-------------------------------------
GREENWICH STREET
MUNICIPAL FUND INC.
-------------------------------------
[GRAPHIC OMITTED]
QUARTERLY REPORT
August 31, 1998
<PAGE>
Greenwich Street Municipal
Fund Inc.
- --------------------------------------------------------------------------------
August 31, 1998
- --------------------------------------------------------------------------------
Dear Shareholder:
We are pleased to provide the first quarter report for the Greenwich
Street Municipal Fund Inc. ("Fund") for the three months ended August 31, 1998.
During the past three months, the Fund distributed income dividends totaling
$0.14 per share. The table below shows the annualized distribution rate and
three-month total return based on the Fund's August 31, 1998 net asset value
("NAV") per share and its New York Stock Exchange ("NYSE") closing price:
Price Annualized Three-Month
Per Share Distribution Rate* Total Return
--------- ------------------ ------------
$11.86 (NAV) 4.65% 2.04%
$10.25(NYSE) 5.39% (0.49)%
In comparison, closed-end municipal bond funds posted an average total
return of a negative 2.37% for the same time period, as reported by Lipper
Analytical Services, Inc. (Lipper is a major fund-tracking organization.)
In an attempt to reduce the difference between the market price and the
Fund's NAV, the Fund's investment adviser, Mutual Management Corp., instituted a
voluntary waiver of a portion of its investment advisory fee commencing on
September 1, 1998. This waiver is a temporary measure, which may be discontinued
at any time without notice. This waiver has the effect of increasing the Fund's
dividend yield.
Market Update and Portfolio Strategy
The municipal bond market has been in a positive state for quite a while
now. Recent events in Asia and Russia have accelerated the flow of investments
into U.S. government bonds. These factors have created a very positive interest
rate backdrop for the tax-exempt market, with investment
- ----------
* This distribution rate assumes a current monthly income dividend rate of
$0.046 per share for twelve months.
1
<PAGE>
flows into the U.S., very modest inflation and a potential slowing of the U.S.
economy due to the economic slowdown of several foreign trading partners. This
is the lowest long-term interest rate we have seen since the 1960's.
The rates for municipal bonds have also moved lower, but not to the same
degree as U.S. government bonds. Municipal bonds don't benefit from foreign
money flows, because the benefits of tax-exemption are only valuable to U.S.
taxpayers.
The new issue supply of municipal bonds in 1998 has been quite heavy. The
municipal bond market is on pace to surpass the record volume underwritten in
1993. These two factors - pressure toward lower rates and heavy municipal bond
issuance - have led to a market that we believe is very attractively priced
versus taxable bonds, and has led to a flatter yield curve than we've seen it in
many years. (A flat yield curve is when there is little difference between
short- and long-term yields.) The difference in yields between intermediate
municipal bonds maturity and very long-term bonds is minimal. In our view, the
yield differential between very high-grade paper and much weaker credits has
never been lower. Because of this narrow difference in yields, we believe that
investors are not being adequately compensated for the added risk of investing
in longer-maturity issues.
Fund's Investment Strategy
During the past three months, the Greenwich Street Municipal Fund Inc.
focused on hospital bonds (18.7%), general obligation bonds (13.9%) and utility
bonds (13.1%) because we believe they offered good relative values. At the end
of August, the Fund's weighted average maturity was approximately 22 years. In
addition, as of August 31, 1998, approximately 89% of the Fund's holdings were
rated investment grade**, with just over 53% of the Fund invested in AAA bonds,
the highest possible rating.
Recently, we have avoided very long-term debt and lower-rated issues. We
have been concentrating our purchases in very high-grade bonds with maturities
between 12 and 20 years. Our coupon structure has also become somewhat higher.
Quite simply, at today's record low interest rates, we are taking a more
conservative approach to the market. Our experience indicates conditions are
near perfect for bonds at the moment and prudence suggests we take advantage of
these conditions.
- ----------
** Investment-grade bonds are those rated Aaa, Aa, A and Baa by Moody's
Investors Service, Inc. or AAA, AA, A and BBB by Standard & Poor's Ratings
Services, or have an equivalent rating by any other nationally recognized
statistical rating organization, or determined by the manager to be of
equivalent quality.
2
<PAGE>
Municipal Bond Market Outlook
Our outlook for the municipal bond market for the next six months carries
a caveat. If economic conditions around the world do not get much worse, then
interest rates have fallen to levels that seem appropriate. If things continue
to deteriorate beyond today's levels, then there could be more downward pressure
on interest rates in the U.S. We will be monitoring these events very closely
for our shareholders.
In closing, thank you for investing in the Greenwich Street Municipals
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 Vice President and
Investment Officer
September 15, 1998
3
<PAGE>
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Take Advantage of the Fund's Dividend Reinvestment Plan!
Did you know that Fund investors who reinvest their dividends are taking
advantage of one of the most effective wealth-building tools available today?
Systematic investments put time to work for you through the strength of
compounding.
As an investor in the Fund, you can participate in its Dividend Reinvestment
Plan ("Plan"), a convenient, simple and efficient way to reinvest your dividends
and capital gains, if any, in additional shares of the Fund. The Fund's complete
Plan begins on page 25. Below is a short summary of how the Plan works.
Plan Summary
If you are a Plan participant who has not elected to receive your dividends in
the form of a cash payment, then your dividend and capital gain distributions
will be reinvested automatically in additional shares of the Fund.
The number of common stock shares in the Fund you will receive in lieu of a cash
dividend is determined in the following manner. If the market price of the
common stock is equal to or exceeds the net asset value ("NAV") per share on the
date of valuation, you will be issued shares for the equivalent of the most
recently determined NAV per share or 95% of the market price, whichever is
greater.
