N-CSRS 1 sb135721.txt SEMI-ANNUAL REPORT UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM N-CSR CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES Investment Company Act file number 811-6506 Intermediate Muni Fund, Inc. (Exact name of registrant as specified in charter) 125 Broad Street, New York, NY 10004 (Address of principal executive offices) (Zip code) Christina T. Sydor, Esq. 300 First Stamford Place Stamford, CT 06902 (Name and address of agent for service) Registrant's telephone number, including area code: (800) 451-2010 Date of fiscal year end: December 31 Date of reporting period: June 30, 2003 ITEM 1. REPORT TO STOCKHOLDERS. The Semi-Annual Report to Stockholders is filed herewith. INTERMEDIATE MUNI FUND, INC. Semi-Annual Report June 30, 2003 ================================================================================ WHAT'S INSIDE ================================================================================ Letter from the Chairman .................................................. 1 Schedule of Investments ................................................... 3 Statement of Assets and Liabilities ....................................... 14 Statement of Operations ................................................... 15 Statements of Changes in Net Assets ....................................... 16 Notes to Financial Statements ............................................. 17 Financial Highlights ...................................................... 21 Financial Data ............................................................ 23 Additional Shareholder Information ........................................ 24 Dividend Reinvestment Plan ................................................ 25 ================================================================================ LETTER FROM THE CHAIRMAN ================================================================================ [PHOTO OMITTED] R. JAY GERKEN, CFA Chairman, President and Chief Executive Officer Dear Shareholder, The philosopher Bertrand Russell famously remarked that, "Change is one thing, progress is another." You will notice in the following pages that we have begun to implement some changes to your shareholder report and we will be reflecting other changes in future reports. Our aim is to make meaningful improvements in reporting on the management of your Fund and its performance, not just to enact change for change's sake. Please bear with us during this transition period. We know that you have questions about fund managers' decisions and plans, and we want to be sure that you have easy access to the information you need. Keeping investors informed is, and always will be, one of my top priorities as Chairman of your Fund. To that end, we encourage you to contact Investor Relations at 1-888-735-6507. We have also included a separate Manager Commentary along with this report, which we hope will give you a better understanding of your Fund and its management. As always, thank you for entrusting your assets to us. We look forward to helping you continue to meet your financial goals. Sincerely, /s/ R. Jay Gerken R. Jay Gerken, CFA Chairman, President and Chief Executive Officer July 24, 2003 -------------------------------------------------------------------------------- Intermediate Muni Fund, Inc. 1 -------------------------------------------------------------------------------- Take Advantage of the Fund's Dividend Reinvestment Plan! As an investor in the Fund, you can participate in its Dividend Reinvestment Plan ("Plan"), a convenient, simple and efficient way to reinvest your dividends and capital gains distributions, if any, in additional shares of the Fund. Below is a short summary of how the Plan works. Plan Summary If you are a Plan participant who has not elected to receive your dividends in the form of a cash payment, then your dividend and capital gain distributions will be reinvested automatically in additional shares of the Fund. The number of common stock shares in the Fund you will receive in lieu of a cash dividend is determined in the following manner. If the market price of the common stock is equal to or exceeds the net asset value per share ("NAV") on the determination date, you will be issued shares by the Fund at a price reflecting the NAV, or 95% of the market price, whichever is greater. If the market price is less than the NAV at the time of valuation (the close of business on the determination date), PFPC 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 25. 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. -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- 2 2003 Semi-Annual Report to Shareholders -------------------------------------------------------------------------------- Schedule of Investments (unaudited) June 30, 2003 --------------------------------------------------------------------------------
FACE AMOUNT RATING(a) SECURITY VALUE ========================================================================================================== Education -- 12.4% $ 1,000,000 A2* Arizona Educational Loan Marketing Corp. Educational Loan Revenue, Sub-Series, 6.625% due 9/1/05 (b) $ 1,006,980 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 1,080,890 800,000 AAA Ball State University of Indiana, University Revenue, Series K, FGIC-Insured, 5.750% due 7/1/20 912,976 Colorado Educational and Cultural Facilities Authority Revenue, Charter School: 1,000,000 Baa3* Community Education Center, (Bromley East Project A), 7.000% due 9/15/20 1,051,350 500,000 Baa2* University Lab School Project, 6.125% due 6/1/21 513,670 1,065,000 AAA Conneaut, PA School District, AMBAC-Insured, 9.500% due 5/1/12 1,394,341 Greenville County, SC School District, Installment Purchase Revenue, (Building Equity Sooner for Tomorrow Project): 2,000,000 AA- 5.875% due 12/1/19 2,273,320 2,000,000 AA- 6.000% due 12/1/21 2,284,220 500,000 BBB Illinois Development Finance Authority Revenue, (Chicago Charter School Foundation Project A), 5.250% due 12/1/12 532,045 1,000,000 AAA Jenison, MI Public Schools, FGIC-Insured, 5.500% due 5/1/20 1,121,650 500,000 NR Los Angeles, CA School District, MBIA-Insured, 9.478% due 7/1/18 622,880 500,000 A Massachusetts State Development Finance Agency Revenue, Curry College, Series A, ACA-Insured, 6.000% due 3/1/20 553,640 1,450,000 AAA Morgan Hill, CA School District, FGIC-Insured, 5.750% due 8/1/17 1,681,072 NebHELP Inc. Revenue, NE, MBIA-Insured: 1,000,000 Aaa* Jr. Sub-Series A-6, 6.450% due 6/1/18 (b) 1,154,510 2,000,000 Aaa* Sr. Sub-Series A-5A, 6.200% due 6/1/13 (b) 2,174,260 500,000 A3* New England Education Loan Marketing Corp., MA Student Loan Revenue, Sub-Issue H, 6.900% due 11/1/09 (b) 587,955 960,000 A++ New Mexico Educational Assistance Foundation, Student Loan Revenue, First Sub-Series A-2, 5.950% due 11/1/07 (b) 1,019,107 1,000,000 AAA Philadelphia, PA School District, Series A, FSA-Insured, 5.500% due 2/1/23 1,102,630 1,350,000 AAA Pittsburgh, PA School District, FSA-Insured, 5.375% due 9/1/16 1,597,806 1,000,000 AAA Southwest Higher Education Authority Inc., TX, (Southern Methodist University Project), AMBAC-Insured, 5.500% due 10/1/19 1,127,260 ---------------------------------------------------------------------------------------------------------- 23,792,562 ----------------------------------------------------------------------------------------------------------
