Smith Barney
----------
INTERMEDIATE
MUNICIPAL FUND, INC.
Annual Report
December 31, 1997
<PAGE>
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Smith Barney Intermediate Municipal Fund, Inc.
- ----------------------------------------------
Dear Shareholder:
We are pleased to provide the annual report for the Smith Barney Intermediate
Municipal Fund, Inc. for the year ended December 31, 1997. During the past
twelve months, the Fund distributed income dividends totaling $0.57 and made a
capital gain distribution of $0.10 per share. The table below shows the
annualized distribution rate and twelve-month total return based on the Fund's
December 31, 1997 net asset value ("NAV") per share and its American Stock
Exchange ("AMEX") closing price.
Price Annualized Twelve-Month
Per Share Distribution Rate* Total Return
--------- ------------------ ------------
$10.64 (NAV) 5.41% 8.49%
$10.563 (AMEX) 5.45% 13.42%
In comparison, intermediate maturity municipal bond funds posted an average
total return of 7.33% based on NAV for the same period, according to Lipper
Analytical Services, Inc. (Lipper is a major fund-tracking organization.)
Investment Strategy
As an intermediate-term municipal bond fund, the weighted average maturity of
the Fund's portfolio will not be more than ten years. During the reporting
period, we lengthened the Fund's average weighted maturity to approximately 9.9
years. (The average weighted maturity is the average life of the securities in
any mutual fund portfolio made up of bonds or other debt securities.) In
addition, we maintained the Fund's high credit quality orientation. As of
December 31, 1997, over 60% of the Fund's holdings were rated in the two highest
rating categories of triple-A or double-A by Moody's Investors Service, Inc. or
Standard & Poor's Ratings Services, or have an equivalent rating by another
nationally recognized statistical rating organization, or determined by the
manager to be of equivalent quality. A major portion of the Fund's assets were
allocated among the following types of municipal bond issues as of December 31,
1997: hospital bonds (14.5%), education bonds (13.5%), and housing: multi-family
bonds (8.7%).
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* The annualized distribution rate assumes a current monthly dividend rate
of $0.048 per share for twelve months.
1
<PAGE>
Municipal Bond Market Update and Outlook
Interest rates continued to decline overall during the course of the year.
However, the bond markets did experience considerable volatility as investors
responded to a conflicting combination of low inflation and falling
unemployment. The persistent strength of the U.S. economy heightened fears among
many investors that the Federal Reserve Board ("Fed") would raise short-term
interest rates. The Fed last raised the federal-funds rate by 0.25% in March
1997, but has since chosen to remain on the sidelines. (The federal-funds rate
is the interest rate banks charge each other for overnight loans and a closely
watched indicator of the direction of interest rates.) Although it did not take
action, the Fed indicated a bias toward tightening monetary policy at each of
its meetings in May, July, August, September and November.
Since the end of October, the dominant theme in the financial markets has been
the Asian financial crisis and the extent of the impact it will have on the U.S.
economy. We expect at least a modest dampening effect on growth in the first
part of the year with inflation continuing to trend lower in spite of wage
pressures resulting from an extremely tight labor market. We also expect the Fed
to hold short-term rates steady over the near term.
In our view, all of these developments have benefited the municipal bond market.
A healthy economy has enabled many municipalities to maintain, or even upgrade,
their credit ratings, while a relatively low rate of inflation has delivered
historically high real yields (i.e., the yield after taking into account the
effects of inflation to investors). We remain positive on the prospects for
municipal bonds and continue to believe that they will offer an excellent
tax-free alternative for investors.
On a more somber note, we are saddened by the loss of an outstanding physician
and Director of the Fund, Dr. Francis P. Martin. His knowledge and wisdom will
be missed.
Thank you for investing in the Smith Barney Intermediate Municipal Fund, Inc. We
look forward to continuing to help you pursue your financial goals.