If the NAV per share at the time of valuation is greater than the market price
of the common stock, or if the Fund declares a dividend or capital gains
distribution payable only in cash, the Fund will buy common stock for your
account in the open market or on the New York Stock Exchange.
If the Fund begins to purchase additional shares in the open market and the
market price of the shares subsequently rises above the NAV before the purchases
are completed, the Fund will attempt to cancel any remaining orders and issue
the remaining dividend or distribution in shares at the Fund's NAV per share. In
that case, the number of Fund shares you receive 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.
To find out more detailed information about the Plan and about how you can
participate, please call First Data Investors Services Group at (800) 331-1710.
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4
<PAGE>
- --------------------------------------------------------------------------------
Schedule of Investments
August 31, 1998 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Face
Amount Ratings Security Value
==================================================================================
- -----------------------------------
MUNICIPAL BONDS AND NOTES -- 100.0%
- -----------------------------------
<S> <C> <C> <C>
Alabama -- 0.5%
$1,200,000 A-1 Columbia, AL IDB, PCR,
(Alabama Power Co. Project), Series E,
3.650% due 10/1/22 $ 1,200,000
- ----------------------------------------------------------------------------------
Alaska -- 0.2%
350,000 A-1+ Valdez, AK Marine Terminal Revenue,
(Exxon Pipeline Co. Project), Series B,
3.650% due 12/1/33 350,000
- ----------------------------------------------------------------------------------
Arizona -- 0.5%
1,200,000 A-1+ Maricopa County, AZ PCR,
(Arizona Public Service Co.), Series A,
3.200% due 5/1/29 1,200,000
- ----------------------------------------------------------------------------------
California -- 9.1%
3,000,000 Baa3* California Educational Facilities Authority
Revenue, (Pooled College & University
Projects), Series A, 5.625% due 7/1/23 3,101,250
2,000,000 AAA California Health Facilities Finance
Authority Revenue, Kaiser Permanente,
Series A, FSA-Insured, 5.500% due 6/1/22 2,097,500
1,000,000 AAA California State Public Works Board Lease
Revenue, Department of Corrections,
Series A, AMBAC-Insured, 5.250%
due 1/1/21 1,015,000
1,980,000 AAA California State University, Headquarters
Building Authority, Series B,
MBIA-Insured, 5.125% due 9/1/17 2,009,700
8,530,000 AAA Los Angeles County, CA Metropolitan
Transportation Authority Revenue, Sales
Tax Revenue, Series A, MBIA-Insured,
5.250% due 7/1/19 8,689,937
1,380,000 AAA Los Angeles County, CA Public Works
Financing Authority Revenue, Series A,
Lease Revenue, (Multiple Capital
Facilities Project), AMBAC-Insured,
5.125% due 6/1/17 1,397,250
</TABLE>
See Notes to Financial Statements.
5
<PAGE>
- --------------------------------------------------------------------------------
Schedule of Investments
August 31, 1998 (unaudited) (continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Face
Amount Ratings Security Value
==================================================================================
<S> <C> <C> <C>
California -- 9.1% (continued)
$1,000,000 AAA Rancho Cucamonga, CA Redevelopment
Agency Tax Allocation, (Rancho
Redevelopment Project), MBIA-Insured,
5.250% due 9/1/26 $ 1,015,000
2,000,000 AAA San Diego County, CA COP, North County
Regional Center Expansion,
AMBAC-Insured, 5.250% due 11/15/19 2,040,000
- ----------------------------------------------------------------------------------
21,365,637
- ----------------------------------------------------------------------------------
Colorado -- 2.8%
2,000,000 Aaa* Arapahoe County, CO Capital Improvement,
Highway Revenue, Current Series E,
(Pre-Refunded-- Escrowed with U.S.
government securities to 8/31/05
Call @ 103), 7.000% due 8/31/26(a) 2,395,000
2,000,000 A Colorado Health Facilities Authority
Revenue, Series B, 5.350% due 8/1/15 2,037,500
2,000,000 AAA E-470 Public Highway Authority
Revenue, Series A, MBIA-Insured,
5.000% due 9/1/15 2,020,000
- ----------------------------------------------------------------------------------
6,452,500
- ----------------------------------------------------------------------------------
Florida -- 3.9%
1,000,000 AAA Bay County, FL Water System Revenue,
MBIA-Insured, 5.125% due 9/1/22 1,010,000
2,000,000 AAA Dade County, FL GO, Unlimited Revenue
Bonds, Florida Seaport, MBIA-Insured,
5.125% due 10/1/21 2,017,500
1,000,000 AAA Florida State Turnpike Authority Revenue,
Department of Transportation, Series A,
FGIC-Insured, 5.000% due 7/1/16 1,008,750
3,500,000 BBB- Martin County, FL IDR, (Indiantown
Cogeneration Project), Series A,
7.875% due 12/15/25(a)(b) 4,086,250
1,000,000 A2* Martin County, FL Special Assessment
Revenue, 6.100% due 11/1/15 1,086,250