See Notes to Financial Statements. -------------------------------------------------------------------------------- Intermediate Muni Fund, Inc. 3 -------------------------------------------------------------------------------- Schedule of Investments (unaudited) (continued) June 30, 2003 --------------------------------------------------------------------------------
FACE AMOUNT RATING(a) SECURITY VALUE ========================================================================================================== General Obligation -- 10.7% $ 500,000 AAA Anchorage, AK GO, Refunding, FGIC-Insured, 6.000% due 10/1/14 $ 614,815 1,000,000 AA Central Falls, RI GO, 5.875% due 5/15/15 1,159,190 2,000,000 AAA Delaware State GO, Series A, 5.000% due 7/1/13 2,249,340 1,000,000 AA Harvey, IL GO, Refunding, 6.700% due 2/1/09 (c) 1,081,000 1,310,000 AAA Kane County, IL GO, FGIC-Insured, 5.500% due 1/1/14 1,501,758 1,130,000 Aaa* Lancaster, MA GO, AMBAC-Insured, 5.375% due 4/15/17 1,273,521 1,500,000 AAA Massachusetts State GO, MBIA-Insured, FLAIRS, 9.807% due 5/1/09 (d) 2,061,060 1,000,000 Aaa* Memphis, MI GO, FGIC-Insured, 5.150% due 5/1/19 1,065,620 2,400,000 Aa2* Minnehaha County, SD GO, Limited Tax Certificates, 5.625% due 12/1/20 2,705,280 2,000,000 AAA Montgomery County, MD GO, Refunding, 5.250% due 10/1/14 2,304,060 3,010,000 AA+ Ohio State GO, (Conservation Projects), Series A, 5.250% due 9/1/13 (c) 3,417,404 1,000,000 AAA Saraland, AL GO, MBIA-Insured, 5.250% due 1/1/15 1,121,490 ---------------------------------------------------------------------------------------------------------- 20,554,538 ---------------------------------------------------------------------------------------------------------- Hospital -- 24.4% 115,000 Baa3* Allentown, PA Area Hospital Authority Revenue, Sacred Heart Hospital of Allentown, Series A, 6.200% due 11/15/03 115,208 205,000 AAA Anderson County, SC Hospital Facilities Revenue, 7.125% due 8/1/07 227,983 1,500,000 BBB++ Arkansas State Development Finance Authority, Hospital Revenue, Washington Regional Medical Center, 7.000% due 2/1/15 1,649,580 95,000 AAA Birmingham, AL Medical Clinic Board Revenue, Baptist Medical Centers, 8.300% due 7/1/08 110,213 650,000 AAA Calcasieu Parish, LA Memorial Hospital Service District Hospital Revenue, (Lake Charles Memorial Hospital Project), Series A, CONNIE LEE-Insured, 7.500% due 12/1/05 738,511 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 (e) 1,613,610 650,000 A- Chatham County, GA Hospital Authority Revenue, Memorial Health Medical Center, Series A, 6.000% due 1/1/17 712,530 305,000 A- Colorado Health Facilities Authority Revenue, Rocky Mountain Adventist Health Center, 6.250% due 2/1/04 312,832 2,000,000 AA Connecticut State Health & Educational Facilities Authority Revenue, Bristol Hospital, Series B, 5.500% due 7/1/21 (c) 2,195,800 2,000,000 BBB Cuyahoga County, OH Hospital Facility Revenue, (Canton Inc. Project), 6.750% due 1/1/10 2,273,880 710,000 BBB+ Denver, CO Health & Hospital Authority Healthcare Revenue, Series A, 6.250% due 12/1/16 781,554 1,000,000 AAA Harris County, TX Hospital District Revenue Refunding, MBIA-Insured, 6.000% due 2/15/15 (c) 1,177,600
See Notes to Financial Statements. -------------------------------------------------------------------------------- 4 2003 Semi-Annual Report to Shareholders -------------------------------------------------------------------------------- Schedule of Investments (unaudited) (continued) June 30, 2003 --------------------------------------------------------------------------------
FACE AMOUNT RATING(a) SECURITY VALUE ========================================================================================================== Hospital -- 24.4% (continued) $ 2,000,000 BBB+ Hawaii State Department of Budget & Finance, Special Purpose Revenue, Kapiolani Health Care System, 6.400% due 7/1/13 (c) $ 2,068,300 1,420,000 BBB+++ Henderson, NV Health Care Facility Revenue, Catholic Healthcare West, Series A, 6.200% due 7/1/09 (c) 1,593,084 Illinois Health Facilities Authority Revenue: 705,000 AAA Methodist Medical Center Project, 9.000% due 10/1/10 868,927 965,000 AAA Ravenswood Hospital Medical Center Project, 7.250% due 8/1/06 (d) 1,050,460 1,300,000 BBB Illinois Health Facilities Authority Revenue Refunding, Friendship Village of Schaumburg, 6.650% due 12/1/06 (c) 1,307,644 1,000,000 A1* Iowa Finance Authority Health Care Facilities Revenue, Genesis Medical Center, 6.250% due 7/1/20 1,071,800 1,200,000 BBB+++ Klamath Falls, OR Intercommunity Hospital Authority Revenue, (Merle West Medical Center Project), 8.000% due 9/1/08 (e) 1,437,972 330,000 AAA Lake County, OH Hospital Improvement Revenue, (Lake County Memorial Hospital Project), 8.625% due 11/1/09 399,795 1,625,000 NR Lee Memorial Health System Board of Directors, FL Hospital Revenue, FSA-Insured, FLAIRS, 10.238% due 4/1/10 (d) 2,160,925 405,000 A-++ Lees Summit, MO IDA, Health Facilities Revenue, (John Knox Village Project), 5.750% due 8/15/11 453,393 345,000 AAA Lima, OH Hospital Revenue, St. Rita Hospital of Lima, 7.500% due 11/1/06 381,463 1,230,000 NR Los Angeles, CA COP, Hollywood Presbyterian Medical Center, 9.625% due 7/1/13 (e) 1,673,747 165,000 AAA Louisiana Public Facilities Authority Hospital Revenue Refunding, (Southern Baptist Hospital Inc. Project), 8.000% due 5/15/12 208,641 25,000 BBB- Louisiana Public Facilities Authority Revenue, (General Health Systems Project), 6.800% due 11/1/16 25,174 370,000 AAA Madison County, IN Industrial Hospital Authority Facilities Revenue, (Community Hospital of Anderson Project), 9.250% due 1/1/10 464,635 Maricopa County, AZ Hospital Revenue: 210,000 AAA Samaritan Health Service, 7.625% due 1/1/08 238,491 840,000 AAA St. Luke's Hospital Medical Center Project, 8.750% due 2/1/10 1,041,020 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 1,232,970 370,000 AAA Massachusetts State Development Finance Agency Revenue, Series A, GNMA-Collateralized, 6.700% due 10/20/21 440,907 Massachusetts State Health & Educational Facilities Authority Revenue: Caritas Christi Obligation, Series B: 2,000,000 BBB 6.500% due 7/1/12 2,097,040 750,000 BBB 6.750% due 7/1/16 780,953 1,000,000 Baa2* Milford-Whitinsville Regional Hospital, 6.500% due 7/15/23 1,063,610
See Notes to Financial Statements. -------------------------------------------------------------------------------- Intermediate Muni Fund, Inc. 5 -------------------------------------------------------------------------------- Schedule of Investments (unaudited) (continued) June 30, 2003 --------------------------------------------------------------------------------
