Smith Barney
----------------
INTERMEDIATE
MUNICIPAL FUND, INC.
Semi-Annual Report
June 30, 1998
<PAGE>
Smith Barney
Intermediate
Municipal
Fund, Inc.
[PHOTO] [PHOTO]
HEATH B. PETER M.
MCLENDON COFFEY
Chairman Vice President
Dear Shareholder:
We are pleased to provide the semi-annual report for the Smith Barney
Intermediate Municipal Fund, Inc. ("Fund") for the period ended June 30, 1998.
During the past six months, the Fund distributed income dividends totaling $0.28
per share. The table below shows the annualized distribution rates and six-month
total return based on the Fund's June 30, 1998 net asset value ("NAV") per share
and its American Stock Exchange ("AMEX") closing price.
Price Annualized Six-Month
Per Share Distribution Rate Total Return
--------- ----------------- ------------
$10.60 (NAV) 5.09% 2.37%
$10.00 (AMEX) 5.40% (2.70%)
In comparison, intermediate maturity municipal bond funds posted an average
total return of 2.27% 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 should not be more than ten years. During the reporting
period, we maintained the Fund's average weighted maturity of approximately 9.9
years. In addition, we continued to emphasize a high credit quality orientation.
As of June 30, 1998, over 63% 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 Service. A major portion of the Fund's assets
was allocated among the following types of municipal bonds at June 30, 1998:
hospital bonds (14.4%), multi-family housing bonds (11.1%), and education bonds
(10.9%).
Municipal Bond Market Update
During the six months, the domestic bond market's performance was influenced
primarily by a healthy economy with low inflation and the uncertainties that
continue to cloud many of the world's major stock markets. Despite robust
consumer demand and labor shortages in many areas, consumer prices remained
fairly stable while wholesale prices for many key commodities, particularly oil,
actually fell.
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Smith Barney Intermediate Municipal Fund, Inc. 1
<PAGE>
Just fifteen months ago, Federal Reserve Board Chairman Alan Greenspan warned
against what he viewed as "irrational exuberance" in financial markets. Since
that time, the economy has continued to expand, the stock market has soared to
even greater heights and the unemployment rate touched historic lows. Yet,
inflation has remained subdued. In a widely expected action, Federal Reserve
("Fed") policy-makers emerged from their July 1, 1998 meeting with no decision
and let stand the 5.5% federal-funds rate, which has remained unchanged since
March 1997. (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.) While the Fed's motivation for its decision is not yet known, persistent
weakness in Asian economies has undoubtedly made the Fed more cautious in its
monetary policy.
Since the Asia crisis first began last summer, many investors began to shift
their attention towards "safe haven" investments such as U.S. Treasury
securities. This renewed demand helped push the yield on the bellwether 30-year
U.S. Treasury bond, which moves in the opposite direction of its price, to a
record low of 5.58% on June 15, 1998.
Foreign investors, who do not benefit from the tax advantages of municipal
bonds, have been substantial buyers of U.S. Treasury notes and bonds. So far,
municipal bonds have not fully participated in this market rally and,
consequently, the yield spread between U.S. Treasury securities and municipal
bonds has narrowed.
For example, the yield on 30-year U.S. Treasury bonds fell from 6.15% to 5.62%
during the reporting period. Municipal bond yields have also declined, but not
as sharply. According to the Bond Buyer 25-Bond Revenue Index, municipal bond
yields have only fallen from 5.41% at the beginning of January to 5.36% on June
25, 1998.
One result of these historically low interest rates has been a record volume of
municipal bond issuance. In the first half of 1998 alone, more than $146 billion
of bonds were sold, representing an increase of roughly 50% from the same period
last year. Many municipalities took advantage of the low interest rates by
refinancing older, higher-coupon bonds. Moreover, the strength of the economy
has filled state coffers and increased their debt capacity while the economic
expansion has accelerated demand for more infrastructure improvements, many of
which have been on hold in an era of fiscal conservatism.
