 Ethics and Character and Director thereof from Partner-
Age: 69 1989 to 1999; Professor from 1982 to 1999 at ship;
Boston University. Council
for
Ethical
and
Spiritual
Education.
- -----------------------------------------------------------------------------------------------------------------------
17
_______________________________________________________________________________________________________________________
The Corporate Fund Accumulation Program, Inc.
Officers and Directors (concluded)
- -----------------------------------------------------------------------------------------------------------------------
Number
of Portfolios
in Fund Other
Complex Director-
Position(s) Length Overseen ships
Held of Time by Held by
Name, Address & Age with Fund Served* Principal Occupation(s) during Past 5 Years Director Director
- -----------------------------------------------------------------------------------------------------------------------
Independent Directors (concluded)
- -----------------------------------------------------------------------------------------------------------------------
Roscoe S. Suddarth Director 2000 to Former President, Middle East Institute from 57 None
7403 MacKenzie Court present 1995 to 2001.
Bethesda, MD 20817
Age: 66
- -----------------------------------------------------------------------------------------------------------------------
Richard R. West Director 1978 to Professor of Finance since 1984, and currently 70 Bowne &
Box 604 present Dean Emeritus of New York University Leonard Co., Inc.;
Genoa, NV 89411 N. Stern School of Business Administration. Vornado
Age: 63 Realty
Trust;
Alexander's
Inc.
- -----------------------------------------------------------------------------------------------------------------------
Edward D. Zinbarg Director 1994 to Self-employed financial consultant since 1994. 57 None
5 Hardwell Road present
Short Hills, NJ 07078-2117
Age: 67
- -----------------------------------------------------------------------------------------------------------------------
*The Director's term is unlimited.
Position(s) Length
Held of Time
Name, Address & Age with Fund Served Principal Occupation(s) during Past 5 Years
- -----------------------------------------------------------------------------------------------------------------------
Fund Officers
- -----------------------------------------------------------------------------------------------------------------------
Donald C. Burke Vice Vice First Vice President of FAM and MLIM since 1997 and the Treasurer
P.O. Box 9011 President President thereof since 1999; Senior Vice President and Treasurer of
Princeton, NJ 08543-9011 and since Princeton Services since 1999; Vice President of FAMD since 1999;
Age: 41 Treasurer 1993 and Vice President of FAM and MLIM from 1990 to 1997; Director of
Treasurer Taxation of MLIM since 1990.
since
1999
- -----------------------------------------------------------------------------------------------------------------------
Christopher Ayoub Senior Vice 1998 to Managing Director of the Investment Advisor and certain of its
P.O. Box 9011 President present affiliates since 1998; Vice President of the Investment Advisor
Princeton, NJ 08543-9011 and certain of its affiliates from 1985 to 1998.
Age: 45
- -----------------------------------------------------------------------------------------------------------------------
Phillip S. Gillespie Secretary 2001 to First Vice President of MLIM since 2001; Director of MLIM
P.O. Box 9011 present from 1999 to 2000; Vice President of MLIM in 1999; Attorney
Princeton, NJ 08543-9011 associated with the Manager and FAM from 1998 to 1999;
Age: 37 Assistant General Counsel LGT Asset Management, Inc. from
1997 to 1998; Senior Counsel and Attorney in the Division
of Investment Management and the Office of General Counsel
at the US Securities and Exchange Commission from 1993 to 1997.
- -----------------------------------------------------------------------------------------------------------------------
Further information about the Fund's Directors is available in the Fund's
Statement of Additional Information, which can be obtained without charge by
calling 1-800-MER-FUND.
Custodian and Transfer Agent
The Bank of New York
90 Washington Street
New York, NY 10286
18