Sincerely,
/s/ Heath B. McLendon /s/ Peter M. Coffey
Heath B. McLendon Peter M. Coffey
Chairman Vice President
February 2, 1998
2
<PAGE>
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Schedule of Investments December 31, 1997
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<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY VALUE
================================================================================================
<C> <C> <S> <C>
Education -- 13.5%
$ 1,700,000 A* Arizona Education Loan Marketing Corp.,
7.000% due 3/1/02(a)(b) $ 1,846,625
1,805,000 AAA Bastrop, TX ISD, PSFG, zero coupon due 2/15/18 652,056
1,030,000 A* Brazos, TX Higher Education Authority Student Loan Revenue,
6.300% due 9/1/98(a) 1,041,052
2,500,000 AAA Chicago, IL Board of Education, Capital Appreciation,
Chicago School Reform, Series A, AMBAC-Insured,
zero coupon due 12/1/16 940,625
760,000 NR Idaho Student Loan Fund Refunding Marketing Association Inc.,
Student Loan Refunding, 6.400% due 10/1/99,
Sinking Fund Average Life 1/30/99 771,400
400,000 Aaa* Joshua, TX Independent School Board, Capital Appreciation,
Series C, PSFG, zero coupon due 2/15/12 198,000
1,075,000 Aaa* Lago Vista, TX ISD, PSFG, zero coupon due 8/15/20 338,625
1,000,000 AAA Lake Superior State University, Michigan Revenue,
MBIA-Insured, 5.000% due 11/15/12 1,001,250
300,000 AAA Massachusetts Education Loan Authority Issue E, Series A,
AMBAC-Insured, 6.850% due 1/1/04(a) 324,750
580,000 A* Montana Higher Education Student Assistance Corp., Student
Loan Revenue, 7.050% due 6/1/04, Sinking Fund Average
Life 7/24/02(a) 627,125
1,000,000 A* Nebraska Higher Education Loan Program, 6.450% due 6/1/18(a) 1,101,250
500,000 A1* New England Education Loan Marketing Corp.,
Massachusetts Refunding Student Loan Revenue,
6.900% due 11/1/09(a) 565,000
1,000,000 A- New York State Dormitory Authority Revenue, State University
Educational Facilities, 5.000% due 5/15/20 1,008,750
1,000,000 Aaa* Northwest, TX ISD, Capital Appreciation, PSFG,
zero coupon due 8/15/13 431,250
1,000,000 AAA Redford Michigan Unified School District, AMBAC-Insured,
5.000% due 5/1/12 1,007,500
Vermont State Colleges Revenue, Capital Appreciation:
500,000 A Zero coupon due 7/1/09 280,625
500,000 A Zero coupon due 7/1/10 263,750
500,000 A Zero coupon due 7/1/11 248,750
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12,648,383
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Electric -- 4.8%
1,000,000 AAA Piedmont Municipal Power Agency Electric Revenue
Refunding, Series A, MBIA-Insured, 4.875% due 1/1/16 971,250
1,750,000 Aa1* Washington Public Power Supply System Nuclear Power
Project #1, 7.750% due 7/1/03(b) 2,025,625
1,500,000 Aa1* Washington State Public Power Supply System Nuclear Power,
Series A, Project #2, 5.000% due 7/1/12 1,479,375
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4,476,250
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</TABLE>
See Notes to Financial Statements.
3
<PAGE>
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Schedule of Investments (continued) December 31, 1997
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<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY VALUE
================================================================================================
<C> <C> <S> <C>
Escrowed to Maturity (c) -- 7.6%
$ 175,000 AAA Los Angeles Hollywood, CA Presbyterian Single-Family
Mortgage, 9.625% due 7/1/13, Sinking Fund Average
Life 2/28/08 $ 235,156
965,000 AAA Metropolitan Nashville, TN Airport Authority Revenue,
7.500% due 7/1/05, Sinking Fund Average Life 8/2/01(b) 1,074,769
249,000 AAA New Jersey State Turnpike Authority Revenue Refunding,
10.375% due 1/1/03, Sinking Fund Average Life 5/23/00 291,330
1,855,000 Aaa* New York State Urban Development Corp. Revenue,
7.300% due 4/1/01 2,035,863
260,000 AAA Ohio State Water Development Authority Revenue, Armco
Steel Corp., 7.875% due 11/1/00, Sinking Fund Average
Life 11/1/98 278,200
1,520,000 AAA Ohio State Water Development Authority Safe Water, Series 2,
9.375% due 12/1/10, Sinking Fund Average Life 3/28/04(b) 1,936,100
95,000 AAA Salt Lake City, UT Water Conservancy Distribution Revenue,
Series A, MBIA-Insured, 10.875% due 10/1/02,
Sinking Fund Average Life 2/26/00 110,794
1,000,000 AAA Southwest Il Development Authority Hospital Revenue
Refunding, Wood River Hospital, 6.875% due 8/1/03,
Sinking Fund Average Life 9/19/01 1,127,500
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7,089,712
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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 1,082,500
1,000,000 AAA New York State Local Government Assistance Corp., Series B,
MBIA-Insured, 4.750% due 4/1/14 973,750
840,000 NR Tulsa, OK Housing Assistance Corp. Multi-Family Revenue,
7.250% due 10/1/07 863,100
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2,919,350
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General Obligation -- 8.3%
1,000,000 AAA Chicago, IL GO, AMBAC-Insured, 6.100% due 1/1/03(b) 1,082,500
1,000,000 AAA District of Columbia GO Refunding, Series B,
MBIA-Insured, 6.750% due 6/1/01 1,025,230
2,125,000 AAA Harris County, TX GO, Capital Appreciation
MBIA-Insured, zero coupon, due 8/15/13 993,593
1,000,000 AA Harvey, IL GO Refunding, Asset Guaranty-Insured,
6.700% due 2/1/09 1,087,500
500,000 AA Texas State Refunding, Public Finance Authority,
5.000% due 10/1/12 506,250
1,250,000 AAA New Haven, CT GO, Series 1992A, 9.250% due 3/1/02,
Sinking Fund Average Life 3/1/00 1,451,563
1,500,000 A- New York City, NY GO, Series 1992D, 7.300% due 2/1/01 1,627,500
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7,774,136
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</TABLE>
See Notes to Financial Statements.
