1995
1995
1995
1995
1995
-------------
ANNUAL REPORT
-------------
Smith Barney
Intermediate
Municipal
Fund, Inc.
-------------------------
December 31, 1995
[LOGO] Smith Barney Mutual Funds
Investing for your future.
Every day.
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Smith Barney Intermediate Municipal Fund, Inc.
- ----------------------------------------------
Dear Shareholder:
We are pleased to provide you with this annual report, which includes audited
financial statements for Smith Barney Intermediate Municipal Fund, Inc. and
covers the year ended December 31, 1995. For your convenience, we summarize the
period's prevailing economic and market conditions below. In addition, a more
detailed summary of performance and current holdings can be found in the
appropriate sections that follow in the annual report.
Performance Summary
Smith Barney Intermediate Municipal Fund posted a one-year total return on net
asset value of 13.72% for the period ended December 31, 1995. The Fund's
performance was sustained with only minimal reliance on capital gains, thereby
preserving favorable tax status for the Fund's distributions. For the year ended
December 31, 1995, the Fund distributed dividends totaling $0.60 per share. The
table below shows the annualized distribution rates based on the Fund's December
31, 1995 net asset value (NAV) per share and its American Stock Exchange (AMEX)
closing price.
Annualized
Distribution Rate
-----------------
$10.66 (NAV) 5.63%
$10.38 (AMEX) 5.78%
1995: The Year in Review
The year 1995 was a positive one for the fixed income markets as low rates
prevailed. One of the more notable events of the year was a significant drop in
intermediate-term interest rates, as measured by the decline of 10-Year
Treasuries from more than 7.79% at the beginning of 1995 to 7.20% on March 31,
1995, 6.18% on September 30, 1995, and, lastly, 5.62% by year end. This drop was
responsible in part for the stock market's remarkable showing in 1995 -- a
performance that defied all expectations. In another surprising development, the
U.S. dollar finished the year in an extremely strong position relative to other
currencies, and that will likely encourage lower interest rates going forward.
The Municipal Bond Market
As Treasury yields were falling in 1995, intermediate-term municipal bond yields
were declining at a much less dramatic rate. However, slow economic growth, low
rates, and a diminishing supply of issues generally combined to create a subdued
municipal bond market environment in 1995, offering value
1
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primarily to investors who were willing to carefully sift through the supply and
focus on intermediate-term municipal bonds with strong credit ratings, as Smith
Barney Intermediate Municipal Fund did during this time period.
Looking Ahead
It now appears that the Federal Reserve has been successful in containing
inflation -- which averaged 2.8% in 1995 -- and in encouraging a slower rate of
economic growth, which totaled 2.5% in 1995 as measured by gross domestic
product (GDP). The Federal Open Market Committee, which controls the federal
funds rate, declined to alter the rate in both September and November after a
quarter point reduction in July. The federal funds rate is a key indicator
because it represents the rate banks charge each other for overnight loans and
affects all other interest rates, including those offered by municipal bonds.
Lower rates typically increase economic growth because they make it less
expensive for businesses to fund expansion. The Federal Reserve acted to lower
short-term rates at their last meeting held in December 1995.
Going forward, we expect to see yet another year of slow economic growth with
GDP posting growth of around 2%. We also forecast steady or slightly lower
interest rates of half a point to a full point in 1996. Our outlook for the
municipal bond market remains positive. Limited supply is driving prices higher,
yields are excellent relative to U.S. Treasuries and growing credit strength in
a number of states is increasing the attractiveness of many issues.
What's Ahead for Municipal Bonds
The supply of municipal bonds is diminishing and the attractiveness of municipal
bonds is on the rise. Not only are the yields attractive relative to Treasuries,
what does come to market is likely to be of higher credit quality than in the
past. The National Governors' Association believes the fiscal condition of many
states is now the strongest it has been since the late 1980s, with many of the
larger states showing remarkable improvement in their ability to service
outstanding bonds and support new debt.
Any municipal bond market rally, however, will depend on tax reform and the
success of Washington, D.C. in reaching a consensus on the federal budget. At
this time, we do not expect any flat tax proposals to be taken seriously given
the upcoming Presidential election. That does not mean, however, that the
municipal bond market will not worry about such a prospect, which could depress
municipal bond prices in 1996. In addition, federal spending reductions could
impact on funding for state and local projects which, if combined with
resistance to higher local taxes that back some municipal bonds, could affect
credit quality or supply.
2
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Portfolio Strategy and Outlook
In light of conflicting economic forces affecting the municipal bond
marketplace, we are taking a cautious investment approach to portfolio
management and being very selective about new investments. We are carefully
balancing the interest-rate sensitivity of Smith Barney Intermediate Municipal
Fund by investing in a strategically diversified combination of maturities. We
remain substantially committed to high-quality coupon issues with call
protection in anticipation of a downturn in rates in 1996. The Fund's average
weighted maturity for the one-year period ended December 31, 1995 was 8.42
years.
