UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSRS
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES
Investment Company Act file number 811-05227
Name of Fund: Apex Municipal Fund, Inc.
Fund Address: P.O. Box 9011
Princeton, NJ 08543-9011
Name and address of agent for service: Robert C. Doll, Jr., President, Apex
Municipal Fund, Inc., 800 Scudders Mill Road, Plainsboro, NJ 08536.
Mailing address: P.O. Box 9011, Princeton, NJ 08543-9011
Registrant's telephone number, including area code: (609) 282-2800
Date of fiscal year end: 06/30/05
Date of reporting period: 07/01/04 - 12/31/04
Item 1 - Report to Stockholders
[LOGO] Merrill Lynch Investment Managers www.mlim.ml.com
Apex Municipal
Fund, Inc.
Semi-Annual Report
December 31, 2004
[LOGO] Merrill Lynch Investment Managers
Apex Municipal Fund, Inc.
Quality Profile
The quality ratings of securities in the Fund as of December 31, 2004 were as
follows:
--------------------------------------------------------------------------------
Percent of
Total
S&P Rating/Moody's Rating Investments
--------------------------------------------------------------------------------
A/A ..................................................... 3.9%
BBB/Baa ................................................. 17.9
BB/Ba ................................................... 20.6
B/B ..................................................... 10.5
CCC/Caa ................................................. 3.1
NR (Not Rated) .......................................... 43.9
Other+ .................................................. 0.1
--------------------------------------------------------------------------------
+ Includes Portfolio holdings in short-term variable rate municipal
securities.
Officers and Directors
Terry K. Glenn, President and Director
James H. Bodurtha, Director
Joe Grills, Director
Herbert I. London, Director
Roberta Cooper Ramo, Director
Robert S. Salomon, Jr., Director
Stephen B. Swensrud, Director
Kenneth A. Jacob, Senior Vice President
John M. Loffredo, Senior Vice President
Theodore R. Jaeckel Jr., Vice President
Donald C. Burke, Vice President and Treasurer
Jeffrey Hiller, Chief Compliance Officer
Alice A. Pellegrino, Secretary
Custodian
The Bank of New York
100 Church Street
New York, NY 10286
Transfer Agent
The Bank of New York
101 Barclay Street -- 11 East
New York, NY 10286
NYSE Symbol
APX
--------------------------------------------------------------------------------
Andre F. Perold resigned as a Director of Apex Municipal Fund, Inc. effective
October 22, 2004.
Effective January 1, 2005, Terry K. Glenn retired as President and Director of
the Fund. The Fund's Board of Directors wishes Mr. Glenn well in his retirement.
Effective January 1, 2005, Robert C. Doll, Jr. became President and Director of
the Fund.
--------------------------------------------------------------------------------
2 APEX MUNICIPAL FUND, INC. DECEMBER 31, 2004
A Letter From the President and Chief Investment Officer
Dear Shareholder
The U.S. equity market ended 2004 in positive territory, although not without
some suspense along the way. Fixed income markets also performed well, with high
yield bond investors enjoying some of the greatest returns.
Over the past year, the equity market generally found support from a healthy
economic environment, above-average corporate earnings, increased capital
spending and still-low interest rates. Stalling the momentum somewhat throughout
the year was a contentious election, negligible inflation amid a rising federal
funds interest rate, record-high oil prices and the seemingly ever-present
worries over terrorism and the war in Iraq.
Still, the Standard & Poor's 500 Index posted a 12-month return of +10.88% and a
six-month return of +7.19% as of December 31, 2004. The fourth quarter of the
year proved to be the most telling, as the S&P 500 Index was up only 1.51%
year-to-date as of September 30, 2004. As the price of oil relaxed and election
uncertainties subsided, the market headed more convincingly upward in the last
quarter of the year.
Given the relatively positive environment for equities, the favorable
performance of the bond market came as somewhat of a surprise. The Lehman
Brothers Aggregate Bond Index posted a 12-month return of +4.34% and a six-month
return of +4.18% as of December 31, 2004. The tax-exempt market performed just
as well, with a 12-month return of +4.48% and a six-month return of +5.19%, as
measured by the Lehman Brothers Municipal Bond Index. Those comfortable with a
higher degree of risk benefited this past year, as the Credit Suisse First
Boston High Yield Index posted a 12-month return of +11.95% and a six-month
return of +9.26%. Interestingly, as the Federal Reserve Board began raising its
target short-term interest rate, long-term bond yields were little changed. In
fact, the yield on the 10-year Treasury was 4.24% at year-end compared to 4.27%
at December 31, 2003. The yield on the two-year Treasury climbed to 3.08% at
year-end 2004 from 1.84% a year earlier.
As always, our investment professionals are closely monitoring the markets, the
economy and the overall environment in an effort to make well-informed decisions
for the portfolios they manage. For the individual investor, the key to
investment success -- particularly during uncertain times -- is to maintain a
long-term perspective and adhere to the disciplines of asset allocation,
diversification and rebalancing. We encourage you to work with your financial
advisor to ensure these time-tested techniques are incorporated into your
investment plan.
We thank you for trusting Merrill Lynch Investment Managers with your investment
assets, and we look forward to serving you in the new year and beyond.
Sincerely,
/s/ Robert C. Doll, Jr.
Robert C. Doll, Jr.
President and Chief Investment Officer
Merrill Lynch Investment Managers
APEX MUNICIPAL FUND, INC. DECEMBER 31, 2004 3
[LOGO] Merrill Lynch Investment Managers
A Discussion With Your Fund's Portfolio Manager
The Fund provided a positive total return for the period, as we continued
to pursue opportunities to diversify the portfolio and enhance yield.
Describe the recent market environment relative to municipal bonds.
Over the past six months, long-term bond yields declined significantly as their
prices, which move in the opposite direction, increased. The rise in bond prices
came as somewhat of a surprise, as the economy generally continued to improve.
Gross domestic product growth was recently reported at 4% for the third quarter
of 2004, up from 3.4% in the second quarter. However, recent improvements in
domestic business activity have been offset by inflationary measures remaining
in the 1.5% - 2% range.
