.....................
Greenwich Street
Municipal Fund Inc.
.....................
QUARTERLY REPORT
February 28, 1997
<PAGE>
Greenwich Street Municipal
Fund Inc.
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February 28, 1997
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Dear Shareholder:
We are pleased to provide you with the quarterly report for the Greenwich
Street Municipal Inc. ("Fund") for the nine months ended February 28, 1997.
During the past nine months, the Fund distributed income dividends totaling
$0.48 per share and a capital gain dividend of $0.34 per share. The table below
shows the annualized distribution rates and nine-month total return based on the
Fund's February 28, 1997 net asset value (NAV) per share and New York Stock
Exchange (NYSE) closing price:
Annualized Nine-Month
Price Per Share Distribution Rate* Total Return
--------------- ------------------ ------------
$11.72 (NAV) 6.14% 3.13%
$11.625 (NYSE) 6.19% 9.58%
In comparison, closed end municipal bond funds posted an average total
return of 8.05% on NAV for the same time period, as reported by Lipper
Analytical Services, Inc. (Lipper Analytical Services, Inc. is a major fund
tracking organization.) The Fund's underperformance on NAV was primarily due to
the drop in value of certain pulp recycling facility bonds held in the Fund's
portfolio. The decline in the value of these bonds was caused by the decline in
the market price of pulp.
Market Update and Fund Strategy
The year ended February 28, 1997, proved to be a volatile one for both the
municipal and the U.S. government bond markets. In early 1996, a significant
bond market sell-off was precipitated by a pick-up in inflationary fears that
was caused by unexpected strength in the U.S. economy and concerns that the
Federal Reserve Board ("Fed") would tighten rates in response. In retrospect,
those concerns were unfounded because Fed
- -----------------
* This distribution rate assumes monthly dividends at the current rate of
$0.06 per share for twelve months.
- ------------------------------------- 1 ------------------------------------
<PAGE>
monetary policy did not change throughout 1996. In fact, as U.S. economic growth
moderated and concerns about Fed tightening eased, bond prices improved
significantly.
This bond market rally was in full swing in early December when Fed
Chairman Alan Greenspan made his now infamous comments concerning "irrational
exuberance" in the financial markets. In our view, Greenspan's comments caused a
rise in U.S. interest rates that persists to this day.
In the early part of 1996, we were extremely cautious about the municipal
bond market and the Fund's holdings reflected that caution. During that time, we
concentrated on municipal bonds with longer coupons and shorter maturities and
we maintained a moderate cash position, a quite defensive strategy.
However, as the year unfolded and high-grade municipal bonds became
available with yields as high as 6.25%, we redeployed the Fund's cash and moved
to build a more interest-rate sensitive portfolio. Our primary focus was to
purchase high grade, discount coupon bonds with somewhat longer maturities that
could enhance the Fund's performance as rates moved lower. We continue to
maintain that same focus in the Fund today because of our belief that the rise
in rates caused by Greenspan's comments and the concurrent rise in bonds rates
should take a little froth off the economic numbers. This in turn should enable
municipal bonds to rally from today's attractive rate levels.
Fund's Investment Strategy
During the past quarter, the Fund focused on the transportation, utility,
and water and sewer sectors because we believe they offered good relative
values. At the end of February, the Fund's weighted average maturity was 25
years. In addition, as of February 28, 1997, approximately 92% of the Fund's
holdings were rated investment grade by either Standard & Poor's Corporation or
Moody's Investors Services Inc., with 56% of the Fund invested in AAA bonds, the
highest possible rating. (Standard & Poor's and Moody's are two major credit
reporting and bond rating agencies.)
Market Outlook
We believe that low inflation and some moderation of recent economic
activity should be positive for interest rates for the balance of 1997.
Notwithstanding any increase by the Fed in short-term rates, the prices of long
bonds today relative to the rate of inflation bodes well for municipal bonds as
the year progresses. Until we see a significant increase in inflation
fundamentals, we remain positive about the municipal bond market's prospects.
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<PAGE>
In closing, thank you for investing in the Greenwich Street Municipal Fund
Inc. We look forward to continuing to help you achieve your financial goals.
Sincerely,
/s/ Heath B. McLendon /s/ Joseph P. Deane
Heath B. McLendon Joseph P. Deane
Chairman and Vice President and
Chief Executive Officer Investment Officer
April 2, 1997
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Congratulations to Joe Deane -- Morningstar, Inc.'s
Top-Rated Fixed Income Manager of the Year
We are pleased to report that Joe Deane, your Fund's portfolio manager, has
been named the top-rated fixed income manager of 1996 by Morningstar, Inc., a
major fund ranking organization. Joe manages in excess of $3.5 billion of Smith
Barney assets in both open-end and closed-end municipal bond funds. In addition,
the firm recently ran an ad honoring Joe's achievement both nationally and in
select California media.
