SEMI-ANNUAL REPORT
================================================================================
Smith Barney
Intermediate
Municipal
Fund, Inc.
----------------------------------------
June 30, 1996
[Logo] Smith Barney Mutual Funds
Investing for your future.
Every day.
<PAGE>
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Smith Barney Intermediate Municipal Fund, Inc.
- ----------------------------------------------
Dear Shareholder:
We are pleased to provide you with the semi-annual report for the Smith Barney
Intermediate Municipal Fund, Inc. for the period ended June 30, 1996. For your
convenience, we have summarized the prevailing economic and market conditions
and outlined the investment strategy employed by the Fund during this time. A
detailed summary of performance and current holdings for the Fund can be found
in the appropriate sections that follow in the semi-annual report.
Fund Performance Summary
For the six months ended June 30, 1996, the Smith Barney Intermediate Municipal
Fund produced a total return on net asset value of 0.17%, which is slightly
better than its Lipper peer group average total return of -0.03% for the same
period. During the past six months, the Fund distributed dividends totaling
$0.30 per share. The table below shows the annualized distribution rates based
on the Fund's June 30, 1996 net asset value (NAV) per share and its American
Stock Exchange closing price.
Price Annualized
Per Share Distribution Rate
--------- -----------------
$10.37 (NAV) 5.79%
$10.00 (AMEX) 6.00%
Market and Economic Overview
Interest rates declined steadily over the latter part of 1995 in response to low
inflation and very sluggish economic growth. During the first six months of
1996, however, interest rates rose sharply as economic reports pointed to much
stronger growth than was expected by most market participants and as concerns
over the stalemated federal budget negotiations continued.
In recent months, the volatility of the municipal bond market has increased and
municipal bond yields have recently reached their highest levels in over a year.
However, despite continued uncertainty over the direction of short-term interest
rates, there have been some signs of a possible municipal bond market turnaround
as the higher yields offered by municipal bonds have begun to attract a growing
number of individual and institutional investors.
1
<PAGE>
Fund's Investment Strategy
Unlike longer-term municipal bonds, intermediate-term municipal bonds tend to be
fairly expensive relative to U.S. Treasury securities. Therefore, the
Intermediate Municipal Fund continues to place a strong emphasis on high-quality
coupon issues trading at a premium to face value for added protection. In
addition, we are carefully balancing the interest-rate sensitivity of the Fund
by investing in a strategically diversified combination of maturities.
During the period covered by this report, the Fund maintained its high credit
quality. As of June 30, 1996, approximately 93% of the Fund's holdings were
rated investment grade (BBB/Baa and higher) by either Standard and Poor's
Corporation or Moody's Investors Service, Inc., with approximately 33% of the
Fund's investments rated triple-A. (Standard & Poor's and Moody's are two major
credit reporting and bond rating agencies.) The Fund's assets are currently
allocated among the following top sectors: hospital bonds (14.3%), education
bonds (11.8%) and multi-family housing bonds (10.8%). The average weighted
maturity of the Fund as of June 30, 1996 was just over 8.5 years.
Outlook
While day-to-day volatility in the fixed income markets is likely to remain, the
recent sharp increase in interest rates has made intermediate-term municipal
bonds more attractive on a relative basis than many other fixed-income vehicles.
In our view, competitive pressures in the global economy and changing
demographics, such as increasing population growth, should help to keep
inflation in check and keep wages from going up. (Labor costs constitute roughly
two-thirds of the total cost of all finished goods.) With intermediate-term
municipal bonds providing roughly 90% of the yield available on comparable
maturity Treasury securities, we believe investors are well compensated for the
potential risks.
While it has recently receded from the Presidential political debate, it was not
too long ago that the "flat tax" issue was touted as potentially the biggest
issue of the upcoming Presidential election in November. However, between now
and November, tax reform again could move into the political spotlight as the
campaign intensifies. Nevertheless, we believe there is little chance that
radical tax reforms will be enacted. Therefore, in our view, the municipal bond
market remains quite attractive and the Smith Barney Intermediate Municipal Fund
is well positioned to meet the challenges presented by the current environment.
2
<PAGE>
Thank you for investing in the Smith Barney Intermediate Municipal Fund. We look
forward to continuing to help you achieve your financial goals.
Sincerely,
/s/ Heath B. McLendon /s/ Peter M. Coffey
- --------------------- -------------------
Heath B. McLendon Peter M. Coffey
Chairman and Vice President
Chief Executive Officer
July 12, 1996
3
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Smith Barney Intermediate Municipal Fund, Inc.
