APEX MUNICIPAL
FUND, INC.
FUND LOGO
Semi-Annual Report
December 31, 1994
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>
January 1, 1993 to March 31, 1993 $0.21 $(0.12) $ 0.27 $0.21 --
April 1, 1993 to June 30, 1993 0.20 -- 0.12 0.21 --
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 --
<CAPTION>
Net Asset Value Market Price**
For the Quarter High Low High Low Volume***
<S> <C> <C> <C> <C> <C>
January 1, 1993 to March 31, 1993 $10.33 $10.08 $11.00 $ 9.625 2,409
April 1, 1993 to June 30, 1993 10.40 10.26 10.875 10.625 1,405
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
<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>
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, New York 10286
NYSE Symbol
APX
DEAR SHAREHOLDERS
For the six months ended December 31, 1994, Apex Municipal Fund,
Inc. earned $0.361 per share income dividends, which includes earned
and unpaid dividends of $0.060. This represents a net annualized
yield of 7.42%, based on a month-end net asset value of $9.64 per
share. Over the same period, the Fund's total investment return was
- -0.68%, based on a change in per share net asset value from $10.10
to $9.64, and assuming reinvestment of $0.361 per share income
dividends.
The Environment
Volatility in the US financial markets continued during the six
months ended December 31, 1994, largely prompted by concerns of
increasing inflationary pressures. The possibility of continued
monetary policy tightening by the Federal Reserve Board was
predominant in the minds of investors throughout most of the period.
Therefore, there was little surprise in mid-November when the
central bank announced the sixth increase in short-term interest
rates in 1994. Early in the period, the weakness of the US dollar in
foreign exchange markets prompted declines in US stock and bond
prices, but some strengthening of the US currency has occurred
recently.
<PAGE>
The manufacturing sector was the driving force behind the US economy
through the final quarter of the year, making an important
contribution to the substantial increase in corporate earnings. US
companies have been successful at containing labor costs, which are
an important component of the inflation outlook. Although consumer
spending grew at a slower pace than in previous economic recoveries,
purchases of vehicles and household durable goods rose in the latter
months of 1994. Despite the relatively modest rise in consumer
spending, the personal savings rate fell to an all-time annual low
in 1994.
In the weeks ahead, investors will continue to assess economic data
and inflationary trends in order to gauge whether further increases
in short-term interest rates are likely. The core inflation rate
rose less than 3% in 1994 following a 3% increase in 1993, the best
sustained inflation performance in 30 years. It is not likely that
such positive inflation results will be duplicated in 1995. In
addition, investor interest in the new year will also be focused on
the progress that the new Congress makes on both reducing spending
and the Federal budget deficit and passing tax cuts that promote
savings and investment. Legislative progress, combined with
continued indications of moderate and sustainable levels of economic
growth, would be positive for the US capital markets. However, the
lagged effects of higher interest rates could slow the economy
sharply and with it, the growth of corporate profits.
The Municipal Market
During the six months ended December 31, 1994, the tax-exempt bond
market continued to deteriorate amid signs of a continuing strong
domestic economy and a restrictive Federal Reserve Board monetary
policy. By the end of December, municipal revenue bond yields had
increased over 40 basis points (0.40%) to 6.97%. Interest rate
volatility remained significant, with yields fluctuating by as much
as 10 basis points--15 basis points on a weekly basis. Long-term US
Treasury bonds also remained very volatile during the December
quarter. For example, by mid-November, US Treasury yields had risen
over 55 basis points to 8.15% before declining to end the quarter at
7.875%.
Over the last six months, long-term municipal bonds have yielded as
much as 90% of comparable US Treasury bonds. Yield ratios in excess
of 85% are considered historically attractive to long-term
investors.
The technical position of the municipal bond market remained
favorable throughout the December period.
<PAGE>
Approximately $71 billion in long-term municipal securities were
issued during the six months ended December 31, 1994. This
represents a decline of over 50% versus the December 31, 1993
period. Similarly, for all of 1994, $164 billion in long-term tax-
exempt bonds were issued, a 44% decline from 1993 annual issuance
levels. Also, estimates of net cash available for reinvestment in
early 1995, based on maturities, coupon income, and advanced
refunded maturities, have been in excess of $25 billion. This
combination of reduced supply and projected sizable future demand,
however, has yet to generate lower interest rates, as might be
expected. However, if current uncertainties regarding the strength
and volatility of the current economic expansion are resolved, and,
more importantly, no further interest rate increases by the Federal
Reserve Board are anticipated, the municipal bond market appears
well-positioned to recoup some of the price deterioration it has
suffered over the last quarters.
