-----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, CRNXZ8Y9vTBj4LQYP4zZhvNS22dwXK6rJbl2lZTP7jCiO1UcBoUR8jhheLfBSTqN xNtSnNXLtJBz7oeVcwdmLQ== 0001133228-03-000055.txt : 20030304 0001133228-03-000055.hdr.sgml : 20030304 20030304113303 ACCESSION NUMBER: 0001133228-03-000055 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20021231 FILED AS OF DATE: 20030304 EFFECTIVENESS DATE: 20030304 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: 03590649 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 sb133794.txt ANNUAL REPORT - -------------------------------------------------------------------------------- INTERMEDIATE MUNI FUND, INC. [GRAPHIC OMITTED] Annual Report December 31, 2002 - -------------------------------------------------------------------------------- ================================================================================ LETTER FROM THE CHAIRMAN - -------------------------------------------------------------------------------- [PHOTO OMITTED] R. JAY GERKEN Chairman, President and Chief Executive Officer Intermediate Muni Fund, Inc. Dear Shareholder, Please allow me to introduce myself as the new Chairman, President and Chief Executive Officer of the Intermediate Muni Fund, Inc. ("Fund"), replacing Heath B. McLendon, who has been appointed Chairman of Salomon Smith Barney Inc.'s new Equity Research Policy Committee. On behalf of all our shareholders and the Fund's Board of Directors, I would like to extend my deepest gratitude to Heath for his years of service and for his dedication to keeping shareholders' needs as the firm's top priority. I look forward to keeping you informed about the investment perspectives of the Fund's manager by regularly providing you with these shareholder letters in the future. To better acquaint you with my experience, I am currently a managing director of Salomon Smith Barney Inc., and I have previously managed the Smith Barney Growth and Income Fund for six years; developed and managed the Smith Barney Allocation Series Inc. from its inception in 1996 through the end of 2001; and was responsible for the investment design and implementation of Citigroup Asset Management's college savings programs with the states of Illinois and Colorado. I am pleased to provide the annual report for the Fund for the year ended December 31, 2002. In this report, the Fund's manager summarizes what he believes to be the period's prevailing economic and market conditions and outline the Fund's investment strategy. A detailed summary of the Fund's performance can be found in the appropriate sections that follow. I hope you find this report to be useful and informative. Sincerely, /s/ R. Jay Gerken R. Jay Gerken Chairman, President and Chief Executive Officer - -------------------------------------------------------------------------------- Intermediate Muni Fund, Inc. 1 ================================================================================ LETTER FROM THE MANAGER ================================================================================ [PHOTO OMITTED] PETER M. COFFEY Vice President Performance Review(1) During the year ended December 31, 2002, the Fund distributed income dividends to shareholders totaling $0.58 per share. The table below shows the annualized distribution yield and 12-month total return based on the Fund's December 31, 2002 net asset value ("NAV") per share and its American Stock Exchange ("AMEX") closing price.(2) Price Annualized Twelve-Month Per Share Distribution Yield(3) Total Returns(3) - ------------ --------------------- ---------------- $10.27 (NAV) 5.96% 6.73% $9.56 (AMEX) 6.40% 4.03% The Fund's Lipper Inc. ("Lipper")(4) peer group of general municipal debt closed-end funds (leveraged) returned 11.38% based on NAV for the year ended December 31, 2002. Investment Strategy The Fund seeks as high a level of current income exempt from federal income tax as is consistent with prudent investing.(5) Under normal market conditions, the Fund invests at least 80% of its total assets in municipal obligations with remaining maturities at the time of investment of less than 15 years. The Fund seeks to achieve its objective by investing primarily in investment-grade municipal debt securities issued by state and local governments. - ---------- (1) Past performance is not indicative of future results. (2) 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) by the total number of the 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 an investor may buy or sell shares of the Fund is at the Fund's market (AMEX) price as determined by supply of and demand for the Fund's shares. (3) Total returns are based on changes in NAV or the market price, respectively. Total returns assume the reinvestment of all dividends and/or capital gains distributions in additional shares. Annualized distribution yield is the Fund's current monthly income dividend rate, annualized, and then divided by the NAV or the market price noted in this report. The annualized distribution yield assumes a current monthly income dividend rate of $0.051 for twelve months. This rate is as of December 31, 2002, and is subject to change. The important difference between a total return and an annualized distribution yield 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 yield 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. (4) Lipper is a major independent mutual-fund tracking organization. Average annual returns are based on the 12-month period ended December 31, 2002, calculated among 56 funds in the Lipper general municipal debt closed-end funds (leveraged) category with reinvestment of dividends and capital gains, excluding sales charges. (5) Please note a portion of the Fund's income may be subject to the Alternative Minimum Tax ("AMT"). State and local income taxes may apply. Capital gains, if any, are fully taxable. Please consult your personal tax adviser. - -------------------------------------------------------------------------------- 2 2002 Annual Report to Shareholders Portfolio Manager Market Overview The year 2002 was characterized by weak economic conditions on a national level and equity market volatility, which exhibited pressure on state revenues for many municipalities. Nonetheless, numerous municipalities capitalized on the period's low interest rate environment by issuing a record amount of tax-exempt municipal securities (approximately $357 billion) amid strong demand by investors. In terms of the overall reporting period, municipal bond issues performed well as risk-adverse equity investors, concerned about stock market fluctuations, shifted significant amounts of money from equities into fixed-income investments. When the reporting period commenced, municipal bond prices initially advanced throughout much of the first quarter of 2002. However, as the period progressed, new economic data released reflected signs of strength in the U.S. economy, which exceeded many expectations in the marketplace. Furthermore, the Federal Reserve Board ("Fed") monetary authorities decided to keep short-term interest rates steady at the time. As a result, municipal bonds gave up many of their gains from the period. (Municipal bond prices typically perform more favorably in environments when inflation appears subdued and interest rates are trending downward.) The decision by the U.S. Federal Open Market Committee ("FOMC")(6) not to change its rate target marked a shift in the FOMC's monetary policy stance from 2001, when the FOMC cut its target for the federal funds rate ("fed funds rate")(7) 11 times to help provide more accommodative conditions for borrowing to help support an economic recovery. Municipal bond prices advanced in the second quarter amid corporate integrity concerns, which prompted investors to seek higher-grade fixed-income securities. New municipal bond issues came to market at a record pace. Municipal bond prices rose in the third quarter amid a volatile equity market environment. In the fourth quarter, the FOMC cut its target for the fed fund rate by half a percentage point to a 41-year low of 1.25%, marking the first reduction in the rate in 2002. Although municipal bond markets lost momentum during the fourth quarter overall (despite having rebounded somewhat in December), tax-exempt issues collectively posted relatively strong results for the reporting period. Despite their favorable performance over 2002, prices of municipal bonds (which move inversely to yields) have generally not rallied as considerably as U.S. Treasuries have over the past year. In our opinion, supply and demand characteristics contributed to municipal securities' less-positive performance relative to U.S. Treasuries, as institutional investors reallocated capital from - ---------- (6) 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. (7) The fed funds rate is the interest rate that banks with excess reserves at a Federal Reserve district bank charge other banks that need overnight loans. The fed funds rate often points to the direction of U.S. interest rates. - -------------------------------------------------------------------------------- Intermediate Muni Fund, Inc. 3 stocks into Treasuries. As a result, amid a period of historically high municipal security issuance levels in 2002, municipal securities rated AAA recently offered yields at levels comparable to 93% of those on U.S. Treasuries with similar maturities. (Remember that unlike U.S. Treasuries, municipal securities are not taxable at the federal level.) We believe this added potential tax savings has made municipal bonds an even more compelling investment alternative to U.S. Treasuries. (A portion of the Fund's income from municipal securities may be subject to certain taxes and any capital gains are taxable.