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Schedule of Investments (unaudited) June 30, 1996
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<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY VALUE
=================================================================================================================
Education -- 11.8%
<C> <C> <S> <C>
$1,700,000 A* Arizona Education Loan Marketing Corp., 7.000% due 3/1/02(a) $ 1,799,875
1,030,000 A* Brazos, TX Higher Education Authority Student Loan Revenue,
6.300% due 9/1/98(a) 1,050,600
3,035,000 AAA Cook & Du Page Countys IL High School District 210,
FSA-Insured, zero coupon due 12/1/11 1,210,206
1,090,000 AAA Goose Creek, TX Independent School District, PSFG,
7.750% due 2/15/04 1,278,025
1,130,000 NR Idaho Student Loan Fund Refunding Marketing Association Inc.,
Student Loan Refunding, 6.400% due 10/1/99,
Sinking Fund Average Life 8/11/98 1,135,650
320,000 AAA Massachusetts Education Loan Authority Issue E, Series A,
AMBAC-Insured, 6.850% due 1/1/04(a) 341,200
655,000 A Montana Higher Education Student Assistance Corp.,
Student Loan Revenue, 7.050% due 6/1/04(a) 700,031
500,000 A1* New England Education Loan Marketing Corp.,
Massachusetts Refunding Student Loan Revenue,
6.900% due 11/1/09 (a) 531,875
1,830,000 A1* Southwest Allen, IN Multi-School Building Corp.,
6.700% due 7/15/04 1,992,413
- -----------------------------------------------------------------------------------------------------------------
10,039,875
- -----------------------------------------------------------------------------------------------------------------
Electric -- 2.9%
1,000,000 AAA Metropolitan Government Nashville & Davidson County,
TN Electric Revenue, Series A, MBIA-Insured,
zero coupon due 5/15/10 452,500
1,750,000 AA Washington Public Power Supply System Nuclear Power
Project #1, 7.750% due 7/1/03 1,984,062
- -----------------------------------------------------------------------------------------------------------------
2,436,562
- -----------------------------------------------------------------------------------------------------------------
Escrowed to Maturity(b) -- 7.9%
1,050,000 AAA Metropolitan Nashville, TN Airport Authority Revenue, (Escrowed
to maturity with U.S. Government Securities)
7.500% due 7/1/05, Sinking Fund Average Life 8/2/01 1,157,625
624,000 AAA New Jersey State Turnpike Authority Revenue Refunding,
(Escrowed to maturity with U.S. Government Securities)
10.375% due 1/1/03, Sinking Fund Average Life 5/23/00 744,120
375,000 AAA Ohio State Water Development Authority Revenue,
Armco Steel Corp., (Escrowed to maturity with U.S. Government
Securities) 7.875% due 11/1/00,
Sinking Fund Average Life 11/1/98 407,813
1,685,000 AAA Ohio State Water Development Authority Safe Water, Series 2,
(Escrowed to maturity with U.S. Government Securities)
9.375% due 12/1/10, Sinking Fund Average Life 3/28/04 2,068,336
</TABLE>
See Notes to Financial Statements.
4
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Smith Barney Intermediate Municipal Fund, Inc.
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Schedule of Investments (unaudited) (continued) June 30, 1996
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<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY VALUE
=================================================================================================================
Escrowed to Maturity(b) -- 7.9% (continued)
<C> <C> <S> <C>
$ 5,000 AAA Pennsylvania State Public School Building Authority Lease Revenue,
(Escrowed to maturity with U.S. Government Securities)
10.375% due 11/1/06, Sinking Fund Average Life 3/5/01 $ 5,063
125,000 AAA Salt Lake City, UT Water Conservancy Distribution Revenue,
Series A, (Escrowed to maturity with U.S. Government Securities)
10.875% due 10/1/02, MBIA-Insured
Sinking Fund Average Life 2/26/00 148,438
1,000,000 AAA Southwestern Illinois Development Authority Hospital Revenue
Refunding, Wood River Hospital, (Escrowed to maturity with
U.S. Government Securities) 6.875% due 8/1/03,
Sinking Fund Average Life 9/19/01 1,110,000
930,000 AAA Tom Green County, TX Hospital Authority, (Escrowed to maturity
with U.S. Government Securities) 7.875% due 2/1/06,
Sinking Fund Average Life 3/30/02 1,045,087
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6,686,482
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Finance -- 3.1%
1,000,000 A New York Local Government Assistance Corp., Series 1992A,
6.400% due 4/1/02 1,078,750
1,500,000 A Pennsylvania State Finance Authority Beaver County, Revenue
Refunding Bonds, Municipal Capital Improvement Program,
Series 1993, 6.600% due 11/1/09 1,578,750
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2,657,500
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General Obligation -- 7.3%
1,000,000 AAA Chicago, IL GO, AMBAC-Insured, 6.100% due 1/1/03 1,062,500
1,000,000 AAA District of Columbia GO Refunding, Series B, MBIA-Insured,
6.750% due 6/1/01 1,047,500
1,000,000 AA Harvey, IL GO Refunding, Asset Guaranty-Insured,
6.700% due 2/1/09 1,030,000
1,250,000 BBB New Haven, CT GO, Series 1992A, 9.250% due 3/1/02,
Sinking Fund Average Life 3/1/00 1,464,063
1,500,000 BBB+ New York City GO, Series 1992D, 7.300% due 2/1/01 1,610,625
- -----------------------------------------------------------------------------------------------------------------
6,214,688
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Hospital -- 14.3%
Colorado Health Facilities Authority Revenue, Rocky Mountain Adventist:
1,500,000 BBB 6.250% due 2/1/04 1,516,875
1,500,000 BBB 6.625% due 2/1/13 1,505,625
915,000 BBB Defiance, OH Hospital Revenue Refunding, Defiance Hospital,
7.625% due 11/1/03 936,054
1,040,000 AAA Delaware State Health Facilities Authority Refunding,
Medical Center of Delaware, MBIA-Insured, 6.250% due 10/1/03 1,128,400
</TABLE>
See Notes to Financial Statements.
5
<PAGE>
Smith Barney Intermediate Municipal Fund, Inc.
