APEX MUNICIPAL
FUND, INC.
FUND LOGO
Annual Report
June 30, 1995
<PAGE>
Officers and Directors
Arthur Zeikel, President and Director
Joe Grills, Director
Walter Mintz, Director
Melvin R. Seiden, Director
Stephen B. Swensrud, Director
Harry Woolf, Director
Terry K. Glenn, Executive Vice President
Donald C. Burke, Vice President
Vincent R. Giordano, Vice President
Kenneth A. Jacob, Vice President
Gerald M. Richard, Treasurer
Mark B. Goldfus, Secretary
Custodian & Transfer Agent
The Bank of New York
90 Washington Street
New York, NY 10286
NYSE Symbol
APX
This report, including the financial information herein, is
transmitted to the shareholders of Apex Municipal Fund, Inc. for
their information. It is not a prospectus, circular or
representation intended for use in the purchase of shares of the
Fund or any securities mentioned in the report. Past performance
results shown in this report should not be considered a
representation of future performance.
Apex Municipal
Fund, Inc.
Box 9011
Princeton, NJ
08543-9011
<PAGE>
APEX MUNICIPAL FUND, INC.
<TABLE>
Per Share
Selected Quarterly
Financial Data*
<CAPTION>
Net Realized Unrealized Dividends/Distributions
Investment Gains Gains Net Investment Capital
For the Quarter Income (Losses) (Losses) Income Gains
<S> <C> <C> <C> <C> <C>
July 1, 1993 to September 30, 1993 $0.19 $(0.01) $ 0.05 $0.19 --
October 1, 1993 to December 31, 1993 0.19 (0.04) 0.08 0.19 --
January 1, 1994 to March 31, 1994 0.18 (0.03) (0.31) 0.18 --
April 1, 1994 to June 30, 1994 0.19 0.01 (0.05) 0.19 --
July 1, 1994 to September 30, 1994 0.18 (0.03) (0.18) 0.18 --
October 1, 1994 to December 31, 1994 0.17 -- (0.24) 0.18 --
January 1, 1995 to March 31, 1995 0.18 (0.26) 0.59 0.18 --
April 1, 1995 to June 30, 1995 0.18 (0.11) 0.19 0.17 --
<CAPTION>
Net Asset Value Market Price**
For the Quarter High Low High Low Volume***
<S> <C> <C> <C> <C> <C>
July 1, 1993 to September 30, 1993 $10.50 $10.33 $11.00 $10.75 1,534
October 1, 1993 to December 31, 1993 10.51 10.40 10.875 10.00 1,699
January 1, 1994 to March 31, 1994 10.53 10.14 10.625 9.625 1,702
April 1, 1994 to June 30, 1994 10.22 10.00 10.00 9.75 1,206
July 1, 1994 to September 30, 1994 10.13 9.89 9.875 8.625 1,564
October 1, 1994 to December 31, 1994 9.88 9.50 9.125 8.00 3,098
January 1, 1995 to March 31, 1995 10.06 9.63 9.375 8.625 1,625
April 1, 1995 to June 30, 1995 10.18 9.96 9.50 9.125 1,537
<FN>
*Calculations are based upon shares of Common Stock outstanding at
the end of each quarter.
**As reported in the consolidated transaction reporting system.
***In thousands.
</TABLE>
<PAGE>
Important Tax
Information
All of the net investment income distributions declared monthly by
Apex Municipal Fund, Inc. during its taxable year ended June 30,
1995 qualify as tax-exempt interest dividends for Federal income tax
purposes.
There were no capital gains distributions declared by the Fund
during its taxable year ended June 30, 1995.
Please retain this information for your records.
DEAR SHAREHOLDERS
For the year ended June 30, 1995, Apex Municipal Fund, Inc. earned
$0.713 per share income dividends, representing a net annualized
yield of 7.09%, based on a month-end net asset value of $10.06 per
share. Over the same period, the Fund's total investment return was
+7.61%, based on a change in per share net asset value from $10.10
to $10.06, and assuming reinvestment of $0.713 per share income
dividends.
For the six months ended June 30, 1995, the Fund's total investment
return was +8.35%, based on a change in per share net asset value
from $9.64 to $10.06, and assuming reinvestment of $0.352 per share
income dividends.
The Municipal Market
The municipal bond market performed well over most of the six-month
period ended June 30, 1995. Given signs of a weakening domestic
economy and continuing low inflation, interest rates, in general,
significantly declined during the reporting period. As measured by
the Bond Buyer Revenue Bond Index, non-insured tax-exempt revenue
bond yields declined almost 70 basis points (0.70%) to 6.20% over
the last six months. Municipal bond yields declined over 100 basis
points from their recent highs last November and are lower than they
were a year ago. However, US Treasury bond yields exhibited a far
more extensive decline during the period, falling over 125 basis
points to end the June period at 6.62%.