At this time, we would like to thank you for your investment in Smith Barney
Intermediate Municipal Fund.
Sincerely,
/s/ Heath B. McLendon /s/ Peter M. Coffey
Heath B. McLendon Peter M. Coffey
Chairman and Vice President and
Chief Executive Officer Investment Officer
January 24, 1996
3
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Smith Barney Intermediate Municipal Fund, Inc.
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Schedule of Investments December 31, 1995
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FACE
AMOUNT RATING SECURITY VALUE
================================================================================
Education -- 11.7%
$1,700,000 A* Arizona Education Loan Marketing Corp., 7.000%
due 3/1/02(a) $ 1,850,875
1,070,000 A* Brazos, TX Higher Education Authority Student
Loan Revenue, 6.300% due 9/1/98(a) 1,106,113
1,090,000 AAA Goose Creek, TX Independent School District,
PSFG, 7.750% due 2/15/04 1,320,262
1,250,000 NR Idaho Student Loan Fund Refunding Marketing
Association Inc. Student Loan Refunding,
6.400% due 10/1/99, Sinking Fund Average
Life 1/7/97 1,271,875
325,000 AAA Massachusetts Education Loan Authority Issue E,
Series A, 6.850% due 1/1/04(a) 354,250
705,000 A* Montana Higher Education Student Assistance
Corp. Student Loan Revenue, 7.050%
due 6/1/04(a) 770,212
New England Education Loan Marketing Corp.
Massachusetts
Refunding Student Loan Revenue:
1,000,000 A- 5.625% due 7/1/04(a) 1,047,500
500,000 A1* 6.900% due 11/1/09(a) 545,000
1,830,000 A1* Southwest Allen, IN Multi-School Building Corp.,
6.700% due 7/15/04 1,990,125
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10,256,212
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Electric -- 2.4%
1,750,000 AA Washington Public Power Supply System Nuclear
Power Project #1, 7.750% due 7/1/03 2,056,250
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Escrowed to Maturity(b) -- 10.7%
1,135,000 AAA Metropolitan Nashville, TN Airport Authority
Revenue, 7.500% due 7/1/05, Sinking Fund
Average Life 8/2/01 1,305,250
684,000 AAA New Jersey State Turnpike Authority Revenue
Refunding, 10.375% due 1/1/03, Sinking Fund
Average Life 5/23/00 831,915
1,855,000 AAA New York State Urban Development Corp. Revenue,
7.300% due 4/1/01 2,107,744
375,000 AAA Ohio State Water Development Authority Revenue
(Armco Steel Corp.), 7.875% due 11/1/00,
Sinking Fund Average Life 11/1/98 420,000
1,685,000 AAA Ohio State Water Development Authority Safe
Water Series 2, 9.375% due 12/1/10, Sinking
Fund Average Life 3/28/04 2,179,969
45,000 AAA Pennsylvania State Public School Building
Authority Lease Revenue, 10.375% due 11/1/06,
Sinking Fund Average Life 3/5/01 45,829
125,000 AAA Salt Lake City, UT Water Conservancy Distribution
Revenue, Series A, 10.875% due 10/1/02, Sinking
Fund Average Life 2/26/00 154,063
1,000,000 AAA Southwestern Illinois Development Authority
Hospital Revenue Refunding (Wood River Hospital),
6.875% due 8/1/03, Sinking Fund Average
Life 9/19/01 1,147,500
See Notes to Financial Statements.
4
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Smith Barney Intermediate Municipal Fund, Inc.
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Schedule of Investments (continued) December 31, 1995
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FACE
AMOUNT RATING SECURITY VALUE
================================================================================
Escrowed to Maturity(b) -- 10.7% (continued)
$ 985,000 AAA Tom Green County, TX Hospital Authority,
7.875% due 2/1/06, Sinking Fund Average
Life 1/18/01 $ 1,156,144
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9,348,414
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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 1,105,000
1,500,000 A Pennsylvania State Finance Authority (Beaver
County) Revenue Refunding Bonds (Municipal
Capital Improvement Program), Series 1993,
6.600% due 11/1/09 1,650,000
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2,755,000
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General Obligation -- 7.3%
1,000,000 AAA Chicago, IL GO, AMBAC-Insured, 6.100% due 1/1/03 1,087,500
1,000,000 AAA District of Columbia GO Refunding, Series B,
MBIA-Insured, 6.750% due 6/1/01 1,066,250
1,000,000 AA Harvey, IL GO Refunding, Asset Guaranty-Insured,
6.700% due 2/1/09 1,065,000
1,250,000 Baa* New Haven, CT GO, Series 1992A, 9.250% due
3/1/02, Sinking Fund Average Life 3/1/00 1,512,500
1,500,000 Baa1* New York City GO, Series 1992D, 7.300% due 2/1/01 1,633,125
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6,364,375
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Hospital -- 12.0%
1,500,000 Baa* Colorado Health Facilities Authority Revenue
(Rocky Mountain Adventist), 6.250% due 2/1/04 1,560,000
915,000 BBB Defiance, OH Hospital Revenue Refunding (Defiance
Hospital), 7.625% due 11/1/03 944,179
1,040,000 AAA Delaware State Health Facilities Authority
Refunding (Medical Center of Delaware),
MBIA-Insured, 6.250% due 10/1/03 1,160,900
1,250,000 A* Harris County, TX Health Facilities Development
Corp. Hospital Revenue (Memorial Hospital
Systems), 7.000% due 6/1/03 1,396,875
1,000,000 A* Indiana Health Facilities Authority Hospital
Revenue Refunding Bonds (St. Anthony Medical
Center), 7.000% due 10/1/06 1,092,500
1,180,000 AAA Orange County, FL Health Facilities Authority
Hospital Revenue Bonds (Adventist Health
Systems/Sunbelt), AMBAC-Insured, 6.875%
due 11/15/04 1,298,000
500,000 AAA Orange County, FL Health Facilities Authority
Revenue (Adventist Health Systems/Sunbelt),
CGIC-Insured, FLAIRS, 8.210% due 11/15/07(c) 538,750
650,000 AAA St. Louis County, MT MBIA-Insured, 6.750%
due 4/1/10 650,123
480,000 AA Taos County, NM Gross Receipts Tax Revenue,
Asset Guaranty-Insured, 6.125% due 12/1/01 513,600
See Notes to Financial Statements.