FACE AMOUNT RATING(a) SECURITY VALUE ========================================================================================================== Hospital -- 24.4% (continued) $ 1,250,000 AAA Massachusetts State Industrial Finance Agency, Assisted Living Facility Revenue, (Arbors at Amherst Project), GNMA-Collateralized, 5.750% due 6/20/17 (b) $ 1,417,300 60,000 Aaa* Nacogdoches County, TX Hospital District Revenue, 9.000% due 5/15/04 62,123 1,000,000 A- New Hampshire Health & Educational Facilities Authority Revenue, Covenant Healthcare System, 6.500% due 7/1/17 1,130,860 1,268,000 NR New York City, NY IDA, Civic Facilities Revenue Refunding, (New York Community Hospital Brooklyn), 6.875% due 11/1/10 1,298,128 2,000,000 B1* Oklahoma Developmental Finance Authority Revenue Refunding, Hillcrest Healthcare System, Series A, 5.625% due 8/15/19 1,455,560 Orange County, FL Health Facilities Authority Revenue: Adventist Health Care: 1,500,000 A 6.250% due 11/15/24 1,643,460 485,000 AAA Southern Adventist Hospital Project, 8.750% due 10/1/09 589,784 865,000 NR First Mortgage, Health Care Facilities, 8.750% due 7/1/11 884,886 Philadelphia, PA Hospital Authority Revenue: 155,000 AAA Thomas Jefferson University Hospital, 7.000% due 7/1/08 175,457 640,000 Aaa* United Hospital Inc. Project, (Call 7/1/05 @ 100), 10.875% due 7/1/08 731,347 1,000,000 NR Rainbow City, AL Special Health Care Facilities Financing Authority, (Regency Pointe Inc.), Series B, 7.250% due 1/1/06 1,014,920 30,000 AAA San Leandro, CA Hospital Revenue, Vesper Memorial Hospital, AMBAC-Insured, 11.500% due 5/1/11 42,418 1,490,000 A- Sayre, PA Health Care Facilities Authority Revenue, Guthrie Healthcare System, Series A, 6.250% due 12/1/18 1,638,225 225,000 NR Southwestern, IL Development Authority Hospital Revenue Refunding, (Wood River Township Hospital Project), 6.875% due 8/1/03 (e) 226,040 160,000 Aaa* Tarrant County, TX Hospital Authority Revenue, 10.250% due 10/1/10 208,650 365,000 NR Tom Green County, TX Hospital Authority, 7.875% due 2/1/06 (e) 401,146 ---------------------------------------------------------------------------------------------------------- 46,890,556 ---------------------------------------------------------------------------------------------------------- Housing: Multi-Family -- 4.4% 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 1,040,850 355,000 AAA Charlotte, NC Mortgage Revenue Refunding, Double Oaks Apartments, Series A, FHA-Insured, 7.300% due 11/15/07 393,684 710,000 Baa1* Dallas, TX Housing Corp., Capital Projects Refunding, 7.700% due 8/1/05 710,234 El Paso County, TX Housing Finance Corp., Multi-Family Housing Revenue: 360,000 A3* American Village Communities, Series A, 6.250% due 12/1/24 372,391 280,000 Baa3* La Plaza Apartments, Sub-Series C, 8.000% due 7/1/30 298,071
See Notes to Financial Statements. -------------------------------------------------------------------------------- 6 2003 Semi-Annual Report to Shareholders -------------------------------------------------------------------------------- Schedule of Investments (unaudited) (continued) June 30, 2003 --------------------------------------------------------------------------------
FACE AMOUNT RATING(a) SECURITY VALUE ========================================================================================================== Housing: Multi-Family -- 4.4% (continued) $ 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 $ 664,478 215,000 AA- Hudson County, NJ Improvement Authority, Multi-Family Housing Revenue, (Observer Park Project), Series A, FNMA-Collateralized, 6.600% due 6/1/04 (b) 222,138 1,175,000 A3* Lubbock, TX Housing Finance Corp., Multi-Family Housing Revenue, (Las Colinas Quality Creek Apartments), 6.000% due 7/1/22 1,215,397 500,000 Aaa* Maricopa County, AZ IDA, Multi-Family Housing Revenue, (Bay Club at Mesa Cove Project), Series A, MBIA-Insured, 5.700% due 9/1/20 537,225 610,000 A2* McMinnville, TN Housing Authority Revenue Refunding, First Mortgage, Beersheba Heights, 6.000% due 10/1/09 665,864 Mount Vernon, IL Elderly Housing Corp., First Lien Revenue: 200,000 Ba3* 7.875% due 4/1/04 200,720 215,000 Ba3* 7.875% due 4/1/05 215,454 235,000 Ba3* 7.875% due 4/1/06 235,501 250,000 Ba3* 7.875% due 4/1/07 250,520 270,000 Ba3* 7.875% due 4/1/08 270,537 Tarrant County, TX Housing Finance Corp. Revenue, Multi-Family Housing, Westridge: 125,000 Baa1* Sr. Series A, 6.000% due 6/1/21 128,374 470,000 Ba1* Sub-Series C, 8.500% due 6/1/31 478,427 510,000 BBB++ Tulsa, OK Housing Assistance Corp., Multi-Family Revenue, 7.250% due 10/1/07 (b) 510,806 ---------------------------------------------------------------------------------------------------------- 8,410,671 ---------------------------------------------------------------------------------------------------------- Housing: Single-Family -- 1.5% 155,000 AAA Cabell, Putnam & Wayne Counties, WV Single-Family Residence Mortgage Revenue, FGIC-Insured, 7.375% due 4/1/10 183,244 30,000 AA Juneau, AK City & Borough Home Mortgage Revenue Refunding, Mortgage-Backed Securities Program, FNMA-Collateralized, 8.000% due 2/1/09 30,189 785,000 AA Massachusetts State Housing Finance Agency, Single-Family Housing Revenue, Series 38, 7.200% due 12/1/26 (b) 817,515 155,000 AAA Missouri State Housing Development Community Mortgage Revenue, Series C, GNMA/FNMA-Collateralized, 7.450% due 9/1/27 (b) 163,849 360,000 AAA Pima County, AZ IDA, Single-Family Mortgage Revenue, Series A, GNMA/FNMA/FHLMC-Collateralized, 7.100% due 11/1/29 (b) 393,260 315,000 NR San Leandro, CA Redevelopment Agency, Residential Mortgage Revenue, (Call 10/1/04 @ 100), 11.250% due 4/1/13 (f) 353,342 105,000 AAA St. Louis County, MO Single-Family Mortgage Revenue, MBIA-Insured, 6.750% due 4/1/10 109,889
See Notes to Financial Statements. -------------------------------------------------------------------------------- Intermediate Muni Fund, Inc. 7 -------------------------------------------------------------------------------- Schedule of Investments (unaudited) (continued) June 30, 2003 --------------------------------------------------------------------------------
FACE AMOUNT RATING(a) SECURITY VALUE ========================================================================================================== Housing: Single-Family -- 1.5% (continued) $ 675,000 AAA Texas State Department of Housing and Community Affairs, Home Mortgage Revenue, RIBS, Series C-2, GMNA/FNMA/ FHLMC-Collateralized, 11.822% due 7/2/24 (b)(d) $ 768,332 ---------------------------------------------------------------------------------------------------------- 2,819,620 ---------------------------------------------------------------------------------------------------------- Industrial Development -- 7.2% 1,000,000 NR Alaska Industrial Development & Export Authority Revenue, Williams Lynxs Alaska Cargoport, 8.000% due 5/1/23 (b) 1,051,610 535,000 C* Bourbonnais, IL IDR Refunding, (Kmart Corp. Project), 6.600% due 10/1/06 (g) 107,712 1,500,000 AAA Des Moines, IA IDR Refunding, (The Printer Inc. Project), LOC-Mercantile Bank/FHLB, 6.375% due 9/1/09 1,521,900 2,000,000 Baa1* LaCrosse, WI Resource Recovery Revenue Refunding, (Northern States Power Co. Project), 6.000% due 11/1/21 (b) 2,081,400 1,300,000 AA Massachusetts State Development Finance Agency Revenue, Worcester Redevelopment Authority Issue, 6.000% due 6/1/24 1,458,301 1,365,000 AA Northampton County, PA IDA Revenue, (Moravian Hall Square Project), 5.500% due 