(5) Portfolio Manager Fund Overview In our view, municipal securities offer favorable values versus many taxable fixed-income alternatives, although we believe that prices of most municipal bonds - particularly those in the investment-grade(8) category -- have approached a peak. In an effort to pursue a more defensive posture, as the period progressed and rates continued to decline, we sought suitable bonds with high coupons and shorter call-adjusted(9) effective maturities; the average life of the Fund's portfolio holdings, based on "effective" maturities, was shortened from 8.5 years to 8 years, even as the average maturity on our holdings actually lengthened from(10).3 years to 11.3 years. We pursued this strategy of focusing on call-adjusted effective maturities due to the steepness of the yield curve10, with yields on shorter-maturities far lower than those on longer-term issues. Through our approach of focusing on callable bonds with somewhat longer maturities within our universe, the Fund was able to obtain much higher yields than those that were available from issues with shorter maturities without greatly increasing market sensitivity levels. The Fund also adopted a short position in U.S. Treasury note futures, with the objective of offsetting a portion of the increased market sensitivity of the Fund incurred with the issuance of preferred stock. Portfolio Manager Market and Fund Outlook After the conclusion of the reporting period, Fed monetary policymakers held a two-day meeting on January 28 and 29, 2003 to discuss Open Market Operations. The FOMC concluded at the meeting to leave its fed funds rate target intact at 1.25%. Fed authorities reportedly stated that rising oil prices and geopolitical risks have restrained spending and hiring by businesses. However, - ---------- (8) Investment-grade bonds are those rated Aaa, Aa, A and Baa by Moody's Investors Service and AAA, AA, A and BBB by Standard & Poor's Ratings Service, or that have an equivalent rating by a nationally recognized statistical rating organization or are determined by the manager to be of equivalent quality. (9) Adjusting for call refers to the consideration of whether or not a bond is callable prior to maturity and trading at a premium to face value when determining its maturity date. Call options are rights to buy shares of a particular stock or index at a predetermined price before a preset deadline, in exchange for a premium. (10) 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 Annual Report to Shareholders according to the Fed's statement, "as those risks lift, as most analysts expect, the accommodative stance of monetary policy, coupled with ongoing growth in productivity, will provide support to an improving economic climate over time." Looking ahead, we anticipate that economic growth will remain sluggish - at least over the course of the next few months, particularly as concerns regarding Iraq loom over the U.S. economy. Against this backdrop, in our view the FOMC will likely continue to keep short-term interest rates at low levels until there is solid evidence that the economy is on sound footing for sustainable growth. We anticipate that interest rates will rise in the future (although not immediately). In this environment, we believe municipal securities should continue to provide favorable relative value. In fiscal year 2003, we believe a challenge for states will be to adjust spending as a result of modified revenues in order to continue to balance their budgets. We will continue to diligently observe national and state-specific economic reports, the situation in Iraq and its potential impact on the U.S. economy, and the course of interest rates while continuing to pursue a conservative investment approach. According to our investment philosophy, the key to long-term investing is through maintaining a diversified(11) portfolio of stocks, fixed-income securities and cash instruments. Granted, the risk is present that short-term rates may rise in the future and exhibit pressure on municipal bond prices. However, considering the competitive yields that municipal bonds have offered relative to many taxable fixed-income investment alternatives, coupled with the tax-treatment advantages of municipal securities, we believe that a professionally managed portfolio of municipal securities should continue to provide favorable long-term relative value to individual investors. Looking for Additional Information? Intermediate Muni Fund, Inc. is traded on the American Stock Exchange under the symbol "SBI." Daily closing prices are available online under symbol XSBIX and in most newspapers under the American Stock Exchange listings. Barron's and The Wall Street Journal's Monday editions carry closed-end fund tables that provide weekly net asset value per share information. In addition, the Fund issues a quarterly allocation press release that can be found on most major financial web sites. - ---------- (11) Diversification does not assure against market loss. - -------------------------------------------------------------------------------- Intermediate Muni Fund, Inc. 5 Thank you for your investment in Intermediate Muni Fund, Inc. We look forward to continuing to help you meet your investment objectives. Sincerely, /s/ Peter M. Coffey Peter M. Coffey Vice President January 29, 2003 The information provided in this commentary by the portfolio manager represents the opinion of the portfolio manager and is not intended to be a forecast of future events, a guarantee of future results or investment advice. Views expressed are those of the portfolio manager and may differ from those of other portfolio managers or of the firm as a whole. Furthermore, there is no assurance that certain securities will remain in or out of the Fund or that the percentage of the Fund's assets in various sectors will remain the same. Please refer to pages 8 through 16 for a list and percentage breakdown of the Fund's holdings. Also, please note that any discussion of the Fund's holdings, the Fund's performance, and the portfolio manager's views are as of December 31, 2002 and are subject to change. - -------------------------------------------------------------------------------- 6 2002 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), 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 35. 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. 7 - -------------------------------------------------------------------------------- Schedule of Investments December 31, 2002 - --------------------------------------------------------------------------------
FACE AMOUNT RATING(a) SECURITY VALUE ============================================================================================================ Education -- 10.4% $ 1,000,000 A2* Arizona Educational Loan Marketing Corp., Educational Loan Revenue, Sub-Series, 6.625% due 9/1/05 (b) $ 1,010,310 1,000,000 Aaa* Athens, GA Housing Authority, Student Housing Lease Revenue, (University of Georgia - East Campus Project), AMBAC-Insured, 5.250% due 12/1/23 1,045,520 800,000 AAA Ball State University of Indiana, University Revenue, Series K, FGIC-Insured, 5.750% due 7/1/20 893,280 Colorado Educational and Cultural Facilities Authority Revenue, Charter School: 1,000,000 Baa3* Community Education Center, (Bromley East Project A), 7.000% due 9/15/20 (c) 1,040,070 500,000 Baa2* University Lab School Project, 6.125% due 6/1/21 507,665 Greenville County, SC School District, Installment Purchase Revenue, (Building Equity Sooner for Tomorrow Project): 2,000,000 AA- 5.875% due 12/1/19 2,233,980 2,000,000 AA- 6.000% due 12/1/21 2,228,280 550,000 BBB Illinois Development Finance Authority Revenue, (Chicago Charter School Foundation Project A), 5.250% due 12/1/12 564,498 1,000,000 AAA Jenison, MI Public Schools, FGIC-Insured, 5.500% due 5/1/20 1,086,480 500,000 A Massachusetts State Development Finance Agency Revenue, Curry College, Series A, ACA-Insured, 6.000% due 3/1/20 541,445 NebHELP Inc. Revenue, NE, MBIA-Insured: 1,000,000 Aaa* Jr. Sub-Series A-6, 6.450% due 6/1/18 (b) 1,112,140 2,000,000 Aaa* Sr. Sub-Series A-5A, 6.200% due 6/1/13 (b) 2,232,280 500,000 A3* New England Education Loan Marketing Corp., MA Student Loan Revenue, Sub-Issue H, 6.900% due 11/1/09 (b) 585,435 960,000 A++ New Mexico Educational Assistance Foundation, Student Loan Revenue, First Sub-Series A-2, 5.950% due 11/1/07 (b) 1,023,898 1,000,000 AAA Philadelphia, PA School District, Series A, FSA-Insured, 5.500% due 2/1/23 1,066,850 1,350,000 AAA Pittsburgh, PA School District, FSA-Insured, 5.375% due 9/1/16 1,543,752 1,000,000 AAA Southwest Higher Education Authority Inc., TX, (Southern Methodist University Project), AMBAC-Insured, 5.500% due 10/1/19 1,090,410 - ------------------------------------------------------------------------------------------------------------ 19,806,293 - ------------------------------------------------------------------------------------------------------------ Escrowed to Maturity (d) -- 13.2% 205,000 AAA Anderson County, SC Hospital Facilities Revenue, 7.125% due 8/1/07 231,515 2,000,000 AAA Atlanta, GA Metropolitan Rapid Transit Authority, Sales Tax Revenue, Series E, 7.000% due 7/1/11 (c) 2,481,480 115,000 AAA Birmingham, AL Medical Clinic Board Revenue, Baptist Medical Centers, 8.300% due 7/1/08 134,823 855,000 AAA Boston, MA Water & Sewer Community Revenue, (Escrowed with state and local government securities), 10.875% due 1/1/09 1,082,438 60,000 AAA Cabell, Putnam & Wayne Counties, WV Single-Family Residence Mortgage Revenue, FGIC-Insured, 7.375% due 4/1/10 70,011
See Notes to Financial Statements. - -------------------------------------------------------------------------------- 8 2002 Annual Report to Shareholders - -------------------------------------------------------------------------------- Schedule of Investments (continued) December 31, 2002 - --------------------------------------------------------------------------------
FACE AMOUNT RATING(a) SECURITY VALUE ============================================================================================================ Escrowed to Maturity (d) -- 13.2% (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 $ 1,638,585 30,000 A- Colorado Health Facilities Authority Revenue Refunding, Rocky Mountain Adventist Health Center, (Escrowed with state and local government securities), 6.250% due 2/1/04 31,588 1,150,000 AAA Conneaut, PA School District, AMBAC-Insured, 9.500% due 5/1/12 (c) 1,492,079 Illinois Health Facilities Authority Revenue: 705,000 AAA Methodist Medical Center Project, 9.000% due 10/1/10 873,305 965,000 AAA Ravenswood Hospital Medical Center Project, 7.250% due 8/1/06 1,069,809 720,000 AAA Jackson, TN Water and Sewer Revenue, 7.200% due 7/1/12 861,969 1,200,000 BBB+++ Klamath Falls, OR Intercommunity Hospital Authority Revenue, (Merle West Medical Center Project), 8.000% due 9/1/08 1,440,696 330,000 AAA Lake County, OH Hospital Improvement Revenue, (Lake County Memorial Hospital Project), 8.625% due 11/1/09 401,613 205,000 AAA Lee County, FL Southwest Florida Regional Airport Revenue, MBIA-Insured, 8.625% due 10/1/09 250,004 345,000 AAA Lima, OH Hospital Revenue, St. Rita Hospital of Lima, 7.500% due 11/1/06 388,432 1,300,000 NR Los Angeles, CA COP, Hollywood Presbyterian Medical Center, 9.625% due 7/1/13 1,767,389 180,000 AAA Louisiana Public Facilities Authority, Hospital Revenue Refunding, (Southern Baptist Hospital Inc. Project), 8.000% due 5/15/12 222,320 370,000 AAA Madison County, IN Industrial Hospital Authority, Facilities Revenue, (Community Hospital of Anderson Project), 9.250% due 1/1/10 456,965 Maricopa County, AZ Hospital Revenue: 210,000 AAA Samaritan Health Service, 7.625% due 1/1/08 238,930 910,000 AAA St. Luke's Hospital Medical Center Project, 8.750% due 2/1/10 1,105,723 420,000 AAA Metropolitan Nashville, TN Airport Authority Tennessee Airport Revenue, MBIA-Insured, 7.500% due 7/1/05 454,591 100,000 NR Nacogdoches County, TX Hospital District Revenue, 9.000% due 5/15/04 106,535 149,000 AAA New Jersey State Turnpike Authority Turnpike Revenue, (Escrowed with state and local government securities), 10.375% due 1/1/03 149,000 930,000 AAA North Carolina Municipal Power Agency No. 1, Catawba Electricity Revenue, 10.500% due 1/1/10 1,188,410 Ohio State Water Development Authority Revenue: 2,935,000 AAA 9.375% due 12/1/10 (c) 3,663,349 280,000 AAA Safe Water, Series III, 9.000% due 12/1/10 332,875 415,000 AAA Orange County, FL Health Facilities Authority Revenue, Adventist Health System, (Southern Adventist Hospital Project), 8.750% due 10/1/09 507,362 175,000 AAA Philadelphia, PA Hospitals Authority Revenue, Thomas Jefferson University Hospital, 7.000% due 7/1/08 198,810