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<PAGE>
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Schedule of Investments
February 28, 1997 (unaudited)
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Face
Amount Rating Security Value
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- ---------------------------------
Municipal Bonds and Notes --100%
- ---------------------------------
Alabama -- 1.6%
$ 3,750,000 AAA Jefferson County, AL Sewer Revenue,
Series A, FGIC-Insured,
5.375% due 2/1/27 $ 3,567,188
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Alaska -- 4.7%
Valdez, Alaska Marine Terminal Revenue,
BP Pipelines Inc. Project:
10,000,000 AA Series A, 5.850% due 8/1/25 (a) 9,737,500
1,000,000 AA Series C, 5.650% due 12/1/28 958,750
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10,696,250
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California -- 12.0%
4,500,000 AAA Anaheim, CA Public Finance Authority
Lease Revenue, Series A, FSA-Insured,
5.000% due 3/1/37 3,999,375
100,000 VMIG 1* California Health Facilities Financing
Authority Revenue, Sutter Hospital,
Series A, 3.350% due 3/1/20 (b) 100,000
1,500,000 AAA California State Department of Water
Reserve, (Central Valley Project
Revenue), Series Q, MBIA-Insured,
5.375% due 12/1/27 1,438,125
2,000,000 AAA California State GO, FGIC-Insured,
5.375% due 6/1/26 1,932,500
California State Public Works Board Lease
Revenue, AMBAC-Insured:
1,000,000 AAA Department of Corrections, Series A,
5.250% due 1/1/21 946,250
1,000,000 AAA Various California State University
Projects, Series B, 5.375% due 12/1/19 963,750
3,195,000 AAA Los Angeles, CA Wastewater Systems
Revenue, MBIA-Insured,
5.200% due 11/1/21 2,959,369
3,000,000 AAA Los Angeles County, CA Metropolitan
Transportation Authority Revenue,
Sales Tax Revenue, AMBAC-Insured,
5.250% due 7/1/23 2,812,500
See Notes to Financial Statements.
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<PAGE>
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Schedule of Investments
February 28, 1997 (unaudited) (continued)
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Face
Amount Rating Security Value
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California -- 12.0% (continued)
$ 1,000,000 AAA Rancho Cucamonga, CA Redevelopment
Agency Tax Allocation, (Rancho
Redevelopment Project), MBIA-Insured,
5.250% due 9/1/26 $ 941,250
2,000,000 AAA San Diego County, CA COP, North County
Regional Center Expansion, AMBAC-
Insured, 5.250% due 11/15/19 1,920,000
3,000,000 AAA San Francisco, CA City & County Sewer
Revenue, FGIC-Insured,
5.375% due 10/1/22 2,865,000
2,000,000 AAA San Francisco, CA State Building Authority
Lease Revenue, Civic Center, Complex-A,
AMBAC-Insured, 5.250% due 12/1/16 1,925,000
5,000,000 AAA San Jose, CA Redevelopment Agency,
(Merged Area Redevelopment Project),
MBIA-Insured, 5.000% due 8/1/20 4,575,000
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27,378,119
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Colorado -- 6.6%
1,000,000 Aaa* Adams County, CO School District #014,
FSA-Insured, 5.500% due 12/1/16 993,750
2,000,000 Baa* Arapahoe County, CO Capital Improvement,
Highway Revenue, Current Series E,
7.000% due 8/31/26 2,200,000
4,000,000 AA Colorado Springs, CO Utilities Revenue,
Series A, 5.125% due 11/15/23 3,755,000
Denver, CO City & County Airport Revenue,
MBIA-Insured:
3,440,000 AAA Series A, 5.500% due 11/15/25 3,315,300
4,950,000 AAA Series D, 5.000% due 11/15/25 4,770,562
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15,034,612
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District of Columbia -- 1.7%
4,000,000 AAA District of Columbia Revenue, The American
University, AMBAC-Insured,
5.625% due 10/1/26 3,920,000
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Florida -- 6.9%
1,000,000 AAA Broward County, FL Professional Sports
Facility, (Civic Arena Project), Series A,
MBIA-Insured, 5.625% due 9/1/28 992,500
2,000,000 AAA Dade County, FL GO Unlimited Revenue
Bonds, Florida Seaport, MBIA-Insured,
5.125% due 10/1/21 1,882,500
See Notes to Financial Statements.
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<PAGE>
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Schedule of Investments
February 28, 1997 (unaudited) (continued)
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Face
Amount Rating Security Value
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Florida -- 6.9% (continued)
$ 2,000,000 AAA Dade County, FL Water & Sewer Systems
Revenue, FGIC-Insured, 5.250%
due 10/1/26 $ 1,887,500
1,000,000 AAA Escambia County, FL School Board
Certificates, Series 1, MBIA-Insured,
5.500% due 2/1/16 995,000
Florida State Board of Education Capital
Outlay:
1,000,000 AA Public Education, Series A,
5.250% due 6/1/22 943,750
1,500,000 AA Refunded Public Education, Series D,
5.200% due 6/1/23 1,404,375
2,450,000 AA- Lakeland, FL Electric & Water Revenue,
Series B, 5.625% due 10/1/19 2,437,750
3,500,000 BBB- Martin County, FL IDR, (Indiantown
Cogeneration Project),
7.875% due 12/15/25 (a)(c) 4,042,500
1,000,000 A* Martin County, FL Special Assessment
Revenue, 6.100% due 11/1/15 1,027,500
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15,613,375
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Illinois -- 6.9%
2,440,000 AAA Chicago, IL Skyway Toll Bridge Revenue,
MBIA-Insured, 5.500% due 1/1/23 2,354,600
5,595,000 AAA Chicago, IL Water Revenue, FGIC-Insured,
5.000% due 11/1/25 5,042,494
7,000,000 AAA Illinois Health Facilities Authority, Ingalls
Health Systems Project, MBIA-Insured,
6.250% due 5/15/24 7,271,250
1,000,000 AAA Illinois Metropolitan Pier & Exposition
Authority, (McCormick Plan Exposition
Project), Series A, AMBAC-Insured,
5.250% due 6/15/27 931,250
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15,599,594
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Indiana -- 1.2%
2,500,000 AA- Petersburg, IN Industrial PCR, Indianapolis
Power & Light Corp., 6.625% due 12/1/24 2,712,500
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Maryland -- 2.1%
11,000,000 NR Maryland State Energy Financing
Administration, Solid Waste Disposal,
(Hagerstown Revenue Project),
9.000% due 10/15/16 (a)(c) 4,840,000
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See Notes to Financial Statements.