7/1/19 1,500,613 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 66,228 1,000,000 AAA Pennsylvania State IDR, Economic Development Revenue, AMBAC-Insured, 5.500% due 7/1/21 1,118,580 1,000,000 B2* Rockbridge County, VA IDA Revenue, Virginia Horse Center, Series C, 6.850% due 7/15/21 1,026,630 795,000 A South Dakota Economic Development Finance Authority, Economic Development Revenue, APA Optics, Series A, 6.750% due 4/1/16 (b) 872,043 1,290,000 NR Suffolk County, NY IDA, Civic Facility Revenue, (Eastern Long Island Hospital Association Project A), 7.750% due 1/1/22 1,321,282 1,500,000 NR Wasco County, OR Solid Waste Disposal Revenue, (Waste Connections Inc. Project), 7.000% due 3/1/12 (b) 1,589,625 ---------------------------------------------------------------------------------------------------------- 13,715,924 ---------------------------------------------------------------------------------------------------------- Miscellaneous -- 4.7% 1,500,000 NR Barona Band of Mission Indians, CA, 8.250% due 1/1/20 (c) 1,630,665 1,310,000 A- District of Columbia, Tobacco Settlement Financing Corp., 6.250% due 5/15/24 1,251,194 1,065,000 A Illinois Development Finance Authority Revenue, East St. Louis, 6.875% due 11/15/05 1,148,390 645,000 Ba2* Indianapolis, IN Economic Development Refunding & Improvement Revenue, National Benevolent Association, 6.900% due 10/1/04 619,916 1,690,000 AAA Monroe, LA Sales & Use Tax Revenue, FGIC-Insured, 5.625% due 7/1/25 1,894,811 60,000 NR Orlando, FL Special Assessment Revenue, (Conroy Road Interchange Project), Series B, 5.250% due 5/1/05 60,650
See Notes to Financial Statements. -------------------------------------------------------------------------------- 8 2003 Semi-Annual Report to Shareholders -------------------------------------------------------------------------------- Schedule of Investments (unaudited) (continued) June 30, 2003 --------------------------------------------------------------------------------
FACE AMOUNT RATING(a) SECURITY VALUE ========================================================================================================== Miscellaneous -- 4.7% (continued) $ 805,000 NR Orlando, FL Urban Community Development District, Capital Improvement, Series B, 6.400% due 5/1/10 $ 834,584 1,500,000 BBB+ Puerto Rico Housing Bank & Finance Agency, 7.500% due 12/1/06 1,656,510 ---------------------------------------------------------------------------------------------------------- 9,096,720 ---------------------------------------------------------------------------------------------------------- Pollution Control -- 3.5% 2,000,000 Aa3* Brazos River, TX Harbor Navigation District, Brazoria County, PCR, (BASF Corp. Project), 6.750% due 2/1/10 (c) 2,420,720 1,000,000 AAA Monroe County, MI PCR, (Detroit Edison Co. Project), Series A, AMBAC-Insured, 6.350% due 12/1/04 (b) 1,071,980 2,000,000 BBB- Ohio State Air Quality Development Authority Revenue, Pollution Control, (Cleveland Electric Illuminating Co. Project), 6.000% due 12/1/13 (c) 2,100,760 1,000,000 BB+ Warren, AR Solid Waste Disposal Revenue, (Potlatch Corp. Project), 7.000% due 4/1/12 1,022,780 ---------------------------------------------------------------------------------------------------------- 6,616,240 ---------------------------------------------------------------------------------------------------------- Public Facilities -- 1.3% De Kalb County, IN Industrial Redevelopment Authority Revenue, (Mini-Mill LOC Public Improvement Project A): 1,000,000 A- 6.250% due 1/15/08 1,082,930 1,350,000 A- 6.250% due 1/15/09 1,455,948 ---------------------------------------------------------------------------------------------------------- 2,538,878 ---------------------------------------------------------------------------------------------------------- Transportation -- 11.4% 2,000,000 AAA Atlanta, GA Metropolitan Rapid Transit Authority, Sales Tax Revenue, Series E, 7.000% due 7/1/11 2,516,560 1,855,000 A Connecticut State Special Obligation, Parking Revenue, Bradley International Airport, Series A, ACA-Insured, 6.375% due 7/1/12 (b)(c) 2,070,588 1,500,000 AAA Connecticut State Special Tax Obligation Revenue, FSA-Insured, FLAIRS, 9.576% due 10/1/09 (d) 1,948,290 5,000,000 B- Connector 2000 Association, SC Toll Road Revenue, Capital Appreciation, Series B, zero coupon due 1/1/15 1,078,450 2,000,000 AAA Dallas, TX Area Rapid Transit Sales Tax Revenue, Sr. Lien, AMBAC-Insured, 5.375% due 12/1/16 (c) 2,244,800 1,500,000 CCC Dallas/Fort Worth, TX International Airport Facility, Improvement Corp. Revenue Refunding, American Airlines Inc., Series C, 6.150% due 5/1/29 (b) 900,255 2,035,000 AAA Dallas/Fort Worth, TX Regional Airport Revenue Refunding, Series A, FGIC-Insured, 7.750% due 11/1/03 (c) 2,079,790 1,855,000 AAA Delaware River Port Authority of Pennsylvania & New Jersey, FSA-Insured, FLAIRS, 9.775% due 1/1/10 (d) 2,416,768 1,000,000 Aaa* Harrisburg, PA Parking Authority, Parking Revenue, FSA-Insured, 5.500% due 5/15/20 (c) 1,125,300 285,000 AAA Lee County, FL Southwest Florida Regional Airport Revenue, MBIA-Insured, 8.625% due 10/1/09 345,771 290,000 AAA Metropolitan Nashville, TN Airport Authority Tennessee Airport Revenue, MBIA-Insured, 7.500% due 7/1/05 306,617
See Notes to Financial Statements. -------------------------------------------------------------------------------- Intermediate Muni Fund, Inc. 9 -------------------------------------------------------------------------------- Schedule of Investments (unaudited) (continued) June 30, 2003 --------------------------------------------------------------------------------
FACE AMOUNT RATING(a) SECURITY VALUE ========================================================================================================== Transportation -- 11.4% (continued) $ 1,000,000 AA+ Oregon State, Highway User Tax Revenue, 5.500% due 11/15/14 $ 1,175,980 4,625,000 BBB-++ Pocahontas Parkway Association, VA Toll Road Revenue, Capital Appreciation, Series B, zero coupon due 8/15/19 1,201,621 170,000 AAA San Francisco, CA Airport Improvement Corp. Lease Revenue, (United Airlines Inc.), 8.000% due 7/1/13 215,563 595,000 NR Sanford, FL Airport Authority IDR, (Central Florida Terminals Inc. Project A), 7.500% due 5/1/06 (b) 598,201 875,000 AAA St. Louis, MO Airport Revenue, 5.250% due 7/1/12 992,285 Tulsa, OK Municipal Airport Revenue Refunding, Series B: 500,000 B- 6.000% due 6/1/35 (b) 340,105 500,000 B- 5.650% due 12/1/35 (b) 340,116 ---------------------------------------------------------------------------------------------------------- 21,897,060 ---------------------------------------------------------------------------------------------------------- Utilities -- 5.0% 1,000,000 A2* Burlington, KS Environmental Improvement Revenue, (Kansas City Power & Light Project), 4.750% due 9/1/15 (c) 1,056,130 2,000,000 AAA Energy Northwest Washington Electric Revenue, (Project No. 3), Series A, FSA-Insured, 5.500% due 7/1/18 (c) 2,254,700 500,000 A Georgia Municipal Electric Authority, Power System Revenue, Series X, 6.500% due 1/1/12 599,355 1,000,000 AAA Griffin, GA Combined Public Utility Revenue, AMBAC-Insured, 5.000% due 1/1/21 