-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, VxHSaI9nEY5xIHuEX80PFPEIAM+nZR0WqNyk6w1MsncGT8vZfYrIoFdowI6Rbrot RGjrLVNW4NUPn3go4kWVNg== 0000091155-96-000087.txt : 19960223 0000091155-96-000087.hdr.sgml : 19960223 ACCESSION NUMBER: 0000091155-96-000087 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19951231 FILED AS OF DATE: 19960222 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: SMITH BARNEY INTERMEDIATE MUNICIPAL FUND INC CENTRAL INDEX KEY: 0000882300 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] IRS NUMBER: 133643581 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: N-30D SEC ACT: 1940 Act SEC FILE NUMBER: 811-06506 FILM NUMBER: 96524157 BUSINESS ADDRESS: STREET 1: 1345 AVE OF THE AMERICAS CITY: NEW YORK STATE: NY ZIP: 10105 BUSINESS PHONE: 2126985344 MAIL ADDRESS: STREET 2: 388 GREENWICH ST CITY: NEW YORK STATE: NY ZIP: 10013 FORMER COMPANY: FORMER CONFORMED NAME: SMITH BARNEY INTERMEDIATE QUALITY MUNICIPAL FUND INC DATE OF NAME CHANGE: 19600201 N-30D 1 1995 1995 1995 1995 1995 ------------- ANNUAL REPORT ------------- Smith Barney Intermediate Municipal Fund, Inc. ------------------------- December 31, 1995 [LOGO] Smith Barney Mutual Funds Investing for your future. Every day. - ---------------------------------------------- Smith Barney Intermediate Municipal Fund, Inc. - ---------------------------------------------- Dear Shareholder: We are pleased to provide you with this annual report, which includes audited financial statements for Smith Barney Intermediate Municipal Fund, Inc. and covers the year ended December 31, 1995. For your convenience, we summarize the period's prevailing economic and market conditions below. In addition, a more detailed summary of performance and current holdings can be found in the appropriate sections that follow in the annual report. Performance Summary Smith Barney Intermediate Municipal Fund posted a one-year total return on net asset value of 13.72% for the period ended December 31, 1995. The Fund's performance was sustained with only minimal reliance on capital gains, thereby preserving favorable tax status for the Fund's distributions. For the year ended December 31, 1995, the Fund distributed dividends totaling $0.60 per share. The table below shows the annualized distribution rates based on the Fund's December 31, 1995 net asset value (NAV) per share and its American Stock Exchange (AMEX) closing price. Annualized Distribution Rate ----------------- $10.66 (NAV) 5.63% $10.38 (AMEX) 5.78% 1995: The Year in Review The year 1995 was a positive one for the fixed income markets as low rates prevailed. One of the more notable events of the year was a significant drop in intermediate-term interest rates, as measured by the decline of 10-Year Treasuries from more than 7.79% at the beginning of 1995 to 7.20% on March 31, 1995, 6.18% on September 30, 1995, and, lastly, 5.62% by year end. This drop was responsible in part for the stock market's remarkable showing in 1995 -- a performance that defied all expectations. In another surprising development, the U.S. dollar finished the year in an extremely strong position relative to other currencies, and that will likely encourage lower interest rates going forward. The Municipal Bond Market As Treasury yields were falling in 1995, intermediate-term municipal bond yields were declining at a much less dramatic rate. However, slow economic growth, low rates, and a diminishing supply of issues generally combined to create a subdued municipal bond market environment in 1995, offering value 1 primarily to investors who were willing to carefully sift through the supply and focus on intermediate-term municipal bonds with strong credit ratings, as Smith Barney Intermediate Municipal Fund did during this time period. Looking Ahead It now appears that the Federal Reserve has been successful in containing inflation -- which averaged 2.8% in 1995 -- and in encouraging a slower rate of economic growth, which totaled 2.5% in 1995 as measured by gross domestic product (GDP). The Federal Open Market Committee, which controls the federal funds rate, declined to alter the rate in both September and November after a quarter point reduction in July. The federal funds rate is a key indicator because it represents the rate banks charge each other for overnight loans and affects all other interest rates, including those offered by municipal bonds. Lower rates typically increase economic growth because they make it less expensive for businesses to fund expansion. The Federal Reserve acted to lower short-term rates at their last meeting held in December 1995. Going forward, we expect to see yet another year of slow economic growth with GDP posting growth of around 2%. We also forecast steady or slightly lower interest rates of half a point to a full point in 1996. Our outlook for the municipal bond market remains positive. Limited supply is driving prices higher, yields are excellent relative to U.S. Treasuries and growing credit strength in a number of states is increasing the attractiveness of many issues. What's Ahead for Municipal Bonds The supply of municipal bonds is diminishing and the attractiveness of municipal bonds is on the rise. Not only are the yields attractive relative to Treasuries, what does come to market is likely to be of higher credit quality than in the past. The National Governors' Association believes the fiscal condition of many states is now the strongest it has been since the late 1980s, with many of the larger states showing remarkable improvement in their ability to service outstanding bonds and support new debt. Any municipal bond market rally, however, will depend on tax reform and the success of Washington, D.C. in reaching a consensus on the federal budget. At this time, we do not expect any flat tax proposals to be taken seriously given the upcoming Presidential election. That does not mean, however, that the municipal bond market will not worry about such a prospect, which could depress municipal bond prices in 1996. In addition, federal spending reductions could impact on funding for state and local projects which, if combined with resistance to higher local taxes that back some municipal bonds, could affect credit quality or supply. 