See Notes to Financial Statements. - -------------------------------------------------------------------------------- Intermediate Muni Fund, Inc. 9 - -------------------------------------------------------------------------------- Schedule of Investments (continued) December 31, 2002 - --------------------------------------------------------------------------------
FACE AMOUNT RATING(a) SECURITY VALUE ============================================================================================================ Escrowed to Maturity (d) -- 13.2% (continued) $ 245,000 AAA Ringwood Borough, NJ Sewer Authority Special Obligation, 9.875% due 7/1/13 $ 321,861 180,000 AAA San Francisco, CA Airport Improvement Corp., Lease Revenue, United Airlines Inc., 8.000% due 7/1/13 228,035 35,000 AAA San Leandro, CA Hospital Revenue, Vesper Memorial Hospital, AMBAC-Insured, 11.500% due 5/1/11 48,735 225,000 NR Southwestern, IL Development Authority, Hospital Revenue Refunding, (Wood River Township Hospital Project), 6.875% due 8/1/03 232,353 470,000 NR Tom Green County, TX Hospital Authority, 7.875% due 2/1/06 512,906 980,000 Aa1* Washington State Public Power Supply System, (Nuclear Project No. 1), Series C, 7.750% due 7/1/03 1,011,262 - ------------------------------------------------------------------------------------------------------------ 25,195,758 - ------------------------------------------------------------------------------------------------------------ General Obligation -- 9.3% 500,000 AAA Anchorage, AK GO, Refunding, FGIC-Insured, 6.000% due 10/1/14 595,490 1,000,000 AA Central Falls, RI GO, 5.875% due 5/15/15 1,131,310 1,000,000 AAA Chicago, IL GO, Refunding, AMBAC-Insured, 6.100% due 1/1/03 1,000,000 1,000,000 AA Harvey, IL GO, Refunding, 6.700% due 2/1/09 1,099,010 1,310,000 AAA Kane County, IL GO, FGIC-Insured, 5.500% due 1/1/14 1,467,043 1,130,000 Aaa* Lancaster, MA GO, AMBAC-Insured, 5.375% due 4/15/17 1,244,232 1,500,000 AAA Massachusetts State GO, MBIA-Insured, FLAIRS, 9.009% due 5/1/09 (e) 1,951,770 2,400,000 Aa2* Minnehaha County, SD GO, Limited Tax Certificates, 5.625% due 12/1/20 (c) 2,614,416 2,000,000 AAA Montgomery County, MD GO, Refunding, 5.250% due 10/1/14 (c) 2,237,660 3,010,000 AA+ Ohio State GO, (Conservation Projects), Series A, 5.250% due 9/1/13 3,328,939 1,000,000 AAA Saraland, AL GO, MBIA-Insured, 5.250% due 1/1/15 1,094,170 - ------------------------------------------------------------------------------------------------------------ 17,764,040 - ------------------------------------------------------------------------------------------------------------ Hospital -- 20.1% 115,000 Baa3* Allentown, PA Area Hospital Authority Revenue, Sacred Heart Hospital of Allentown, Series A, 6.200% due 11/15/03 114,989 1,500,000 BBB++ Arkansas State Development Finance Authority, Hospital Revenue, Washington Regional Medical Center, 7.000% due 2/1/15 1,603,095 650,000 AAA Calcasieu Parish, LA Memorial Hospital Service District Hospital Revenue, (Lake Charles Memorial Hospital Project), Series A, CONNIE LEE-Insured, 7.500% due 12/1/05 751,510 650,000 A- Chatham County, GA Hospital Authority Revenue, Memorial Health Medical Center, Series A, 6.000% due 1/1/17 688,545 545,000 A- Colorado Health Facilities Authority Revenue, Rocky Mountain Adventist Health Center, 6.250% due 2/1/04 568,430 2,000,000 AA Connecticut State Health & Educational Facilities Authority Revenue, Bristol Hospital, Series B, 5.500% due 7/1/21 (c) 2,129,440
See Notes to Financial Statements. - -------------------------------------------------------------------------------- 10 2002 Annual Report to Shareholders - -------------------------------------------------------------------------------- Schedule of Investments (continued) December 31, 2002 - --------------------------------------------------------------------------------
FACE AMOUNT RATING(a) SECURITY VALUE ============================================================================================================ Hospital -- 20.1% (continued) $ 2,000,000 BBB Cuyahoga County, OH Hospital Facility Revenue, (Canton Inc. Project), 6.750% due 1/1/10 (c) $ 2,222,900 710,000 BBB+ Denver, CO Health & Hospital Authority, Healthcare Revenue, Series A, 6.250% due 12/1/16 761,503 400,000 A-1+ Harris County, TX Health Facilities Development Corp. Revenue, Methodist Hospital, 1.800% due 12/1/32 (f) 400,000 Harris County, TX Hospital District Revenue Refunding, MBIA-Insured: 1,000,000 AAA 6.000% due 2/15/15 1,152,700 25,000 AAA 6.000% due 2/15/16 28,639 2,000,000 BBB+ Hawaii State Department of Budget & Finance, Special Purpose Revenue, Kapiolani Health Care System, 6.400% due 7/1/13 2,053,280 1,445,000 BBB+++ Henderson, NV Health Care Facility Revenue, Catholic Healthcare West, Series A, 6.200% due 7/1/09 1,586,957 1,300,000 BBB Illinois Health Facilities Authority Revenue Refunding, Friendship Village of Schaumburg, 6.650% due 12/1/06 1,311,986 1,000,000 A1* Iowa Finance Authority Health Care Facilities Revenue, Genesis Medical Center, 6.250% due 7/1/20 1,051,770 1,625,000 NR Lee Memorial Health System Board of Directors, FL Hospital Revenue, FSA-Insured, FLAIRS, 9.394% due 4/1/10 (e) 2,092,773 405,000 A-++ Lees Summit, MO IDA, Health Facilities Revenue, (John Knox Village Project), 5.750% due 8/15/11 441,989 25,000 BBB- Louisiana Public Facilities Authority Revenue, (General Health Systems Project), 6.800% due 11/1/16 25,942 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 1,211,500 370,000 AAA Massachusetts State Development Finance Agency Revenue, Series A, GNMA-Collateralized, 6.700% due 10/20/21 432,093 Massachusetts State Health & Educational Facilities Authority Revenue: Caritas Christi Obligation, Series B: 2,000,000 BBB 6.500% due 7/1/12 (c) 2,195,880 750,000 BBB 6.750% due 7/1/16 815,513 1,000,000 Baa2* Milford-Whitinsville Regional Hospital, 6.500% due 7/15/23 1,035,420 1,280,000 AAA Massachusetts State Industrial Finance Agency, Assisted Living Facility Revenue, (Arbors at Amherst Project), GNMA-Collateralized, 5.750% due 6/20/17 (b) 1,426,547 1,000,000 A- New Hampshire Health & Educational Facilities Authority Revenue, Covenant Healthcare System, 6.500% due 7/1/17 1,102,470 1,268,000 NR New York City, NY IDA, Civic Facilities Revenue Refunding, (New York Community Hospital Brooklyn), 6.875% due 11/1/10 1,270,904 2,000,000 B1* Oklahoma Developmental Finance Authority Revenue Refunding, Hillcrest Healthcare System, Series A, 5.625% due 8/15/19 1,514,860 Orange County, FL Health Facilities Authority Revenue: Adventist Health Care: 1,500,000 A- 6.250% due 11/15/24 1,584,600 2,500,000 AAA FSA-Insured, 6.050% due 11/15/07 2,588,950
See Notes to Financial Statements. - -------------------------------------------------------------------------------- Intermediate Muni Fund, Inc. 11 - -------------------------------------------------------------------------------- Schedule of Investments (continued) December 31, 2002 - --------------------------------------------------------------------------------
FACE AMOUNT RATING(a) SECURITY VALUE ============================================================================================================ Hospital -- 20.1% (continued) $ 935,000 NR First Mortgage, Health Care Facilities, 8.750 due 7/1/11 $ 958,534 1,000,000 NR Rainbow City, AL Special Health Care Facilities Financing Authority, (Regency Pointe Inc.), Series B, 7.250% due 1/1/06 1,012,270 500,000 BBB- Rhode Island State Health & Educational Building Corp., Revenue Refunding, Roger Williams Hospital Financing, 5.400% due 7/1/13 466,930 1,490,000 A- Sayre, PA Health Care Facilities Authority Revenue, Guthrie Healthcare System, Series A, 6.250% due 12/1/18 1,594,330 - ------------------------------------------------------------------------------------------------------------ 38,197,249 - ------------------------------------------------------------------------------------------------------------ Housing: Multi-Family -- 5.6% 1,000,000 A3* Bexar County, TX Housing Finance Corp., Multi-Family Housing Revenue Refunding, Nob Hill Apartments, Series A, 6.000% due 6/1/21 1,016,170 390,000 AAA Charlotte, NC Mortgage Revenue Refunding, Double Oaks Apartments, Series A, FHA-Insured, 7.300% due 11/15/07 429,468 710,000 Baa1* Dallas, TX Housing Corp., Capital Projects Refunding, 7.700% due 8/1/05 710,476 El Paso County, TX Housing Finance Corp., Multi-Family Housing Revenue: 360,000 A3* American Village Communities, Series A, 6.250% due 12/1/24 365,548 280,000 Baa3* La Plaza Apartments, Sub-Series C, 8.000% due 7/1/30 293,440 585,000 AAA Grand Prairie, TX Housing Finance Corp., Multi-Family Housing Revenue, (Landings of Carrier Project A), GNMA-Collateralized, 6.650% due 9/20/22 654,755 310,000 AA- Hudson County, NJ Improvement Authority, Multi-Family Housing Revenue, (Observer Park Project), Series A, FNMA-Collateralized, 6.600% due 6/1/04 (b) 323,646 1,175,000 A3* Lubbock, TX Housing Finance Corp., Multi-Family Housing Revenue, (Las Colinas Quality Creek Apartments), 6.000% due 7/1/22 1,190,240 1,470,000 A++ Lynchburg, VA Redevelopment & Housing Authority, Multi-Family Housing Revenue Refunding, (Princeton Circle Association Project), 6.250% due 12/1/10 1,477,526 500,000 Aaa* Maricopa County, AZ IDA, Multi-Family Housing Revenue, (Bay Club at Mesa Cove Project), Series A, MBIA-Insured, 5.700% due 9/1/20 525,330 645,000 A2* McMinnville, TN Housing Authority Revenue Refunding, First Mortgage, Beersheba Heights, 6.000% due 10/1/09 699,606 Mount Vernon, IL Elderly Housing Corp., First Lien Revenue: 185,000 Ba3* 7.875% due 4/1/03 185,943 200,000 Ba3* 7.875% due 4/1/04 200,460 215,000 Ba3* 7.875% due 4/1/05 215,393 235,000 Ba3* 7.875% due 4/1/06 235,442 250,000 Ba3* 7.875% due 4/1/07 250,457 270,000 Ba3* 7.875% due 4/1/08 270,500