1,072,350 1,000,000 BB+++ Klamath Falls, OR Electric Revenue Refunding, Sr. Lien, 5.750% due 1/1/13 1,009,680 1,000,000 BBB+++ North Carolina Eastern Municipal Power Agency, Power System Revenue, Series D, 6.450% due 1/1/14 1,139,260 1,085,000 AAA North Carolina Municipal Power Agency No. 1, Catawba Electricity Revenue, 10.500% due 1/1/10 1,413,636 Washington State Public Power Supply System, (Nuclear Project No. 1), Series C: 980,000 Aa1* 7.750% due 7/1/03 (e) 980,000 20,000 Aa1* Unrefunded balance, 7.750% due 7/1/03 20,000 ---------------------------------------------------------------------------------------------------------- 9,545,111 ---------------------------------------------------------------------------------------------------------- Water and Sewer -- 13.5% 855,000 AAA Boston, MA Water & Sewer Community Revenue, (Escrowed with state and local government securities), 10.875% due 1/1/09 1,094,562 1,445,000 AA- Charleston, SC Waterworks & Sewer Revenue, 5.250% due 1/1/16 1,611,450 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) 2,387,840 1,370,000 AAA Cleveland, OH Waterworks Revenue, Series K, FGIC-Insured, 5.250% due 1/1/21 1,488,190
See Notes to Financial Statements. -------------------------------------------------------------------------------- 10 2003 Semi-Annual Report to Shareholders -------------------------------------------------------------------------------- Schedule of Investments (unaudited) (continued) June 30, 2003 --------------------------------------------------------------------------------
FACE AMOUNT RATING(a) SECURITY VALUE ========================================================================================================== Water and Sewer -- 13.5% (continued) $ 1,000,000 AAA El Paso, TX Water and Sewer Revenue Refunding and Improvement, Series A, FSA-Insured, 6.000% due 3/1/15 $ 1,190,290 2,000,000 AA+++ Fort Worth, TX Water and Sewer Revenue, 5.625% due 2/15/17 (c) 2,280,180 1,000,000 AAA Gainesville, GA Water & Sewer Revenue, FSA-Insured, 5.375% due 11/15/20 1,104,390 660,000 AAA Jackson, TN Water and Sewer Revenue, 7.200% due 7/1/12 793,558 Ohio State Water Development Authority Revenue: 2,970,000 AAA 9.375% due 12/1/10 (c)(h) 3,678,791 620,000 AAA Safe Water, Series III, 9.000% due 12/1/10 726,169 2,000,000 AAA Philadelphia, PA Water & Wastewater Revenue, Series B, FGIC-Insured, 5.250% due 11/1/14 (c) 2,293,540 2,750,000 AAA Phoenix, AZ Water Revenue, FGIC-Insured, 5.500% due 7/1/14 3,212,853 1,765,000 AAA Pueblo, CO Bridge Waterworks, Water Revenue Improvement, Series A, FSA-Insured, 6.000% due 11/1/14 (c) 2,101,955 210,000 AAA Ringwood Borough, NJ Sewer Authority Special Obligation, 9.875% due 7/1/13 275,276 1,485,000 Aaa* Spanish Fork City, UT Water Revenue, FSA-Insured, 5.500% due 6/1/16 1,695,974 ---------------------------------------------------------------------------------------------------------- 25,935,018 ---------------------------------------------------------------------------------------------------------- TOTAL INVESTMENTS -- 100.0% (Cost -- $181,311,384**) $191,812,898 ==========================================================================================================
(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) All or a portion of this security is held as collateral for open futures contracts commitments (See Note 5). (d) Inverse floating rate security-coupon varies inversely with level of short-term tax-exempt interest rates. (e) 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. (f) 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. (g) Security is currently in default. (h) All or a portion of this security is segregated for open futures contracts commitments (See Note 5). ** Aggregate cost for Federal income tax purposes is substantially the same. See pages 12 and 13 for definitions of ratings and abbreviations. See Notes to Financial Statements. -------------------------------------------------------------------------------- Intermediate Muni Fund, Inc. 11 -------------------------------------------------------------------------------- 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. -------------------------------------------------------------------------------- 12 2003 Semi-Annual Report to Shareholders -------------------------------------------------------------------------------- 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. -------------------------------------------------------------------------------- Abbreviations* (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 ---------- * Abbreviations may or may not appear on the schedule of investments. -------------------------------------------------------------------------------- Intermediate Muni Fund, Inc. 13 -------------------------------------------------------------------------------- Statement of Assets and Liabilities (unaudited) June 30, 2003 -------------------------------------------------------------------------------- ASSETS: Investments, at value (Cost -- $181,311,384) $ 191,812,898 Interest receivable 3,479,154 Receivable for securities sold 720,248 ----------------------------------------------------------------------------------------- Total Assets 196,012,300 ----------------------------------------------------------------------------------------- LIABILITIES: Payable for securities purchased 1,006,924 Payable to broker - variation margin 257,813 Management fee payable 96,496 Bank overdraft 89,873 Dividends payable 37,058 Dividends payable to Municipal Auction Rate Cumulative Preferred Stockholders 9,980 Accrued expenses 82,180 ----------------------------------------------------------------------------------------- Total Liabilities 1,580,324 ----------------------------------------------------------------------------------------- Series M Municipal Auction Rate Cumulative Preferred Stock (2,000 shares authorized and issued at $25,000 per share) (Note 6) 50,000,000 ----------------------------------------------------------------------------------------- Total Net Assets $ 144,431,976 ========================================================================================= NET ASSETS: Par value of capital shares $ 14,005 Capital paid in excess of par value 141,233,797 Undistributed net investment income 1,086,564 Accumulated net realized loss from investment transactions and futures contracts (8,836,912) Net unrealized appreciation of investments and futures contracts 10,934,522 ----------------------------------------------------------------------------------------- Total Net Assets (Equivalent to $10.31 per share on 14,004,750 capital shares of $0.001 par value outstanding; 100,000,000 capital shares authorized) $ 144,431,976 =========================================================================================