4
<PAGE>
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Schedule of Investments (continued) December 31, 1997
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<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY VALUE
================================================================================================
<C> <C> <S> <C>
Government Facilities -- 1.7%
$1,490,000 AAA Chicago Il Public Buildings Committee Building Revenue,
Series A, MBIA-Insured, 5.250% due 12/1/11 $ 1,562,637
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Hospital -- 14.5%
1,500,000 BBB Colorado Health Facilities Authority Revenue, Rocky Mountain
Adventist, 6.250% due 2/1/04 1,608,750
725,000 BBB+ Defiance, OH Hospital Revenue Refunding, Defiance Hospital,
7.625% due 11/1/03 743,516
1,250,000 AAA* Illinois Health Facilities Authority Revenue, Memorial Health
System, MBIA-Insured, 5.200% due 10/1/12 1,256,250
1,000,000 A2* Indiana Health Facilities Authority Hospital Revenue Refunding
Bonds, St. Anthony Medical Center, 7.000% due 10/1/06 1,086,250
1,000,000 AAA Maine Health & Higher Educational Facilities
Authority Revenue, Series B, MBIA-Insured, 5.000% due
7/1/13 991,250
1,000,000 AAA Maryland Health & Higher Education Facility Authority Revenue,
(Mercy Medical Center Project), FSA-Insured,
6.500% due 7/1/13 1,178,750
2,350,000 AAA Massachusetts State Health & Educational Facilities Authority
Revenue, Hallmark Health System, Series A, FSA-Insured,
5.000% due 7/1/12 2,344,125
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 1,258,175
500,000 AAA CGIC-Insured, FLAIRS, 6.270% due 11/15/07(d) 537,500
340,000 AA Taos County, NM Gross Receipts Tax Revenue,
Asset Guaranty-Insured, 6.125% due 12/1/01 357,000
2,000,000 AAA Tarrant County Texas Health Facilities Development
Corporation Health System Revenue, Series A, MBIA-Insured,
5.750% due 2/15/02 2,195,000
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13,556,566
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Housing: Multi-Family -- 8.7%
920,000 AA Beaumont, TX Multi-Family Housing Finance, Regency Place
Apartments, Asset Guaranty-Insured, 7.000% mandatory
tender 10/1/03(b) 947,830
610,000 AAA Charlotte, NC Mortgage Revenue Refunding Double Oaks
Apartments, Series A, FHA-Insured, 7.300% due 11/15/07 678,625
915,000 AAA Hudson County, NJ Improvement Authority, Multi-Family
Housing Revenue Bonds, 6.600% due 6/1/04(a) 993,918
970,000 A2* McMinnville, TN Housing Authority Revenue Refunding, 1st
Mortgage, Beersheba Heights, 6.000% due 10/1/09 1,030,625
500,000 AAA Missouri State Housing Development Community Mortgage
Revenue, Series C, GNMA/FNMA-Collateralized,
7.450% due 9/1/27 577,500
</TABLE>
See Notes to Financial Statements.
5
<PAGE>
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Schedule of Investments (continued) December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY VALUE
================================================================================================
<C> <C> <S> <C>
Housing: Multi-Family -- 8.7% (continued)
Mount Vernon, IL Elderly Housing Corp., First Lien Revenue
Bonds, Section 8 Assisted, Series 1979:
$ 160,000 Baa1* 7.875% due 4/1/01 $ 160,501
170,000 Baa1* 7.875% due 4/1/02 170,532
185,000 Baa1* 7.875% due 4/1/03 185,579
200,000 Baa1* 7.875% due 4/1/04 200,626
215,000 Baa1* 7.875% due 4/1/05 215,673
235,000 Baa1* 7.875% due 4/1/06 235,736
250,000 Baa1* 7.875% due 4/1/07 250,783
270,000 Baa1* 7.875% due 4/1/08 270,845
480,000 AAA Nevada Housing Division, Multi-Unit Housing, (Austin Crest
Project), FNMA-Collateralized, 5.500% due 10/1/09 486,600
745,000 AAA San Jose, CA Multi-Family Housing, (Country Brook Project),
FNMA-Collateralized, 6.500% mandatory tender 4/1/02 787,838
945,000 Aa* Streamwood, IL Multi-Family Housing Revenue, (Southgate
Project), FHA-Insured, 6.200% due 11/1/07 1,002,881
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8,196,092
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Housing: Single-Family -- 4.6%
415,000 AA Maine State Housing Authority, Mortgage Purchase, Series D3,
7.600% due 11/15/01, Sinking Fund Average Life 1/8/00(a) 435,750
1,200,000 A-1+ Philadelphia, PA Authority Industrial Development,
Morgan Guaranty-Insured, 4.250% due 7/1/25(d) 1,200,000
465,000 AAA St. Louis County, MO Single-Family Mortgage Revenue,
MBIA-Insured, 6.750% due 4/1/10 465,298
1,000,000 AA+ Virginia State Housing Development Authority Commonwealth
Mortgage, Series H, 6.100% due 7/1/03 1,066,250
1,060,000 AA Wisconsin Housing & Education Development Authority,
Home Ownership Revenue, 6.350% due 3/1/01 1,109,025
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4,276,323
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Industrial Development -- 4.5%
1,000,000 A2* Alaska Individual Development Export Authority, Series A,
6.200% due 4/1/07(a) 1,092,500
1,000,000 A Kanawha, WV Commercial Development Revenue,
(May Department Store Project), 6.500% due 6/1/03 1,112,500
1,000,000 NR Newbern, TN Industrial Development Ltd. Obligation,
Newburn Rubber Inc., 7.900% due 3/1/00 1,058,750
900,000 NR Sussex County, DE Economic Development Revenue Refunding
Bonds, (Rehoboth Mall Project), Series 1992,
7.250% due 10/15/12 958,500
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4,222,250
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</TABLE>
See Notes to Financial Statements.