See Notes to Financial Statements. - -------------------------------------------------------------------------------- 12 2002 Annual Report to Shareholders - -------------------------------------------------------------------------------- Schedule of Investments (continued) December 31, 2002 - --------------------------------------------------------------------------------
FACE AMOUNT RATING(a) SECURITY VALUE ============================================================================================================ Housing: Multi-Family -- 5.6% (continued) Tarrant County, TX Housing Finance Corp. Revenue, Multi-Family Housing, Westridge: $ 600,000 A3* Sr. Series A, 6.000% due 6/1/21 $ 601,338 475,000 Baa3* Sub-Series C, 8.500% due 6/1/31 474,934 545,000 BBB++ Tulsa, OK Housing Assistance Corp., Multi-Family Revenue, 7.250% due 10/1/07 (b) 548,499 - ------------------------------------------------------------------------------------------------------------ 10,669,171 - ------------------------------------------------------------------------------------------------------------ Housing: Single-Family -- 2.1% 55,000 AA Juneau, AK City & Borough Home Mortgage Revenue Refunding, Mortgage-Backed Securities Program, FNMA-Collateralized, 8.000% due 2/1/09 55,432 1,030,000 AA Massachusetts State Housing Finance Agency, Single-Family Housing Revenue, Series 38, 7.200% due 12/1/26 (b) 1,073,703 200,000 AAA Missouri State Housing Development Community Mortgage Revenue, Series C, GNMA/FNMA-Collateralized, 7.450% due 9/1/27 (b) 217,154 475,000 AAA Pima County, AZ IDA, Single-Family Mortgage Revenue, Series A, GNMA/FNMA/FHLMC-Collateralized, 7.100% due 11/1/29 (b) 509,034 120,000 AAA St. Louis County, MO Single-Family Mortgage Revenue, MBIA-Insured, 6.750% due 4/1/10 125,844 775,000 AAA Texas State Department of Housing and Community Affairs, Home Mortgage Revenue, RIBS, Series C-2, GMNA/FNMA/ FHLMC-Collateralized, 12.208% due 7/2/24 (b)(e) 909,571 1,000,000 AA+ Virginia State Housing Development Authority, Commonwealth Mortgage, Series H, Sub-Series H-1, 6.100% due 7/1/03 1,014,400 - ------------------------------------------------------------------------------------------------------------ 3,905,138 - ------------------------------------------------------------------------------------------------------------ Industrial Development -- 8.8% 1,000,000 NR Alaska Industrial Development & Export Authority Revenue, Williams Lynxs Alaska Cargoport, 8.000% due 5/1/23 (b) 1,039,070 535,000 C* Bourbonnais, IL IDR Refunding, (Kmart Corp. Project), 6.600% due 10/1/06 241,975 1,500,000 AAA Des Moines, IA IDR Refunding, (The Printer Inc. Project), LOC-Mercantile Bank/FHLB, 6.375% due 9/1/09 1,518,675 1,000,000 A+ Kanawha County, WV Commercial Development Revenue Refunding, (May Department Stores Co. Project), 6.500% due 6/1/03 1,016,010 2,000,000 Baa1* LaCrosse, WI Resource Recovery Revenue Refunding, (Northern States Power Co. Project), 6.000% due 11/1/21 (b) 2,249,780 1,300,000 AA Massachusetts State Development Finance Agency Revenue, Worcester Redevelopment Authority Issue, 6.000% due 6/1/24 1,388,725 1,365,000 AA Northampton County, PA IDA Revenue, (Moravian Hall Square Project), 5.500% due 7/1/19 1,452,346 2,000,000 BBB- Ohio State Air Quality Development Authority Revenue, Pollution Control, (Cleveland Electric Illuminating Co. Project), 6.000% due 12/1/13 2,024,620
See Notes to Financial Statements. - -------------------------------------------------------------------------------- Intermediate Muni Fund, Inc. 13 - -------------------------------------------------------------------------------- Schedule of Investments (continued) December 31, 2002 - --------------------------------------------------------------------------------
FACE AMOUNT RATING(a) SECURITY VALUE ============================================================================================================ Industrial Development -- 8.8% (continued) $ 1,000,000 AAA Pennsylvania State IDR, Economic Development Revenue, AMBAC-Insured, 5.500% due 7/1/21 $ 1,086,300 1,000,000 Baa3* Rockbridge County, VA IDA Revenue, Virginia Horse Center, Series C, 6.850% due 7/15/21 1,032,500 795,000 A South Dakota Economic Development Finance Authority, Economic Development Revenue, APA Optics, Series A, 6.750% due 4/1/16 (b) 868,561 1,290,000 NR Suffolk County, NY IDA, Civic Facility Revenue, (Eastern Long Island Hospital Association Project A), 7.750% due 1/1/22 1,282,376 1,500,000 NR Wasco County, OR Solid Waste Disposal Revenue, (Waste Connections Inc. Project), 7.000% due 3/1/12 (b) 1,562,505 - ------------------------------------------------------------------------------------------------------------ 16,763,443 - ------------------------------------------------------------------------------------------------------------ Miscellaneous -- 4.9% 1,500,000 NR Barona Band of Mission Indians, CA, 8.250% due 1/1/20 1,604,745 1,410,000 A1* District of Columbia, Tobacco Settlement Financing Corp., 6.250% due 5/15/24 1,411,819 1,065,000 A Illinois Development Finance Authority Revenue, East St. Louis, 6.875% due 11/15/05 1,167,741 645,000 Baa2* Indianapolis, IN Economic Development Refunding & Improvement Revenue, National Benevolent Association, 6.900% due 10/1/04 663,053 1,690,000 AAA Monroe, LA Sales & Use Tax Revenue, FGIC-Insured, 5.625% due 7/1/25 1,841,627 60,000 NR Orlando, FL Special Assessment Revenue, (Conroy Road Interchange Project), Series B, 5.250% due 5/1/05 60,451 905,000 NR Orlando, FL Urban Community Development District, Capital Improvement, Series B, 6.400% due 5/1/10 925,018 1,500,000 BBB+ Puerto Rico Housing Bank & Finance Agency, 7.500% due 12/1/06 1,677,195 - ------------------------------------------------------------------------------------------------------------ 9,351,649 - ------------------------------------------------------------------------------------------------------------ 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 2,373,600 1,000,000 AAA Monroe County, MI PCR, (Detroit Edison Co. Project), Series A, AMBAC-Insured, 6.350% due 12/1/04 (b)(c) 1,089,050 - ------------------------------------------------------------------------------------------------------------ 3,462,650 - ------------------------------------------------------------------------------------------------------------ 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 (c) 2,337,280 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 66,587 735,000 NR Philadelphia, PA Hospital Authority Revenue, (United Hospital Inc. Project), (Call 7/1/05 @ 100), 10.875% due 7/1/08 870,784
See Notes to Financial Statements. - -------------------------------------------------------------------------------- 14 2002 Annual Report to Shareholders - -------------------------------------------------------------------------------- Schedule of Investments (continued) December 31, 2002 - --------------------------------------------------------------------------------
FACE AMOUNT RATING(a) SECURITY VALUE ============================================================================================================ Pre-Refunded (g) -- 1.9% (continued) $ 330,000 NR San Leandro, CA Redevelopment Agency, Residential Mortgage Revenue, (Call 10/1/04 @ 100), 11.250% due 4/1/13 $ 377,025 - ------------------------------------------------------------------------------------------------------------ 3,651,676 - ------------------------------------------------------------------------------------------------------------ Public Facilities -- 1.4% DeKalb County, IN Industrial Redevelopment Authority Revenue, (Mini-Mill LOC Public Improvement Project A): 1,000,000 A- 6.250% due 1/15/08 1,088,640 1,350,000 A- 6.250% due 1/15/09 1,461,821 - ------------------------------------------------------------------------------------------------------------ 2,550,461 - ------------------------------------------------------------------------------------------------------------ Transportation -- 8.5% 1,855,000 A Connecticut State Special Obligation, Parking Revenue, Bradley International Airport, Series A, ACA-Insured, 6.375% due 7/1/12 (b)(c) 2,046,213 1,500,000 AAA Connecticut State Special Tax Obligation Revenue, FSA-Insured, FLAIRS, 8.782% due 10/1/09 (c)(e) 1,867,260 5,000,000 BBB- Connector 2000 Association, SC Toll Road Revenue, Capital Appreciation, Series B, zero coupon due 1/1/15 (c) 1,446,500 2,000,000 AAA Dallas, TX Area Rapid Transit Sales Tax Revenue, Sr. Lien, AMBAC-Insured, 5.375% due 12/1/16 (c) 2,185,400 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)(c) 701,445 2,035,000 AAA Dallas/Fort Worth, TX Regional Airport Revenue Refunding, Series A, FGIC-Insured, 7.750% due 11/1/03 (c) 2,141,247 1,855,000 AAA Delaware River Port Authority of Pennsylvania and New Jersey, FSA-Insured, FLAIRS, 8.996% due 1/1/10 (e) 2,301,313 1,000,000 Aaa* Harrisburg, PA Parking Authority, Parking Revenue, FSA-Insured, 5.500% due 5/15/20 1,089,990 4,675,000 BBB-++ Pocahontas Parkway Association, VA Toll Road Revenue, Capital Appreciation, Series B, zero coupon due 8/15/19 1,078,289 595,000 NR Sanford, FL Airport Authority IDR, (Central Florida Terminals Inc. Project A), 7.500% due 5/1/06 (b) 596,975 Tulsa, OK Municipal Airport Revenue Refunding, Series B: 500,000 BB- 6.000% due 6/1/35 (b) 302,685 500,000 BB- 5.650% due 12/1/35 (b) 302,720 - ------------------------------------------------------------------------------------------------------------ 16,060,037 - ------------------------------------------------------------------------------------------------------------ Utilities -- 4.7% 2,000,000 A2* Burlington, KS Environmental Improvement Revenue, (Kansas City Power & Light Project), 4.750% due 9/1/15 2,032,080 2,000,000 AAA Energy Northwest Washington Electric Revenue, (Project No. 3), Series A, FSA-Insured, 5.500% due 7/1/18 2,183,060 500,000 A Georgia Municipal Electric Authority, Power System Revenue, Series X, 6.500% due 1/1/12 591,265 1,000,000 AAA Griffin, GA Combined Public Utility Revenue, AMBAC-Insured, 5.000% due 1/1/21 1,041,220 1,000,000 NR Klamath Falls, OR Electric Revenue Refunding, Sr. Lien, 5.750% due 1/1/13 1,010,820
See Notes to Financial Statements. - -------------------------------------------------------------------------------- Intermediate Muni Fund, Inc. 15 - -------------------------------------------------------------------------------- Schedule of Investments (continued) December 31, 2002 - --------------------------------------------------------------------------------