2 Portfolio Strategy and Outlook In light of conflicting economic forces affecting the municipal bond marketplace, we are taking a cautious investment approach to portfolio management and being very selective about new investments. We are carefully balancing the interest-rate sensitivity of Smith Barney Intermediate Municipal Fund by investing in a strategically diversified combination of maturities. We remain substantially committed to high-quality coupon issues with call protection in anticipation of a downturn in rates in 1996. The Fund's average weighted maturity for the one-year period ended December 31, 1995 was 8.42 years. At this time, we would like to thank you for your investment in Smith Barney Intermediate Municipal Fund. Sincerely, /s/ Heath B. McLendon /s/ Peter M. Coffey Heath B. McLendon Peter M. Coffey Chairman and Vice President and Chief Executive Officer Investment Officer January 24, 1996 3 Smith Barney Intermediate Municipal Fund, Inc. - -------------------------------------------------------------------------------- Schedule of Investments December 31, 1995 - -------------------------------------------------------------------------------- FACE AMOUNT RATING SECURITY VALUE ================================================================================ Education -- 11.7% $1,700,000 A* Arizona Education Loan Marketing Corp., 7.000% due 3/1/02(a) $ 1,850,875 1,070,000 A* Brazos, TX Higher Education Authority Student Loan Revenue, 6.300% due 9/1/98(a) 1,106,113 1,090,000 AAA Goose Creek, TX Independent School District, PSFG, 7.750% due 2/15/04 1,320,262 1,250,000 NR Idaho Student Loan Fund Refunding Marketing Association Inc. Student Loan Refunding, 6.400% due 10/1/99, Sinking Fund Average Life 1/7/97 1,271,875 325,000 AAA Massachusetts Education Loan Authority Issue E, Series A, 6.850% due 1/1/04(a) 354,250 705,000 A* Montana Higher Education Student Assistance Corp. Student Loan Revenue, 7.050% due 6/1/04(a) 770,212 New England Education Loan Marketing Corp. Massachusetts Refunding Student Loan Revenue: 1,000,000 A- 5.625% due 7/1/04(a) 1,047,500 500,000 A1* 6.900% due 11/1/09(a) 545,000 1,830,000 A1* Southwest Allen, IN Multi-School Building Corp., 6.700% due 7/15/04 1,990,125 - -------------------------------------------------------------------------------- 10,256,212 - -------------------------------------------------------------------------------- Electric -- 2.4% 1,750,000 AA Washington Public Power Supply System Nuclear Power Project #1, 7.750% due 7/1/03 2,056,250 - -------------------------------------------------------------------------------- Escrowed to Maturity(b) -- 10.7% 1,135,000 AAA Metropolitan Nashville, TN Airport Authority Revenue, 7.500% due 7/1/05, Sinking Fund Average Life 8/2/01 1,305,250 684,000 AAA New Jersey State Turnpike Authority Revenue Refunding, 10.375% due 1/1/03, Sinking Fund Average Life 5/23/00 831,915 1,855,000 AAA New York State Urban Development Corp. Revenue, 7.300% due 4/1/01 2,107,744 375,000 AAA Ohio State Water Development Authority Revenue (Armco Steel Corp.), 7.875% due 11/1/00, Sinking Fund Average Life 11/1/98 420,000 1,685,000 AAA Ohio State Water Development Authority Safe Water Series 2, 9.375% due 12/1/10, Sinking Fund Average Life 3/28/04 2,179,969 45,000 AAA Pennsylvania State Public School Building Authority Lease Revenue, 10.375% due 11/1/06, Sinking Fund Average Life 3/5/01 45,829 125,000 AAA Salt Lake City, UT Water Conservancy Distribution Revenue, Series A, 10.875% due 10/1/02, Sinking Fund Average Life 2/26/00 154,063 1,000,000 AAA Southwestern Illinois Development Authority Hospital Revenue Refunding (Wood River Hospital), 6.875% due 8/1/03, Sinking Fund Average Life 9/19/01 1,147,500 See Notes to Financial Statements. 4 Smith Barney Intermediate Municipal Fund, Inc. - -------------------------------------------------------------------------------- Schedule of Investments (continued) December 31, 1995 - -------------------------------------------------------------------------------- FACE AMOUNT RATING SECURITY VALUE ================================================================================ Escrowed to Maturity(b) -- 10.7% (continued) $ 985,000 AAA Tom Green County, TX Hospital Authority, 7.875% due 2/1/06, Sinking Fund Average Life 1/18/01 $ 1,156,144 - -------------------------------------------------------------------------------- 9,348,414 - -------------------------------------------------------------------------------- Finance -- 3.1% 1,000,000 A New York Local Government Assistance Corp., Series 1992A, 6.400% due 4/1/02 1,105,000 1,500,000 A Pennsylvania State Finance Authority (Beaver County) Revenue Refunding Bonds (Municipal Capital Improvement Program), Series 1993, 6.600% due 11/1/09 1,650,000 - -------------------------------------------------------------------------------- 2,755,000 - -------------------------------------------------------------------------------- General Obligation -- 7.3% 1,000,000 AAA Chicago, IL GO, AMBAC-Insured, 6.100% due 1/1/03 1,087,500 1,000,000 AAA District of Columbia GO Refunding, Series B, MBIA-Insured, 6.750% due 6/1/01 1,066,250 1,000,000 AA Harvey, IL GO Refunding, Asset Guaranty-Insured, 6.700% due 2/1/09 1,065,000 1,250,000 Baa* New Haven, CT GO, Series 1992A, 9.250% due 3/1/02, Sinking Fund Average Life 3/1/00 1,512,500 1,500,000 Baa1* New York City GO, Series 1992D, 7.300% due 2/1/01 1,633,125 - -------------------------------------------------------------------------------- 6,364,375 - -------------------------------------------------------------------------------- Hospital -- 12.0% 1,500,000 Baa* Colorado Health Facilities Authority Revenue (Rocky Mountain Adventist), 6.250% due 2/1/04 1,560,000 915,000 BBB Defiance, OH Hospital Revenue Refunding (Defiance Hospital), 7.625% due 11/1/03 944,179 1,040,000 AAA Delaware State Health Facilities Authority Refunding (Medical Center of Delaware), MBIA-Insured, 6.250% due 10/1/03 1,160,900 1,250,000 A* Harris County, TX Health Facilities Development Corp. Hospital Revenue (Memorial Hospital Systems), 7.000% due 6/1/03 1,396,875 1,000,000 A* Indiana Health Facilities Authority Hospital Revenue Refunding Bonds (St. Anthony Medical Center), 7.000% due 10/1/06 1,092,500 1,180,000 AAA Orange County, FL Health Facilities Authority Hospital Revenue Bonds (Adventist Health Systems/Sunbelt), AMBAC-Insured, 6.875% due 11/15/04 1,298,000 500,000 AAA Orange County, FL Health Facilities Authority Revenue (Adventist Health Systems/Sunbelt), CGIC-Insured, FLAIRS, 8.210% due 11/15/07(c) 538,750 650,000 AAA St. Louis County, MT MBIA-Insured, 6.750% due 4/1/10 650,123 480,000 AA Taos County, NM Gross Receipts Tax Revenue, Asset Guaranty-Insured, 6.125% due 12/1/01 513,600 See Notes to Financial Statements. 