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Schedule of Investments (unaudited) (continued) June 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY VALUE
=================================================================================================================
Hospital -- 14.3% (continued)
<C> <C> <S> <C>
$1,250,000 A- Harris County, TX Health Facilities Development Corp. Hospital
Revenue, Memorial Hospital Systems, 7.000% due 6/1/03 $ 1,351,563
1,000,000 A* Indiana Health Facilities Authority Hospital Revenue Refunding Bonds,
St. Anthony Medical Center, 7.000% due 10/1/06 1,062,500
1,000,000 AAA Maryland Health & Higher Education Facility Authority Revenue,
(Mercy Medical Center Project), FSA-Insured,
6.500% due 7/1/13 1,075,000
Orange County, FL Health Facilities
Authority Hospital Revenue Bonds,
Adventist Health Systems/Sunbelt:
1,180,000 AAA AMBAC-Insured, 6.875% due 11/15/04 1,271,450
500,000 AAA CGIC-Insured, FLAIRS, 6.050% due 11/15/07(c) 517,500
420,000 AA Taos County, NM Gross Receipts Tax Revenue,
Asset Guaranty-Insured, 6.125% due 12/1/01 438,375
1,250,000 AA- Washington State Health Care Facilities Authority Revenue,
Sacred Heart Medical Center, 6.750% due 2/15/06 1,339,062
- -----------------------------------------------------------------------------------------------------------------
12,142,404
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Housing:Multi-Family -- 10.8%
950,000 AA Beaumont, TX Multi-Family Housing Finance, Regency Place Apartments,
Asset Guaranty-Insured, 7.000% mandatory tender 10/1/03 977,313
610,000 AAA Charlotte, NC Mortgage Revenue Refunding Double, Oaks APT-A,
FHA-Insured, 7.300% due 11/15/07 648,125
990,000 AAA Hudson County, NJ Improvement Authority Multi-Family
Housing Revenue Bonds, 6.600% due 6/1/04(a) 1,039,500
2,000,000 AA- Lombard, IL Multi-Family Housing Clover Creek Apartments,
Surety Bond Continental Casualty, Series 1985,
6.500% mandatory tender 12/15/96 2,010,080
Mount Vernon, IL Elderly Housing Corp., First Lien Revenue Bonds,
Section 8 Assisted, Series 1979:
160,000 Baa1* 7.875% due 4/1/01 160,235
170,000 Baa1* 7.875% due 4/1/02 170,250
185,000 Baa1* 7.875% due 4/1/03 185,272
200,000 Baa1* 7.875% due 4/1/04 200,294
215,000 Baa1* 7.875% due 4/1/05 215,316
235,000 Baa1* 7.875% due 4/1/06 235,345
250,000 Baa1* 7.875% due 4/1/07 250,368
270,000 Baa1* 7.875% due 4/1/08 270,397
750,000 AAA San Jose, CA Multi-Family Housing, (Country Brook Project),
FNMA-Insured, 6.500% mandatory tender 4/1/02 776,250
1,035,000 Aa* Streamwood, IL Multi-Family Housing Revenue, (Southgate Project),
FHA-Insured, 6.200% due 11/1/07 1,075,106
</TABLE>
See Notes to Financial Statements.
6
<PAGE>
Smith Barney Intermediate Municipal Fund, Inc.
- --------------------------------------------------------------------------------
Schedule of Investments (unaudited) (continued) June 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY VALUE
=================================================================================================================
Housing:Multi-Family -- 10.8% (continued)
<C> <C> <S> <C>
$ 915,000 A+ Tulsa, OK Housing Assistance Corp., 7.250% due 10/1/07,
Sinking Fund Average Life 8/12/03(a) $ 923,006
- -----------------------------------------------------------------------------------------------------------------
9,136,857
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Housing:Single-Family -- 5.3%
570,000 AA- Maine State Housing Authority, Mortgage Purchase, Series D3,
7.600% due 11/15/01, Sinking Fund Average Life 8/4/99(a) 589,237
110,000 AAA Nebraska Investment Finance Authority, Single-Family Mortgage Revenue,
FGIC-Insured, Series 1985A, 8.500% due 11/15/96 110,831
545,000 AAA St. Louis County, Single-Family Mortgage Revenue,
MBIA-Insured, 6.750% due 4/1/10 548,831
1,000,000 AAA Texas Department of Housing and Community Affairs, Collateralized
Home Mortgage Revenue Bonds, Series C, GNMA/FNMA-Insured,
RIBS, 10.272% due 7/2/24(a)(c) 1,068,750
1,000,000 AA+ Virginia State Housing Development Authority Commonwealth
Mortgage, Series H, 6.100% due 7/1/03 1,046,250
1,060,000 AA Wisconsin Housing and Education Development Authority, Home
Ownership Revenue, 6.350% due 3/1/01 1,094,450
- -----------------------------------------------------------------------------------------------------------------
4,458,349
- -----------------------------------------------------------------------------------------------------------------
Industrial Development -- 7.3%
1,000,000 A- Alaska Individual Development Export Authority, Series A,
6.200% due 4/1/07(a) 1,043,750
1,000,000 A Kanawha, WV Commercial Development Revenue,
(May Department Store Project), 6.500% due 6/1/03 1,080,000
1,000,000 NR Newbern, TN Industrial Development Ltd. Obligation,
Newbern Rubber Inc., 7.900% due 3/1/00 1,060,000
1,855,000 BBB New York State Urban Development Corp. Revenue,
7.300% due 4/1/01 2,054,413
900,000 A++ Sussex County, DE Economic Development Revenue Refunding
Bonds, (Rehoboth Mall Project), Series 1992,
7.250% due 10/15/12 967,500
- -----------------------------------------------------------------------------------------------------------------
6,205,663
- -----------------------------------------------------------------------------------------------------------------
Miscellaneous -- 4.7%
1,000,000 BBB- Clarksville, TN Natural Gas Acquis Corp. Gas Revenue,
Series A, 7.500% due 11/1/04 1,037,500
1,000,000 A- Hoffman Estates, IL Tax Increment Revenue, Junior Lien Hoffman
Estates Unconditional Guarantee, Sears Roebuck & Co.,
6.600% due 5/15/02 1,056,250
1,000,000 A- Illinois Development Finance Authority, City East of St. Louis,
6.875% due 11/15/05, Sinking Fund Average Life 7/26/03 1,047,500
</TABLE>
See Notes to Financial Statements.
