UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES
Investment Company Act file number 811-5729
Apex Municipal Fund, Inc.
Address: P.O. Box 9011
Princeton, NJ 08543-9011
Name and address of agent for service: Terry K. Glenn, 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: 06/30/03
Date of reporting period: 07/01/02 - 12/31/02
Item 1 - Is shareholder report attached? - Y
[LOGO] Merrill Lynch Investment Managers
Semi-Annual Report
December 31, 2002
Apex
Municipal Fund,
Inc.
www.mlim.ml.com
APEX MUNICIPAL FUND, INC.
Managed 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 consistent yield to the current trading price of shares
of Common Stock of the Fund, 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.
Quality Profile
The quality ratings of securities in the Fund as of December 31, 2002 were as
follows:
--------------------------------------------------------------------------------
Percent of
S&P Rating/Moody's Rating Total Investments
--------------------------------------------------------------------------------
A/A .......................................................... 5.6%
BBB/Baa ...................................................... 19.6
BB/Ba ........................................................ 18.4
B/B .......................................................... 7.3
CCC/Caa ...................................................... 0.8
NR (Not Rated) ............................................... 47.6
Other+ ....................................................... 0.7
--------------------------------------------------------------------------------
+ Temporary investments in short-term municipal securities.
Apex Municipal Fund, Inc., December 31, 2002
DEAR SHAREHOLDER
For the six months ended December 31, 2002, Apex Municipal Fund, Inc. earned
$.278 per share income dividends, which included earned and unpaid dividends of
$.047. This represents a net annualized yield of 6.25%, based on a period-end
net asset value of $8.84 per share. Over the same period, the Fund's total
investment return was -1.07%, based on a change in per share net asset value
from $9.24 to $8.84, and assuming reinvestment of $.276 per share income
dividends.
The Municipal Market Environment
During the six-month period ended December 31, 2002, long-term fixed income
interest rates continued to move lower. As they had earlier in 2002, declining
U.S. equity markets and worldwide political tensions easily overshadowed the
incipient U.S. economic recovery allowing bond yields to fall to recent historic
low levels. In late July, second quarter 2002 gross domestic product activity
was reported at 1.1%, a significant decline from the first quarter rate of 5%.
This rate suggested that continued declines in U.S. equity prices were
negatively affecting not only consumer and business confidence but undermining
much of the economic growth seen earlier this year. Some analysts extrapolated
that recent weakness would continue, if not accelerate. This brought about
forecasts that the Federal Reserve Board would soon be obliged to lower
short-term interest rates both to offset equity market declines and boost
consumer and business spending. The possibility of lower short-term interest
rates helped push longer-term bond yields lower still during July and August.
The dramatic decline in U.S. equity prices in late August and September
triggered a significant fixed income rally as investors sought the safe-haven
status of U.S. Treasury securities. By the end of September, U.S. Treasury bond
yields had fallen to 4.66%.
Bolstered by an unexpected decline in the national unemployment rate to 5.6% in
early October, U.S. equity markets staged a strong rally throughout much of the
month. The Standard & Poor's 500 (S&P 500) Index rose over 8% for the month,
triggered by stronger-than-expected earnings reports from a large number of
companies, such as General Electric Company, International Business Machines
Corporation and Microsoft Corporation. As they have throughout most of the
period, bond prices traded in an inverse relationship to equity prices.
Consequently, as stocks rallied, bond yields rose in October, despite generally
weak economic releases. During October, the U.S. housing sector remained quite
robust, but retail sales and industrial production slowed. Fixed income bond
yields remained under pressure in November as U.S. equity markets continued to
strengthen. During November, the S&P 500 Index rose an additional 5.5%. Equity
prices were supported by signs of further U.S. economic recovery, especially
improving labor market activity. By the end of November, third quarter U.S.
gross domestic product (GDP) growth was revised to 4%. Financial conditions were
also strengthened by a larger-than-expected reduction in short-term interest
rates by the Federal Reserve Board in early November. The Federal Funds target
rate was lowered 50 basis points (.50%) to 1.25%, its lowest level since the
1960s. Recent action by the Federal Reserve Board was largely viewed as being
taken to bolster the sputtering U.S. economic recovery. Rebounding U.S. equity
markets and the prospects for a more substantial U.S. economic recovery pushed
long-term U.S. Treasury yield levels to 5.10% by late November.
In December, softer equity prices and renewed investor concerns about potential
U.S. military action against Iraq again combined to push long-term interest
rates lower. The S&P 500 Index declined more than 5% in December on
disappointing earnings reports and anticipated weak holiday sales. During
December 2002, as both national and international investors sought the
safe-haven sanctuary of U.S. Treasury issues, long-term U.S. Treasury yields
declined over 25 basis points to end the period at 4.75%. During the last six
months, long-term U.S. Treasury bond yields declined 75 basis points.
For the six-month period ended December 31, 2002, tax-exempt bond prices also
generally rose. In recent months, municipal bond yields have declined in
response to the positive fixed income environment engendered by falling equity
valuations. Price advances in tax-exempt issues have not been able to keep pace
with the U.S. Treasury bond price improvement as municipal bonds cannot offer
foreign investors the safe-haven status U.S. Treasury obligations enjoy in
periods of economic and political instability. Additionally, tax-exempt bond
issuance increased dramatically in the last half of 2002 removing some of the
positive technical support the municipal bond market enjoyed earlier this year.
By the end of 2002, long-term municipal bond yields, as measured by the Bond
Buyer Revenue Bond Index, stood at 5.16%, a decline of 25 basis points during
the last six months.
Investor demand for tax-exempt products remained positive throughout the period.