<PAGE>
Municipal bonds have underperformed US Treasury securities for a
number of reasons. The record highs of the US equity market have
continued to attract retail investors seeking further capital gains.
Investor demand has also diminished in recent months by the
"sticker shock" effect that periodically affects the municipal bond
market. Investors who had become accustomed to purchasing tax-exempt
securities yielding in the 6.50%--7.00% range six or seven months
ago have demonstrated understandable reluctance to purchase similar
securities at current levels. The strong fundamental structure of
the municipal bond market, however, suggests that such hesitancy may
prove costly.
However, the major reason for the tax-exempt market's recent
underperformance was the concern regarding the implication for
municipal bonds' tax advantage resulting from various proposed tax
law changes (for example, flat-tax, value-added tax and national
sales tax) that have reduced investor demand for tax-exempt
products. Such concerns are likely to quickly recede as investors
realize that such changes are unlikely to be enacted before late
1996 at the earliest, if at all. Also, long-term investors will
recall 1986 when similar tax proposals were made and municipal bonds
initially rose to at least 100% of taxable yields. Tax-exempt bond
yields quickly declined as investors' fears proved to be unfounded.
The municipal bond market's strong technical position has diminished
somewhat in recent months. New-issue supply over the last six months
has totaled approximately $69 billion, for a decline of over 25%
versus the corresponding period in 1994. In recent months, however,
municipalities have issued approximately $40 billion in new
securities, which represents only a 3% decline versus the same
period a year earlier. Investor demand has remained muted despite
significant funds available to investors in recent months. By the
end of July investors, both individual and institutional, are
expected to receive as much as $80 billion from tax-exempt bond
maturities, coupon payments and the proceeds of early bond
redemptions. Little new money has entered the municipal market in
recent months, largely in response to the factors mentioned above.
Consequently, much of the technical support the municipal market
enjoyed earlier this year has evaporated, causing municipal bond
yields to decline at a slower rate than their taxable counterparts.
Their recent relative underperformance has made municipal bonds
particularly attractive to long-term investors. Tax-exempt bonds
currently yield well over 90% of US Treasury securities. In some
instances, A-rated, long-term revenue bonds have yielded almost 95%
of US Treasury bonds. Analysts usually consider municipal bonds
yielding over 82% of US Treasury securities to be historically
attractive. With inflation-adjusted, "real" after-tax equivalent tax-
exempt yields of over 6.50%, municipal securities currently appear
to represent considerable value relative to taxable bonds.
<PAGE>
Current tax-exempt yield levels appear to be over-compensating for
any proposed changes in tax law that can be reasonably expected to
be enacted. As Congressional hearings on this will continue into
1996, and the revenue losses resultant from such changes become more
apparent, the likelihood of any significant changes to tax codes and
the resultant decline of municipal bonds' inherent tax advantage
should quickly decline. Under such a scenario, tax-exempt bond
yields would quickly decline and currently available municipal bond
yields would return to their normal his-toric relationship.
Portfolio Strategy
During the six-month period ended June 30, 1995, Apex Municipal
Fund, Inc. remained fully invested. We continued to place emphasis
on the monitoring of existing holdings for credit developments and
financial performance. We seek to maintain a higher yield than that
offered in the general market.
A Federal judge entered a judgment in May 1995 that confirms a jury
verdict in favor of the Fund for securities fraud and related claims
that arose out of the public offering of bonds issued in 1989 to
finance the construction of private criminal detention facilities in
the State of Texas. We recovered 86% of the Fund's capital invested
in the Texas criminal detention facility bonds from the proceeds of
dispositions of the detention facilities and from settlements with
some of the defendants in the fraud action. We intend to vigorously
enforce the judgment against the non-settling defendants. However,
the prospects for further recovery are uncertain.
New issuance of high-yield securities consisted of large project
finance related to independent electric generating facilities and
resource recyclers. Increasing numbers of non-investment grade
utilities, nursing homes, and continuing care retirement facilities
are contributing to new supply. In addition, refinancing of
outstanding higher-coupon corporate-related debt is expected to
increase the supply of new issue high-yield securities in the
upcoming months.
In Conclusion
We appreciate your ongoing interest in Apex Municipal Fund, Inc.,
and we look forward to serving your investment needs and objectives
in the months and years to come.