While municipal bonds have tended to lag other bond markets, we believe this has
created investment opportunities in the tax-exempt bond market. The massive
issuance volume that we have witnessed recently has helped keep municipal bond
yields from falling as much as their taxable counterparts. As noted above, this
yield differential has narrowed in recent weeks and as of June 30, 1998,
long-term municipal bonds yielded as much as roughly 95% of
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2 1998 Semi-Annual Report to Shareholders
<PAGE>
30-year U.S. Treasury bonds. While the narrowing of yield differential between
municipals and U.S. Treasury bonds is less pronounced in the intermediate
maturity ranges, many municipal issues currently offer an after tax yield
advantage over taxable fixed-income investments, especially for investors in the
28% and higher tax brackets.
Municipal Bond Market Outlook
We remain optimistic on the prospects for the municipal bond market in the
coming months. We believe our positive outlook is supported by the following
factors:
o The full impact of the Asian crisis on the U.S. economy has yet to be
realized. As Asian companies attempt to recover, domestic companies will
face fierce competition and that will tend to hold prices down and help to
contain any emerging inflationary pressures. Moreover, there exists a
significant possibility that the Asian economic and financial recovery
will take longer than many investment professionals currently anticipate,
therefore extending the disinflationary influence on the U.S. economy.
o The rate of inflation remains historically low.
o The reduction of the federal budget, which should also reduce the need for
federal borrowing.
In addition, municipal bonds may be a safe haven in a potentially volatile stock
market.
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
July 9, 1998
Shareholder Notice
On a more somber note, we report with much sadness the passing of Emeritus
Director C. Richard Youngdahl on August 6, 1998. Dick made many valuable
contributions to the Board and the Fund during his tenure and he will be missed.
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Smith Barney Intermediate Municipal Fund, Inc. 3
<PAGE>
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Take Advantage of the Fund's Dividend Reinvestment Plan!
Did you know that fund investors who reinvest their dividends are taking
advantage of one of the most effective wealth-building tools available today?
Systematic investments put time to work for you through the strength of
compounding.
As an investor in the Fund, you can participate in its Dividend Reinvestment
Plan ("Plan"), a convenient, simple and efficient way to reinvest your dividends
and capital gains distributions, if any, in additional shares of the Fund. The
Fund's complete Plan begins on page 23. Below is a short summary of how the Plan
works.
Plan Summary
If you are a Plan participant who has not elected to receive your dividends in
the form of a cash payment, then your dividend and capital gain distributions
will be reinvested automatically in additional shares of the Fund.
The number of common stock shares in the Fund you will receive in lieu of a cash
dividend is determined in the following manner. If the market price of the
common stock is equal to or exceeds the net asset value ("NAV") per share on the
date of valuation, you will be issued shares for the equivalent of the most
recently determined NAV per share or 95% of the market price, whichever is
greater.
If the NAV per share at the time of valuation is greater than the market price
of the common stock, or if the Fund declares a dividend or capital gains
distribution payable only in cash, the Fund will buy common stock for your
account in the open market or on the American Stock Exchange.
If the Fund begins to purchase additional shares in the open market and the
market price of the shares subsequently rises above the NAV before the purchases
are completed, the Fund will attempt to cancel any remaining orders and issue
the remaining dividend or distribution in shares at the Fund's NAV per share. In
that case, the number of Fund shares you receive will be based on the weighted
average of prices paid for shares purchased in the open market and the price at
which the Fund issues the remaining shares.
To find out more detailed information about the Plan and about how you can
participate, please call First Data Investors Services Group at (800) 331-1710.