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<PAGE>
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Schedule of Investments
February 28, 1997 (unaudited) (continued)
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Face
Amount Rating Security Value
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Massachusetts -- 4.0%
Massachusetts Bay Transportation Authority,
Series B:
$ 1,500,000 AAA AMBAC-Insured, 5.375% due 3/1/20 $ 1,445,625
2,000,000 AAA FSA-Insured, 5.250% due 3/1/26 1,870,000
10,000,000 NR Massachusetts State Industrial Financing
Agency Revenue, Solid Waste Disposal
Revenue, Massachusetts Recycling
Association, Series A,
9.000% due 8/1/16 (a)(c) 5,000,000
1,000,000 AAA Massachusetts State Water Reserve
Authority, Series C, MBIA-Insured,
5.250% due 12/1/20 941,250
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9,256,875
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Michigan -- 0.9%
2,000,000 NR Midland County, MI EDC, PCR, Limited
Obligation, Series B,
9.500% due 7/23/09 (c) 2,185,000
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Minnesota -- 2.7%
6,185,000 AAA Minnesota State Health & Educational
Facilities Authority, Rental Housing,
Series D, MBIA-Insured,
5.950% due 2/1/18 6,239,119
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New York -- 16.1%
New York City, NY Municipal Water Finance
Authority, Water & Sewer Systems
Revenue, MBIA-Insured:
1,790,000 AAA Series B, 5.375% due 6/15/19 1,713,925
5,000,000 AAA Series F, 5.500% due 6/15/23 4,843,750
New York State Dormitory Authority Revenue:
2,000,000 AAA Barnard College, ABMAC-Insured,
5.250% due 7/1/26 1,892,500
5,000,000 AAA City University System, 3rd Series,
AMBAC-Insured, 5.375% due 7/1/25 4,843,750
1,000,000 AAA Lease Revenue, Health Facilities
Improvement Program, Series A,
FSA-Insured, 5.500% due 5/15/16 993,750
3,000,000 AAA Montefiore Medical Center, AMBAC/
FHA-Insured, 5.250% due 2/1/15 2,895,000
2,000,000 AAA Mount Sinai Medical School, Series A,
MBIA-Insured, 5.000% due 7/1/21 1,822,500
See Notes to Financial Statements.
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<PAGE>
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Schedule of Investments
February 28, 1997 (unaudited) (continued)
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Face
Amount Rating Security Value
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New York -- 16.1% (continued)
New York State Local Government
Assistance Corp.:
$ 4,500,000 A Series A, 5.500% due 4/1/23 $ 4,387,500
7,000,000 A Series C, 5.000% due 4/1/21 6,335,000
4,690,000 Aa* New York State Medical Care Facilities
Finance Agency, (Healthcare Project A),
5.850% due 2/15/33 4,690,000
2,500,000 A+ New York State Triborough Bridge & Tunnel
Authority, NY Revenue, Series A,
5.000% due 1/1/24 2,253,125
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36,670,800
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Oklahoma -- 0.6%
1,250,000 AAA Tulsa, OK Metropolitan Utility Authority,
Utility Revenue, MBIA-Insured,
5.750% due 9/1/25 1,257,813
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Pennsylvania -- 3.8%
5,000,000 AAA Allegheny County, PA Hospital Development
Authority Revenue, Magee-Womens
Hospital, FGIC-Insured,
5.625% due 10/1/20 4,925,000
1,900,000 AAA Beaver County, PA IDA, PCR, (Power Co.
Mansfield Project), Series A, AMBAC-
Insured, 5.450% due 9/15/28 1,797,875
1,000,000 AAA Northeastern, PA Hospital & Education
Authority Health Care Revenue, Wyoming
Valley Health Care, Series A, AMBAC-
Insured, 5.250% due 1/1/26 932,500
1,000,000 AAA Pottstown Boro, PA Sewer Revenue,
AMBAC-Insured, 5.500% due 11/1/16 991,250
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8,646,625
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Texas -- 10.9%
Burleson, TX ISD, PSFG:
725,000 Aaa* 6.750% due 8/1/24 792,969
1,775,000 AAA Pre-Refunded-- Escrowed with U.S.
Government Securities to 8/1/06
Call @ 100, 6.750% due 8/1/24 2,019,063
3,650,000 AAA El Paso, TX ISD, PSFG, 5.900% due 2/15/13 3,768,625
Houston, TX Water & Sewer Systems
Revenue, FGIC-Insured:
2,000,000 AAA Series A, 5.375% due 12/1/27 1,902,500
2,000,000 AAA Series C, 5.375% due 12/1/27 1,902,500
See Notes to Financial Statements.
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<PAGE>
- --------------------------------------------------------------------------------
Schedule of Investments
February 28, 1997 (unaudited) (continued)
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Face
Amount Rating Security Value
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Texas -- 10.9% (continued)
$ 1,250,000 AAA Leander, TX ISD, PSFG,
5.625% due 8/15/17 $ 1,256,250
3,000,000 AAA Texas State Turnpike Authority, Dallas
North Thruway Revenue, President
Bush Turnpike, FGIC-Insured,
5.250% due 1/1/23 2,838,750
9,035,000 AA Texas State Veterans Housing, GO,
Series B-4, 6.700% due 12/1/24 (c) 9,317,343
1,000,000 AA Texas State Water Development,
5.250% due 8/1/28 938,750
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24,736,750
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Utah -- 3.1%
7,700,000 A+ Intermountain Power Agency, Utah Power
Supply Revenue, Series D,
5.000% due 7/1/21 6,997,375
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Virginia -- 5.8%
1,665,000 AAA Loudoun County, VA Sanitation Authority,
Water & Sewer Revenue, FGIC-Insured,
5.250% due 1/1/17 1,592,156
Virginia College Building Authority,
Virginia Educational Facilities Revenue:
1,250,000 A+ Hampton University Project,
5.750% due 4/1/14 1,250,000
3,425,000 AA 21st Century College Program,
5.200% due 8/1/12 3,386,468
Virginia State Housing Development
Authority:
3,760,000 AA+ Series A-1, 6.400% due 7/1/17 3,910,400
1,675,000 AA+ Series D-1, 6.400% due 7/1/17 1,729,438
1,315,000 AA+ Series D-3, 5.800% due 7/1/10 1,333,081
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13,201,543
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Washington -- 3.9%
Washington State Public Power Supply
System, Series B:
5,000,000 AAA Nuclear Project No. 1, MBIA-Insured,
5.600% due 7/1/15 (a) 4,856,250
4,250,000 Aa1* Nuclear Project No. 3,
5.500% due 7/1/18 4,000,312
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8,856,562
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See Notes to Financial Statements.