6
<PAGE>
- --------------------------------------------------------------------------------
Schedule of Investments (continued) December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY VALUE
================================================================================================
<C> <C> <S> <C>
Miscellaneous -- 7.4%
$ 670,000 AAA Cibola County, NM, Gross Receipts, Tax Revenue,
AMBAC-Insured, 5.000% due 11/1/16 $ 667,487
1,000,000 BBB- Clarksville, TN Natural Gas Acquisition Corp. Gas Revenue,
Series A, 7.500% due 11/1/04 1,061,250
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 1,108,750
800,000 A South Dakota Economic Development Finance Authority,
APA Optics, Series A, 6.750% due 4/1/16(a) 889,000
2,000,000 AAA Southern Il University Revenue Capital Appreciation,
Housing & Auxiliary Facilities, MBIA-Insured, zero
coupon due 4/1/12 985,000
1,000,000 AAA Texas State Department, Housing & Community Affairs Home
Mortgage Revenue, GNMA/FNMA/FHLMC-Collateralized,
9.207% due 7/2/24(e) 1,242,500
1,000,000 AAA Turtle Run, FL Community Development, District Revenue,
MBIA-Insured, 5.000% due 5/1/11 1,001,250
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6,955,237
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Pollution Control -- 6.1%
1,000,000 Aa3* Brazos River, TX Navigation District Brazoria County PCR,
6.750% due 2/1/10 1,200,000
100,000 VMIG1* Burke County, GA Development Authority Pollution Control
Revenue, 4.150% due 4/1/32(d) 100,000
1,200,000 A- Erie County, PA Pollution Control (International Paper Company
Project), Series A, 5.300% due 4/1/12 1,242,000
1,000,000 AAA Monroe County, MI PCR, (Detroit Edison Co. Project),
AMBAC-Insured, 6.350% due 12/1/04(a) 1,107,500
1,000,000 AAA Orange County, CA Public Financing Authority Waste
Management, System Revenue, AMBAC-Insured,
5.750% due 12/1/11 1,085,000
1,000,000 A- Port Umpqua, OR Pollution Control (International Paper
Company Project) 5.200% due 6/1/11 1,015,000
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5,749,500
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Pre-Refunded(f) -- 0.2%
110,000 AAA Indiana University Revenue, Series 1983N, (Call 7/1/01 @ 100),
10.000% due 7/1/03, Sinking Fund Average Life 12/22/99 126,913
55,000 AAA Oklahoma State IDA Oklahoma Health Care Corp., Series A,
FGIC-Insured, (Various Call Dates), 9.125% due 11/1/08,
Sinking Fund Average Life 5/7/06 70,606
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197,519
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Public Facilities -- 2.8%
1,350,000 A Dekalb County, IN Redevelopment Authority Revenue,
Mini-Mill Public Improvement, 6.250% due 1/15/09 1,473,188
</TABLE>
See Notes to Financial Statements.
7
<PAGE>
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Schedule of Investments (continued) December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY VALUE
================================================================================================
<C> <C> <S> <C>
Public Facilities -- 2.8% (continued)
$1,000,000 AA- La Crosse, WI Resource Recovery Revenue, (Northern States
Power Co. Project), 6.000% due 11/1/21(a) $ 1,117,500
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2,590,688
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Solid Waste -- 4.3%
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(b) 2,052,500
2,000,000 BB Union County, NJ Utility Authority Solid Waste Revenue,
6.850% due 6/15/02(a) 2,012,500
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4,065,000
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Transportation -- 6.0%
2,035,000 AAA Dallas Fort Worth, TX Regional Airport Revenue
Refunding, Series 1992A, FGIC-Insured, 7.750% due
11/1/03 2,396,212
1,920,000 Baa1* Denver, CO City and County Airport Revenue, Series 1990A,
8.250% due 11/15/02(a) 2,140,800
605,000 AAA Metropolitan Nashville Airport, FGIC-Insured, 5.000% due 7/1/11 607,269
500,000 A Pittsfield Township, MI Economic Development Corp.
