APEX MUNICIPAL
FUND, INC.
FUND LOGO
Semi-Annual Report
December 31, 1995
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
<PAGE>
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. Statements and other
information herein are as dated and are subject to change.
Apex Municipal
Fund, Inc.
Box 9011
Princeton, NJ
08543-9011
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, 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 --
July 1, 1995 to September 30, 1995 0.16 -- 0.09 0.17 --
October 1, 1995 to December 31, 1995 0.16 (0.10) 0.11 0.17 --
<PAGE>
<CAPTION>
Net Asset Value Market Price**
For the Quarter High Low High Low Volume***
<S> <C> <C> <C> <C> <C>
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
July 1, 1995 to September 30, 1995 10.22 10.02 9.75 9.125 1,373
October 1, 1995 to December 31, 1995 10.23 10.08 9.375 8.625 1,946
<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>
DEAR SHAREHOLDERS
For the six months ended December 31, 1995, Apex Municipal Fund,
Inc. earned $0.334 per share income dividends, which included earned
and unpaid dividends of $0.053. This represents a net annualized
yield of 6.54%, based on a month-end net asset value of $10.14 per
share. Over the same period, the Fund's total investment return was
+4.55%, based on a change in per share net asset value from $10.06
to $10.14, and assuming reinvestment of $0.341 per share income
dividends.
The Environment
The direction of the US economy changed during the six months ended
December 31, 1995. There was strong evidence of a slowing economy by
mid-year, a trend that was quickly reversed as gross domestic
product growth rebounded to a 4.2% pace during the third calendar
quarter of 1995. However, recent economic releases suggest that this
rate of expansion has not been sustained, and that US economic
growth slowed as 1995 drew to a close.
<PAGE>
A number of key measures of economic growth indicate evidence of
slowing momentum. Retail sales for November were soft, a trend that
continued throughout the all-important holiday season, reflecting
ongoing caution on the part of debt-burdened consumers. At the same
time, there has been an increase in initial unemployment claims,
along with weak job and income growth. As labor costs continue to
decelerate and commodity price pressures remain subdued,
inflationary pressures continue to be well under control.
These developments led the Federal Reserve Board to ease its
monetary policy slightly at the December 19, 1995 Federal Open
Market Committee meeting. However, the Clinton Administration and
Congress have yet to reach an agreement in their current Federal
budget deliberations. While the probable direction of economic
activity will continue to be the primary focus of investors in the
weeks ahead, a credible plan for reducing the Federal budget deficit
will also be an important factor in the investment outlook.
The Municipal Market
The municipal bond market rallied strongly over the six months ended
December 31, 1995. Long-term, tax-exempt revenue bond yields, as
measured by the Bond Buyer Revenue Bond Index, declined over 55
basis points (0.55%) to end the December quarter at 5.71%. Continued
weak economic conditions coupled with low inflation fostered a very
positive environment for almost all fixed-income products throughout
most of the December quarter. Long-term US Treasury bond yields also
fell approximately 65 basis points to 5.95%. Both US Treasury and
long-term tax-exempt bond yields are now at their lowest levels in
the past two years.
The municipal bond market had to contend with a number of
difficulties for much of 1995. Various tax reform proposals made the
future tax advantage of municipal bonds uncertain. This has reduced
the overall demand for tax-exempt securities. At the same time, as
municipal bond yields declined, tax-exempt authorities rushed to
issue debt at near historic low yield levels. During the December
31, 1995 period, over $85 billion in municipal securities were
underwritten, an increase of over 20% compared to the December 31,
1994 period's levels. However, as early 1995 issuance was
significantly reduced, 1995 annual issuance of approximately $160
billion remained about 5% below 1994 issuance. Tax-exempt bond
yields declined throughout the December 31, 1995 quarter despite
investor uncertainty and increased supply pressures.
It is also important to note that the municipal market may regain
much of the technical support it enjoyed earlier in 1995. 1995
issuance remained significantly below levels underwritten in 1993
when over $290 billion in long-term tax-exempt securities were
issued. Also, municipal investors were expected to receive over $25
billion in bond maturities, coupon income and early redemptions on
January 1, 1996. This $25 billion is almost twice the average
monthly issuance for 1995. The amount of outstanding municipal
securities will likely continue to decline throughout 1996 and into
early 1997. As the uncertainties surrounding "proposed" tax reform
are resolved in 1996, the tax-exempt bond market's technical
position should provide a large measure of stability to municipal
bond prices.
