-----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, KwEKpBChODziR04ukGsE4h8uYdcLqP/fnSAljYDlcidga4oWaP+epmRQRL16N3+H Dzqtk/acXLuQ2AKRN9qDHw== 0001133228-02-000250.txt : 20020830 0001133228-02-000250.hdr.sgml : 20020830 20020830112717 ACCESSION NUMBER: 0001133228-02-000250 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20020630 FILED AS OF DATE: 20020830 FILER: COMPANY DATA: COMPANY CONFORMED NAME: INTERMEDIATE MUNI FUND INC CENTRAL INDEX KEY: 0000882300 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: 02753709 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 FORMER COMPANY: FORMER CONFORMED NAME: SMITH BARNEY INTERMEDIATE MUNICIPAL FUND INC DATE OF NAME CHANGE: 19920909 N-30D 1 sb131842.txt SEMI-ANNUAL REPORT INTERMEDIATE MUNI FUND, INC. Semi-Annual Report June 30, 2002 Intermediate Muni Fund, Inc. [PHOTO OMITTED] [PHOTO OMITTED] Heath B. McLendon Peter M. Coffey Chairman Vice President Dear Shareholder, We are pleased to provide the semi-annual report for Intermediate Muni Fund, Inc. ("Fund") for the period ended June 30, 2002. In this report, we summarize what we believe to be the period's prevailing economic and market conditions and outline our investment strategy. A detailed summary of the Fund's performance can be found in the appropriate sections that follow. We hope you find this report to be useful and informative. Special Notice to Shareholders The Board of Directors of Intermediate Muni Fund, Inc. has approved certain changes to the Fund's management policies in connection with Rule 35d-1 under the Investment Company Act of 1940. Under normal conditions, the Fund will invest at least 80% of its net assets plus any borrowings for investment purposes in intermediate-term, investment-grade municipal obligations with remaining maturities at the time of investment of less than 15 years. Previously, the Fund's management policies stated that the Fund would invest at least 80% of its total assets in such securities. On January 28, 2002, Intermediate Muni Fund, Inc. issued and sold 2,000 shares of Municipal Auction Rate Cumulative Preferred Stock, valued at $50 million. The Fund used the proceeds from this sale to invest in municipal obligations that meet its investment objectives. In general, closed-end funds such as Intermediate Muni Fund, Inc. issue preferred stock when the Fund's managers believe investment opportunities exist that could increase the Fund's yield. Of course, along with potentially increasing the Fund's yield, leveraging techniques such as this may also increase the potential for share price volatility and market risk. In general, leveraging techniques such as this are beneficial in periods when interest rates are declining and short-term rates are substantially lower than intermediate- and long-term rates, as leveraging tends to enhance both net asset value and yield. In periods of rising interest rates, however, the opposite typically happens: drops in net asset value per share are magnified, as falling prices on the increased asset base are spread over the same amount of common shares outstanding. Additionally, the yield advantage diminishes as short-term rates rise closer to the yields of the Fund's longer-term holdings. - -------------------------------------------------------------------------------- Intermediate Muni Fund, Inc. 1 Performance Update During the period, the Fund paid income dividends totaling $0.28 per share to common shareholders. The table below details the annualized distribution rate and the six-month total return for the Fund based on its June 30, 2002 net asset value ("NAV") per share and the American Stock Exchange ("AMEX") closing price.(1) Price Annualized Six-Month Per Share Distribution Rate(2) Total Return(2) --------------- -------------------- --------------- $10.27 (NAV) 5.61% 3.53% $9.87 (AMEX) 5.84% 4.20% During the period, the Fund generated a return based on NAV of 3.53%. In comparison, the Lipper Inc. ("Lipper")(3) peer group of general and insured municipal bond closed-end funds (unleveraged) returned 3.67% based on NAV. Please note that past performance is not indicative of future results. Investment Objective The Fund seeks as high a level of current income exempt from federal income tax as is consistent with prudent investing.(4) The Fund invests primarily in intermediate term, investment grade municipal obligations with remaining maturities at the time of investment of less than 15 years. The Fund seeks to maintain a dollar-weighted average portfolio effective maturity of between three and 10 years. Municipal obligations may have all types of interest rate and reset terms, including fixed rate, floating and variable rate, zero coupon, payment in kind and auction rate features. - ---------- (1) The NAV is calculated by subtracting total liabilities and outstanding preferred stock from the closing value of all securities held by the Fund (plus all other assets) and dividing the result (total net assets of common stockholders) by the total number of the Fund's common shares outstanding. The NAV fluctuates with changes in the market prices of securities in which the Fund has invested. However, the price at which the investor may buy or sell shares of the Fund is at their market (AMEX) price as determined by supply of and demand for the Fund's shares. (2) Total returns are based on changes in net asset value or the market price, respectively. Total returns assume the reinvestment of all dividends and/or capital gains distributions in additional shares. Annualized distribution rate is the Fund's current monthly income dividend rate, annualized, and then divided by the NAV or the market value noted in this report. The annualized distribution rate assumes a current monthly income dividend rate of $0.048 for 12 months. The rate is as of June 30, 2002 and is subject to change. The important difference between a total return and an annualized distribution rate is that the total return takes into consideration a number of factors including the fluctuation of the NAV or the market price during the period reported. The NAV fluctuation includes the effects of unrealized appreciation or depreciation in the Fund. Accordingly, since an annualized distribution rate only reflects the current monthly income dividend rate annualized, it should not be used as the sole indicator to judge the return you receive from your Fund investment. Past performance is not indicative of future results. (3) Lipper is an independent mutual fund-tracking organization. (4) Certain investors may be subject to the Federal Alternative Minimum Tax ("AMT"), and state and local taxes may apply. Capital gains, if any, are fully taxable. - -------------------------------------------------------------------------------- 2 2002 Semi-Annual Report to Shareholders Market Review Although the economy may struggle for another quarter or so, we believe that it is on the road to recovery and should gain momentum by late 2002. Inflation remained subdued during the period. Therefore, we believe the Federal Open Market Committee ("FOMC")(5) will probably not raise the federal funds rate ("fed funds rate")(6) until signs of a sustainable recovery - such as stronger growth in corporate profits, an increase in capital spending and rising employment levels - appear. One obstacle to this recovery could be lingering skepticism among some investors about truthfulness in corporate accounting practices, along with some possible delays in corporate earnings releases as executives check and double-check their financial reports before releasing them. We believe these accounting problems may be causing a drag on the general economy. However, we also believe that corporate profits could improve enough by late 2002 and early 2003 to exceed investor expectations. Municipal Bond Market and Fund Outlook In general, we believe the municipal bond market should continue to provide an alternative to money market instruments(7) and a jittery equity market in the near term. One reason municipal bond prices remained relatively low during the period (compared to other periods in the past) is that there was roughly $290 billion in new issuance in 2001 - the second-highest level on record. These high levels of supply helped keep prices low. While the heavy supply of new municipal bond issues continued this year, we believe it could subside over the next year or two, which could help municipal bonds offer competitive returns versus many other securities in the fixed income market. Because we believe the U.S. economy is currently in the early stages of an economic recovery, we do not anticipate an increase in short-term interest rates anytime soon. We project stable-to-declining long-term rates, possibly through the end of the summer. While we have some