Revenue Refunding, (Airport Association Project),
Unconditional Guaranty-Lincoln National, 6.400% due 12/1/02 521,875
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5,666,156
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Utilities -- 1.9%
1,735,000 A- Palo Duro River Authority, TX Refunding, CGIC-Insured,
zero coupon due 8/1/09 1,004,131
1,500,000 AAA Port St. Lucie, FL Utility Revenue Capital Appreciation,
Series A, MBIA-Insured, zero coupon due 9/1/12 733,125
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1,737,256
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TOTAL INVESTMENTS -- 100%
(Cost -- $88,359,689**) $93,683,055
================================================================================================
</TABLE>
(a) Income from these issues is considered a preference item for purposes of
calculating the alternative minimum tax.
(b) Security segregated by custodian for open purchase commitments.
(c) Bonds are escrowed to maturity with U.S. government securities and are
considered by the portfolio manager to be triple-A rated even if issuer
has not applied for new ratings.
(d) Variable rate obligation payable at par on demand at any time on no more
than seven day notice.
(e) Inverse floating rate security - coupon varies inversely with level of
short-term tax-exempt interest rates.
(f) Bonds are escrowed with U.S. government securities and are considered by
the portfolio manager to be triple-A rated even if issuer has not applied
for new ratings.
** Aggregate cost for Federal income tax purposes is substantially the same.
See pages 9 and 10 for definition of ratings and certain security
descriptions.
See Notes to Financial Statements.
8
<PAGE>
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Bond Ratings
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All ratings are by Standard & Poor's Ratings Service ("Standard &Poor's"),
except those identified by an asterisk (*) are rated by Moody's Investors
Service, Inc. ("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.
BB -- Debt rated "BB" have less near-term vulnerability to default than
other speculative issues. However, they face major ongoing
uncertainties or exposure to adverse business, financial, or economic
conditions which could lead to inadequate capacity to meet timely
interest and principal payments.
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.
Ba -- Bonds that are rated "Ba" are judged to have speculative elements;
their future cannot be considered as well assured. Often the
protection of interest and principal payments may be very moderate,
and therefore not well safeguarded during both good and bad times over
the future. Uncertainty of position characterizes bonds in this class.
NR -- Indicates that the bond is not rated by Standard & Poor's or
Moody's.
9
<PAGE>
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Short-Term Securities Ratings
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VMIG1 -- Moody's highest rating for issues having a demand feature -- VRDO.
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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
ISD -- Independent School District
LOC -- Letter of Credit
MBIA -- Municipal Bond Investors Assurance Corporation
PCFA -- Pollution Control Financing Authority
PCR -- Pollution Control Revenue
PSFG -- Permanent School Fund Guaranty
RIBS -- Residual Interest Bonds
10
<PAGE>
- --------------------------------------------------------------------------------
Statement of Assets and Liabilities December 31, 1997
- --------------------------------------------------------------------------------
ASSETS:
Investments, at value (Cost-- $88,359,689) $ 93,683,055
Cash 51,093
Receivable for securities sold 1,437,031
Interest receivable 1,222,550
- --------------------------------------------------------------------------------
Total Assets 96,393,729
- --------------------------------------------------------------------------------
LIABILITIES:
Payable for securities purchased 7,644,828
Dividends payable 70,816
Management fees payable 43,758
Accrued expenses 27,845
- --------------------------------------------------------------------------------
Total Liabilities 7,787,247
- --------------------------------------------------------------------------------
Total Net Assets $ 88,606,482
================================================================================
NET ASSETS:
Par value of capital shares 8,329
Capital paid in excess of par value 83,278,601
Overdistributed net investment income (2,478)
Overdistributed net realized gains (1,336)
Net unrealized appreciation of investments 5,323,366
- --------------------------------------------------------------------------------
Total Net Assets
(Equivalent to $10.64 a share on 8,329,033 shares of $0.001
par value outstanding; 100,000,000 shares authorized) $ 88,606,482
================================================================================
See Notes to Financial Statements.
11
<PAGE>
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Statement of Operations For the Year Ended December 31, 1997
- --------------------------------------------------------------------------------
INVESTMENT INCOME:
Interest $ 5,381,992
- --------------------------------------------------------------------------------
EXPENSES:
Management fees (Note 3) 522,436
Shareholder communications 40,052
Shareholder and system servicing fees 37,745
Audit and legal 16,187
Pricing service fees 11,010
Listing fees 6,000
Directors' fees 3,904
Custody 3,362
Other 4,500
- --------------------------------------------------------------------------------
Total Expenses 645,196
- --------------------------------------------------------------------------------
Net Investment Income 4,736,796
- --------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN ON
INVESTMENTS (NOTE 4):
Realized Gain From Security Transactions
(excluding short-term securities):
Proceeds from sales 50,428,930
Cost of securities sold 48,878,761
- --------------------------------------------------------------------------------
Net Realized Gain 1,550,169
- --------------------------------------------------------------------------------
Change in Net Unrealized Appreciation of Investments:
Beginning of year 4,621,136
End of year 5,323,366
- --------------------------------------------------------------------------------
Increase in Net Unrealized Appreciation 702,230
- --------------------------------------------------------------------------------
Net Gain on Investments 2,252,399
- --------------------------------------------------------------------------------
Increase in Net Assets From Operations $ 6,989,195
================================================================================
See Notes to Financial Statements.