7
<PAGE>
Smith Barney Intermediate Municipal Fund, Inc.
- --------------------------------------------------------------------------------
Schedule of Investments (unaudited) (continued) June 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY VALUE
=================================================================================================================
Miscellaneous -- 4.7% (continued)
<C> <C> <S> <C>
$ 800,000 A SD Economic Development Finance Authority, APA Optics,
Series A, 6.750% due 4/1/16 (a) $ 839,000
- -----------------------------------------------------------------------------------------------------------------
3,980,250
- -----------------------------------------------------------------------------------------------------------------
Pollution Control -- 5.1%
1,000,000 Aa3* Brazos River, TX Navigation District Brazoria County PCR,
6.750% due 2/1/10 1,116,250
965,000 A- Broward County, FL (Resource South Project), 7.950% due 12/1/08 1,062,706
1,000,000 A Indianapolis, IN Reserve Recovery, Ogden Martin Systems Inc.,
7.700% due 12/1/00 1,042,710
1,000,000 AAA Monroe County, MI PCR, (Detroit Edison Co. Project), AMBAC-Insured,
6.350% due 12/1/04(a) 1,070,000
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4,291,666
- -----------------------------------------------------------------------------------------------------------------
Pre-Refunded(b) -- 4.5%
825,000 AAA Gila County, AZ Individual Development Authority Revenue,
Series 1981, 11.250% due 4/1/01, (Pre-Refunded
with U.S. Government Securities to 4/1/01 Call @ 100),
Sinking Fund Average Life 12/1/01 895,125
125,000 AAA Indiana University Revenue, Series 1983N, 10.000% due 7/1/03,
(Pre-Refunded with U.S. Government Securities to
7/1/01 Call @ 100), Sinking Fund Average Life 12/22/99 148,750
900,000 AAA Nassau County, NY IDA (Hofstra University Project),
Series 1987, 8.000% due 7/1/00, (Pre-Refunded with
U.S. Government Securities to 7/1/98 Call @ 100) 965,250
155,000 AAA New York State Medical Care Facilities Finance Agency
Revenue Hospital and Nursing Home Mortgage, Series A,
St. Vincent's Medical Center, FHA-Insured, 7.750% due 2/15/02,
(Pre-Refunded with U.S. Government Securities to 8/15/97
Call @ 102), Sinking Fund Average Life 1/2/95 164,494
500,000 AAA Oklahoma State IDA Oklahoma Health Care Corp.,
Series A, 9.125% due 11/1/08, (Pre-Refunded with
U.S. Government Securities to Various Call Dates),
Sinking Fund Average Life 5/7/06 506,875
1,000,000 AAA Texas National Research Lab Community Financing Corp.
Lease Revenue, (Superconducting Supercollider Project),
6.750% due 12/1/04, (Pre-Refunded with U.S. Government
Securities to 12/1/01 Call @ 102) 1,107,500
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3,787,994
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</TABLE>
See Notes to Financial Statements.
8
<PAGE>
Smith Barney Intermediate Municipal Fund, Inc.
- --------------------------------------------------------------------------------
Schedule of Investments (unaudited) (continued) June 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY VALUE
=================================================================================================================
Public Facilities -- 2.9%
<C> <C> <S> <C>
$1,350,000 A Dekalb County, IN Redevelopment Authority Revenue,
Mini-Mill Public Improvement, 6.250% due 1/15/09 $ 1,393,875
1,000,000 AAA Harrisburg, PA Lease Revenue, (Green County Prison Project),
CGIC-Insured, 6.500% due 6/1/04 1,077,500
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2,471,375
- -----------------------------------------------------------------------------------------------------------------
Solid Waste -- 4.7%
2,000,000 Ba* Atlantic City, NJ Utility Authority Solid Waste Revenue,
7.000% due 3/1/02, Sinking Fund Average Life 4/20/00 2,005,000
2,000,000 A- Union County, NJ Utility Authority Solid Waste Revenue,
6.850% due 6/15/02(a) 2,020,000
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4,025,000
- -----------------------------------------------------------------------------------------------------------------
Transportation -- 5.9%
2,035,000 AAA Dallas Fort Worth, TX Regional Airport Revenue Refunding,
FGIC-Insured, Series 1992A, 7.750% due 11/1/03 2,363,144
1,920,000 BBB Denver, CO City and County Airport Revenue, Series 1990A,
8.250% due 11/15/02(a) 2,167,200
500,000 A Pittsfield Township, MI Economic Development Corp.
Revenue Refunding, (Airport Association Project), Unconditional
Guaranty-Lincoln National, 6.400% due 12/1/02 503,125
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5,033,469
- -----------------------------------------------------------------------------------------------------------------
Utilities -- 1.5%
465,000 AA Hogansville, GA Combined Public Utility Revenue,
Asset Guaranty Insured, 5.850% due 10/1/15 457,444
1,735,000 AAA Palo Duro River Authority, TX Refunding, CGIC-Insured,
zero coupon due 8/1/09 813,281
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1,270,725
- -----------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 100%
(Cost -- $81,217,965**) $84,838,859
=================================================================================================================
(a) Income from these issues is considered a preference item for purposes of
calculating the alternative minimum tax.