For its part, the Federal Reserve Board (the Fed) raised its short-term interest
rate target by 25 basis points (.25%) to 1.25% in June, the first change in more
than a year. In its accompanying statement, the Fed called for a "measured"
approach to interest rate increases, removing much of the earlier concern that
it might embark on a dramatic series of interest rate hikes. The prospect for a
more moderate tightening sequence helped support higher bond prices for the
remainder of the period. Four subsequent Fed interest rate hikes brought the
federal funds rate to 2.25% by period-end, but had limited market impact as
monthly U.S. employment gains remained modest. In addition, strong
currency-related demand for U.S. Treasury issues from many foreign governments
helped bolster fixed income bond prices. By the end of December 2004, long-term
U.S. Treasury bond yields stood at 4.85%, a decline of 46 basis points over the
past six months. The 10-year U.S. Treasury note yield fell 36 basis points to
4.24%.
The municipal bond market benefited from a generally supportive technical
environment throughout the six-month period. Consequently, while tax-exempt bond
yields followed the same pattern as their taxable counterparts, yield volatility
was more subdued than that seen in the U.S. Treasury market. Long-term revenue
bond yields, as measured by the Bond Buyer Revenue Bond Index, fell 30 basis
points over the six months. As reported by Municipal Market Data, AAA-rated
issues maturing in 30 years saw their yields decline 41 basis points to 4.61%,
while yields on 10-year, AAA-rated issues declined 43 basis points to 3.52%.
During the period, more than $170 billion in new long-term tax-exempt bonds was
underwritten, a decline of nearly 7.5% versus the same six months a year ago.
The declining supply trend allowed tax-exempt bond prices to register
significant gains over the period, performing similarly to their taxable
counterparts. New-issue municipal volume should be easily manageable in early
2005, continuing to support the tax-exempt market's favorable technical
position.
Relative to Treasury issues, long-term tax-exempt bond yield ratios have
remained in the 85% - 95% range, at or above their recent historic average of
85% - 88%. These attractive yield ratios should continue to attract both
traditional and non-traditional investors to the tax-exempt market.
How did the Fund perform during the period in light of the existing market
conditions?
For the six-month period ended December 31, 2004, the Common Stock of Apex
Municipal Fund, Inc. had net annualized yields of 5.99% and 6.46%, based on a
period-end per share net asset value of $9.53 and a per share market price of
$8.84, respectively, and $.288 per share income dividends. Over the same period,
the total investment return on the Fund's Common Stock was +7.85%, based on a
change in per share net asset value from $9.13 to $9.53, and assuming
reinvestment of all distributions.
The Fund's total return for the period, based on net asset value, slightly
lagged the +8.13% average return of the Lipper High Yield Municipal Debt Funds
category. Funds in this Lipper category invest at least 50% of their assets in
lower-rated municipal debt issues. Several funds in the Lipper group also employ
leverage, a strategy that is not within the Fund's investment parameters. Given
the low borrowing rates we have seen for some time now, leverage has been a
competitive advantage for these funds. Absent the levered funds, the Fund's
return exceeded the average of its unlevered peers.
Benefiting performance during the period was the Fund's overweight exposure to
corporate-related tax-exempt debt as well as tax-backed debt and bonds in the
transportation and health care sectors. The strong performance in these areas
has been driven largely by the continued narrowing of credit spreads, a trend
observed in both the municipal market and the taxable bond market. The narrowing
of spreads has
4 APEX MUNICIPAL FUND, INC. DECEMBER 31, 2004
been supported by a generally improving economy, a moderate pace of inflation
and the Fed's measured approach to interest rate increases, which generally
served to sustain investors' appetites for risk.
In terms of specific securities, we saw strong performance from a capital
appreciation bond (or zero coupon bond) representing toll-road financing for the
Pocahontas Parkway in Virginia. In conjunction with the toll road's opening in
2002 and the subsequent increase in traffic, spreads on the bond narrowed
significantly, making it a meaningful contributor to Fund performance in the
past six months.
For a description of the Fund's total investment return based on a change in the
per share market value of the Fund's Common Stock (as measured by the trading
price of the Fund's shares on the New York Stock Exchange), and assuming
reinvestment of dividends, please refer to the Financial Highlights section of
this report. As a closed-end fund, the Fund's shares may trade in the secondary
market at a premium or discount to the Fund's net asset value. As a result,
total investment returns based on changes in the market value of the Fund's
Common Stock can vary significantly from total investment returns based on
changes in the Fund's net asset value.
What changes were made to the portfolio during the period?
We continued to focus on capturing relative value within the high yield
municipal arena as a means of enhancing Fund returns over time. To that end, we
continued to pursue opportunities to diversify the portfolio and enhance yield.
This involved reductions in the corporate sector and increased exposure to
non-rated credits.
In light of the significant rally seen in corporate-related debt, we began to
realize profits through selective sales of some of our holdings, particularly in
wood and forest products, capital goods and technology sectors. We made these
reductions with the realization that the corporate sector traditionally tends to
be the most volatile in the municipal market. Thus, when the credit cycle does
turn and spreads begin to widen, we would expect corporate-related bonds to
suffer the most. Our goal, therefore, has been to realize profits where we can
and reduce exposure to a sector that has experienced the greatest volatility
over time.
In our previous report to shareholders, we mentioned that the Fund had
above-market concentrations in credits rated BBB and BB. At that time, we stated
our desire to boost portfolio income through a reallocation of assets into
lesser-rated, or non-rated issues. We have since pursued that strategy with some
success, and as a result, the Fund's income reserves have increased. At the same
time, we were able to reduce our overweighting and approach a market weighting
in credits rated BBB and BB.
Finally, we maintained the Fund's exposure to debt issued by the State of
California, and performance has benefited as investors' appetite for risk has
continued to drive the spreads on these bonds tighter.
How would you characterize the Fund's position at the close of the period?
We maintain a largely positive view on credit spreads, although we believe we
have seen the majority of the contraction at this point. Having said that, we
will continue to further reduce our overweight exposure to the corporate-related
debt sectors, using the proceeds from the sales to increase the Fund's exposure
to health care and tax-backed debt. These represent higher-quality,
lower-volatility securities, and also complement our efforts to improve the
overall diversification of the portfolio.