5 Smith Barney Intermediate Municipal Fund, Inc. - -------------------------------------------------------------------------------- Schedule of Investments (continued) December 31, 1995 - -------------------------------------------------------------------------------- FACE AMOUNT RATING SECURITY VALUE ================================================================================ Hospital -- 12.0% (continued) $1,250,000 AA- Washington State Health Care Facilities Authority Revenue (Sacred Heart Medical Center), 6.750% due 2/15/06 $ 1,378,125 - -------------------------------------------------------------------------------- 10,533,052 - -------------------------------------------------------------------------------- Housing: Multi-Family -- 12.0% 950,000 AA Beaumont, TX Multi-Family Housing Finance (Regency Place Apartments), Asset Guaranty-Insured, 7.000% mandatory tender 10/1/04 992,750 610,000 AAA Charlotte, NC Mortgage Revenue Refunding (Double Oaks APT-A), FHA-Insured, 7.300% due 11/15/07 667,950 1,000,000 AAA Hudson County, NJ Improvement Authority Multi-Family Housing Revenue Bonds, 6.600% due 6/1/04(a) 1,080,000 2,000,000 A Lombard, IL Multi-Family Housing (Clover Creek Apartments), Surety Bond Continental Casualty, Series 1985, 6.500% mandatory tender 12/15/96 2,028,560 Mount Vernon, IL Elderly Housing Corp. First Lien Revenue Bonds Section 8 Assisted, Series 1979: 160,000 Baa1* 7.875% due 4/1/01 160,368 170,000 Baa1* 7.875% due 4/1/02 170,391 185,000 Baa1* 7.875% due 4/1/03 185,426 200,000 Baa1* 7.875% due 4/1/04 200,460 215,000 Baa1* 7.875% due 4/1/05 215,494 235,000 Baa1* 7.875% due 4/1/06 235,541 250,000 Baa1* 7.875% due 4/1/07 250,575 270,000 Baa1* 7.875% due 4/1/08 270,621 750,000 AAA San Jose, CA Multi-Family Housing (Country Brook Project), FNMA-Insured, 6.500% mandatory tender 4/1/02 794,063 1,100,000 AA- South Carolina State Housing Finance and Development Authority, 5.500% due 12/1/05 1,105,500 1,070,000 Aa* Streamwood, IL Multi-Family Housing Revenue (Southgate Project), FHA-Insured, 6.200% due 11/1/07 1,134,200 935,000 A-++ Tulsa, OK Multi-Family Housing Assistance Corp., 7.250% due 10/1/07, Sinking Fund Average Life 6/7/02(a) 963,050 - -------------------------------------------------------------------------------- 10,454,949 - -------------------------------------------------------------------------------- Housing: Single-Family -- 5.3% 570,000 AA- Maine State Housing Authority, Mortgage Purchase, Series D3, 7.600% due 11/15/01, Sinking Fund Average Life 8/4/99(a) 600,637 130,000 AAA Nebraska Investment Finance Authority Single-Family Mortgage Revenue, FGIC-Insured, Series 1985A, 8.500% due 11/15/96 132,713 570,000 NR North Tonawanda, NY Housing Development Corporation Mortgage Revenue Refunding (Bishop Gibbons Project), FHA-Insured, 6.350% due 12/15/02 609,188 See Notes to Financial Statements. 6 Smith Barney Intermediate Municipal Fund, Inc. - -------------------------------------------------------------------------------- Schedule of Investments (continued) December 31, 1995 - -------------------------------------------------------------------------------- FACE AMOUNT RATING SECURITY VALUE ================================================================================ Housing: Single-Family -- 5.3% (continued) $1,000,000 AAA Texas Department of Housing and Community Affairs Collateralized Home Mortgage Revenue Bonds, Series C, GNMA/FNMA-Insured, RIBS, 9.288% due 7/2/24(a)(c) $ 1,133,750 1,000,000 Aa1* Virginia State Housing Development Authority Commonwealth Mortgage, Series H, 6.100% due 7/1/03 1,072,500 1,060,000 Aa* Wisconsin Housing and Education Development Authority Home Ownership Revenue, 6.350% due 3/1/01 1,116,975 - -------------------------------------------------------------------------------- 4,665,763 - -------------------------------------------------------------------------------- Industrial Development -- 7.1% 1,000,000 A* Alaska Individual Development Export Authority, Series A, 6.200% due 4/1/07 1,080,000 400,000 NR Carroll County, TN Individual Development Revenue Refunding (Henry Siegel Co. Inc.), 7.200% due 4/1/05 415,500 1,500,000 Aa3* Gary, IN Economic Development Revenue Miller Partnership LOC Royal Bank of Scotland, 7.400% mandatory tender 4/1/01(a) 1,510,335 1,000,000 A Kanawha, WV Commercial Development Revenue (May Department Store Project), 6.500% due 6/1/03 1,115,000 1,000,000 NR Newbern, TN Industrial Development Ltd. Obligation (Newbern Rubber Inc.), 7.900% due 3/1/00 1,082,500 900,000 A+ Sussex County, DE Economic Development Revenue Refunding Bonds (Rehoboth Mall Project), Series 1992, 7.250% due 10/15/12 1,009,125 - -------------------------------------------------------------------------------- 6,212,460 - -------------------------------------------------------------------------------- Miscellaneous -- 3.7% 1,000,000 BBB- Clarksville, TN Natural Gas Acquis Corporation Gas Revenue, Series A, 7.500% due 11/1/04 1,060,000 1,000,000 A* Hoffman Estates, IL Tax Increment Revenue Junior Lien Hoffman Estates Unconditional Guarantee (Sears Roebuck & Co.), 6.600% due 5/15/02 1,105,000 1,000,000 A- Illinois Development Finance Authority City East of St. Louis, 6.875% due 11/15/05, Sinking Fund Average Life 4/15/00 1,081,250 - -------------------------------------------------------------------------------- 3,246,250 - -------------------------------------------------------------------------------- Pollution Control -- 5.1% 1,000,000 Aa3* Brazos River, TX Navigation District Brazoria County Pollution Control Revenue, 6.750% due 2/1/10 1,170,000 965,000 A Broward County, FL Resource South Project, 7.950% due 12/1/08 1,085,625 1,000,000 A+ Indianapolis, IN Reserve Recovery (Ogden Martin Systems Inc.), 7.700% due 12/1/00 1,051,740 1,000,000 AAA Monroe County, MI PCR (Detroit Edison Co. Project), AMBAC-Insured, 6.350% due 12/1/04(a) 1,110,000 - -------------------------------------------------------------------------------- 4,417,365 - -------------------------------------------------------------------------------- See Notes to Financial Statements. 