5
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Smith Barney Intermediate Municipal Fund, Inc.
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Schedule of Investments (continued) December 31, 1995
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FACE
AMOUNT RATING SECURITY VALUE
================================================================================
Hospital -- 12.0% (continued)
$1,250,000 AA- Washington State Health Care Facilities
Authority Revenue (Sacred Heart Medical
Center), 6.750% due 2/15/06 $ 1,378,125
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10,533,052
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Housing: Multi-Family -- 12.0%
950,000 AA Beaumont, TX Multi-Family Housing Finance
(Regency Place Apartments), Asset
Guaranty-Insured, 7.000% mandatory
tender 10/1/04 992,750
610,000 AAA Charlotte, NC Mortgage Revenue Refunding (Double
Oaks APT-A), FHA-Insured, 7.300% due 11/15/07 667,950
1,000,000 AAA Hudson County, NJ Improvement Authority
Multi-Family Housing Revenue Bonds, 6.600%
due 6/1/04(a) 1,080,000
2,000,000 A Lombard, IL Multi-Family Housing (Clover Creek
Apartments), Surety Bond Continental Casualty,
Series 1985, 6.500% mandatory tender 12/15/96 2,028,560
Mount Vernon, IL Elderly Housing Corp. First
Lien Revenue Bonds
Section 8 Assisted, Series 1979:
160,000 Baa1* 7.875% due 4/1/01 160,368
170,000 Baa1* 7.875% due 4/1/02 170,391
185,000 Baa1* 7.875% due 4/1/03 185,426
200,000 Baa1* 7.875% due 4/1/04 200,460
215,000 Baa1* 7.875% due 4/1/05 215,494
235,000 Baa1* 7.875% due 4/1/06 235,541
250,000 Baa1* 7.875% due 4/1/07 250,575
270,000 Baa1* 7.875% due 4/1/08 270,621
750,000 AAA San Jose, CA Multi-Family Housing (Country Brook
Project), FNMA-Insured, 6.500% mandatory
tender 4/1/02 794,063
1,100,000 AA- South Carolina State Housing Finance and
Development Authority, 5.500% due 12/1/05 1,105,500
1,070,000 Aa* Streamwood, IL Multi-Family Housing Revenue
(Southgate Project), FHA-Insured, 6.200%
due 11/1/07 1,134,200
935,000 A-++ Tulsa, OK Multi-Family Housing Assistance Corp.,
7.250% due 10/1/07, Sinking Fund Average Life
6/7/02(a) 963,050
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10,454,949
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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) 600,637
130,000 AAA Nebraska Investment Finance Authority
Single-Family Mortgage Revenue, FGIC-Insured,
Series 1985A, 8.500% due 11/15/96 132,713
570,000 NR North Tonawanda, NY Housing Development Corporation
Mortgage Revenue Refunding (Bishop Gibbons
Project), FHA-Insured, 6.350% due 12/15/02 609,188
See Notes to Financial Statements.
6
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Smith Barney Intermediate Municipal Fund, Inc.