FACE AMOUNT RATING(a) SECURITY VALUE ============================================================================================================ Utilities -- 4.7% (continued) $ 1,000,000 BBB+++ North Carolina Eastern Municipal Power Agency, Power System Revenue, Series D, 6.450% due 1/1/14 $ 1,114,840 1,000,000 BBB- Warren, AR Solid Waste Disposal Revenue, (Potlatch Corp. Project), 7.000% due 4/1/12 (b) 1,004,700 20,000 Aa1* Washington State Public Power Supply System, (Nuclear Project No. 1), Series C, 7.750% due 7/1/03 20,638 - ------------------------------------------------------------------------------------------------------------ 8,998,623 - ------------------------------------------------------------------------------------------------------------ Water and Sewer -- 7.3% 1,445,000 AA- Charleston, SC Waterworks and Sewer Revenue, 5.250% due 1/1/16 1,575,888 1,370,000 AAA Cleveland, OH Waterworks Revenue, Series K, FGIC-Insured, 5.250% due 1/1/21 (c) 1,446,282 1,000,000 AAA El Paso, TX Water and Sewer Revenue Refunding and Improvement, Series A, FSA-Insured, 6.000% due 3/1/15 1,166,150 2,000,000 AA+++ Fort Worth, TX Water and Sewer Revenue, 5.625% due 2/15/17 2,221,760 1,000,000 AAA Gainesville, GA Water and Sewer Revenue, FSA-Insured, 5.375% due 11/15/20 1,078,440 2,000,000 AAA Philadelphia, PA Water and Wastewater Revenue, Series B, FGIC-Insured, 5.250% due 11/1/14 2,223,580 1,765,000 AAA Pueblo, CO Bridge Waterworks, Water Revenue Improvement, Series A, FSA-Insured, 6.000% due 11/1/14 2,053,966 500,000 AAA Rhode Island Clean Water Finance Agency, Water Pollution Control Revenue, 5.000% due 10/1/20 522,310 1,485,000 Aaa* Spanish Fork City, UT Water Revenue, FSA-Insured, 5.500% due 6/1/16 1,649,478 - ------------------------------------------------------------------------------------------------------------ 13,937,854 - ------------------------------------------------------------------------------------------------------------ TOTAL INVESTMENTS -- 100% (Cost -- $182,069,893**) $190,314,042 ============================================================================================================
(a) All ratings are by Standard & Poor's Ratings Service, except for those identified by an asterisk (*), which are rated by Moody's Investors Service and those identified by a double dagger (++), which are rated by Fitch Ratings. (b) Income from these issues is considered a preference item for purposes of calculating the alternative minimum tax. (c) Security has been segregated for open futures contracts commitments. (d) 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. (e) Inverse floating rate security-coupon varies inversely with level of short-term tax-exempt interest rates. (f) Variable rate obligation payable at par on demand at any time on no more than seven days notice. (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. + Security is currently in default. ** Aggregate cost for Federal income tax purposes is $181,885,521. See pages 17 and 18 for definitions of ratings and certain security descriptions. See Notes to Financial Statements. - -------------------------------------------------------------------------------- 16 2002 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 "CCC" may be modified by the addition of a plus (+) or a minus (-) sign to show relative standings within the major rating categories. AAA -- Bonds rated "AAA" have the highest rating assigned by Standard & Poor's. Capacity to pay interest and repay principal is extremely strong. AA -- Bonds rated "AA" have a very strong capacity to pay interest and repay principal and differs from the highest rated issue only in a small degree. A -- Bonds rated "A" have a strong capacity to pay interest and repay principal although it is somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than debt in higher rated categories. BBB -- Bonds rated "BBB" are regarded as having an adequate capacity to pay interest and repay principal. Whereas it normally exhibits adequate protection parameters, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity to pay interest and repay principal for debt in this category than in higher rated categories. BB, B -- Bonds rated "BB", "B", "CCC" and "CC" are regarded, on 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 ("Moody's") -- Numerical modifiers 1, 2, and 3 may be applied to each generic rating from "Aa" to "Caa", where 1 is the highest and 3 the lowest rating within its generic category. Aaa -- Bonds rated "Aaa" are judged to be of the best quality. They carry the smallest degree of investment risk and are generally referred to as "gilt edge." Interest payments are protected by a large or by an exceptionally stable margin and principal is secure. While the various protective elements are likely to change, such changes as can be visualized are most unlikely to impair the fundamentally strong position of such issues. Aa -- Bonds rated "Aa" are judged to be of high quality by all standards. Together with the Aaa group they comprise what are generally known as high grade bonds. They are rated lower than the best bonds because margins of protection may not be as large as in Aaa securities or fluctuation of protective elements may be of greater amplitude or there may be other elements present which make the long-term risks appear somewhat larger than in Aaa securities. A -- Bonds rated "A" possess many favorable investment attributes and are to be considered as upper medium grade obligations. Factors giving security to principal and interest are considered adequate but elements may be present which suggest a susceptibility to impairment some time in the future. Baa -- Bonds rated "Baa" are considered as medium grade obligations, i.e., they are neither highly protected nor poorly secured. Interest payments and principal security appear adequate for the present but certain protective elements may be lacking or may be characteristically unreliable over any great length of time. Such bonds lack outstanding investment characteristics and in fact have speculative characteristics as well. Ba -- Bonds rated "Ba" are judged to have speculative elements; their future cannot be considered as well assured. Often the protection of interest and principal payments may be very moderate, and therefore not well safeguarded during both good and bad times over the future. Uncertainty of position characterizes bonds in this class. B -- Bonds rated "B" generally lack characteristics of the desirable investments. Assurance of interest and principal payments or maintenance of other terms of the contract over any long period of time may be small. 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. 17 - -------------------------------------------------------------------------------- Bond Ratings (unaudited) (continued) - -------------------------------------------------------------------------------- Fitch Ratings ("Fitch") -- Ratings from "AA" to "BBB" may be modified by the addition of a plus (+) sign or minus (-) sign to show relative standings within the major ratings categories. AA -- Bonds rated "AA" are considered to be investment grade and of very high credit quality. The obligor's ability to pay interest and/or dividends and repay principal is very strong. A -- Bonds and preferred stock considered to be investment grade and of high credit quality. The obligor's ability to pay interest and/or dividends and repay principal is considered to be strong, but may be more vulnerable to adverse changes in economic conditions and circumstances than debt or preferred securities with higher ratings. BBB -- Bonds rated "BBB" are considered to be investment grade and of satisfactory credit quality. The obligor's ability to pay interest or dividends and repay principal is considered to be adequate. Adverse changes in economic conditions and circumstances, however, are more likely to have adverse impact on these securities and, therefore, impair timely payment. The likelihood that the ratings of these bonds will fall below investment grade is higher than for securities with higher ratings. NR -- Indicates that the bond is not rated by Standard & Poor's 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 FHLB -- Federal Home Loan Bank FHLMC -- Federal Home Loan Mortgage Corporation FLAIRS -- Floating Adjustable Interest Rate Securities FNMA -- Federal National Mortgage Association FSA -- Financial Security Assurance GIC -- Guaranteed Investment Contract GNMA -- Government National Mortgage Association GO -- General Obligation HFA -- Housing Finance Authority IDA -- Industrial Development Agency IDR -- Industrial Development Revenue INDLC -- Industrial Indemnity Company ISD -- Independent School District LOC -- Letter of Credit MBIA -- Municipal Bond Investors Assurance Corporation PCFA -- Pollution Control Financing Authority PCR -- Pollution Control Revenue PSFG -- Permanent School Fund Guaranty RIBS -- Residual Interest Bonds VRDD -- Variable Rate Daily Demand - -------------------------------------------------------------------------------- 18 2002 Annual Report to Shareholders - -------------------------------------------------------------------------------- Statement of Assets and Liabilities December 31, 2002 - -------------------------------------------------------------------------------- ASSETS: Investments, at value (Cost -- $182,069,893) $ 190,314,042 Cash 101,082 Interest receivable 3,341,771 Receivable for securities sold 255,124 Receivable from broker - variation margin 65,625 Other assets 2,056 - ---------------------------------------------------------------------------------------------- Total Assets 194,079,700 - ---------------------------------------------------------------------------------------------- LIABILITIES: Management fee payable 98,339 Dividends payable 37,039 Accrued preferred stock distribution payable 2,328 Accrued expenses 57,870 - ---------------------------------------------------------------------------------------------- Total Liabilities 195,576 - ---------------------------------------------------------------------------------------------- Series M Municipal Auction Rate Cumulative Preferred Stock (2,000 shares authorized and issued at $25,000 per share) (Note 7) 50,000,000 - ---------------------------------------------------------------------------------------------- Total Net Assets $ 143,884,124 - ---------------------------------------------------------------------------------------------- NET ASSETS: Par value of capital shares $ 14,005 Capital paid in excess of par value 141,233,797 Undistributed net investment income 959,915 Accumulated net realized loss on security transactions and futures contracts (5,827,117) Net unrealized appreciation of investments and futures contracts 7,503,524 - ---------------------------------------------------------------------------------------------- Total Net Assets (Equivalent to $10.27 per share on 14,004,750 capital shares of $0.001 par value outstanding; 100,000,000 capital shares authorized) $ 143,884,124 ==============================================================================================