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<PAGE>
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Schedule of Investments
February 28, 1997 (unaudited) (continued)
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Face
Amount Rating Security Value
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West Virginia -- 2.4%
Marion County, WV Community Solid Waste
Disposal Facilities Revenue, (American
Paper Recycling Project):
$10,000,000 NR 7.750% due 12/1/11(a)(c) $ 5,000,000
1,000,000 NR 9.250% due 12/1/11(a)(c) 500,000
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5,500,000
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Wisconsin -- 1.2%
Wisconsin State Health & Educational
Facilities Authority Revenue,
MBIA-Insured:
2,000,000 AAA Aurora Health Care Obligated,
5.250% due 8/15/23 1,860,000
1,000,000 AAA The Medical College Wisconsin, Inc.
Project, 5.400% due 12/1/16 956,250
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2,816,250
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Wyoming -- 0.9%
2,000,000 AA Wyoming Community Development
Authority Housing Revenue, Series 4,
5.900% due 12/1/14 2,017,500
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TOTAL INVESTMENTS -- 100%
(COST-- $236,867,285**) $227,743,850
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(a) Security segregated by custodian for open purchase commitments.
(b) Variable rate municipal bonds and notes are payable on one business day's
notice.
(c) Income from this issue is considered a preference item for purposes of
calculating the alternative minimum tax.
** Aggregate cost for Federal income tax purposes is substantially the same.
See pages 12 and 13 for definition of ratings and certain security
descriptions.
See Notes to Financial Statements.
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<PAGE>
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Summary of Investments by Combined Ratings
February 28, 1997 (unaudited)
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Standard & Percent of
Moody's and/or Poor's Total Investments
- --------------------------------------------------------------------------------
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Aaa AAA 56.4%
Aa AA 27.5
A A 5.7
Baa BBB 2.7
NR NR 7.7
-----
100.0%
-----
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<PAGE>
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Bond Ratings
- --------------------------------------------------------------------------------
All ratings are by Standard & Poor's Ratings Service ("Standard & Poor's"),
except that those identified by an asterisk (*) are rated by Moody's Investors
Service, Inc. ("Moody's"). The definitions of the applicable rating symbols are
set forth below:
Standard & Poor's -- Ratings from "AA" to "BBB" may be modified by the addition
of a plus (+) or a minus (-) sign to show relative standings within the major
rating categories.
AAA -- Bonds rated "AAA" have the highest rating assigned by Standard & Poor's.
Capacity to pay interest and repay principal is extremely strong.
AA -- Bonds rated "AA" have a very strong capacity to pay interest and repay
principal and differ from the highest rated issue only in a small degree.
A -- Bonds rated "A" have a strong capacity to pay interest and repay
principal although it is somewhat more susceptible to the adverse effects
of changes in circumstances and economic conditions than debt in higher
rated categories.
BBB -- Bonds rated "BBB" are regarded as having an adequate capacity to pay
interest and repay principal. Whereas they normally exhibit adequate
protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay
interest and repay principal for debt in this category than in higher
rated categories.
Moody's-- Numerical modifiers 1, 2, and 3 may be applied to each generic rating
from "Aa" to "Baa," where 1 is the highest and 3 the lowest rating within its
generic category.
Aaa -- Bonds that are rated "Aaa" are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred
to as "gilt edge." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be
visualized are most unlikely to impair the fundamentally strong position
of such issues.
Aa -- Bonds that are rated "Aa" are judged to be of high quality by all
standards. Together with the "Aaa" group they comprise what are generally
known as high grade bonds. They are rated lower than the best bonds
because margins of protection may not be as large as in "Aaa" securities
or fluctuation of protective elements may be of greater amplitude or
there may be other elements present which make the long-term risks appear
somewhat larger than in "Aaa" securities.
A -- Bonds that are rated "A" possess many favorable investment attributes and
are to be considered as upper medium grade obligations. Factors giving
security to principal and interest are considered adequate but elements
may be present which suggest a susceptibility to impairment some time in
the future.
Baa -- Bonds that are rated "Baa" are considered as medium grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest
payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack outstanding
investment characteristics and in fact have speculative characteristics
as well.
NR -- Indicates that the bond is not rated by Standard & Poor's or Moody's.
- ------------------------------------- 12 ------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
Short-Term Securities Ratings
- --------------------------------------------------------------------------------
SP-1 -- Standard & Poor's highest rate rating indicating very strong or strong
capacity to pay principal and interest; those issues determined to
possess overwhelming safety characteristics are denoted with a plus (+)
sign.
A-1 -- Standard & Poor's highest commercial paper and variable-rate demand
obligation (VRDO) rating indicating that the degree of safety regarding
timely payment is either overwhelming or very strong; those issues
determined to possess overwhelming safety characteristics are denoted
with a plus (+) sign.
VMIG 1-- Moody's highest rating for issues having demand feature -- VRDO.