12
<PAGE>
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets For the Years Ended December 31,
- --------------------------------------------------------------------------------
1997 1996
================================================================================
OPERATIONS:
Net investment income $ 4,736,796 $ 4,819,705
Net realized gain (loss) 1,550,169 (111,453)
Increase (decrease) in net unrealized appreciation 702,230 (1,312,656)
- --------------------------------------------------------------------------------
Increase in Net Assets From Operations 6,989,195 3,395,596
- --------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM (NOTE 2):
Net investment income (4,742,383) (4,973,337)
In excess of net investment income (39,390) --
Net realized gains (842,433) --
- --------------------------------------------------------------------------------
Decrease in Net Assets From
Distributions to Shareholders (5,624,206) (4,973,337)
- --------------------------------------------------------------------------------
FUND SHARE TRANSACTIONS (NOTE 7):
Net asset value of shares issued
for reinvestment of dividends 426,918 --
- --------------------------------------------------------------------------------
Increase in Net Assets From
Fund Share Transactions 426,918 --
- --------------------------------------------------------------------------------
Increase (Decrease) in Net Assets 1,791,907 (1,577,741)
NET ASSETS:
Beginning of year 86,814,575 88,392,316
- --------------------------------------------------------------------------------
End of year* $88,606,482 $86,814,575
================================================================================
* Includes undistributed (overdistributed) net
investment income of: $(2,478) $3,109
================================================================================
See Notes to Financial Statements.
13
<PAGE>
- --------------------------------------------------------------------------------
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) security transactions are accounted for on trade date;(b) securities are
valued at the mean between the bid and ask prices provided by an independent
pricing service that are based on transactions in municipal obligations,
quotations from municipal bond dealers, market transactions in comparable
securities and various relationships between securities; (c) securities maturing
within 60 days are valued at cost plus accreted discount, or minus amortized
premium, which approximates 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. At December 31,1997, reclassifications were made to the
Fund's capital accounts to reflect permanent book/tax differences and income and
gains available for distributions under income tax regulation. Accordingly, a
portion of accumulated net investment income and overdistributed net realized
gains amounting to $35,038 and $4,352, respectively was reclassified to paid-in
capital. Net investment income, net realized gains and net assets were not
affected by this change; 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.
14
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
2. EXEMPT-INTEREST DIVIDENDS AND OTHER DISTRIBUTIONS
The Fund intends to satisfy conditions that will enable interest from
municipal securities, which is exempt from Federal income tax and from
designated state income taxes, to retain such tax-exempt status when distributed
to the shareholders of the Fund.
Capital gains distributions, if any, are taxable to shareholders, and are
declared and paid at least annually.
3. MANAGEMENT AGREEMENT AND TRANSACTIONS WITH AFFILIATED PERSONS
Mutual Management Corp. ("MMC"), formerly known as Smith Barney Mutual
Funds Management Inc., a subsidiary of Salomon Smith Barney Holdings Inc., acts
as investment manager to the Fund. As compensation for its services, the Fund
pays MMC 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 one Director of the Fund are employees of Smith Barney
Inc.
4. INVESTMENTS
During the year ended December 31, 1997, the aggregate cost of purchases
and proceeds from sales of investments (including maturities, but excluding
short-term securities) were as follows:
================================================================================
Purchases $54,788,208
- --------------------------------------------------------------------------------
Sales 50,428,930
================================================================================
At December 31, 1997, aggregate gross unrealized appreciation and
depreciation of investments for Federal income tax purposes were substantially
as follows:
================================================================================
Gross unrealized appreciation $ 5,325,746
Gross unrealized depreciation (2,380)
- --------------------------------------------------------------------------------
Net unrealized appreciation $ 5,323,366
================================================================================
15
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
5. FUTURES CONTRACTS
Initial margin deposits made upon entering into futures contracts are
recognized as assets. The initial margin is segregated by the custodian and is
noted in the schedule of investments. During the period the futures contract is
open, changes in the value of the contract are recognized as unrealized gains or
losses by "marking to market" on a daily basis to reflect the market value of
the contract at the end of each day's trading. Variation margin payments are
made or received and recognized as assets due from or liabilities due to broker,
depending upon whether unrealized gains or losses are incurred. When the
contract is closed, the Fund records a realized gain or loss equal to the
difference between the proceeds from (or cost of) the closing transactions and
the Fund's basis in the contract. The Fund enters into such contracts to hedge a
portion of its portfolio. The Fund bears the market risk that arises from
changes in the value of the financial instruments and securities indices
(futures contracts).
At December 31, 1997, there were no open futures contracts.