concerns about an improving economy and a weakening dollar eventually putting pressure on bonds, we anticipate that fixed income markets should perform well as long as geopolitical risk is high and corporate malaise continues. - ---------- (5) The FOMC is a policy-making body of the Federal Reserve System responsible for the formulation of a policy designed to promote economic growth, full employment, stable prices, and a sustainable pattern of international trade and payments. (6) The fed funds rate is the interest rate that banks with excess reserves at a Federal Reserve district bank charge. The fed funds rate often points to the direction of U.S. interest rates. (7) Money market instruments typically carry less risk than municipal bond funds. - -------------------------------------------------------------------------------- Intermediate Muni Fund, Inc. 3 We continue to pay close attention to credit quality, as many states and municipalities face future budget challenges caused by a depressed stock market and shrinking tax revenues. This weaker revenue picture could have credit rating implications for many states, especially states that rely heavily on capital gains taxes as a source of income. Going forward, we plan to continue emphasizing higher coupon structures with good credit quality. The yield curve(8) steepened during the second quarter. Therefore, we believe the best values are in somewhat longer high-coupon bonds with shorter call-adjusted effective maturities. We believe that this approach could provide volatility comparable to intermediate-term bonds, but with the potential for yields more comparable to those available on long-term issues. Thank you for investing in Intermediate Muni Fund, Inc. We appreciate your continued trust and confidence. Sincerely, /s/ Heath B. McLendon /s/ Peter M. Coffey Heath B. McLendon Peter M. Coffey Chairman Vice President July 29, 2002 The information provided in this letter represents the opinion of the manager and is not intended to be a forecast of future events, a guarantee of future results nor investment advice. Further, there is no assurance that certain securities will remain in or out of the Fund. Please refer to pages 6 through 14 for a list and percentage breakdown of the Fund's holdings. Also, please note any discussion of the Fund's holdings is as of June 30, 2002 and is subject to change. - ---------- (8) The yield curve is the graphical depiction of the relationship between the yield on bonds of the same credit quality but different maturities. - -------------------------------------------------------------------------------- 4 2002 Semi-Annual Report to Shareholders - -------------------------------------------------------------------------------- Take Advantage of the Fund's Dividend Reinvestment Plan! Did you know that Fund investors who reinvest their dividends are taking advantage of one of the most effective wealth-building tools available today? Systematic investments put time to work for you through the strength of compounding. As an investor in the Fund, you can participate in its Dividend Reinvestment Plan ("Plan"), a convenient, simple and efficient way to reinvest your dividends and capital gains 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), or if the Fund declares a dividend or capital gains distribution payable only in cash, PFPC Global Fund Services ("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 28. To find out more detailed information about the Plan and about how you can participate, please call PFPC Global Fund Services at (800) 331-1710. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Intermediate Muni Fund, Inc. 5 - -------------------------------------------------------------------------------- Schedule of Investments (unaudited) June 30, 2002 - --------------------------------------------------------------------------------
FACE AMOUNT RATING(a) SECURITY VALUE - ----------------------------------------------------------------------------------------------------- Education -- 10.3% $ 1,000,000 A++ Arizona Educational Loan Marketing Corp., Educational Loan Revenue, Sub-Series, 6.625% due 9/1/05 (b) $ 1,014,630 800,000 AAA Ball State University of Indiana, University Revenue, Series K, FGIC-Insured, 5.750% due 7/1/20 850,504 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 1,030,600 500,000 Baa2* University Lab School Project, 6.125% due 6/1/21 502,520 Greenville County, SC School District, Installment Purchase Revenue, (Building Equity Sooner Tomorrow Project): 2,000,000 AA- 5.875% due 12/1/19 2,139,100 2,000,000 AA- 6.000% due 12/1/21 2,137,340 650,000 BBB Illinois Development Finance Authority Revenue, (Chicago Charter School Foundation Project A), 5.250% due 12/1/12 643,806 1,000,000 AAA Jenison, MI Public Schools, FGIC-Insured, 5.500% due 5/1/20 1,048,670 500,000 A Massachusetts State Development Finance Agency Revenue, Curry College, Series A, ACA-Insured, 6.000% due 3/1/20 527,810 350,000 A* Montana State Higher Education Student Assistance Corp., Student Loan Revenue, Series B, 7.050% due 6/1/04 (b) 360,539 Nebhelp Inc. Revenue, NE MBIA-Insured: 1,000,000 Aaa* Junior Sub-Series A-6, 6.450% due 6/1/18 (b) 1,104,310 2,000,000 Aaa* Senior Sub-Series A-5A, 6.200% due 6/1/13 (b) 2,222,980 500,000 A3* New England Education Loan Marketing Corp., MA Student Loan Revenue, Sub-Issue H, 6.900% due 11/1/09 (b) 578,210 1,465,000 A++ New Mexico Educational Assistance Foundation, Student Loan Revenue, First Sub-Series A-2, 5.950% due 11/1/07 (b) 1,554,673 1,000,000 AAA Philadelphia, PA School District, Series A, FSA-Insured, 5.500% due 2/1/23 1,036,100 1,350,000 AAA Pittsburgh, PA School District, FSA-Insured, 5.375% due 9/1/16 1,486,039 1,000,000 AAA Southwest Higher Education Authority Inc., TX (Southern Methodist University Project), AMBAC-Insured, 5.500% due 10/1/19 1,051,910 - ----------------------------------------------------------------------------------------------------- 19,289,741 - ----------------------------------------------------------------------------------------------------- Escrowed to Maturity (c) -- 14.0% 215,000 AAA Anderson County, SC Hospital Facilities Revenue, 7.125% due 8/1/07 238,091 2,000,000 AAA Atlanta, GA Metropolitan Rapid Transit Authority, Sales Tax Revenue, Series E, 7.000% due 7/1/11 2,412,340 105,000 AAA Birmingham, AL Medical Clinic Board Revenue, Baptist Medical Centers, 8.300% due 7/1/08 120,226 955,000 AAA Boston, MA Water & Sewer Community Revenue, (Escrowed with state and local government securities), 10.875% due 1/1/09 1,214,999 60,000 AAA Cabell, Putnam & Wayne Counties, WV Single-Family Residence Mortgage Revenue, FGIC-Insured, 7.375% due 4/1/10 69,348
See Notes to Financial Statements. - -------------------------------------------------------------------------------- 6 2002 Semi-Annual Report to Shareholders - -------------------------------------------------------------------------------- Schedule of Investments (unaudited) (continued) June 30, 2002 - --------------------------------------------------------------------------------
FACE AMOUNT RATING(a) SECURITY VALUE - ----------------------------------------------------------------------------------------------------- Escrowed to Maturity (c) -- 14.0% (continued) $ 1,500,000 NR California Statewide COP, Community Development Authority Revenue Refunding, Hospital Triad Healthcare, (Escrowed with state and local government securities), 6.250% due 8/1/06 $ 1,638,855 30,000 A3* Colorado Health Facilities Authority Revenue Refunding, Rocky Mountain Adventist Health Center, (Escrowed with state and local government securities), 6.250% due 2/1/04 31,999 1,150,000 AAA Conneaut, PA School District, AMBAC-Insured, 9.500% due 5/1/12 1,477,968 Illinois Health Facilities Authority Revenue: 795,000 AAA Methodist Medical Center Project, 9.000% due 10/1/10 970,250 1,165,000 AAA Ravenswood Hospital Medical Center Project, 7.250% due 8/1/06 1,279,566 720,000 AAA Jackson, TN Water and Sewer Revenue, 7.200% due 7/1/12 841,082 1,200,000 BBB+++ Klamath Falls, OR Intercommunity Hospital Authority Revenue, (Merle West Medical Center Project), 8.000% due 9/1/08 1,427,052 355,000 AAA Lake County, OH Hospital Improvement Revenue, (Lake County Memorial Hospital Project), 8.625% due 11/1/09 424,889 225,000 AAA Lee County, FL Southwest Florida Regional Airport Revenue, MBIA-Insured, 8.625% due 10/1/09 270,450 420,000 AAA Lima, OH Hospital Revenue, St. Rita Hospital of Lima, 7.500% due 11/1/06 467,418 1,300,000 NR Los Angeles, CA COP, Hollywood Presbyterian Medical Center, 9.625% due 7/1/13 1,708,889 180,000 AAA Louisiana Public Facilities Authority, Hospital Revenue Refunding, (Southern Baptist Hospital Inc. Project), 8.000% due 5/15/12 217,597 405,000 AAA Madison County, IN Industrial Hospital Authority, Facilities Revenue, (Community Hospital of Anderson Project), 9.250% due 1/1/10 497,607 Maricopa County, AZ Hospital Revenue: 225,000 AAA Samaritan Health Service, 7.625% due 1/1/08 255,910 910,000 AAA St. Luke's Hospital Medical Center Project, 8.750% due 2/1/10 1,099,426 420,000 AAA Metropolitan Nashville, TN Airport Authority, Tennessee Airport Revenue, MBIA-Insured, 7.500% due 7/1/05 443,163 100,000 Aaa* Nacogdoches County, TX Hospital District Revenue, 9.000% due 5/15/04 109,565 149,000 AAA New Jersey State Turnpike Authority Revenue, (Escrowed with state and local government securities), 10.375% due 1/1/03 155,413 1,000,000 AAA North Carolina Municipal Power Agency No. 1, Catawba Electricity Revenue, 10.500% due 1/1/10 1,277,270 Ohio State Water Development Authority Revenue: 3,260,000 AAA 9.375% due 12/1/10 (d) 4,002,595 310,000 AAA Safe Water, Series III, 9.000% due 12/1/10 355,015 435,000 AAA Orange County, FL Health Facilities Authority Revenue, Adventist Health System, (Southern Adventist Hospital Project), 8.750% due 10/1/09 525,245 175,000 AAA Philadelphia, PA Hospitals Authority Revenue, Thomas Jefferson University Hospital, 7.000% due 7/1/08 196,019 240,000 AAA Ringwood Borough, NJ Sewer Authority Special Obligation, 9.875% due 7/1/13 303,965
