UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-6506
Intermediate Muni Fund, Inc.
(Exact name of registrant as specified in charter)
125 Broad Street, New York, NY 10004
(Address of principal executive offices) (Zip code)
Robert I. Frenkel, Esq.
Smith Barney Fund Management LLC
300 First Stamford Place
Stamford, CT 06902
(Name and address of agent for service)
Registrant's telephone number, including area code: (800) 451-2010
Date of fiscal year end: December 31
Date of reporting period: December 31, 2003
ITEM 1. REPORT TO STOCKHOLDERS.
The Annual Report to Stockholders is filed herewith.
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INTERMEDIATE
MUNI FUND, INC.
[GRAPHIC OMITTED]
Annual Report
December 31, 2003
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WHAT'S INSIDE
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Letter from the Chairman .................................................. 1
Manager Overview .......................................................... 2
Schedule of Investments ................................................... 7
Statement of Assets and Liabilities ....................................... 18
Statement of Operations ................................................... 19
Statements of Changes in Net Assets ....................................... 20
Notes to Financial Statements ............................................. 21
Financial Highlights ...................................................... 26
Independent Auditors' Report .............................................. 28
Financial Data ............................................................ 29
Additional Information .................................................... 30
Tax Information ........................................................... 33
Dividend Reinvestment Plan ................................................ 34
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LETTER FROM THE CHAIRMAN
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[PHOTO OMITTED]
R. JAY GERKEN, CFA
Chairman, President and
Chief Executive Officer
Dear Shareholder,
I am pleased to provide you with the shareholder letter for the Intermediate
Muni Fund, Inc. for the 12 months ended December 31, 2003. After a formidable
run, municipal bonds lost some of the gains they had generated earlier in the
year as signs of a sharp pick-up in the pace of economic growth exerted pressure
on U.S. Treasuries and other fixed-income markets. Although many municipalities
grappled with budgetary pressures brought on by the weak economy, tax revenues
reportedly grew during the third quarter of 2003.
Please read on for a more detailed look at prevailing economic and market
conditions during the fund's fiscal year and to see how those conditions may
have affected fund performance.
Information About Your Fund
In recent months several issues in the mutual fund industry have come under the
scrutiny of federal and state regulators. The fund's Adviser and some of its
affiliates have received requests for information from various government
regulators regarding market timing, late trading, fees and other mutual fund
issues in connection with various investigations. The fund has been informed
that the Adviser and its affiliates are responding to those information
requests, but are not in a position to predict the outcome of these requests and
investigations.
As always, thank you for your confidence in our stewardship of your assets. We
look forward to helping you continue to meet your financial goals.
Sincerely,
/s/ R. Jay Gerkin
R. Jay Gerken, CFA
Chairman, President and Chief Executive Officer
January 12, 2004
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Intermediate Muni Fund, Inc. 1
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MANAGER OVERVIEW
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PETER M. COFFEY
Vice President
Performance Review
During the 12 months ended December 31, 2003, the fund returned 13.33%, based on
its American Stock Exchange ("AMEX") market price and 6.22% based on its net
asset value ("NAV")(i) per share. In comparison, the Lehman Brothers Municipal
Bond Index(ii) returned 5.31%, and the fund's Lipper general municipal debt
(leveraged) closed-end funds category average was 8.53% over the same time
frame.(iii) Please note that Lipper performance returns are based on each fund's
NAV.
During the period we structured the fund to be less susceptible to rising
interest rates by placing an emphasis on bonds with higher coupons, maintaining
a lower average life, and selling U.S. Treasury futures to hedge the portfolio
against interest rate risk.(iv) This lower-duration strategy at times limited
the fund's full participation in market rallies such as during the first half of
the year, which detracted from the fund's performance versus many of its peers.
However, it helped reduce its volatility during the period, which favorably
contributed to its performance during periods when long-term bond yields were
rising, particularly during the sharp spike in yields the market experienced
from mid-June through the end of July. Sector- and security-specific factors
also impacted the fund's relative performance. The effect of leveraging
positively impacted the fund's performance over the period.
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FUND PERFORMANCE
AS OF DECEMBER 31, 2003
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Annualized 12 Month
Price Per Share Distribution Yield Total Return
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$10.26 (NAV) 5.96% 6.22%
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$10.19 (AMEX) 6.01% 13.33%
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Total returns are based on changes in NAV or the market price, respectively.
Total returns assume the reinvestment of all dividends and/or capital gains
distributions, if any, in additional common shares. Annualized distribution
yield is the common shareholders' current monthly income dividend rate,
annualized, and then divided by the NAV or the market price noted in this
report. The annualized distribution yield assumes a current monthly income
dividend rate of $0.051 for 12 months. This rate is as of December 31, 2003 and
is subject to change.
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2 2003 Annual Report
During the 12-month period, the fund distributed dividends to shareholders
totaling $0.61 per common share. The performance table shows the fund's 12-month
total return based on its NAV and market price as of December 31, 2003. Certain
investors may be subject to the federal Alternative Minimum Tax, and state and
local taxes will apply. Capital gains, if any, are fully taxable. Please consult
your personal tax adviser. Past performance is not indicative of future results.
Market Overview
During the spring many states continued to wrestle with addressing budgetary
challenges stemming from a faltering economy. In an effort to jumpstart the
economy, the Fed cut its target for the federal funds rate,(v) which dropped to
its lowest level since the Eisenhower Administration.
U.S. Treasury bonds subsequently sold off, particularly in July, as signs
emerged that economic growth was more robust than previously thought, which
triggered concerns that inflation could pick up. Bond prices have typically
performed less favorably during times when inflation concerns arise. However,
municipal bonds collectively held up better than Treasury bonds during this
tumultuous time. Although the U.S. Treasury bond market regained some of its
footing in September, bonds collectively vacillated during the fall as
third-quarter economic indicators showed stronger-than-expected results.
Despite an improving economy and vibrant stock market, investors' interest in
tax-exempt municipal bonds held firm over 2003 as the Fed signaled that it was
is no hurry to raise short-term interest rates. Consequently, investors
gravitated to the municipal bond market as higher-rated issues offered favorable
taxable equivalent yields(vi) compared to comparable-maturity U.S. Treasuries
and Agencies.(vii)
Additionally, 2003 was a banner year for municipalities in terms of bond
issuance. Municipalities collectively issued over $380 billion of debt to fund
new projects and refinance outstanding bonds.(viii) Tax-exempt new issue volume
exceeded last year's previous record of approximately $358 billion.(viii)
Despite historically low nominal yields, demand was strong as property and
casualty insurance companies, institutions and individual investors combined to
absorb the massive supply.
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Intermediate Muni Fund, Inc. 3
Selection of Municipal Bonds
The fund has invested primarily in revenue bonds, which generally provide higher
yields than general obligation ("GO") bonds. While the creditworthiness of
revenue bonds is less correlated to tax receipts than GOs because revenue issues
are backed by revenue streams of specific projects, GOs are considered safer
because they are backed by the full faith and credit of the issuing state or
municipality. At the end of the year, the portfolio's heaviest exposure was to
revenue bonds in the hospital, education, water and sewer, and transportation
sectors.
While a few holdings suffered substantial price declines due to credit-quality
deterioration since our last report at mid-year 2003, the impact on NAV was
offset by significant appreciation in other holdings that have benefited from
improving economic conditions.
We remain fairly defensive in terms of interest rate risk. Even though recent
employment results have been lackluster and inflation has so far remained
contained, interest rates have remained quite low by historical standards and
the economy has continued to exhibit strong growth.
Looking for Additional Information?
The fund is traded under the symbol "SBI" and its closing market price is
available in most newspapers under the American Stock Exchange listings. The
daily NAV is available online under symbol XSBIX. Barron's and The Wall Street
Journal's Monday editions carry closed-end fund tables that will provide
additional information. In addition, the fund issues a quarterly allocation
press release that can be found on most major financial web sites as well as
www.citigroupassetmanagement.com.
In a continuing effort to provide information concerning the fund, shareholders
may call 1-888-735-6507, Monday through Friday from 8:00 a.m. to 6:00 p.m.
Eastern Time, for the fund's current net asset value, market price and other
information.
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4 2003 Annual Report
Thank you for your investment in the Intermediate Muni Fund, Inc. We appreciate
that you have entrusted us to manage your money and value our relationship with
you.
Sincerely,
/s/ Peter M. Coffey
Peter M. Coffey
Vice President
January 12, 2004
The information provided is not intended to be a forecast of future events, a
guarantee of future results or investment advice. Views expressed may differ
from those of the firm as a whole.
Portfolio holdings and breakdowns are as of December 31, 2003 and are subject to
change and may not be representative of the portfolio manager's current or
future investments. Please refer to pages 7 through 15 for a list and percentage
breakdown of the fund's holdings.
All index performance reflects no deduction for fees, expenses or taxes.
i NAV is a price that reflects the value of the fund's underlying portfolio
plus other assets, less the fund's liabilities. However, the price at
which an investor may buy or sell common shares of the fund is at the
fund's market price as determined by supply of and demand for the fund's
common shares, which may be more or less than the fund's NAV.
ii The Lehman Brothers Municipal Bond Index is a broad measure of the
municipal bond market with maturities of at least one year. Please note
that an investor cannot invest directly in an index.
iii Lipper, Inc. is a major independent mutual-fund tracking organization.
Returns are based on the 12-month period ended December 31, 2003,
calculated among the 64 funds in the fund's Lipper category including the
reinvestment of dividends and capital gains, if any.
iv Derivatives, such as options and futures, can be illiquid and harder to
value, especially in declining markets. A small investment in certain
derivatives may have a potentially large impact on the fund's performance.
Derivatives can disproportionately increase losses as stated in the
prospectus.
v The federal funds rate is the interest rate that banks with excess
reserves at a Federal Reserve district bank charge other banks that need
overnight loans.
vi The taxable equivalent yield applies to income taxation on a federal (not
state and local) level. This yield would be slightly lower for an investor
below the federal income tax bracket of 31% and slightly higher for an
investor in a higher tax bracket.
vii The face-value principal and coupon payments of U.S. Government bonds, in
contrast to municipals, are guaranteed by full faith and credit of the
U.S. Government.
viii Source: Lehman Brothers
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Intermediate Muni Fund, Inc. 5
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Take Advantage of the Fund's Dividend Reinvestment Plan!
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 distributions, if any, in additional shares of the Fund. 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 per share ("NAV") on the
determination date, you will be issued shares by the Fund at a price reflecting
the NAV, or 95% of the market price, whichever is greater.
If the market price is less than the NAV at the time of valuation (the close of
business on the determination date), PFPC Inc. ("Plan Agent") will buy common
stock for your account in the open market.
If the Plan Agent begins to purchase additional shares in the open market and
the market price of the shares subsequently rises above the previously
determined NAV before the purchases are completed, the Plan Agent will attempt
to terminate purchases and have the Fund issue the remaining dividend or
distribution in shares at the greater of the previously determined NAV or 95% of
the market price. 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.
A more complete description of the current Plan appears in the section of this
report beginning on page 34. To find out more detailed information about the
Plan and about how you can participate, please call PFPC Inc. at (800) 331-1710.