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Schedule of Investments (continued) December 31, 1995
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FACE
AMOUNT RATING SECURITY VALUE
================================================================================
Housing: Single-Family -- 5.3% (continued)
$1,000,000 AAA Texas Department of Housing and Community
Affairs Collateralized Home Mortgage Revenue
Bonds, Series C, GNMA/FNMA-Insured, RIBS,
9.288% due 7/2/24(a)(c) $ 1,133,750
1,000,000 Aa1* Virginia State Housing Development Authority
Commonwealth Mortgage, Series H, 6.100%
due 7/1/03 1,072,500
1,060,000 Aa* Wisconsin Housing and Education Development
Authority Home Ownership Revenue, 6.350%
due 3/1/01 1,116,975
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4,665,763
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Industrial Development -- 7.1%
1,000,000 A* Alaska Individual Development Export Authority,
Series A, 6.200% due 4/1/07 1,080,000
400,000 NR Carroll County, TN Individual Development Revenue
Refunding (Henry Siegel Co. Inc.), 7.200%
due 4/1/05 415,500
1,500,000 Aa3* Gary, IN Economic Development Revenue Miller
Partnership LOC Royal Bank of Scotland, 7.400%
mandatory tender 4/1/01(a) 1,510,335
1,000,000 A Kanawha, WV Commercial Development Revenue
(May Department Store Project), 6.500%
due 6/1/03 1,115,000
1,000,000 NR Newbern, TN Industrial Development Ltd. Obligation
(Newbern Rubber Inc.), 7.900% due 3/1/00 1,082,500
900,000 A+ Sussex County, DE Economic Development Revenue
Refunding Bonds (Rehoboth Mall Project),
Series 1992, 7.250% due 10/15/12 1,009,125
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6,212,460
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Miscellaneous -- 3.7%
1,000,000 BBB- Clarksville, TN Natural Gas Acquis Corporation
Gas Revenue, Series A, 7.500% due 11/1/04 1,060,000
1,000,000 A* Hoffman Estates, IL Tax Increment Revenue Junior
Lien Hoffman Estates Unconditional Guarantee
(Sears Roebuck & Co.), 6.600% due 5/15/02 1,105,000
1,000,000 A- Illinois Development Finance Authority City
East of St. Louis, 6.875% due 11/15/05,
Sinking Fund Average Life 4/15/00 1,081,250
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3,246,250
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Pollution Control -- 5.1%
1,000,000 Aa3* Brazos River, TX Navigation District Brazoria
County Pollution Control Revenue, 6.750%
due 2/1/10 1,170,000
965,000 A Broward County, FL Resource South Project, 7.950%
due 12/1/08 1,085,625
1,000,000 A+ Indianapolis, IN Reserve Recovery (Ogden Martin
Systems Inc.), 7.700% due 12/1/00 1,051,740
1,000,000 AAA Monroe County, MI PCR (Detroit Edison Co.
Project), AMBAC-Insured, 6.350% due 12/1/04(a) 1,110,000
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4,417,365
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See Notes to Financial Statements.
7
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Smith Barney Intermediate Municipal Fund, Inc.
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Schedule of Investments (continued) December 31, 1995
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FACE
AMOUNT RATING SECURITY VALUE
================================================================================
Pre-Refunded(b) -- 5.0%
$1,095,000 AAA Gila County, AZ Individual Development
Authority Revenue, Series 1981, 11.250% due
4/1/01, Pre-Refunded with U.S. Government
Securities to 4/1/01 Call @ 100, Sinking Fund
Average Life 12/1/01 $ 1,219,556
140,000 AAA Indiana University Revenue, Series 1983N,
10.000% due 7/1/03, Pre-Refunded with U.S.
Government Securities to 7/1/01 Call @ 100,
Sinking Fund Average Life 12/22/99 173,425
900,000 AAA Nassau County, NY IDA Hofstra University Project,
Series 1987, 8.000% due 7/1/00, Pre-Refunded
with U.S. Government Securities to 7/1/98
Call @ 100 983,250
265,000 AAA New York State Medical Care Facilities Finance
Agency Revenue Hospital and Nursing Home Mortgage,
Series A, (St. Vincent's Medical Center),
FHA-Insured, 7.750% due 2/15/02, Pre-Refunded
with U.S. Government Securities to 8/15/97
Call @ 102, Sinking Fund Average Life 1/2/95 288,188
500,000 AAA Oklahoma State IDA (Oklahoma Health Care Corp.)
Series A, 9.125% due 11/1/08, Pre-Refunded with
U.S. Government Securities to Various Call Dates,
Sinking Fund Average Life 5/7/06 528,750
1,000,000 AAA Texas National Research Lab Community Financing
Corp. Lease Revenue (Superconducting Supercollider
Project), 6.750% due 12/1/04, Pre-Refunded with
U.S. Government Securities to 12/1/01
Call @ 102 1,138,750
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4,331,919
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Public Facilities -- 2.9%
1,350,000 A- Dekalb County, IN Redevelopment Authority Revenue
(Mini-Mill Public Improvement), 6.250%
due 1/15/09 1,446,187
1,000,000 AAA Harrisburg, PA Lease Revenue Green County Prison
Project, CGIC-Insured, 6.500% due 6/1/04 1,102,500
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2,548,687
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Solid Waste -- 4.8%
2,000,000 Baa* Atlantic City, NJ Utility Authority Solid Waste
Revenue, 7.000% due 3/1/02, Sinking Fund Average
Life 4/20/00 2,062,500
2,000,000 A- Union County, NJ Utility Authority Solid Waste
Revenue, 6.850% due 6/15/02(a) 2,130,000
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4,192,500
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See Notes to Financial Statements.