In addition to the approximately $75 billion investors received from June to
August 2002 from bond maturities, coupon income and proceeds from early
redemptions, investors are expected to receive approximately $30 billion from
these sources in January 2003. The Investment Company Institute reported that in
2002 municipal bond funds net cash flows continued to be very positive at nearly
$16 billion, an increase of more than 25% compared to 2001. However, these
positive demand factors have not been able to offset the increase in tax-exempt
new-issue supply that has resulted in the underperformance seen in recent
months. This price underperformance served to make municipal bonds a
particularly attractive purchase relative to their taxable counterparts.
Throughout most of the yield curve, municipal bonds have been available for
purchase at yields near or exceeding those of comparable U.S. Treasury issues.
Compared to their recent historical averages of 82% - 88% of U.S. Treasury
yields, municipal bond yields ratios at their current 95% - 105% range are
likely to prove attractive to long-term investors.
Continued uncertainty regarding the pace of the current U.S. economic recovery
as well as the resolution of the U.N./Iraq confrontation are likely to keep
interest rates near their present levels for the immediate future. Equity market
declines over the past three years have helped push interest rates lower than
economic fundamentals alone would support. When U.S. business conditions improve
and equity markets stabilize, however, any associated interest rate increases
should not be extreme. Inflationary pressures are negligible and any move by the
Federal Reserve Board to raise short-term interest rates is unlikely before late
2003. As equity valuations are likely to only gradually recover, U.S. economic
recovery is also likely to be a moderate process. This suggests that the pace of
any interest rate increases will be gradual. As the municipal bond market's
strong technical position can be expected to remain supportive in the coming
months, future tax-exempt interest rate increases should be more restrained than
their taxable counterparts.
Portfolio Strategy
During the six-month period ended December 31, 2002, the high-yield tax-exempt
market came under renewed pressure, as valuations remained heavily influenced by
developments in the taxable corporate high-yield market. Late last summer,
weaker equity markets contributed to a widening of credit spreads amid mounting
investor concerns about corporate profits and the reliability of company
financial statements. Portfolio investments in tax-exempt corporate-backed debt
were similarly affected. Airline obligations were particularly hard hit after
the sector rally earlier this year proved to be short-lived. These and other
economically cyclical holdings contributed to the lackluster results during the
period as high-yield fixed income markets, beset by declining liquidity and
credit quality, have not participated in the rally enjoyed by both the Treasury
and high grade municipal markets. Investors, perhaps more optimistic about
prospects for an economic recovery, have exhibited a heightened level of risk
tolerance.
Factors that had a positive effect on the Fund included concentrations in health
care and tax-backed residential sectors. These sectors were largely immune to
the pressures affecting corporate debt and, in fact, exhibited a tendency to
rise in value relative to widely watched market benchmarks. While reasons for
this strong performance vary, there is
2 & 3
Apex Municipal Fund, Inc., December 31, 2002
little doubt that widely publicized reports of corporate malfeasance influenced
investors' preferences when making investment decisions. As a consequence,
demand for high-yield municipal bonds shifted away from corporate-related debt
to other sectors unaffected by these reports. Many of the portfolio's purchases
during the period occurred within these sectors, which should help to mute some
of the volatility associated with corporate issuance. Nevertheless, the Fund
remains positioned to benefit from an improving economic environment.
Corporate-related debt still constitutes a significant concentration within the
portfolio and, given the cyclical nature of many of these holdings, the expected
contraction in credit spreads is likely to provide a material and beneficial
effect on Fund performance.
In Conclusion
We appreciate your ongoing interest in Apex Municipal Fund, Inc., and we look
forward to serving your investment needs in the months and years to come.
Sincerely,
/s/ Terry K. Glenn
Terry K. Glenn
President and Director
/s/ Kenneth A. Jacob
Kenneth A. Jacob
Senior Vice President
/s/ John M. Loffredo
John M. Loffredo
Senior Vice President
/s/ Theodore R. Jaeckel Jr.
Theodore R. Jaeckel Jr.