- ----------------------------------------------------------------------------------
9,208,750
- ----------------------------------------------------------------------------------
Hawaii -- 1.1%
2,540,000 AAA Hawaii State GO, Series CP, FGIC-Insured,
5.000% due 10/1/16 2,549,525
- ----------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
6
<PAGE>
- --------------------------------------------------------------------------------
Schedule of Investments
August 31, 1998 (unaudited) (continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Face
Amount Ratings Security Value
==================================================================================
<S> <C> <C> <C>
Illinois -- 4.9%
Illinois Health Facilities Authority,
MBIA-Insured:
$ 7,000,000 AAA Ingalls Health Systems Project,
6.250% due 5/15/24 $ 7,551,250
1,000,000 AAA Memorial Health Systems,
5.250% due 10/1/18 1,018,750
3,000,000 AAA Illinois State GO, FGIC-Insured,
5.250% due 12/1/20 3,052,500
- ----------------------------------------------------------------------------------
11,622,500
- ----------------------------------------------------------------------------------
Indiana -- 2.5%
2,000,000 AAA Avon, IN Community School Building Corp.,
First Mortgage, AMBAC-Insured, 5.250%
due 1/1/22 2,032,500
1,100,000 A-1 Jasper County, IN PCR,
(Nothern Indiana Public Service),
Series A, 3.700% due 8/1/10 1,100,000
2,500,000 AA- Petersburg, IN Industrial PCR,
Indianapolis Power & Light Corp.,
6.625% due 12/1/24 2,809,375
- ----------------------------------------------------------------------------------
5,941,875
- ----------------------------------------------------------------------------------
Iowa -- 0.3%
755,000 AAA Iowa Finance Authority, Multi-Family Housing
Revenue Refunding, (Forest Glen Apartments
Project), Series A, FNMA-Collateralized,
5.600% due 11/1/22 778,594
- ----------------------------------------------------------------------------------
Louisiana -- 1.2%
200,000 VMIG1* Louisiana State Offshore Terminal Authority,
Deepwater Port Revenue, 3.700% due
9/1/06(c) 200,000
2,500,000 AAA Terrebonne Parish, LA Hospital Service
District 1, (Terrebonne Medical Center
Project), AMBAC-Insured, 5.375%
due 4/1/23 2,562,500
- ----------------------------------------------------------------------------------
2,762,500
- ----------------------------------------------------------------------------------
Maryland -- 1.5%
11,000,000 NR Maryland State Energy & Financing
Administration, Solid Waste Disposal
Revenue, (Hagerstown Recycling Project),
9.000% due 10/15/16(a)(b)(d) 3,410,000
- ----------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
7
<PAGE>
- --------------------------------------------------------------------------------
Schedule of Investments
August 31, 1998 (unaudited) (continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Face
Amount Ratings Security Value
==================================================================================
<S> <C> <C> <C>
Massachusetts -- 5.0%
$ 2,000,000 AAA Massachusetts Bay Transportation Authority,
Series B, FSA-Insured, 5.250% due 3/1/26 $ 2,025,000
1,850,000 AAA Massachusetts State Health & Educational
Facilities Revenue, Northeastern
University, Series G, MBIA-Insured,
5.000% due 10/1/16 1,861,562
1,000,000 AAA Massachusetts State Housing Finance Agency,
Series B, MBIA-Insured, 5.300%
due 12/1/17 1,016,250
10,000,000 NR Massachusetts State Industrial Financing
Agency, Solid Waste Disposal Revenue,
Massachusetts Recycling Association,
Series A, 9.000% due 8/1/16(a)(b)(d) 3,750,000
Massachusetts State Water Resource
Authority, MBIA-Insured:
2,000,000 AAA Series B, 5.000% due 12/1/25 1,987,500
1,000,000 AAA Series C, 5.250% due 12/1/20 1,013,750
- ----------------------------------------------------------------------------------
11,654,062
- ----------------------------------------------------------------------------------
Michigan -- 5.2%
4,000,000 AA+ Michigan Municipal Bond Authority Revenue,
State Revolving Fund, 5.125% due 10/1/20 4,045,000
6,000,000 NR Michigan Strategic Fund Resource Recovery,
Limited Obligation Revenue, Central Wayne
Energy, Series A, 7.000% due 7/1/27(b) 6,112,500
2,000,000 NR Midland County, MI EDC, PCR, Limited
Obligation, Series B, 9.500% due
7/23/09(a)(b) 2,185,000
- ----------------------------------------------------------------------------------
12,342,500
- ----------------------------------------------------------------------------------
Minnesota -- 0.2%
500,000 A3* Minnesota State Higher Education Facilities
Authority Revenue, St. Johns University,
Series Four-L, 5.350% due 10/1/17 508,750
- ----------------------------------------------------------------------------------
Missouri -- 1.5%
1,000,000 AAA Fenton, MO COP, (Capital Improvement
Projects), MBIA-Insured,
5.125% due 9/1/17 1,013,750
1,100,000 AA Joplin, MO IDA, Catholic Health
Initiatives, Series A, 5.000%
due 12/1/18 1,095,875
</TABLE>
See Notes to Financial Statements.