7 Smith Barney Intermediate Municipal Fund, Inc. - -------------------------------------------------------------------------------- Schedule of Investments (continued) December 31, 1995 - -------------------------------------------------------------------------------- FACE AMOUNT RATING SECURITY VALUE ================================================================================ Pre-Refunded(b) -- 5.0% $1,095,000 AAA Gila County, AZ Individual Development Authority Revenue, Series 1981, 11.250% due 4/1/01, Pre-Refunded with U.S. Government Securities to 4/1/01 Call @ 100, Sinking Fund Average Life 12/1/01 $ 1,219,556 140,000 AAA Indiana University Revenue, Series 1983N, 10.000% due 7/1/03, Pre-Refunded with U.S. Government Securities to 7/1/01 Call @ 100, Sinking Fund Average Life 12/22/99 173,425 900,000 AAA Nassau County, NY IDA Hofstra University Project, Series 1987, 8.000% due 7/1/00, Pre-Refunded with U.S. Government Securities to 7/1/98 Call @ 100 983,250 265,000 AAA New York State Medical Care Facilities Finance Agency Revenue Hospital and Nursing Home Mortgage, Series A, (St. Vincent's Medical Center), FHA-Insured, 7.750% due 2/15/02, Pre-Refunded with U.S. Government Securities to 8/15/97 Call @ 102, Sinking Fund Average Life 1/2/95 288,188 500,000 AAA Oklahoma State IDA (Oklahoma Health Care Corp.) Series A, 9.125% due 11/1/08, Pre-Refunded with U.S. Government Securities to Various Call Dates, Sinking Fund Average Life 5/7/06 528,750 1,000,000 AAA Texas National Research Lab Community Financing Corp. Lease Revenue (Superconducting Supercollider Project), 6.750% due 12/1/04, Pre-Refunded with U.S. Government Securities to 12/1/01 Call @ 102 1,138,750 - -------------------------------------------------------------------------------- 4,331,919 - -------------------------------------------------------------------------------- Public Facilities -- 2.9% 1,350,000 A- Dekalb County, IN Redevelopment Authority Revenue (Mini-Mill Public Improvement), 6.250% due 1/15/09 1,446,187 1,000,000 AAA Harrisburg, PA Lease Revenue Green County Prison Project, CGIC-Insured, 6.500% due 6/1/04 1,102,500 - -------------------------------------------------------------------------------- 2,548,687 - -------------------------------------------------------------------------------- Solid Waste -- 4.8% 2,000,000 Baa* Atlantic City, NJ Utility Authority Solid Waste Revenue, 7.000% due 3/1/02, Sinking Fund Average Life 4/20/00 2,062,500 2,000,000 A- Union County, NJ Utility Authority Solid Waste Revenue, 6.850% due 6/15/02(a) 2,130,000 - -------------------------------------------------------------------------------- 4,192,500 - -------------------------------------------------------------------------------- See Notes to Financial Statements. 8 Smith Barney Intermediate Municipal Fund, Inc. - -------------------------------------------------------------------------------- Schedule of Investments (continued) December 31, 1995 - -------------------------------------------------------------------------------- FACE AMOUNT RATING SECURITY VALUE ================================================================================ Transportation -- 5.9% $2,035,000 AAA Dallas Fort Worth, TX Regional Airport Revenue Refunding, FGIC-Insured, Series 1992A, 7.750% due 11/1/03 $ 2,442,000 1,920,000 Baa* Denver, CO City and County Airport Revenue, Series 1990A, 8.250% due 11/15/02(a) 2,224,800 500,000 A Pittsfield Township, MI Economic Development Corp. Revenue Refunding Airport Association Project Unconditional Guaranty-Lincoln National, 6.400% due 12/1/02 521,250 - -------------------------------------------------------------------------------- 5,188,050 - -------------------------------------------------------------------------------- Utilities -- 1.0% 1,735,000 AAA Palo Duro River Authority, TX Refunding, CGIC-Insured, Series 1992, zero coupon due 8/1/09 832,800 - -------------------------------------------------------------------------------- TOTAL INVESTMENTS -- 100% (Cost -- $81,470,254)* $87,404,046 ================================================================================ (a) Income from these issues is considered a preference item for purposes of calculating the alternative minimum tax. (b) Pre-Refunded bonds escrowed by U.S. Government Securities and bonds escrowed to maturity by U.S. Government Securities are considered by manager to be triple-A rated even if issuer has not applied for new ratings. (c) Inverse floating rate security -- coupon varies inversely with level of short-term tax-exempt interest rates. ++ Fitch Investors Services, Inc. + Duff & Phelps Credit Rating Co. * Aggregate cost for Federal income tax purposes is substantially the same. See page 10 for definition of ratings and certain security descriptions. See Notes to Financial Statements. 