Vice President and Portfolio Manager
January 5, 2003
SCHEDULE OF INVESTMENTS (in Thousands)
S&P Moody's Face
STATE Ratings Ratings Amount Issue Value
====================================================================================================================================
Alabama--0.6% B NR* $ 1,000 Brewton, Alabama, IDB, PCR, Refunding (Container
Corporation of America--Jefferson Smurfit Corp. Project),
8% due 4/01/2009 $ 1,029
====================================================================================================================================
Alaska--1.2% NR* NR* 2,000 Alaska Industrial Development and Expert Authority Revenue
Bonds (Williams Lynxs Alaska Cargoport), AMT, 8% due 5/01/2023 2,079
====================================================================================================================================
Arizona--2.6% NR* NR* 1,500 Maricopa County, Arizona, IDA, M/F Housing Revenue Bonds
(Sun King Apartments Project), Sub-Series C, 9.50%
due 11/01/2031 1,529
NR* Caa2 4,000 Phoenix, Arizona, IDA, Airport Facility Revenue Refunding
Bonds (America West Airlines Inc. Project), AMT, 6.30%
due 4/01/2023 1,452
B+ Ba3 1,585 Pima County, Arizona, IDA, Industrial Revenue Refunding Bonds
(Tucson Electric Power Company Project), Series C, 6%
due 9/01/2029 1,481
====================================================================================================================================
Colorado--5.9% NR* Baa2 3,000 Denver, Colorado, Urban Renewal Authority, Tax Increment
Revenue Bonds (Pavilions), AMT, 7.75% due 9/01/2016 3,261
NR* NR* 2,800 Elk Valley, Colorado, Public Improvement Revenue Bonds
(Public Improvement Fee), Series A, 7.30% due 9/01/2022 2,854
NR* NR* 1,640 Lincoln Park, Colorado, Metropolitan District, GO, Refunding,
7.75% due 12/01/2026 1,693
NR* NR* 1,235 North Range, Colorado, Metropolitan District Number 1, GO,
7.25% due 12/15/2031 1,238
BB+ Ba1 1,145 Northwest Parkway, Colorado, Public Highway Authority Revenue
Bonds, First Tier, Sub-Series D, 7.125% due 6/15/2041 1,197
====================================================================================================================================
Connecticut--0.8% NR* B1 1,305 New Haven, Connecticut, Facility Revenue Bonds (Hill Health
Corporation Project), 9.25% due 5/01/2017 1,332
====================================================================================================================================
Florida--10.3% NR* NR* 920 Arbor Greene Community Development District, Florida, Special
Assessment Revenue Bonds, 7.60% due 5/01/2018 971
NR* NR* 1,370 Bonnet Creek Resort, Florida, Community Development District,
Special Assessment Revenue Bonds, 7.50% due 5/01/2034 1,396
NR* NR* 1,685 Capital Projects Finance Authority, Florida, Continuing Care
Retirement Revenue Bonds (Glenridge on Palmer Ranch),
Series A, 8% due 6/01/2032 1,615
NR* NR* 2,500 Hillsborough County, Florida, IDA, Exempt Facilities Revenue
Bonds (National Gypsum), AMT, Series A, 7.125% due 4/01/2030 2,474
NR* NR* 920 Lakewood Ranch, Florida, Community Development District
Number 5, Special Assessment Revenue Refunding Bonds,
Series A, 6.70% due 5/01/2031 928
NR* NR* 3,100 Lee County, Florida, IDA, Health Care Facilities Revenue Bonds
(Cypress Cove Healthpark), Series A, 6.375% due 10/01/2025 2,912
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
4 & 5
Apex Municipal Fund, Inc., December 31, 2002
SCHEDULE OF INVESTMENTS (continued) (in Thousands)
S&P Moody's Face
STATE Ratings Ratings Amount Issue Value
====================================================================================================================================
Florida NR* NR* $ 1,650 Orlando, Florida, Urban Community Development District,
(concluded) Capital Improvement Special Assessment Bonds, Series A,
6.95% due 5/01/2033 $ 1,679
NR* NR* 3,480 Parkway Center, Florida, Community Development District
Special Assessment Refunding Bonds, Series B, 8%
due 5/01/2010 2,682
NR* NR* 3,025 Tampa Palms, Florida, Open Space and Transportation Community
Development District Revenue Bonds, Capital Improvement
(Richmond Place Project), 7.50% due 5/01/2018 3,193
====================================================================================================================================
Georgia--1.6% NR* NR* 2,000 Atlanta, Georgia, Tax Allocation Revenue Bonds (Atlantic
Station Project), 7.90% due 12/01/2024 2,071
BBB- Ba1 1,000 Effingham County, Georgia, IDA, PCR, Refunding (Georgia
Pacific Corporation Project), 6.50% due 6/01/2031 773
====================================================================================================================================
Idaho--0.9% NR* NR* 1,470 Idaho Health Facilities Authority, Revenue Refunding Bonds
(Valley Vista Care Corporation), Series A, 7.75%
due 11/15/2016 1,501
====================================================================================================================================
Illinois--3.4% BB- B2 3,000 Chicago, Illinois, O'Hare International Airport, Special
Facility Revenue Refunding Bonds (American Airlines Inc.
Project), 8.20% due 12/01/2024 1,307
NR* NR* 400 Chicago, Illinois, Special Assessment Bonds (Lake Shore East),
6.75% due 12/01/2032 400
NR* NR* 3,190 Illinois Development Finance Authority Revenue Bonds (Primary
Health Care Centers Facilities Acquisition Program),
7.75% due 12/01/2016 3,475
Illinois Health Facilities Authority, Revenue Refunding
Bonds, VRDN (a):
A1+ VMIG1+ 250 (Resurrection Health Care), Series A, 1.65% due 5/15/2029 250
A1+ VMIG1+ 500 (University of Chicago Hospitals), 1.65% due 8/01/2026 500
====================================================================================================================================
Indiana--2.6% NR* NR* 2,600 Indiana State Educational Facilities Authority, Revenue
Refunding Bonds (Saint Joseph's College Project), 7%
due 10/01/2029 2,744
NR* NR* 1,820 Indianapolis, Indiana, M/F Revenue Bonds (Lake Nora Fox
Club Project), Series B, 7.50% due 10/01/2029 1,771
====================================================================================================================================
Iowa--2.7% NR* NR* 4,000 Iowa Finance Authority, Health Care Facilities Revenue
Refunding Bonds (Care Initiatives Project), 9.25%
due 7/01/2025 4,744
====================================================================================================================================