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6 2003 Annual Report
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Schedule of Investments December 31, 2003
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FACE
AMOUNT RATING(a) SECURITY VALUE
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Education -- 13.9%
$3,000,000 AAA Alabama State Public School & College Authority Revenue,
5.125% due 11/1/15 $ 3,274,770
1,000,000 A2* Arizona Educational Loan Marketing Corp., Educational Loan
Revenue, Sub-Series, 6.625% due 9/1/05 (b) 1,006,500
1,000,000 Aaa* Athens, GA Housing Authority, Student Housing Lease
Revenue, (University of Georgia - East Campus Project),
AMBAC-Insured, 5.250% due 12/1/23 1,063,530
800,000 AAA Ball State University of Indiana, University Revenue, Series K,
FGIC-Insured, 5.750% due 7/1/20 898,384
Colorado Educational and Cultural Facilities Authority Revenue,
Charter School:
1,000,000 Baa3* Community Education Center, (Bromley East Project A),
7.000% due 9/15/20 (c) 1,042,030
500,000 Baa2* University Lab School Project, 6.125% due 6/1/21 509,635
1,065,000 AAA Conneaut, PA School District, AMBAC-Insured,
9.500% due 5/1/12 (c)+ 1,353,232
Greenville County, SC School District, Installment Purchase
Revenue, (Building Equity Sooner for Tomorrow Project):
2,000,000 AA- 5.875% due 12/1/19 (c) 2,271,600
2,000,000 AA- 6.000% due 12/1/21 (c) 2,212,800
500,000 BBB Illinois Development Finance Authority Revenue, (Chicago
Charter School Foundation Project A), 5.250% due 12/1/12 522,755
1,000,000 AAA Jenison, MI Public Schools, FGIC-Insured, 5.500% due 5/1/20 1,106,700
500,000 NR Los Angeles, CA School District, MBIA-Insured,
9.058% due 7/1/18 612,660
500,000 A Massachusetts State Development Finance Agency Revenue,
Curry College, Series A, ACA-Insured, 6.000% due 3/1/20 550,685
1,450,000 AAA Morgan Hill, CA School District, FGIC-Insured,
5.750% due 8/1/17 1,652,420
NebHELP Inc. Revenue, NE, MBIA-Insured:
1,000,000 Aaa* Jr. Sub-Series A-6, 6.450% due 6/1/18 (b) 1,114,770
1,900,000 Aaa* Sr. Sub-Series A-5A, 6.200% due 6/1/13 (b) 2,093,249
500,000 A3* New England Education Loan Marketing Corp., MA Student
Loan Revenue, Sub-Issue H, 6.900% due 11/1/09 (b) 575,700
630,000 A++ New Mexico Educational Assistance Foundation, Student Loan
Revenue, First Sub-Series A-2, 5.950% due 11/1/07 (b) 660,530
1,000,000 AAA Philadelphia, PA School District, Series A, FSA-Insured,
5.500% due 2/1/23 1,083,890
1,350,000 AAA Pittsburgh, PA School District, FSA-Insured,
5.375% due 9/1/16 1,566,377
1,000,000 AAA Southwest Higher Education Authority Inc., TX, (Southern
Methodist University Project), AMBAC-Insured,
5.500% due 10/1/19 1,117,430
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26,289,647
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General Obligation -- 9.5%
500,000 AAA Anchorage, AK GO, Refunding, FGIC-Insured,
6.000% due 10/1/14 601,590
1,000,000 AA Central Falls, RI GO, 5.875% due 5/15/15 1,147,050
See Notes to Financial Statements.
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Intermediate Muni Fund, Inc. 7
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Schedule of Investments (continued) December 31, 2003
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FACE
AMOUNT RATING(a) SECURITY VALUE
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General Obligation -- 9.5% (continued)
$ 1,000,000 AA Harvey, IL GO, Refunding, 6.700% due 2/1/09 $ 1,060,030
1,310,000 AAA Kane County, IL GO, FGIC-Insured, 5.500% due 1/1/14 1,482,278
1,130,000 Aaa* Lancaster, MA GO, AMBAC-Insured, 5.375% due 4/15/17 1,259,295
1,500,000 AAA Massachusetts State GO, MBIA-Insured, FLAIRS,
9.285% due 5/1/09 (d) 2,007,780
1,000,000 Aaa* Memphis, MI GO, FGIC-Insured, 5.150% due 5/1/19 (c) 1,061,940
2,400,000 Aa2* Minnehaha County, SD GO, Limited Tax Certificates,
5.625% due 12/1/20 (c) 2,672,904
2,000,000 AAA Montgomery County, MD GO, Refunding, 5.250% due 10/1/14 2,260,760
3,010,000 AA+ Ohio State GO, (Conservation Projects), Series A,
5.250% due 9/1/13 3,360,785
1,000,000 AAA Saraland, AL GO, MBIA-Insured, 5.250% due 1/1/15 1,108,250
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18,022,662
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Hospital -- 24.7%
170,000 AAA Anderson County, SC Hospital Facilities Revenue,
7.125% due 8/1/07+ 187,692
1,500,000 BBB++ Arkansas State Development Finance Authority, Hospital
Revenue, Washington Regional Medical Center,
7.000% due 2/1/15 1,636,485
402,500 AAA Birmingham, AL Medical Clinic Board Revenue, Baptist
Medical Centers, 8.300% due 7/1/08+ 463,137
650,000 AAA Calcasieu Parish, LA Memorial Hospital Service District
Hospital Revenue, (Lake Charles Memorial Hospital Project),
Series A, CONNIE LEE-Insured, 7.500% due 12/1/05 718,855
1,160,000 NR California Statewide COP, Community Development Authority
Revenue Refunding, Hospital Triad Healthcare,
(Pre-Refunded -- Escrowed with state and local government
securities to 8/1/04 Call @ 100), 6.250% due 8/1/06 1,238,381
650,000 A- Chatham County, GA Hospital Authority Revenue, Memorial
Health Medical Center, Series A, 6.000% due 1/1/17 703,118
305,000 A- Colorado Health Facilities Authority Revenue, Rocky Mountain
Adventist Health Center, 6.250% due 2/1/04+ 305,912
2,000,000 AA Connecticut State Health & Educational Facilities Authority
Revenue, Bristol Hospital, Series B, 5.500% due 7/1/21 (c) 2,177,100
1,770,000 BBB Cuyahoga County, OH Hospital Facility Revenue, (Canton Inc.
Project), 6.750% due 1/1/10 1,976,948
710,000 BBB Denver, CO Health & Hospital Authority Healthcare Revenue,
Series A, 6.250% due 12/1/16 758,713
1,200,000 AA Harris County, TX Health Facilities Developmental Corp.
Revenue, Methodist Hospital, 0.780% due 12/1/32 1,200,000
1,000,000 AAA Harris County, TX Hospital District Revenue Refunding,
MBIA-Insured, 6.000% due 2/15/15 1,171,400
2,000,000 BBB+ Hawaii State Department of Budget & Finance, Special
Purpose Revenue, Kapiolani Health Care System,
6.400% due 7/1/13 2,049,560
1,420,000 Baa1* Henderson, NV Health Care Facility Revenue, Catholic
Healthcare West, Series A, 6.200% due 7/1/09 1,590,315
See Notes to Financial Statements.
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8 2003 Annual Report
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Schedule of Investments (continued) December 31, 2003
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FACE
AMOUNT RATING(a) SECURITY VALUE
==========================================================================================================
Hospital -- 24.7% (continued)
Illinois Health Facilities Authority Revenue:
$ 625,000 AAA Methodist Medical Center Project, 9.000% due 10/1/10+ $ 745,112
750,000 AAA Ravenswood Hospital Medical Center Project,
7.250% due 8/1/06 (d)+ 813,330
1,300,000 BBB Illinois Health Facilities Authority Revenue Refunding,
Friendship Village of Schaumburg, 6.650% due 12/1/06 1,307,215
1,000,000 A1* Iowa Finance Authority Health Care Facilities Revenue,
Genesis Medical Center, 6.250% due 7/1/20 1,058,300
1,200,000 BBB+++ Klamath Falls, OR Intercommunity Hospital Authority Revenue,
(Merle West Medical Center Project), 8.000% due 9/1/08+ 1,395,168
290,000 AAA Lake County, OH Hospital Improvement Revenue, (Lake
County Memorial Hospital Project), 8.625% due 11/1/09+ 349,401
1,625,000 NR Lee Memorial Health System Board of Directors, FL Hospital
Revenue, FSA-Insured, FLAIRS, 10.238% due 4/1/10 (d) 2,069,372
405,000 A-++ Lees Summit, MO IDA, Health Facilities Revenue, (John Knox
Village Project), 5.750% due 8/15/11 445,225
270,000 AAA Lima, OH Hospital Revenue, St. Rita Hospital of Lima,
7.500% due 11/1/06+ 297,707
15,000 NR Loma Linda, CA Community Hospital Corporation Revenue,
8.000% due 12/1/08 18,721
1,230,000 NR Los Angeles, CA COP, Hollywood Presbyterian Medical Center,
9.625% due 7/1/13+ 1,656,958
165,000 AAA Louisiana Public Facilities Authority Hospital Revenue
Refunding, (Southern Baptist Hospital Inc. Project),
8.000% due 5/15/12+ 203,331
330,000 AAA Madison County, IN Industrial Hospital Authority Facilities
Revenue, (Community Hospital of Anderson Project),
9.250% due 1/1/10+ 400,204
Maricopa County, AZ Hospital Revenue:
180,000 AAA Samaritan Health Service, 7.625% due 1/1/08+ 198,317
860,000 AAA St. Luke's Hospital Medical Center Project,
8.750% due 2/1/10+ 1,031,011
1,000,000 AAA Maryland State Health & Higher Education Facilities Authority
Revenue Refunding, (Mercy Medical Center Project),
FSA-Insured, 6.500% due 7/1/13 1,210,580
370,000 AAA Massachusetts State Development Finance Agency Revenue,
Series A, GNMA-Collateralized, 6.700% due 10/20/21 426,136
Massachusetts State Health & Educational Facilities Authority
Revenue:
Caritas Christi Obligation, Series B:
2,000,000 BBB 6.500% due 7/1/12 (c) 2,076,480
835,000 BBB 6.750% due 7/1/16 (c) 862,121
1,000,000 Baa2* Milford-Whitinsville Regional Hospital, Series D,
6.500% due 7/15/23 1,038,060
1,000,000 BBB+++ Winchester Hospital, Series E, 6.750% due 7/1/30 1,067,120
1,220,000 AAA Massachusetts State Industrial Finance Agency, Assisted
Living Facility Revenue, (Arbors at Amherst Project),
GNMA-Collateralized, 5.750% due 6/20/17 (b)(c) 1,360,581
See Notes to Financial Statements.