See Notes to Financial Statements. - -------------------------------------------------------------------------------- Intermediate Muni Fund, Inc. 19 - -------------------------------------------------------------------------------- Statement of Operations For the Year Ended December 31, 2002 - -------------------------------------------------------------------------------- INVESTMENT INCOME: Interest $ 11,022,494 - ------------------------------------------------------------------------------- EXPENSES: Management fee (Note 3) 1,140,159 Auction fees (Note 7) 113,144 Listing fees 83,245 Audit and legal 71,559 Custody 45,255 Shareholder communications 40,150 Shareholder servicing fees 31,712 Registration fees 16,122 Directors' fees 1,027 Other 10,151 - ------------------------------------------------------------------------------- Total Expenses 1,552,524 - ------------------------------------------------------------------------------- Net Investment Income 9,469,970 - ------------------------------------------------------------------------------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FUTURES CONTRACTS (NOTES 4 AND 5): Realized Loss From: Security transactions (excluding short-term securities) (1,732,694) Futures contracts (1,578,690) - ------------------------------------------------------------------------------- Net Realized Loss (3,311,384) - ------------------------------------------------------------------------------- Change in Net Unrealized Appreciation of Investments and Futures Contracts: Beginning of year 3,206,673 End of year 7,503,524 - ------------------------------------------------------------------------------- Increase Net Unrealized Appreciation 4,296,851 - ------------------------------------------------------------------------------- Net Gain on Investments and Futures Contracts 985,467 - ------------------------------------------------------------------------------- Distributions Paid to Municipal Auction Rate Cumulative Preferred Stockholders From Net Investment Income (664,828) - ------------------------------------------------------------------------------- Increase in Net Assets From Operations $ 9,790,609 =============================================================================== See Notes to Financial Statements. - -------------------------------------------------------------------------------- 20 2002 Annual Report to Shareholders - -------------------------------------------------------------------------------- Statements of Changes in Net Assets - --------------------------------------------------------------------------------
For the Years Ended December 31, 2002 2001 ============================================================================================== OPERATIONS: Net investment income $ 9,469,970 $ 7,771,750 Net realized gain (loss) (3,311,384) 707,073 Increase (decrease) in net unrealized appreciation 4,296,851 (601,846) Distributions paid to Municipal Auction Rate Cumulative Preferred Stockholders from net investment income (664,828) -- - ---------------------------------------------------------------------------------------------- Increase in Net Assets From Operations 9,790,609 7,876,977 - ---------------------------------------------------------------------------------------------- DISTRIBUTIONS PAIDTO SHAREHOLDERS FROM (NOTE 2): Net investment income (8,087,762) (7,730,624) - ---------------------------------------------------------------------------------------------- Decrease in Net Assets From Distributions Paid to Common Stock Shareholders (8,087,762) (7,730,624) - ---------------------------------------------------------------------------------------------- FUND SHARE TRANSACTIONS (NOTE 11): Underwriting commissions and expenses from the issuance of Municipal Auction Rate Cumulative Preferred Stock (Note 7) (778,731) -- Treasury stock acquired -- (621) - ---------------------------------------------------------------------------------------------- Decrease in Net Assets From Fund Share Transactions (778,731) (621) - ---------------------------------------------------------------------------------------------- Increase in Net Assets 924,116 145,732 NET ASSETS: Beginning of year 142,960,008 142,814,276 - ---------------------------------------------------------------------------------------------- End of year* $ 143,884,124 $ 142,960,008 ============================================================================================== * Includes undistributed net investment income of: $ 959,915 $ 247,196 ==============================================================================================
See Notes to Financial Statements. - -------------------------------------------------------------------------------- Intermediate Muni Fund, Inc. 21 - -------------------------------------------------------------------------------- Notes to Financial Statements - -------------------------------------------------------------------------------- 1. Significant Accounting Policies The Intermediate Muni Fund, Inc. ("Fund"), a Maryland corporation, is registered under the Investment Company Act of 1940, as amended, as a diversified, closed-end management investment company. The significant accounting policies consistently followed by the Fund are:(a) security transactions are accounted for on trade date;(b) securities are valued at the mean between the bid and 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 an 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, 2002, reclassifications were made to the capital accounts of the Fund 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 adjustment; (j) the net asset value of the Fund's Common Stock is determined by dividing the value of the net assets available to Common Stock by the total number of shares of common stock outstanding. For the purpose of determining the net asset value per share of the common stock, the value of the Fund's net assets shall be deemed to equal the value of the Fund's assets less (1) the Fund's liabilities, (2) the aggregate liquidation value (i.e., $25,000 per outstanding share) of the Municipal Auction Rate Cumulative Preferred Stock and (3) accumulated and unpaid dividends on the outstanding Municipal Auction Rate Cumulative Preferred Stock issue; - -------------------------------------------------------------------------------- 22 2002 Annual Report to Shareholders - -------------------------------------------------------------------------------- Notes to Financial Statements (continued) - -------------------------------------------------------------------------------- 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 and recorded adjustments to increase accumulated undistributed net investment income by $125,678 to reflect the cumulative effect of this change up to the date of the adoption. This change does not affect the Fund's net asset value, but does change the classification of certain amounts in the statement of operations. 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. For purposes of calculating the management fee, the liquidation value of any preferred stock of the Fund is not deducted in determining the Fund's average daily net assets. This fee is calculated daily and paid monthly. All officers and one Director of the Fund are employees of Citigroup or its affiliates. - -------------------------------------------------------------------------------- Intermediate Muni Fund, Inc. 23 - -------------------------------------------------------------------------------- Notes to Financial Statements (continued) - -------------------------------------------------------------------------------- 4. Investments During the year ended December 31, 2002, the aggregate cost of purchases and proceeds from sales of investments (including maturities, but excluding short-term securities) were as follows: ================================================================================ Purchases $136,463,249 - -------------------------------------------------------------------------------- Sales 91,298,650 ================================================================================ At December 31, 2002, aggregate gross unrealized appreciation and depreciation of investments for Federal income tax purposes were as follows: ================================================================================ Gross unrealized appreciation $ 10,813,721 Gross unrealized depreciation (2,385,200) - -------------------------------------------------------------------------------- Net unrealized appreciation $ 8,428,521 ================================================================================ 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 December 31, 2002, the Fund had the following open futures contracts:
Number of Basis Market Unrealized Contracts Expiration Value Value Loss ================================================================================================= To Sell: U.S. 10 Year Treasury Note 300 3/03 $33,773,438 $34,514,063 $(740,625) =================================================================================================