Portfolio Strategy
During the six-month period ended December 31, 1994, 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.
In October 1994, a Federal jury in Houston, Texas returned verdicts
for securities fraud and related claims in favor of the Fund and its
co-plaintiffs against a number of professionals involved in the 1989
public offering of tax-exempt bonds issued to finance the
construction of private jail facilities in six counties in the State
of Texas. We anticipate that the Fund will receive approximately
$3.7 million from a settlement agreement reached with one of the
principal defendants in the litigation. Settlement proceeds are
expected early in the first quarter of 1995 and will be reinvested
when they are received.
New issuance of high-yield securities continued to be concentrated
in project finance issues that related to independent electric
generating plants, resource recyclers, and noninvestment-grade
utilities. Supply in the new-issue high-yield market is expected to
shift in 1995 to the refinancing of outstanding higher-coupon
corporate-related debt issued in 1985 and which is now generally
reaching its first eligible call date.
In Conclusion
We appreciate your ongoing interest in Apex Municipal Fund, Inc.,
and we look forward to serving your investment needs in the months
and years to come.
<PAGE>
Sincerely,
(Arthur Zeikel)
Arthur Zeikel
President
(Vincent R. Giordano)
Vincent R. Giordano
Vice President and
Portfolio Manager
January 27, 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)
DATES Daily Adjustable Tax-Exempt Securities
GO General Obligation Bonds
IDA Industrial Development Authority
IDR Industrial Development Revenue Bonds
M/F Multi-Family
PCR Pollution Control Revenue Bonds
RIB Residual Interest 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 $ 986
<PAGE>
Arizona--2.9% NR* NR* 3,915 Fort Mojave Indian Tribe, Arizona, Water and Sewer Revenue
Bonds, 10.25% due 9/01/2019 (e) 2,349
A1+ VMIG1 1,000 Maricopa County, Arizona, IDA, Hospital Facility Revenue Bonds
(Samaritan Health Service Hospital), VRDN, Series B2, 4.75%
due 1/03/1995 (a)(d) 1,000
BB Ba2 1,000 Maricopa County, Arizona, Pollution Control Corporation, PCR,
Refunding (Public Service Company-Palo Verde), Series A,
6.375% due 8/15/2023 847
AA P1 1,300 Pinal County, Arizona, IDA, PCR (Magma-Copper/Newmont Mining
Corporation), VRDN, 4.75% due 1/03/1995 (a) 1,300
Arkansas--2.0% NR* NR* 405 Alma, Arkansas, Health Facilities Board Revenue Bonds, 10.50%
due 12/01/2019 419
NR* NR* 405 Conway, Arkansas, Public Facilities Board, Health Care Revenue
Bonds (Creative Living Project), 10.50% due 12/01/2019 416
NR* NR* 405 Hope, Arkansas, Health Facilities Board Revenue Bonds (Omega
Home), 10.50% due 12/01/2019 419
NR* NR* 810 Little Rock, Arkansas, Health Facilities Board Revenue Bonds
(Community Life Services), 10.50% due 12/01/2019 839
NR* NR* 810 Pine Bluff, Arkansas, Health Facilities Board Revenue Bonds
(Jenkins Housing), 10.50% due 12/01/2019 839
NR* NR* 405 Texarkana, Arkansas, Public Facilities Board, Health Care
Revenue Bonds (Housing Opportunities Addition Project), 10.50%
due 12/01/2019 419
NR* NR* 405 West Helena, Arkansas, Health Facilities Board Revenue Bonds
(Delta House), 10.50% due 12/01/2019 419
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 1,864
NR* NR* 975 Pleasanton, California, Joint Power Financing Authority,
Reassessment Revenue Bonds, Sub-Series B, 6.75% due 9/02/2017 883
Colorado--3.2% Denver, Colorado, City and County Airport Revenue Bonds, AMT:
BB Baa 2,000 Series A, 8% due 11/15/2017 1,939
BB Baa 2,505 Series A, 8% due 11/15/2025 2,443
BB Baa 2,000 Series C, 6.75% due 11/15/2022 1,712
<PAGE>