6. OPTIONS CONTRACTS
Premiums paid when put or call options are purchased by the Fund represent
investments, which are marked-to-market daily. When a purchased option expires,
the Fund will realize a loss in the amount of the premium paid. When the Fund
enters into a closing sales transaction, the Fund will realize a gain or loss
depending on whether the proceeds from the closing sales transaction are greater
or less than the premium paid for the option. When the Fund exercises a put
option, it will realize a gain or loss from the sale of the underlying security
and the proceeds from such sale will be decreased by the premium originally
paid. When the Fund exercises a call option, the cost of the security which the
Fund purchases upon exercise will be increased by the premium originally paid.
At December 31, 1997, there were no open purchased call or put options
contracts.
16
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
When a Fund writes a covered call or put option, an amount equal to the
premium received by the Fund is recorded as a liability, the value of which is
marked-to-market daily. When a written option expires, the Fund realizes a gain
equal to the amount of the premium received. When the Fund enters into a closing
purchase transaction, the Fund realizes a gain or loss depending upon whether
the cost of the closing transaction is greater or less than the premium
originally received without regard to any unrealized gain or loss on the
underlying security, and the liability related to such option is eliminated.
When a written call option is exercised, the cost of the security sold will be
decreased by the premium originally received. When a put option is exercised,
the amount of the premium originally received will reduce the cost of the
security which the Fund purchased upon exercise. When written index options are
exercised, settlement is made in cash.
The risk associated with purchasing options is limited to the premium
originally paid. The Fund enters into options for hedging purposes. The risk in
writing a call option is that the Fund gives up the opportunity to participate
in any increase in the price of the underlying security beyond the exercise
price. The risk in writing a put option is that the Fund is exposed to the risk
of a loss if the market price of the underlying security declines.
At December 31, 1997, the Fund had no open written options contracts.
7. CAPITAL SHARES
During the year ended December 31, 1997, capital stock transactions were
as follows:
Shares Amount
================================================================================
Shares issued on reinvestment 40,148 $426,918
================================================================================
17
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
For a share of capital stock outstanding throughout each year:
<TABLE>
<CAPTION>
1997 1996 1995 1994(1) 1993(1)
=======================================================================================================
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $ 10.47 $ 10.66 $ 9.95 $ 10.81 $ 10.36
- -------------------------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment income 0.57 0.58 0.58 0.58 0.59
Net realized and unrealized gain (loss) 0.28 (0.17) 0.73 (0.84) 0.46
- -------------------------------------------------------------------------------------------------------
Total Income (Loss) From Operations 0.85 0.41 1.31 (0.26) 1.05
- -------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.57) (0.60) (0.60) (0.60) (0.57)
In excess of net
investment income (0.01) -- -- -- --
Net realized gains (0.10) -- -- -- (0.03)
- -------------------------------------------------------------------------------------------------------
Total Distributions (0.68) (0.60) (0.60) (0.60) (0.60)
- -------------------------------------------------------------------------------------------------------
Net Asset Value, End of Year $ 10.64 $ 10.47 $ 10.66 $ 9.95 $ 10.81
- -------------------------------------------------------------------------------------------------------
Total Return, Based on Market Value 13.42% 1.56% 15.93% (9.34)% 16.71%
- -------------------------------------------------------------------------------------------------------
Total Return, Based on Net Asset Value 8.49% 4.13% 13.72% (2.33)% 10.30%
- -------------------------------------------------------------------------------------------------------
Net Assets, End of Year (000s) $ 88,606 $ 86,815 $ 88,392 $ 82,494 $ 88,966
- -------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses 0.74% 0.77% 0.72% 0.72% 0.73%
Net investment income 5.42 5.56 5.63 5.64 5.56
- -------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 58% 21% 13% 26% 10%
- -------------------------------------------------------------------------------------------------------
Market Price,End of Year $ 10.563 $ 9.938 $ 10.375 $ 9.500 $ 11.125
=======================================================================================================
</TABLE>
(1) Per share amounts have been calculated using the monthly average shares
method, rather than the undistributed net investment income method,
because it more accurately reflects the per share data for the period.
- --------------------------------------------------------------------------------
Tax Information (unaudited)
- --------------------------------------------------------------------------------
For Federal tax purposes, the Fund hereby designated for the fiscal year
ended December 31, 1997:
o 100% of the dividends paid by the Fund from net investment income as
tax-exempt for regular Federal income tax purposes.
o The Taxpayer Relief Act of 1997 enacted differing rates of tax on
various long-term capital gain transactions. As a result, the Fund
designates:
o Total long-term capital gain distributions paid of $842,433
are considered "20 percent rate gains".
18
<PAGE>
- --------------------------------------------------------------------------------
Independent Auditors' Report
- --------------------------------------------------------------------------------
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, 1997, the related statement of
operations for the year then ended, the statements of changes in net assets for
each of the years in the two-year period then ended and the financial highlights
for each of the years in the five-year period then ended. These financial
statements and financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with 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, 1997, by correspondence with the custodian. As to securities sold
or purchased but not delivered or received, 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, 1997, 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 financial highlights
for each of the years in the five-year period then ended, in conformity with
generally accepted accounting principles.