Kansas--0.6% BB+ NR* 1,000 Lenexa, Kansas, Health Care Facility Revenue Bonds (Lakeview
Village Inc.), Series C, 6.875% due 5/15/2032 1,010
====================================================================================================================================
Louisiana--3.2% BB- NR* 5,500 Port New Orleans, Louisiana, IDR, Refunding (Continental Grain
Company Project), 7.50% due 7/01/2013 5,593
====================================================================================================================================
Maryland--2.1% NR* NR* 1,875 Anne Arundel County, Maryland, Special Obligation Revenue
Bonds (Arundel Mills Project), 7.10% due 7/01/2029 2,048
NR* NR* 1,500 Maryland State Energy Financing Administration, Limited
Obligation Revenue Bonds (Cogeneration--AES Warrior Run),
AMT, 7.40% due 9/01/2019 1,511
====================================================================================================================================
Massachusetts--3.9% BBB NR* 825 Massachusetts State Development Finance Agency, Resource
Recovery Revenue Bonds (Ogden Haverhill Associates), AMT,
Series A, 6.70% due 12/01/2014 817
Massachusetts State Development Finance Agency, Revenue
Refunding Bonds (Eastern Nazarine College):
BB+ NR* 245 5.625% due 4/01/2019 199
BB+ NR* 1,220 5.625% due 4/01/2029 930
NR* Ba2 3,000 Massachusetts State Health and Educational Facilities
Authority, Revenue Refunding Bonds (Bay Cove Human Services
Issue), Series A, 5.90% due 4/01/2028 2,605
NR* NR* 1,700 Massachusetts State Industrial Finance Agency Revenue Bonds,
Sewer Facility (Resource Control Composting), AMT, 9.25%
due 6/01/2010 1,714
BBB NR* 500 Massachusetts State Industrial Financial Agency, Resource
Recovery Revenue Refunding Bonds (Ogden Haverhill Project),
AMT, Series A, 5.60% due 12/01/2019 439
====================================================================================================================================
Michigan--0.6% BBB- Baa3 1,000 Michigan State Hospital Finance Authority, Revenue Refunding
Bonds (Detroit Medical Center Obligation Group), Series A,
6.50% due 8/15/2018 1,003
====================================================================================================================================
Minnesota--1.8% NR* NR* 3,160 Anoka, Minnesota, M/F Housing Revenue Bonds (Rainbow Plaza
Apartments Project), 9.375% due 12/01/2024 3,187
====================================================================================================================================
Missouri--0.7% NR* NR* 1,200 Fenton, Missouri, Tax Increment Revenue Refunding and
Improvement Bonds (Gravois Bluffs), 7% due 10/01/2021 1,264
====================================================================================================================================
Nevada--1.3% BBB Baa2 2,500 Henderson, Nevada, Health Care Facility Revenue Bonds (Catholic
Healthcare West--Saint Rose Dominican Hospital), 5.375%
due 7/01/2026 2,217
====================================================================================================================================
New Jersey--12.5% Camden County, New Jersey, Improvement Authority, Lease
Revenue Bonds (Holt Hauling & Warehousing), AMT, Series A (b):
NR* NR* 2,000 9.625% due 1/01/2011 590
NR* NR* 4,500 9.875% due 1/01/2021 1,328
CCC B2 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 5,938
BBB- NR* 1,400 New Jersey EDA, First Mortgage Revenue Bonds (Fellowship
Village), Series C, 5.50% due 1/01/2028 1,276
NR* Ba3 1,500 New Jersey EDA, IDR, Refunding (Newark Airport Marriott
Hotel), 7% due 10/01/2014 1,493
New Jersey EDA, Retirement Community Revenue Bonds, Series A:
NR* NR* 1,000 (Cedar Crest Village Inc. Facility), 7.25% due 11/15/2031 995
NR* NR* 3,700 (Seabrook Village Inc.), 8.125% due 11/15/2023 3,892
B+ B3 3,050 New Jersey EDA, Special Facility Revenue Bonds (Continental
Airlines Inc. Project), AMT, 6.625% due 9/15/2012 2,263
NR* Baa1 1,410 New Jersey Health Care Facilities Financing Authority Revenue
Bonds (South Jersey Hospital), 6% due 7/01/2026 1,450
A A1 2,485 Tobacco Settlement Financing Corporation, New Jersey,
Asset-Backed Revenue Refunding Bonds, 6.125% due 6/01/2042 2,394
====================================================================================================================================
New Mexico--3.0% B+ Ba3 5,000 Farmington, New Mexico, PCR, Refunding (Tucson Electric
Power Co.--San Juan Project), Series A, 6.95% due 10/01/2020 5,178
====================================================================================================================================
New York--2.4% NR* NR* 350 New York City, New York, City IDA, Civic Facility Revenue
Bonds, Series C, 6.80% due 6/01/2028 356
BBB- Ba2 1,730 New York City, New York, City IDA, Special Facility Revenue
Bonds (British Airways PLC Project), AMT, 7.625%
due 12/01/2032 1,477
Utica, New York, GO, Public Improvement:
BBB Ba1 700 9.25% due 8/15/2004 772
BBB Ba1 700 9.25% due 8/15/2005 807
BBB Ba1 635 9.25% due 8/15/2006 758
====================================================================================================================================
North Carolina-- NR* NR* 1,600 North Carolina Medical Care Commission, Health Care Facilities,
1.0% First Mortgage Revenue Refunding Bonds (Presbyterian Homes
Project), 7% due 10/01/2031 1,706
====================================================================================================================================
Ohio--1.1% B+ B3 3,135 Cleveland, Ohio, Airport Special Revenue Refunding Bonds
(Continental Airlines Inc. Project), AMT, 5.70% due 12/01/2019 1,824
====================================================================================================================================
6 & 7
Apex Municipal Fund, Inc., December 31, 2002
SCHEDULE OF INVESTMENTS (concluded) (in Thousands)
S&P Moody's Face
STATE Ratings Ratings Amount Issue Value
====================================================================================================================================
Oklahoma--0.2% BB- B2 $ 420 Tulsa, Oklahoma, Municipal Airport Trust Revenue Refunding
Bonds (AMR), AMT, Series A, 5.80% due 6/01/2035 $ 323
====================================================================================================================================
Oregon--0.6% NR* NR* 1,000 Western Generation Agency, Oregon, Cogeneration Project
Revenue Bonds (Wauna Cogeneration Project), AMT, Series B,
7.40% due 1/01/2016 1,024