- -------------------------------------------------------------------------------- 24 2002 Annual Report to Shareholders - -------------------------------------------------------------------------------- Notes to Financial Statements (continued) - -------------------------------------------------------------------------------- 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 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 December 31, 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. The risk in writing a call option is that the Fund is exposed to the risk of loss if the market price of the underlying security increases. During the year ended December 31, 2002, the Fund did not enter into any written covered call or put option contracts. - -------------------------------------------------------------------------------- Intermediate Muni Fund, Inc. 25 - -------------------------------------------------------------------------------- Notes to Financial Statements (continued) - -------------------------------------------------------------------------------- 7. Municipal Auction Rate Cumulative Preferred Stock On January 28, 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 1.15%-1.75% for the year ended December 31, 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 year ended December 31, 2002, SSB earned $113,144 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. 8. Asset Maintenance and Asset Coverage Requirements The Fund is required to maintain certain asset coverages with respect to the ARCPS. If the Fund fails to maintain these coverages and does not cure any such failure within the required time period, the Fund is required to redeem a requisite number of the ARCPS in order to meet the applicable requirement. Additionally, failure to meet the foregoing asset coverage requirements would restrict the Fund's ability to pay dividends. - -------------------------------------------------------------------------------- 26 2002 Annual Report to Shareholders - -------------------------------------------------------------------------------- Notes to Financial Statements (continued) - -------------------------------------------------------------------------------- 9. Capital Loss Carryforward At December 31, 2002, the Fund had, for Federal income tax purposes, a capital loss carryforward of approximately $6,495,000, 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 2010 ================================================================================ Carryforward amounts $38,000 $1,897,000 $513,000 4,047,000 ================================================================================ 10. Income Tax Information and Distributions to Shareholders At December 31, 2002, the tax basis components of distributable earnings were: ================================================================================ Undistributed tax-exempt income $ 708,351 - -------------------------------------------------------------------------------- Accumulated capital loss (6,494,699) - -------------------------------------------------------------------------------- Unrealized appreciation 8,428,521 ================================================================================ The difference between book basis and tax basis unrealized appreciation and depreciation is attributable primarily to wash sales, mark-to-market of futures contracts and open AICPA amortization adjustments. The tax character of distributions paid during the year ended December 31, 2002 was: ================================================================================ Tax-exempt income $8,738,103 Ordinary income 14,487 - -------------------------------------------------------------------------------- Total $8,752,590 ================================================================================ 11. Capital Shares At December 31, 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 year ended December 31, 2002, the Fund did not repurchase any shares. - -------------------------------------------------------------------------------- Intermediate Muni Fund, Inc. 27 - -------------------------------------------------------------------------------- Financial Highlights - -------------------------------------------------------------------------------- For a share of capital stock outstanding throughout each year ended December 31, unless otherwise noted:
2002 2001 2000 1999 1998 ============================================================================================================ Net Asset Value, Beginning of Year $ 10.21 $ 10.20 $ 9.89 $ 10.61 $ 10.64 - ------------------------------------------------------------------------------------------------------------ Income (Loss) From Operations: Net investment income(1) 0.68 0.56 0.55 0.53 0.55 Net realized and unrealized gain (loss)(1) 0.07 -- 0.28 (0.71) 0.01 Distributions paid to Municipal Auction Rate Cumulative Preferred Stockholders from net investment income (0.05) -- -- -- -- - ------------------------------------------------------------------------------------------------------------ Total Income (Loss) From Operations 0.70 0.56 0.83 (0.18) 0.56 - ------------------------------------------------------------------------------------------------------------ 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 (0.58) (0.55) (0.54) (0.53) (0.55) Net realized gains -- -- -- (0.01) (0.04) - ------------------------------------------------------------------------------------------------------------ Total Distributions Paid to Common Stock Shareholders (0.58) (0.55) (0.54) (0.54) (0.59) - ------------------------------------------------------------------------------------------------------------ Net Asset Value, End of Year $ 10.27 $ 10.21 $ 10.20 $ 9.89 $ 10.61 - ------------------------------------------------------------------------------------------------------------ Total Return, Based on Market Value(2) 4.03% 17.17% 11.90% (17.10)% 7.05% - ------------------------------------------------------------------------------------------------------------ Total Return, Based on Net Asset Value(2) 6.73% 6.01% 9.68% (1.39)% 5.50% - ------------------------------------------------------------------------------------------------------------ Net Assets, End of Year (millions) $ 144 $ 143 $ 143 $ 83 $ 89 ============================================================================================================
- -------------------------------------------------------------------------------- 28 2002 Annual Report to Shareholders - -------------------------------------------------------------------------------- Financial Highlights (continued) - -------------------------------------------------------------------------------- For a share of capital stock outstanding throughout each year ended December 31, unless otherwise noted:
2002 2001 2000 1999 1998 ======================================================================================= Ratios to Average Net Assets Based on Common Shares Outstanding(3): Net investment income(1) 6.59% 5.35% 5.47% 5.17% 5.10% Auction fees 0.08 -- -- -- -- Operating expenses 1.00 0.80 0.78 0.77 0.76 Total expenses 1.08 0.80 0.78 0.77 0.76 - --------------------------------------------------------------------------------------- Portfolio Turnover Rate 49% 36% 45% .54% .42% - --------------------------------------------------------------------------------------- Market Price, End of Year $ 9.56 $ 9.75 $ 8.81 $ 8.375 $ 10.688 =======================================================================================
(1) Without the adoption of the change in the accounting method discussed in Note 1 to the financial statements, for the year ended December 31, 2001, the ratio of net investment income to average net assets would have been 5.31%. 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. (2) The total return calculation assumes that dividends are reinvested in accordance with the Fund's dividend reinvestment plan. (3) Calculated on basis of average net assets of common shareholders. Ratios do not reflect the effect of dividend payments to preferred shareholders. * Amount represents less than $0.01 per share. The table below sets out information with respect to Municipal Auction Rate Cumulative Preferred Stock: 2002(1) ================================================================================ Municipal Auction Rate Cumulative Preferred Stock(2): Total Amount Outstanding (000s) $50,000 Asset Coverage Per Share 96,942 Involuntary Liquidating Preference Per Share (3) 25,000 Average Market Value Per Share(3) 25,000 ================================================================================ (1) As of December 31, 2002. (2) On January 28, 2002, the Fund issued 2,000 shares of Series M, of Municipal Auction Rate Cumulative Preferred Stock at $25,000 a share. (3) Excludes accrued interest or accumulated undeclared dividends. - -------------------------------------------------------------------------------- Intermediate Muni Fund, Inc. 29 - -------------------------------------------------------------------------------- Independent Auditors' Report - -------------------------------------------------------------------------------- The Shareholders and Board of Directors of the Intermediate Muni Fund, Inc.: We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of the Intermediate Muni Fund, Inc. ("Fund") as of December 31, 2002, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the years in the two-year period then ended, and the financial highlights for each of the years in the five-year period then ended. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of December 31, 2002, by correspondence with the custodian. As to securities sold but not yet delivered, we performed other appropriate auditing procedures. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of the Fund as of December 31, 2002, and the results of its operations for the year then ended, the changes in its net assets for each of the years in the two-year period then ended, and the financial highlights for each of the years in the five-year period then ended, in conformity with accounting principles generally accepted in the United States of America. /s/ KPMG LLP New York, New York February 12, 2003 - -------------------------------------------------------------------------------- 30 2002 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 ================================================================================ 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 July 9.90 10.37 0.048 9.92 August 10.05 10.44 0.048 10.07 September 10.09 10.57 0.048 10.11 October 9.75 10.24 0.051 9.50 November 9.42 10.16 0.051 9.57 December 9.56 10.27 0.051 9.48 ================================================================================ * On the last business day of the month. - -------------------------------------------------------------------------------- Intermediate Muni Fund, Inc. 31 - -------------------------------------------------------------------------------- Additional Information (unaudited) - -------------------------------------------------------------------------------- Information about Directors and Officers The business and affairs of the Intermediate Muni Fund, Inc. ("Fund") are managed under the direction of the Fund's Board of Directors. Information pertaining to the Directors and Officers of the Fund is set forth below. The Statement of Additional Information includes additional information about the Fund's Directors and is available, without charge, upon request by calling the Fund's transfer agent (PFPC Global Fund Services at 1-800-331-1710).