8
<PAGE>
- --------------------------------------------------------------------------------
Schedule of Investments
August 31, 1998 (unaudited) (continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Face
Amount Ratings Security Value
==================================================================================
<S> <C> <C> <C>
Missouri -- 1.5% (continued)
$1,500,000 AAA Kansas City, MO Municipal Assistance
Refunding, MBIA-Insured,
5.000% due 4/15/20 $ 1,500,000
- ----------------------------------------------------------------------------------
3,609,625
- ----------------------------------------------------------------------------------
New Jersey -- 0.4%
1,000,000 AAA Middlesex County , NJ COP, MBIA-Insured,
5.200% due 6/15/18 1,023,750
- ----------------------------------------------------------------------------------
New York -- 8.6%
2,000,000 A- Long Island Power Authority, NY Electric
Systems Revenue, 5.500% due 12/1/29 2,052,500
1,790,000 AAA New York City, NY Municipal Water Finance
Authority, Water & Sewer Systems Revenue,
Series B, MBIA-Insured, 5.375%
due 6/15/19 1,830,275
2,000,000 AA New York City Transitional Finance Authority
Revenue, Future Tax Secured, Series A,
5.000% due 8/15/17 2,000,000
New York State Dormitory Authority Revenue:
1,000,000 AAA City University System, Series A,
FGIC-Insured, 5.000% due 7/1/16 1,007,500
1,000,000 AAA Lease Revenue, Health Facilities
Improvement Program, Series A,
FSA-Insured, 5.500% due 5/15/16 1,057,500
1,500,000 AAA Mental Health Services Facilities
Improvement, Series D, FSA-Insured,
5.125% due 8/15/17 1,515,000
3,000,000 AAA Montefiore Medical Center, AMBAC/
FHA-Insured, 5.250% due 2/1/15 3,056,250
3,000,000 AAA State University Educational Facilities,
Series A, MBIA-Insured, 5.000%
due 5/15/18 3,003,750
2,580,000 BBB+ New York State Thruway Authority Service
Contract Revenue, Local Highway & Bridge,
6.000% due 4/1/11 2,825,100
2,000,000 Aa3* New York State Triborough Bridge & Tunnel
Authority Revenue, Series A, 5.000%
due 1/1/24 1,970,000
- ----------------------------------------------------------------------------------
20,317,875
- ----------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
9
<PAGE>
- --------------------------------------------------------------------------------
Schedule of Investments
August 31, 1998 (unaudited) (continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Face
Amount Ratings Security Value
==================================================================================
<S> <C> <C> <C>
North Carolina -- 0.4%
$1,000,000 AA- North Carolina Medical Care, Community
Hospital Revenue, Pitt County Memorial
Hospital, Series A, 5.000% due 12/1/18 $ 986,250
- ----------------------------------------------------------------------------------
Ohio -- 1.7%
4,000,000 AAA Cuyahoga County, OH Hospital Revenue,
Metrohealth Systems, Series A,
MBIA-Insured, 5.125% due 2/15/16 4,085,000
- ----------------------------------------------------------------------------------
Pennsylvania -- 4.9%
2,500,000 AAA Altoona, PA City Authority, Water Revenue
Refunding, FGIC-Insured, 5.000%
due 11/1/19 2,493,750
1,900,000 AAA Beaver County, PA IDA, FSA-Insured,
5.450% due 9/15/28 1,942,750
1,865,000 Aaa* Cranberry Township, PA Municipal Water
& Sewer Revenue, MBIA-Insured,
5.000% due 12/1/17 1,869,662
1,500,000 AAA Montgomery County, PA Health Care, Holy
Redeemer Health, Higher Education &
Health Authority Revenue, Series A,
AMBAC-Insured, 5.250% due 10/1/17 1,530,000
2,580,000 AAA North Wales, PA Water Authority,
FGIC-Insured, 5.000% due 11/1/15 2,599,350
1,000,000 AAA Pittsburgh, PA Water & Sewer Authority,
Series C, FSA-Insured, 5.000% due 9/1/17 1,002,500
- ----------------------------------------------------------------------------------
11,438,012
- ----------------------------------------------------------------------------------
Puerto Rico -- 0.5%
1,250,000 AAA Puerto Rico Commonwealth Infrastructure
Financing Authority, Series A,
AMBAC-Insured, 5.000% due 7/1/16 1,260,937
- ----------------------------------------------------------------------------------
South Carolina -- 1.7%
2,000,000 AAA Lexington County, SC Health Services District
Inc., Hospital Revenue, Refunding &
Improvement, FSA-Insured, 5.250% due
11/1/17 2,042,500
2,000,000 AAA Piedmont, SC Municipal Power Agency,
Electric Revenue, Series A,
MBIA-Insured, 4.875% due 1/1/16 1,985,000
- ----------------------------------------------------------------------------------
4,027,500
- ----------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
10
<PAGE>
- --------------------------------------------------------------------------------
Schedule of Investments
August 31, 1998 (unaudited) (continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Face
Amount Ratings Security Value
==================================================================================
<S> <C> <C> <C>
Tennessee -- 0.4%
$1,000,000 AA Metropolitan Government Nashville &
Davidson County, Tennessee Electric
Revenue, Series A, 5.125% due 5/15/15 $1,018,750
- ----------------------------------------------------------------------------------
Texas -- 21.8%
1,000,000 Aaa* Amarillo, TX Health Facilities, St Anthony's
Hospital, FSA-Insured, 5.000% due 1/1/22 986,250
2,000,000 Aaa* Azle, TX ISD, Series C, PSFG, FGIC-Insured,
5.000% due 2/15/22 1,990,000
4,000,000 AAA Bexar County, TX Health Facilities
Development Corp. Revenue, Baptist
Health Systems, Series A, MBIA-Insured,
5.250% due 11/15/27 4,035,000
2,000,000 AAA Brazos County, TX Health Facilities
Development Corp., Franciscan Services
Corp. Revenue, Series A, MBIA-Insured,
5.375% due 1/1/17 2,057,500
Brazos River Authority, PCR:
1,000,000 AAA Houston Industrial Income Project,
Series A, 5.125% due 5/1/19 1,005,000
2,000,000 BBB Utilities Electric Co., Series C, 5.550%
due 6/1/30 2,015,000
Burleson, TX ISD, PSFG:
725,000 NR 6.750% due 8/1/24 820,156
1,775,000 AAA Pre-Refunded-- Escrowed with U.S.
government securities to 8/1/06
Call @ 100, 6.750% due 8/1/24 2,070,094
2,000,000 AAA Del Valle, TX ISD, PSFG, 5.000% due 2/1/18 1,995,000
3,650,000 AAA El Paso, TX ISD, PSFG, 5.900% due 2/15/13 3,878,125
1,610,000 AA- Fort Worth, TX Higher Education Finance
Corp., Texas Christian University,
5.000% due 3/15/15 1,614,025
2,000,000 AA Harris County, TX Health Facilities
Development Revenue, School Health Care
Systems, Series B, 5.750% due 7/1/27 2,120,000
2,500,000 AA Harris County, TX Toll Road, Sub-Lien,
5.125% due 8/15/17 2,515,625
5,000,000 AA- Houston, TX GO, Series A, 5.000% due
3/1/14 5,068,750
1,000,000 AAA Manor, TX ISD, PSFG, 5.000% due 8/1/17 1,003,750
2,500,000 AAA Nueces River Authority, TX Water Supply,
FSA-Insured, 5.500% due 3/1/27 2,615,625
</TABLE>
See Notes to Financial Statements.