====================================================================================================================================
Pennsylvania--7.9% NR* NR* 750 Blair County, Pennsylvania, IDA, Revenue Bonds (Village of
Pennsylvania State Project), Series A, 7% due 1/01/2034 754
NR* NR* 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 1,731
NR* Ba2 2,000 Lehigh County, Pennsylvania, General Purpose Authority,
Revenue Refunding Bonds (Kidspeace Obligation Group), 6%
due 11/01/2023 1,854
Montgomery County, Pennsylvania, Higher Education and Health
Authority, Revenue Refunding Bonds (Faulkeways at Gwynedd
Project):
BBB+ NR* 900 6.75% due 11/15/2024 945
BBB+ NR* 925 6.75% due 11/15/2030 967
A1+ NR* 300 Pennsylvania State Higher Educational Facilities Authority,
Revenue Refunding Bonds (Carnegie Mellon University), VRDN,
Series C, 1.65% due 11/01/2029 (a) 300
Philadelphia, Pennsylvania, Authority for IDR, AMT:
NR* Ba1 1,600 (Air Cargo), Series A, 7.50% due 1/01/2025 1,562
NR* NR* 5,500 Commercial Development, 7.75% due 12/01/2017 5,654
====================================================================================================================================
Rhode Island--0.5% BBB Baa2 930 Rhode Island State Health and Educational Building Corporation,
Hospital Financing Revenue Bonds (Lifespan Obligation Group),
6.50% due 8/15/2032 953
====================================================================================================================================
South Carolina-- BBB- NR* 1,000 South Carolina Jobs, EDA, Revenue Bonds (Myrtle Beach
0.6% Convention Center), Series A, 6.625% due 4/01/2036 1,005
====================================================================================================================================
Tennessee--0.5% BBB- Ba1 840 McMinn County, Tennessee, IDB, Solid Waste Revenue Bonds
(Recycling Facility--Calhoun Newsprint), AMT, 7.40%
due 12/01/2022 816
====================================================================================================================================
Texas--10.3% BBB- Baa3 1,000 Austin, Texas, Convention Center Revenue Bonds (Convention
Enterprises Inc.), First Tier, Series A, 6.70%
due 1/01/2028 1,025
Brazos River Authority, Texas, PCR, Refunding, AMT:
BBB Baa2 1,000 (TXU Electric Company Project), Series C, 5.75% due 5/01/2036 950
BBB Baa2 2,870 (Utilities Electric Company), Series B, 5.05% due 6/01/2030 2,748
A A3 2,500 Brazos River, Texas, Harbor Navigation District, Brazoria
County Environmental Revenue Refunding Bonds (Dow Chemical
Company Project), AMT, Series A-7, 6.625% due 5/15/2033 2,592
NR* Baa2 900 Gulf Coast, Texas, IDA, Solid Waste Disposal Revenue Bonds
(Citgo Petroleum Corporation Project), AMT, 7.50% due 5/01/2025 890
BBB Baa2 3,335 Gulf Coast, Texas, Waste Disposal Authority, Revenue
Refunding Bonds (International Paper Company), AMT, Series A,
6.10% due 8/01/2024 3,329
A1+ NR* 100 Harris County, Texas, Health Facilities Development
Corporation, Revenue Refunding Bonds (Methodist Hospital),
VRDN, 1.65% due 12/01/2032 (a) 100
A- Baa1 3,500 Lower Colorado River Authority, Texas, PCR (Samsung Austin
Semiconductor), AMT, 6.375% due 4/01/2027 3,593
BBB Baa2 890 Sabine River Authority, Texas, PCR, Refunding (TXU Electric
Company Project), Series C, 4% due 5/01/2028 877
NR* Baa3 1,740 Texas State Student Housing Corporation, Student Housing
Revenue Bonds (MidWestern State University Project), 6.50%
due 9/01/2022 1,706
====================================================================================================================================
Utah--1.3% NR* NR* 2,240 Carbon County, Utah, Solid Waste Disposal Revenue Refunding
Bonds (Laidlaw Environmental), AMT, Series A, 7.45%
due 7/01/2017 2,208
====================================================================================================================================
Virginia--6.0% NR* NR* 2,500 Dulles Town Center, Virginia, Community Development Authority,
Special Assessment Tax (Dulles Town Center Project), 6.25%
due 3/01/2026 2,523
NR* NR* 3,000 Pittsylvania County, Virginia, IDA, Revenue Refunding Bonds,
Exempt-Facility, AMT, Series A, 7.50% due 1/01/2014 2,993
Pocahontas Parkway Association, Virginia, Toll Road Revenue
Bonds:
NR* Ba1 6,200 First Tier, Sub-Series C, 6.25%** due 8/15/2033 172
NR* Ba1 6,200 First Tier, Sub-Series C, 6.25%** due 8/15/2034 153
BB NR* 32,600 Senior Series B, 5.875%** due 8/15/2025 4,646
====================================================================================================================================
Washington--1.7% NR* NR* 2,600 Port Seattle, Washington, Special Facilities Revenue Bonds
(Northwest Airlines Project), AMT, 7.25% due 4/01/2030 1,912
A A1 1,050 Tobacco Settlement Authority, Washington, Tobacco Settlement
Revenue Bonds, 6.625% due 6/01/2032 1,053
====================================================================================================================================
Wyoming--1.0% BB+ Ba3 1,800 Sweetwater County, Wyoming, Solid Waste Disposal Revenue Bonds
(FMC Corporation Project), AMT, Series A, 7% due 6/01/2024 1,669
====================================================================================================================================
Virgin Islands--1.2% BBB- Baa3 2,100 Virgin Islands Government Refinery Facilities Revenue Bonds
(Hovensa Coker Project), AMT, 6.50% due 7/01/2021 2,119
====================================================================================================================================
Total Municipal Bonds (Cost--$183,774)--98.6%
====================================================================================================================================
Shares
Ratings Held
====================================================================================================================================
Common Stock--0.0% 181 Horizon Natural Resources (b)(c) 2
====================================================================================================================================
Total Common Stock (Cost--$1,995)--0.0%
====================================================================================================================================
Total Investments (Cost--$185,769)--98.6% 170,713
Other Assets Less Liabilities--1.4% 2,495
--------
Net Assets--100.0% $173,208
========
====================================================================================================================================
* Not Rated.