Number of Term of Portfolios Office* and Principal In Fund Position(s) Length Occupation(s) Complex Other Held with of Time During Past Overseen Directorships Name, Address and Age Fund Served Five Years by Director Held by Director - ----------------------- ----------- ----------- ------------ ----------- ---------------- Non-Interested Directors: Lee Abraham Director Since Retired; Former 28 Signet Group 13732 LeHavre Drive 1999 Chairman and Chief PLC Frenchman's Creek Executive Officer of Palm Beach Gardens Associated Merchan- FL 33410 dising Corp., a major Age 75 retail merchandising organization; Former Director of Galey & Lord and Liz Claiborne. Allan J. Bloostein Director Since President of Allan 35 Taubman 27 West 67th Street 1999 Bloostein Associates, Centers Inc. Apt. 5FW a consulting firm; New York, NY 10023 Former Director of Age 72 CVS Corp. Jane F. Dasher Director Since Controller of PBK 28 None Korsant Partners 1999 Holdings Inc., a 283 Greenwich Avenue family investment 3rd Floor company Greenwich, CT 06830 Age 53 Donald R. Foley Director Since Retired 19 None 3668 Freshwater Drive 1992 Jupiter, FL 33477 Age 80 Richard E. Hanson, Jr. Director Since Retired; Former 28 None 2751 Vermont Route 140 1999 Head of the New Poultney, VT 05764 Atlanta Jewish Age 61 Community High School Dr. Paul Hardin Director Since Professor of Law & 36 None 12083 Morehead 1994 Chancellor Emeritus Chapel Hill, NC at the University of 27514-8426 North Carolina Age 71
- -------------------------------------------------------------------------------- 32 2002 Annual Report to Shareholders - -------------------------------------------------------------------------------- Additional Information (unaudited) (continued) - --------------------------------------------------------------------------------
Number of Term of Portfolios Office* and Principal In Fund Position(s) Length Occupation(s) Complex Other Held with of Time During Past Overseen Directorships Name, Address and Age Fund Served Five Years by Director Held by Director - ----------------------- ----------- ----------- ------------ ----------- ---------------- Roderick C. Rasmussen Director Since Investment Counselor 28 None 9 Cadence Court 1992 Morristown, NJ 07960 Age 76 John P. Toolan Director Since Retired 28 John Hancock 7202 Southeast Golf 1992 Funds Ridge Way Hobe Sound, FL 33455 Age 72 Interested Director: R. Jay Gerken** Director/ Since Managing Director of 227 None SSB Chairman 2002 Salomon Smith Barney 399 Park Avenue Inc ("SSB"); Chairman, 4th Floor President and Chief New York, NY 10022 Executive Officer of Age 51 Smith Barney Fund Management LLC ("SBFM"), Travelers Investment Adviser, Inc. ("TIA") and Citi Fund Management Inc. Officers: Lewis E. Daidone Senior Vice Since Managing Director of N/A N/A SSB President 1992 SSB; Former Chief 125 Broad Street and Chief Financial Officer and 11th Floor Administrative Treasurer of mutual New York, NY 10004 Officer funds affiliated with Age 45 Citigroup Inc.; Director and Senior Vice President of SBFM and TIA Richard L. Peteka Chief Since Director and Head of N/A N/A SSB Financial 2002 Internal Control for 125 Broad Street Officer and Citigroup Asset 11th Floor Treasurer Management U.S. New York, NY 10004 Mutual Fund Age 41 Administration from 1999-2002; Vice President and Head of Mutual Fund Administration and Treasurer at Oppenheimer Capital from 1996 - 1999
- ---------- * Directors are elected for staggered terms for three years at the Fund's annual meeting and until their successors are duly elected and qualified. ** Mr. Gerken is an "interested person" of the Fund as defined in the Investment Company Act of 1940, because he is an officer of SBFM and certain of its affiliates. - -------------------------------------------------------------------------------- Intermediate Muni Fund, Inc. 33 - -------------------------------------------------------------------------------- Additional Information (unaudited) (continued) - --------------------------------------------------------------------------------
Number of Term of Portfolios Office* and Principal In Fund Position(s) Length Occupation(s) Complex Other Held with of Time During Past Overseen Directorships Name, Address and Age Fund Served Five Years by Director Held by Director - ----------------------- ----------- ----------- ------------ ----------- ---------------- Peter M. Coffey Vice Since Portfolio Manager N/A N/A SSB President 1992 399 Park Avenue New York, NY10022 Age 57 Kaprel Ozsolak Controller Since Vice President of SSB N/A N/A SSB 2002 125 Broad Street 11th Floor New York, NY 10004 Age 37 Christina T. Sydor Secretary Since Managing Director N/A N/A SSB 1992 of SSB; General 300 First Stamford Place Counsel and Secretary 4th Floor of SBFM and TIA Stamford, CT 06902 Age 52
- -------------------------------------------------------------------------------- Tax Information (unaudited) - -------------------------------------------------------------------------------- For Federal tax purposes the Fund hereby designates for the fiscal year ended December 31, 2002: o 99.83% of the dividends paid by the Fund from net investment income as tax exempt for regular Federal income tax purposes. - -------------------------------------------------------------------------------- 34 2002 Annual Report to Shareholders - -------------------------------------------------------------------------------- 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), PFPC will buy common stock in the open market, on the AMEX or elsewhere, for the participants' accounts. If following the commencement of the purchases and before PFPC has completed its purchases, the market price exceeds the net asset value of the common stock as of the valuation time, PFPC will attempt to terminate purchases in the open market and cause the fund to issue the remaining portion of the dividend or distribution in shares at a price equal to the greater of (a) net asset value as of the valuation time or (b) 95% of the then current market price. In this case, the number of shares received by a Plan participant will be based on the weighted average of prices paid for shares purchased in the open market and the price at which the fund issues the remaining shares. To the extent PFPC is unable to stop open market purchases and cause the Fund to issue the remaining shares, the average per share purchase price paid by PFPC may exceed the net asset value of the common stock as of the valuation time, resulting in the acquisition of fewer shares than if the dividend or capital gains distribution had been paid in common stock issued by the Fund at such net asset value. PFPC will begin to purchase common stock on the open market as soon as practicable after the - -------------------------------------------------------------------------------- Intermediate Muni Fund, Inc. 35 - -------------------------------------------------------------------------------- Dividend Reinvestment Plan (unaudited) (continued) - -------------------------------------------------------------------------------- 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. - -------------------------------------------------------------------------------- 36 2002 Annual Report to Shareholders - -------------------------------------------------------------------------------- INTERMEDIATE MUNI FUND, INC. - -------------------------------------------------------------------------------- DIRECTORS Lee Abraham Alan J. Bloostein Jane F. Dasher Donald R. Foley R. Jay Gerken, Chairman Richard E. Hanson, Jr. Paul Hardin Roderick C. Rasmussen John P. Toolan OFFICERS R. Jay Gerken President and Chief Executive Officer 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 FD1067 2/03 03-4499 -----END PRIVACY-ENHANCED MESSAGE-----