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4 1998 Semi-Annual Report to Shareholders
<PAGE>
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Schedule of Investments (unaudited) June 30, 1998
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<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY VALUE
===========================================================================================================
<S> <C> <C> <C>
Education -- 10.9%
$1,700,000 Aa2* Arizona Education Loan Marketing Corp.,
7.000% due 3/1/02(a)(b) $ 1,829,625
1,805,000 AAA Bastrop, TX ISD, PSFG, zero coupon due 2/15/18 647,544
2,500,000 AAA Chicago, IL Board of Education, Capital Appreciation,
Chicago School Reform, Series A, AMBAC-Insured,
zero coupon due 12/1/16 965,625
645,000 NR Idaho Student Loan Fund Refunding Marketing Association Inc.,
Student Loan Refunding, 6.400% due 10/1/99,
Sinking Fund Average Life 1/30/99 651,450
400,000 Aaa* Joshua, TX Independent School Board, Capital Appreciation,
Series C, PSFG, zero coupon due 2/15/12 203,000
300,000 AAA Massachusetts Education Loan Authority Issue E, Series A,
AMBAC-Insured, 6.850% due 1/1/04 (a) 322,875
560,000 A* Montana Higher Education Student Assistance Corp.,
Student Loan Revenue, 7.050% due 6/1/04,
Sinking Fund Average Life 7/24/02(a) 597,100
1,000,000 Aaa* Nebraska Higher Education Loan Program,
Series A-6, MBIA-Insured, 6.450% due 6/1/18(a) 1,113,750
500,000 A3* New England Education Loan Marketing Corp.,
Massachusetts Refunding Student Loan Revenue,
6.900% due 11/1/09(a) 566,875
500,000 A- New York State Dormitory Authority, State University
Educational Facilities, 5.000% due 5/15/10 509,375
1,000,000 Aaa* Northwest, TX ISD, Capital Appreciation, PSFG,
zero coupon due 8/15/13 442,500
1,000,000 AAA Redford Michigan Unified School District,
AMBAC-Insured, 5.000% due 5/1/12 1,022,500
Vermont State Colleges Revenue, Capital Appreciation:
500,000 A Zero coupon due 7/1/09 289,375
500,000 A Zero coupon due 7/1/10 271,875
500,000 A Zero coupon due 7/1/11 255,000
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9,688,469
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Electric -- 3.0%
500,000 AAA Eugene, OR Electric Utility Revenue, FSA-Insured,
4.850% due 8/1/15 496,250
Washington Public Power Supply System Nuclear Power:
1,000,000 Aa1* Project 1, 7.750% due 7/1/03 (b) 1,150,000
1,000,000 Aa1* Series A, Project 2, 5.000% due 7/1/12 995,000
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2,641,250
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Escrowed to Maturity (c) -- 7.4%
175,000 NR Los Angeles Hollywood, CA Presbyterian Single-Family Mortgage,
9.625% due 7/1/13, Sinking Fund Average Life 2/28/08 233,844
965,000 AAA Metropolitan Nashville, TN Airport Authority Revenue,
7.500% due 7/1/05, Sinking Fund Average Life 8/2/01(b) 1,067,531
</TABLE>
See Notes to Financial Statements.
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Smith Barney Intermediate Municipal Fund, Inc. 5
<PAGE>
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Schedule of Investments (unaudited) (continued) June 30, 1998
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<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY VALUE
===========================================================================================================
<S> <C> <C> <C>
Escrowed to Maturity (c) -- 7.4% (continued)
$ 249,000 AAA New Jersey State Turnpike Authority Revenue Refunding,
10.375% due 1/1/03, Sinking Fund Average Life 5/23/00 $ 288,218
610,000 A3* New York City, NY, Series D, 7.300% due 2/1/01 658,037
1,855,000 Aaa* New York State Urban Development Corp. Revenue,
7.300% due 4/1/01 2,012,675
260,000 AAA Ohio State Water Development Authority Revenue,
Armco Steel Corp., 7.875% due 11/1/00,
Sinking Fund Average Life 11/1/98 273,975
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) 1,919,000
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 2/26/00 109,369
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6,562,649