See Notes to Financial Statements. - -------------------------------------------------------------------------------- Intermediate Muni Fund, Inc. 7 - -------------------------------------------------------------------------------- Schedule of Investments (unaudited) (continued) June 30, 2002 - --------------------------------------------------------------------------------
FACE AMOUNT RATING(a) SECURITY VALUE - ----------------------------------------------------------------------------------------------------- Escrowed to Maturity (c) -- 14.0% (continued) $ 20,000 AAA Salt Lake County, UT Water Conservancy Distribution Revenue, Series A, MBIA-Insured, 10.875% due 10/1/02 $ 20,460 120,000 AAA San Francisco, CA Airport Improvement Corp., Lease Revenue, United Airlines Inc., 8.000% due 7/1/13 148,662 35,000 AAA San Leandro, CA Hospital Revenue, Vesper Memorial Hospital, AMBAC-Insured, 11.500% due 5/1/11 48,367 440,000 AAA Southwestern, IL Development Authority, Hospital Revenue Refunding, (Wood River Township Hospital Project), 6.875% due 8/1/03 452,197 470,000 NR Tom Green County, TX Hospital Authority, 7.875% due 2/1/06 519,439 980,000 Aa1* Washington State Public Power Supply System, (Nuclear Project No. 1), Series C, 7.750% due 7/1/03 1,039,221 - ----------------------------------------------------------------------------------------------------- 26,260,558 - ----------------------------------------------------------------------------------------------------- General Obligation -- 9.2% 500,000 AAA Anchorage, AK GO, Refunding, FGIC-Insured, 6.000% due 10/1/14 578,155 1,000,000 AA Central Falls, RI GO, 5.875% due 5/15/15 1,090,770 1,000,000 AAA Chicago, IL GO, Refunding, AMBAC-Insured, 6.100% due 1/1/03 1,022,620 1,000,000 AA Harvey, IL GO, Refunding, 6.700% due 2/1/09 1,099,310 1,310,000 AAA Kane County, IL GO, FGIC-Insured, 5.500% due 1/1/14 1,422,202 1,130,000 Aaa* Lancaster, MA GO, AMBAC-Insured, 5.375% due 4/15/17 1,211,078 1,500,000 AAA Massachusetts State GO, MBIA-Insured, FLAIRS, 9.590% due 5/1/09 (e) 1,872,150 2,400,000 Aa2* Minnehaha County, SD GO, Limited Tax Certificates, 5.625% due 12/1/20 2,520,336 2,000,000 AAA Montgomery County, MD GO, Refunding, 5.250% due 10/1/14 2,175,720 3,010,000 AA+ Ohio State GO, Conservation Projects, Series A, 5.250% due 9/1/13 3,248,663 1,000,000 AAA Saraland, AL GO, MBIA-Insured, 5.250% due 1/1/15 1,062,990 - ----------------------------------------------------------------------------------------------------- 17,303,994 - ----------------------------------------------------------------------------------------------------- Hospital -- 19.1% 230,000 Baa3* Allentown, PA Area Hospital Authority Revenue, Sacred Heart Hospital of Allentown, Series A, 6.200% due 11/15/03 228,321 1,500,000 BBB++ Arkansas State Development Finance Authority, Hospital Revenue, Washington Regional Medical Center, 7.000% due 2/1/15 1,597,680 650,000 AAA Calcasieu Parish, LA Memorial Hospital Service District Hospital Revenue, (Lake Charles Memorial Hospital Project), Series A, CONNIE LEE-Insured, 7.500% due 12/1/05 746,876 650,000 A- Chatham County, GA Hospital Authority Revenue, Memorial Health Medical Center, Series A, 6.000% due 1/1/17 678,288 640,000 NR Clayton County, GA Development Authority Revenue, First Mortgage, Senior Care Group Inc., (Bayberry Project A), 6.750% due 7/1/10 (f) 160,000 545,000 A3* Colorado Health Facilities Authority Revenue, Rocky Mountain Adventist Health Center, 6.250% due 2/1/04 571,738 2,000,000 AA Connecticut State Health & Educational Facilities Authority Revenue, Bristol Hospital, Series B, 5.500% due 7/1/21 2,053,040
See Notes to Financial Statements. - -------------------------------------------------------------------------------- 8 2002 Semi-Annual Report to Shareholders - -------------------------------------------------------------------------------- Schedule of Investments (unaudited) (continued) June 30, 2002 - --------------------------------------------------------------------------------
FACE AMOUNT RATING(a) SECURITY VALUE - ----------------------------------------------------------------------------------------------------- Hospital -- 19.1% (continued) $ 945,000 NR Coweta County, GA Development Authority Revenue, First Mortgage, (Senior Care Group Inc. Pointe Project A), Series A, 6.750% due 7/1/10 (f) $ 236,250 2,000,000 BBB Cuyahoga County, OH Hospital Facility Revenue, (Canton Inc. Project), 6.750% due 1/1/10 2,187,780 710,000 BBB+ Denver, CO Health & Hospital Authority, Healthcare Revenue, Series A, 6.250% due 12/1/16 751,343 Harris County, TX Hospital District Revenue Refunding, MBIA-Insured: 1,000,000 AAA 6.000% due 2/15/15 1,108,880 125,000 AAA 6.000% due 2/15/16 137,981 2,000,000 A Hawaii State Department of Budget & Finance, Special Purpose Revenue, Kapiolani Health Care System, 6.400% due 7/1/13 2,061,360 1,445,000 BBB+++ Henderson, NV Health Care Facility Revenue, Catholic Healthcare West, Series A, 6.200% due 7/1/09 1,558,649 1,300,000 BBB Illinois Health Facilities Authority Revenue Refunding, Friendship Village of Schaumburg, 6.650% due 12/1/06 1,316,081 1,000,000 A1* Iowa Finance Authority, Health Care Facilities Revenue, Genesis Medical Center, 6.250% due 7/1/20 1,039,470 350,000 B3* Langhorne Manor Borough, PA Higher Education & Health Authority Revenue, Lower Bucks Hospital, 6.750% due 7/1/02 350,000 1,625,000 NR Lee Memorial Health System Board of Directors, FL Hospital Revenue, FSA-Insured, FLAIRS, 9.971% due 4/1/10 (e) 1,972,133 405,000 A-++ Lees Summit, MO IDA, Health Facilities Revenue, (John Knox Village Project), 5.750% due 8/15/11 428,518 25,000 BBB- Louisiana Public Facilities Authority Revenue, (General Health Systems Project), 6.800% due 11/1/16 25,707 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 1,174,490 370,000 AAA Massachusetts State Development Finance Agency Revenue, Series A, GNMA-Collateralized, 6.700% due 10/20/21 424,246 2,000,000 BBB Massachusetts State Health & Educational Facilities Authority Revenue, Caritas Christi Obligation, Series B, 6.500% due 7/1/12 2,153,800 1,305,000 AAA Massachusetts State Industrial Finance Agency, Assisted Living Facility Revenue, (Arbors at Amherst Project), GNMA-Collateralized, 5.750% due 6/20/17 (b) 1,408,304 1,000,000 A- New Hampshire Health & Educational Facilities Authority Revenue, Covenant Healthcare System, 6.500% due 7/1/17 1,088,460 1,390,000 NR New York City, NY IDA, Civic Facilities Revenue Refunding, (New York Community Hospital Brooklyn), 6.875% due 11/1/10 1,381,577 2,000,000 B2* Oklahoma Developmental Finance Authority Revenue Refunding, Hillcrest Healthcare System, Series A, 5.625% due 8/15/19 1,530,460 Orange County, FL Health Facilities Authority Revenue: 2,500,000 AAA Adventist Health Care, FSA-Insured, 6.050% due 11/15/07 2,583,775 935,000 NR First Mortgage, Health Care Facilities, 8.750% due 7/1/11 952,419 1,000,000 NR Rainbow City, AL Special Health Care Facilities Financing Authority, Regency Pointe Inc., Series B, 7.250% due 1/1/06 1,011,980
See Notes to Financial Statements. - -------------------------------------------------------------------------------- Intermediate Muni Fund, Inc. 9 - -------------------------------------------------------------------------------- Schedule of Investments (unaudited) (continued) June 30, 2002 - --------------------------------------------------------------------------------