9 Smith Barney Intermediate Municipal Fund, Inc. - -------------------------------------------------------------------------------- Ratings and Security Descriptions - -------------------------------------------------------------------------------- BOND RATINGS All ratings are by Standard & Poor's Corporation ("Standard & Poor's"), except that those identified by an asterisk (*) are rated by Moody's Investors Services ("Moody's"). The definitions of the applicable rating symbols are set forth below: Standard & Poor's -- Ratings from "AA" to "BBB" may be modified by the addition of a plus (+) or a minus (-) sign to show relative standings within the major rating categories. AAA -- Debt rated "AAA"' has the highest rating assigned by Standard & Poor's. Capacity to pay interest and repay principal is extremely strong. AA -- Debt rated "AA" has a very strong capacity to pay interest and repay principal and differs from the highest rated issue only in a small degree. A -- Debt rated "A" has 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 -- Debt rated "BBB" is 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. Moody's -- Numerical modifiers 1, 2, and 3 may be applied to each generic rating from "Aa" to "Baa", where 1 is the highest and 3 the lowest rating within its generic category. Aaa -- Bonds that are rated "Aaa" are judged to be of the best quality. They carry the smallest degree of investment risk and are generally referred to as "gilt edge." Interest payments are protected by a large or by an exceptionally stable margin and principal is secure. While the various protective elements are likely to change, such changes as can be visualized are most unlikely to impair the fundamentally strong position of such issues. Aa -- Bonds that are rated "Aa" are judged to be of high quality by all standards. Together with the Aaa group they comprise what are generally known as high grade bonds. They are rated lower than the best bonds because margins of protection may not be as large as in Aaa securities or fluctuation of protective elements may be of greater amplitude or there may be other elements present which make the long-term risks appear somewhat larger than in Aaa securities. A -- Bonds that are rated "A" possess many favorable investment attributes and are to be considered as upper medium grade obligations. Factors giving security to principal and interest are considered adequate but elements may be present which suggest a susceptibility to impairment some time in the future. Baa -- Bonds that are rated "Baa" are considered as medium grade obligations, i.e., they are neither highly protected nor poorly secured. Interest payments and principal security appear adequate for the present but certain protective elements may be lacking or may be characteristically unreliable over any great length of time. Such bonds lack outstanding investment characteristics and in fact have speculative characteristics as well. NR -- Indicates that the bond is not rated by Standard & Poor's or Moody's. SHORT-TERM SECURITIES RATINGS SP-1 -- Standard & Poor's highest rate rating indicating very strong or strong capacity to pay principal and interest; those issues determined to possess overwhelming safety characteristics are denoted with a plus (+) sign. VMIG 1 -- Moody's highest rating for issues having demand feature -- variable- rate demand obligation (VRDO). SECURITY DESCRIPTIONS AMBAC -- AMBAC Indemnity Corporation CGIC -- Capital Guaranty Insurance Company COP -- Certificate of Participation FGIC -- Financial Guaranty Insurance Company FHA -- Federal Housing Administration 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 IDA -- Industrial Development Agency IDR -- Industrial Development Revenue 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 10 Smith Barney Intermediate Municipal Fund, Inc. - -------------------------------------------------------------------------------- Statement of Assets and Liabilities December 31, 1995 - -------------------------------------------------------------------------------- ASSETS: Investments, at value (Cost -- $81,470,254) $87,404,046 Interest receivable 1,416,443 Receivable for securities sold 5,000 - -------------------------------------------------------------------------------- Total Assets 88,825,489 - -------------------------------------------------------------------------------- LIABILITIES: Payable to bank 220,119 Dividends payable 131,470 Management fees payable 44,958 Accrued expenses 36,626 - -------------------------------------------------------------------------------- Total Liabilities 433,173 - -------------------------------------------------------------------------------- Total Net Assets $88,392,316 ================================================================================ NET ASSETS: Par value of capital shares $ 8,289 Capital paid in excess of par value 82,891,113 Undistributed net investment income 156,741 Accumulated net realized loss on investments (597,619) Net unrealized appreciation of investments 5,933,792 - -------------------------------------------------------------------------------- Total Net Assets (Equivalent to $10.66 a share on 8,288,885 shares of $0.001 par value outstanding; 100,000,000 shares authorized) $88,392,316 ================================================================================ See Notes to Financial Statements. 11 Smith Barney Intermediate Municipal Fund, Inc. - -------------------------------------------------------------------------------- Statement of Operations For the Year Ended December 31, 1995 - -------------------------------------------------------------------------------- INVESTMENT INCOME: Interest $ 5,466,540 - -------------------------------------------------------------------------------- EXPENSES: Management fees (Note 3) 517,473 Shareholder and system servicing fees 26,400 Shareholder communications 20,001 Audit and legal 12,202 Directors' fees 11,742 Pricing service fees 9,800 Custody 9,402 Other 15,806 - -------------------------------------------------------------------------------- Total Expenses 622,826 - -------------------------------------------------------------------------------- Net Investment Income 4,843,714 - -------------------------------------------------------------------------------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (NOTE 4): Realized Loss From Security Transactions (excluding short-term securities): Proceeds from sales 10,688,516 Cost of securities sold 10,690,460 - -------------------------------------------------------------------------------- Net Realized Loss (1,944) - -------------------------------------------------------------------------------- Change in Net Unrealized Appreciation (Depreciation) of Investments: Beginning of year (95,664) End of year 5,933,792 - -------------------------------------------------------------------------------- Increase in Net Unrealized Appreciation 6,029,456 - -------------------------------------------------------------------------------- Net Gain on Investments 6,027,512 - -------------------------------------------------------------------------------- Increase in Net Assets From Operations $10,871,226 ================================================================================ See Notes to Financial Statements. 12 Smith Barney Intermediate Municipal Fund, Inc. - -------------------------------------------------------------------------------- Statements of Changes in Net Assets For the Years Ended December 31, - --------------------------------------------------------------------------------