Theodore R. Jaeckel Jr., CFA
Vice President and Portfolio Manager
January 12, 2005
APEX MUNICIPAL FUND, INC. DECEMBER 31, 2004 5
[LOGO] Merrill Lynch Investment Managers
Schedule of Investments (in Thousands)
Face
State Amount Municipal Bonds Value
==============================================================================================================
Alabama--0.6% $ 1,000 Brewton, Alabama, IDB, PCR, Refunding (Container Corporation
of America--Jefferson Smurfit Corp. Project), 8%
due 4/01/2009 $ 1,034
==============================================================================================================
Alaska--1.1% 2,000 Alaska Industrial Development and Expert Authority Revenue
Bonds (Williams Lynxs Alaska Cargoport), AMT, 8%
due 5/01/2023 2,064
==============================================================================================================
Arizona--4.1% 1,000 Maricopa County, Arizona, IDA, Education Revenue Bonds
(Arizona Charter Schools Project 1), Series A, 6.625%
due 7/01/2020 991
Maricopa County, Arizona, IDA, M/F Housing Revenue Bonds (Sun
King Apartments Project):
80 Series A, 5.875% due 11/01/2008 77
20 Series A, 6% due 11/01/2010 19
970 Series A, 6.75% due 5/01/2031 796
1,500 Sub-Series C, 9.50% due 11/01/2031 1,162
4,000 Phoenix, Arizona, IDA, Airport Facility Revenue Refunding
Bonds (America West Airlines Inc. Project), AMT, 6.30%
due 4/01/2023 3,026
1,000 Pima County, Arizona, IDA, Education Revenue Bonds (Arizona
Charter Schools Project), Series E, 7.25% due 7/01/2031 1,067
500 Yavapai County, Arizona, IDA, Hospital Facility Revenue Bonds
(Yavapai Regional Medical Center), Series A, 6% due 8/01/2033 528
==============================================================================================================
California--3.8% 1,800 California State, GO, 5% due 2/01/2033 1,826
California State, Various Purpose, GO:
1,300 5.25% due 11/01/2025 1,381
820 5.25% due 4/01/2034 855
1,000 Fontana, California, Special Tax, Refunding (Community
Facilities District Number 22--Sierra), 6% due 9/01/2034 1,016
1,860 Golden State Tobacco Securitization Corporation of
California, Tobacco Settlement Revenue Bonds, Series B,
5.50% due 6/01/2043 1,945
==============================================================================================================
Colorado--5.5% 2,920 Denver, Colorado, Urban Renewal Authority, Tax Increment
Revenue Bonds (Pavilions), AMT, 7.75% due 9/01/2016 3,071
2,800 Elk Valley, Colorado, Public Improvement Revenue Bonds
(Public Improvement Fee), Series A, 7.30% due 9/01/2022 3,015
1,235 North Range, Colorado, Metropolitan District Number 1, GO,
7.25% due 12/15/2031 1,243
2,000 Plaza Metropolitan District No. 1, Colorado, Tax Allocation
Revenue Bonds (Public Improvement Fees), 8% due 12/01/2025 2,087
830 Southlands, Colorado, Medical District, GO (Metropolitan
District # 1), 7.125% due 12/01/2034 826
==============================================================================================================
Connecticut--1.0% 490 Connecticut State Development Authority, Airport Facility
Revenue Bonds (LearJet Inc. Project), AMT, 7.95%
due 4/01/2026 577
1,220 New Haven, Connecticut, Facility Revenue Bonds (Hill Health
Corporation Project), 9.25% due 5/01/2017 1,223
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 at right.
AMT Alternative Minimum Tax (subject to)
EDA Economic Development Authority
GO General Obligation Bonds
IDA Industrial Development Authority
IDB Industrial Development Board
IDR Industrial Development Revenue Bonds
M/F Multi-Family
PCR Pollution Control Revenue Bonds
VRDN Variable Rate Demand Notes
6 APEX MUNICIPAL FUND, INC. DECEMBER 31, 2004
Schedule of Investments (continued) (in Thousands)
Face
State Amount Municipal Bonds Value
==============================================================================================================
Florida--7.8% $ 855 Arbor Greene Community Development District, Florida, Special
Assessment Revenue Bonds, 7.60% due 5/01/2018 $ 878
800 Capital Projects Finance Authority, Florida, Continuing Care
Retirement Revenue Bonds (Glenridge on Palmer Ranch),
Series A, 8% due 6/01/2032 839
2,500 Hillsborough County, Florida, IDA, Exempt Facilities Revenue
Bonds (National Gypsum), AMT, Series A, 7.125% due 4/01/2030 2,756
895 Lakewood Ranch, Florida, Community Development District
Number 5, Special Assessment Revenue Refunding Bonds,
Series A, 6.70% due 5/01/2031 941
Midtown Miami, Florida, Community Development District,
Special Assessment Revenue Bonds, Series A:
1,500 6% due 5/01/2024 1,549
1,350 6.25% due 5/01/2037 1,398
1,605 Orlando, Florida, Urban Community Development District,
Capital Improvement Special Assessment Bonds, Series A,
6.95% due 5/01/2033 1,712
1,700 Santa Rosa Bay Bridge Authority, Florida, Revenue Bonds,
6.25% due 7/01/2028 1,523
2,760 Tampa Palms, Florida, Open Space and Transportation Community
Development District Revenue Bonds, Capital Improvement
(Richmond Place Project), 7.50% due 5/01/2018 2,880
==============================================================================================================
Georgia--3.5% 2,000 Atlanta, Georgia, Tax Allocation Revenue Bonds (Atlantic
Station Project), 7.90% due 12/01/2024 2,178
Brunswick & Glynn County, Georgia, Development Authority,
First Mortgage Revenue Bonds (Coastal Community Retirement
Corporation Project), Series A:
830 7.125% due 1/01/2025 825
1,185 7.25% due 1/01/2035 1,183
1,500 Milledgeville--Baldwin County, Georgia, Development Authority
Revenue Bonds (Georgia College and State University
Foundation), 5.25% due 9/01/2019 1,577
830 Savannah, Georgia, EDA, Revenue Bonds (Marshes of Skidaway),
First Mortgage, Series A, 7.40% due 1/01/2034 847
==============================================================================================================
Idaho--0.8% 1,470 Idaho Health Facilities Authority, Revenue Refunding Bonds
(Valley Vista Care Corporation), Series A, 7.75%
due 11/15/2016 1,495
==============================================================================================================
Illinois--4.8% 1,845 Caseyville, Illinois, Senior Tax Increment Revenue Bonds
(Forest Lakes Project), 7% due 12/30/2022 1,846
3,000 Chicago, Illinois, O'Hare International Airport, Special
Facility Revenue Refunding Bonds (American Airlines Inc.