FACE AMOUNT RATING(a) SECURITY VALUE - ----------------------------------------------------------------------------------------------------- Hospital -- 19.1% (continued) $ 620,000 BBB- Rhode Island State Health & Educational Building Corp., Revenue Refunding, Roger Williams Hospital Financing, 5.400% due 7/1/13 $ 572,043 1,490,000 A- Sayre, PA Health Care Facilities Authority Revenue, Guthrie Healthcare System, Series A, 6.250% due 12/1/18 1,584,883 850,000 Baa2* Tomball, TX Hospital Authority Revenue, Tomball Regional Hospital, 5.750% due 7/1/14 863,107 - ----------------------------------------------------------------------------------------------------- 35,939,639 - ----------------------------------------------------------------------------------------------------- Housing: Multi-Family -- 5.9% 1,000,000 A3* Bexar County, TX Housing Finance Corp., Multi-Family Housing Revenue Refunding, Nob Hill Apartments, Series A, 6.000% due 6/1/21 979,480 425,000 AAA Charlotte, NC Mortgage Revenue Refunding, Double Oaks Apartments, Series A, FHA-Insured, 7.300% due 11/15/07 462,357 910,000 Baa2* Dallas, TX Housing Corp., Capital Projects Refunding, 7.700% due 8/1/05 911,674 El Paso County, TX Housing Finance Corp., Multi-Family Housing Revenue: 360,000 A3* American Village Communities, Series A, 6.250% due 12/1/24 358,258 280,000 Baa3* La Plaza Apartments, Sub-Series C, 8.000% due 7/1/30 288,926 585,000 AAA Grand Prairie, TX Housing Finance Corp., Multi-Family Housing Revenue, (Landings of Carrier Project A), GNMA-Collateralized, 6.650% due 9/20/22 629,829 420,000 AA Hudson County, NJ Improvement Authority, Multi-Family Housing Revenue, (Observer Park Project), Series A, FNMA-Collateralized, 6.600% due 6/1/04 (b) 439,425 1,175,000 A3* Lubbock, TX Housing Finance Corp., Multi-Family Housing Revenue, (Las Colinas Quality Creek Apartments), 6.000% due 7/1/22 1,175,869 1,470,000 A++ Lynchburg, VA Redevelopment & Housing Authority, Multi-Family Housing Revenue Refunding, (Princeton Circle Association Project), 6.250% due 12/1/10 1,472,499 500,000 Aaa* Maricopa County, AZ IDA, Multi-Family Housing Revenue, (Bay Club at Mesa Cove Project), Series A, MBIA-Insured, 5.700% due 9/1/20 515,915 680,000 A2* McMinnville, TN Housing Authority Revenue Refunding, First Mortgage, Beersheba Heights, 6.000% due 10/1/09 731,068 Mount Vernon, IL Elderly Housing Corp., First Lien Revenue: 185,000 Ba3* 7.875% due 4/1/03 185,845 200,000 Ba3* 7.875% due 4/1/04 200,686 215,000 Ba3* 7.875% due 4/1/05 215,729 235,000 Ba3* 7.875% due 4/1/06 235,627 250,000 Ba3* 7.875% due 4/1/07 250,545 270,000 Ba3* 7.875% due 4/1/08 270,610
See Notes to Financial Statements. - -------------------------------------------------------------------------------- 10 2002 Semi-Annual Report to Shareholders - -------------------------------------------------------------------------------- Schedule of Investments (unaudited) (continued) June 30, 2002 - --------------------------------------------------------------------------------
FACE AMOUNT RATING(a) SECURITY VALUE - ----------------------------------------------------------------------------------------------------- Housing: Multi-Family -- 5.9% (continued) Tarrant County, TX Housing Finance Corp. Revenue, Multi-Family Housing, Westridge: $ 750,000 A3* Senior Series A, 6.000% due 6/1/21 $ 731,753 475,000 Baa3* Sub-Series C, 8.500% due 6/1/31 462,992 580,000 BBB++ Tulsa, OK Housing Assistance Corp., Multi-Family Revenue, 7.250% due 10/1/07 (b) 589,883 - ----------------------------------------------------------------------------------------------------- 11,108,970 - ----------------------------------------------------------------------------------------------------- Housing: Single-Family -- 2.5% 85,000 A1* Ford County, KS Single-Family Mortgage Revenue Refunding, Series A, FHA-Insured, 7.900% due 8/1/10 87,661 85,000 AA Juneau, AK City & Borough Home Mortgage Revenue Refunding, Mortgage-Backed Securities Program, FNMA-Collateralized, 8.000% due 2/1/09 86,621 1,385,000 AA Massachusetts State Housing Finance Agency, Single-Family Housing Revenue, Series 38, 7.200% due 12/1/26 (b) 1,446,120 235,000 AAA Missouri State Housing Development Community Mortgage Revenue, Series C, GNMA/FNMA-Collateralized, 7.450% due 9/1/27 (b) 255,647 565,000 AAA Pima County, AZ IDA, Single-Family Mortgage Revenue, Series A, GNMA/FNMA/FHLMC-Collateralized, 7.100% due 11/1/29 (b) 610,432 150,000 AAA St. Louis County, MO Single-Family Mortgage Revenue, MBIA-Insured, 6.750% due 4/1/10 150,033 850,000 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)(e) 990,939 1,000,000 AA+ Virginia State Housing Development Authority, Commonwealth Mortgage, Series H, Sub-Series H-1, 6.100% due 7/1/03 1,025,780 - ----------------------------------------------------------------------------------------------------- 4,653,233 - ----------------------------------------------------------------------------------------------------- Industrial Development -- 8.5% 1,000,000 NR Alaska Industrial Development & Export Authority Revenue, Williams Lynxs Alaska Cargoport, 8.000% due 5/1/23 (b) 1,044,980 535,000 C* Bourbonnais, IL IDR Refunding, (KMart Corp. Project), 6.600% due 10/1/06 337,050 1,500,000 AAA Des Moines, IA IDR Refunding, (The Printer Inc. Project), LOC-Mercantile Bank/Federal Home Loan Bank, 6.375% due 9/1/09 1,532,595 1,500,000 BBB Dickinson County, MI Economic Development Corp., Solid Waste Disposal Revenue Refunding, Champion International Corp., 6.550% due 3/1/07 1,546,830 1,000,000 A+ Kanawha County, WV Commercial Development Revenue Refunding, (May Department Stores Co. Project), 6.500% due 6/1/03 1,032,660 2,000,000 A1* LaCrosse, WI Resource Recovery Revenue Refunding, (Northern States Power Co. Project), 6.000% due 11/1/21 (b) 2,193,440
See Notes to Financial Statements. - -------------------------------------------------------------------------------- Intermediate Muni Fund, Inc. 11 - -------------------------------------------------------------------------------- Schedule of Investments (unaudited) (continued) June 30, 2002 - --------------------------------------------------------------------------------
FACE AMOUNT RATING(a) SECURITY VALUE - ----------------------------------------------------------------------------------------------------- Industrial Development -- 8.5% (continued) $ 1,300,000 AA Massachusetts State Development Finance Agency Revenue, Worcester Redevelopment Authority Issue, 6.000% due 6/1/24 $ 1,387,490 1,000,000 BBB+ Ohio State Air Quality Development Authority Revenue, Environmental Improvement, (USX Corp. Project), 5.000% due 11/1/15 1,023,140 1,000,000 AAA Pennsylvania State IDR, Economic Development Revenue, AMBAC-Insured, 5.500% due 7/1/21 1,049,660 1,000,000 Baa3* Rockbridge County, VA IDA Revenue, Virginia Horse Center, Series C, 6.850% due 7/15/21 1,022,910 795,000 A South Dakota Economic Development Finance Authority, Economic Development Revenue, APA Optics, Series A, 6.750% due 4/1/16 (b) 861,359 1,300,000 NR Suffolk County, NY IDA, Civic Facility Revenue, (Eastern Long Island Hospital Association Project A), 7.750% due 1/1/22 1,292,239 1,500,000 NR Wasco County, OR Solid Waste Disposal Revenue, (Waste Connections Inc. Project), 7.000% due 3/1/12 (b) 1,556,280 - ----------------------------------------------------------------------------------------------------- 15,880,633 - ----------------------------------------------------------------------------------------------------- Miscellaneous -- 6.9% 1,500,000 NR Barona Band of Mission Indians, CA 8.250% due 1/1/20 1,600,710 1,410,000 A1* District of Columbia, Tobacco Settlement Financing Corp., 6.250% due 5/15/24 1,435,831 1,360,000 A Illinois Development Finance Authority Revenue, East St. Louis, 6.875% due 11/15/05 1,487,051 645,000 BBB++ Indianapolis, IN Economic Development Refunding & Improvement Revenue, National Benevolent Association, 6.900% due 10/1/04 661,886 1,500,000 A1* Louisiana Tobacco Settlement Financing Corp. Revenue, Series 2001B, 5.500% due 5/15/30 1,389,420 1,690,000 AAA Monroe, LA Sales & Use Tax Revenue, FGIC-Insured, 5.625% due 7/1/25 1,781,294 60,000 NR Orlando, FL Special Assessment Revenue, (Conroy Road Interchange Project), Series B, 5.250% due 5/1/05 60,292 1,000,000 NR Orlando, FL Urban Community Development District, Capital Improvement, Series B, 6.400% due 5/1/10 1,014,620 1,500,000 BBB+ Puerto Rico Housing Bank & Finance Agency, 7.500% due 12/1/06 1,689,000 1,785,000 A1* South Carolina Tobacco Settlement Revenue Management Authority, Series B, 6.000% due 5/15/22 1,764,044 - ----------------------------------------------------------------------------------------------------- 12,884,148 - ----------------------------------------------------------------------------------------------------- Pollution Control -- 1.8% 2,000,000 Aa3* Brazos River, TX Harbor Navigation District, Brazoria County, PCR, (BASF Corp. Project), 6.750% due 2/1/10 2,343,580 1,000,000 AAA Monroe County, MI PCR, (Detroit Edison Co. Project), Series A, AMBAC-Insured, 6.350% due 12/1/04 (b) 1,097,410 - ----------------------------------------------------------------------------------------------------- 3,440,990 - -----------------------------------------------------------------------------------------------------