Florida--7.9% NR* NR* 9,922 Florida Housing Finance Agency, M/F Housing Agency Revenue
Bonds (Palm Aire), AMT, 10% due 1/01/2020 (e) 5,953
NR* NR* 5,585 Miami Beach, Florida, Redevelopment Agency, Tax Increment
Revenue Bonds, AMT, 9.125% due 12/01/2004 6,123
NR* NR* 4,378 North Miami, Florida, Health Facilities Authority Revenue Bonds
(Hallmark Homes Project), Series A, 10.50% due 8/01/2020 (e) 219
NR* NR* 4,650 Palm Beach County, Florida, Housing Authority Revenue Bonds
(Scattered Sites Project), 9.75% due 6/01/2020 2,325
NR* VMIG1 100 Palm Beach County, Florida, Water and Sewer Revenue Bonds, VRDN,
4.75% due 1/03/1995 (a) 100
A1 VMIG1 100 Pinellas County, Florida, Health Facilities Authority, Revenue
Refunding Bonds (Pooled Hospital Loan Program), DATES, 4.75% due
1/03/1995 (a) 100
Georgia--2.2% NR* NR* 4,000 Atlanta, Georgia, Urban Residential Finance Authority, M/F Mortgage
Revenue Bonds (Northside Plaza Apartments Project), 9.75% due
11/01/2020 4,210
Illinois--5.4% Chicago, Illinois, O'Hare International Airport, Special
Facilities Revenue Bonds (United Airlines, Inc.):
BB Baa2 4,860 AMT, Series B, 8.95% due 5/01/2018 5,158
BB Baa2 4,745 Series 1984-B, 8.85% due 5/01/2018 5,060
Iowa--5.6% NR* NR* 10,000 Iowa Finance Authority, Health Care Facilities Revenue Bonds
(Mercy Health Initiatives Project), 9.95% due 7/01/2019 10,492
A1+ NR* 100 Iowa Finance Authority, Solid Waste Disposal Revenue Bonds
(Cedar River Paper Company Project), VRDN, Series A, 4.85% due
1/03/1995 (a) 100
Louisiana-- NR* NR* 5,000 Hodge, Louisiana, Utilities Revenue Bonds (Stone Container
5.9% Corp.), AMT, 9% due 3/01/2010 5,126
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 3,043
NR* A 1,000 Louisiana Public Facilities Authority Revenue Bonds, Student
Loan, AMT, Sub-Series A-3, 7% due 9/01/2006 1,012
BB- NR* 2,000 Port New Orleans, Louisiana, IDR, Refunding (Continental Grain
Company Project), 7.50% due 7/01/2013 1,927
<PAGE>
Massachusetts NR* NR* 1,900 Boston, Massachusetts, Industrial Development Financing
- --6.9% Authority, Solid Waste Disposal Facilities Revenue Bonds (Jet-
A-Way Project), AMT, 10.50% due 1/01/2011 2,037
NR* NR* 3,600 Massachusetts State Health and Educational Facilities Authority
Revenue Bonds (Farren Care Center), Series A, 10.375% due
6/01/2010 3,998
NR* NR* 2,045 Massachusetts State Industrial Finance Agency, Educational
Institution Revenue Bonds (Center for Human Development), 9.375%
due 7/01/2015 2,185
NR* NR* 2,500 Massachusetts State Industrial Finance Agency, Sewage Facility
Revenue Bonds (Resource Control Composting, Inc. Project), AMT,
9.25% due 6/01/2010 2,597
NR* NR* 2,000 Massachusetts State Port Authority, Special Project Revenue Bonds
(Harborside Hyatt), AMT, 10% due 3/01/2026 2,131
Michigan--0.6% BBB- Baa 1,200 Wayne County, Michigan, Downriver Sewer Disposal System Revenue
Bonds, Series A, 7% due 11/01/2013 1,183
Minnesota-- NR* NR* 3,385 Anoka, Minnesota, M/F Housing Revenue Bonds (Rainbow Plaza
8.5% Apartments Project), AMT, 9.375% due 12/01/2024 3,557
Saint Paul, Minnesota, Housing and Redevelopment Authority,
Hospital Revenue Bonds (Healtheast Project):
BBB- Baa 6,655 Series A, 9.75% due 11/01/2017 7,272
BBB- Baa 4,720 Series D, 9.75% due 11/01/2017 5,158
New Jersey-- New Jersey Health Care Facilities Financing Authority Revenue
1.7% Bonds:
NR* NR* 1,000 (Riverwood Center), Series A, 9.90% due 7/01/2021 1,079
BBB- Baa 1,000 (Saint Elizabeth Hospital), Series B, 8.25% due 7/01/2020 1,033
AAA VMIG1 1,000 New Jersey State Turnpike Authority, Turnpike Revenue Refunding
Bonds, VRDN, Series D, 4.65% due 1/03/1995 (a)(g) 1,000
New York-- New York City, New York, GO, UT, Series D:
11.5% A- Baa1 3,000 9.50% due 8/01/2002 3,549