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Intermediate Muni Fund, Inc. 9
================================================================================
Schedule of Investments (continued) December 31, 2003
================================================================================
FACE
AMOUNT RATING(a) SECURITY VALUE
==========================================================================================================
Hospital -- 24.7% (continued)
$ 1,000,000 A Michigan State Hospital Finance Authority Revenue, Oakwood
Obligated Group, 5.500% due 11/1/18 (c) $ 1,033,640
60,000 Aaa* Nacogdoches County, TX Hospital District Revenue,
9.000% due 5/15/04+ 60,000
960,000 A- New Hampshire Health & Educational Facilities Authority
Revenue, Covenant Healthcare System, 6.500% due 7/1/17 1,069,718
1,135,000 NR New York City, NY IDA, Civic Facilities Revenue Refunding, (New
York Community Hospital Brooklyn), 6.875% due 11/1/10 1,157,961
2,000,000 B1* Oklahoma Developmental Finance Authority Revenue Refunding,
Hillcrest Healthcare System, Series A, 5.625% due 8/15/19 1,588,140
Orange County, FL Health Facilities Authority Revenue:
Adventist Health Care:
1,500,000 A 6.250% due 11/15/24 1,636,125
510,000 AAA Southern Adventist Hospital Project, 8.750% due 10/1/09+ 616,187
865,000 NR First Mortgage, Health Care Facilities, 8.750% due 7/1/11 871,090
Philadelphia, PA Hospitals Authority Revenue:
155,000 AAA Thomas Jefferson University Hospital, 7.000% due 7/1/08+ 173,285
640,000 Aaa* United Hospital Inc. Project, (Call 7/1/05 @ 100),
10.875% due 7/1/08 (e) 712,787
1,000,000 NR Rainbow City, AL Special Health Care Facilities Financing
Authority, (Regency Pointe Inc.), Series B, 7.250% due 1/1/06 1,009,790
120,000 AAA San Leandro, CA Hospital Revenue, Vesper Memorial Hospital,
AMBAC-Insured, 11.500% due 5/1/11+ 163,762
145,000 Aaa* Tarrant County, TX Hospital Authority Revenue, Adventist
Health System-Sunbelt, 10.250% due 10/1/10 186,587
365,000 NR Tom Green County, TX Hospital Authority, 7.875% due 2/1/06+ 388,778
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46,875,916
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Housing: Multi-Family -- 4.6%
1,000,000 A3* Bexar County, TX Housing Finance Corp., Multi-Family Housing
Revenue Refunding, Nob Hill Apartments, Series A,
6.000% due 6/1/21 1,032,560
320,000 AAA Charlotte, NC Mortgage Revenue Refunding, Double Oaks
Apartments, Series A, FHA-Insured, 7.300% due 11/15/07 349,728
490,000 Baa1* Dallas, TX Housing Corp., Capital Projects Refunding,
7.700% due 8/1/05 490,200
El Paso County, TX Housing Finance Corp., Multi-Family
Housing Revenue:
360,000 A3* American Village Communities, Series A,
6.250% due 12/1/24 370,361
280,000 Baa3* La Plaza Apartments, Sub-Series C, 8.000% due 7/1/30 285,592
585,000 AAA Grand Prairie, TX Housing Finance Corp., Multi-Family
Housing Revenue, (Landings of Carrier Project A),
GNMA-Collateralized, 6.650% due 9/20/22 658,236
100,000 AA- Hudson County, NJ Improvement Authority, Multi-Family
Housing Revenue, (Observer Park Project), Series A,
FNMA-Collateralized, 6.600% due 6/1/04 (b) 101,430
See Notes to Financial Statements.
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10 2003 Annual Report
================================================================================
Schedule of Investments (continued) December 31, 2003
================================================================================
FACE
AMOUNT RATING(a) SECURITY VALUE
==========================================================================================================
Housing: Multi-Family -- 4.6% (continued)
$ 1,175,000 A3* Lubbock, TX Housing Finance Corp., Multi-Family Housing
Revenue, (Las Colinas Quality Creek Apartments),
6.000% due 7/1/22 $ 1,206,396
500,000 Aaa* Maricopa County, AZ IDA, Multi-Family Housing Revenue,
(Bay Club at Mesa Cove Project), Series A, MBIA-Insured,
5.700% due 9/1/20 500,635
570,000 A2* McMinnville, TN Housing Authority Revenue Refunding,
First Mortgage, Beersheba Heights, 6.000% due 10/1/09 (c) 614,996
Mount Vernon, IL Elderly Housing Corp., First Lien Revenue:
200,000 Ba3* 7.875% due 4/1/04 200,622
215,000 Ba3* 7.875% due 4/1/05 215,426
235,000 Ba3* 7.875% due 4/1/06 235,404
250,000 Ba3* 7.875% due 4/1/07 250,418
270,000 Ba3* 7.875% due 4/1/08 270,405
Tarrant County, TX Housing Finance Corp. Revenue,
Multi-Family Housing, Westridge:
100,000 Ba3* Sr. Series A, 6.000% due 6/1/21 84,917
470,000 Caa1* Sub-Series C, 8.500% due 6/1/31 352,486
470,000 BBB++ Tulsa, OK Housing Assistance Corp., Multi-Family Revenue,
7.250% due 10/1/07 (b) 470,578
1,000,000 NR Village Community Development, District No. 5, FL Special
Assessment Revenue, 6.000% due 5/1/22 1,011,400
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8,701,790
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Housing: Single-Family -- 1.1%
155,000 AAA Cabell, Putnam & Wayne Counties, WV Single-Family Residence
Mortgage Revenue, FGIC-Insured, 7.375% due 4/1/10+ 177,988
20,000 AA Juneau, AK City & Borough Home Mortgage Revenue
Refunding, Mortgage-Backed Securities Program,
FNMA-Collateralized, 8.000% due 2/1/09 20,013
470,000 AA Massachusetts State Housing Finance Agency, Single-Family
Housing Revenue, Series 38, 7.200% due 12/1/26 (b) 485,660
120,000 AAA Missouri State Housing Development Community Mortgage
Revenue, Series C, GNMA/FNMA-Collateralized,
7.450% due 9/1/27 (b) 126,006
210,000 AAA Pima County, AZ IDA, Single-Family Mortgage Revenue,
Series A, GNMA/FNMA/FHLMC-Collateralized,
7.100% due 11/1/29 (b) 225,664
315,000 NR San Leandro, CA Redevelopment Agency, Residential Mortgage
Revenue, (Call 10/1/04 @ 100), 11.250% due 4/1/13 (e) 337,384
85,000 AAA St. Louis County, MO Single-Family Mortgage Revenue,
MBIA-Insured, 6.750% due 4/1/10 88,800
525,000 AAA Texas State Department of Housing and Community Affairs,
Home Mortgage Revenue, RIBS, Series C-2, GMNA/FNMA/
FHLMC-Collateralized, 11.822% due 7/2/24 (b)(d) 571,557
----------------------------------------------------------------------------------------------------------
2,033,072
----------------------------------------------------------------------------------------------------------
See Notes to Financial Statements.
--------------------------------------------------------------------------------
Intermediate Muni Fund, Inc. 11
================================================================================
Schedule of Investments (continued) December 31, 2003
================================================================================
FACE
AMOUNT RATING(a) SECURITY VALUE
==========================================================================================================
Industrial Development -- 7.1%
$ 1,000,000 NR Alaska Industrial Development & Export Authority Revenue,
Williams Lynxs Alaska Cargoport, 8.000% due 5/1/23 (b) $ 1,041,880
535,000 C* Bourbonnais, IL IDR Refunding, (Kmart Corp. Project),
6.600% due 10/1/06 (f) 107,000
1,500,000 AAA Des Moines, IA IDR Refunding, (The Printer Inc. Project),
LOC-Mercantile Bank/FHLB, 6.375% due 9/1/09 (c) 1,512,255
2,000,000 A-++ LaCrosse, WI Resource Recovery Revenue Refunding,
(Northern States Power Co. Project), 6.000% due 11/1/21 (b) 2,059,600
1,300,000 AA Massachusetts State Development Finance Agency Revenue,
Worcester Redevelopment Authority Issue, 6.000% due 6/1/24,
mandatory tender 6/1/04 1,446,367
1,365,000 AA Northampton County, PA IDA Revenue, (Moravian Hall Square
Project), 5.500% due 7/1/19 1,474,787
55,000 AAA Oklahoma State Industrial Authority Revenue, Oklahoma Health
Care Corp., Series A, FGIC-Insured, (Call 5/1/07 @ 100),
9.125% due 11/1/08 (e) 64,885
1,000,000 AAA Pennsylvania State IDR, Economic Development Revenue,
AMBAC-Insured, 5.500% due 7/1/21 1,105,050
1,000,000 B2* Rockbridge County, VA IDA Revenue, Virginia Horse Center,
Series C, 6.850% due 7/15/21 937,150
795,000 A South Dakota Economic Development Finance Authority,
Economic Development Revenue, APA Optics, Series A,
6.750% due 4/1/16 (b) 862,249
1,280,000 NR Suffolk County, NY IDA, Civic Facility Revenue, (Eastern Long
Island Hospital Association Project A), 7.750% due 1/1/22 1,306,483
1,500,000 NR Wasco County, OR Solid Waste Disposal Revenue, (Waste
Connections Inc. Project), 7.000% due 3/1/12 (b) 1,588,515
----------------------------------------------------------------------------------------------------------
13,506,221
----------------------------------------------------------------------------------------------------------
Miscellaneous -- 6.7%
1,500,000 NR Barona Band of Mission Indians, CA, 8.250% due 1/1/20 1,618,440
1,860,000 Aaa* Broomfield, CO COP, Open Space Park & Recreational
Facilites, AMBAC-Insured, 5.500% due 12/1/20 2,051,525
1,310,000 BBB District of Columbia, Tobacco Settlement Financing Corp.,
6.250% due 5/15/24 (c) 1,251,875
745,000 A Illinois Development Finance Authority Revenue,
East St. Louis, 6.875% due 11/15/05 790,676
645,000 Ca* Indianapolis, IN Economic Development Refunding &
Improvement Revenue, National Benevolent Association,
6.900% due 10/1/04 322,500
1,690,000 AAA Monroe, LA Sales & Use Tax Revenue, FGIC-Insured,
5.625% due 7/1/25 1,838,534
1,000,000 NR Oglala Sioux Tribe, SD Essential Government Revenue,
5.500% due 7/1/13 1,022,230
1,500,000 BBB+ Puerto Rico Housing Bank & Finance Agency,
7.500% due 12/1/06 1,635,540
2,000,000 AA- Tobacco Settlement Financing Corp., NY, Series C-1,
5.500% due 6/1/14 2,161,540
----------------------------------------------------------------------------------------------------------
12,692,860
----------------------------------------------------------------------------------------------------------
See Notes to Financial Statements.
--------------------------------------------------------------------------------
12 2003 Annual Report
================================================================================
Schedule of Investments (continued) December 31, 2003
================================================================================
FACE
AMOUNT RATING(a) SECURITY VALUE
==========================================================================================================
Pollution Control -- 3.4%
$ 2,000,000 Aa3* Brazos River, TX Harbor Navigation District, Brazoria
County, PCR, (BASF Corp. Project), 6.750% due 2/1/10 $ 2,377,860
1,000,000 AAA Monroe County, MI PCR, (Detroit Edison Co. Project), Series A,
AMBAC-Insured, 6.350% due 12/1/04 (b) 1,043,960
2,000,000 Baa3* Ohio State Air Quality Development Authority Revenue,
Pollution Control, (Cleveland Electric Illuminating Co.
Project), 6.000% due 12/1/13 2,069,960
1,000,000 BB+ Warren, AR Solid Waste Disposal Revenue, (Potlatch Corp.