8
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Smith Barney Intermediate Municipal Fund, Inc.
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Schedule of Investments (continued) December 31, 1995
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FACE
AMOUNT RATING SECURITY VALUE
================================================================================
Transportation -- 5.9%
$2,035,000 AAA Dallas Fort Worth, TX Regional Airport Revenue
Refunding, FGIC-Insured, Series 1992A, 7.750%
due 11/1/03 $ 2,442,000
1,920,000 Baa* Denver, CO City and County Airport Revenue,
Series 1990A, 8.250% due 11/15/02(a) 2,224,800
500,000 A Pittsfield Township, MI Economic Development
Corp. Revenue Refunding Airport Association
Project Unconditional Guaranty-Lincoln National,
6.400% due 12/1/02 521,250
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5,188,050
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Utilities -- 1.0%
1,735,000 AAA Palo Duro River Authority, TX Refunding,
CGIC-Insured, Series 1992, zero coupon
due 8/1/09 832,800
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TOTAL INVESTMENTS -- 100% (Cost -- $81,470,254)* $87,404,046
================================================================================
(a) Income from these issues is considered a preference item for purposes of
calculating the alternative minimum tax.
(b) Pre-Refunded bonds escrowed by U.S. Government Securities and bonds
escrowed to maturity by U.S. Government Securities are considered by
manager to be triple-A rated even if issuer has not applied for new
ratings.
(c) Inverse floating rate security -- coupon varies inversely with level of
short-term tax-exempt interest rates.
++ Fitch Investors Services, Inc.
+ Duff & Phelps Credit Rating Co.
* Aggregate cost for Federal income tax purposes is substantially the same.
See page 10 for definition of ratings and certain security descriptions.
See Notes to Financial Statements.
9
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Smith Barney Intermediate Municipal Fund, Inc.
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Ratings and Security Descriptions
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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.
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Statement of Assets and Liabilities December 31, 1995
- --------------------------------------------------------------------------------
ASSETS:
Investments, at value (Cost -- $81,470,254) $87,404,046
Interest receivable 1,416,443
Receivable for securities sold 5,000
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Total Assets 88,825,489
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LIABILITIES:
Payable to bank 220,119
Dividends payable 131,470
Management fees payable 44,958
Accrued expenses 36,626
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Total Liabilities 433,173
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Total Net Assets $88,392,316
================================================================================
NET ASSETS:
Par value of capital shares $ 8,289
Capital paid in excess of par value 82,891,113
Undistributed net investment income 156,741
Accumulated net realized loss on investments (597,619)
Net unrealized appreciation of investments 5,933,792
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Total Net Assets
(Equivalent to $10.66 a share on 8,288,885 shares of $0.001
par value outstanding; 100,000,000 shares authorized) $88,392,316
================================================================================
See Notes to Financial Statements.
11
<PAGE>
Smith Barney Intermediate Municipal Fund, Inc.
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Statement of Operations For the Year Ended December 31, 1995
- --------------------------------------------------------------------------------
INVESTMENT INCOME:
Interest $ 5,466,540
- --------------------------------------------------------------------------------
EXPENSES:
Management fees (Note 3) 517,473
Shareholder and system servicing fees 26,400
Shareholder communications 20,001
Audit and legal 12,202
Directors' fees 11,742
Pricing service fees 9,800
Custody 9,402
Other 15,806
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Total Expenses 622,826
- --------------------------------------------------------------------------------
Net Investment Income 4,843,714
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REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS (NOTE 4):
Realized Loss From Security Transactions (excluding short-term
securities):
Proceeds from sales 10,688,516
Cost of securities sold 10,690,460
- --------------------------------------------------------------------------------
Net Realized Loss (1,944)
- --------------------------------------------------------------------------------
Change in Net Unrealized Appreciation (Depreciation) of Investments:
Beginning of year (95,664)
End of year 5,933,792
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Increase in Net Unrealized Appreciation 6,029,456
- --------------------------------------------------------------------------------
Net Gain on Investments 6,027,512
- --------------------------------------------------------------------------------
Increase in Net Assets From Operations $10,871,226
================================================================================
See Notes to Financial Statements.
12
<PAGE>
Smith Barney Intermediate Municipal Fund, Inc.