Sincerely,
(Arthur Zeikel)
Arthur Zeikel
President
<PAGE>
(Vincent R. Giordano)
Vincent R. Giordano
Vice President and Portfolio Manager
July 31, 1995
Portfolio
Abbreviations
To simplify the listings of Apex Municipal Fund, Inc.'s
portfolio holdings in the Schedule of Investments,
we have abbreviated the names of many of the securities
according to the list below and at right.
AMT Alternative Minimum Tax (subject to)
COP Certificates of Participation
GO General Obligation Bonds
IDA Industrial Development Authority
IDR Industrial Development Revenue Bonds
M/F Multi-Family
PCR Pollution Control Revenue Bonds
S/F Single-Family
UT Unlimited Tax
VRDN Variable Rate Demand Notes
<TABLE>
SCHEDULE OF INVESTMENTS (in Thousands)
<CAPTION>
S&P Moody's Face Value
STATE Ratings Ratings Amount Issue (Note 1a)
<S> <S> <S> <C> <S> <C>
Alabama--0.5% B+ NR* $ 1,000 Brewton, Alabama, Industrial Development Board,
PCR, Refunding (Container Corporation America Project),
8% due 4/01/2009 $ 1,040
<PAGE>
Alaska--0.6% AA- A1 1,000 Valdez, Alaska, Marine Terminal Revenue Refunding Bonds
(Sohio Pipeline), 7.125% due 12/01/2025 1,081
Arizona--1.4% NR* NR* 3,915 Fort Mojave Indian Tribe, Arizona, Water and Sewer Revenue
Bonds, 10.25% due 9/01/2019 (e) 2,349
AA P1 400 Pinal County, Arizona, IDA, PCR (Magma-Copper/Newmont Mining
Corporation), VRDN, 4.20% due 12/01/2009 (a) 400
Arkansas--2.0% NR* NR* 405 Alma, Arkansas, Health Facilities Board Revenue Bonds, 10.50%
due 12/01/2019 432
NR* NR* 405 Conway, Arkansas, Public Facilities Board, Health Care Revenue
Bonds (Creative Living Project), 10.50% due 12/01/2019 429
NR* NR* 405 Hope, Arkansas, Health Facilities Board Revenue Bonds
(Omega Home), 10.50% due 12/01/2019 432
NR* NR* 810 Little Rock, Arkansas, Health Facilities Board Revenue Bonds
(Community Life Services), 10.50% due 12/01/2019 864
NR* NR* 810 Pine Bluff, Arkansas, Health Facilities Board Revenue Bonds
(Jenkins Housing), 10.50% due 12/01/2019 863
NR* NR* 405 Texarkana, Arkansas, Public Facilities Board, Health Care
Revenue Bonds (Housing Opportunities Addition Project),
10.50% due 12/01/2019 432
NR* NR* 405 West Helena, Arkansas, Health Facilities Board Revenue Bonds
(Delta House), 10.50% due 12/01/2019 432
California-- NR* NR* 2,000 Long Beach, California, Redevelopment Agency, M/F Housing
1.5% Revenue Bonds (Pacific Court Apartments), Issue B, AMT, 6.95%
due 9/01/2023 1,907
NR* NR* 975 Pleasanton, California, Joint Power Financing Authority,
Reassessment Revenue Bonds, Sub-Series B, 6.75% due 9/02/2017 969
Colorado--4.8% Denver, Colorado, City and County Airport Revenue
Bonds, AMT:
BB Baa 2,000 Series A, 8% due 11/15/2017 2,103
BB Baa 2,505 Series A, 8% due 11/15/2025 2,688
BB Baa 2,500 Series B, 7.25% due 11/15/2023 2,582
BB Baa 2,000 Series C, 6.75% due 11/15/2022 1,966
District of B- NR* 1,000 District of Columbia, COP, 7.30% due 1/01/2013 996
Columbia--0.5%
<PAGE>
Florida--8.5% NR* NR* 9,449 Florida Housing Finance Agency, M/F Housing Revenue
Bonds (Palm Aire), AMT, 10% due 1/01/2020 (e) 6,520
A1+ VMIG1++ 800 Hillsborough County, Florida, IDA, PCR, Refunding
(Tampa Electric Company), VRDN, 4.30% due 5/15/2018 (a) 800
NR* P1 700 Manatee County, Florida, PCR, Refunding (Florida
Power & Lighting Co. Project), VRDN, 4.20% due 9/01/2024 (a) 700
NR* NR* 5,585 Miami Beach, Florida, Redevelopment Agency, Tax
Increment Revenue Bonds, AMT, 9.125% due 12/01/2004 6,289
NR* NR* 4,378 North Miami, Florida, Health Facilities Authority
Revenue Bonds (Hallmark Homes Project), Series A,
10.50% due 8/01/2020 (e) 131
NR* NR* 4,650 Palm Beach County, Florida, Housing Authority Revenue
Bonds (Scattered Sites Project), 9.75% due 6/01/2020 2,186
Georgia--3.4% NR* NR* 4,000 Atlanta, Georgia, Urban Residential Finance Authority,