Project), 7.000% due 4/1/12 1,032,650
----------------------------------------------------------------------------------------------------------
6,524,430
----------------------------------------------------------------------------------------------------------
Public Facilities -- 1.3%
De Kalb County, IN Industrial Redevelopment Authority
Revenue, (Mini-Mill Local Public Improvement
Project), Series A:
1,000,000 A- 6.250% due 1/15/08 (c) 1,063,770
1,350,000 A- 6.250% due 1/15/09 (c) 1,432,080
----------------------------------------------------------------------------------------------------------
2,495,850
----------------------------------------------------------------------------------------------------------
Transportation -- 10.2%
2,000,000 AAA Atlanta, GA Metropolitan Rapid Transit Authority, Sales Tax
Revenue, Series E, 7.000% due 7/1/11 (c)+ 2,448,360
1,500,000 AAA Chicago, IL O'Hare International Airport Revenue, Lien A-2,
5.750% due 1/1/19 (c) 1,654,560
1,855,000 A Connecticut State Special Obligation, Parking Revenue,
Bradley International Airport, Series A, ACA-Insured,
6.375% due 7/1/12 (b)(c) 2,045,063
1,500,000 AAA Connecticut State Special Tax Obligation Revenue,
FSA-Insured, FLAIRS, 9.576% due 10/1/09 (c)(d) 1,899,900
5,000,000 B- Connector 2000 Association, SC Toll Road Revenue,
Capital Appreciation, Series B, zero coupon due 1/1/15 910,600
2,000,000 AAA Dallas, TX Area Rapid Transit Sales Tax Revenue, Sr. Lien,
AMBAC-Insured, 5.375% due 12/1/16 (c) 2,217,540
1,500,000 CCC Dallas/Fort Worth, TX International Airport Facility,
Improvement Corp. Revenue Refunding, American
Airlines Inc., Series C, 6.150% due 5/1/29,
mandatory tender 11/1/07 (b)(c) 1,195,845
1,855,000 AAA Delaware River Port Authority of Pennsylvania & New Jersey,
FSA-Insured, FLAIRS, 9.775% due 1/1/10 (c)(d) 2,348,727
1,000,000 Aaa* Harrisburg, PA Parking Authority, Parking Revenue,
FSA-Insured, 5.500% due 5/15/20 1,103,390
250,000 AAA Lee County, FL Southwest Florida Regional Airport Revenue,
MBIA-Insured, 8.625% due 10/1/09+ 301,307
290,000 AAA Metropolitan Nashville, TN Airport Authority Tennessee Airport
Revenue, MBIA-Insured, 7.500% due 7/1/05 (c)+ 306,054
4,595,000 BBB-++ Pocahontas Parkway Association, VA Toll Road Revenue,
Capital Appreciation, Series B, zero coupon due 8/15/19 1,387,690
170,000 AAA San Francisco, CA Airport Improvement Corp. Lease Revenue,
United Airlines Inc., 8.000% due 7/1/13+ 213,569
See Notes to Financial Statements.
--------------------------------------------------------------------------------
Intermediate Muni Fund, Inc. 13
================================================================================
Schedule of Investments (continued) December 31, 2003
================================================================================
FACE
AMOUNT RATING(a) SECURITY VALUE
==========================================================================================================
Transportation -- 10.2% (continued)
$ 595,000 NR Sanford, FL Airport Authority IDR, (Central Florida
Terminals Inc. Project A), 7.500% due 5/1/06 (b)(c) $ 541,515
Tulsa, OK Municipal Airport Revenue Refunding,
American Airlines, Series B:
500,000 B- 6.000% due 6/1/35, mandatory tender 12/1/08 (b) 426,590
500,000 B- 5.650% due 12/1/35, mandatory tender 12/1/08 (b) 426,625
----------------------------------------------------------------------------------------------------------
19,427,335
----------------------------------------------------------------------------------------------------------
Utilities -- 4.1%
1,000,000 A3* Burlington, KS Environmental Improvement Revenue,
(Kansas City Power & Light Project), 4.750% due 9/1/15 1,068,310
2,000,000 AAA Energy Northwest Washington Electric Revenue, (Project
No. 3), Series A, FSA-Insured, 5.500% due 7/1/18 (c) 2,197,760
500,000 A Georgia Municipal Electric Authority, Power System Revenue,
Series X, 6.500% due 1/1/12 588,780
1,000,000 AAA Griffin, GA Combined Public Utility Revenue, AMBAC-Insured,
5.000% due 1/1/21 1,057,180
1,000,000 BBB+++ North Carolina Eastern Municipal Power Agency, Power
System Revenue, Series D, 6.450% due 1/1/14+ 1,133,170
1,355,000 AAA North Carolina Municipal Power Agency No. 1, Catawba
Electricity Revenue, 10.500% due 1/1/10 1,735,999
----------------------------------------------------------------------------------------------------------
7,781,199
----------------------------------------------------------------------------------------------------------
Water and Sewer -- 13.4%
1,045,000 AAA Boston, MA Water & Sewer Community Revenue,
(Escrowed to maturity with state and local government
securities), 10.875% due 1/1/09 1,283,584
1,445,000 AA- Charleston, SC Waterworks & Sewer Revenue,
5.250% due 1/1/16 1,586,408
2,000,000 Aaa* Chicago, IL Metropolitan Water Reclamation District,
Capital Improvement, Series A, (Escrowed with state and
local government securities to 12/1/12 Call @ 101),
5.500% due 12/1/14 (c) 2,350,220
1,370,000 AAA Cleveland, OH Waterworks Revenue, Series K, FGIC-Insured,
5.250% due 1/1/21 (c) 1,474,435
1,000,000 AAA El Paso, TX Water and Sewer Revenue Refunding and
Improvement, Series A, FSA-Insured, 6.000% due 3/1/15 (c) 1,189,210
2,000,000 AA+++ Fort Worth, TX Water and Sewer Revenue,
5.625% due 2/15/17 (c) 2,254,060
1,000,000 AAA Gainesville, GA Water & Sewer Revenue, FSA-Insured,
5.375% due 11/15/20 (c) 1,084,170
660,000 AAA Jackson, TN Water and Sewer Revenue, 7.200% due 7/1/12+ 786,812
Ohio State Water Development Authority Revenue:
2,660,000 AAA 9.375% due 12/1/10 (g)+ 3,266,799
465,000 AAA Safe Water, Series III, 9.000% due 12/1/10+ 550,825
2,000,000 AAA Philadelphia, PA Water & Wastewater Revenue, Series B,
FGIC-Insured, 5.250% due 11/1/14 2,253,820
2,750,000 AAA Phoeniz, AZ Water Revenue, FGIC-Insured, 5.500% due 7/1/14 3,183,565
1,765,000 AAA Pueblo, CO Bridge Waterworks, Water Revenue Improvement,
Series A, FSA-Insured, 6.000% due 11/1/14 2,086,883
See Notes to Financial Statements.
--------------------------------------------------------------------------------
14 2003 Annual Report
================================================================================
Schedule of Investments (continued) December 31, 2003
================================================================================
FACE
AMOUNT RATING(a) SECURITY VALUE
==========================================================================================================
Water and Sewer -- 13.4% (continued)
$ 210,000 AAA Ringwood Borough, NJ Sewer Authority Special Obligation,
9.875% due 7/1/13+ $ 277,460
Spanish Fork City, UT Water Revenue, FSA Insured:
350,000 Aaa* Call 6/1/12 @ 100, 5.500% due 6/1/16 (e) 408,608
1,135,000 Aaa* Unrefunded, 5.500% due 6/1/16 1,275,252
----------------------------------------------------------------------------------------------------------
25,312,111
----------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 100.0%
(Cost -- $181,387,724**) $189,663,093
==========================================================================================================
(a) All ratings are by Standard & Poor's Ratings Service, except for those
which are identified by an asterisk (*), are rated by Moody's Investors
Service and those identified by a double dagger (++), are rated by Fitch
Ratings.
(b) Income from this issue is considered a preference item for purposes of
calculating the alternative minimum tax.
(c) All or a portion of this security is segregated for open futures
contracts.
(d) Inverse floating rate security -- coupon varies inversely with level of
short-term tax-exempt interest rates.
(e) Pre-Refunded bonds are escrowed with U.S. government securities and are
considered by the Manager to be triple-A rated even if the issuer has not
applied for new ratings.
(f) Security is currently in default.
(g) All or a portion of this security is held as collateral for open futures
contracts.
+ Bonds are escrowed to maturity with U.S. government securities and are
considered by the Manager to be triple-A rated even if the issuer has not
applied for new ratings.
** Aggregate cost for Federal income tax purposes is $181,111,888.
See pages 16 and 17 for definitions of ratings and certain abbreviations.
See Notes to Financial Statements.
--------------------------------------------------------------------------------
Intermediate Muni Fund, Inc. 15
================================================================================
Bond Ratings (unaudited)
================================================================================
The definitions of the applicable rating symbols are set forth below:
Standard & Poor's Ratings Service ("Standard & Poor's") -- Ratings from "AA" to
"CCC" 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 differs 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 it normally exhibits
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.
BB, B -- Bonds rated "BB", "B", "CCC" and "CC" are regarded, on
CCC and CC balance, as predominantly speculative and with respect to capacity
to pay interest and repay principal in accordance with the terms
of the obligation. "BB" represents a lower degree of speculation
than "B", and "CC" the highest degree of speculation. While such
bonds will likely have some quality and protective
characteristics, these are outweighed by large uncertainties or
major risk exposures to adverse conditions.
Moody's Investors Service ("Moody's") -- Numerical modifiers 1, 2, and 3 may be
applied to each generic rating from "Aa" to "Caa", where 1 is the highest and 3
the lowest rating within its generic category.
Aaa -- Bonds 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 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 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 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.
Ba -- Bonds rated "Ba" are judged to have speculative elements; their
future cannot be considered as well assured. Often the protection
of interest and principal payments may be very moderate, and
therefore not well safeguarded during both good and bad times over
the future. Uncertainty of position characterizes bonds in this
class.
B -- Bonds rated "B" generally lack characteristics of the desirable
investments. Assurance of interest and principal payments or
maintenance of other terms of the contract over any long period of
time may be small.
Caa -- Bonds rated "Caa" are of poor standing. These issues may be in
default, or there may be present elements of danger with respect
to principal or interest.
--------------------------------------------------------------------------------
16 2003 Annual Report
================================================================================
Bond Ratings (unaudited) (continued)
================================================================================
Ca -- Bonds rated "Ca" represent obligations which are speculative in
a high degree. Such issues are often in default or have other
marked shortcomings.
C -- Bonds rated "C" are the lowest rated class of bonds, and issues
so rated can be regarded as having extremely poor prospects of
ever attaining any real investment standing.
Fitch Ratings ("Fitch") -- Ratings from "AA" to "BBB" may be modified by the
addition of a plus (+) sign or minus (-) sign to show relative standings within
the major ratings categories.
AA -- Bonds rated "AA" are considered to be investment-grade and of
very high credit quality. The obligor's ability to pay interest
and/or dividends and repay principal is very strong.
A -- Bonds and preferred stock considered to be investment-grade and
of high credit quality. The obligor's ability to pay interest
and/or dividends and repay principal is considered to be strong,
but may be more vulnerable to adverse changes in economic
conditions and circumstances than debt or preferred securities
with higher ratings.