Project), 8.20% due 12/01/2024 2,585
400 Chicago, Illinois, Special Assessment Bonds (Lake Shore
East), 6.75% due 12/01/2032 414
3,190 Illinois Development Finance Authority Revenue Bonds (Primary
Health Care Centers Facilities Acquisition Program), 7.75%
due 12/01/2016 3,369
755 Lincolnshire, Illinois, Special Service Area No. 1, Special
Tax Bonds (Sedgebrook Project), 6.25% due 3/01/2034 761
==============================================================================================================
Iowa--2.5% 3,910 Iowa Finance Authority, Health Care Facilities, Revenue
Refunding Bonds (Care Initiatives Project), 9.25%
due 7/01/2025 4,741
==============================================================================================================
Louisiana--3.1% 5,500 Port New Orleans, Louisiana, IDR, Refunding (Continental
Grain Company Project), 7.50% due 7/01/2013 5,698
==============================================================================================================
Maine--0.5% 840 Maine Finance Authority, Solid Waste Recycling Facilities
Revenue Bonds (Great Northern Paper Project--Bowater), AMT,
7.75% due 10/01/2022 841
==============================================================================================================
Maryland--0.8% 1,500 Maryland State Energy Financing Administration, Limited
Obligation Revenue Bonds (Cogeneration--AES Warrior Run),
AMT, 7.40% due 9/01/2019 1,533
==============================================================================================================
Massachusetts--5.0% 1,845 Massachusetts State Development Finance Agency, First
Mortgage Revenue Bonds (Overlook Communities Inc.), Series A,
6.25% due 7/01/2034 1,830
Massachusetts State Development Finance Agency, Revenue Bonds
(Eastern Nazarine College):
1,245 5.625% due 4/01/2019 1,174
1,220 5.625% due 4/01/2029 1,093
850 Massachusetts State Health and Educational Facilities
Authority Revenue Bonds (Jordan Hospital), Series E, 6.75%
due 10/01/2033 901
Massachusetts State Health and Educational Facilities
Authority, Revenue Refunding Bonds:
2,115 (Bay Cove Human Services Issue), Series A, 5.90%
due 4/01/2028 2,040
1,000 (Milton Hospital), Series, 5.50% due 7/01/2016 1,012
1,300 Massachusetts State Industrial Finance Agency Revenue Bonds,
Sewer Facility (Resource Control Composting), AMT, 9.25%
due 6/01/2010 1,310
APEX MUNICIPAL FUND, INC. DECEMBER 31, 2004 7
[LOGO] Merrill Lynch Investment Managers
Schedule of Investments (continued) (in Thousands)
Face
State Amount Municipal Bonds Value
==============================================================================================================
Michigan--1.1% $ 1,000 Flint, Michigan, Hospital Building Authority, Revenue
Refunding Bonds (Hurley Medical Center), Series A, 6%
due 7/01/2020 (a) $ 1,095
1,000 Michigan State Hospital Finance Authority, Revenue Refunding
Bonds (Detroit Medical Center Obligation Group), Series A,
6.50% due 8/15/2018 979
==============================================================================================================
Minnesota--1.1% 820 Minneapolis & Saint Paul, Minnesota, Metropolitan Airports
Commission, Special Facilities Revenue Refunding Bonds
(Northwest Airlines Inc. Project), AMT, 7.375% due 4/01/2025 787
1,230 Saint Paul, Minnesota, Port Authority, Hotel Facility Revenue
Refunding Bonds (Radisson Kellogg Project), Series 2, 7.375%
due 8/01/2029 1,286
==============================================================================================================
Missouri--1.2% 1,200 Fenton, Missouri, Tax Increment Revenue Refunding and
Improvement Bonds (Gravois Bluffs), 7% due 10/01/2021 1,295
1,000 Kansas City, Missouri, IDA, First Mortgage Health Facilities
Revenue Bonds (Bishop Spencer Place), Series A, 6.50%
due 1/01/2035 1,022
==============================================================================================================
Nevada--0.2% 430 Clark County, Nevada, Improvement District No. 142 Special
Assessment, 6.375% due 8/01/2023 443
==============================================================================================================
New Jersey--15.3% Camden County, New Jersey, Improvement Authority, Lease
Revenue Bonds (Holt Hauling & Warehousing), AMT,
Series A (d):
2,000 9.625% due 1/01/2011 (e) 263
4,500 9.875% due 1/01/2021 592
6,000 Camden County, New Jersey, Pollution Control Financing
Authority, Solid Waste Resource Recovery Revenue Refunding
Bonds, AMT, Series A, 7.50% due 12/01/2010 5,999
2,170 New Jersey EDA, Cigarette Tax Revenue Bonds, 5.50%
due 6/15/2024 2,250
1,500 New Jersey EDA, IDR, Refunding (Newark Airport Marriott
Hotel), 7% due 10/01/2014 1,558
New Jersey EDA, Retirement Community Revenue Bonds, Series A:
1,000 (Cedar Crest Village Inc. Facility), 7.25% due 11/15/2031 1,053
3,700 (Seabrook Village Inc.), 8.125% due 11/15/2023 3,994
New Jersey EDA, Special Facility Revenue Bonds (Continental
Airlines Inc. Project), AMT:
3,050 6.625% due 9/15/2012 2,828
5,135 6.25% due 9/15/2029 4,173
1,870 New Jersey Health Care Facilities Financing Authority Revenue
Bonds (Pascack Valley Hospital Association), 6.625%
due 7/01/2036 1,759
Tobacco Settlement Financing Corporation of New Jersey
Revenue Bonds:
3,025 6.75% due 6/01/2039 3,021
1,075 7% due 6/01/2041 1,086
==============================================================================================================
New Mexico--2.8% 5,000 Farmington, New Mexico, PCR, Refunding (Tucson Electric Power
Co.--San Juan Project), Series A, 6.95% due 10/01/2020 5,246
==============================================================================================================
New York--3.9% 1,000 Dutchess County, New York, IDA, Civic Facility Revenue Bonds
(Saint Francis Hospital), Series B, 7.50% due 3/01/2029 995
New York City, New York, City IDA, Civic Facility Revenue
Bonds:
350 Series C, 6.80% due 6/01/2028 362
1,495 (Special Needs Facility Pooled Program), Series C-1,
6.50% due 7/01/2024 1,509
1,730 New York City, New York, City IDA, Special Facility Revenue
Bonds (British Airways Plc Project), AMT, 7.625%
due 12/01/2032 1,793
Utica, New York, GO, Public Improvement:
700 9.25% due 8/15/2005 724
635 9.25% due 8/15/2006 688
1,180 Westchester County, New York, IDA, Continuing Care
Retirement, Mortgage Revenue Bonds (Kendal on Hudson
Project), Series A, 6.50% due 1/01/2034 1,203