M/F Mortgage Housing Revenue Bonds (Northside Plaza
Apartments Project), 9.75% due 11/01/2020 4,220
NR* NR* 2,450 Hancock County, Georgia, COP, 8.50% due 4/01/2015 2,429
Illinois--5.4% Chicago, Illinois, O'Hare International Airport,
Special Facilities Revenue Bonds (United Airlines, Inc.):
BB Baa2 4,665 Series 1984-B, 8.85% due 5/01/2018 5,249
BB Baa2 4,800 Series B, AMT, 8.95% due 5/01/2018 5,376
Iowa--5.4% NR* NR* 10,000 Iowa Finance Authority, Health Care Facilities Revenue
Bonds (Mercy Health Initiatives Project), 9.95% due 7/01/2019 10,635
Louisiana--5.9% NR* NR* 5,000 Hodge, Louisiana, Utilities Revenue Bonds (Stone
Container Corp.), AMT, 9% due 3/01/2010 5,296
NR* Baa3 3,000 Lake Charles, Louisiana, Harbor and Terminal District
Port Facilities, Revenue Refunding Bonds (Trunk Line Co.
Project), 7.75% due 8/15/2022 3,302
NR* A 1,000 Louisiana Public Facilities Authority Revenue Bonds,
Student Loan, Sub-Series A-3, AMT, 7% due 9/01/2006 1,050
BB- NR* 2,000 Port New Orleans, Louisiana, IDR, Refunding (Continental
Grain Company Project), 7.50% due 7/01/2013 2,037
<PAGE>
Massachusetts-- NR* NR* 1,800 Boston, Massachusetts, Industrial Development Financing
6.6% Authority, Solid Waste Disposal Facilities Revenue Bonds
(Jet-A-Way Project), AMT, 10.50% due 1/01/2011 1,981
NR* NR* 3,500 Massachusetts State Health and Educational Facilities
Authority Revenue Bonds (Farren Care Center), Series A,
10.375% due 6/01/2010 4,004
NR* NR* 2,045 Massachusetts State Industrial Finance Agency, Educational
Institution Revenue Bonds (Center for Human Development),
9.375% due 7/01/2015 2,239
NR* NR* 2,400 Massachusetts State Industrial Finance Agency, Sewage
Facility Revenue Bonds (Resource Control Composting, Inc.
Project), AMT, 9.25% due 6/01/2010 2,586
NR* NR* 2,000 Massachusetts State Port Authority, Special Project Revenue
Bonds (Harborside Hyatt), AMT, 10% due 3/01/2026 2,224
Michigan--1.1% A1+ VMIG1++ 1,000 Grand Rapids, Michigan, Water Supply Systems Revenue Refunding
Bonds, VRDN, 4.10% due 1/01/2020 (a)(b) 1,000
BBB- Baa 1,200 Wayne County, Michigan, Downriver Sewer Disposal System
Revenue Bonds, Series A, 7% due 11/01/2013 1,243
Minnesota--8.2% NR* NR* 3,375 Anoka, Minnesota, M/F Housing Revenue Bonds (Rainbow Plaza
Apartments Project), AMT, 9.375% due 12/01/2024 3,564
Saint Paul, Minnesota, Housing and Redevelopment Authority,
Hospital Revenue Bonds (Healtheast Project):
BBB- Baa 6,655 Series A, 9.75% due 11/01/2017 7,301
BBB- Baa 4,720 Series D, 9.75% due 11/01/2017 5,178
New Jersey-- New Jersey Health Care Facilities Financing Authority
1.1% Revenue Bonds:
NR* NR* 1,000 (Riverwood Center), Series A, 9.90% due 7/01/2021 1,112
BBB- Baa 1,000 (Saint Elizabeth Hospital), Series B, 8.25% due 7/01/2020 1,075
<PAGE>
New York--6.6% New York City, New York, GO, UT, Series D:
A- Baa1 3,000 9.50% due 8/01/2002 3,594
A- Baa1 2,045 7.70% due 2/01/2011 2,225
NR* NR* 7,265 New York City, New York, IDA, Civic Facilities Revenue
Bonds (Amboy Properties Corporation Project), 9.625%
due 6/01/2015 7,265
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (concluded) (in Thousands)
<CAPTION>
S&P Moody's Face Value
STATE Ratings Ratings Amount Issue (Note 1a)
<S> <S> <S> <C> <S> <C>
Ohio--0.9% NR* NR* $ 1,740 Cincinnati, Ohio, Student Loan Funding Corporation, Revenue
Refunding Bonds, Sub-Series B, AMT, 6.75% due 1/01/2007 $ 1,768
Oregon--0.5% NR* NR* 1,000 Western Generation Agency, Oregon, Cogeneration Project
Revenue Bonds (Wauna Cogeneration Project), Series B,
AMT, 7.40% due 1/01/2016 1,030
Pennsylvania-- NR* NR* 5,000 Lehigh County, Pennsylvania, General Purpose Authority
15.0% Revenue Bonds (Wiley House), 8.75% due 11/01/2014 5,069