BBB -- Bonds rated "BBB" are considered to be investment-grade and of
satisfactory credit quality. The obligor's ability to pay interest
or dividends and repay principal is considered to be adequate.
Adverse changes in economic conditions and circumstances, however,
are more likely to have adverse impact on these securities and,
therefore, impair timely payment. The likelihood that the ratings
of these bonds will fall below investment grade is higher than for
securities with higher ratings.
NR -- Indicates that the bond is not rated by Standard & Poor's,
Moody's or Fitch.
================================================================================
Short-Term Security Ratings (unaudited)
================================================================================
SP-1 -- Standard & Poor's highest 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 a demand feature -- VRDO.
================================================================================
Abbreviations* (unaudited)
================================================================================
ACA -- American Capital Assurance
AMBAC -- American Municipal Bond Assurance Corporation
CGIC -- Capital Guaranty Insurance Company
CONNIE LEE -- College Construction Loan Insurance Association
COP -- Certificate of Participation
FGIC -- Financial Guaranty Insurance Company
FHA -- Federal Housing Administration
FHLB -- Federal Home Loan Bank
FHLMC -- Federal Home Loan Mortgage Corporation
FLAIRS -- Floating Adjustable Interest Rate Securities
FNMA -- Federal National Mortgage Association
FSA -- Financial Security Assurance
GIC -- Guaranteed Investment Contract
GNMA -- Government National Mortgage Association
GO -- General Obligation
HFA -- Housing Finance Authority
IDA -- Industrial Development Agency
IDR -- Industrial Development Revenue
INDLC -- Industrial Indemnity Company
ISD -- Independent School District
LOC -- Letter of Credit
MBIA -- Municipal Bond Investors Assurance Corporation
PCFA -- Pollution Control Financing Authority
PCR -- Pollution Control Revenue
PSFG -- Permanent School Fund Guaranty
RIBS -- Residual Interest Bonds
VRDD -- Variable Rate Daily Demand
--------------
* Abbreviations may or may not appear in the schedule of investments.
--------------------------------------------------------------------------------
Intermediate Muni Fund, Inc. 17
================================================================================
Statement of Assets and Liabilities December 31, 2003
================================================================================
ASSETS:
Investments, at value (Cost -- $181,387,724) $ 189,663,093
Cash 23,915
Interest receivable 3,402,423
Receivable for securities sold 821,444
Prepaid assets 7,877
-------------------------------------------------------------------------------------------
Total Assets 193,918,752
-------------------------------------------------------------------------------------------
LIABILITIES:
Management fee payable 98,624
Payable to broker -- variation margin 56,250
Distributions payable to Municipal Auction Rate
Cumulative Preferred Stockholders 3,170
Accrued expenses 80,542
-------------------------------------------------------------------------------------------
Total Liabilities 238,586
-------------------------------------------------------------------------------------------
Series M Municipal Auction Rate Cumulative Preferred Stock
(2,000 shares authorized and issued at $25,000 per share) (Note 6) 50,000,000
-------------------------------------------------------------------------------------------
Total Net Assets $ 143,680,166
-------------------------------------------------------------------------------------------
NET ASSETS:
Par value of capital shares $ 14,005
Capital paid in excess of par value 141,233,797
Undistributed net investment income 1,284,893
Accumulated net realized loss from investment transactions and
futures contracts (6,285,710)
Net unrealized appreciation of investments and futures contracts 7,433,181
-------------------------------------------------------------------------------------------
Total Net Assets
(Equivalent to $10.26 per share on 14,004,750 capital shares of
$0.001 par value outstanding; 100,000,000 capital shares authorized) $ 143,680,166
-------------------------------------------------------------------------------------------
See Notes to Financial Statements.
--------------------------------------------------------------------------------
18 2003 Annual Report
================================================================================
Statement of Operations For the Year Ended December 31, 2003
================================================================================
INVESTMENT INCOME:
Interest $ 10,936,074
--------------------------------------------------------------------------------
EXPENSES:
Management fee (Note 3) 1,160,750
Auction participation fees (Note 6) 125,095
Audit and legal 87,000
Shareholder servicing fees 60,460
Custody 30,846
Shareholder communications 22,432
Rating agency fees 16,500
Stock exchange listing fees 13,612
Auction agency fees 8,000
Directors' fees 4,905
Other 4,581
--------------------------------------------------------------------------------
Total Expenses 1,534,181
--------------------------------------------------------------------------------
Net Investment Income 9,401,893
--------------------------------------------------------------------------------
REALIZED AND UNREALIZED LOSS ON INVESTMENTS
AND FUTURES CONTRACTS (NOTES 4 AND 5):
Realized Loss From:
Investment transactions (429,714)
Futures contracts (32,906)
--------------------------------------------------------------------------------
Net Realized Loss (462,620)
--------------------------------------------------------------------------------
Change in Net Unrealized Appreciation of Investments
and Futures Contracts:
Beginning of year 7,503,524
End of year 7,433,181
--------------------------------------------------------------------------------
Decrease in Net Unrealized Appreciation (70,343)
--------------------------------------------------------------------------------
Net Loss on Investments and Futures Contracts (532,963)
--------------------------------------------------------------------------------
Distributions Paid to Municipal Auction Rate Cumulative Preferred
Stockholders From Net Investment Income (501,981)
--------------------------------------------------------------------------------
Increase in Net Assets From Operations $ 8,366,949
================================================================================
See Notes to Financial Statements.
--------------------------------------------------------------------------------
Intermediate Muni Fund, Inc. 19
================================================================================
Statements of Changes in Net Assets
================================================================================
For the Years
Ended December 31,
2003 2002
====================================================================================================
OPERATIONS:
Net investment income $ 9,401,893 $ 9,469,970
Net realized loss (462,620) (3,311,384)
Increase (decrease) in net unrealized appreciation (70,343) 4,296,851
Dividends paid to Municipal Auction Rate Cumulative
Preferred Stockholders from net investment income (501,981) (664,828)
----------------------------------------------------------------------------------------------------
Increase in Net Assets From Operations 8,366,949 9,790,609
----------------------------------------------------------------------------------------------------
DISTRIBUTIONS PAID TO COMMON STOCK
SHAREHOLDERS FROM (NOTE 2):
Net investment income (8,570,907) (8,087,762)
----------------------------------------------------------------------------------------------------
Decrease in Net Assets From Distributions
Paid to Common Stock Shareholders (8,570,907) (8,087,762)
----------------------------------------------------------------------------------------------------
FUND SHARE TRANSACTIONS:
Underwriting commissions and expenses from the issuance of
Municipal Auction Rate Cumulative Preferred Stock (Note 6) -- (778,731)
----------------------------------------------------------------------------------------------------
Decrease in Net Assets From Fund Share Transactions -- (778,731)
----------------------------------------------------------------------------------------------------
Increase (Decrease) in Net Assets (203,958) 924,116
NET ASSETS:
Beginning of year 143,884,124 142,960,008
----------------------------------------------------------------------------------------------------
End of year* $ 143,680,166 $ 143,884,124
====================================================================================================
* Includes undistributed net investment income of: $ 1,284,893 $ 959,915
====================================================================================================
See Notes to Financial Statements.
--------------------------------------------------------------------------------
20 2003 Annual Report
================================================================================
Notes to Financial Statements
================================================================================
1. Significant Accounting Policies
The Intermediate Muni Fund, Inc. ("Fund"), a Maryland corporation, is registered
under the Investment Company Act of 1940, as amended, as a 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 the bid and asked 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 for which market quotations are
not available will be valued in good faith at fair value by or under the
direction of the Board of Directors; (d) securities maturing within 60 days are
valued at cost plus accreted discount, or minus amortized premium, which
approximates value; (e) gains or losses on the sale of securities are calculated
by using the specific identification method; (f) interest income, adjusted for
amortization of premium and accretion of discount, is recorded on an accrual
basis; (g) dividends and distributions to shareholders are recorded monthly by
the Fund on the ex-dividend date for the shareholders of Common Stock based on
net investment income. The holders of the Municipal Auction Rate Cumulative
Preferred Stock shall be entitled to receive dividends in accordance with an
auction that will normally be held weekly and out of funds legally available to
shareholders; (h) the character of income and gains to be distributed is
determined in accordance with income tax regulations which may differ from
accounting principles generally accepted in the United States of America. At
December 31, 2003, 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. Net investment income, net realized
gains and net assets were not affected by this change; (i) 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; (j) the net asset value of the Fund's Common Stock is
determined by dividing the value of the net assets available to Common Stock by
the total number of shares of common stock outstanding. For the purpose of
determining the net asset value per share of the common stock, the value of the
Fund's net assets shall be deemed to equal the value of the Fund's assets less
(1) the Fund's liabilities, (2) the aggregate liquidation value (i.e., $25,000
per outstanding share) of the Municipal Auction Rate Cumulative Preferred Stock
and (3) accumulated and unpaid dividends on the outstanding Municipal Auction
Rate Cumulative Preferred Stock issue; and (k) estimates and assumptions are
required to be made regarding assets, liabilities and changes in net assets
result-
--------------------------------------------------------------------------------
Intermediate Muni Fund, Inc. 21
================================================================================
Notes to Financial Statements (continued)
================================================================================
ing 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. Exempt-Interest Dividends and Other Distributions
The Fund intends to satisfy conditions that will enable interest from municipal
securities, which is exempt from Federal income tax and from designated state
income taxes, to retain such tax-exempt status when distributed to the
shareholders of the Fund.
Capital gains distributions, if any, are taxable to shareholders, and are
declared and paid at least annually.
3. Management Agreement and Transactions with Affiliated Persons
Smith Barney Fund Management LLC ("SBFM"), an indirect wholly-owned subsidiary
of Citigroup Inc. ("Citigroup"), acts as investment manager to the Fund. As
compensation for its services, the Fund pays SBFM a management fee calculated at
an annual rate of 0.60% of the Fund's average daily net assets. For purposes of
calculating the management fee, the liquidation value of any preferred stock of
the Fund is not deducted in determining 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 Citigroup or its
affiliates.
4. Investments
During the year ended December 31, 2003, the aggregate cost of purchases and
proceeds from sales of investments (including maturities of long-term
investments, but excluding short-term investments) were as follows:
================================================================================
Purchases $40,258,291
--------------------------------------------------------------------------------
Sales 40,889,194
================================================================================
At December 31, 2003, the aggregate gross unrealized appreciation and
depreciation of investments for Federal income tax purposes were as follows:
================================================================================
Gross unrealized appreciation $11,359,098
Gross unrealized depreciation (2,807,893)
--------------------------------------------------------------------------------
Net unrealized appreciation $ 8,551,205
================================================================================
--------------------------------------------------------------------------------
22 2003 Annual Report
================================================================================
Notes to Financial Statements (continued)
================================================================================
5. Futures Contracts
Securities or cash equal to the initial margin amount are either deposited with
the broker or segregated by the custodian upon entering into the futures
contract. Additional securities are also segregated up to the current market
value of the futures contracts. During the period the futures contract is open,
changes in the value of the contract are recognized as unrealized gains or
losses by "marking to market" on a daily basis to reflect the market value of
the contract at the end of each day's trading. Variation margin payments are
received or made and recognized as assets due from or liabilities due to broker,
depending upon whether unrealized gains or losses are incurred. When the
contract is closed, the Fund records a realized gain or loss equal to the
difference between the proceeds from (or cost of) the closing transactions and
the Fund's basis in the contract. The Fund enters into such contracts typically
to hedge a portion of its portfolio. The Fund bears the market risk that arises
from changes in the value of the financial instruments and securities indices.