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets For the Years Ended December 31,
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1995 1994
==============================================================================================
<S> <C> <C>
OPERATIONS:
Net investment income $ 4,843,714 $ 4,824,829
Net realized loss (1,944) (595,675)
Increase in net unrealized appreciation (depreciation) 6,029,456 (6,379,884)
- ----------------------------------------------------------------------------------------------
Increase (Decrease) in
Net Assets From Operations 10,871,226 (2,150,730)
- ----------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS
FROM (NOTE 2):
Net investment income (4,973,331) (4,965,775)
- ----------------------------------------------------------------------------------------------
Decrease in Net Assets From
Distributions To Shareholders (4,973,331) (4,965,775)
- ----------------------------------------------------------------------------------------------
FUND SHARE TRANSACTIONS FROM:
Net proceeds from 60,922 shares issued
for reinvestment of dividends -- 645,354
- ----------------------------------------------------------------------------------------------
Increase in Net Assets From Fund Share Transactions -- 645,354
- ----------------------------------------------------------------------------------------------
Total Increase (Decrease) in Net Assets 5,897,895 (6,471,151)
NET ASSETS:
Beginning of year 82,494,421 88,965,572
- ----------------------------------------------------------------------------------------------
End of year* $88,392,316 $82,494,421
==============================================================================================
* Includes undistributed net investment income of: $156,741 $286,344
==============================================================================================
</TABLE>
See Notes to Financial Statements.
13
<PAGE>
Smith Barney Intermediate Municipal Fund, Inc.
- --------------------------------------------------------------------------------
Notes to Financial Statements
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
The Smith Barney Intermediate Municipal Fund, Inc. ("Fund"), a Maryland
corporation, is registered under the Investment Company Act of 1940, as amended,
as a diversified, closed-end management investment company.
The significant accounting policies consistently followed by the Fund are:(a)
securities transactions are accounted for on the trade date;(b) securities are
valued at the mean between the bid and ask prices provided by an independent
pricing service that are based on transactions in municipal obligations,
quotations from municipal bond dealers, market transactions in comparable
securities and various relationships between securities; short-term securities
maturing within 60 days are valued at cost plus accreted discount, or minus
amortized premium, which approximates market value; (c) gains or losses on the
sale of securities are calculated by using the specific identification method;
(d) interest income, adjusted for amortization of premium and accretion of
original issue discount, is recorded on the accrual basis; market discount is
recognized upon the disposition of the security; (e) the Fund intends to comply
with the applicable provisions of the Internal Revenue Code of 1986, as amended,
pertaining to regulated investment companies and to make distributions of
taxable income sufficient to relieve it from substantially all Federal income
and excise taxes; (f) the character of income and gains to be distributed are
determined in accordance with income tax regulations which may differ from
generally accepted accounting principles. Accordingly, at December 31, 1995 a
portion of paid-in capital amounting to $14 had been reclassified to
undistributed net investment income. Net investment income, net realized gains
and net assets were not affected by this change; and (g) estimates and
assumptions are required to be made regarding assets, liabilities and changes in
net assets resulting from operations when financial statements are prepared.
Changes in the economic environment, financial markets and any other parameters
used in determining these estimates could cause actual results to differ from
these amounts.
2. EXEMPT-INTEREST DIVIDENDS AND OTHER DISTRIBUTIONS
The Fund intends to satisfy conditions that will enable interest from
municipal securities, which is exempt from Federal income tax and from
designated state income taxes, to retain such tax-exempt status when distributed
to the shareholders of the Fund.
Capital gains distributions, if any, are taxable to shareholders, and are
declared and paid at least annually.
14
<PAGE>
Smith Barney Intermediate Municipal Fund, Inc.
- --------------------------------------------------------------------------------
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
3. MANAGEMENT AGREEMENT AND TRANSACTIONS WITH AFFILIATED PERSONS
Smith Barney Mutual Funds Management Inc. ("SBMFM"), a subsidiary of Smith
Barney Holdings Inc., acts as investment manager to the Fund. As compensation
for its services, the Fund pays SBMFM a fee calculated at the annual rate of
0.60% of the Fund's average daily net assets. This fee is calculated daily and
paid monthly.
All officers and two Directors of the Fund are employees of Smith Barney Inc.
4. INVESTMENTS
For the year ended December 31, 1995, the aggregate cost of purchases and
proceeds from sales of investments (including maturities, excluding short-term
investments) were $11,980,538 and $10,688,516, respectively. At December 31,
1995, aggregate gross unrealized appreciation for all securities in which there
is an excess of market value over tax cost amounted to $5,967,789, and aggregate
gross unrealized depreciation for all securities in which there is an excess of
tax cost over market value amounted to $33,997, or a net unrealized appreciation
of $5,933,792.
5. CAPITAL LOSS CARRYFORWARD
At December 31, 1995, the Fund had for Federal income tax purposes net
capital loss carryforwards of $592,944 available to offset future capital gains.
To the extent that these carryforward losses are used to offset capital gains,
it is probable that the gains so offset will not be distributed. The amount and
expiration of the carryforwards are indicated below. Expiration occurs on the
dates indicated:
12/31/02 12/31/03
================================================================================
Carryforward Amounts $591,000 $1,944
================================================================================
15
<PAGE>
Smith Barney Intermediate Municipal Fund, Inc.