11
<PAGE>
- --------------------------------------------------------------------------------
Schedule of Investments
August 31, 1998 (unaudited) (continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Face
Amount Ratings Security Value
==================================================================================
<S> <C> <C> <C>
Texas -- 21.8% (continued)
$9,035,000 AA Texas State Veterans Housing GO, Series B-4,
6.700% due 12/1/24(b) $ 9,769,094
Texas Water Development Board Revenue,
State Revolving Fund, Senior Lien,
Series B:
1,200,000 AAA 5.000% due 7/15/14 1,221,000
3,110,000 AAA 5.000% due 7/15/16 3,144,988
1,520,000 AAA West Texas Municipal Power Agency,
MBIA-Insured, 5.000% due 2/15/17 1,523,800
- ----------------------------------------------------------------------------------
51,448,782
- ----------------------------------------------------------------------------------
Utah -- 4.2%
Intermountain Power Agency, UT Power
Supply Revenue:
1,500,000 AAA Series A, MBIA-Insured, 5.250%
due 7/1/15 1,531,875
8,400,000 A+ Series D, 5.000% due 7/1/21 8,305,500
- ----------------------------------------------------------------------------------
9,837,375
- ----------------------------------------------------------------------------------
Virgin Islands -- 1.7%
4,000,000 BBB- Virgin Islands Public Finance Authority,
Series A, 5.500% due 10/1/22 4,055,000
- ----------------------------------------------------------------------------------
Virginia -- 4.2%
1,250,000 A+ Virginia College Building Authority, VA
Educational Facilities Revenue,
(Hampton University Project), 5.750%
due 4/1/14 1,326,563
Virginia State Housing Development
Authority, Commonwealth Mortgage:
3,720,000 AA+ Series A, Sub-Series A-1, 6.400%
due 7/1/17 3,966,450
1,500,000 AA+ Series C, Sub-Series C-1, 5.100%
due 7/1/14 1,505,625
Series D:
1,585,000 AA+ Sub-Series D-1, 6.400% due 7/1/17 1,705,856
1,315,000 AA+ Sub-Series D-3, 5.800% due 7/1/10 1,402,119
- ----------------------------------------------------------------------------------
9,906,613
- ----------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
12
<PAGE>
- --------------------------------------------------------------------------------
Schedule of Investments
August 31, 1998 (unaudited) (continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Face
Amount Ratings Security Value
==================================================================================
<S> <C> <C> <C>
Washington -- 3.2%
$2,040,000 Aaa* Skagit County, WA Public Hospital District
No. 001 Revenue Refunding, Affiliated
Health Services, FSA-Insured,
5.750% due 12/1/11 $2,238,900
Washington State Public Power Supply System:
1,000,000 AAA Series A, (Nuclear Project No. 2),
FSA-Insured, 5.125% due 7/1/11 1,041,250
4,250,000 Aa1* Series B, (Nuclear Project No. 3), 5.500%
due 7/1/18 4,265,938
- ----------------------------------------------------------------------------------
7,546,088
- ----------------------------------------------------------------------------------
West Virginia -- 2.3%
Marion County, WV Community Solid Waste
Disposal Facilities Revenue, Adirondack
Recycling:
4,646,856 NR Series A, 8.000% due 12/1/25(b) 4,646,856
653,688 NR Series B, 10.000% due 12/1/25(b) 653,688
- ----------------------------------------------------------------------------------
5,300,544
- ----------------------------------------------------------------------------------
Wisconsin -- 1.3%
Wisconsin State Health & Educational
Facilities Authority Revenue, MBIA-Insured:
2,000,000 AAA Aurora Health Care Inc., 5.250%
due 8/15/17 2,030,000
1,000,000 AAA The Medical College Wisconsin Inc.
Project, 5.400% due 12/1/16 1,038,750
- ----------------------------------------------------------------------------------
3,068,750
- ----------------------------------------------------------------------------------
Wyoming -- 2.3%
400,000 P-1* Uinta County, WY PCR, (Chevron USA Inc.
Project), 3.700% due 8/15/20 400,000
2,000,000 AA Wyoming Community Development Authority
Housing Revenue, Series 4, 5.900%
due 12/1/14 2,127,500
</TABLE>
See Notes to Financial Statements.
13
<PAGE>
- --------------------------------------------------------------------------------
Schedule of Investments
August 31, 1998 (unaudited) (continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Face
Amount Ratings Security Value
==================================================================================
<S> <C> <C> <C>
Wyoming -- 2.3% (continued)
$2,920,000 AA Wyoming Community Development
Authority, Series 1, 5.450% due 12/1/29 $ 2,960,150
- ----------------------------------------------------------------------------------
5,487,650
- ----------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 100%
(Cost-- $236,831,761**) $235,765,694
==================================================================================
</TABLE>
(a) Security is segregated by custodian for open purchase commitments.
(b) Income from this issue is considered a preference item for purposes of
calculating the alternative minimum tax.
(c) Variable rate municipal bonds are payable upon not more than seven
business days notice.