See Notes to Financial Statements. -------------------------------------------------------------------------------- 14 2003 Semi-Annual Report to Shareholders -------------------------------------------------------------------------------- Statement of Operations (unaudited) -------------------------------------------------------------------------------- For the Six Months Ended June 30, 2003 INVESTMENT INCOME: Interest $ 5,485,458 -------------------------------------------------------------------------------- EXPENSES: Management fee (Note 3) 576,915 Audit and legal 60,648 Shareholder servicing fees 29,632 Custody 21,631 Shareholder communications 16,810 Directors' fees 2,145 Other 86,284 -------------------------------------------------------------------------------- Total Expenses 794,065 -------------------------------------------------------------------------------- Net Investment Income 4,691,393 -------------------------------------------------------------------------------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FUTURES CONTRACTS (NOTES 4 AND 5): Realized Gain (Loss) From: Investment transactions 6,233 Futures contracts (3,016,028) -------------------------------------------------------------------------------- Net Realized Loss (3,009,795) -------------------------------------------------------------------------------- Change in Net Unrealized Appreciation of Investments and Futures Contracts: Beginning of period 7,503,524 End of period 10,934,522 -------------------------------------------------------------------------------- Increase in Net Unrealized Appreciation 3,430,998 -------------------------------------------------------------------------------- Net Gain on Investments and Futures Contracts 421,203 -------------------------------------------------------------------------------- Dividends Paid to Municipal Auction Rate Cumulative Preferred Stockholders From Net Investment Income (279,291) -------------------------------------------------------------------------------- Increase in Net Assets From Operations $ 4,833,305 ================================================================================ See Notes to Financial Statements. -------------------------------------------------------------------------------- Intermediate Muni Fund, Inc. 15 -------------------------------------------------------------------------------- Statements of Changes in Net Assets -------------------------------------------------------------------------------- For the Six Months Ended June 30, 2003 (unaudited) and the Year Ended December 31, 2002
2003 2002 ================================================================================================= OPERATIONS: Net investment income $ 4,691,393 $ 9,469,970 Net realized loss (3,009,795) (3,311,384) Increase in net unrealized appreciation 3,430,998 4,296,851 Dividends paid to Municipal Auction Rate Cumulative Preferred Stockholders from net investment income (279,291) (664,828) ------------------------------------------------------------------------------------------------- Increase in Net Assets From Operations 4,833,305 9,790,609 ------------------------------------------------------------------------------------------------- DISTRIBUTIONS PAID TO SHAREHOLDERS FROM (NOTE 2): Net investment income (4,285,453) (8,087,762) ------------------------------------------------------------------------------------------------- Decrease in Net Assets From Distributions Paid to Common Stock Shareholders (4,285,453) (8,087,762) ------------------------------------------------------------------------------------------------- FUND SHARE TRANSACTIONS: Underwriting commissions and expenses from the issuance of Municipal Auction Rate Cumulative Preferred Stock (Note 6) -- (778,731) ------------------------------------------------------------------------------------------------- Decrease in Net Assets From Fund Share Transactions -- (778,731) ------------------------------------------------------------------------------------------------- Increase in Net Assets 547,852 924,116 NET ASSETS: Beginning of period 143,884,124 142,960,008 ------------------------------------------------------------------------------------------------- End of period* $ 144,431,976 $ 143,884,124 ================================================================================================= * Includes undistributed net investment income of: $ 1,086,564 $ 959,915 =================================================================================================
See Notes to Financial Statements. -------------------------------------------------------------------------------- 16 2003 Semi-Annual Report to Shareholders -------------------------------------------------------------------------------- Notes to Financial Statements (unaudited) -------------------------------------------------------------------------------- 1. Significant Accounting Policies The Intermediate Muni Fund, Inc. ("Fund"), a Maryland corporation, is registered under the Investment Company Act of 1940, as amended, as a diversified, closed-end management investment company. The significant accounting policies consistently followed by the Fund are:(a) security transactions are accounted for on trade date;(b) securities are valued at the mean between the bid and asked prices provided by an independent pricing service that are based on transactions in municipal obligations, quotations from municipal bond dealers, market transactions in comparable securities and various relationships between securities; (c) securities for which market quotations are not available will be valued in good faith at fair 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; capital gains distributions, if any, are taxable to shareholders, and are declared and paid at least annually; (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; (j) the net asset value of the Fund's Common Stock is determined by dividing the value of the net assets available to Common Stock by the total number of shares of common stock outstanding. For the purpose of determining the net asset value per share of the common stock, the value of the Fund's net assets shall be deemed to equal the value of the Fund's assets less (1) the Fund's liabilities, (2) the aggregate liquidation value (i.e., $25,000 per outstanding share) of the Municipal Auction Rate Cumulative Preferred Stock and (3) accumulated and unpaid dividends on the outstanding Municipal Auction Rate Cumulative Preferred Stock issue; and (k) estimates and assumptions are required to be made regarding assets, liabilities and changes in net assets 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. -------------------------------------------------------------------------------- Intermediate Muni Fund, Inc. 17 -------------------------------------------------------------------------------- Notes to Financial Statements (unaudited) (continued) -------------------------------------------------------------------------------- 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. 3. Management Agreement and Transactions with Affiliated Persons Smith Barney Fund Management LLC ("SBFM"), an indirect wholly-owned subsidiary of Citigroup Inc. ("Citigroup"), acts as investment manager to the Fund. As compensation for its services, the Fund pays SBFM a 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. 