See Notes to Financial Statements. - -------------------------------------------------------------------------------- 12 2002 Semi-Annual Report to Shareholders - -------------------------------------------------------------------------------- Schedule of Investments (unaudited) (continued) June 30, 2002 - --------------------------------------------------------------------------------
FACE AMOUNT RATING(a) SECURITY VALUE - ----------------------------------------------------------------------------------------------------- Pre-Refunded (g) -- 1.9% $ 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 $ 2,201,040 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 65,495 820,000 Aaa* Philadelphia, PA Hospital Authority Revenue, (United Hospital Inc. Project), (Call 7/1/05 @ 100), 10.875% due 7/1/08 973,037 330,000 NR San Leandro, CA Redevelopment Agency, Residential Mortgage Revenue, (Call 10/1/04 @ 100), 11.250% due 4/1/13 388,120 - ----------------------------------------------------------------------------------------------------- 3,627,692 - ----------------------------------------------------------------------------------------------------- Public Facilities -- 2.1% DeKalb County, IN Industrial Redevelopment Authority Revenue, (Mini-Mill LOC Public Improvement Project A): 1,000,000 A- 6.250% due 1/15/08 1,082,630 1,350,000 A- 6.250% due 1/15/09 1,456,758 2,500,000 AAA Metropolitan Pier & Exposition Authority, IL Dedicated State Tax Revenue, Capital Appreciation Refunding, (McCormick Place Project B), MBIA-Insured, step bond to yield 5.200% due 6/15/17 1,506,400 - ----------------------------------------------------------------------------------------------------- 4,045,788 - ----------------------------------------------------------------------------------------------------- Transportation -- 9.0% 1,855,000 A Connecticut State Special Obligation, Parking Revenue, Bradley International Airport, Series A, ACA-Insured, 6.375% due 7/1/12 (b) 2,003,344 1,500,000 AAA Connecticut State Special Tax Obligation Revenue, FSA-Insured, FLAIRS, 9.369% due 10/1/09 (e) 1,789,230 5,000,000 BBB- Connector 2000 Association, SC Toll Road Revenue, Capital Appreciation, Series B, zero coupon due 1/1/15 1,666,450 2,000,000 AAA Dallas, TX Area Rapid Transit Sales Tax Revenue, Sr. Lien, AMBAC-Insured, 5.375% due 12/1/16 2,118,800 1,500,000 BB- Dallas/Fort Worth, TX International Airport Facility, Improvement Corp. Revenue Refunding, American Airlines Inc., Series C, 6.150% due 5/1/29 (b) 1,344,135 2,035,000 AAA Dallas/Fort Worth, TX Regional Airport Revenue Refunding, Series A, FGIC-Insured, 7.750% due 11/1/03 2,192,529 1,855,000 AAA Delaware River Port Authority of Pennsylvania and New Jersey, FSA-Insured, FLAIRS, 9.608% due 1/1/10 (e) 2,171,945 1,000,000 Aaa* Harrisburg, PA Parking Authority, Parking Revenue, FSA-Insured, 5.500% due 5/15/20 1,054,440 4,825,000 BBB- Pocahontas Parkway Association, VA Toll Road Revenue, Capital Appreciation, Series B, zero coupon due 8/15/19 1,124,997 595,000 NR Sanford, FL Airport Authority IDR, (Central Florida Terminals Inc. Project A), 7.500% due 5/1/06 (b) 599,415
See Notes to Financial Statements. - -------------------------------------------------------------------------------- Intermediate Muni Fund, Inc. 13 - -------------------------------------------------------------------------------- Schedule of Investments (unaudited) (continued) June 30, 2002 - --------------------------------------------------------------------------------
FACE AMOUNT RATING(a) SECURITY VALUE - ----------------------------------------------------------------------------------------------------- Transportation -- 9.0% (continued) Tulsa, OK Municipal Airport Revenue Refunding, Series B: $ 500,000 BB- 6.000% due 6/1/35 (b) $ 434,225 500,000 BB- 5.650% due 12/1/35 (b) 425,770 - ----------------------------------------------------------------------------------------------------- 16,925,280 - ----------------------------------------------------------------------------------------------------- Utilities -- 2.6% 2,000,000 AAA Energy Northwest Washington Electric Revenue, (Project No. 3), Series A, FSA-Insured, 5.500% due 7/1/18 2,105,240 500,000 A Georgia Municipal Electric Authority, Power System Revenue, Series X, 6.500% due 1/1/12 572,190 1,000,000 NR Klamath Falls, OR Electric Revenue Refunding, Sr. Lien, 5.750% due 1/1/13 1,007,340 1,000,000 BBB+++ North Carolina Eastern Municipal Power Agency, Power System Revenue, Series D, 6.450% due 1/1/14 1,092,680 20,000 Aa1* Washington State Public Power Supply System, (Nuclear Project No. 1), Series C, 7.750% due 7/1/03 21,209 - ----------------------------------------------------------------------------------------------------- 4,798,659 - ----------------------------------------------------------------------------------------------------- Water and Sewer -- 6.2% 1,445,000 AA- Charleston, SC Waterworks and Sewer Revenue, 5.250% due 1/1/16 1,529,128 1,000,000 AAA El Paso, TX Water and Sewer Revenue Refunding and Improvement, Series A, FSA-Insured, 6.000% due 3/1/15 1,134,020 2,000,000 AA+++ Fort Worth, TX Water and Sewer Revenue, 5.625% due 2/15/17 2,152,920 1,000,000 AAA Gainesville, GA Water and Sewer Revenue, FSA-Insured, 5.375% due 11/15/20 1,041,380 2,000,000 AAA Philadelphia, PA Water and Wastewater Revenue, Series B, FGIC-Insured, 5.250% due 11/1/14 2,155,260 1,765,000 AAA Pueblo, CO Bridge Waterworks, Water Revenue Improvement, Series A, FSA-Insured, 6.000% due 11/1/14 2,002,128 1,485,000 Aaa* Spanish Fork City, UT Water Revenue, FSA-Insured, 5.500% due 6/1/16 1,597,711 - ----------------------------------------------------------------------------------------------------- 11,612,547 - ----------------------------------------------------------------------------------------------------- TOTAL INVESTMENTS -- 100% (Cost -- $182,616,626**) $187,771,872 =====================================================================================================
(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, Inc. and those identified by a double dagger (++), are rated by Fitch IBCA, Duff & Phelps. (b) Income from these issues is considered a preference item for purposes of calculating the alternative minimum tax. (c) 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. (d) Security has been segregated for open futures contracts commitments. (e) Inverse floating rate security-coupon varies inversely with level of short-term tax-exempt interest rates. (f) Security is currently in default. (g) 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. ** Aggregate cost for Federal income tax purposes is substantially the same. See pages 15 and 16 for definitions of ratings and certain security descriptions. See Notes to Financial Statements. - -------------------------------------------------------------------------------- 14 2002 Semi-Annual Report to Shareholders - -------------------------------------------------------------------------------- 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 "CC" 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 balance, as CCC and CC 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, Inc. ("Moody's") -- Numerical modifiers 1, 2, and 3 may be applied to each generic rating from "Aa" to "C", 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. 