At December 31, 2003, the Fund had the following open futures contracts:
Number of Basis Market Unrealized
Contracts Expiration Value Value Loss
======================================================================================================
Contracts to Sell:
U.S. 10 Year Treasury Note 450 3/04 $48,348,437 $49,190,625 $(842,188)
======================================================================================================
6. Municipal Auction Rate Cumulative Preferred Stock
On January 28, 2002, the Fund issued 2,000 shares of Series M Municipal Auction
Rate Cumulative Preferred Stock ("ARCPS"). The underwriting discount of $500,000
and offering expenses of $278,731 associated with the ARCPS offering were
recorded as a reduction of the capital paid in excess of par value of common
stock for the year ended December 31, 2002. The ARCPS' dividends are cumulative
at a rate determined at an auction and the dividend period is typically 7 days.
The dividend rates ranged from 0.61% to 1.30% during the year ended December 31,
2003. At December 31, 2003, the dividend rate was 1.05%.
The ARCPS are redeemable under certain conditions by the Fund, or subject to
mandatory redemption (if the Fund is in default of certain coverage
requirements) at a redemption price equal to the liquidation preference, which
is the sum of $25,000 per share plus accumulated and unpaid dividends.
The Fund is required to maintain certain asset coverages with respect to the
ARCPS. If the Fund fails to maintain these coverages and does not cure any such
failure within the required time period, the Fund is required to redeem a
requisite number of the ARCPS in order to meet the applicable requirement.
--------------------------------------------------------------------------------
Intermediate Muni Fund, Inc. 23
================================================================================
Notes to Financial Statements (continued)
================================================================================
Additionally, failure to meet the foregoing asset coverage requirements would
restrict the Fund's ability to pay dividends to common shareholders.
Citigroup Global Markets Inc. ("CGM") (formerly known as Salomon Smith Barney
Inc.), another indirect wholly-owned subsidiary of Citigroup, also currently
acts as a broker/dealer in connection with the auction of ARCPS. After each
auction, the auction agent will pay to each broker/dealer, from monies the Fund
provides, a participation fee at the annual rate of 0.25% of the purchase price
of the ARCPS that the broker/dealer places at the auction. For the year ended
December 31, 2003, CGM earned $125,095 as a participating broker/dealer.
7. Capital Loss Carryforward
At December 31, 2003, the Fund had, for Federal income tax purposes,
approximately $7,064,000 of unused capital loss carryforwards available to
offset future capital gains. To the extent that these carryforward losses are
used to offset capital gains, it is probable that the gains so offset will not
be distributed.
The amount and year of expiration for each carryforward loss is indicated below.
Expiration occurs on December 31 of the year indicated:
2006 2007 2008 2010 2011
================================================================================
Carryforward Amounts $38,000 $1,896,000 $514,000 $4,047,000 $569,000
================================================================================
8. Income Tax Information and Distributions to Shareholders
The tax basis components of distributable earnings at December 31 were:
2003 2002
================================================================================
Undistributed tax-exempt income $ 950,395 $ 708,351
--------------------------------------------------------------------------------
Accumulated capital losses (7,064,168) (6,494,699)
--------------------------------------------------------------------------------
Unrealized appreciation 8,551,205 8,428,521
================================================================================
At December 31, 2003 and 2002, the differences between book basis and tax basis
unrealized appreciation and depreciation were attributable primarily to wash
sale loss deferrals, the treatment of accretion of discounts and amortization of
premiums and mark to market of derivative contracts.
The tax character of distributions paid during the year ended December 31 was:
2003 2002
================================================================================
Tax-exempt income $ 9,072,888 $ 8,738,103
Ordinary income -- 14,487
--------------------------------------------------------------------------------
Total $ 9,072,888 $ 8,752,590
================================================================================
--------------------------------------------------------------------------------
24 2003 Annual Report
================================================================================
Notes to Financial Statements (continued)
================================================================================
9. Additional Information
The Fund has received the following information from Citigroup Asset Management
("CAM"), the Citigroup business unit which includes the Fund's Investment
Manager and other investment advisory companies, all of which are indirect,
wholly-owned subsidiaries of Citigroup. CAM is reviewing its entry, through an
affiliate, into the transfer agent business in the period 1997-1999. As CAM
currently understands the facts, at the time CAM decided to enter the transfer
agent business, CAM sub-contracted for a period of five years certain of the
transfer agency services to a third party and also concluded a revenue guarantee
agreement with this sub-contractor providing that the sub-contractor would
guarantee certain benefits to CAM or its affiliates (the "Revenue Guarantee
Agreement"). In connection with the subsequent purchase of the sub-contractor's
business by an affiliate of the current sub-transfer agent (PFPC Inc.) used by
CAM on many of the funds it manages, this Revenue Guarantee Agreement was
amended eliminating those benefits in exchange for arrangements that included a
one-time payment from the sub-contractor.
The Boards of CAM-managed funds (the "Boards") were not informed of the Revenue
Guarantee Agreement with the sub-contractor at the time the Boards considered
and approved the transfer agent arrangements. Nor were the Boards informed of
the subsequent amendment to the Revenue Guarantee Agreement when that occurred.
CAM has begun to take corrective actions. CAM will pay to the applicable funds
approximately $17 million (plus interest) that CAM and its affiliates received
from the Revenue Guarantee Agreement and its amendment. CAM also plans an
independent review to verify that the transfer agency fees charged by CAM were
fairly priced as compared to competitive alternatives. CAM is instituting new
procedures and making changes designed to ensure no similar arrangements are
entered into in the future.
CAM has briefed the SEC, the New York State Attorney General and other
regulators with respect to this matter, as well as the U.S. Attorney who is
investigating the matter. CAM is cooperating with governmental authorities on
this matter, the ultimate outcome of which is not yet determinable.
The Fund's transfer agent is PFPC Inc., which is not affiliated with CAM.
--------------------------------------------------------------------------------
Intermediate Muni Fund, Inc. 25
================================================================================
Financial Highlights
================================================================================
For a share of capital stock outstanding throughout each year ended December 31,
unless otherwise noted:
2003 2002 2001 2000 1999
======================================================================================================================
Net Asset Value, Beginning of Year $ 10.27 $ 10.21 $ 10.20 $ 9.89 $ 10.61
----------------------------------------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment income(1) 0.68 0.68 0.56 0.55 0.53
Net realized and unrealized gain (loss)(1) (0.03) 0.07 -- 0.28 (0.71)
Dividends paid to Municipal Auction
Rate Cumulative Preferred Stockholders
from net investment income (0.05) (0.05) -- -- --
----------------------------------------------------------------------------------------------------------------------
Total Income (Loss) From Operations 0.60 0.70 0.56 0.83 (0.18)
----------------------------------------------------------------------------------------------------------------------
Gains From Repurchase of Treasury Stock -- -- 0.00* 0.02 --
----------------------------------------------------------------------------------------------------------------------
Underwriting Commissions and Expenses
from the Issuance of Municipal Auction
Rate Cumulative Preferred Stock -- (0.06) -- -- --
----------------------------------------------------------------------------------------------------------------------
Distributions Paid To Common
Stock Shareholders From:
Net investment income (0.61) (0.58) (0.55) (0.54) (0.53)
Net realized gains -- -- -- -- (0.01)
----------------------------------------------------------------------------------------------------------------------
Total Distributions Paid to
Common Stock Shareholders (0.61) (0.58) (0.55) (0.54) (0.54)
----------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Year $ 10.26 $ 10.27 $ 10.21 $ 10.20 $ 9.89
----------------------------------------------------------------------------------------------------------------------
Total Return, Based on Market Price(2) 13.33% 4.03% 17.17% 11.90% (17.10)%
----------------------------------------------------------------------------------------------------------------------
Total Return, Based on Net Asset Value(2) 6.22% 6.73% 6.01% 9.68% (1.39)%
----------------------------------------------------------------------------------------------------------------------
Net Assets, End of Year (millions) $ 144 $ 144 $ 143 $ 143 $ 83
----------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets Based on
Common Shares Outstanding(3):
Expenses 1.07% 1.08% 0.80% 0.78% 0.77%
Net investment income(1) 6.55 6.59 5.35 5.47 5.17
----------------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 21% 49% 36% 45% 54%
----------------------------------------------------------------------------------------------------------------------
Market Price, End of Year $ 10.19 $ 9.56 $ 9.75 $ 8.81 $ 8.375
======================================================================================================================
--------------------------------------------------------------------------------
26 2003 Annual Report
================================================================================
Financial Highlights (continued)
================================================================================
2003 2002 2001 2000 1999
==========================================================================================
Municipal Auction Rate
Cumulative Preferred Stock(4):
Total Amount Outstanding (000s) $50,000 $50,000 -- -- --
Asset Coverage Per Share 96,840 96,942 -- -- --
Involuntary Liquidating
Preference Per Share(5) 25,000 25,000 -- -- --
Average Market Value Per Share(5) 25,000 25,000 -- -- --
==========================================================================================
(1) Effective January 1, 2001, the Fund adopted a change in the accounting
method that requires the Fund to amortize premiums and accrete all
discounts. Without the adoption of this change, for the year ended
December 31, 2001, the ratio of net investment income to average net
assets would have been 5.31%. Per share information, ratios and
supplemental data for the periods prior to January 1, 2001 have not been
restated to reflect this change in presentation. In addition, the impact
of this change to net investment income and net realized and unrealized
gain was less than $0.01 per share.
(2) The total return calculation assumes that dividends are reinvested in
accordance with the Fund's dividend reinvestment plan.
(3) Calculated on basis of average net assets of common shareholders. Ratios
do not reflect the effect of dividend payments to preferred shareholders.
(4) On January 28, 2002, the Fund issued 2,000 shares of Series M Municipal
Auction Rate Cumulative Preferred Stock at $25,000 a share.
(5) Excludes accumulated and unpaid dividends.
* Amount represents less than $0.01 per share.
--------------------------------------------------------------------------------
Intermediate Muni Fund, Inc. 27
================================================================================
Independent Auditors' Report
================================================================================
The Shareholders and Board of Directors
of Intermediate Muni Fund, Inc.:
We have audited the accompanying statement of assets and liabilities, including
the schedule of investments, of Intermediate Muni Fund, Inc. ("Fund") as of
December 31, 2003, and the related statement of operations for the year then
ended, the statements of changes in net assets for each of the years in the
two-year period then ended, and the financial highlights for each of the years
in the five-year period then ended. These financial statements and financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures included confirmation of
securities owned as of December 31, 2003, by correspondence with the custodian
and broker. As to securities sold but not yet delivered, we performed other
appropriate auditing procedures. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Fund as of December 31, 2003, and the results of its operations for the year
then ended, the changes in its net assets for each of the years in the two-year
period then ended, and the financial highlights for each of the years in the
five-year period then ended, in conformity with accounting principles generally
accepted in the United States of America.