4. Investments During the six months ended June 30, 2003, the aggregate cost of purchases and proceeds from sales of investments (including maturities of long-term investments, but excluding short-term investments) were as follows: ================================================================================ Purchases $15,270,556 -------------------------------------------------------------------------------- Sales 15,443,080 ================================================================================ At June 30, 2003, aggregate gross unrealized appreciation and depreciation of investments for Federal income tax purposes were substantially as follows: ================================================================================ Gross unrealized appreciation $ 13,238,153 Gross unrealized depreciation (2,736,639) -------------------------------------------------------------------------------- Net unrealized appreciation $ 10,501,514 ================================================================================ -------------------------------------------------------------------------------- 18 2003 Semi-Annual Report to Shareholders -------------------------------------------------------------------------------- Notes to Financial Statements (unaudited) (continued) -------------------------------------------------------------------------------- 5. Futures Contracts Securities or cash equal to the initial margin amount are either deposited with the broker or segregated by the custodian upon entering into the futures contract. 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 typically to hedge a portion of its portfolio. The Fund bears the market risk that arises from changes in the value of the financial instruments and securities indices. At June 30, 2003, the Fund had the following open futures contracts:
Number of Basis Market Unrealized Contracts Expiration Value Value Gain ========================================================================================================== To Sell: U.S. 10 Year Treasury Note 375 9/03 $44,436,914 $44,003,906 $433,008 ==========================================================================================================
6. Municipal Auction Rate Cumulative Preferred Stock The underwriting discount of $500,000 and offering expenses of $278,731 associated with the Municipal Auction Rate Cumulative Preferred Stock ("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 0.90%-1.30% for the six months ended June 30, 2003. 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. -------------------------------------------------------------------------------- Intermediate Muni Fund, Inc. 19 -------------------------------------------------------------------------------- Notes to Financial Statements (unaudited) (continued) -------------------------------------------------------------------------------- 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. Citigroup Global Markets Inc. ("CGM"), formerly known as Salomon Smith Barney Inc., another indirect wholly-owned subsidiary of Citigroup also currently acts as a broker/dealer in connection with the auction of ARCPS. After each auction, the auction agent will pay to each broker/dealer, from monies the Fund provides a participation fee at the annual rate of 0.25% of the purchase price of the ARCPS that the broker/dealer places at the auction. For the six months ended June 30, 2003, CGM earned $62,058 as the broker/dealer. -------------------------------------------------------------------------------- 20 2003 Semi-Annual Report to Shareholders -------------------------------------------------------------------------------- Financial Highlights -------------------------------------------------------------------------------- For a share of capital stock outstanding throughout each year ended December 31, unless otherwise noted:
2003(1) 2002 2001 2000 1999 1998 =========================================================================================================================== Net Asset Value, Beginning of Period $ 10.27 $ 10.21 $ 10.20 $ 9.89 $ 10.61 $ 10.64 --------------------------------------------------------------------------------------------------------------------------- Income (Loss) From Operations: Net investment income(2) 0.33 0.68 0.56 0.55 0.53 0.55 Net realized and unrealized gain (loss)(2) 0.04 0.07 -- 0.28 (0.71) 0.01 Dividends paid to Municipal Auction Rate Cumulative Preferred Stockholders from net investment income (0.02) (0.05) -- -- -- -- --------------------------------------------------------------------------------------------------------------------------- Total Income (Loss) From Operations 0.35 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 (0.31) (0.58) (0.55) (0.54) (0.53) (0.55) Net realized gains -- -- -- -- (0.01) (0.04) --------------------------------------------------------------------------------------------------------------------------- Total Distributions Paid to Common Stock Shareholders (0.31) (0.58) (0.55) (0.54) (0.54) (0.59) --------------------------------------------------------------------------------------------------------------------------- Net Asset Value, End of Period $ 10.31 $ 10.27 $ 10.21 $ 10.20 $ 9.89 $ 10.61 --------------------------------------------------------------------------------------------------------------------------- Total Return, Based on Market Price(3) 7.72%++ 4.03% 17.17% 11.90% (17.10)% 7.05% --------------------------------------------------------------------------------------------------------------------------- Total Return, Based on Net Asset Value(3) 3.59%++ 6.73% 6.01% 9.68% (1.39)% 5.50% --------------------------------------------------------------------------------------------------------------------------- Net Assets, End of Period (millions) $ 144 $ 144 $ 143 $ 143 $ 83 $ 89 ---------------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------- Intermediate Muni Fund, Inc. 21 -------------------------------------------------------------------------------- Financial Highlights (continued) -------------------------------------------------------------------------------- --------------------------------------------------------------------------------
2003(1) 2002 2001 2000 1999 1998 =========================================================================================================================== Ratios to Average Net Assets Based on Common Shares Outstanding(4): Net investment income(2) 6.57%+ 6.59% 5.35% 5.47% 5.17% 5.10% Total expenses 1.11+ 1.08 0.80 0.78 0.77 0.76 --------------------------------------------------------------------------------------------------------------------------- Portfolio Turnover Rate 8% 49% 36% 45% .54% .42% --------------------------------------------------------------------------------------------------------------------------- Market Price, End of Period $ 9.98 $ 9.56 $ 9.75 $ 8.81 $ 8.375 $ 10.688 --------------------------------------------------------------------------------------------------------------------------- Municipal Auction Rate Cumulative Preferred Stock(5): Total Amount Outstanding (000s) $ 50,000 $ 50,000 -- -- -- -- Asset Coverage Per Share 97,216 96,942 -- -- -- -- Involuntary Liquidating Preference Per Share(6) 25,000 25,000 -- -- -- -- Average Market Value Per Share(6) 25,000 25,000 -- -- -- -- ===========================================================================================================================