** Represents a zero coupon bond; the interest rate shown reflects the
effective yield at the time of purchase by the Fund.
+ Highest short-term rating by Moody's Investors Service, Inc.
(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, 2002.
(b) Non-income producing security.
(c) Represents entitlement received from a bankruptcy exchange for Peninsula
Ports, 6.90% due 5/22/2022.
See Notes to Financial Statements.
8 & 9
Apex Municipal Fund, Inc., December 31, 2002
STATEMENT OF ASSETS, LIABILITIES AND CAPITAL
As of December 31, 2002
=============================================================================================================================
Assets: Investments, at value (identified cost--$185,769,050) ................ $ 170,713,449
Cash ................................................................. 72,831
Interest receivable .................................................. 3,000,617
Prepaid expenses and other assets .................................... 8,846
-------------
Total assets ......................................................... 173,795,743
-------------
=============================================================================================================================
Liabilities: Payables:
Securities purchased ............................................... $ 399,000
Investment adviser ................................................. 95,182
Dividends to shareholders .......................................... 91,267 585,449
-----------
Accrued expenses ..................................................... 1,801
-------------
Total liabilities .................................................... 587,250
-------------
=============================================================================================================================
Net Assets: Net assets ........................................................... $ 173,208,493
=============
=============================================================================================================================
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 ..................................... 208,769,504
Undistributed investment income--net ................................. $ 1,551,357
Accumulated realized capital losses on investments--net .............. (24,016,440)
Unrealized depreciation on investments--net .......................... (15,055,601)
-----------
Total accumulated losses--net ........................................ (37,520,684)
-------------
Total capital--Equivalent to $8.84 net asset value per share of
Common Stock (market price--$7.95) ................................... $ 173,208,493
=============
=============================================================================================================================
See Notes to Financial Statements.
STATEMENT OF OPERATIONS
For the Six Months Ended December 31, 2002
=============================================================================================================================
Investment Interest ............................................................. $ 6,558,528
Income: Dividends ............................................................ 13
-------------
Total income ......................................................... 6,558,541
-------------
=============================================================================================================================
Expenses: Investment advisory fees ............................................. $ 578,408
Professional fees .................................................... 51,155
Accounting services .................................................. 33,625
Printing and shareholder reports ..................................... 24,408
Transfer agent fees .................................................. 20,030
Directors' fees and expenses ......................................... 19,996
Listing fees ......................................................... 15,610
Pricing fees ......................................................... 7,430
Custodian fees ....................................................... 5,655
Other ................................................................ 4,226
-----------
Total expenses before reimbursement .................................. 760,543
Reimbursement of expenses ............................................ (2)
-----------
Total expenses after reimbursement ................................... 760,541
-------------
Investment income--net ............................................... 5,798,000
-------------
=============================================================================================================================
Realized & Realized gain on investments--net .................................... 514,167
Unrealized Gain (Loss) Change in unrealized depreciation on investments--net ................ (8,792,599)
On Investments--Net: -------------
Total realized and unrealized loss on investments--net ............... (8,278,432)
-------------
Net Decrease in Net Assets Resulting from Operations ................. $ (2,480,432)
=============
=============================================================================================================================
See Notes to Financial Statements.
STATEMENTS OF CHANGES IN NET ASSETS
For the Six For the
Months Ended Year Ended
December 31, June 30,
Increase (Decrease) in Net Assets: 2002 2002
=============================================================================================================================
Operations: Investment income--net ............................................ $ 5,798,000 $ 11,278,629
Realized gain (loss) on investments--net .......................... 514,167 (4,092,274)
Change in unrealized appreciation/depreciation on investments--net (8,792,599) (225,283)
------------- -------------
Net increase (decrease) in net assets resulting from operations ... (2,480,432) 6,961,072
------------- -------------
=============================================================================================================================
Dividends to Investment income--net ............................................ (5,404,211) (11,114,247)
Shareholders: ------------- -------------
Net decrease in net assets resulting from dividends to shareholders (5,404,211) (11,114,247)
------------- -------------
=============================================================================================================================
Net Assets: Total decrease in net assets ...................................... (7,884,643) (4,153,175)
Beginning of period ............................................... 181,093,136 185,246,311
------------- -------------
End of period* .................................................... $ 173,208,493 $ 181,093,136
============= =============
=============================================================================================================================
*Undistributed investment income--net ............................. $ 1,551,357 $ 1,157,568
============= =============
=============================================================================================================================
See Notes to Financial Statements.