(d) Security is in default.
** Aggregate cost for Federal income tax purposes is substantially the same.
See pages 15 and 16 for definition of ratings and certain security
descriptions.
- --------------------------------------------------------------------------------
Summary of Investments by Combined Ratings
August 31, 1998 (unaudited)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Standard & Percentage of
Moody's and/or Poor's Total Investments
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Aaa AAA 53.2%
Aa AA 22.5
A A 6.5
Baa BBB 6.8
NR NR 9.1
VMIG A-1 1.9
--------
100.0%
========
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
14
<PAGE>
- --------------------------------------------------------------------------------
Bond Ratings (unaudited)
- --------------------------------------------------------------------------------
All ratings are by Standard & Poor's Ratings Service ("Standard & Poor's"),
except 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.
15
<PAGE>
- --------------------------------------------------------------------------------
Short-Term Security Ratings (unaudited)
- --------------------------------------------------------------------------------
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.
- --------------------------------------------------------------------------------
Security Descriptions (unaudited)
- --------------------------------------------------------------------------------
ABAG -- Association of Bay Area Governments
AIG -- American International Guaranty
AMBAC -- AMBAC Indemnity 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
VAN -- Veterans Administration
VRDD -- Variable Rate Daily Demand
VRWE -- Variable Rate Wednesday Demand
16
<PAGE>
- --------------------------------------------------------------------------------
Statement of Assets and Liabilities
(unaudited)
- --------------------------------------------------------------------------------
August 31, 1998
================================================================================
ASSETS:
Investments, at value (Cost -- $236,831,761) $ 235,765,694
Cash 50,142
Interest receivable 3,168,063
- --------------------------------------------------------------------------------
Total Assets 238,983,899
- --------------------------------------------------------------------------------
LIABILITIES:
Payable for securities purchased 2,516,115
Dividends payable 383,072
Investment advisory fees payable 181,734
Accrued expenses 94,530
- --------------------------------------------------------------------------------
Total Liabilities 3,175,451
- --------------------------------------------------------------------------------
Total Net Assets $ 235,808,448
================================================================================
NET ASSETS:
Par value of capital shares $ 19,882
Capital paid in excess of par value 237,656,883
Overdistributed net investment income (712,511)
Accumulated net realized loss from security transactions (89,739)
Net unrealized depreciation of investments (1,066,067)
- --------------------------------------------------------------------------------
Total Net Assets
(Equivalent to $11.86 per share on 19,882,045 shares of
$0.001 par value outstanding; 500,000,000 shares authorized) $ 235,808,448
================================================================================
See Notes to Financial Statements.
17
<PAGE>
- --------------------------------------------------------------------------------
Statement of Operations
(unaudited)
- --------------------------------------------------------------------------------
Three Months
Ended
8/31/98
================================================================================
INVESTMENT INCOME:
Interest $ 3,174,059
- --------------------------------------------------------------------------------
EXPENSES:
Investment advisory fees (Note 3) 542,511
Directors' fees 16,587
Listing fees 10,524
Shareholder communications 10,340
Shareholder and system servicing fees 9,019
Audit and legal 8,064
Pricing service fees 4,774
Custody 3,210
Other 816
- --------------------------------------------------------------------------------
Total Expenses 605,845
- --------------------------------------------------------------------------------
Net Investment Income 2,568,214
- --------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN ON
INVESTMENTS (NOTE 4):
Realized Gain From Security Transactions
(excluding short-term securities):
Proceeds from sales 21,135,906
Cost of securities sold 20,532,816
- --------------------------------------------------------------------------------
Net Realized Gain 603,090
- --------------------------------------------------------------------------------
Change in Net Unrealized Depreciation
of Investments:
Beginning of period (2,350,122)
End of period (1,066,067)
- --------------------------------------------------------------------------------
Decrease in Net Unrealized Depreciation 1,284,055
- --------------------------------------------------------------------------------
Net Gain on Investments 1,887,145
- --------------------------------------------------------------------------------
Increase in Net Assets From Operations $ 4,455,359
================================================================================
See Notes to Financial Statements.
18
<PAGE>
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
Three Months
Ended Year
8/31/98 Ended
(unaudited) 5/31/98
================================================================================
OPERATIONS:
Net investment income $ 2,568,214 $ 9,947,837
Net realized gain 603,090 3,104,107
Decrease in net unrealized depreciation 1,284,055 9,774,667
- --------------------------------------------------------------------------------
Increase in Net Assets From Operations 4,455,359 22,826,611
- --------------------------------------------------------------------------------
DISTRIBUTIONS TO
SHAREHOLDERS FROM (NOTE 2):
Net investment income (2,803,370) (11,946,605)
In excess of net investment income -- (69,250)
Net realized gains -- (7,113,504)
- --------------------------------------------------------------------------------
Decrease in Net Assets From
Distributions to Shareholders (2,803,370) (19,129,359)
- --------------------------------------------------------------------------------
FUND SHARE TRANSACTIONS (NOTE 5):
Net asset value of shares issued
for reinvestment of dividends -- 2,544,884
- --------------------------------------------------------------------------------
Increase in Net Assets From
Fund Share Transactions -- 2,544,884
- --------------------------------------------------------------------------------
Increase in Net Assets 1,651,989 6,242,136
NET ASSETS:
Beginning of period 234,156,459 227,914,323
- --------------------------------------------------------------------------------
End of period* $ 235,808,448 $ 234,156,459
================================================================================
* Includes overdistributed net
investment income of: $ (712,511) $ (477,355)
================================================================================
See Notes to Financial Statements.