(b) Pre-Refunded bonds escrowed by U.S. Government Securities and bonds escrowed
to maturity by U.S. Government Securities are considered by manager to be
triple-A rated even if issuer has not applied for new ratings.
(c) Inverse floating rate security -- coupon varies inversely with level of
short-term tax-exempt interest rates.
+ Fitch Investors Services, Inc.
++ Duff & Phelps Credit Rating Co.
** Aggregate cost for Federal income tax purposes is substantially the same.
See Notes to Financial Statements.
9
<PAGE>
Smith Barney Intermediate Municipal Fund, Inc.
- --------------------------------------------------------------------------------
Ratings and Security Descriptions
- --------------------------------------------------------------------------------
BOND RATINGS
All ratings are by Standard & Poor's Corporation ("Standard & Poor's"), except
that those identified by an asterisk (*) are rated by Moody's Investors Services
("Moody's"). The definitions of the applicable rating symbols are set forth
below:
Standard & Poor's -- Ratings from "AA" to "BBB" may be modified by the addition
of a plus (+) or a minus (-) sign to show relative standings within the major
rating categories.
AAA -- Debt rated "AAA"' has the highest rating assigned by Standard &
Poor's. Capacity to pay interest and repay principal is extremely
strong.
AA -- Debt rated "AA" has a very strong capacity to pay interest and
repay principal and differs from the highest rated issue only in a
small degree.
A -- Debt rated "A" has a strong capacity to pay interest and repay
principal although it is somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than
debt in higher rated categories.
BBB -- Debt rated "BBB" is regarded as having an adequate capacity to
pay interest and repay principal. Whereas it normally exhibits
adequate protection parameters, adverse economic conditions or
changing circumstances are more likely to lead to a weakened
capacity to pay interest and repay principal for debt in this
category than in higher rated categories.
Moody's -- Numerical modifiers 1, 2, and 3 may be applied to each generic
rating from "Aa" to "Baa", where 1 is the highest and 3 the lowest
rating within its generic category.
Aaa -- Bonds that are rated "Aaa" are judged to be of the best quality.
They carry the smallest degree of investment risk and are generally
referred to as "gilt edge." Interest payments are protected by a
large or by an exceptionally stable margin and principal is secure.
While the various protective elements are likely to change, such
changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
Aa -- Bonds that are rated "Aa" are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are
generally known as high grade bonds. They are rated lower than the
best bonds because margins of protection may not be as large as in
Aaa securities or fluctuation of protective elements may be of
greater amplitude or there may be other elements present which make
the long-term risks appear somewhat larger than in Aaa securities.
A -- Bonds that are rated "A" possess many favorable investment
attributes and are to be considered as upper medium grade
obligations. Factors giving security to principal and interest are
considered adequate but elements may be present which suggest a
susceptibility to impairment some time in the future.
Baa -- Bonds that are rated "Baa" are considered as medium grade
obligations, i.e., they are neither highly protected nor poorly
secured. Interest payments and principal security appear adequate
for the present but certain protective elements may be lacking or
may be characteristically unreliable over any great length of time.
Such bonds lack outstanding investment characteristics and in fact
have speculative characteristics as well.
NR -- Indicates that the bond is not rated by Standard & Poor's or
Moody's.
SHORT-TERM SECURITIES RATINGS
SP-1 -- Standard & Poor's highest rate rating indicating very strong or
strong capacity to pay principal and interest; those issues
determined to possess overwhelming safety characteristics are
denoted with a plus (+) sign.
VMIG 1 -- Moody's highest rating for issues having demand feature --
variable-rate demand obligation (VRDO).
SECURITY DESCRIPTIONS
AMBAC -- AMBAC Indemnity Corporation
CGIC -- Capital Guaranty Insurance Company
COP -- Certificate of Participation
FGIC -- Financial Guaranty Insurance Company
FHA -- Federal Housing Administration
FHLMC -- Federal Home Loan Mortgage Corporation
FLAIRS -- Floating Adjustable Interest Rate Securities
FNMA -- Federal National Mortgage Association
FSA -- Financial Security Assurance
GIC -- Guaranteed Investment Contract
GNMA -- Government National Mortgage Association
GO -- General Obligation
IDA -- Industrial Development Agency
IDR -- Industrial Development Revenue
LOC -- Letter of Credit
MBIA -- Municipal Bond Investors Assurance Corporation
PCFA -- Pollution Control Financing Authority
PCR -- Pollution Control Revenue
PSFG -- Permanent School Fund Guaranty
RIBS -- Residual Interest Bonds
10
<PAGE>
Smith Barney Intermediate Municipal Fund, Inc.
- --------------------------------------------------------------------------------
Statement of Assets and Liabilities (unaudited) June 30, 1996
- --------------------------------------------------------------------------------
ASSETS:
Investments, at value (Cost -- $81,217,965) $84,838,859
Interest receivable 1,369,600
Receivable for securities sold 105,000
Other assets 15,060
- --------------------------------------------------------------------------------
Total Assets 86,328,519
- --------------------------------------------------------------------------------
LIABILITIES:
Dividends payable 136,815
Payable to bank 151,019
Management fees payable 42,097
Accrued expenses 13,906
- --------------------------------------------------------------------------------
Total Liabilities 343,837
- --------------------------------------------------------------------------------
Total Net Assets $85,984,682
================================================================================
NET ASSETS:
Par value of capital shares $ 8,289
Capital paid in excess of par value 82,891,113
Undistributed net investment income 88,815
Accumulated net realized loss on investments (624,429)
Net unrealized appreciation of investments 3,620,894
- --------------------------------------------------------------------------------
Total Net Assets
(Equivalent to $10.37 a share on 8,288,885
shares of $0.001 par value outstanding;
100,000,000 shares authorized) $85,984,682
================================================================================
See Notes to Financial Statements.