==============================================================================================================
North Carolina--0.5% 1,000 North Carolina Medical Care Commission, Retirement
Facilities, First Mortgage Revenue Bonds (Givens Estates
Project), Series A, 6.50% due 7/01/2032 1,026
==============================================================================================================
Oregon--0.7% 1,310 Western Generation Agency, Oregon, Cogeneration Project
Revenue Bonds (Wauna Cogeneration Project), AMT, Series B,
7.40% due 1/01/2016 1,343
8 APEX MUNICIPAL FUND, INC. DECEMBER 31, 2004
Schedule of Investments (continued) (in Thousands)
Face
State Amount Municipal Bonds Value
==============================================================================================================
Pennsylvania--5.3% $ 1,750 Chester County, Pennsylvania, Health and Education Facilities
Authority, Senior Living Revenue Refunding Bonds (Jenners
Pond Inc. Project), 7.625% due 7/01/2034 $ 1,780
Montgomery County, Pennsylvania, Higher Education and Health
Authority Revenue Bonds (Faulkeways at Gwynedd Project):
900 6.75% due 11/15/2024 954
925 6.75% due 11/15/2030 975
Philadelphia, Pennsylvania, Authority for IDR:
1,600 (Air Cargo), AMT, Series A, 7.50% due 1/01/2025 1,620
4,460 Commercial Development, 7.75% due 12/01/2017 4,557
==============================================================================================================
Tennessee--1.0% 1,800 Shelby County, Tennessee, Health, Educational and Housing
Facilities Board Revenue Bonds (Germantown Village),
Series A, 7.25% due 12/01/2034 1,857
==============================================================================================================
Texas--10.0% 1,000 Austin, Texas, Convention Center Revenue Bonds (Convention
Enterprises Inc.), First Tier, Series A, 6.70% due 1/01/2028 1,069
Bell County, Texas, Health Facilities Development
Corporation, Hospital Revenue Bonds (Scott & White Memorial
Hospital), VRDN (b)(c):
100 Series 2001-2, 1.98% due 8/15/2031 100
100 Series B-2, 1.98% due 8/15/2029 100
Brazos River Authority, Texas, PCR, Refunding, AMT:
2,530 (Texas Utility Company), Series A, 7.70% due 4/01/2033 3,003
2,760 (Utilities Electric Company), Series B, 5.05%
due 6/01/2030 2,839
1,220 Brazos River Authority, Texas, Revenue Refunding Bonds
(Reliant Energy Inc. Project), Series B, 7.75% due 12/01/2018 1,346
475 Dallas-Fort Worth, Texas, International Airport Facility,
Improvement Corporation Revenue Bonds (Learjet Inc.), AMT,
Series 2001-A-1, 6.15% due 1/01/2016 479
1,660 Grand Prairie, Texas, Housing Finance Corporation Revenue
Bonds (Independent Senior Living Center), 7.75%
due 1/01/2034 1,628
1,000 Houston, Texas, Health Facilities Development Corporation,
Retirement Facility Revenue Bonds (Buckingham Senior Living
Community), Series A, 7.125% due 2/15/2034 1,055
945 Lufkin, Texas, Health Facilities Development Corporation,
Health System Revenue Bonds (Memorial Health System of East
Texas), 5.70% due 2/15/2028 963
2,310 Matagorda County, Texas, Navigation District Number 1,
Revenue Refunding Bonds (Reliant Energy Inc.), Series C, 8%
due 5/01/2029 2,560
1,330 Port Corpus Christi, Texas, Individual Development
Corporation, Environmental Facilities Revenue Bonds (Citgo
Petroleum Corporation Project), AMT, 8.25% due 11/01/2031 1,421
2,000 Port Corpus Christi, Texas, Revenue Refunding Bonds (Celanese
Project), AMT, Series B, 6.70% due 11/01/2030 2,041
==============================================================================================================
Utah--1.2% 2,240 Carbon County, Utah, Solid Waste Disposal Revenue Refunding
Bonds (Laidlaw Environmental), AMT, Series A, 7.45%
due 7/01/2017 2,305
==============================================================================================================
Virginia--6.0% 2,490 Dulles Town Center, Virginia, Community Development
Authority, Special Assessment Tax (Dulles Town Center
Project), 6.25% due 3/01/2026 2,551
32,600 Pocahontas Parkway Association, Virginia, Toll Road Revenue
Bonds, Senior Series B, 5.875%** due 8/15/2025 8,664
==============================================================================================================
West Virginia--0.4% 875 Princeton, West Virginia, Hospital Revenue Refunding Bonds
(Community Hospital Association Inc. Project), 6.20%
due 5/01/2013 749
==============================================================================================================
Wisconsin--0.7% 1,320 Wisconsin State Health and Educational Facilities Authority
Revenue Bonds (New Castle Place Project), Series A, 7%
due 12/01/2031 1,343
==============================================================================================================
Wyoming--1.0% 1,800 Sweetwater County, Wyoming, Solid Waste Disposal Revenue
Bonds (FMC Corporation Project), AMT, Series A, 7%
due 6/01/2024 1,832
APEX MUNICIPAL FUND, INC. DECEMBER 31, 2004 9
[LOGO] Merrill Lynch Investment Managers
Schedule of Investments (concluded) (in Thousands)
Face
Amount Municipal Bonds Value
==============================================================================================================
U.S. Virgin Islands $ 2,100 Virgin Islands Government Refinery Facilities Revenue
--1.2% Refunding Bonds (Hovensa Coker Project), AMT, 6.50%
due 7/01/2021 $ 2,297
--------------------------------------------------------------------------------------------------------------
Total Municipal Bonds (Cost--$183,831)--98.5% 184,018
==============================================================================================================
Total Investments (Cost--$183,831*)--98.5% 184,018
Other Assets Less Liabilities--1.5% 2,743
---------
Net Assets--100.0% $ 186,761
=========
* The cost and unrealized appreciation/depreciation of investments as of
December 31, 2004, as computed for federal income tax purposes, were as
follows:
(in Thousands)
--------------------------------------------------------------------------
Aggregate cost ................................. $ 183,612
=========
Gross unrealized appreciation .................. $ 9,338
Gross unrealized depreciation .................. (8,932)
---------
Net unrealized appreciation .................... $ 406
=========
** Represents a zero coupon; the interest rate shown reflects the effective
yield at the time of purchase by the Fund.