NR* NR* 3,150 Montgomery County, Pennsylvania, Higher Education and
Health Authority Revenue Bonds (Retirement Community--GDL
Farms), Series A, 9.50% due 1/01/2000 (f) 3,794
NR* NR* 1,000 Montgomery County, Pennsylvania, IDA, First Mortgage Revenue
Refunding Bonds (Meadowood Corporation Project), Series A,
10.25% due 12/01/2020 1,098
BBB- Baa2 3,000 Pennsylvania Economic Development Financing Authority,
Exempt Facilities Revenue Bonds (MacMillan Limited Partnership
Project), AMT, 7.60% due 12/01/2020 3,238
NR* NR* 1,000 Pennsylvania Economic Development Financing Authority,
IDR (Gehl Co., Inc. Project), Series F, AMT, 9% due 9/01/2010 1,048
NR* NR* 4,000 Pennsylvania Economic Development Financing Authority,
Recycling Revenue Bonds (Ponderosa Fibres Project), Series A,
AMT, 9.25% due 1/01/2022 4,117
BBB+ Baa1 1,000 Pennsylvania Economic Development Financing Authority,
Wastewater Treatment Revenue Bonds (Sun Company Inc.,
R & M Project), Series A, AMT, 7.60% due 12/01/2024 1,080
AAA Aaa 4,000 Pennsylvania State Higher Education Assistance Agency, Student
Loan Revenue Bonds, Series B, AMT, 6.172% due 3/01/2022 (c) 3,943
NR* NR* 5,200 Philadelphia, Pennsylvania, IDR, First Mortgage Revenue Bonds
(Tucker House II Project), 11% due 10/01/2019 (e) 4,160
NR* NR* 2,000 Washington County, Pennsylvania, Hospital Authority, Revenue
Refunding Bonds (Canonsburg General Hospital Project), 7.35%
due 6/01/2013 1,978
<PAGE>
Tennessee--2.4% NR* NR* 2,000 Knox County, Tennessee, Health, Educational and Housing
Facilities Board, Hospital Facilities Revenue Bonds (Baptist
Health System of East Tennessee), 8.60% due 4/15/2016 2,156
A+ A1 2,500 Tennessee Housing Development Agency, Mortgage Financing
Revenue Bonds, Series A, AMT, 7.125% due 7/01/2026 2,623
Texas--5.2% NR* NR* 1,460 Angelina County, Texas, Jail Facilities Financing Corporation,
Criminal Detention Center Mortgage Revenue Bonds, 9.75%
due 8/01/2009 (e) --
NR* NR* 6,035 Bexar County, Texas, Health Facilities Development
Corporation Revenue Bonds (Heartway Corporation), Series A-1,
10.25% due 3/01/2019 5,854
BB+ Baa2 2,000 Dallas-Fort Worth, Texas, International Airport
Facilities Improvement Corporation Revenue Bonds (American
Airlines, Inc.), 7.50% due 11/01/2025 2,080
A1+ NR* 300 Harris County, Texas, Health Facilities Development
Corporation, Hospital Revenue Bonds (Methodist Hospital),
VRDN, 4.50% due 12/01/2025 (a) 300
NR* Ba3 945 Nolan County, Texas, Industrial Development Corporation,
IDR (US Gypsum Company Project), 7.25% due 12/01/2014 947
BB Ba 1,000 Odessa, Texas, Junior College District, Revenue Refunding
Bonds, Series A, 8.125% due 12/01/2018 1,006
NR* NR* 3,530 Pecos County, Texas, Jail Facilities Financing Corporation,
Criminal Detention Center Mortgage Revenue Bonds, 9.75%
due 8/01/2009 (e) --
Utah--0.5% BBB+ Baa2 1,000 Carbon County, Utah, Solid Waste Disposal Revenue Refunding
Bonds (Laidlaw Inc.--ECDC Project), Series A, AMT, 7.50%
due 2/01/2010 1,029
Washington-- NR* Baa1 7,730 Washington State Healthcare Facilities Authority Revenue Bonds
6.4% (Kadlec Medical Center, Richland), 9% due 1/01/2011 8,739
AAA NR* 3,645 Washington State Housing Finance Community, S/F Mortgage
Revenue Refunding Bonds, Series E, AMT, 7.10% due 7/01/2022 (d) 3,795
West Virginia-- NR* NR* 6,450 Fayette County, West Virginia, Community Commercial
3.7% Development Revenue RefundingBonds (MPC Incorporated Project),
9.75% due 2/01/2011 7,192
Total Investments (Cost--$195,878)--98.1% 192,820
Other Assets Less Liabilities--1.9% 3,827
--------
Net Assets--100.0% $196,647
========
<PAGE>
<FN>
(a)The interest rate is subject to change periodically based upon
the prevailing market rates. The interest rate shown is the rate in
effect at June 30, 1995.