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
For a share of capital stock outstanding throughout each year:
<TABLE>
<CAPTION>
1995 1994(a) 1993(a) 1992(a)(b)
==========================================================================================
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $ 9.95 $10.81 $10.36 $10.00
- ------------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment income 0.58 0.58 0.59 0.48*
Net realized and unrealized gain (loss) 0.73 (0.84) 0.46 0.34
- ------------------------------------------------------------------------------------------
Total Income (Loss) From Operations 1.31 (0.26) 1.05 0.82
- ------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.60) (0.60) (0.57) (0.46)
Net realized gains -- -- (0.03) --
- ------------------------------------------------------------------------------------------
Total Distributions (0.60) (0.60) (0.60) (0.46)
- ------------------------------------------------------------------------------------------
Net Asset Value, End of Year $10.66 $9.95 $10.81 $10.36
- ------------------------------------------------------------------------------------------
Total Return 13.72% (2.33)% 10.30% 8.44%++
- ------------------------------------------------------------------------------------------
Net Assets, End of Year (000s) $88,392 $82,494 $88,966 $83,499
- ------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses 0.72% 0.72% 0.73% 0.59%+*
Net investment income 5.63 5.64 5.56 5.74+
- ------------------------------------------------------------------------------------------
Portfolio Turnover Rate 12.57% 25.59% 10.46% 23.48%
- ------------------------------------------------------------------------------------------
Market Price at End of Year $10.38 $9.50 $11.13 $10.13
==========================================================================================
</TABLE>
(a) Based on the weighted average shares outstanding for the period.
(b) For the period from March 2, 1992 (commencement of operations) to
December 31, 1992.
* The manager waived a portion of its fees for the period from March 2, 1992
to December 31, 1992. If such fees were not waived, the per share decrease
in net investment income would have been $0.01 and the ratio of expenses to
average net assets would have been 0.70% (annualized).
++ Total return is not annualized, as it may not be representative of the
total return for the year.
+ Annualized.
16
<PAGE>
Smith Barney Intermediate Municipal Fund, Inc.
- --------------------------------------------------------------------------------
Independent Auditors' Report
- --------------------------------------------------------------------------------
To the Shareholders and Board of Directors
of the Smith Barney Intermediate Municipal Fund, Inc.:
We have audited the accompanying statement of assets and liabilities, including
the schedule of investments, of the Smith Barney Intermediate Municipal Fund,
Inc. as of December 31, 1995, the related statement of operations for the year
then ended, the statement of changes in net assets for each of the years in the
two-year period then ended and the financial highlights for each of the years in
the three-year period then ended and for the period from March 2, 1992
(commencement of operations) to December 31, 1992. These financial statements
and financial highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1995, by correspondence with the custodian. As to securities sold
but not delivered, we performed other appropriate auditing procedures. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Smith Barney Intermediate Municipal Fund, Inc. as of December 31, 1995, the
results of its operations for the year then ended, the changes in its net assets
for each of the years in the two-year period then ended and the financial
highlights for each of the years in the three-year period then ended and for the
period from March 2, 1992 to December 31, 1992, in conformity with generally
accepted accounting principles.
KPMG PEAT MARWICK LLP
New York, New York
February 2, 1996
17
<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
================================================================================
1992
2nd Quarter+ $ 9.88 $10.24 $0.12 $ 9.90
3rd Quarter 10.00 10.36 0.15 10.15
4th Quarter 10.13 10.36 0.19 10.15
- --------------------------------------------------------------------------------
1993
1st Quarter 10.75 10.59 0.10 10.63
2nd Quarter 10.63 10.73 0.15 10.67
3rd Quarter 11.25 10.89 0.15 10.93
4th Quarter 11.13 10.81 0.17 10.78
- --------------------------------------------------------------------------------
1994
1st Quarter 10.00 10.29 0.15 10.65
2nd Quarter 10.00 10.24 0.15 9.90
3rd Quarter 9.88 10.19 0.15 9.78
4th Quarter 9.50 9.95 0.15 9.40
- --------------------------------------------------------------------------------
1995
1st Quarter 9.63 10.31 0.15 9.90
2nd Quarter 9.88 10.39 0.15 9.81
3rd Quarter 10.00 10.50 0.15 10.27
4th Quarter 10.38 10.66 0.15 10.34
================================================================================
* On the last business day of the quarter.
+ For the period from March 2, 1992 (commencement of operations) to March 31,
1992.
- --------------------------------------------------------------------------------
Tax Information (unaudited)
- --------------------------------------------------------------------------------
100% of the dividends paid by the Fund from net investment income for the
year ended December 31, 1995, are tax-exempt for regular Federal income tax
purposes.
18
<PAGE>
Smith Barney Intermediate Municipal Fund, Inc.
- --------------------------------------------------------------------------------
Dividend Reinvestment Plan
- --------------------------------------------------------------------------------
Pursuant to the Fund's Dividend Reinvestment Plan (the "Plan"), all
distributions are automatically reinvested by First Data Investor Services
Group, Inc., (formerly known as "The Shareholder Services Group, Inc."), as plan
agent (the "Plan Agent"), in additional shares of its Common Stock (the "Common
Shares") as provided below unless a shareholder elects to receive cash.