(1) For the six months ended June 30, 2003 (unaudited). (2) Effective January 1, 2001, the Fund adopted a change in the accounting method that requires the Fund to amortize premiums and accrete all discounts. Without the adoption of this change, for the year ended December 31, 2001, the ratio of net investment income to average net assets would have been 5.31%. Per share information, ratios and supplemental data for the periods prior to January 1, 2001 have not been restated to reflect this change in presentation. In addition, the impact of this change to net investment income and net realized and unrealized gain per share was less than $0.01. (3) The total return calculation assumes that dividends are reinvested in accordance with the Fund's dividend reinvestment plan. (4) Calculated on basis of average net assets of common shareholders. Ratios do not reflect the effect of dividend payments to preferred shareholders. (5) 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. (6) Excludes accumulated and unpaid dividends. * Amount represents less than $0.01 per share. ++ Total return is not annualized, as it may not be representative of the total return for the year. + Annualized. -------------------------------------------------------------------------------- 22 2003 Semi-Annual Report to Shareholders -------------------------------------------------------------------------------- Financial Data (unaudited) -------------------------------------------------------------------------------- For a share of capital stock outstanding throughout each period: AMEX Net Asset Dividends Reinvestment Period Closing Price* Value* Paid Price ================================================================================ 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 2003 January 9.45 10.17 0.051 9.47 February 9.50 10.22 0.051 9.60 March 9.40 10.12 0.051 9.53 April 9.65 10.20 0.051 9.70 May 9.85 10.41 0.051 10.01 June 9.98 10.31 0.051 10.03 ================================================================================ * On the last business day of the month. -------------------------------------------------------------------------------- Intermediate Muni Fund, Inc. 23 -------------------------------------------------------------------------------- Additional Shareholder Information (unaudited) -------------------------------------------------------------------------------- Results of Annual Meeting of Shareholders The Annual Meeting of Shareholders of Intermediate Muni Fund, Inc. was held on April 23, 2003, for the purpose of considering and voting upon the election of three Directors, each for a three year term. The following table provides information concerning the matters voted upon at the Meeting: 1. Election of Directors* Nominees Votes For Votes Withheld -------- --------- -------------- Allan J. Bloostein 13,003,041.173 29,861.045 R. Jay Gerken 12,920,209.173 112,693.045 Robert E. Hanson Jr. 13,008,938.173 23,964.045 ---------- * The following Directors, representing the balance of the Board of Directors, continue to serve as Directors: Lee Abraham, Jane F. Dasher, Donald R. Foley, Paul Hardin, Roderick C. Rasmussen and John P. Toolan. -------------------------------------------------------------------------------- 24 2003 Semi-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 -------------------------------------------------------------------------------- Intermediate Muni Fund, Inc. 25 -------------------------------------------------------------------------------- Dividend Reinvestment Plan (unaudited) (continued) -------------------------------------------------------------------------------- common stock issued by the Fund at such net asset value. PFPC will begin to purchase common stock on the open market as soon as practicable after the determination date for the dividend or capital gains distribution, but in no event 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. -------------------------------------------------------------------------------- 26 2003 Semi-Annual Report to Shareholders -------------------------------------------------------------------------------- INTERNEDIATE MUNI FUND, INC. -------------------------------------------------------------------------------- DIRECTORS Lee Abraham Alan J. Bloostein Jane F. Dasher Donald R. Foley R. Jay Gerken, CFA Chairman Richard E. Hanson, Jr. Paul Hardin Roderick C. Rasmussen John P. Toolan OFFICERS R. Jay Gerken, CFA President and Chief Executive Officer Lewis E. Daidone Senior Vice President and Chief Administrative Officer Richard L. Peteka Chief Financial Officer and Treasurer Peter M. Coffey Vice President Kaprel Ozsolak Controller Christina T. Sydor Secretary INVESTMENT MANAGER Smith Barney Fund Management LLC CUSTODIAN State Street Bank and Trust Company SHAREHOLDER SERVICING AGENT PFPC Global Fund Services P.O. Box 8030 Boston, Massachusetts 02266-8030 This report is intended only for the shareholders of Intermediate Muni Fund, Inc. It is not a Prospectus, circular or representation intended for use in the purchase or sale of shares of the Fund or any securities mentioned in the report. INTERMEDIATE MUNI FUND, INC. 125 Broad Street 10th Floor, MF-2 New York, New York 10004 FD0633 8/03 03-4962 SBI Listed on the American Stock Exchange ITEM 2. CODE OF ETHICS. Not applicable. ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT. Not applicable. ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES. Not applicable. ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS. Not applicable. ITEM 6. [RESERVED] ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES. Not applicable. ITEM 8. [RESERVED] ITEM 9. CONTROLS AND PROCEDURES. (a) The registrant's principal executive officer and principal financial officer have concluded that the registrant's disclosure controls and procedures (as defined in Rule 30a-2(c) under the Investment Company Act of 1940, as amended) are effective based on their evaluation of the disclosure controls and procedures as of a date within 90 days of the filing date of this document. (b) In the last 90 days, there have been no significant changes in the Registrant's internal controls or in other factors that could significantly affect these controls. ITEM 10. EXHIBITS. (a) Not applicable. (b) Attached hereto. Exhibit 99.CERT Certifications pursuant to section 302 of the Sarbanes-Oxley Act of 2002 Exhibit 99.906 CERT Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this Report to be signed on its behalf by the undersigned, there unto duly authorized. Intermediate Muni Fund, Inc. By: /s/ R. Jay Gerken R. Jay Gerken Chief Executive Officer of Intermediate Muni Fund, Inc. Date: August 28, 2003 Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. By: /s/ R. Jay Gerken (R. Jay Gerken) Chief Executive Officer of Intermediate Muni Fund, Inc. Date: August 28, 2003 By: /s/ Richard Peteka (Richard Peteka) Chief Financial Officer of Intermediate Muni Fund, Inc. Date: August 28, 2003