A- Baa1 2,045 7.70% due 2/01/2011 2,124
NR* NR* 7,385 New York City, New York, IDA, Civic Facilities Revenue Bonds
(Amboy Properties Corporation Project), 9.625% due 6/01/2015 7,385
</TABLE>
<PAGE>
<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>
New York New York State Energy Research and Development Authority,
(concluded) Electric Facilities Revenue Bonds (Long Island Lighting),
AMT, Series A:
BB+ Ba1 $ 7,000 7.15% due 6/01/2020 $ 6,413
BB+ Ba1 2,500 7.15% due 2/01/2022 2,279
Ohio--0.9% NR* NR* 1,740 Cincinnati, Ohio, Student Loan Funding Corporation, Revenue
Refunding Bonds, AMT, Sub-Series B, 6.75% due 1/01/2007 1,712
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 949
Pennsylvania NR* NR* 7,500 Bucks County, Pennsylvania, IDA, First Mortgage Revenue Bonds
- --12.7% (RHA/Mill Run Care), 10% due 7/01/2019 3,675
NR* NR* 4,000 Lehigh County, Pennsylvania, General Purpose Authority Revenue
Bonds (Wiley House), 8.75% due 11/01/2014 3,780
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) 3,712
NR* NR* 1,000 Montgomery County, Pennsylvania, IDA, First Mortgage Revenue
Refunding Bonds (Meadowood Corporation Project), Series A,
10.25% due 12/01/2020 1,061
NR* NR* 1,000 Pennsylvania Economic Development Financing Authority, IDR
(Gehl Co., Inc. Project), AMT, Series F, 9% due 9/01/2010 996
AAA AAA 4,000 Pennsylvania State Higher Education Assistance Agency, Student
Loan Revenue Bonds, AMT, RIB, Series B, 6.172% due 3/01/2022
(b)(c) 3,603
NR* NR* 5,200 Philadelphia, Pennsylvania, IDR, First Mortgage Revenue Bonds
(Tucker House II Project), 11% due 10/01/2019 5,096
NR* NR* 2,000 Washington County, Pennsylvania, Hospital Authority, Revenue
Refunding Bonds (Canonsburg General Hospital Project), 7.35%
due 6/01/2013 1,930
<PAGE>
Tennessee-- NR* NR* 2,000 Knox County, Tennessee, Health, Educational and Housing
1.1% Facilities Board, Hospital Facilities Revenue Bonds (Baptist
Health System of East Tennessee), 8.60% due 4/15/2016 2,062
Texas--4.2% 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* 6,095 Bexar County, Texas, Health Facilities Development Corporation
Revenue Bonds (Heartway Corporation), Series A-1, 10.25%
due 3/01/2019 5,973
A1+ VMIG1 100 Harris County, Texas, Health Facilities Development Corporation,
Special Facilities Revenue Bonds (Texas Medical Center Project),
VRDN, 4.75% due 1/03/1995 (a)(d) 100
NR* B1 945 Nolan County, Texas, Industrial Development Corporation, IDR
(US Gypsum Company Project), 7.25% due 12/01/2014 898
NR* NR* 3,530 Pecos County, Texas, Jail Facilities Financing Corporation,
Criminal Detention Center, Mortgage Revenue Bonds, 9.75%
due 8/01/2009 (e) --
NR* VMIG1 1,100 Southwest Texas Higher Education Authority Incorporated,
Revenue Refunding Bonds (Southern Methodist University),
VRDN, 4.50% due 1/03/1995 (a) 1,100
Virginia--1.8% NR* NR* 4,940 Alexandria, Virginia, Redevelopment and Housing Authority,
M/F Housing Revenue Bonds (Portals West Apartments Project),
AMT, Series B, 9.50% due 7/15/2020 3,310
Washington-- NR* Baa1 7,940 Washington State Healthcare Facilities Authority Revenue
6.6% Bonds (Kadlec Medical Center, Richland), 9% due 1/01/2011 8,670
AAA NR* 3,645 Washington State Housing Finance Community, S/F Mortgage
Revenue Refunding Bonds, AMT, Series E, 7.10% due 7/01/2022 (h) 3,658
West Virginia NR* NR* 6,650 Fayette County, West Virginia, Community Commercial
- --3.8% Development Revenue Refunding Bonds (MPC Incorporated
Project), 9.75% due 2/01/2011 7,214
Total Investments (Cost--$202,915)--97.9% 184,520
Other Assets Less Liabilities--2.1% 3,939
--------
Net Assets--100.0% $188,459
========
<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 December 31, 1994.