10 & 11
Apex Municipal Fund, Inc., December 31, 2002
FINANCIAL HIGHLIGHTS
The following per share data and ratios have
been derived from information provided in the For the Six
financial statements. Months Ended For the Year Ended June 30,
December 31, -----------------------------------------------
Increase (Decrease) in Net Asset Value: 2002 2002 2001 2000 1999
===================================================================================================================================
Per Share Net asset value, beginning of period .......... $ 9.24 $ 9.45 $ 9.33 $ 10.37 $ 10.60
Operating --------- --------- --------- --------- ---------
Performance: Investment income--net ........................ .30++ .58 .59 .66 .63
Realized and unrealized gain (loss) on
investments--net .............................. (.42) (.22) .13 (1.03) (.23)
--------- --------- --------- --------- ---------
Total from investment operations .............. (.12) .36 .72 (.37) .40
--------- --------- --------- --------- ---------
Less dividends from investment income--net .... (.28) (.57) (.60) (.67) (.63)
--------- --------- --------- --------- ---------
Net asset value, end of period ................ $ 8.84 $ 9.24 $ 9.45 $ 9.33 $ 10.37
========= ========= ========= ========= =========
Market price per share, end of period ......... $ 7.95 $ 8.39 $ 9.10 $ 8.9375 $ 10.25
========= ========= ========= ========= =========
===================================================================================================================================
Total Investment Based on market price per share ............... (2.01%) (1.64%) 9.05% (6.22%) 3.68%
Return:** ========= ========= ========= ========= =========
Based on net asset value per share ............ (1.07%)+ 4.31% 8.48% (3.23%) 3.90%
========= ========= ========= ========= =========
===================================================================================================================================
Ratios to Average Expenses net of reimbursement ................. .85%* .87% .82% .81% .81%
Net Assets: ========= ========= ========= ========= =========
Expenses ...................................... .85%* .87% .82% .81% .81%
========= ========= ========= ========= =========
Investment income--net ........................ 6.50%* 6.19% 6.35% 6.71% 5.93%
========= ========= ========= ========= =========
===================================================================================================================================
Supplemental Net assets, end of period (in thousands) ...... $ 173,208 $ 181,093 $ 185,246 $ 182,879 $ 203,198
Data: ========= ========= ========= ========= =========
Portfolio turnover ............................ 10% 25% 17% 20% 40%
========= ========= ========= ========= =========
===================================================================================================================================
* Annualized.
** Total investment returns based on market value, which can be significantly
greater or lesser than the net asset value, may result in substantially
different returns. Total investment returns exclude the effects of sales
charges.
+ Aggregate total investment return.
++ Based on average shares outstanding.
See Notes to Financial Statements.
NOTES TO FINANCIAL STATEMENTS
1. Significant Accounting Policies:
Apex Municipal Fund, Inc. (the "Fund") is registered under the Investment
Company Act of 1940 as a non-diversified, closed-end management investment
company. The Fund's financial statements are prepared in conformity with
accounting principles generally accepted in the United States of America, which
may require the use of management accruals and estimates. 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.
(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 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). 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
investment strategies to increase or decrease the level of risk to which the
Fund is exposed more quickly and efficiently than transactions in other types of
instruments. 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 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.
o 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
12 & 13
Apex Municipal Fund, Inc., December 31, 2002
NOTES TO FINANCIAL STATEMENTS (concluded)
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).
Realized gains and losses on security transactions are determined on the
identified cost basis. Interest income is recognized on the accrual basis.
(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 weekly net assets. For the six
months ended December 31, 2002, FAM reimbursed the Fund in the amount of $2.
For the six months ended December 31, 2002, the Fund reimbursed FAM $1,968 for
certain accounting services.
Certain officers and/or directors of the Fund are officers and/or directors of
FAM, PSI, Merrill Lynch, Pierce, Fenner & Smith Incorporated, and/or ML & Co.
3. Investments:
Purchases and sales of investments, excluding short-term securities, for the six
months ended December 31, 2002 were $23,663,820 and $16,492,833, respectively.
Net realized gains for the six months ended December 31, 2002 and net unrealized
losses as of December 31, 2002 were as follows:
--------------------------------------------------------------------------------
Realized Unrealized
Gains Losses
--------------------------------------------------------------------------------
Long-term investments ............... $ 514,167 $(15,055,601)
------------ ------------
Total ............................... $ 514,167 $(15,055,601)
============ ============
--------------------------------------------------------------------------------
As of December 31, 2002, net unrealized depreciation for Federal income tax
purposes aggregated $14,926,939, of which $5,482,944 related to appreciated
securities and $20,409,883 related to depreciated securities. The aggregate cost
of investments at December 31, 2002 for Federal income tax purposes was
$185,640,388.
4. Common Stock Transactions:
At December 31, 2002, the Fund had one class of shares of Common Stock, par
value $.10 per share, of which 150,000,000 shares were authorized. Shares issued
and outstanding during the six months ended December 31, 2002 and the year ended
June 30, 2002 remained constant.
5. Capital Loss Carryforward:
On June 30, 2002, the Fund had a net capital loss carryforward of $21,453,358,
of which $1,754,099 expires in 2003, $7,056,648 expires in 2004, $1,311,769
expires in 2005, $938,156 expires in 2006, $2,975,000 expires in 2008,
$5,341,699 expires in 2009 and $2,075,987 expires in 2010. This amount will be
available to offset like amounts of any future taxable gains.
6. Subsequent Event:
On January 7, 2003, the Fund's Board of Directors declared a tax exempt income
dividend to Common Stock shareholders in the amount of $.047000 per share,
payable on January 30, 2003 to shareholders of record as of January 16, 2003.
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.