11
<PAGE>
Smith Barney Intermediate Municipal Fund, Inc.
- --------------------------------------------------------------------------------
Statement of Operations (unaudited)
- --------------------------------------------------------------------------------
For the Six Months Ended June 30, 1996
INVESTMENT INCOME:
Interest $2,729,059
- --------------------------------------------------------------------------------
EXPENSES:
Management fees (Note 3) 259,210
Shareholder and system servicing fees 15,000
Shareholder communications 12,000
Pricing service fees 7,500
Audit and legal 6,500
Directors' fees 3,500
Registration fees 3,315
Custody 1,950
Other 1,345
- --------------------------------------------------------------------------------
Total Expenses 310,320
- --------------------------------------------------------------------------------
Net Investment Income 2,418,739
- --------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS (NOTE 4):
Realized Loss From Security Transactions
(excluding short-term securities):
Proceeds from sales 8,724,468
Cost of securities sold 8,751,278
- --------------------------------------------------------------------------------
Net Realized Loss (26,810)
- --------------------------------------------------------------------------------
Change in Net Unrealized Appreciation
(Depreciation) of Investments:
Beginning of period 5,933,792
End of period 3,620,894
- --------------------------------------------------------------------------------
Increase in Net Unrealized Depreciation (2,312,898)
- --------------------------------------------------------------------------------
Net Loss on Investments (2,339,708)
- --------------------------------------------------------------------------------
Increase in Net Assets From Operations $ 79,031
================================================================================
See Notes to Financial Statements.
12
<PAGE>
Smith Barney Intermediate Municipal Fund, Inc.
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
For the Six Months Ended June 30, 1996 (unaudited)
and the Year Ended December 31, 1995
1996 1995
================================================================================
OPERATIONS:
Net investment income $ 2,418,739 $ 4,843,714
Net realized loss (26,810) (1,944)
Increase in net unrealized
appreciation (depreciation) (2,312,898) 6,029,456
- --------------------------------------------------------------------------------
Increase in Net Assets From Operations 79,031 10,871,226
- --------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS
FROM (NOTE 2):
Net investment income (2,486,665) (4,973,331)
- --------------------------------------------------------------------------------
Decrease in Net Assets From
Distributions to Shareholders (2,486,665) (4,973,331)
- --------------------------------------------------------------------------------
Increase (Decrease) in Net Assets (2,407,634) 5,897,895
NET ASSETS:
Beginning of period 88,392,316 82,494,421
- --------------------------------------------------------------------------------
End of period* $85,984,682 $88,392,316
================================================================================
* Includes undistributed
net investment income of: $ 88,815 $ 156,741
================================================================================
See Notes to Financial Statements.
13
<PAGE>
Smith Barney Intermediate Municipal Fund, Inc.
- --------------------------------------------------------------------------------
Notes to Financial Statements (unaudited)
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
The Smith Barney Intermediate Municipal Fund, Inc. ("Fund"), a Maryland
corporation, is registered under the Investment Company Act of 1940, as amended,
as a diversified, closed-end management investment company.
The significant accounting policies consistently followed by the Fund
are:(a) security transactions are accounted for on the trade date;(b) securities
are valued at the mean between the bid and ask prices provided by an independent
pricing service that are based on transactions in municipal obligations,
quotations from municipal bond dealers, market transactions in comparable
securities and various relationships between securities; (c) securities maturing
within 60 days are valued at cost plus accreted discount, or minus amortized
premium, which approximates market value; (d) gains or losses on the sale of
securities are calculated by using the specific identification method; (e)
interest income, adjusted for amortization of premium and accretion of original
issue discount, is recorded on the accrual basis; market discount is recognized
upon the disposition of the security; (f) 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; (g) dividends and distributions to shareholders are recorded
on the ex-dividend date; (h) the character of income and gains to be distributed
are determined in accordance with income tax regulations which may differ from
generally accepted accounting principles; and (i) 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.
2. EXEMPT-INTEREST DIVIDENDS AND OTHER DISTRIBUTIONS
The Fund intends to satisfy conditions that will enable
interest from municipal securities, which is exempt from Federal income tax and
from designated state income taxes, to retain such tax-exempt status when
distributed to the shareholders of the Fund.
Capital gains distributions, if any, are taxable to shareholders, and are
declared and paid at least annually.
14
<PAGE>
Smith Barney Intermediate Municipal Fund, Inc.
- --------------------------------------------------------------------------------
Notes to Financial Statements (unaudited) (continued)
- --------------------------------------------------------------------------------
3. MANAGEMENT AGREEMENT
AND TRANSACTIONS WITH AFFILIATED PERSONS
Smith Barney Mutual Funds Management Inc. ("SBMFM"), a subsidiary of Smith
Barney Holdings Inc., acts as investment manager to the Fund. As compensation
for its services, the Fund pays SBMFM a fee calculated at the annual rate of
0.60% of the Fund's average daily net assets. This fee is calculated daily and
paid monthly.
All officers and two Directors of the Fund are employees of Smith Barney
Inc.
4. INVESTMENTS
For the six months ended June 30, 1996, the aggregate cost of purchases and
proceeds from sales of investments (including maturities, excluding short-term
investments) were $8,556,276 and $8,724,468, respectively. At June 30, 1996,
aggregate gross unrealized appreciation for all securities in which there is an
excess of market value over tax cost amounted to $3,728,377, and aggregate gross
unrealized depreciation for all securities in which there is an excess of tax
cost over market value amounted to $107,483, or a net unrealized appreciation of
$3,620,894.