(b)The interest rate is subject to change periodically and
inversely based upon prevailing market rates. The interest rate
shown is the rate in effect at December 31, 1994.
(c)AMBAC Insured.
(d)MBIA Insured.
(e)Non-income producing security.
(f)Prerefunded.
(g)FGIC Insured.
(h)GNMA/FNMA Collateralized.
*Not Rated.
See Notes to Financial Statements.
</TABLE>
<TABLE>
STATEMENT OF ASSETS, LIABILITIES AND CAPITAL
<CAPTION>
As of December 31, 1994
<S> <S> <C> <C>
Assets: Investments, at value (identified cost--$202,914,983) (Note 1a) $184,520,214
Cash 30,873
Interest receivable 4,214,182
Deferred organization expenses (Note 1e) 727
Prepaid expenses 29,998
------------
Total assets 188,795,994
------------
Liabilities: Payables:
Dividends to shareholders (Note 1g) $ 196,390
Investment adviser (Note 2) 100,643 297,033
------------
Accrued expenses and other liabilities 39,663
------------
Total liabilities 336,696
------------
Net Assets: Net assets $188,459,298
============
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 1,243,221
Accumulated realized capital losses on investments--net (Note 5) (11,574,006)
Unrealized depreciation on investments--net (18,394,769)
------------
Total capital--Equivalent to $9.64 net asset value per share of
Common Stock (market price--$8.625) (Note 4) $188,459,298
============
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
STATEMENT OF OPERATIONS
<CAPTION>
For the Six Months Ended December 31, 1994
<S> <S> <C> <C>
Investment Interest and amortization of premium and discount earned $ 7,760,815
Income
(Note 1d):
Expenses: Investment advisory fees (Note 2) $ 627,622
Professional fees 120,120
Transfer agent fees 26,377
Printing and shareholder reports 21,369
Directors' fees and expenses 21,151
Accounting services (Note 2) 20,081
Listing fees 11,864
Custodian fees 8,144
Pricing fees 4,206
Amortization of organization expenses (Note 1e) 340
Other 9,457
------------
Total expenses 870,731
------------
Investment income--net 6,890,084
------------
Realized & Realized loss on investments (573,436)
Unrealized Change in unrealized depreciation on investments--net (8,270,679)
Loss on ------------
Investments--Net Net Decrease in Net Assets Resulting from Operations $ (1,954,031)
(Notes 1d & 3): ============
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
<CAPTION>
For the Six For the
Months Ended Year Ended
December 31, June 30,
Increase (Decrease) in Net Assets: 1994 1994
<S> <S> <C> <C>
Operations: Investment income--net $ 6,890,084 $ 14,606,491
Realized loss on investments--net (573,436) (1,400,659)
Change in unrealized depreciation on investments--net (8,270,679) (4,439,982)
------------ ------------
Net increase (decrease) in net assets resulting from operations (1,954,031) 8,765,850
------------ ------------
Dividends to Investment income--net (7,052,411) (14,597,172)
Shareholders ------------ ------------
(Note 1g): Net decrease in net assets resulting from dividends to
shareholders (7,052,411) (14,597,172)
============ ============
Common Stock Net increase in net assets derived from capital shares issued
Transactions to shareholders in reinvestment of dividends -- 1,536,574
(Note 4): ------------ ------------
Net Assets: Total decrease in net assets (9,006,442) (4,294,748)
Beginning of period 197,465,740 201,760,488
------------ ------------
End of period* $188,459,298 $197,465,740
============ ============
<FN>
*Undistributed investment income--net $ 1,243,221 $ 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 For the Six
provided in the financial statements. Months Ended
December 31, For the Year Ended June 30,
Increase (Decrease) in Net Asset Value: 1994 1994 1993 1992 1991
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 10.10 $ 10.40 $ 10.31 $ 10.92 $ 11.18
Operating -------- -------- -------- -------- ---------
Performance: Investment income--net .35 .75 .84 .91 .94
Realized and unrealized gain (loss) on
investments--net (.45) (.30) .09 (.61) (.26)
-------- -------- -------- -------- ---------
Total from investment operations (.10) .45 .93 .30 .68
-------- -------- -------- -------- ---------
Less dividends and distributions:
Investment income--net (.36) (.75) (.84) (.91) (.94)
-------- -------- -------- -------- ---------
Net asset value, end of period $ 9.64 $ 10.10 $ 10.40 $ 10.31 $ 10.92