19
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements
- --------------------------------------------------------------------------------
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
an 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) the
character of income and gains to be distributed are determined in accordance
with income tax regulations which may differ from generally accepted accounting
principles. At May 31, 1998, reclassifications were made to the Fund's capital
accounts to reflect permanent book/tax differences and income and gains
available for distributions under income tax regulations. Accordingly, a portion
of overdistributed net investment income and accumulated net realized loss
amounting to $69,250 and $117,095, respectively, was reclassified to paid-in
capital. Net investment income, net 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.
20
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements
(continued)
- --------------------------------------------------------------------------------
Capital gain distributions, if any, are taxable to shareholders, and are
declared and paid at least annually.
3. Investment Advisory Agreement and Other Transactions
Mutual Management Corp. ("MMC"), a subsidiary of Salomon Smith Barney
Holdings Inc. ("SSBH"), acts as investment adviser to the Fund. The Fund pays
MMC 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., another subsidiary of SSBH.
4. Securities Transactions
For the three months ended August 31, 1998, the aggregate cost of
purchases and proceeds from sales of investments (including maturities but
excluding short-term securities) were as follows:
================================================================================
Purchases $ 11,624,369
- --------------------------------------------------------------------------------
Sales 21,135,906
================================================================================
At August 31, 1998, the aggregate gross unrealized appreciation and
depreciation of investments for Federal income tax purposes were substantially
as follows:
================================================================================
Gross unrealized appreciation $ 12,910,182
Gross unrealized depreciation (13,976,249)
- --------------------------------------------------------------------------------
Net unrealized depreciation $ (1,066,067)
================================================================================
5. Capital Shares
During the three months ended August 31, 1998, and the year ended May 31,
1998, capital stock transactions were as follows:
August 31, 1998 May 31, 1998
------------------ -------------------
Shares Amount Shares Amount
================================================================================
Shares issued on reinvestment -- -- 217,191 $2,544,884
================================================================================
21
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights
(unaudited)
- --------------------------------------------------------------------------------
For a share of capital stock outstanding throughout each period:
<TABLE>
<CAPTION>
1998(1) 1998 1997 1996 1995(2)
=========================================================================================
<S> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period $ 11.78 $ 11.59 $ 12.19 $ 12.84 $ 12.00
- -----------------------------------------------------------------------------------------
Income From Operations:
Net investment income 0.13 0.50 0.66 0.66 0.63
Net realized and unrealized
gain (loss) 0.09 0.66 (0.26) (0.42) 0.77
- -----------------------------------------------------------------------------------------
Total Income From Operations 0.22 1.16 0.40 0.24 1.40
- -----------------------------------------------------------------------------------------
Offering Costs Charged to
Paid-In Capital -- -- -- -- (0.02)
- -----------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.14) (0.60) (0.66) (0.66) (0.54)
In excess of net investment
income -- (0.01) -- -- --
Net realized gains -- (0.36) (0.34) (0.23) --
- -----------------------------------------------------------------------------------------
Total Distributions (0.14) (0.97) (1.00) (0.89) (0.54)
- -----------------------------------------------------------------------------------------
Net Asset Value,
End of Period $ 11.86 $ 11.78 $ 11.59 $ 12.19 $ 12.84
- -----------------------------------------------------------------------------------------
Total Return, Based on
Market Value* (0.49)%++ (0.20)% 8.97% 5.52% 1.65%++
- -----------------------------------------------------------------------------------------
Total Return, Based on
Net Asset Value* 2.04%++ 10.53% 3.61% 2.40% 12.28%++
- -----------------------------------------------------------------------------------------
Net Assets,
End of Period (000s) $235,808 $234,156 $227,914 $238,468 $251,219
- -----------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses 1.03%+ 1.00% 1.03% 1.06% 1.05%+
Net investment income 4.35+ 4.25 5.57 5.17 5.63+
- -----------------------------------------------------------------------------------------
Portfolio Turnover Rate 5% 85% 115% 42% 115%
- -----------------------------------------------------------------------------------------
Market Value, End of Period $ 10.250 $ 10.438 $ 11.375 $ 11.375 $ 11.625
=========================================================================================
</TABLE>
(1) For the three months ended August 31, 1998 (unaudited).
(2) For the period from June 24, 1994 (commencement of operations) to May 31,
1995.
* The total return calculation assumes that dividends are reinvested in
accordance with the Fund's dividend reinvestment plan.
++ Total return is not annualized, as it may not be representative of the
total return for the year.
+ Annualized.
22
<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>
8/31/96 $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)
5/31/97 3,857,047 0.19 3,273,623 0.16 (2,187,452) (0.11) 1,086,171 0.05
8/31/97 3,149,970 0.16 2,546,539 0.13 3,996,871 0.20 6,543,410 0.33
11/30/97 3,008,049 0.15 2,431,992 0.12 4,698,522 0.24 7,130,514 0.36
2/28/98 3,051,177 0.15 2,469,512 0.13 3,841,082 0.19 6,310,594 0.32
5/31/98 3,083,519 0.16 2,499,794 0.12 342,299 0.03 2,842,093 0.15
8/31/98 3,174,059 0.16 2,568,214 0.13 1,887,145 0.09 4,455,359 0.22
===================================================================================================================
</TABLE>
23
<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
================================================================================
1/28/97 1/31/97 $11.563 $11.65 $0.060 $11.53
2/25/97 2/28/97 11.750 11.80 0.060 11.66
3/24/97 3/27/97 11.250 11.40 0.060 11.40
4/22/97 4/25/97 11.250 11.30 0.060 11.29
5/27/97 5/30/97 11.250 11.51 0.060 11.49
6/24/97 6/27/97 11.625 11.74 0.060 11.74
7/22/97 7/25/97 11.875 11.98 0.060 11.90
8/26/97 8/29/97 11.563 11.70 0.060 11.65
9/23/97 9/26/97 11.625 11.86 0.056 11.56
10/28/97 10/31/97 11.063 11.86 0.056 11.29
11/24/97 11/28/97 11.250 11.90 0.056 11.45
12/22/97+ 12/26/97 11.188 11.78 0.360 11.57
1/27/98 1/30/98 11.688 11.79 0.056 11.77
2/24/98 2/27/98 11.688 11.78 0.056 11.78
3/24/98 3/27/98 10.875 11.76 0.049 10.87
4/21/98 4/24/98 10.563 11.64 0.049 10.55
5/26/98 5/29/98 10.438 11.75 0.049 10.55
6/23/98 6/26/98 10.688 11.76 0.049 10.69
7/28/98 7/31/98 10.313 11.72 0.046 10.26
8/25/98 8/28/98 10.188 11.81 0.046 10.40
================================================================================
* As of record date.