P-1 -- Moody's highest rating for commercial paper and for VRDO prior to the
advent of the VMIG 1 rating.
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Security Descriptions
- --------------------------------------------------------------------------------
ABAG -- Association of Bay Area Governors
AIG -- American International Guaranty
AMBAC -- American Municipal Bond Assurance Corporation
BAN -- Bond Anticipation Notes
BIG -- Bond Investors Guaranty
CDA -- Community Development Administration
CGIC -- Capital Guaranty Insurance Company
CHFCLI -- California Health Facility Construction Loan Insurance
COP -- Certificate of Participation
EDA -- Economic Development Authority
EDC -- Economic Development Corporation
ETM -- Escrowed to Maturity
FAIRS -- Floating Adjustable Interest Rate Securities
FGIC -- Financial Guaranty Insurance Company
FHA -- Federal Housing Administration
FHLMC -- Federal Home Loan Mortgage Corporation
FNMA -- Federal National Mortgage Association
FRTC -- Floating Rate Trust Certificates
FSA -- Federal Savings Association
GIC -- Guaranteed Investment Contract
GNMA -- Government National Mortgage Association
GO -- General Obligation
HDC -- Housing Development Corporation
HFA -- Housing Finance Authority
IDA -- Industrial Development Agency
IDB -- Industrial Development Board
IDR -- Industrial Development Revenue
INFLOS -- Inverse Floaters
ISD -- Independent School District
LOC -- Letter of Credit
MBIA -- Municipal Bond Investors Assurance Corporation
MVRICS -- Municipal Variable Rate Inverse Coupon Security
PCR -- Pollution Control Revenue
PSFG -- Permanent School Fund Guaranty
RAN -- Revenue Anticipation Notes
RIBS -- Residual Interest Bonds
RITES -- Residual Interest Tax-Exempt Securities
SYCC -- Structured Yield Curve Certificate
TAN -- Tax Anticipation Notes
TECP -- Tax Exempt Commercial Paper
TOB -- Tender Option Bonds
TRAN -- Tax and Revenue Anticipation Notes
VA -- Veterans Administration
VRDD -- Variable Rate Daily Demand
VRWE -- Variable Rate Wednesday Demand
- ------------------------------------- 13 ------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
Statement of Assets and Liabilities
(unaudited)
- --------------------------------------------------------------------------------
February 28, 1997
- --------------------------------------------------------------------------------
ASSETS:
Investments, at value (Cost -- $236,867,285) 227,743,850
Cash 44,147
Interest receivable 3,517,436
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Total Assets 231,305,433
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LIABILITIES:
Payable for securities purchased 984,487
Dividends payable 592,256
Investment advisory fees payable 162,617
Accrued expenses 115,975
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Total Liabilities 1,855,335
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Total Net Assets $229,450,098
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NET ASSETS:
Par value of capital shares $ 19,585
Capital paid in excess of par value 234,387,429
Undistributed net investment income 1,980,944
Accumulated net realized gain from security transactions 2,185,575
Net unrealized depreciation of investments (9,123,435)
- --------------------------------------------------------------------------------
Total Net Assets
(Equivalent to $11.72 a share on 19,584,674 shares of
$0.001 par value outstanding; 500,000,000 shares authorized) $229,450,098
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
- ------------------------------------- 14 ------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
Statement of Operations
(unaudited)
- --------------------------------------------------------------------------------
Nine Months
Ended
2/28/97
- --------------------------------------------------------------------------------
INVESTMENT INCOME:
Interest $ 11,557,121
- --------------------------------------------------------------------------------
EXPENSES:
Investment advisory fees (Note 3) 1,593,079
Shareholder communications 89,509
Audit and legal 45,798
Shareholder and system servicing fees 29,542
Directors' fees 27,029
Registration fees 14,634
Custody 9,323
Pricing service fees 7,418
Other 5,201
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Total Expenses 1,821,533
- --------------------------------------------------------------------------------
Net Investment Income 9,735,588
- --------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS (NOTE 4):
Realized Gain From Security Transactions
(excluding short-term securities):
Proceeds from sales 208,050,863
Cost of securities sold 203,074,011
- --------------------------------------------------------------------------------
Net Realized Gain 4,976,852
- --------------------------------------------------------------------------------
Change in Net Unrealized Depreciation
of Investments:
Beginning of period (1,125,861)
End of period (9,123,435)
- --------------------------------------------------------------------------------
Increase in Net Unrealized Depreciation (7,997,574)
- --------------------------------------------------------------------------------
Net Loss on Investments (3,020,722)
- --------------------------------------------------------------------------------
Increase in Net Assets From Operations $ 6,714,866
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
- ------------------------------------- 15 ------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
Nine Months
Ended Year
2/28/97 Ended
(unaudited) 5/31/96
- --------------------------------------------------------------------------------
OPERATIONS:
Net investment income $ 9,735,588 $ 12,860,049
Net realized gain 4,976,852 5,005,387
Increase in net unrealized depreciation (7,997,574) (13,167,657)
- --------------------------------------------------------------------------------
Increase in Net Assets From Operations 6,714,866 4,697,779
- --------------------------------------------------------------------------------
DISTRIBUTIONS TO
SHAREHOLDERS FROM (NOTE 2):
Net investment income (9,389,580) (12,908,597)
Net realized gains (6,649,833) (4,540,862)
- --------------------------------------------------------------------------------
Decrease in Net Assets From
Distributions to Shareholders (16,039,413) (17,449,459)
- --------------------------------------------------------------------------------
FUND SHARE TRANSACTIONS (NOTE 5):
Net asset value of shares issued
for reinvestment of dividends 306,863 --
- --------------------------------------------------------------------------------
Increase in Net Assets From
Fund Share Transactions 306,863 --
- --------------------------------------------------------------------------------
Decrease in Net Assets (9,017,684) (12,751,680)
NET ASSETS:
Beginning of period 238,467,782 251,219,462
- --------------------------------------------------------------------------------
End of period* $229,450,098 $238,467,782
- --------------------------------------------------------------------------------
* Includes undistributed net investment income of: $1,980,944 $1,634,936
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
- ------------------------------------- 16 ------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements
(unaudited)
- --------------------------------------------------------------------------------
1. Significant Accounting Policies
Greenwich Street Municipal Fund Inc. ("Fund"), a Maryland corporation, is
registered under the Investment Company Act of 1940, as amended, as a
non-diversified, closed-end management investment company.