======== ======== ======== ======== =========
Market price per share, end of period $ 8.625 $ 9.875 $ 10.875 $ 11.00 $ 11.50
======== ======== ======== ======== =========
Total Investment Based on market price per share (9.11%)+++ (2.26%) 7.34% 3.93% 8.78%
Return:** ======== ======== ======== ======== =========
Based on net asset value per share (.68%)+++ 4.53% 9.52% 2.59% 6.25%
======== ======== ======== ======== =========
Ratios to Average Expenses, net of reimbursement .90%* .88% .60% .83% .84%
Net Assets: ======== ======== ======== ======== =========
Expenses .90%* .88% .81% .83% .84%
======== ======== ======== ======== =========
Investment income--net 7.12%* 7.24% 8.18% 8.45% 8.49%
======== ======== ======== ======== =========
Supplemental Net assets, end of year (in thousands) $188,459 $197,466 $201,760 $197,996 $ 206,736
Data: ======== ======== ======== ======== =========
Portfolio turnover 7% 12% 11% 3% 31%
======== ======== ======== ======== =========
<PAGE>
<FN>
*Annualized.
**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.
+++Aggregate total investment return.
See Notes to Financial Statements.
</TABLE>
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. These unaudited financial
statements reflect all adjustments which are, in the opinion of
management, necessary to a fair statement of the results for the
interim period presented. All such adjustments are of a normal
recurring nature. The Fund determines and makes available for
publication the net asset value of its Common Stock on a weekly
basis. The FundOs 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 primarily
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, 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 market. Losses may
arise due to changes in the value of the contract.
<PAGE>
* 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.
(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 expenses
are amortized on a straight-line basis over a five-year period.
(f)Non-income producing investments--Written and purchased options
are non-income producing investments.
(g)Dividends and distributions--Dividends from net investment
income are declared daily 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. For the six months
ended December 31, 1994, FAM earned a fee of $627,622.
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.
("MLPF&S"), and/or ML & Co.
3. Investments:
Purchases and sales of investments, excluding short-term securities,
for the six months ended December 31, 1994 were $13,553,781 and
$19,225,445, respectively.
Realized Unrealized
Losses Losses
Long-term investments $ (573,436) $(18,394,769)
----------- ------------
Total $ (573,436) $(18,394,769)
=========== ============
As of December 31, 1994, net unrealized depreciation for Federal
income tax purposes aggregated $18,394,769, of which $6,823,293
related to appreciated securities and $25,218,062 related to
depreciated securities. The aggregate cost of investments at
December 31, 1994 for Federal income tax purposes was $202,914,983.
4. Common Stock Transactions:
At December 31, 1994, 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 six months ended December 31, 1994, shares
issued and outstanding remained constant at 19,544,644. At December
31, 1994, total paid-in capital amounted to $217,184,852.
5. Capital Loss Carryforward:
At June 30, 1994, the Fund had a net capital loss carryforward of
approximately $9,452,000, 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 which will be available to offset like
amounts of any future taxable gains.
6. Subsequent Event:
On January 9, 1995, the Fund's Board of Directors declared an
ordinary income dividend to Common Stock shareholders in the amount
of $.059805 per share, payable on January 30, 1995 to shareholders
of record as of January 20, 1995.
<PAGE>
The Fund entered into a settlement agreement with one of the
principal defendants in the Texas Jail Bond Securities Fraud
Litigation as of January 6, 1995, with respect to certain jail facil-
ities bonds held by the Fund. The Fund received approximately $3.7
million, net of attorney's fees and expenses. The Fund intends to
pursue its claims against non-settling defendants vigorously,
although the prospects for further recoveries are not certain.