<PAGE>
Many of the features that attracted investors to tax-exempt products
throughout 1995 remain available. Long-term, A-rated municipal
revenue bonds continue to yield well over 90% of comparable US
Treasury bond yields. Historically, analysts have considered yields
in excess of 82% attractive for long-term investors. Currently
available tax-exempt bond yields continue to generate taxable
equivalent yields in excess of 8.50%.
Looking ahead, it may be unreasonable to expect to duplicate the
double-digit returns produced by most tax-exempt products in 1995.
Current municipal bond yield levels would make such duplication
difficult. Municipal bond yields would have to decline to levels not
seen since the 1960s in order to generate such significant returns
in the coming years. While the current economic environment may
still justify additional declines in interest rates, it may be
prudent to expect some period of consolidation before any further
declines. Tax-exempt bond market performance in 1996 is likely to be
generated more by maximizing current income and minimizing credit
risk than by significant interest rate declines.
Portfolio Strategy
Apex Municipal Fund, Inc. remained fully invested during the six-
month period ended December 31, 1995. We continued to monitor
existing holdings for credit developments and financial performance
since we seek to maintain a higher yield than offered by the general
municipal bond market.
During the six months ended December 31, 1995, we purchased
approximately $16.5 million in high-yield tax-exempt securities
bearing an average yield of 7.20%. The majority of these new
purchases were corporate-related senior unsecured debt possessing
both adequate liquidity characteristics and the potential for
improvements in the securities' credit profile.
One sale that occurred near the end of the December period reflected
our overall approach to managing a high-yield portfolio. Stone
Container Corporation, an unsecured obligation representing almost
3% of the Fund's net assets, was acquired when weaker economic
fundamentals caused credit spreads in the paper industry to widen
substantially. In many cases, these credit spreads narrowed
significantly as firming paper prices in the context of a
strengthening economy improved the industry's outlook. Stone
Container bonds exhibited particularly strong out-performance
relative to various tax-exempt benchmarks. Based upon the inherent
cyclicality of this industry and the recent softening evident in the
latest economic releases, we decided to liquidate the position and
invest the assets elsewhere until circumstances warrant a
reappraisal. While the Fund still has exposure in this industry, the
logic for selling was compelling in the case of Stone Container.
Relative valuations for our other holdings in this industry have yet
to attain the levels reached by Stone Container. They also possess
stronger fundamentals which should help them better withstand a
business downturn.
<PAGE>
New issuance of high-yield securities continued to be concentrated
in project finance issues that related to independent electric
generating plants, resource recyclers and non-investment grade
utilities. Supply in the new-issue high-yield market is expected to
shift in 1996 to the refinancing of outstanding higher-coupon
corporate-related debt issued in the mid-1980s which is now
generally reaching its first eligible call dates.
Sincerely,
(Arthur Zeikel)
Arthur Zeikel
President
(Vincent R. Giordano)
Vincent R. Giordano
Vice President
(Theodore R. Jaeckel Jr.)
Theodore R. Jaeckel Jr.
Portfolio Manager
January 30, 1996
We are pleased to announce that Theodore R. Jaeckel Jr. is
responsible for the day-to-day management of Apex Municipal Fund,
Inc. Mr. Jaeckel has been employed by Merrill Lynch Asset
Management, L.P. (an affiliate of the Fund's investment adviser)
since 1991 as Vice President and Portfolio Manager. Prior thereto,
he was employed by Chemical Bank from 1983 to 1991, becoming Vice
President in the Tax-Exempt Bond Division in 1983.
<PAGE>
Portfolio
Abbreviations
To simplify the listings of Apex Municipal
Fund, Inc.'s portfolio holdings in the
Schedule of Investments, we have abbrev-
iated the names of many of the securities
according to the list at right.