(a) ACA Insured
(b) MBIA Insured.
(c) Security has a maturity of more than one year, but has variable rate and
demand features which qualify it as a short-term security. The rate
disclosed is that currently in effect. This rate changes periodically
based upon prevailing market rates.
(d) Non-income producing--issuer filed for bankruptcy or is in default of
interest payments.
(e) Restricted securities as to resale:
(in Thousands)
--------------------------------------------------------------------------
Acquisition
Issue Date Cost Value
--------------------------------------------------------------------------
Camden County, New Jersey,
Improvement Authority, Lease
Revenue Bonds (Holt Hauling
& Warehousing), AMT, Series A,
9.625% due 1/01/2011 1/29/1997 $2,116 $263
--------------------------------------------------------------------------
See Notes to Financial Statements.
10 APEX MUNICIPAL FUND, INC. DECEMBER 31, 2004
Statement of Assets, Liabilities and Capital
As of December 31, 2004
======================================================================================================================
Assets
----------------------------------------------------------------------------------------------------------------------
Investments in unaffiliated securities, at value (identified
cost--$183,830,687) ....................................... $ 184,018,125
Cash ....................................................... 48,569
Receivables:
Interest ................................................ $ 3,175,057
Securities sold ......................................... 546,000 3,721,057
-------------
Prepaid expenses ........................................... 1,206
-------------
Total assets ............................................... 187,788,957
-------------
======================================================================================================================
Liabilities
----------------------------------------------------------------------------------------------------------------------
Payables:
Securities purchased .................................... 788,709
Investment adviser ...................................... 115,827
Dividends to shareholders ............................... 82,061
Other affiliates ........................................ 1,926 988,523
-------------
Accrued expenses ........................................... 39,930
-------------
Total liabilities .......................................... 1,028,453
-------------
======================================================================================================================
Net Assets
----------------------------------------------------------------------------------------------------------------------
Net Assets ................................................. $ 186,760,504
=============
======================================================================================================================
Capital
----------------------------------------------------------------------------------------------------------------------
Common Stock, $.10 par value, 150,000,000 shares authorized;
19,596,732 shares issued and outstanding .................. $ 1,959,673
Paid-in capital in excess of par ........................... 199,958,756
Undistributed investment income--net ....................... $ 2,208,767
Accumulated realized capital losses--net ................... (17,554,130)
Unrealized appreciation--net ............................... 187,438
-------------
Total accumulated losses--net .............................. (15,157,925)
-------------
Total capital--Equivalent to $9.53 net asset value per share
of Common Stock (market price--$8.84) ..................... $ 186,760,504
=============
See Notes to Financial Statements.
APEX MUNICIPAL FUND, INC. DECEMBER 31, 2004 11
[LOGO] Merrill Lynch Investment Managers
Statement of Operations
For the Six Months Ended December 31, 2004
======================================================================================================================
Investment Income
----------------------------------------------------------------------------------------------------------------------
Interest ................................................... $ 6,433,300
======================================================================================================================
Expenses
----------------------------------------------------------------------------------------------------------------------
Investment advisory fees ................................... $ 606,377
Accounting services ........................................ 36,569
Professional fees .......................................... 23,456
Printing and shareholder reports ........................... 22,022
Transfer agent fees ........................................ 20,621
Listing fees ............................................... 10,477
Directors' fees and expenses ............................... 7,963
Pricing fees ............................................... 7,028
Custodian fees ............................................. 5,956
Other ...................................................... 9,481
-------------
Total expenses ............................................. 749,950
-------------
Investment income--net ..................................... 5,683,350
-------------
======================================================================================================================
Realized & Unrealized Gain (Loss)--Net
----------------------------------------------------------------------------------------------------------------------
Realized loss on investments ............................... (520,487)
Change in unrealized appreciation/depreciation on investments 8,258,258
-------------
Total realized and unrealized gain--net .................... 7,737,771
-------------
Net Increase in Net Assets Resulting from Operations ....... $ 13,421,121
=============
See Notes to Financial Statements.
12 APEX MUNICIPAL FUND, INC. DECEMBER 31, 2004
Statements of Changes in Net Assets
For the Six For the
Months Ended Year Ended
December 31, June 30,
Increase (Decrease) in Net Assets: 2004 2004
======================================================================================================================
Operations
----------------------------------------------------------------------------------------------------------------------
Investment income--net ..................................... $ 5,683,350 $ 11,663,235
Realized gain (loss)--net .................................. (520,487) 51,260
Change in unrealized appreciation/depreciation--net ........ 8,258,258 2,365,416
-------------------------------
Net increase in net assets resulting from operations ....... 13,421,121 14,079,911
-------------------------------
======================================================================================================================
Dividends & Distributions to Shareholders
----------------------------------------------------------------------------------------------------------------------
Investment income--net ..................................... (5,643,859) (11,150,541)
Realized gain--net ......................................... -- (61,886)
-------------------------------
Net decrease in net assets resulting from dividends and
distributions to shareholders ............................. (5,643,859) (11,212,427)
-------------------------------
======================================================================================================================
Net Assets
----------------------------------------------------------------------------------------------------------------------
Total increase in net assets ............................... 7,777,262 2,867,484
Beginning of period ........................................ 178,983,242 176,115,758
-------------------------------
End of period* ............................................. $ 186,760,504 $ 178,983,242
===============================
* Undistributed investment income--net .................. $ 2,208,767 $ 2,169,276
===============================
See Notes to Financial Statements.