The significant accounting policies consistently followed by the Fund are:
(a) security transactions are accounted for on trade date; (b) securities are
valued at the mean between bid and ask prices provided by an independent pricing
service that are based on transactions in municipal obligations, quotations from
municipal bond dealers, market transactions in comparable securities and various
relationships between securities; (c) securities maturing within 60 days are
valued at cost plus accreted discount, or minus amortized premium, which
approximates value; (d) gains or losses on the sale of securities are calculated
by using the specific identification method; (e) interest income, adjusted for
amortization of premium and accretion of original issue discount, is recorded on
the accrual basis; market discount is recognized upon the disposition of the
security; (f) dividends and distributions to shareholders are recorded on the
ex-dividend date; (g) the Fund intends to comply with the applicable provisions
of the Internal Revenue Code of 1986, as amended, pertaining to regulated
investment companies and to make distributions of taxable income sufficient to
relieve it from substantially all Federal income and excise taxes; (h) certain
prior years amounts have been restated to reflect current year's presentation.
Net investment income, realized gains, and net assets were not affected by this
change; and (i) estimates and assumptions are required to be made regarding
assets, liabilities and changes in net assets resulting from operations when
financial statements are prepared. Changes in the economic environment,
financial markets and any other parameters used in determining these estimates
could cause actual results to differ.
2. Dividends, Exempt-Interest Dividends and Other Distributions
The Fund intends to satisfy conditions that will enable interest from
municipal securities, which is exempt from regular Federal income tax and from
designated state income taxes, to retain such tax-exempt status when distributed
to the shareholders of the Fund.
Capital gain distributions, if any, are taxable to shareholders, and are
declared and paid at least annually.
- ------------------------------------- 17 ------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements
(unaudited) (continued)
- --------------------------------------------------------------------------------
3. Investment Advisory Agreement and Other Transactions
Smith Barney Mutual Funds Management Inc. ("SBMFM"), a subsidiary of Smith
Barney Holdings Inc. ("SBH"), through its Greenwich Street Advisors division,
acts as investment adviser to the Fund. The Fund pays SBMFM an advisory fee
calculated at an annual rate of 0.90% of the Fund's average daily net assets.
This fee is calculated daily and paid monthly.
All officers and one Director of the Fund are employees of Smith Barney
Inc.
4. Securities Transactions
For the nine months ended February 28, 1997, the aggregate cost of
purchases and proceeds from sales of investments (including maturities but
excluding short-term securities) were as follows:
- --------------------------------------------------------------------------------
Purchases $208,004,701
- --------------------------------------------------------------------------------
Sales 208,050,863
- --------------------------------------------------------------------------------
At February 28, 1997, the aggregate gross unrealized appreciation and
depreciation of investments were as follows:
- --------------------------------------------------------------------------------
Gross unrealized appreciation $ 7,653,610 *
Gross unrealized depreciation (16,777,045)*
- --------------------------------------------------------------------------------
Net unrealized depreciation $(9,123,435)*
- --------------------------------------------------------------------------------
* Substantially the same for Federal income tax purposes.
5. Capital Shares
During the year ended February 28, 1997, capital stock transactions were as
follows:
Shares Amount
- --------------------------------------------------------------------------------
Shares issued on reinvestment 26,340 $306,863
- --------------------------------------------------------------------------------
- ------------------------------------- 18 ------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
For a share of capital stock outstanding throughout each period:
1997(1) 1996 1995(2)
- --------------------------------------------------------------------------------
Net Asset Value, Beginning of Period $12.19 $12.84 $12.00
- --------------------------------------------------------------------------------
Income From Operations:
Net investment income 0.50 0.66 0.63
Net realized and unrealized gain (loss) (0.15) (0.42) 0.77
- --------------------------------------------------------------------------------
Total Income From Operations 0.35 0.24 1.40
- --------------------------------------------------------------------------------
Offering Costs Charged to Paid-In Capital -- -- (0.02)
- --------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.48) (0.66) (0.54)
Net realized gains (0.34) (0.23) --
- --------------------------------------------------------------------------------
Total Distributions (0.82) (0.89) (0.54)
- --------------------------------------------------------------------------------
Net Asset Value, End of Period $11.72 $12.19 $12.84
- --------------------------------------------------------------------------------
Total Return, Based on Market Value 9.58%++ (4.10)% 1.65%++
- --------------------------------------------------------------------------------
Total Return, Based on Net Asset Value 3.13%++ 2.39% 12.28%++
- --------------------------------------------------------------------------------
Net Assets, End of Period (000s) $229,450 $238,468 $251,219
- --------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses 1.03%+ 1.06% 1.05%+
Net investment income 5.50+ 5.17 5.63+
- --------------------------------------------------------------------------------
Portfolio Turnover Rate 87% 42% 115%
- --------------------------------------------------------------------------------
Market Value, End of Period $11.625 $11.375 $11.625
- --------------------------------------------------------------------------------
(1) For the nine months ended February 28, 1997 (unaudited).
(2) For the period from June 24, 1994 (commencement of operations) to May 31,
1995.