AMT Alternative Minimum Tax (subject to)
COP Certificates of Participation
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
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--0.6% B+ NR* $ 1,000 Brewton, Alabama, Industrial Development Board,
PCR, Refunding (Container Corporation America Project),
8% due 4/01/2009 $ 1,095
Arizona--1.0% NR* NR* 3,915 Fort Mojave Indian Tribe, Arizona, Water and Sewer
Revenue Bonds, 10.25% due 9/01/2019 (e) 1,999
<PAGE>
Arkansas--2.0% NR* NR* 400 Alma, Arkansas, Health Facilities Board Revenue Bonds,
10.50% due 12/01/2019 439
NR* NR* 400 Conway, Arkansas, Public Facilities Board, Health Care
Revenue Bonds (Creative Living Project), 10.50% due 12/01/2019 435
NR* NR* 400 Hope, Arkansas, Health Facilities Board Revenue
Bonds (Omega Home), 10.50% due 12/01/2019 436
NR* NR* 800 Little Rock, Arkansas, Health Facilities Board Revenue
Bonds (Community Life Services), 10.50% due 12/01/2019 877
NR* NR* 800 Pine Bluff, Arkansas, Health Facilities Board
Revenue Bonds (Jenkins Housing), 10.50% due 12/01/2019 882
NR* NR* 400 Texarkana, Arkansas, Public Facilities Board, Health
Care Revenue Bonds (Housing Opportunities Addition
Project), 10.50% due 12/01/2019 440
NR* NR* 400 West Helena, Arkansas, Health Facilities Board
Revenue Bonds (Delta House), 10.50% due 12/01/2019 436
California-- NR* NR* 2,000 Long Beach, California, Redevelopment Agency, M/F Housing
2.8% Revenue Bonds (Pacific Court Apartments), Issue B,
AMT, 6.95% due 9/01/2023 1,587
NR* NR* 3,870 Pleasanton, California, Joint Power Financing Authority,
Reassessment Revenue Bonds, Sub-Series B, 6.75% due 9/02/2017 3,991
Colorado--4.9% Denver, Colorado, City and County Airport Revenue Bonds, AMT:
BBB Baa 2,000 Series A, 8% due 11/15/2017 2,137
BBB Baa 2,505 Series A, 8% due 11/15/2025 2,809
BBB Baa 2,500 Series B, 7.25% due 11/15/2023 2,722
BBB Baa 2,000 Series C, 6.75% due 11/15/2022 2,081
District of B- NR* 3,000 District of Columbia, COP, 7.30% due 1/01/2013 3,135
Columbia--1.6%
Florida--7.1% NR* NR* 9,449 Florida Housing Finance Agency, M/F Housing Agency
Revenue Bonds (Palm Aire Retirement Facilities Project),
Series S, AMT, 10% due 1/01/2020 (e) 6,520
NR* NR* 5,220 Miami Beach, Florida, Redevelopment Agency, Tax
Increment Revenue Bonds, AMT, 9.125% due 12/01/2004 5,984
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
A1 VMIG1++ 1,300 Pinellas County, Florida, Health Facilities Authority,
Revenue Refunding Bonds (Pooled Hospital Loan Program),
DATES, 4.95% due 12/01/2015 (a) 1,300
A1+ VMIG1++ 200 Saint Lucie County, Florida, PCR, Refunding (Florida
Power & Lighting Co. Project), VRDN, 4.75% due 1/01/2026 (a) 200
<PAGE>
Georgia--3.5% 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 4,325
NR* NR* 2,450 Hancock County, Georgia, COP, 8.50% due 4/01/2015 2,612
Illinois--5.5% 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 5,357
BB Baa2 4,800 Series B, AMT, 8.95% due 5/01/2018 5,510
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 10,769
Louisiana-- NR* Baa2 3,000 Lake Charles, Louisiana, Harbor and Terminal District
4.2% Port Facilities, Revenue Refunding Bonds (Trunk Line Co.