Distributions with respect to Common Shares registered in the name of a
broker-dealer or other nominee (i.e., in "street name") are reinvested by the
broker or nominee in additional Common Shares under the Plan, unless the service
is not provided by the broker or nominee. Investors who own Common Shares
registered in street name should consult their broker-dealer for details. All
distributions to shareholders who do not participate in the Plan are paid by
check mailed directly to the record holder by First Data Investor Services
Group, Inc., as dividend disbursing agent.
If the Fund declares a distribution payable either in Common Shares or in
cash, nonparticipants in the Plan receive cash, and Plan participants receive
the equivalent in Common Shares valued in the following manner: whenever the
market price is equal to or exceeds the net asset value per share at the time
Common Shares are valued for the purpose of determining the number of Common
Shares equivalent to the cash distribution, participants are issued Common
Shares valued at the greater of (1) the net asset value most recently determined
or (2) 95% of the then current market price of the Common Shares.
If the net asset value of the Common Shares at the time of valuation
exceeds the market price of the Common Shares, or if the Fund declares a
distribution payable only in cash, the Plan Agent buys Common Shares in the open
market, on the American Stock Exchange or elsewhere, for the participants'
accounts. If, following the commencement of purchases and before the Plan Agent
has completed its purchases the market price exceeds the net asset value of the
Common Shares, the average per Common Share purchase price paid by the Plan
Agent may exceed the net asset value of the Common Shares, resulting in the
acquisition of fewer Common Shares than if the distribution had been paid in
Common Shares issued by the Fund at net asset value. The Plan Agent applies all
cash received as a distribution to purchase Common Shares on the open market as
soon as practicable after the payment date of the distribution, but in no event
later than 30 days after such date, except when necessary to comply with
applicable provisions of the Federal securities laws.
19
<PAGE>
Smith Barney Intermediate Municipal Fund, Inc.
- --------------------------------------------------------------------------------
Dividend Reinvestment Plan (continued)
- --------------------------------------------------------------------------------
Participants in the Plan may withdraw from the Plan upon written notice to
the Plan Agent which must be received at least ten business days prior to the
distribution record date to become effective for that distribution. Shares in
the account of each Plan participant are held by the Plan Agent in
non-certificated form in the name of the Plan Agent or participant. When a
participant withdraws from the Plan or upon termination of the Plan as provided
below, certificates for whole Fund shares credited to his or her account under
the Plan are issued and a cash payment is made for any fraction of a Fund share
credited to such account.
The automatic reinvestment of distributions does not relieve participants
to any Federal income tax that may be payable on such distributions.
The Fund does not charge participants for reinvesting distributions. Any
Plan Agent's fees for the handling of reinvestment of distributions under the
Plan are paid by the Fund. There are no brokerage charges with respect to Common
Shares issued directly by the Fund as a result of distributions payable either
in stock or in cash. However, each participant pays a pro rata share of
brokerage commissions incurred with respect to the Plan Agent's open market
purchases in connection with the reinvestment of distributions.
Experience under the Plan may indicate that changes are desirable.
Accordingly, the Fund and the Plan Agent reserve the right to amend the Plan as
applied to any distribution paid subsequent to written notice of the change sent
to all shareholders of the Fund at least 90 days before the record date for the
distribution. The Plan also may be terminated by the Fund or the Plan Agent by
at least 30 days' written notice to all shareholders of the Fund. All
correspondence concerning the Plan should be directed to the Plan Agent at First
Data Investor Services Group, Inc., P.O. Box 1376, Boston, Massachussetts 02104.
20
<PAGE>
Smith Barney SMITH BARNEY
Intermediate ------------
Municipal Fund, Inc. A Member of Travelers Group [LOGO]
Directors
Jessica M. Bibliowicz
Joseph H. Fleiss
Donald R. Foley
Paul Hardin
Francis P. Martin, M.D.
Heath B. McLendon, Chairman
Roderick C. Rasmussen
John P. Toolan
C. Richard Youngdahl
Officers
Heath B. McLendon
Chief Executive Officer
Jessica M. Bibliowicz
President
Lewis E. Daidone
Senior Vice President and Treasurer
Peter M. Coffey
Vice President
Thomas M. Reynolds
Controller
Christina T. Sydor
Secretary
Investment Manager
Smith Barney Mutual Funds
Management Inc.
Distributor
Smith Barney Inc.
Custodian
PNC Bank
Shareholder
Servicing Agent
First Data Investor Services
Group, Inc.
P.O. Box 1376
Boston, MA 02104
This report is submitted for the general information of the shareholders of
Smith Barney Intermediate Municipal Fund, Inc. It is not authorized for
distribution to prospective investors unless accompanied or preceded by a
current Prospectus for the Fund, which contains information concerning the
Fund's investment policies and expenses as well as other pertinent information.
Smith Barney
Intermediate
Municipal Fund, Inc.
388 Greenwich Street
New York, New York 10013
FD01067 2/96