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. - -------------------------------------------------------------------------------- Intermediate Muni Fund, Inc. 15 - -------------------------------------------------------------------------------- Bond Ratings (unaudited) (continued) - -------------------------------------------------------------------------------- Fitch IBCA, Duff & Phelps ("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 or Moody's. - -------------------------------------------------------------------------------- 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. - -------------------------------------------------------------------------------- Security Descriptions (unaudited) - -------------------------------------------------------------------------------- ACA -- American Capital Assurance AMBAC -- AMBAC Indemnity Corporation CGIC -- Capital Guaranty Insurance Company CONNIE -- College Construction Loan LEE Insurance Association 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 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 - -------------------------------------------------------------------------------- 16 2002 Semi-Annual Report to Shareholders - -------------------------------------------------------------------------------- Statement of Assets and Liabilities (unaudited) June 30, 2002 - -------------------------------------------------------------------------------- ASSETS: Investments, at value (Cost -- $182,616,626) $ 187,771,872 Receivable for securities sold 6,947,449 Interest receivable 3,294,838 Receivable from broker - variation margin 9,375 Receivable from manager (Note 3) 3,491 - ---------------------------------------------------------------------------------------- Total Assets 198,027,025 - ---------------------------------------------------------------------------------------- LIABILITIES: Payable for securities purchased 3,891,578 Payable to bank 170,248 Dividends payable 152,099 Accrued preferred stock distribution payable 12,086 Accrued expenses 17,330 - ---------------------------------------------------------------------------------------- Total Liabilities 4,243,341 - ---------------------------------------------------------------------------------------- Series M Municipal Auction Rate Cumulative Preferred Stock (2,000 shares authorized and issued at $25,000 per share) (Note 8) 50,000,000 - ---------------------------------------------------------------------------------------- Total Net Assets $ 143,783,684 ======================================================================================== NET ASSETS: Par value of capital shares $ 14,005 Capital paid in excess of par value 141,233,797 Undistributed net investment income 683,948 Accumulated net realized loss from security transactions (3,269,718) Net unrealized appreciation of investments and futures contracts 5,121,652 - ---------------------------------------------------------------------------------------- Total Net Assets (Equivalent to $10.27 a share on 14,004,750 capital shares of $0.001 par value outstanding; 100,000,000 capital shares authorized) $ 143,783,684 ========================================================================================
See Notes to Financial Statements. - -------------------------------------------------------------------------------- Intermediate Muni Fund, Inc. 17 - -------------------------------------------------------------------------------- Statement of Operations (unaudited) - -------------------------------------------------------------------------------- For the Six Months Ended June 30, 2002 INVESTMENT INCOME: Interest $ 5,372,858 - ------------------------------------------------------------------------------- EXPENSES: Management fee (Note 3) 550,269 Auction fees 50,058 Audit and legal 25,514 Shareholder communications 19,910 Shareholder and system servicing fees 16,611 Custody 13,942 Listing fees 8,580 Registration fees 7,602 Pricing service fees 3,294 Directors' fees 362 Other 4,886 - ------------------------------------------------------------------------------- Total Expenses 701,028 - ------------------------------------------------------------------------------- Net Investment Income 4,671,830 - ------------------------------------------------------------------------------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FUTURES CONTRACTS (NOTES 4 AND 5): Realized Loss From: Security transactions (excluding short-term securities) (189,106) Futures contracts (560,218) - ------------------------------------------------------------------------------- Net Realized Loss (749,324) - ------------------------------------------------------------------------------- Change in Net Unrealized Appreciation: Beginning of period 3,206,673 End of period 5,121,652 - ------------------------------------------------------------------------------- Increase in Net Unrealized Appreciation 1,914,979 - ------------------------------------------------------------------------------- Net Gain on Investments and Futures Contracts 1,165,655 - ------------------------------------------------------------------------------- Distributions Paid to Municipal Auction Rate Cumulative Preferred Stockholders From Net Investment Income (306,746) - ------------------------------------------------------------------------------- Increase in Net Assets From Operations $ 5,530,739 ================================================================================ See Notes to Financial Statements. - -------------------------------------------------------------------------------- 18 2002 Semi-Annual Report to Shareholders - -------------------------------------------------------------------------------- Statements of Changes in Net Assets - -------------------------------------------------------------------------------- For the Six Months Ended June 30, 2002 (unaudited) and the Year Ended December 31, 2001
2002 2001 =============================================================================================== OPERATIONS: Net investment income $ 4,671,830 $ 7,771,750 Net realized gain (loss) (749,324) 707,073 Increase (decrease) in net unrealized appreciation 1,914,979 (601,846) Distributions paid to Municipal Auction Rate Cumulative Preferred Stockholders from net investment income (306,746) -- - ----------------------------------------------------------------------------------------------- Increase in Net Assets From Operations 5,530,739 7,876,977 - ----------------------------------------------------------------------------------------------- DISTRIBUTIONS PAID TO COMMON STOCK SHAREHOLDERS FROM: Net investment income (3,928,332) (7,730,624) - ----------------------------------------------------------------------------------------------- Decrease in Net Assets From Distributions Paid to Common Stock Shareholders (3,928,332) (7,730,624) - ----------------------------------------------------------------------------------------------- FUND SHARE TRANSACTIONS (NOTE 7): Underwriting commissions and expenses from the issuance of Municipal Auction Rate Cumulative Preferred Stock (Note 8) (778,731) -- Treasury stock acquired -- (621) - ----------------------------------------------------------------------------------------------- Decrease in Net Assets From Fund Share Transactions (778,731) (621) - ----------------------------------------------------------------------------------------------- Increase in Net Assets 823,676 145,732 NET ASSETS: Beginning of period 142,960,008 142,814,276 - ----------------------------------------------------------------------------------------------- End of period* $ 143,783,684 $ 142,960,008 =============================================================================================== * Includes undistributed net investment income of: $ 683,948 $ 247,196 ===============================================================================================
See Notes to Financial Statements. - -------------------------------------------------------------------------------- Intermediate Muni Fund, Inc. 19 - -------------------------------------------------------------------------------- Notes to Financial Statements (unaudited) - -------------------------------------------------------------------------------- 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 ask prices provided by an independent pricing service that are based on transactions in municipal obligations, quotations from municipal bond dealers, market transactions in comparable securities and various relationships between securities; (c) securities for which market quotations are not available will be valued in good faith at fair market 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 the accrual basis; (g) the Fund intends to comply with the applicable provisions of the Internal Revenue Code of 1986, as amended, pertaining to regulated investment companies and to make distributions of taxable income sufficient to relieve it from substantially all Federal income and excise taxes; (h) 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 to shareholders of funds legally available to shareholders; (i) the character of income and gains to be distributed are determined in accordance with income tax regulations which may differ from accounting principles generally accepted in the United States of America. At December 31, 2001, 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; (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 - -------------------------------------------------------------------------------- 20 2002 Semi-Annual Report to Shareholders - -------------------------------------------------------------------------------- Notes to Financial Statements (unaudited) (continued) - -------------------------------------------------------------------------------- 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 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. In November 2000, the American Institute of Certified Public Accountants ("AICPA") issued a revised Audit and Accounting Guide for Investment Companies ("Guide"). This revised version is effective for financial statements issued for fiscal years beginning after December 15, 2000. The revised Guide requires the Fund to amortize premium and accrete all discounts on all fixed-income securities. The Fund adopted this requirement effective January 1, 2001. This change does not affect the Fund's net asset value, but does change the classification of certain amounts in the statement of operations. For the six months ended June 30, 2002, interest income increased by $40,236, net realized loss increased by $2,313 and the change in net unrealized appreciation of investments decreased by $37,923. 