APEX MUNICIPAL FUND, INC. DECEMBER 31, 2004 13
[LOGO] Merrill Lynch Investment Managers
Financial Highlights
The following per share data and ratios have been derived For the Six
from information provided in the financial statements. Months Ended For the Year Ended June 30,
December 31, --------------------------------------------------------
Increase (Decrease) in Net Asset Value: 2004 2004 2003 2002 2001
===================================================================================================================================
Per Share Operating Performance
-----------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period ... $ 9.13 $ 8.99 $ 9.24 $ 9.45 $ 9.33
------------------------------------------------------------------------
Investment income--net ................. .29+ .60+ .58+ .58 .59
Realized and unrealized gain (loss)--net .40 .11 (.27) (.22) .13
------------------------------------------------------------------------
Total from investment operations ....... .69 .71 .31 .36 .72
------------------------------------------------------------------------
Less dividends and distributions to
Common Stock shareholders:
Investment income--net .............. (.29) (.57) (.56) (.57) (.60)
Realized gain--net .................. -- --** -- -- --
------------------------------------------------------------------------
Total dividends and distributions to
Common Stock shareholders ............. (.29) (.57) (.56) (.57) (.60)
------------------------------------------------------------------------
Net asset value, end of period ......... $ 9.53 $ 9.13 $ 8.99 $ 9.24 $ 9.45
========================================================================
Market price per share, end of period .. $ 8.84 $ 8.26 $ 8.48 $ 8.39 $ 9.10
========================================================================
===================================================================================================================================
Total Investment Return*
-----------------------------------------------------------------------------------------------------------------------------------
Based on net asset value per share ..... 7.85%++ 8.64% 4.13% 4.31% 8.48%
========================================================================
Based on market price per share ........ 10.58%++ 4.20% 8.18% (1.64%) 9.05%
========================================================================
===================================================================================================================================
Average Net Assets
-----------------------------------------------------------------------------------------------------------------------------------
Expenses ............................... .80%@ .79% .90% .87% .82%
========================================================================
Investment income--net ................. 6.09%@ 6.52% 6.56% 6.19% 6.35%
========================================================================
===================================================================================================================================
Supplemental Data
-----------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $ 186,761 $ 178,983 $ 176,116 $ 181,093 $ 185,246
========================================================================
Portfolio turnover ..................... 14% 19% 24% 25% 17%
========================================================================
* 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
charges.
** Amount is less than $(.01) per share.
+ Based on average shares outstanding.
++ Aggregate total investment return.
@ Annualized.
See Notes to Financial Statements.
14 APEX MUNICIPAL FUND, INC. DECEMBER 31, 2004
Notes to Financial Statements
1. Significant Accounting Policies:
Apex Municipal Fund, Inc. (the "Fund") is registered under the Investment
Company Act of 1940, as amended, as a non-diversified, closed-end management
investment company. The Fund's financial statements are prepared in conformity
with U.S. generally accepted accounting principles, which may require the use of
management accruals and estimates. Actual results may differ from these
estimates. These unaudited financial statements reflect all adjustments, which
are, in the opinion of management, necessary to present a fair statement of the
results for the interim period. 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 daily 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 primarily in the
over-the-counter markets and are valued at the last available bid price in the
over-the-counter market or on the basis of values as obtained by a pricing
service. Pricing services use valuation matrixes that incorporate both
dealer-supplied valuations and valuation models. The procedures of the pricing
service and its valuations are reviewed by the officers of the Fund under the
general direction of the Board of Directors. Such valuations and procedures are
reviewed periodically by the Board of Directors of the Fund. 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 written or
purchased are valued at the last sale price in the case of exchange-traded
options. In the case of options traded in the over-the-counter market, valuation
is the last asked price (options written) or the last bid price (options
purchased). Swap agreements are valued by quoted fair values received daily by
the Fund's pricing service. Short-term investments with a remaining maturity of
60 days or less are valued at amortized cost, which approximates market value,
under which method the investment is valued at cost and any premium or discount
is amortized on a straight line basis to maturity. Investments in open-end
investment companies are valued at their net asset value each business day.
Securities and other 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.
(b) Derivative financial instruments -- The Fund may engage in various portfolio
investment strategies both to increase the return of the Fund and to hedge, or
protect, its exposure to interest rate movements and movements in the securities
markets. Losses may arise due to changes in the value of the contract or if the
counterparty does not perform under the contract.
o Financial futures contracts -- The Fund may purchase or sell financial
futures contracts and options on such futures contracts. 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.
o Options -- The Fund may 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.
APEX MUNICIPAL FUND, INC. DECEMBER 31, 2004 15
[LOGO] Merrill Lynch Investment Managers
Notes to Financial Statements (concluded)
o Forward interest rate swaps -- The Fund may enter into forward interest
rate swaps. In a forward interest rate swap, the Fund and the counterparty
agree to make periodic net payments on a specified notional contract
amount, commencing on a specified future effective date, unless terminated
earlier. When the agreement is closed, the Fund records a realized gain or
loss in an amount equal to the value of the agreement.
(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).
Realized gains and losses on security transactions are determined on the
identified cost basis. Interest income is recognized on the accrual basis. The
Fund amortizes all premiums and discounts on debt securities.
(e) 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.
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 .65% of the Fund's average daily net assets.
For the six months ended December 31, 2004, the Fund reimbursed FAM $1,958 for
certain accounting services.
Certain officers and/or directors of the Fund are officers and/or directors of
FAM, PSI, and/or ML & Co.
3. Investments:
Purchases and sales of investments, excluding short-term securities, for the six
months ended December 31, 2004 were $25,115,544 and $24,939,734, respectively.
4. Common Stock Transactions:
At December 31, 2004, the Fund had one class of shares of Common Stock, par
value $.10 per share, of which 150,000,000 shares were authorized.
5. Subsequent Event:
On January 6, 2005, the Fund paid a tax-exempt income dividend to holders of
Common Stock in the amount of $.048000 per share, payable on January 28, 2005 to
shareholders of record on January 19, 2005.
6. Capital Loss Carryfoward:
On June 30, 2004, the Fund had a net capital loss carryforward of $16,465,384,
of which $1,311,769 expires in 2005, $938,156 expires in 2006, $2,975,000
expires in 2008, $5,341,699 expires in 2009, $2,075,987 expires in 2010,
$2,163,492 expires in 2011 and $1,659,281 expires in 2012. This amount will be
available to offset like amounts of any future taxable gains.