++ Total return is not annualized, as it may not be representative of the
total return for the year.
+ Annualized.
- ------------------------------------- 19 ------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
Quarterly Results of Operations
(unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Net Realized Net Increase
and Unrealized (Decrease) in
Investment Net Investment Gain (Loss) on Net Assets From
Income Income Investments Operations
- -------------------------------------------------------------------------------------------
Quarter Per Per Per Per
Ended Total Share Total Share Total Share Total Share
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
8/31/94* $2,522,206 $0.13 $2,049,342 $0.11 $ 4,076,999 $0.20 $ 6,126,341 $0.31
11/30/94 3,946,853 0.20 3,334,708 0.17 (22,644,150) (1.16) (19,309,442) (0.99)
2/28/95 3,990,277 0.20 3,363,082 0.17 24,095,398 1.23 27,458,480 1.40
5/31/95 4,061,565 0.21 3,497,852 0.18 9,687,147 0.50 13,184,999 0.68
8/31/95 3,871,127 0.20 3,186,132 0.16 (3,092,160) (0.16) 93,972 0.01
11/30/95 3,890,364 0.20 3,202,189 0.16 8,514,682 0.44 11,716,871 0.60
2/29/96 3,877,668 0.20 3,181,364 0.16 (2,239,170) (0.11) 942,194 0.04
5/31/96 3,852,531 0.19 3,290,364 0.18 (11,345,622) (0.59) (8,055,258) (0.41)
8/31/96 3,940,034 0.20 3,319,852 0.17 (3,899,664) (0.20) (579,812) (0.03)
11/30/96 3,836,212 0.20 3,226,504 0.17 8,809,662 0.45 12,036,166 0.62
2/28/97 3,780,875 0.19 3,189,232 0.16 (7,930,720) (0.40) (4,741,488) (0.24)
- -------------------------------------------------------------------------------------------
</TABLE>
*For the period from June 24, 1994 (commencement of operations) to August 31,
1994.
- ------------------------------------- 20 ------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
Financial Data
(unaudited)
- --------------------------------------------------------------------------------
For a share of capital stock outstanding throughout each period:
NYSE Dividend
Record Payable Closing Net Asset Dividend Reinvestment
Date Date Price* Value* Paid Price
- --------------------------------------------------------------------------------
9/23/94 9/30/94 $11.250 $11.93 $0.06 $11.50
10/24/94 10/31/94 11.125 11.63 0.06 10.91
11/22/94 11/30/94 10.375 10.81 0.06 10.57
12/22/94 12/30/94 10.250 11.33 0.06 10.47
1/24/95 1/31/95 10.938 11.63 0.06 10.81
2/21/95 2/28/95 11.500 12.19 0.06 11.11
3/24/95 3/31/95 11.375 12.40 0.06 11.38
4/21/95 4/28/95 11.438 12.57 0.06 11.47
5/23/95 5/31/95 11.438 12.72 0.06 11.69
6/23/95 6/30/95 11.375 12.71 0.06 11.62
7/25/95 7/28/95 11.563 12.53 0.06 11.48
8/22/95 8/25/95 11.375 12.86 0.06 11.52
9/26/95 9/29/95 11.500 12.62 0.06 11.20
10/24/95 10/27/95 11.500 12.84 0.06 11.58
11/20/95 11/24/95 11.750 12.95 0.06 11.64
12/26/95+ 12/29/95 11.875 12.99 0.23 12.10
1/23/96 1/26/96 11.875 12.92 0.06 12.12
2/20/96 2/23/96 12.000 12.86 0.06 12.30
3/26/96 3/29/96 11.375 12.55 0.06 11.54
4/23/96 4/26/96 11.438 12.32 0.06 11.42
5/28/96 5/31/96 11.375 12.35 0.06 11.43
6/25/96 6/28/96 11.250 12.10 0.06 11.54
7/23/96 7/26/96 11.375 12.06 0.06 11.58
8/27/96 8/30/96 11.625 12.10 0.06 11.70
9/24/96 9/27/96 11.688 12.08 0.06 11.71
10/22/96 10/25/96 11.688 12.18 0.06 11.75
11/25/96 11/29/96 11.625 12.35 0.06 11.59
12/23/96+ 12/27/96 11.250 11.99 0.34 11.56
1/28/97 1/31/97 11.563 11.65 0.06 11.53
2/25/97 2/28/97 11.750 11.80 0.06 11.66
- --------------------------------------------------------------------------------
* As of record date.
+ Capital gain distribution.
- ------------------------------------- 21 ------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
Additional Shareholder Information
(unaudited)
- --------------------------------------------------------------------------------
On September 12, 1996, the annual meeting of the shareholders of the Fund
was held for the purpose of voting on the following matters:
1. To approve or disapprove for the Fund, the election of Charles F.
Barber, Allan J. Bloostein, Martin Brody, Dwight B. Crane, Robert A.
Frankel, William R. Hutchinson and Heath B. McLendon as Directors; and
2. To approve or disapprove the selection of KPMG Peat Marwick LLP as the
independent auditors for the current fiscal year of the Fund.