/s/ KPMG Peat Marwick LLP
New York, New York
February 10, 1998
19
<PAGE>
- --------------------------------------------------------------------------------
Financial Data (unaudited)
- --------------------------------------------------------------------------------
For a share of capital stock outstanding throughout each period:
AMEX Net Asset Dividends Reinvestment
Period Closing Price* Value* Paid Price
================================================================================
1996
January $10.63 $10.65 $0.050 $10.52
February 10.50 10.57 0.050 10.47
March 10.25 10.46 0.050 9.88
April 9.81 10.39 0.050 9.88
May 10.38 10.35 0.050 10.15
June 10.00 10.37 0.050 10.01
July 10.13 10.39 0.050 10.15
August 10.38 10.36 0.050 10.34
September 10.25 10.40 0.050 10.24
October 10.13 10.44 0.050 10.27
November 10.25 10.54 0.050 10.27
December 9.94 10.47 0.050 10.14
1997
January 10.00 10.46 0.048 10.00
February 9.94 10.49 0.048 10.00
March 9.88 10.36 0.048 9.94
April 9.88 10.39 0.048 9.94
May 9.88 10.45 0.048 9.97
June 10.13 10.48 0.048 10.24
July 10.75 10.66 0.048 10.62
August 10.25 10.52 0.048 10.26
September 10.31 10.61 0.048 10.46
October 10.44 10.62 0.048 10.44
November 10.38 10.63 0.048 10.46
December 10.56 10.64 0.048 10.73
December+ 10.56 10.64 0.102 10.64
================================================================================
* On the last business day of the month.
+ Capital gain distribution.
20
<PAGE>
- --------------------------------------------------------------------------------
Additional Shareholder Information (unaudited)
- --------------------------------------------------------------------------------
On April 25, 1997 the annual meeting of the shareholders of the Fund was
held for the purpose of voting on the following matters:
1. To vote on the election of Joseph H. Fleiss and Heath B. McLendon 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 the vote on Proposal 1 were as follows:
% of Votes % of
Directors* Votes For Shares Voted Against Shares Voted
================================================================================
Joseph H. Fleiss 7,191,494 98.85% 83,308 1.15%
Heath B. McLendon 7,191,494 98.85 83,308 1.15
================================================================================
The results of the vote on Proposal 2 were as follows:
% of Votes % of Votes % of
Votes For Shares Voted Against Shares Voted Abstained Shares Voted
================================================================================
7,209,835 99.11% 36,526 0.50% 28,441 0.39%
================================================================================
* The following Directors, representing the balance of the Board of
Directors, continue to serve: Donald R. Foley, Paul Hardin, Roderick C.
Rasmussen and John P. Toolan. C. Richard Youngdahl will continue to serve
as a Director Emeritus. In addition, as of January 1, 1998, Joseph H.
Fleiss became a Director Emeritus.
21
<PAGE>
- --------------------------------------------------------------------------------
Dividend Reinvestment Plan (unaudited)
- --------------------------------------------------------------------------------
Pursuant to the Fund's Dividend Reinvestment Plan ("Plan"), all
distributions are automatically reinvested by First Data Investor Services
Group, Inc., as plan agent ("Plan Agent"), in additional shares of its Common
Stock ("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 Plan Agent is permitted to cease purchasing shares on the
open market and the Fund may issue the remaining shares at a price equal to the
greater of (a) net asset value or (b) 95% of the then current market price. In a
case where the Plan Agent has terminated open market purchases and the Fund has
issued the remaining shares, the number of shares received by the participant in
respect of the cash dividend or distribution will be based on the weighted
average of prices paid for shares purchased in the open market and the price at
which the Fund issued the remaining shares. The Plan Agent applies all cash
received as a distribution to purchase Common Shares on the open market as soon
as practicable after the record date of the
22
<PAGE>
- --------------------------------------------------------------------------------
Dividend Reinvestment Plan (unaudited) (continued)
- --------------------------------------------------------------------------------
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.
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 8030, Boston, Massachusetts
02266-8030.
23
<PAGE>
(This page intentionally left blank.)
<PAGE>
Smith Barney
----------
INTERMEDIATE
MUNICIPAL FUND, INC.
DIRECTORS
Donald R. Foley
Paul Hardin
Heath B. McLendon, Chairman
Roderick C. Rasmussen
John P. Toolan
Joseph H. Fleiss, Emeritus
C. Richard Youngdahl, Emeritus
OFFICERS
Heath B. McLendon
President and
Chief Executive Officer
Lewis E. Daidone
Senior Vice President
and Treasurer
Peter M. Coffey
Vice President
Thomas M. Reynolds
Controller
Christina T. Sydor
Secretary
INVESTMENT MANAGER
Mutual Management Corp.
CUSTODIAN
PNC Bank, N.A.
SHAREHOLDER
SERVICING AGENT
First Data Investor Services Group, Inc.
P.O. Box 8030
Boston, MA 02266-8030
This report is submitted for the general information of the shareholders of
Smith Barney 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
FD1067 2/98