1995 1994 ============================================================================================== OPERATIONS: Net investment income $ 4,843,714 $ 4,824,829 Net realized loss (1,944) (595,675) Increase in net unrealized appreciation (depreciation) 6,029,456 (6,379,884) - ---------------------------------------------------------------------------------------------- Increase (Decrease) in Net Assets From Operations 10,871,226 (2,150,730) - ---------------------------------------------------------------------------------------------- DISTRIBUTIONS TO SHAREHOLDERS FROM (NOTE 2): Net investment income (4,973,331) (4,965,775) - ---------------------------------------------------------------------------------------------- Decrease in Net Assets From Distributions To Shareholders (4,973,331) (4,965,775) - ---------------------------------------------------------------------------------------------- FUND SHARE TRANSACTIONS FROM: Net proceeds from 60,922 shares issued for reinvestment of dividends -- 645,354 - ---------------------------------------------------------------------------------------------- Increase in Net Assets From Fund Share Transactions -- 645,354 - ---------------------------------------------------------------------------------------------- Total Increase (Decrease) in Net Assets 5,897,895 (6,471,151) NET ASSETS: Beginning of year 82,494,421 88,965,572 - ---------------------------------------------------------------------------------------------- End of year* $88,392,316 $82,494,421 ============================================================================================== * Includes undistributed net investment income of: $156,741 $286,344 ==============================================================================================
See Notes to Financial Statements. 13 Smith Barney Intermediate Municipal Fund, Inc. - -------------------------------------------------------------------------------- Notes to Financial Statements - -------------------------------------------------------------------------------- 1. SIGNIFICANT ACCOUNTING POLICIES The Smith Barney Intermediate Municipal 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) securities transactions are accounted for on the trade date;(b) securities are valued at the mean between the bid and ask prices provided by an independent pricing service that are based on transactions in municipal obligations, quotations from municipal bond dealers, market transactions in comparable securities and various relationships between securities; short-term securities maturing within 60 days are valued at cost plus accreted discount, or minus amortized premium, which approximates market value; (c) gains or losses on the sale of securities are calculated by using the specific identification method; (d) interest income, adjusted for amortization of premium and accretion of original issue discount, is recorded on the accrual basis; market discount is recognized upon the disposition of the security; (e) 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; (f) the character of income and gains to be distributed are determined in accordance with income tax regulations which may differ from generally accepted accounting principles. Accordingly, at December 31, 1995 a portion of paid-in capital amounting to $14 had been reclassified to undistributed net investment income. Net investment income, net realized gains and net assets were not affected by this change; and (g) estimates and assumptions are required to be made regarding assets, liabilities and changes in net assets resulting from operations when financial statements are prepared. Changes in the economic environment, financial markets and any other parameters used in determining these estimates could cause actual results to differ from these amounts. 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. 14 Smith Barney Intermediate Municipal Fund, Inc. - -------------------------------------------------------------------------------- Notes to Financial Statements (continued) - -------------------------------------------------------------------------------- 3. MANAGEMENT AGREEMENT AND TRANSACTIONS WITH AFFILIATED PERSONS Smith Barney Mutual Funds Management Inc. ("SBMFM"), a subsidiary of Smith Barney Holdings Inc., acts as investment manager to the Fund. As compensation for its services, the Fund pays SBMFM a fee calculated at the annual rate of 0.60% of the Fund's average daily net assets. This fee is calculated daily and paid monthly. All officers and two Directors of the Fund are employees of Smith Barney Inc. 4. INVESTMENTS For the year ended December 31, 1995, the aggregate cost of purchases and proceeds from sales of investments (including maturities, excluding short-term investments) were $11,980,538 and $10,688,516, respectively. At December 31, 1995, aggregate gross unrealized appreciation for all securities in which there is an excess of market value over tax cost amounted to $5,967,789, and aggregate gross unrealized depreciation for all securities in which there is an excess of tax cost over market value amounted to $33,997, or a net unrealized appreciation of $5,933,792. 5. CAPITAL LOSS CARRYFORWARD At December 31, 1995, the Fund had for Federal income tax purposes net capital loss carryforwards of $592,944 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 expiration of the carryforwards are indicated below. Expiration occurs on the dates indicated: 12/31/02 12/31/03 ================================================================================ Carryforward Amounts $591,000 $1,944 ================================================================================ 15 Smith Barney Intermediate Municipal Fund, Inc. - -------------------------------------------------------------------------------- Financial Highlights - -------------------------------------------------------------------------------- For a share of capital stock outstanding throughout each year:
1995 1994(a) 1993(a) 1992(a)(b) ========================================================================================== Net Asset Value, Beginning of Year $ 9.95 $10.81 $10.36 $10.00 - ------------------------------------------------------------------------------------------ Income (Loss) From Operations: Net investment income 0.58 0.58 0.59 0.48* Net realized and unrealized gain (loss) 0.73 (0.84) 0.46 0.34 - ------------------------------------------------------------------------------------------ Total Income (Loss) From Operations 1.31 (0.26) 1.05 0.82 - ------------------------------------------------------------------------------------------ Less Distributions From: Net investment income (0.60) (0.60) (0.57) (0.46) Net realized gains -- -- (0.03) -- - ------------------------------------------------------------------------------------------ Total Distributions (0.60) (0.60) (0.60) (0.46) - ------------------------------------------------------------------------------------------ Net Asset Value, End of Year $10.66 $9.95 $10.81 $10.36 - ------------------------------------------------------------------------------------------ Total Return 13.72% (2.33)% 10.30% 8.44%++ - ------------------------------------------------------------------------------------------ Net Assets, End of Year (000s) $88,392 $82,494 $88,966 $83,499 - ------------------------------------------------------------------------------------------ Ratios to Average Net Assets: Expenses 0.72% 0.72% 0.73% 0.59%+* Net investment income 5.63 5.64 5.56 5.74+ - ------------------------------------------------------------------------------------------ Portfolio Turnover Rate 12.57% 25.59% 10.46% 23.48% - ------------------------------------------------------------------------------------------ Market Price at End of Year $10.38 $9.50 $11.13 $10.13 ==========================================================================================
(a) Based on the weighted average shares outstanding for the period. (b) For the period from March 2, 1992 (commencement of operations) to December 31, 1992. * The manager waived a portion of its fees for the period from March 2, 1992 to December 31, 1992. If such fees were not waived, the per share decrease in net investment income would have been $0.01 and the ratio of expenses to average net assets would have been 0.70% (annualized). ++ Total return is not annualized, as it may not be representative of the total return for the year. + Annualized. 16 Smith Barney Intermediate Municipal Fund, Inc. - -------------------------------------------------------------------------------- Independent Auditors' Report - -------------------------------------------------------------------------------- To the Shareholders and Board of Directors of the Smith Barney Intermediate Municipal Fund, Inc.: We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of the Smith Barney Intermediate Municipal Fund, Inc. as of December 31, 1995, the related statement of operations for the year then ended, the statement 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 three-year period then ended and for the period from March 2, 1992 (commencement of operations) to December 31, 1992. 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 generally accepted auditing standards. 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, 1995, by correspondence with the custodian. As to securities sold but not 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 Smith Barney Intermediate Municipal Fund, Inc. as of December 31, 1995, 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 three-year period then ended and for the period from March 2, 1992 to December 31, 1992, in conformity with generally accepted accounting principles. KPMG PEAT MARWICK LLP New York, New York February 2, 1996 17 Smith Barney Intermediate Municipal Fund, Inc. - -------------------------------------------------------------------------------- Financial Data (unaudited) - -------------------------------------------------------------------------------- For a share of capital stock outstanding throughout each period: AMEX Net Asset Income Reinvestment Period Closing Price* Value* Declared Price ================================================================================ 1992 2nd Quarter+ $ 9.88 $10.24 $0.12 $ 9.90 3rd Quarter 10.00 10.36 0.15 10.15 4th Quarter 10.13 10.36 0.19 10.15 - -------------------------------------------------------------------------------- 1993 1st Quarter 10.75 10.59 0.10 10.63 2nd Quarter 10.63 10.73 0.15 10.67 3rd Quarter 11.25 10.89 0.15 10.93 4th Quarter 11.13 10.81 0.17 10.78 - -------------------------------------------------------------------------------- 1994 1st Quarter 10.00 10.29 0.15 10.65 2nd Quarter 10.00 10.24 0.15 9.90 3rd Quarter 9.88 10.19 0.15 9.78 4th Quarter 9.50 9.95 0.15 9.40 - -------------------------------------------------------------------------------- 1995 1st Quarter 9.63 10.31 0.15 9.90 2nd Quarter 9.88 10.39 0.15 9.81 3rd Quarter 10.00 10.50 0.15 10.27 4th Quarter 10.38 10.66 0.15 10.34 ================================================================================ * On the last business day of the quarter. + For the period from March 2, 1992 (commencement of operations) to March 31, 1992. - -------------------------------------------------------------------------------- Tax Information (unaudited) - -------------------------------------------------------------------------------- 100% of the dividends paid by the Fund from net investment income for the year ended December 31, 1995, are tax-exempt for regular Federal income tax purposes. 