OFFICERS AND DIRECTORS
Terry K. Glenn, President and Director
James H. Bodurtha, Director
Joe Grills, Director
Herbert I. London, Director
Andre F. Perold, Director
Roberta Cooper Ramo, Director
Robert S. Salomon, Jr., Director
Melvin R. Seiden, 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
Stephen M. Benham, Secretary
Custodian & Transfer Agent
The Bank of New York
100 Church Street
New York, NY 10286
NYSE Symbol
APX
--------------------------------------------------------------------------------
Effective January 1, 2003, Melvin R. Seiden, Director of Apex Municipal Fund,
Inc., retired. The Fund's Board of Directors wishes Mr. Seiden well in his
retirement.
--------------------------------------------------------------------------------
14 & 15
[LOGO] Merrill Lynch Investment Managers
[GRAPHICS OMITTED]
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.
Apex Municipal Fund, Inc.
Box 9011
Princeton, NJ
08543-9011
[RECYCLED LOGO] Printed on post-consumer recycled paper #10955--12/02
--------------------------------------------------------------------------------
Item 2 - Did registrant adopt a code of ethics, as of the end of the period
covered by this report, that applies to the registrant's principal
executive officer, principal financial officer, principal accounting
officer or controller, or persons performing similar functions,
regardless of whether these individuals are employed by the registrant
or a third party? If not, why not? Briefly describe any amendments or
waivers that occurred during the period. State here if code of
ethics/amendments/waivers are on website and give website address-.
State here if fund will send code of ethics to shareholders without
charge upon request-- N/A (not answered until July 15, 2003 and only
annually for funds)
Item 3 - Did the registrant's board of directors determine that the registrant
either: (i) has at least one audit committee financial expert serving
on its audit committee; or (ii) does not have an audit committee
financial expert serving on its audit committee? If yes, disclose name
of financial expert and whether he/she is "independent," (fund may, but
is not required, to disclose name/independence of more than one
financial expert). If no, explain why not. -N/A (not answered until
July 15, 2003 and only annually for funds)
Item 4 - Disclose annually only (not answered until December 15, 2003)
(a) Audit Fees - Disclose aggregate fees billed for each of the last two
fiscal years for professional services rendered by the
principal accountant for the audit of the registrant's
annual financial statements or services that are
normally provided by the accountant in connection with
statutory and regulatory filings or engagements for
those fiscal years. N/A.
(b) Audit-Related Fees - Disclose aggregate fees billed in each of the
last two fiscal years for assurance and related
services by the principal accountant that are
reasonably related to the performance of the
audit of the registrant's financial statements
and are not reported under paragraph (a) of this
Item. Registrants shall describe the nature of
the services comprising the fees disclosed under
this category. N/A.
(c) Tax Fees - Disclose aggregate fees billed in each of the last two
fiscal years for professional services rendered by the
principal accountant for tax compliance, tax advice, and
tax planning. Registrants shall describe the nature of the
services comprising the fees disclosed under this category.
N/A.
(d) All Other Fees - Disclose aggregate fees billed in each of the last
two fiscal years for products and services provided
by the principal accountant, other than the services
reported in paragraphs (a) through (c) of this Item.
Registrants shall describe the nature of the
services comprising the fees disclosed under this
category. N/A.
(e)(1) Disclose the audit committee's pre-approval policies and
procedures described in paragraph (c)(7) of Rule 2-01 of
Regulation S-X. N/A.
(e)(2) Disclose the percentage of services described in each of
paragraphs (b) through (d) of this Item that were approved by the
audit committee pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of
Regulation S-X. N/A.
(f) If greater than 50%, disclose the percentage of hours expended on
the principal accountant's engagement to audit the registrant's
financial statements for the most recent fiscal year that were
attributed to work performed by persons other than the principal
accountant's full-time, permanent employees. N/A.
(g) Disclose the aggregate non-audit fees billed by the registrant's
accountant for services rendered to the registrant, and rendered
to the registrant's investment adviser (not including any
sub-adviser whose role is primarily portfolio management and is
subcontracted with or overseen by another investment adviser), and
any entity controlling, controlled by, or under common control
with the adviser that provides ongoing services to the registrant
for each of the last two fiscal years of the registrant. N/A.
(h) Disclose whether the registrant's audit committee has considered
whether the provision of non-audit services that were rendered to
the registrant's investment adviser (not including any subadviser
whose role is primarily portfolio management and is subcontracted
with or overseen by another investment adviser), and any entity
controlling, controlled by, or under common control with the
investment adviser that provides ongoing services to the
registrant that were not pre-approved pursuant to paragraph
(c)(7)(ii) of Rule 2-01 of Regulation S-X is compatible with
maintaining the principal accountant's independence. N/A.
Items 5-6 - Reserved
Item 7 - For closed-end funds that contain voting securities in their portfolio,
describe the policies and procedures that it uses to determine how to
vote proxies relating to those portfolio securities. N/A.
Item 8 -- Reserved
Item 9(a) - Disclose the conclusions of the registrant's principal executive
officer or officers and principal financial officer or officers, or
persons performing similar functions, about the effectiveness of the
registrant's disclosure controls and procedures (as defined in Rule
30a-2(c) under the Act (17 CFR 270.30a-2(c))) based on their
evaluation of these controls and procedures as of a date within 90
days of the filing date of the report that includes the disclosure
required by this paragraph. N/A.
Item 9(b) -- There were no significant changes in the registrant's internal
controls or in other factors that could significantly affect these
controls subsequent to the date of their evaluation, including any
corrective actions with regard to significant deficiencies and
material weaknesses.
Item 10 - Exhibits
10(a) - Attach code of ethics or amendments/waivers, unless code of ethics or
amendments/waivers is on website or offered to shareholders upon request
without charge. N/A.
10(b) - Attach certifications (4 in total pursuant to Sections 302 and 906 for
CEO/CFO). Attached hereto.