(b)FGIC Insured.
(c)AMBAC Insured.
(d)GNMA/FNMA Collateralized.
(e)Non-income producing security.
(f)Prerefunded.
*Not Rated.
++Highest short-term rating by Moody's Investors Service, Inc.
Ratings of issues shown have not been audited by Deloitte & Touche
LLP.
See Notes to Financial Statements.
</TABLE>
<TABLE>
STATEMENT OF ASSETS, LIABILITIES AND CAPITAL
<CAPTION>
As of June 30, 1995
<S> <S> <C> <C>
Assets: Investments, at value (identified cost--$195,878,476) (Note 1a) $192,819,739
Cash 65,355
Interest receivable 4,078,437
Prepaid expenses 55,451
------------
Total assets 197,018,982
------------
Liabilities: Payables:
Dividends to shareholders (Note 1f) $ 198,103
Investment adviser (Note 2) 105,819 303,922
------------
Accrued expenses and other liabilities 68,166
------------
Total liabilities 372,088
------------
Net Assets: Net assets $196,646,894
============
<PAGE>
Capital: Common Stock, $.10 par value, 150,000,000 shares authorized;
19,544,644 shares issued and outstanding $ 1,954,464
Paid-in capital in excess of par 215,230,388
Undistributed investment income--net 1,316,404
Accumulated realized capital losses on investments--net (Note 5) (18,795,625)
Unrealized depreciation on investments--net (3,058,737)
------------
Total capital--Equivalent to $10.06 net asset value per share of
Common Stock (market price--$9.375) (Note 4) $196,646,894
============
See Notes to Financial Statements.
</TABLE>
<TABLE>
STATEMENT OF OPERATIONS
<CAPTION>
For the Year Ended June 30, 1995
<S> <S> <C> <C>
Investment Interest and amortization of premium and discount earned $ 15,621,433
Income (Note 1d):
Expenses: Investment advisory fees (Note 2) $ 1,260,726
Professional fees 259,107
Transfer agent fees 59,594
Directors' fees and expenses 45,184
Printing and shareholder reports 43,874
Accounting services (Note 2) 39,300
Listing fees 25,012
Custodian fees 16,873
Pricing fees 8,821
Amortization of organization expenses (Note 1e) 727
Other 15,070
------------
Total expenses 1,774,288
------------
Investment income--net 13,847,145
------------
Realized & Unreal- Realized loss on investments--net (7,795,055)
ized Gain (Loss) Change in unrealized depreciation on investments--net 7,065,353
on Investments-- ------------
Net (Notes 1b, Net Increase in Net Assets Resulting from Operations $ 13,117,443
1d & 3): ============
<PAGE>
See Notes to Financial Statements.
</TABLE>
<TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
<CAPTION>
For the Year Ended June 30,
Increase (Decrease) in Net Assets: 1995 1994
<S> <S> <C> <C>
Operations: Investment income--net $ 13,847,145 $ 14,606,491
Realized loss on investments--net (7,795,055) (1,400,659)
Change in unrealized depreciation on investments--net 7,065,353 (4,439,982)
------------ ------------
Net increase in net assets resulting from operations 13,117,443 8,765,850
------------ ------------
Dividends to Investment income--net (13,936,289) (14,597,172)
Shareholders ------------ ------------
(Note 1f): Net decrease in net assets resulting from dividends
to shareholders (13,936,289) (14,597,172)
------------ ------------
Common Stock Net increase in net assets derived from capital shares
Transactions issued to shareholders in reinvestment of dividends -- 1,536,574
(Note 4): ------------ ------------
Net Assets: Total decrease in net assets (818,846) (4,294,748)
Beginning of year 197,465,740 201,760,488
------------ ------------
End of year* $196,646,894 $197,465,740
============ ============
<FN>
*Undistributed investment income--net $ 1,316,404 $ 1,405,548
============ ============
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
FINANCIAL HIGHLIGHTS
<CAPTION>
The following per share data and ratios
have been derived from information provided
in the financial statements.