18 Smith Barney Intermediate Municipal Fund, Inc. - -------------------------------------------------------------------------------- Dividend Reinvestment Plan - -------------------------------------------------------------------------------- Pursuant to the Fund's Dividend Reinvestment Plan (the "Plan"), all distributions are automatically reinvested by First Data Investor Services Group, Inc., (formerly known as "The Shareholder Services Group, Inc."), as plan agent (the "Plan Agent"), in additional shares of its Common Stock (the "Common Shares") as provided below unless a shareholder elects to receive cash. Distributions with respect to Common Shares registered in the name of a broker-dealer or other nominee (i.e., in "street name") are reinvested by the broker or nominee in additional Common Shares under the Plan, unless the service is not provided by the broker or nominee. Investors who own Common Shares registered in street name should consult their broker-dealer for details. All distributions to shareholders who do not participate in the Plan are paid by check mailed directly to the record holder by First Data Investor Services Group, Inc., as dividend disbursing agent. If the Fund declares a distribution payable either in Common Shares or in cash, nonparticipants in the Plan receive cash, and Plan participants receive the equivalent in Common Shares valued in the following manner: whenever the market price is equal to or exceeds the net asset value per share at the time Common Shares are valued for the purpose of determining the number of Common Shares equivalent to the cash distribution, participants are issued Common Shares valued at the greater of (1) the net asset value most recently determined or (2) 95% of the then current market price of the Common Shares. If the net asset value of the Common Shares at the time of valuation exceeds the market price of the Common Shares, or if the Fund declares a distribution payable only in cash, the Plan Agent buys Common Shares in the open market, on the American Stock Exchange or elsewhere, for the participants' accounts. If, following the commencement of purchases and before the Plan Agent has completed its purchases the market price exceeds the net asset value of the Common Shares, the average per Common Share purchase price paid by the Plan Agent may exceed the net asset value of the Common Shares, resulting in the acquisition of fewer Common Shares than if the distribution had been paid in Common Shares issued by the Fund at net asset value. The Plan Agent applies all cash received as a distribution to purchase Common Shares on the open market as soon as practicable after the payment date of the distribution, but in no event later than 30 days after such date, except when necessary to comply with applicable provisions of the Federal securities laws. 19 Smith Barney Intermediate Municipal Fund, Inc. - -------------------------------------------------------------------------------- Dividend Reinvestment Plan (continued) - -------------------------------------------------------------------------------- Participants in the Plan may withdraw from the Plan upon written notice to the Plan Agent which must be received at least ten business days prior to the distribution record date to become effective for that distribution. Shares in the account of each Plan participant are held by the Plan Agent in non-certificated form in the name of the Plan Agent or participant. When a participant withdraws from the Plan or upon termination of the Plan as provided below, certificates for whole Fund shares credited to his or her account under the Plan are issued and a cash payment is made for any fraction of a Fund share credited to such account. The automatic reinvestment of distributions does not relieve participants to any Federal income tax that may be payable on such distributions. The Fund does not charge participants for reinvesting distributions. Any Plan Agent's fees for the handling of reinvestment of distributions under the Plan are paid by the Fund. There are no brokerage charges with respect to Common Shares issued directly by the Fund as a result of distributions payable either in stock or in cash. However, each participant pays a pro rata share of brokerage commissions incurred with respect to the Plan Agent's open market purchases in connection with the reinvestment of distributions. Experience under the Plan may indicate that changes are desirable. Accordingly, the Fund and the Plan Agent reserve the right to amend the Plan as applied to any distribution paid subsequent to written notice of the change sent to all shareholders of the Fund at least 90 days before the record date for the distribution. The Plan also may be terminated by the Fund or the Plan Agent by at least 30 days' written notice to all shareholders of the Fund. All correspondence concerning the Plan should be directed to the Plan Agent at First Data Investor Services Group, Inc., P.O. Box 1376, Boston, Massachussetts 02104. 20 Smith Barney SMITH BARNEY Intermediate ------------ Municipal Fund, Inc. A Member of Travelers Group [LOGO] Directors Jessica M. Bibliowicz Joseph H. Fleiss Donald R. Foley Paul Hardin Francis P. Martin, M.D. Heath B. McLendon, Chairman Roderick C. Rasmussen John P. Toolan C. Richard Youngdahl Officers Heath B. McLendon Chief Executive Officer Jessica M. Bibliowicz President Lewis E. Daidone Senior Vice President and Treasurer Peter M. Coffey Vice President Thomas M. Reynolds Controller Christina T. Sydor Secretary Investment Manager Smith Barney Mutual Funds Management Inc. Distributor Smith Barney Inc. Custodian PNC Bank Shareholder Servicing Agent First Data Investor Services Group, Inc. P.O. Box 1376 Boston, MA 02104 This report is submitted for the general information of the shareholders of Smith Barney Intermediate Municipal Fund, Inc. It is not authorized for distribution to prospective investors unless accompanied or preceded by a current Prospectus for the Fund, which contains information concerning the Fund's investment policies and expenses as well as other pertinent information. Smith Barney Intermediate Municipal Fund, Inc. 388 Greenwich Street New York, New York 10013 FD01067 2/96 -----END PRIVACY-ENHANCED MESSAGE-----