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"), a subsidiary of Salomon Smith Barney Holdings Inc., which, in turn, is a subsidiary of Citigroup Inc. ("Citigroup"), acts as investment manager to the Fund. As compensation for its services, the Fund pays SBFM 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 Citigroup or its affiliates. - -------------------------------------------------------------------------------- Intermediate Muni Fund, Inc. 21 - -------------------------------------------------------------------------------- Notes to Financial Statements (unaudited) (continued) - -------------------------------------------------------------------------------- 4. Investments During the six months ended June 30, 2002, the aggregate cost of purchases and proceeds from sales of investments (including maturities, but excluding short-term securities) were as follows: ================================================================================ Purchases $115,848,448 - -------------------------------------------------------------------------------- Sales 71,421,775 ================================================================================ At June 30, 2002 aggregate gross unrealized appreciation and depreciation of investments for Federal income tax purposes were substantially as follows: ================================================================================ Gross unrealized appreciation $ 7,498,576 Gross unrealized depreciation (2,343,330) - -------------------------------------------------------------------------------- Net unrealized appreciation $ 5,155,246 ================================================================================ 5. Futures Contracts Initial margin deposits made upon entering into futures contracts are recognized as assets. The initial margin is segregated by the custodian and is noted in the schedule of investments. 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 made or received 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 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 (futures contracts). At June 30, 2002, the Fund had the following open futures contracts:
# of Basis Market Unrealized Contracts Expiration Value Value Loss ============================================================================================= To Sell: U.S. 10 Year Treasury Note 100 9/02 $10,689,844 $10,723,438 $(33,594) =============================================================================================
6. Option Contracts Premiums paid when put or call options are purchased by the Fund represent investments, which are marked-to-market daily. When a purchased option expires, the Fund will realize a loss in the amount of the premium paid. When the - -------------------------------------------------------------------------------- 22 2002 Semi-Annual Report to Shareholders - -------------------------------------------------------------------------------- Notes to Financial Statements (unaudited) (continued) - -------------------------------------------------------------------------------- Fund enters into a closing sales transaction, the Fund will realize a gain or loss depending on whether the proceeds from the closing sales transaction are greater or less than the premium paid for the option. When the Fund exercises a put option, it will realize a gain or loss from the sale of the underlying security and the proceeds from such sale will be decreased by the premium originally paid. When the Fund exercises a call option, the cost of the security which the Fund purchases upon exercise will be increased by the premium originally paid. At June 30, 2002, the Fund did not hold any purchased call or put option contracts. When a Fund writes a covered call or put option, an amount equal to the premium received by the Fund is recorded as a liability, the value of which is marked-to-market daily. When a written option expires, the Fund realizes a gain equal to the amount of the premium received. When the Fund enters into a closing purchase transaction, the Fund realizes a gain or loss depending upon whether the cost of the closing transaction is greater or less than the premium originally received without regard to any unrealized gain or loss on the underlying security, and the liability related to such option is eliminated. When a written call option is exercised, the cost of the security sold will be decreased by the premium originally received. When a put option is exercised, the amount of the premium originally received will reduce the cost of the security which the Fund purchased upon exercise. When written index options are exercised, settlement is made in cash. The risk associated with purchasing options is limited to the premium originally paid. The Fund enters into options for hedging purposes. The risk in writing a covered call option is that the Fund gives up the opportunity to participate in any increase in the price of the underlying security beyond the exercise price. The risk in writing a put option is that the Fund is exposed to the risk of a loss if the market price of the underlying security declines. During the six months ended June 30, 2002, the Fund did not enter into any written covered call or put option contracts. 7. Capital Shares At June 30, 2002, the Fund had 100,000,000 shares of common stock authorized with a par value of $0.001 per share. On January 4, 2000, the Fund commenced a share repurchase plan. Since the inception of the plan, the Fund repurchased shares totalling 156,042 with a total cost of $1,341,478. For the six months ended June 30, 2002, the Fund did not repurchase any shares. - -------------------------------------------------------------------------------- Intermediate Muni Fund, Inc. 23 - -------------------------------------------------------------------------------- Notes to Financial Statements (unaudited) (continued) - -------------------------------------------------------------------------------- 8. Municipal Auction Rate Cumulative Preferred Stock On February 24, 2002, the Fund issued 2,000 shares of Series M, of 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. 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 1.20%-1.70% for the six months ended June 30, 2002. 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 $25,000 per share plus accumulated and unpaid dividends. ARCPS have a liquidation preference of $25,000 per share plus accumulated and unpaid dividends. The Fund is required to maintain certain asset coverages with respect to the ARCPS under the Investment Company Act of 1940. Salomon Smith Barney Inc. ("SSB"), another 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 six months ended June 30, 2002, SSB earned $50,058 as the broker/dealer. Under Emerging Issues Task Force ("EITF") announcement Topic D-98, Classification and Measurement of Redeemable Securities, which was issued on July 19, 2001, preferred securities that are redeemable for cash or other assets are to be classified outside of permanent equity to the extent that the redemption is at a fixed or determinable price and at the option of the holder or upon the occurrence of an event that is not solely within the control of the issuer. 9. Capital Loss Carryforward At December 31, 2001, the Fund had, for Federal income tax purposes, a capital loss carryforward of approximately $2,448,000, available to offset future capital gains. To the extent that these carryforward losses are used to offset capital gains, it is probable that any 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 ================================================================================ Carryforward Amounts $38,000 $1,897,000 $513,000 ================================================================================ - -------------------------------------------------------------------------------- 24 2002 Semi-Annual Report to Shareholders - -------------------------------------------------------------------------------- Financial Highlights - -------------------------------------------------------------------------------- For a share of capital stock outstanding throughout each year ended December 31, unless otherwise noted:
2002(1) 2001 2000 1999 1998 1997 ======================================================================================================================== Net Asset Value, Beginning of Period $ 10.21 $ 10.20 $ 9.89 $ 10.61 $ 10.64 $ 10.47 - ------------------------------------------------------------------------------------------------------------------------ Income (Loss) From Operations: Net investment income(2) 0.33 0.56 0.55 0.53 0.55 0.57 Net realized and unrealized gain (loss)(2) 0.09 -- 0.28 (0.71) 0.01 0.28 Distributions paid to Municipal Auction Rate Cumulative Preferred Stockholders from net investment income (0.02) -- -- -- -- -- - ------------------------------------------------------------------------------------------------------------------------ Total Income (Loss) From Operations 0.40 0.56 0.83 (0.18) 0.56 0.85 - ------------------------------------------------------------------------------------------------------------------------ Gains From Repurchase of Treasury Stock -- 0.00* 0.02 -- -- -- - ------------------------------------------------------------------------------------------------------------------------ Underwriting Commission and Expenses of Issuance of Municipal Auction Rate Cumulative Preferred Stock (0.06) -- -- -- -- -- - ------------------------------------------------------------------------------------------------------------------------ Distributions Paid To Common Stock Shareholders From: Net investment income (0.28) (0.55) (0.54) (0.53) (0.55) (0.57) In excess of net investment income -- -- -- -- -- (0.01) Net realized gains -- -- -- (0.01) (0.04) (0.10) - ------------------------------------------------------------------------------------------------------------------------ Total Distributions Paid to Common Stock Shareholders (0.28) (0.55) (0.54) (0.54) (0.59) (0.68) - ------------------------------------------------------------------------------------------------------------------------ Net Asset Value, End of Period $ 10.27 $ 10.21 $ 10.20 $ 9.89 $ 10.61 $ 10.64 - ------------------------------------------------------------------------------------------------------------------------ Total Return, Based on Market Value(3) 4.20%++ 17.17% 11.90% (17.10)% 7.05% 13.42% - ------------------------------------------------------------------------------------------------------------------------ Total Return, Based on Net Asset Value(3) 3.53%++ 6.01% 9.68% (1.39)% 5.50% 8.49% - ------------------------------------------------------------------------------------------------------------------------ Net Assets, End of Period (millions) $ 144 $ 143 $ 143 $ 83 $ 89 $ 89 ========================================================================================================================
- -------------------------------------------------------------------------------- Intermediate Muni Fund, Inc. 25 - -------------------------------------------------------------------------------- Financial Highlights (continued) - -------------------------------------------------------------------------------- For a share of capital stock outstanding throughout each year ended December 31, unless otherwise noted:
2002(1) 2001 2000 1999 1998 1997 ======================================================================================================================== Ratios to Average Net Assets Based on Common Shares Outstanding(4): Net investment income(2) 6.60%+ 5.35% 5.47% 5.17% 5.10% 5.42% Auction fees 0.07+ -- -- -- -- -- Operating expenses 0.92+ 0.80 0.78 0.77 0.76 0.74 Total expenses 0.99+ 0.80 0.78 0.77 0.76 0.74 - ------------------------------------------------------------------------------------------------------------------------ Portfolio Turnover Rate 39% 36% 45% 54% 42% 58% - ------------------------------------------------------------------------------------------------------------------------ Market Price, End of Period $ 9.87 $ 9.75 $ 8.81 $ 8.375 $ 10.688 $ 10.563 ========================================================================================================================
(1) For the six months ended June 30, 2002 (unaudited). (2) Without the adoption of the change in the accounting method discussed in Note 1 to the financial statements, for the six months ended June 30, 2002, the annualized ratio of net investment income to average net assets would have been 6.55%. Per share, 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 per share was less than $0.01. (3) The total return calculation assumes that dividends are reinvested in accordance with the Fund's dividend reinvestment plan. (4) Calculated on basis of average net assets of common shareholders. Ratios do not reflect the effect of dividend payments to preferred shareholders. * Amount represents less than $0.01 per share. ++ Total return is not annualized, as it may not be representative of the total return for the year. + Annualized. - -------------------------------------------------------------------------------- 26 2002 Semi-Annual Report to Shareholders - -------------------------------------------------------------------------------- Financial Data (unaudited) - -------------------------------------------------------------------------------- For a share of capital stock outstanding throughout each period: AMEX Net Asset Dividends Reinvestment Period Closing Price* Value* Paid Price ================================================================================ 2000 January $8.63 $ 9.83 $0.044 $8.64 February 8.50 9.87 0.044 8.46 March 8.56 10.00 0.044 8.54 April 8.44 9.92 0.045 8.50 May 8.56 9.84 0.045 8.64 June 8.88 10.00 0.045 8.91 July 9.38 10.05 0.046 9.28 August 9.13 10.13 0.046 9.08 September 8.81 10.06 0.046 8.84 October 8.69 10.12 0.046 8.73 November 8.88 10.08 0.046 8.90 December 8.81 10.20 0.046 9.24 2001 January 9.69 10.24 0.046 9.52 February 9.40 10.24 0.046 9.48 March 9.55 10.28 0.046 9.44 April 9.37 10.18 0.046 9.42 May 9.60 10.24 0.046 9.63 June 9.58 10.26 0.046 9.60 July 9.62 10.36 0.046 9.71 August 9.73 10.47 0.046 9.72 September 9.65 10.40 0.046 9.79 October 9.72 10.47 0.046 9.80 November 9.65 10.36 0.046 9.48 December 9.75 10.21 0.046 9.59 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 ================================================================================ * On the last business day of the month. - -------------------------------------------------------------------------------- Intermediate Muni Fund, Inc. 27 - -------------------------------------------------------------------------------- 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 Global Fund Services ("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), or if the Fund declares a dividend or capital gains distribution payable only in cash, 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 - -------------------------------------------------------------------------------- 28 2002 Semi-Annual Report to Shareholders - -------------------------------------------------------------------------------- Dividend Reinvestment Plan (unaudited) (continued) - -------------------------------------------------------------------------------- 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 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 Global Fund Services, P.O. Box 8030, Boston, Massachusetts 02266-8030 or by telephone at (800) 331-1710. - -------------------------------------------------------------------------------- Intermediate Muni Fund, Inc. 29 - -------------------------------------------------------------------------------- INTERNEDIATE MUNI FUND, INC. - -------------------------------------------------------------------------------- DIRECTORS Lee Abraham Alan J. Bloostein Jane F. Dasher Donald R. Foley R. Jay Gerken Richard E. Hanson, Jr. Paul Hardin Heath B. McLendon, Chairman Roderick C. Rasmussen John P. Toolan Joseph H. Fleiss, Emeritus OFFICERS Heath B. McLendon President and Chief Executive Officer R. Jay Gerken Executive Vice President Lewis E. Daidone Senior Vice President and Chief Administrative Officer Richard L. Peteka Chief Financial Officer and Treasurer Peter M. Coffey Vice President Kaprel Ozsolak Controller Christina T. Sydor Secretary INVESTMENT MANAGER Smith Barney Fund Management LLC CUSTODIAN State Street Bank and Trust Company SHAREHOLDER SERVICING AGENT PFPC Global Fund Services 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 FD0633 8/02 02-3638 -----END PRIVACY-ENHANCED MESSAGE-----