/s/ KPMG LLP
New York, New York
February 13, 2004
--------------------------------------------------------------------------------
28 2003 Annual Report
================================================================================
Financial Data (unaudited)
================================================================================
For a share of capital stock outstanding throughout each period:
AMEX Net Asset Dividends Reinvestment
Period Closing Price* Value* Paid Price
================================================================================
2002
January $ 9.70 $10.21 $0.046 $ 9.67
February 9.69 10.29 0.046 9.67
March 9.50 10.02 0.046 9.52
April 9.59 10.16 0.048 9.58
May 9.70 10.18 0.048 9.75
June 9.87 10.27 0.048 9.95
July 9.90 10.37 0.048 9.92
August 10.05 10.44 0.048 10.07
September 10.09 10.57 0.048 10.11
October 9.75 10.24 0.051 9.50
November 9.42 10.16 0.051 9.57
December 9.56 10.27 0.051 9.48
2003
January 9.45 10.18 0.051 9.47
February 9.47 10.25 0.051 9.60
March 9.48 10.19 0.051 9.53
April 9.75 10.24 0.051 10.01
May 10.09 10.40 0.051 10.01
June 9.98 10.31 0.051 10.03
July 9.61 10.12 0.051 10.12
August 10.02 10.09 0.051 10.01
September 10.15 10.24 0.051 10.19
October 10.22 10.21 0.051 10.25
November 10.39 10.28 0.051 10.32
December 10.19 10.26 0.051 10.31
================================================================================
* On the last business day of the month.
--------------------------------------------------------------------------------
Intermediate Muni Fund, Inc. 29
================================================================================
Additional Information (unaudited)
================================================================================
Information about Directors and Officers
The business and affairs of the Intermediate Muni Fund, Inc. ("Fund") are
managed under the direction of the Fund's Board of Directors. Information
pertaining to the Directors and Officers of the Fund is set forth below. The
Statement of Additional Information includes additional information about
Directors and is available, without charge, upon request by calling the Fund's
transfer agent (PFPC Inc. at 1-800-331-1710).
Number of
Term of Portfolios
Office* Principal in Fund
Position(s) and Length Occupation(s) Complex Other Board
Held with of Time During Past Overseen Memberships
Name, Address and Age Fund Served Five Years by Director Held by Director
-------------------------------------------------------------------------------------------------------------------------------
Non-Interested Directors:
Lee Abraham Director Since Former Director 27 None
13732 LeHavre Drive 1999 of Signet Group PLC
Frenchman's Creek
Palm Beach Gardens, FL 33410
Age 76
Allan J. Bloostein Director Since President of Allan 34 Taubman
27 West 67th Street 1999 Bloostein Associates, a Realty Corp.
New York, NY 10023 consulting firm;
Age 74 former Director of
CVS Corp.
Jane F. Dasher Director Since Controller of PBK 27 None
Korsant Partners 1999 Holdings Inc., a family
283 Greenwich Avenue investment company
3rd Floor
Greenwich, CT 06830
Age 54
Donald R. Foley Director Since Retired 27 None
3668 Freshwater Drive 1992
Jupiter, FL 33477
Age 81
Richard E. Hanson, Jr. Director Since Retired; Former Head of 27 None
2751 Vermont Route 140 1999 the New Atlanta Jewish
Poultney, VT 05764 Community High School
Age 62
Paul Hardin Director Since Professor of Law & 34 None
12083 Morehead 1994 Chancellor Emeritus at
Chapel Hill, NC 27514-8426 the University of
Age 72 North Carolina
Roderick C. Rasmussen Director Since Investment Counselor 27 None
9 Cadence Court 1992
Morristown, NJ 07960
Age 77
John P. Toolan Director Since Retired 27 John Hancock
13 Chadwell Place 1992 Funds
Morristown, NJ 07960
Age 73
--------------------------------------------------------------------------------
30 2003 Annual Report
================================================================================
Additional Information (unaudited) (continued)
================================================================================
Number of
Term of Portfolios
Office* Principal in Fund
Position(s) and Length Occupation(s) Complex Other Board
Held with of Time During Past Overseen Memberships
Name, Address and Age Fund Served Five Years by Director Held by Director
-------------------------------------------------------------------------------------------------------------------------------
Interested Director:
R. Jay Gerken, CFA** Chairman, Since Managing Director of 221 None
Citigroup Asset Management President 2002 Citigroup Global Markets
("CAM") and Chief Inc. ("CGM"); Chairman,
399 Park Avenue Executive President and Chief
4th Floor Officer Executive Officer of Smith
New York, NY 10022 Barney Fund Management
Age 52 LLC ("SBFM"), Travelers
Investment Adviser, Inc.
("TIA") and Citi Fund
Management, Inc. ("CFM");
President and Chief Executive
Officer of certain mutual funds
associated with Citigroup Inc.
("Citigroup"); Formerly
Portfolio Manager of Smith
Barney Allocation Series Inc.
(from 1996 to 2001) and Smith
Barrney Growth and Income
Fund (from 1996 to 2000)
Officers:
Andrew B. Shoup Senior Vice Since Director of CAM; Senior N/A N/A
CAM President 2003 Vice President and Chief
125 Broad Street and Chief Administrative Officer of
10th Floor Administrative mutual funds associated
New York, NY 10004 Officer with Citigroup; Treasurer of
Age 47 certain mutual funds associated
with Citigroup; Head of
International Funds
Administration of CAM (from
2001 to 2003); Director of
Global Funds Administration
of CAM (from 2000 to 2001);
Head of U.S. Citibank Funds
Administration of CAM (from
1998 to 2000)
Richard L. Peteka Chief Since Director of CGM; Chief N/A N/A
CAM Financial 2002 Financial Officer and
125 Broad Street Officer and Treasurer of certain mutual
11th Floor Treasurer funds associated with
New York, NY 10004 Citigroup; Director and
Age 42 Head of Internal Control for
CAM U.S. Mutual Fund
Administration (from
1999 to 2002); Vice President,
Head of Mutual Fund
Administration and
Treasurer at Oppenheimer
Capital (from 1996 to 1999)
--------------------------------------------------------------------------------
Intermediate Muni Fund, Inc. 31
================================================================================
Additional Information (unaudited) (continued)
================================================================================
Number of
Term of Portfolios
Office* Principal in Fund
Position(s) and Length Occupation(s) Complex Other Board
Held with of Time During Past Overseen Memberships
Name, Address and Age Fund Served Five Years by Director Held by Director
-------------------------------------------------------------------------------------------------------------------------------
Peter M. Coffey Vice Since Managing Director of N/A N/A
CAM President 1992 CGM; Investment
399 Park Avenue Officer of SBFM
4th Floor
New York, NY 10022
Age 58
Kaprel Ozsolak Controller Since Vice President of CGM; N/A N/A
CAM 2002 Controller of certain
125 Broad Street mutual funds associated
11th Floor with Citigroup
New York, NY 10004
Age 38
Robert I. Frenkel Secretary Since Managing Director and N/A N/A
CAM and Chief 2003 General Counsel of Global
300 First Stamford Place Legal Officer Mutual Funds for CAM and
4th Floor its predecessor (since 1994);
Stamford, CT 06902 Secretary of CFM; Secretary
Age 48 and Chief Legal Officer of
mutual funds associated with
Citigoup
---------
* Each Director and Officer serves until his or her successor has been duly
elected and qualified.
** Mr. Gerken is an "interested person" of the Fund as defined in the
Investment Company Act of 1940, as amended, because Mr. Gerken is an
officer of SBFM and certain of its affiliates.
--------------------------------------------------------------------------------
32 2003 Annual Report
================================================================================
Tax Information (unaudited)
================================================================================
For Federal tax purposes, the Fund hereby designates for the fiscal year ended
December 31, 2003:
o 100% of the dividends paid by the Fund from net investment income as
tax exempt for regular Federal income tax purposes.
--------------------------------------------------------------------------------
Intermediate Muni Fund, Inc. 33
================================================================================
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 PFPC Inc. ("PFPC"), as purchasing 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 determination date (generally, the record date
for the distribution), Plan participants will be issued shares of common stock
by the fund at a price equal to the greater of net asset value 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 (which is the close of business on the
determination date), PFPC will buy common stock in the open market, on the AMEX
or elsewhere, for the participants' accounts. If following the commencement of
the purchases and before PFPC has completed its purchases, the market price
exceeds the net asset value of the common stock as of the valuation time, PFPC
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 as of the valuation time 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 PFPC is unable to stop open market purchases and
cause the Fund to issue the remaining shares, the average per share purchase
price paid by PFPC may exceed the net asset value of the common stock as of the
valuation time, 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 at such net asset value. PFPC will begin to purchase common stock on
the open market as soon as practicable after the determination date for the
dividend or capital gains distribution, but in no event
--------------------------------------------------------------------------------
34 2003 Annual Report
================================================================================
Dividend Reinvestment Plan (unaudited) (continued)
================================================================================
shall such purchases continue later than 30 days after the payment date for such
dividend or distribution, or the record date for a succeeding dividend or
distribution, except when necessary to comply with applicable provisions of the
federal securities laws.
PFPC 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 PFPC 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. PFPC'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 any brokerage commissions actually 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 PFPC, 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 PFPC Inc., P.O. Box 8030, Boston, Massachusetts
02266-8030 or by telephone at (800) 331-1710.
--------------------------
A description of the policies and procedures that the Fund uses to determine how
to vote proxies relating to portfolio securities is available without charge,
upon request, by telephoning the Fund (toll-free) at 1-800-451-2010 and by
visiting the SEC's web site at www.sec.gov.
--------------------------------------------------------------------------------
Intermediate Muni Fund, Inc. 35
(This page intentionally left blank.)
--------------------------------------------------------------------------------
Intermediate
Muni Fund, Inc.
--------------------------------------------------------------------------------
DIRECTORS
Lee Abraham
Alan J. Bloostein
Jane F. Dasher
Donald R. Foley
R. Jay Gerken, CFA
Chairman
Richard E. Hanson, Jr.
Paul Hardin
Roderick C. Rasmussen
John P. Toolan
OFFICERS
R. Jay Gerken, CFA
President and Chief
Executive Officer
Andrew B. Shoup
Senior Vice President and
Chief Administrative Officer
Richard L. Peteka
Chief Financial Officer
and Treasurer
Peter M. Coffey
Vice President
Kaprel Ozsolak
Controller
Robert I. Frenkel
Secretary and
Chief Legal Officer
SBI
Listed on the American
Stock Exchange
INVESTMENT MANAGER
Smith Barney Fund Management LLC
CUSTODIAN
State Street Bank and Trust Company
SHAREHOLDER
SERVICING AGENT
PFPC Inc.
P.O. Box 8030
Boston, Massachusetts 02266-8030
This report is intended only for the shareholders of Intermediate Muni Fund,
Inc. It is not a Prospectus, circular or representation intended for use in the
purchase or sale of shares of the Fund or any securities mentioned in the
report.
INTERMEDIATE
MUNI FUND, INC.
125 Broad Street
10th Floor, MF-2
New York, New York 10004
FD1067 2/04
04-6110
ITEM 2. CODE OF ETHICS.
The registrant has adopted a code of ethics that applies to the
registrant's principal executive officer, principal financial officer,
principal accounting officer or controller.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
The Board of Directors of the registrant has determined that Jane F.