For the Year Ended June 30,
Increase (Decrease) in Net Asset Value: 1995 1994 1993 1992 1991
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of year $ 10.10 $ 10.40 $ 10.31 $ 10.92 $ 11.18
Operating -------- -------- -------- -------- --------
Performance: Investment income--net .71 .75 .84 .91 .94
Realized and unrealized gain (loss) on
investments--net (.04) (.30) .09 (.61) (.26)
-------- -------- -------- -------- --------
Total from investment operations .67 .45 .93 .30 .68
-------- -------- -------- -------- --------
Less dividends from investment income--net (.71) (.75) (.84) (.91) (.94)
-------- -------- -------- -------- --------
Net asset value, end of year $ 10.06 $ 10.10 $ 10.40 $ 10.31 $ 10.92
======== ======== ======== ======== ========
Market price per share, end of year $ 9.375 $ 9.875 $ 10.875 $ 11.00 $ 11.50
======== ======== ======== ======== ========
Total Investment Based on market price per share 2.57% (2.26%) 7.34% 3.93% 8.78%
Return:* ======== ======== ======== ======== ========
Based on net asset value per share 7.61% 4.53% 9.52% 2.59% 6.25%
======== ======== ======== ======== ========
Ratios to Average Expenses, net of reimbursement .91% .88% .60% .83% .84%
Net Assets: ======== ======== ======== ======== ========
Expenses .91% .88% .81% .83% .84%
======== ======== ======== ======== ========
Investment income--net 7.14% 7.24% 8.18% 8.45% 8.49%
======== ======== ======== ======== ========
Supplemental Net assets, end of year (in thousands) $196,647 $197,466 $201,760 $197,996 $206,736
Data: ======== ======== ======== ======== ========
Portfolio turnover 20% 12% 11% 3% 31%
======== ======== ======== ======== ========
<FN>
*Total investment returns based on market value, which can be
significantly greater or lesser than the net asset value, may result
in substantially different returns. Total investment returns exclude
the effects of sales loads.
See Notes to Financial Statements.
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS
1. Significant Accounting Policies:
Apex Municipal Fund, Inc. (the "Fund") is registered under the
Investment Company Act of 1940 as a non-diversified, closed-end
management investment company. The Fund determines and makes
available for publication the net asset value of its Common Stock on
a weekly basis. The Fund's Common Stock is listed on the New York
Stock Exchange under the symbol APX. The following is a summary of
significant accounting policies followed by the Fund.
(a) Valuation of investments--Municipal bonds are traded primar-ily
in the over-the-counter markets and are valued at the most recent
bid price or yield equivalent as obtained by the Fund's pricing
service from dealers that make markets in such securities. Financial
futures contracts and options thereon, which are traded on
exchanges, are valued at their closing prices as of the close of
such exchanges. Options, which are traded on exchanges, are valued
at their last sale price as of the close of such exchanges or,
lacking any sales, at the last available bid price. Securities with
remaining maturities of sixty days or less are valued at amortized
cost, which approximates market value. Securities for which market
quotations are not readily available are valued at their fair value
as determined in good faith by or under the direction of the Board
of Directors of the Fund.
(b) Derivative financial instruments--The Fund may engage in various
portfolio strategies to seek to increase its return by hedging its
portfolio against adverse movements in the debt markets. Losses may
arise due to changes in the value of the contract or if the
counterparty does not perform under the contract.
* Financial futures contracts--The Fund may purchase or sell
interest rate futures contracts and options on such futures
contracts for the purpose of hedging the market risk on existing
securities or the intended purchase of securities. Futures contracts
are contracts for delayed delivery of securities at a specific
future date and at a specific price or yield. Upon entering into a
contract, the Fund deposits and maintains as collateral such initial
margin as required by the exchange on which the transaction is
effected. Pursuant to the contract, the Fund agrees to receive from
or pay to the broker an amount of cash equal to the daily
fluctuation in value of the contract. Such receipts or payments are
known as variation margin and are recorded by the Fund as unrealized
gains or losses. When the contract is closed, the Fund records a
realized gain or loss equal to the difference between the value of
the contract at the time it was opened and the value at the time it
was closed.