Project), 7.75% due 8/15/2022 3,424
NR* A 1,000 Louisiana Public Facilities Authority Revenue Bonds,
Student Loan, Sub-Series A-3, AMT, 7% due 9/01/2006 1,082
BB- NR* 3,500 Port New Orleans, Louisiana, IDR, Refunding (Continental
Grain Company Project), 7.50% due 7/01/2013 3,740
Massachusetts-- NR* NR* 1,700 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 1,924
NR* NR* 3,500 Massachusetts State Health and Educational Facilities
Authority Revenue Bonds (Farren Care Center), Series A,
10.375% due 6/01/2010 4,071
NR* NR* 2,045 Massachusetts State Industrial Finance Agency, Educational
Institution Revenue Bonds (Center for Human Development),
9.375% due 7/01/2015 2,293
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 2,616
NR* NR* 2,000 Massachusetts State Port Authority, Special Project
Revenue Bonds (Harborside Hyatt), AMT, 10% due 3/01/2026 2,260
Michigan--1.7% NR* NR* 2,050 Wayne Charter County, Michigan, Special Airport Facilities
Revenue Refunding Bonds (Northwest Airlines, Inc.),
6.75% due 12/01/2015 2,113
BBB- Baa 1,200 Wayne County, Michigan, Downriver Sewer Disposal System
Revenue Bonds, Series A, 7% due 11/01/2013 1,293
Minnesota-- NR* NR* 3,365 Anoka, Minnesota, M/F Housing Revenue Bonds (Rainbow Plaza
8.1% Apartments Project), AMT, 9.375% due 12/01/2024 3,588
Saint Paul, Minnesota, Housing and Redevelopment Authority,
Hospital Revenue Bonds (Healtheast Project):
BBB- Baa 6,565 Series A, 9.75% due 11/01/2017 7,324
BBB- Baa 4,665 Series D, 9.75% due 11/01/2017 5,205
<PAGE>
New Jersey-- New Jersey Health Care Facilities Financing Authority Revenue Bonds:
1.1% NR* NR* 980 (Riverwood Center), Series A, 9.90% due 7/01/2021 1,115
BBB- Baa 1,000 (Saint Elizabeth Hospital), Series B, 8.25% due 7/01/2020 1,097
New York--8.2% New York City, New York, GO, UT, Series D:
BBB+ Baa1 3,000 9.50% due 8/01/2002 3,636
BBB+ Baa1 2,045 7.70% due 2/01/2011 2,313
NR* NR* 7,265 New York City, New York, IDA, Civic Facilities Revenue
Bonds (Amboy Properties Corporation Project), 9.625% due 6/01/2015 7,779
NR* NR* 2,500 New York City, New York, IDA, Revenue Bonds (Visy Paer
Inc. Project), AMT, 7.95% due 1/01/2028 2,552
</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 $ 1,797
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 1,062
Pennsylvania-- NR* NR* 5,000 Lehigh County, Pennsylvania, General Purpose Authority
17.1% Revenue Bonds (Wiley House), 8.75% due 11/01/2014 5,240
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 (d) 3,793
NR* NR* 1,000 Montgomery County, Pennsylvania, IDA, First Mortgage
Revenue Refunding Bonds (Meadowood Corporation Project),
Series A, 10.25% due 12/01/2020 1,124
BBB- Baa2 3,000 Pennsylvania Economic Development Financing Authority,
Exempt Facilities Revenue Bonds (MacMillan Limited Partnership
Project), AMT, 7.60% due 12/01/2020 3,367
NR* NR* 1,000 Pennsylvania Economic Development Financing Authority,
IDR (Gehl Co., Inc. Project), Series F, AMT, 9% due 9/01/2010 1,095
NR* NR* 4,000 Pennsylvania Economic Development Financing Authority,
Recycling Revenue Bonds (Ponderosa Fibres Project), Series A,
AMT, 9.25% due 1/01/2022 4,168
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 1,114
AAA Aaa 2,000 Pennsylvania State Higher Education Assistance Agency,
Student Loan Revenue Bonds, Series B, AMT, RIB, 8.025% due
3/01/2022 (b)(c) 2,120
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* 5,500 Philadelphia, Pennsylvania, IDR, Refunding (Commercial
Development Philadelphia Airport), AMT, 7.75% due 12/01/2017 5,751
NR* NR* 2,000 Washington County, Pennsylvania, Hospital Authority, Revenue
Refunding Bonds (Canonsburg General Hospital Project), 7.35%
due 6/01/2013 1,902
<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 2,144
A+ A1 2,500 Tennessee Housing Development Agency, Mortgage Financing
Revenue Bonds, Series A, AMT, 7.125% due 7/01/2026 2,621
Texas--4.8% 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 1989-A-1, 10.25%
due 3/01/2019 (e) 4,225
BB+ Baa2 2,000 Dallas-Fort Worth, Texas, International Airport Facilities
Improvement Corporation Revenue Bonds (American Airlines, Inc.),
AMT, 7.50% due 11/01/2025 2,144
NR* Ba3 945 Nolan County, Texas, Industrial Development Corporation,
IDR (US Gypsum Company Project), 7.25% due 12/01/2014 1,001
BB Ba 1,000 Odessa, Texas, Junior College District, Revenue Refunding
Bonds, Series A, 8.125% due 12/01/2018 1,094