Dasher, the Chairman of the Board's Audit Committee, possesses the
technical attributes identified in Instruction 2(b) of Item 3 to Form
N-CSR to qualify as an "audit committee financial expert," and has
designated Ms. Dasher as the Audit Committee's financial expert. Ms.
Dasher is an "independent" Director pursuant to paragraph (a)(2) of
Item 3 to Form N-CSR.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
(a) Audit Fees for Intermediate Muni Fund, Inc. were $15,000 and
$15,000 for the years ended 12/31/03 and 12/31/02.
(b) Audit-Related Fees for Intermediate Muni Fund, Inc. were $12,500
and $7,000 for the years ended 12/31/03 and 12/31/02. These
amounts represent procedures performed and prepared for agreed
upon procedures letter in accordance with the terms of the
Supplementary Articles.
(c) Tax Fees for Intermediate Muni Fund, Inc. were $2,100 and $2,000
for the years ended 12/31/03 and 12/31/02. These amounts
represent aggregate fees paid for tax compliance, tax advice and
tax planning services, which include (the filing and amendment of
federal, state and local income tax returns, timely RIC
qualification review and tax distribution and analysis planning)
rendered by the Accountant to Intermediate Muni Fund, Inc.
(d) There were no all other fees for Intermediate Muni Fund, Inc. for
the years ended 12/31/03 and 12/31/02.
(e) (1) Audit Committee's pre-approval policies and procedures
described in paragraph (c) (7) of Rule 2-01 of Regulation S-X.
The Charter for the Audit Committee (the "Committee") of the
Board of each registered investment company (the "Fund") advised
by Smith Barney Fund Management LLC or Salomon Brothers Asset
Management Inc or one of their affiliates (each, an "Adviser")
requires that the Committee shall approve (a) all audit and
permissible non-audit services to be provided to the Fund and (b)
all permissible non-audit services to be provided by the Fund's
independent auditors to the Adviser and any Covered Service
Providers if the engagement relates directly to the operations
and financial reporting of the Fund. The Committee may implement
policies and procedures by which such services are approved other
than by the full Committee.
The Committee shall not approve non-audit services that the
Committee believes may impair the independence of the auditors.
As of the date of the approval of this Audit Committee Charter,
permissible non-audit services include any professional services
(including tax services), that are not prohibited services as
described below, provided to the Fund by the independent
auditors, other than those provided to the Fund in connection
with an audit or a review of the financial statements of the
Fund. Permissible non-audit services may not include: (i)
bookkeeping or other services related to the accounting records
or financial statements of the Fund; (ii) financial information
systems design and implementation; (iii) appraisal or valuation
services, fairness opinions or contribution-in-kind reports; (iv)
actuarial services; (v) internal audit outsourcing services; (vi)
management functions or human resources; (vii) broker or dealer,
investment adviser or investment banking services; (viii) legal
services and expert services unrelated to the audit; and (ix) any
other service the Public Company Accounting Oversight Board
determines, by regulation, is impermissible.
Pre-approval by the Committee of any permissible non-audit
services is not required so long as: (i) the aggregate amount of
all such permissible non-audit services provided to the Fund, the
Adviser and any service providers controlling, controlled by or
under common control with the Adviser that provide ongoing
services to the Fund ("Covered Service Providers") constitutes
not more than 5% of the total amount of revenues paid to the
independent auditors during the fiscal year in which the
permissible non-audit services are provided to (a) the Fund, (b)
the Adviser and (c) any entity controlling, controlled by or
under common control with the Adviser that provides ongoing
services to the Fund during the fiscal year in which the services
are provided that would have to be approved by the Committee;
(ii) the permissible non-audit services were not recognized by
the Fund at the time of the engagement to be non-audit services;
and (iii) such services are promptly brought to the attention of
the Committee and approved by the Committee (or its delegate(s))
prior to the completion of the audit.
(f) N/A
(g) Non-audit fees billed - $100,000 and $1.2 million for the years
ended 12/31/2003 and 12/31/2002.
(h) Yes. Intermediate Muni Fund, Inc.'s Audit Committee has
considered whether the provision of non-audit services that were
rendered to Service Affiliates which were not pre-approved (not
requiring pre-approval) is compatible with maintaining the
Accountant's independence. All services provided by the
Accountant to Intermediate Muni Fund, Inc. or to Service
Affiliates which were required to be pre-approved were
pre-approved as required.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable.
ITEM 6. [RESERVED]
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
The Board of Directors of the Fund has delegated the authority to
develop policies and procedures relating to proxy voting to the
Manager. The Manager is part of Citigroup Asset Management ("CAM"), a
group of investment adviser affiliates of Citigroup, Inc.
("Citigroup"). Along with the other investment advisers that comprise
CAM, the Manager has adopted a set of proxy voting policies and
procedures (the "Policies") to ensure that the Manager votes proxies
relating to equity securities in the best interest of clients.
In voting proxies, the Manager is guided by general fiduciary
principles and seeks to act prudently and solely in the best interest
of clients. The Manager attempts to consider all factors that could
affect the value of the investment and will vote proxies in the manner
that it believes will be consistent with efforts to maximize
shareholder values. The Manager may utilize an external service
provider to provide it with information and/or a recommendation with
regard to proxy votes. However, such recommendations do not relieve the
Manager of its responsibility for the proxy vote.
In the case of a proxy issue for which there is a stated position in
the Policies, CAM generally votes in accordance with such stated
position. In the case of a proxy issue for which there is a list of
factors set forth in the Policies that CAM considers in voting on such
issue, CAM votes on a case-by-case basis in accordance with the general
principles set forth above and considering such enumerated
factors. In the case of a proxy issue for which there is no stated
position or list of factors that CAM considers in voting on such issue,
CAM votes on a case-by-case basis in accordance with the general
principles set forth above. Issues for which there is a stated position
set forth in the Policies or for which there is a list of factors set
forth in the Policies that CAM considers in voting on such issues fall
into a variety of categories, including election of directors,
ratification of auditors, proxy and tender offer defenses, capital
structure issues, executive and director compensation, mergers and
corporate restructurings, and social and environmental issues. The
stated position on an issue set forth in the Policies can always be
superseded, subject to the duty to act solely in the best interest of
the beneficial owners of accounts, by the investment management
professionals responsible for the account whose shares are being voted.
Issues applicable to a particular industry may cause CAM to abandon a
policy that would have otherwise applied to issuers generally. As a
result of the independent investment advisory services provided by
distinct CAM business units, there may be occasions when different
business units or different portfolio managers within the same business
unit vote differently on the same issue.
In furtherance of the Manager's goal to vote proxies in the best
interest of clients, the Manager follows procedures designed to
identify and address material conflicts that may arise between the
Manager's interests and those of its clients before voting proxies on
behalf of such clients. To seek to identify conflicts of interest, CAM
periodically notifies CAM employees (including employees of the
Manager) in writing that they are under an obligation (i) to be aware
of the potential for conflicts of interest with respect to voting
proxies on behalf of client accounts both as a result of their personal
relationships and due to special circumstances that may arise during
the conduct of CAM's and the Manager's business, and (ii) to bring
conflicts of interest of which they become aware to the attention of
compliance personnel. The Manager also maintains and considers a list
of significant relationships that could present a conflict of interest
for the Manager in voting proxies. The Manager is also sensitive to the
fact that a significant, publicized relationship between an issuer and
a non-CAM affiliate might appear to the public to influence the manner
in which the Manager decides to vote a proxy with respect to such
issuer. Absent special circumstances or a significant, publicized
non-CAM affiliate relationship that CAM or the Manager for prudential
reasons treats as a potential conflict of interest because such
relationship might appear to the public to influence the manner in
which the Manager decides to vote a proxy, the Manager generally takes
the position that non-CAM relationships between Citigroup and an issuer
(e.g. investment banking or banking) do not present a conflict of
interest for the Manager in voting proxies with respect to such issuer.
Such position is based on the fact that the Manager is operated as an
independent business unit from other Citigroup business units as well
as on the existence of information barriers between the Manager and
certain other Citigroup business units.
CAM maintains a Proxy Voting Committee, of which the Manager personnel
are members, to review and address conflicts of interest
brought to its attention by compliance personnel. A proxy issue that
will be voted in accordance with a stated position on an issue or in
accordance with the recommendation of an independent third party is not
brought to the attention of the Proxy Voting Committee for a conflict
of interest review because the Manager's position is that to the extent
a conflict of interest issue exists, it is resolved by voting in
accordance with a pre-determined policy or in accordance with the
recommendation of an independent third party. With respect to a
conflict of interest brought to its attention, the Proxy Voting
Committee first determines whether such conflict of interest is
material. A conflict of interest is considered material to the extent
that it is determined that such conflict is likely to influence, or
appear to influence, the Manager's decision-making in voting proxies.
If it is determined by the Proxy Voting Committee that a conflict of
interest is not material, the Manager may vote proxies notwithstanding
the existence of the conflict.
If it is determined by the Proxy Voting Committee that a conflict of
interest is material, the Proxy Voting Committee is responsible for
determining an appropriate method to resolve such conflict of interest
before the proxy affected by the conflict of interest is voted. Such
determination is based on the particular facts and circumstances,
including the importance of the proxy issue and the nature of the
conflict of interest. Methods of resolving a material conflict of
interest may include, but are not limited to, disclosing the conflict
to clients and obtaining their consent before voting, or suggesting to
clients that they engage another party to vote the proxy on their
behalf.
ITEM 8. [RESERVED]
ITEM 9. CONTROLS AND PROCEDURES.
(a) The registrant's principal executive officer and principal
financial officer have concluded that the registrant's disclosure
controls and procedures (as defined in Rule 30a- 3(c) under the
Investment Company Act of 1940, as amended (the "1940 Act")) are
effective as of a date within 90 days of the filing date of this
report that includes the disclosure required by this paragraph,
based on their evaluation of the disclosure controls and
procedures required by Rule 30a-3(b) under the 1940 Act and
15d-15(b) under the Securities Exchange Act of 1934.
(b) There were no changes in the registrant's internal control over
financial reporting (as defined in Rule 30a-3(d) under the 1940
Act) that occurred during the registrant's last fiscal half-year
(the registrant's second fiscal half-year in the case of an
annual report) that have materially affected, or are likely to
materially affect the registrant's internal control over
financial reporting.
ITEM 10. EXHIBITS.
(a) Code of Ethics attached hereto.
Exhibit 99.CODE ETH
(b) Attached hereto.
Exhibit 99.CERT Certifications pursuant to section 302 of the
Sarbanes-Oxley Act of 2002
Exhibit 99.906CERT Certifications pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and
the Investment Company Act of 1940, the registrant has duly caused this Report
to be signed on its behalf by the undersigned, there unto duly authorized.
Intermediate Muni Fund, Inc.
By: /s/ R. Jay Gerken
R. Jay Gerken
Chief Executive Officer of
Intermediate Muni Fund, Inc.
Date: March 11, 2004
Pursuant to the requirements of the Securities Exchange Act of 1934 and
the Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By: /s/ R. Jay Gerken
(R. Jay Gerken)
Chief Executive Officer of
Intermediate Muni Fund, Inc.
Date: March 11, 2004
By: /s/ Richard L. Peteka
Richard L. Peteka
Chief Financial Officer of
Intermediate Muni Fund, Inc.
Date: March 11, 2004