16 APEX MUNICIPAL FUND, INC. DECEMBER 31, 2004
About Inverse Floaters
As a part of its investment strategy, the Fund may invest in certain securities
whose potential income return is inversely related to changes in a floating
interest rate ("inverse floaters"). In general, income on inverse floaters will
decrease when short-term interest rates increase and increase when short-term
interest rates decrease. Investments in inverse floaters may be characterized as
derivative securities and may subject the Fund to the risks of reduced or
eliminated interest payments and losses of invested principal. In addition,
inverse floaters have the effect of providing investment leverage and, as a
result, the market value of such securities will generally be more volatile than
that of fixed rate, tax-exempt securities. To the extent the Fund invests in
inverse securities, the market value of the Fund's portfolio and the net asset
value of the Fund's shares may also be more volatile than if the Fund did not
invest in these securities. As of December 31, 2004, none of the Fund's total
net assets were invested in these securities.
Dividend Policy
The Fund's dividend policy is to distribute all or a portion of its net
investment income to its shareholders on a monthly basis. In order to provide
shareholders with a more stable level of dividend distributions, the Fund may at
times pay out less than the entire amount of net investment income earned in any
particular month and may at times in any particular month pay out such
accumulated but undistributed income in addition to net investment income earned
in that month. As a result, the dividends paid by the Fund for any particular
month may be more or less than the amount of net investment income earned by the
Fund during such month. The Fund's current accumulated but undistributed net
investment income, if any, is disclosed in the Statement of Assets, Liabilities
and Capital, which comprises part of the financial information included in this
report.
APEX MUNICIPAL FUND, INC. DECEMBER 31, 2004 17
[LOGO] Merrill Lynch Investment Managers
Availability of Quarterly Schedule of Investments
The Fund files its complete schedule of portfolio holdings with the Securities
and Exchange Commission ("SEC") for the first and third quarters of each fiscal
year on Form N-Q. The Fund's Forms N-Q are available on the SEC's Web site at
http://www.sec.gov. The Fund's Forms N-Q may also be reviewed and copied at the
SEC's Public Reference Room in Washington, DC. Information on the operation of
the Public Reference Room may be obtained by calling 1-800-SEC-0330.
18 APEX MUNICIPAL FUND, INC. DECEMBER 31, 2004
Electronic Delivery
The Fund offers electronic delivery of communications to its shareholders. In
order to receive this service, you must regis-ter your account and provide us
with e-mail information. To sign up for this service, simply access this Web
site at http://www.icsdelivery.com/live and follow the instructions. When you
visit this site, you will obtain a personal identification number (PIN). You
will need this PIN should you wish to update your e-mail address, choose to
discontinue this service and/or make any other changes to the service. This
service is not available for certain retirement accounts at this time.
APEX MUNICIPAL FUND, INC. DECEMBER 31, 2004 19
[LOGO] Merrill Lynch Investment Managers www.mlim.ml.com
Apex Municipal Fund, Inc. seeks to provide shareholders with high current income
exempt from federal income taxes by investing primarily in a portfolio of
medium-to-lower grade or unrated municipal obligations, the interest on which is
exempt from federal income taxes in the opinion of bond counsel to the issuer.
This report, including the financial information herein, is transmitted to
shareholders of Apex Municipal Fund, Inc. for their information. It is not a
prospectus. 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.
A description of the policies and procedures that the Fund uses to determine how
to vote proxies relating to portfolio securities is available (1) without
charge, upon request, by calling toll-free 1-800-MER-FUND (1-800-637-3863); (2)
at www.mutualfunds.ml.com; and (3) on the Securities and Exchange Commission's
Web site at http://www.sec.gov. Information about how the Fund voted proxies
relating to securities held in the Fund's portfolio during the most recent
12-month period ended June 30 is available (1) at www.mutualfunds.ml.com and (2)
on the Securities and Exchange Commission's Web site at http://www.sec.gov.
Apex Municipal Fund, Inc.
Box 9011
Princeton, NJ
08543-9011
#10955 -- 12/04
Item 2 - Code of Ethics - Not Applicable to this semi-annual report
Item 3 - Audit Committee Financial Expert - Not Applicable to this semi-annual
report
Item 4 - Principal Accountant Fees and Services - Not Applicable to this
semi-annual report
Item 5 - Audit Committee of Listed Registrants - Not Applicable to this
semi-annual report
Item 6 - Schedule of Investments - Not Applicable
Item 7 - Disclosure of Proxy Voting Policies and Procedures for Closed-End
Management Investment Companies - Not Applicable to this semi-annual
report
Item 8 - Portfolio Managers of Closed-End Management Investment Companies - Not
Applicable to this semi-annual report
Item 9 - Purchases of Equity Securities by Closed-End Management Investment
Company and Affiliated Purchasers - Not Applicable
Item 10 - Submission of Matters to a Vote of Security Holders - Not Applicable
Item 11 - Controls and Procedures
11(a) - The registrant's certifying officers have reasonably designed such
disclosure controls and procedures to ensure material information
relating to the registrant is made known to us by others particularly
during the period in which this report is being prepared. The
registrant's certifying officers have determined that the registrant's
disclosure controls and procedures are effective based on our evaluation
of these controls and procedures as of a date within 90 days prior to
the filing date of this report.
11(b) - There were no changes in the registrant's internal control over
financial reporting (as defined in Rule 30a-3(d) under the Act (17 CFR
270.30a-3(d)) that occurred during the last fiscal half-year of the
period covered by this report that has materially affected, or is
reasonably likely to materially affect, the registrant's internal
control over financial reporting.
Item 12 - Exhibits attached hereto
12(a)(1) - Code of Ethics - Not Applicable to this semi-annual report
12(a)(2) - Certifications - Attached hereto
12(a)(3) - Not Applicable
12(b) - Certifications - Attached hereto
Pursuant to the requirements of the Securities Exchange Act of 1934 and
the Investment Company Act of 1940, the registrant has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Apex Municipal Fund, Inc.
By: /s/ Robert C. Doll, Jr.
-------------------------------------
Robert C. Doll, Jr.,
President of
Apex Municipal Fund, Inc.
Date: February 24, 2005
Pursuant to the requirements of the Securities Exchange Act of 1934 and
the Investment Company Act of 1940, this report has been signed below by
the following persons on behalf of the registrant and in the capacities
and on the dates indicated.
By: /s/ Robert C. Doll, Jr.
-------------------------------------
Robert C. Doll, Jr.,
President of
Apex Municipal Fund, Inc.
Date: February 24, 2005
By: /s/ Donald C. Burke
-------------------------------------
Donald C. Burke,
Chief Financial Officer of
Apex Municipal Fund, Inc.
Date: February 24, 2005