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* P1 1,000 Port Arthur, Texas, Navigational District, Industrial
Development Corporation, PCR (American Petrofina Incorporation),
VRDN, 5.05% due 5/01/2003 (a) 1,000
Washington-- NR* Baa1 7,730 Washington State Healthcare Facilities Authority Revenue
4.4% Bonds (Kadlec Medical Center, Richland), 9% due 1/01/2011 8,636
West Virginia-- NR* NR* 6,450 Fayette County, West Virginia, Community Commercial
3.7% Development Revenue Refunding Bonds (MPC Incorporated
Project), 9.75% due 2/01/2011 7,246
Total Investments (Cost--$193,702 )--98.1% 194,438
Other Assets Less Liabilities--1.9% 3,753
--------
Net Assets--100.0% $198,191
========
<FN>
(a)The interest rate is subject to change periodically based upon
prevailing market rates. The interest rate shown is the rate in
effect at December 31, 1995.
(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, 1995.
(c)AMBAC Insured.
(d)Prerefunded.
(e)Non-income producing security.
*Not Rated.
++Highest short-term rating by Moody's Investors Service, Inc.
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
STATEMENT OF ASSETS, LIABILITIES AND CAPITAL
<CAPTION>
As of December 31, 1995
<S> <S> <C> <C>
Assets: Investments, at value (identified cost--$193,702,323) (Note 1a) $194,437,758
Cash 100,850
Receivables:
Interest $ 3,798,743
Securities sold 100,000 3,898,743
------------
Prepaid expenses and other assets 65,414
------------
Total assets 198,502,765
------------
Liabilities: Payables:
Dividends to shareholders (Note 1e) 165,098
Investment adviser (Note 2) 101,960 267,058
------------
Accrued expenses and other liabilities 44,894
------------
Total liabilities 311,952
------------
Net Assets: Net assets $198,190,813
============
Capital: Common Stock, $.10 par value, 150,000,000 shares authorized;
19,544,644 shares issued and outstanding (Note 4) $ 1,954,464
Paid-in capital in excess of par 215,230,388
Undistributed investment income--net 1,062,457
Accumulated realized capital losses on investments--net (Note 5) (20,791,931)
Unrealized appreciation on investments--net 735,435
------------
Total capital--Equivalent to $10.14 net asset value per share of
Common Stock (market price--$8.625) $198,190,813
============
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
STATEMENT OF OPERATIONS
<CAPTION>
For the Six Months Ended December 31, 1995
<S> <S> <C> <C>
Investment Interest and amortization of premium and discount earned $ 7,255,618
Income (Note 1d):
Expenses: Investment advisory fees (Note 2) $ 639,204
Professional fees 80,298
Transfer agent fees 26,494
Accounting services (Note 2) 25,008
Directors' fees and expenses 20,990
Printing and shareholder reports 19,211
Listing fees 11,468
Custodian fees 7,722
Pricing fees 4,144
Other 13,938
------------
Total expenses 848,477
------------
Investment income--net 6,407,141
------------
Realized & Realized loss on investments--net (1,996,306)
Unrealized Gain Change in unrealized appreciation/depreciation on investments--net 3,794,172
(Loss) on ------------
Investments--Net Net Increase in Net Assets Resulting from Operations $ 8,205,007
(Notes 1b, 1d & 3): ============
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
<CAPTION>
For the For the
Six Months Year
Ended Ended
December 31, June 30,
Increase (Decrease) in Net Assets: 1995 1995
<S> <S> <S> <S>
Operations: Investment income--net $ 6,407,141 $ 13,847,145
Realized loss on investments--net (1,996,306) (7,795,055)
Change in unrealized appreciation/depreciation on
investments--net 3,794,172 7,065,353
------------ ------------
Net increase in net assets resulting from operations 8,205,007 13,117,443
------------ ------------
Dividends to Investment income--net (6,661,088) (13,936,289)
Shareholders ------------ ------------
(Note 1e): Net decrease in net assets resulting from dividends to
shareholders (6,661,088) (13,936,289)
------------ ------------
Net Assets: Total increase (decrease) in net assets 1,543,919 (818,846)
Beginning of period 196,646,894 197,465,740
------------ ------------
End of period* $198,190,813 $196,646,894
============ ============
<FN>
*Undistributed investment income--net $ 1,062,457 $ 1,316,404
============ ============
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
FINANCIAL HIGHLIGHTS
<CAPTION>
The following per share data and For the