<PAGE>
* Options--The Fund is authorized to write covered call options and
purchase put options. When the Fund writes an option, an amount
equal to the premium received by the Fund is reflected as an asset
and an equivalent liability. The amount of the liability is
subsequently marked to market to reflect the current market value of
the option written.
When a security is purchased or sold through an exercise of an
option, the related premium paid (or received) is added to (or
deducted from) the basis of the security acquired or deducted from
(or added to) the proceeds of the security sold. When an option
expires (or the Fund enters into a closing transaction), the Fund
realizes a gain or loss on the option to the extent of the premiums
received or paid (or gain or loss to the extent the cost of the
closing transaction exceeds the premium paid or received).
Written and purchased options are non-income producing
investments.
(c) Income taxes--It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated
investment companies and to distribute substantially all of its
taxable income to its shareholders. Therefore, no Federal income tax
provision is required.
(d) Security transactions and investment income--Security
transactions are recorded on the dates the transactions are entered
into (the trade dates). Interest income is recognized on the accrual
basis. Discounts and market premiums are amortized into interest
income. Realized gains and losses on security transactions are
determined on the identified cost basis.
(e) Deferred organization expenses--Deferred organization ex-penses
are amortized on a straight-line basis over a five-year period.
(f) Dividends and distributions--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 Fund 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.
<PAGE>
FAM is responsible for the management of the Fund's portfolio and
provides the necessary personnel, facilities, equipment and certain
other services necessary to the operations of the Fund. For such
services, the Fund pays a monthly fee at an annual rate of 0.65% of
the Fund's average weekly net assets.
Accounting services are provided to the Fund by FAM at cost.
Certain officers and/or directors of the Fund are officers and/or
directors of FAM, PSI, Merrill Lynch, Pierce, Fenner & Smith Inc.,
and/or ML & Co.
3. Investments:
Purchases and sales of investments, excluding short-term securities,
for the year ended June 30, 1995 were $37,337,743 and $41,214,044,
respectively.
Net realized and unrealized losses as of June 30, 1995 were as
follows:
Realized Unrealized
Losses Losses
Long-term investments $(7,795,055) $(3,058,737)
----------- -----------
Total $(7,795,055) $(3,058,737)
=========== ===========
As of June 30, 1995, net unrealized depreciation for Federal income
tax purposes aggregated $3,058,737 of which $11,156,178 related to
appreciated securities and $14,214,915 related to depreciated
securities. The aggregate cost of investments at June 30, 1995 for
Federal income tax purposes was $195,878,476.
4. Common Stock Transactions:
At June 30, 1995, the Fund had one class of shares of Common Stock,
par value $0.10 per share, of which 150,000,000 shares were
authorized. During the year ended June 30, 1995, shares issued and
outstanding remained constant at 19,544,644. At June 30, 1995, total
paid-in capital amounted to $217,184,852.
5. Capital Loss Carryforward:
At June 30, 1995, the Fund had a net capital loss carryforward of
approximately $11,206,000, of which $274,000 expires in 1998,
$1,527,000 expires in 1999, $4,876,000 expires in 2001, and
$2,775,000 expires in 2002, and $1,754,000 expires in 2003. This
amount will be available to offset like amounts of any future
taxable gains.
<PAGE>
6. Subsequent Event:
On July 10, 1995, the Fund's Board of Directors declared an ordinary
income dividend to Common Stock shareholders in the amount of
$.059944 per share, payable on July 28, 1995 to shareholders of
record as of July 21, 1995.
<AUDIT-REPORT>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders,
Apex Municipal Fund, Inc.:
We have audited the accompanying statement of assets, liabilities,
and capital, including the schedule of investments, of Apex
Municipal Fund, Inc., as of June 30, 1995, the related statements of
operations for the year then ended and changes in net assets for
each of the years in the two-year period then ended, and the
financial highlights for each of the years in the five-year period
then ended. These financial statements and the financial highlights
are the responsibility of the Fund's management. Our responsibility
is to express an opinion on the financial statements and the
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial
statements and 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 June 30,
1995 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.
<PAGE>
In our opinion, such financial statements and the financial
highlights present fairly, in all material respects, the financial
position of Apex Municipal Fund, Inc. as of June 30, 1995, the
results of its operations, the changes in its net assets, and the
financial highlights for the respective stated periods in conformity
with generally accepted accounting principles.
Deloitte & Touche LLP
Princeton, New Jersey
July 31, 1995
</AUDIT REPORT>