5. CAPITAL LOSS CARRYFORWARD
At December 31, 1995, the Fund had for Federal income tax purposes net
capital loss carryforwards of $592,944 available to offset future capital gains.
To the extent that these carryforward losses are used to offset capital gains,
it is probable that the gains so offset will not be distributed. The amount and
expiration of the carryforwards are indicated below. Expiration occurs on the
dates indicated:
12/31/02 12/31/03
================================================================================
Carryforward Amounts $591,000 $1,944
================================================================================
15
<PAGE>
Smith Barney Intermediate Municipal Fund, Inc.
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
For a share of capital stock outstanding throughout each period:
</TABLE>
<TABLE>
<CAPTION>
1996(1) 1995 1994(2) 1993(2) 1992(2)(3)
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $10.66 $9.95 $10.81 $10.36 $10.00
- ---------------------------------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment income 0.29 0.58 0.58 0.59 0.48*
Net realized and unrealized gain (loss) (0.28) 0.73 (0.84) 0.46 0.34
- ---------------------------------------------------------------------------------------------------------------
Total Income (Loss) From Operations 0.01 1.31 (0.26) 1.05 0.82
- ---------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.30) (0.60) (0.60) (0.57) (0.46)
Net realized gains -- -- -- (0.03) --
- ---------------------------------------------------------------------------------------------------------------
Total Distributions (0.30) (0.60) (0.60) (0.60) (0.46)
- ---------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $10.37 $10.66 $9.95 $10.81 $10.36
- ---------------------------------------------------------------------------------------------------------------
Total Return 0.17%++ 13.72% (2.33)% 10.30% 8.44%++
- ---------------------------------------------------------------------------------------------------------------
Net Assets, End of Period (000s) $85,985 $88,392 $82,494 $88,966 $83,499
- ---------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses 0.72%+ 0.72% 0.72% 0.73% 0.59%+*
Net investment income 5.60+ 5.63 5.64 5.56 5.74+
- ---------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 10.08% 12.57% 25.59% 10.46% 23.48%
- ---------------------------------------------------------------------------------------------------------------
Market Price at End of Period $10.00 $10.38 $9.50 $11.13 $10.13
===============================================================================================================
</TABLE>
(1) For the six months ended June 30, 1996 (unaudited).
(2) Based on the weighted average shares outstanding for the period.
(3) For the period from March 2, 1992 (commencement of operations) to December
31, 1992.
* The manager waived a portion of its fees for the period from March 2, 1992
to December 31, 1992. If such fees were not waived, the per share decrease
in net investment income would have been $0.01 and the ratio of expenses to
average net assets would have been 0.70% (annualized).
++ Total return is not annualized, as it may not be representative of the total
return for the year.
+ Annualized.
16
<PAGE>
Smith Barney Intermediate Municipal Fund, Inc.
- --------------------------------------------------------------------------------
Financial Data (unaudited)
- --------------------------------------------------------------------------------
For a share of capital stock outstanding throughout each period:
AMEX Net Asset Income Reinvestment
Period Closing Price* Value* Declared Price
- --------------------------------------------------------------------------------
1995
January $ 9.50 $10.12 $0.05 $ 9.50
February 9.75 10.26 0.05 9.99
March 9.63 10.31 0.05 9.81
April 9.88 10.28 0.05 9.81
May 10.00 10.49 0.05 9.94
June 9.88 10.39 0.05 9.90
July 10.13 10.43 0.05 10.15
August 10.13 10.49 0.05 10.14
September 10.00 10.50 0.05 10.24
October 10.13 10.58 0.05 10.26
November 10.25 10.65 0.05 10.27
December 10.38 10.66 0.05 10.34
- --------------------------------------------------------------------------------
1996
January 10.63 10.65 0.05 10.52
February 10.50 10.57 0.05 10.47
March 10.25 10.46 0.05 9.88
April 9.81 10.39 0.05 9.88
May 10.38 10.35 0.05 10.15
June 10.00 10.37 0.05 10.01
================================================================================
* On the last business day of the month.
17
<PAGE>
Smith Barney Intermediate Municipal Fund, Inc.
- --------------------------------------------------------------------------------
Additional Shareholder Information (unaudited)
- --------------------------------------------------------------------------------
On April 25, 1996 the annual meeting of the shareholders of the Fund was
held for the purpose of voting on the following matters:
1. To approve or disapprove for the Fund the election of Jessica M.
Bibliowicz and Donald R. Foley as Directors; and
2. To approve or disapprove the selection of KPMG Peat Marwick LLP as the
independent auditors for the current fiscal year of the Fund.
The results of Proposal 1 were as follows:
% of Votes % of
Directors Votes For Shares Voted Against Shares Voted
================================================================================
Jessica M. Bibliowicz 7,572,978.747 98.58% 109,463.000 1.42%
Donald R. Foley 7,570,203.747 98.54% 112,238.000 1.46%
================================================================================
The results of Proposal 2 were as follows:
% of Votes % of Votes % of
Votes For Shares Voted Against Shares Voted Abstained* Shares Voted
================================================================================
7,575,727.747 98.61% 21,297.000 0.28% 688,825.896 1.11%
================================================================================
* There are approximately 603,409 broker non-votes included in the amount
abstaining.
The following directors, representing the balance of the Board of Directors,
continue to serve as Directors: Joseph H. Fleiss, Paul Hardin, Francis P.
Martin, Heath B. McLendon, Roderick C. Rasmussen, John P. Toolan and C.