ratios have been derived from information Six Months
provided in the financial statements. Ended
December 31, For the Year Ended June 30,
Increase (Decrease) in Net Asset Value: 1995 1995 1994 1993 1992
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 10.06 $ 10.10 $ 10.40 $ 10.31 $ 10.92
Operating -------- -------- -------- -------- --------
Performance: Investment income--net .32 .71 .75 .84 .91
Realized and unrealized gain (loss) on
investments--net .10 (.04) (.30) .09 (.61)
-------- -------- -------- -------- --------
Total from investment operations .42 .67 .45 .93 .30
-------- -------- -------- -------- --------
Less dividends from investment income--net (.34) (.71) (.75) (.84) (.91)
-------- -------- -------- -------- --------
Net asset value, end of period $ 10.14 $ 10.06 $ 10.10 $ 10.40 $ 10.31
======== ======== ======== ======== ========
Market price per share, end of period $ 8.625 $ 9.375 $ 9.875 $ 10.875 $ 11.00
======== ======== ======== ======== ========
Total Investment Based on market price per share (4.57%)+++ 2.57% (2.26%) 7.34% 3.93%
Return:** ======== ======== ======== ======== ========
Based on net asset value per share 4.55%+++ 7.61% 4.53% 9.52% 2.59%
======== ======== ======== ======== ========
Ratios to Average Expenses, net of reimbursement .86%* .91% .88% .60% .83%
Net Assets: ======== ======== ======== ======== ========
Expenses .86%* .91% .88% .81% .83%
======== ======== ======== ======== ========
Investment income--net 6.50%* 7.14% 7.24% 8.18% 8.45%
======== ======== ======== ======== ========
Supplemental Net assets, end of period (in thousands) $198,191 $196,647 $197,466 $201,760 $197,996
Data: ======== ======== ======== ======== ========
Portfolio turnover 12% 20% 12% 11% 3%
======== ======== ======== ======== ========
<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 effect of sales loads.
+++Aggregate total investment return.
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. 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 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, including valuations furnished by a pricing
service retained 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 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 and assets for
which market quotations are not readily available are valued at fair
value as determined in good faith by or under the direction of the
Board of Directors of the Fund, including valuations furnished by a
pricing service retained by the Fund, which may utilize a matrix
system for valuations. The procedures of the pricing service and its
valuations are reviewed by the officers of the Fund under the general
supervision of the Board of Directors.
(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.
<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.
* 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.
<PAGE>
(e) 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 a
limited partner.
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.
("MLPF&S"), and/or ML & Co.
3. Investments:
Purchases and sales of investments, excluding short-term securities,
for the six months ended December 31, 1995 were $26,449,473 and
$23,917,287, respectively.
Net realized and unrealized gains (losses) as of December 31, 1995
were as follows:
Realized Unrealized
Losses Gains
Long-term investments $(1,996,306) $ 735,435
----------- -------------
Total $(1,996,306) $ 735,435
=========== =============
As of December 31, 1995, net unrealized appreciation for Federal
income tax purposes aggregated $735,435, of which $14,712,085
related to appreciated securities and $13,976,650 related to
depreciated securities. The aggregate cost of investments at
December 31, 1995 for Federal income tax purposes was $193,702,323.
<PAGE>
4. Common Stock Transactions:
At December 31, 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 six months ended December 31, 1995, shares
issued and outstanding remained constant at 19,544,644. At December
31, 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, $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.
6. Subsequent Event:
On January 9, 1996, the Fund's Board of Directors declared an
ordinary income dividend to Common Stock shareholders in the amount
of $.053489 per share, payable on January 30, 1996 to shareholders
of record as of January 19, 1996.