The results of the vote on Proposal 1 were as follows:
% of Voted % of
Directors Voted For Shares Voted Against Shares Voted
- --------------------------------------------------------------------------------
Charles F. Barber 18,930,436.630 98.790% 231,841.658 1.210%
Allan J. Bloostein 18,984,028.060 99.070 178,250.236 0.930
Martin Brody 18,952,481.010 98.905 209,797.284 1.095
Dwight B. Crane 18,981,520.060 99.057 180,758.236 0.943
Robert A. Frankel 18,983,925.060 99.069 178,353.240 0.931
William R. Hutchinson 18,964,589.420 98.968 197,688.877 1.032
Heath B. McLendon 18,982,160.060 99.060 180,118.236 0.940
- --------------------------------------------------------------------------------
The results of the vote on Proposal 2 were as follows:
% of Votes % of Votes % of
Votes For Shares Votes Against Shares Votes Abstained Shares Voted
- --------------------------------------------------------------------------------
18,909,894.930 98.683% 63,320.112 0.330% 189,063.248 0.987%
- --------------------------------------------------------------------------------
- ------------------------------------- 22 ------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
Dividend Reinvestment Plan
(unaudited)
- --------------------------------------------------------------------------------
Under the Fund's Dividend Reinvestment Plan (the "Plan"), a shareholder
whose Common Stock is registered in his own name will have all distributions
reinvested automatically by First Data Investor Services Group, Inc. ("First
Data") as agent under the Plan, unless the shareholder elects to receive cash.
Distributions with respect to shares registered in the name of a broker-dealer
or other nominee (that is, in "street name") will be reinvested by the broker or
nominee in additional Common Stock under the Plan, but only if the service is
provided by the broker or nominee, and the broker or nominee makes an election
on behalf of the shareholder to participate in the Plan. Distributions with
respect to Common Stock registered in the name of Smith Barney will
automatically be reinvested by Smith Barney in additional shares under the Plan
unless the shareholder elects to receive distributions in cash. A shareholder
who holds Common Stock registered in the name of a broker or other nominee may
not be able to transfer the Common Stock to another broker or nominee and
continue to participate in the Plan. Investors who own Common Stock registered
in street name should consult their broker or nominee for details regarding
reinvestment.
The number of shares of Common Stock distributed to participants in the
Plan in lieu of a cash dividend is determined in the following manner. Whenever
the market price of the Fund's Common Stock is equal to or exceeds the net asset
value per share, participants will be issued shares of Common Stock valued at
the greater (i) net asset value per share or (ii) 95% of the then current market
price. If the net asset value per share of Common Stock at the time of valuation
exceeds the market price of the Common Stock, First Data will buy shares of the
Fund's Common Stock on the open market, on the New York Stock Exchange, Inc. or
elsewhere, as soon as practicable after the record date of the dividend or
distribution, until it has expended for such purchases all of the cash that
would otherwise be payable to the participants.
First Data may commence purchasing shares beginning on the record date for
the dividend or distribution. The number of purchased shares that will then be
credited to the participants' accounts will be based on the average per share
purchase price of the shares so purchased, including brokerage commissions. If
First Data commences purchases in the open market and the market price of the
shares subsequently exceeds net asset value before the completion of the
purchases, First Data will attempt to terminate purchases in the open market and
cause the Fund to issue the remaining dividend or distribution in shares at net
asset value per share. In
- ------------------------------------- 23 ------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
Dividend Reinvestment Plan
(unaudited) (continued)
- --------------------------------------------------------------------------------
this case, the number of shares of Common Stock received by the participant will
be based on the weighted average of prices paid for shares purchased in the open
market and the price at which the Fund issues the remaining shares.
Plan participants are not subject to any charge for reinvesting dividends
or capital gains distributions. Each Plan participant will, however, bear a
proportionate share of brokerage commissions incurred with respect to First
Data's open market purchases of shares of Common Stock in connection with
reinvestment of dividends or capital gains distributions.
A participant in the Plan will be treated for Federal income tax purposes
as having received, on the dividend payment date, a dividend or distribution in
an amount equal to the cash that the participant could have received instead of
shares of Common Stock.
A shareholder may terminate participation in the Plan at any time by
notifying First Data in writing. A termination will be effective immediately if
notice is received by First Data not less than 10 days before any dividend or
distribution record date. Otherwise, the termination will be effective, and only
with respect to any subsequent dividends or distributions, on the first trading
day after the dividend or distribution has been credited to the participant's
account in additional shares of Common Stock of the Fund. Upon termination
according to a participant's instructions, First Data will either (a) issue
certificates for the whole shares credited to a Plan account and a check
representing any fractional shares or (b) sell the shares in the market. There
will be $5.00 fee assessed for liquidation service, plus brokerage commissions,
and First Data is authorized to sell a sufficient number of a participant's
shares to cover such amounts.
Information concerning the Plan may be obtained from First Data at (800)
331-1710.
- --------------------------------------------------------------------------------
Additional Information
(unaudited)
- --------------------------------------------------------------------------------
Notice is hereby given in accordance with Section 23(c) of the Investment
Company Act of 1940, as amended, that from time to time the Fund may purchase
shares of its common stock in the open market.
- ------------------------------------- 24 ------------------------------------
<PAGE>
Greenwich Street Municipal
Fund Inc.
Directors
Charles F. Barber
Allan J. Bloostein
Martin Brody
Dwight B. Crane
Robert A. Frankel
William R. Hutchinson
Heath B. McLendon, Chairman
Officers
Heath B. McLendon
Chief Executive Officer
Jessica M. Bibliowicz
President
Lewis E. Daidone
Senior Vice President
and Treasurer
Joseph P. Deane
Vice President and
Investment Officer
David Fare
Investment Officer
Thomas M. Reynolds
Controller
Christina T. Sydor
Secretary
Investment Adviser
Smith Barney Mutual Funds
Management Inc.
388 Greenwich Street
New York, New York 10013
Transfer Agent
First Data Investor Services
Group, Inc.
P.O. Box 1376
Boston, Massachusetts 02104
Custodian
PNC Bank, N.A.
17th and Chestnut Streets
Philadelphia, Pennsylvania 19103
<PAGE>
This report is to the shareholders of
Greenwich Street Municipal Fund Inc.
for their information. It is not a Prospectus,
circular or representation intended for use in the
purchase or sale of the Fund or any
securities mentioned in the report.
FD01109 4/97