Richard Youngdahl.
18
<PAGE>
Smith Barney Intermediate Municipal Fund, Inc.
- --------------------------------------------------------------------------------
Dividend Reinvestment Plan (unaudited)
- --------------------------------------------------------------------------------
Pursuant to the Fund's Dividend Reinvestment Plan (the "Plan"), all
distributions are automatically reinvested by First Data Investor Services
Group, Inc., (formerly known as "The Shareholder Services Group, Inc."), as plan
agent (the "Plan Agent"), in additional shares of its Common Stock (the "Common
Shares") as provided below unless a shareholder elects to receive cash.
Distributions with respect to Common Shares registered in the name of a
broker-dealer or other nominee (i.e., in "street name") are reinvested by the
broker or nominee in additional Common Shares under the Plan, unless the service
is not provided by the broker or nominee. Investors who own Common Shares
registered in street name should consult their broker-dealer for details. All
distributions to shareholders who do not participate in the Plan are paid by
check mailed directly to the record holder by First Data Investor Services
Group, Inc., as dividend disbursing agent.
If the Fund declares a distribution payable either in Common Shares or in
cash, nonparticipants in the Plan receive cash, and Plan participants receive
the equivalent in Common Shares valued in the following manner: whenever the
market price is equal to or exceeds the net asset value per share at the time
Common Shares are valued for the purpose of determining the number of Common
Shares equivalent to the cash distribution, participants are issued Common
Shares valued at the greater of (1) the net asset value most recently determined
or (2) 95% of the then current market price of the Common Shares.
If the net asset value of the Common Shares at the time of valuation exceeds
the market price of the Common Shares, or if the Fund declares a distribution
payable only in cash, the Plan Agent buys Common Shares in the open market, on
the American Stock Exchange or elsewhere, for the participants' accounts. If,
following the commencement of purchases and before the Plan Agent has completed
its purchases the market price exceeds the net asset value of the Common Shares,
the average per Common Share purchase price paid by the Plan Agent may exceed
the net asset value of the Common Shares, resulting in the acquisition of fewer
Common Shares than if the distribution had been paid in Common Shares issued by
the Fund at net asset value. The Plan Agent applies all cash received as a
distribution to purchase Common Shares on the open market as soon as practicable
after the payment date of the distribution, but in no event later than 30 days
after such date, except when necessary to comply with applicable provisions of
the Federal securities laws.
19
<PAGE>
Smith Barney Intermediate Municipal Fund, Inc.
- --------------------------------------------------------------------------------
Dividend Reinvestment Plan (unaudited) (continued)
- --------------------------------------------------------------------------------
Participants in the Plan may withdraw from the Plan upon written notice to
the Plan Agent which must be received at least ten business days prior to the
distribution record date to become effective for that distribution. Shares in
the account of each Plan participant are held by the Plan Agent in
non-certificated form in the name of the Plan Agent or participant. When a
participant withdraws from the Plan or upon termination of the Plan as provided
below, certificates for whole Fund shares credited to his or her account under
the Plan are issued and a cash payment is made for any fraction of a Fund share
credited to such account.
The automatic reinvestment of distributions does not relieve participants to
any Federal income tax that may be payable on such distributions.
The Fund does not charge participants for reinvesting distributions. Any
Plan Agent's fees for the handling of reinvestment of distributions under the
Plan are paid by the Fund. There are no brokerage charges with respect to Common
Shares issued directly by the Fund as a result of distributions payable either
in stock or in cash. However, each participant pays a pro rata share of
brokerage commissions incurred with respect to the Plan Agent's open market
purchases in connection with the reinvestment of distributions.
Experience under the Plan may indicate that changes are desirable.
Accordingly, the Fund and the Plan Agent reserve the right to amend the Plan as
applied to any distribution paid subsequent to written notice of the change sent
to all shareholders of the Fund at least 90 days before the record date for the
distribution. The Plan also may be terminated by the Fund or the Plan Agent by
at least 30 days' written notice to all shareholders of the Fund. All
correspondence concerning the Plan should be directed to the Plan Agent at First
Data Investor Services Group, Inc., P.O. Box 1376, Boston, Massachussetts 02104.
20
<PAGE>
Smith Barney
Intermediate
Municipal Fund, Inc.
Directors
Jessica M. Bibliowicz
Joseph H. Fleiss
Donald R. Foley
Paul Hardin
Francis P. Martin, M.D.
Heath B. McLendon, Chairman
Roderick C. Rasmussen
John P. Toolan
C. Richard Youngdahl
Officers
Heath B. McLendon
Chief Executive Officer
Jessica M. Bibliowicz
President
Lewis E. Daidone
Senior Vice President and Treasurer
Peter M. Coffey
Vice President
Thomas M. Reynolds
Controller
Christina T. Sydor
Secretary
SMITH BARNEY
------------
A Member of the TravelersGroup [Logo]
Investment Manager
Smith Barney Mutual Funds
Management Inc.
Distributor
Smith Barney Inc.
Custodian
PNC Bank, N.A.
Shareholder
Servicing Agent
First Data Investor Services
Group, Inc.
P.O. Box 1376
Boston, MA 02104
This report is submitted for
the general information of the
shareholders of Smith Barney
Intermediate Municipal Fund, Inc. It is not
authorized for distribution to prospective
investors unless accompanied or preceded
by a current Prospectus for the Fund,
which contains information concerning
the Fund's investment
policies and expenses as well as other
pertinent information.
Smith Barney
Intermediate
Municipal Fund, Inc.
388 Greenwich Street
New York, New York 10013
FD0633 8/96