+ Capital gain distribution.
24
<PAGE>
- --------------------------------------------------------------------------------
Dividend Reinvestment Plan
(unaudited)
- --------------------------------------------------------------------------------
Under the Fund's Dividend Reinvestment Plan ("Plan"), a shareholder whose
shares of Common Stock are registered in his own name will have all
distributions from the Fund 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 shares under
the Plan, unless the service is not provided by the broker or nominee or the
shareholder elects to receive distributions in cash. Investors who own Common
Stock registered in Street Name should consult their broker-dealers for details
regarding reinvestment. All distributions to shareholders who do not participate
in the Plan will be paid by check mailed directly to the record holder by or
under the direction of First Data as dividend paying agent.
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. When the
market price of the Common Stock is equal to or exceeds the net asset value per
share of the Common Stock on the date of valuation, Plan participants will be
issued shares of Common Stock at a price equal to the greater of net asset value
most recently determined as described below under "Net Asset Value" or 95% of
the market price of the Common Stock.
If the market price of the Common Stock is less than the net asset value
of the Common Stock at the time of valuation, or if the Fund declares a dividend
or capital gains distribution payable only in cash, First Data will buy Common
Stock in the open market, on the New York Stock Exchange or elsewhere, for the
participants' accounts. If following the commencement of the purchases and
before First Data has completed its purchases, the market price exceeds the net
asset value of the Common Stock, First Data will attempt to terminate purchases
in the open market and cause the Fund to issue the remaining portion of the
dividend or distribution in shares at a price equal to the greater of (a) net
asset value or (b) 95% of the then current market price. In this case, the
number of shares received by a Plan 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. To the extent First Data is unable
to stop open market purchases and cause the Fund to issue the remaining shares,
the average per share purchase price paid by the Purchasing Agent may exceed the
net asset value of the Common Stock, resulting in the acquisition of fewer
shares than if the dividend or capital gains distribution had been paid in
Common Stock issued by the Fund
25
<PAGE>
- --------------------------------------------------------------------------------
Dividend Reinvestment Plan
(unaudited) (continued)
- --------------------------------------------------------------------------------
at net asset value. First Data will begin to purchase Common Stock on the open
market as soon as practicable after the payment date of the dividend or capital
gains distribution, but in no event shall such purchases continue later than 30
days after that date, except when necessary to comply with applicable provisions
of the federal securities laws.
First Data maintains all shareholder accounts in the Plan and furnishes
written confirmations of all transactions in each account, including information
needed by a shareholder for personal and tax records. The automatic reinvestment
of dividends and capital gains distributions will not relieve Plan participants
of any income tax that may be payable on the dividends or capital gains
distributions. Common Stock in the account of each Plan participant will be held
by First Data in uncertificated form in the name of the Plan participant.
Plan participants are subject to no charge for reinvesting dividends and
capital gains distributions under the Plan. First Data's fees for handling the
reinvestment of dividends and capital gains distributions will be paid by the
Fund. No brokerage charges apply with respect to shares of Common Stock issued
directly by the Fund under the Plan. Each Plan participant will, however, bear a
proportionate share of brokerage commissions incurred with respect to any open
market purchases made under the Plan.
Experience under the Plan may indicate that changes to it are desirable.
The Fund reserves the right to amend or terminate the Plan as applied to any
dividend or capital gains distribution paid subsequent to written notice of the
change sent to participants at least 30 days before the record date for the
dividend or capital gains distribution. The Plan also may be amended or
terminated by First Data, with the Fund's prior written consent, on at least 30
days' written notice to Plan participants. All correspondence concerning the
Plan should be directed by mail to First Data Investor Services Group, Inc.,
P.O. Box 8030, Boston, Massachusetts 02266 or by telephone at 1-800-331-1710.
- --------------------------------------------------------------------------------
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.
26
<PAGE>
- --------------------------------------------------------------------------------
Greenwich Street Municipal
Fund Inc.
- --------------------------------------------------------------------------------
Directors
Allan J. Bloostein
Martin Brody
Dwight B. Crane
Robert A. Frankel
William R. Hutchinson
Heath B. McLendon, Chairman
Charles F. Barber, Emeritus
Officers
Heath B. McLendon
President and
Chief Executive Officer
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
Mutual Management Corp.
388 Greenwich Street
New York, New York 10013
Transfer Agent
First Data Investor Services
Group, Inc.
P.O. Box 8030
Boston, Massachusetts 02266
Custodian
PNC Bank, N.A.
17th and Chestnut Streets
Philadelphia, Pennsylvania 19103
27
<PAGE>
[This page left intentionally blank.]
<PAGE>
This report is intended only for the shareholders of
Greenwich Street Municipal Fund Inc.
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.
FD0778 10/98