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Finance -- 0.9%
815,000 A-++ Tulsa, OK Housing Assistance Corp. Multi-Family Revenue,
7.250% due 10/1/07 837,412
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General Obligation -- 5.9%
1,000,000 AAA Chicago, IL GO, AMBAC-Insured, 6.100% due 1/1/03(b) 1,075,000
885,000 AAA District of Columbia GO Refunding, Series B,
MBIA-Insured, 6.750% due 6/1/01 907,435
Harris County, TX GO, Capital Appreciation, MBIA-Insured:
875,000 AAA Zero coupon due 8/15/12 433,125
1,250,000 AAA Zero coupon due 8/15/13 584,375
1,000,000 AA Harvey, IL GO Refunding, Asset Guaranty-Insured,
6.700% due 2/1/09 1,105,000
1,000,000 AAA New Haven, CT GO, Series 1992A, 9.250% due 3/1/02,
Sinking Fund Average Life 3/1/00 1,112,500
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5,217,435
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Government Facilities -- 1.8%
1,490,000 AAA Chicago, IL Public Buildings Committee Building Revenue,
Series A, MBIA-Insured, 5.250% due 12/1/11 1,568,225
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Hospital -- 14.4%
1,500,000 BBB Colorado Health Facilities Authority Revenue,
Rocky Mountain Adventist, 6.250% due 2/1/04 1,593,750
725,000 A Defiance, OH Hospital Revenue Refunding, Defiance Hospital,
7.625% due 11/1/03 737,760
1,250,000 Aaa* Illinois Health Facilities Authority Revenue, Memorial Health
System, MBIA-Insured, 5.200% due 10/1/12 1,282,812
1,000,000 A2* Indiana Health Facilities Authority Hospital Revenue
Refunding Bonds, St. Anthony Medical Center,
7.000% due 10/1/06 1,080,000
1,000,000 AAA Maryland Health & Higher Education Facility Authority Revenue,
(Mercy Medical Center Project), FSA-Insured,
6.500% due 7/1/13 1,185,000
</TABLE>
See Notes to Financial Statements.
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6 1998 Semi-Annual Report to Shareholders
<PAGE>
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Schedule of Investments (unaudited) (continued) June 30, 1998
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<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY VALUE
===========================================================================================================
<S> <C> <C> <C>
Hospital -- 14.4% (continued)
$1,000,000 AAA New York State Dormitory Authority, New York Presbyterian
Hospital, AMBAC/FHA-Insured, 5.500% due 8/1/11 $ 1,070,000
Orange County, FL Health Facilities Authority Hospital
Revenue Bonds, Adventist Health Systems/Sunbelt:
1,180,000 AAA AMBAC-Insured, 6.875% due 11/15/04 1,244,900
500,000 AAA FSA-Insured, FLAIRS, 6.810% due 11/15/07(d) 541,250
1,000,000 AAA Southwestern Illinois Development Authority, (Wood River
Township Hospital Project), (Escrowed to maturity
with U.S. government securities) 6.875% due 8/1/03 1,092,500
295,000 AA Taos County, NM Gross Receipts Tax Revenue,
Asset Guaranty-Insured, 6.125% due 12/1/01 306,800
2,000,000 AAA Tarrant County, TX Health Facilities Development Corp.
Health System Revenue, Series A, MBIA-Insured,
5.750% due 2/15/12 2,197,500
500,000 AAA Wisconsin State Health & Educational Facilities Authority
Revenue Bonds, Children's Hospital of Wisconsin,
AMBAC-Insured, 5.625% due 2/15/16 535,625
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12,867,897
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Housing: Multi-Family -- 11.1%
920,000 AA Beaumont, TX Multi-Family Housing Finance, Regency
Place Apartments, Asset Guaranty-Insured,
7.000% mandatory tender 10/1/03(b) 941,464
610,000 AAA Charlotte, NC Mortgage Revenue Refunding, Double Oaks
Apartments, Series A, FHA-Insured, 7.300% due 11/15/07 675,575
900,000 AAA Hudson County, NJ Improvement Authority, Multi-Family
Housing Revenue Bonds, 6.600% due 6/1/04(a) 975,375
1,770,000 AAA Maricopa County, AZ Industrial Development Authority
Revenue Bonds, Multi-Family Housing, (Project A),
FSA-Insured, 5.500% due 1/1/18 1,858,500
945,000 A2* McMinnville, TN Housing Authority Revenue Refunding,
First Mortgage, Beersheba Heights, 6.000% due 10/1/09 1,007,606
470,000 AAA Missouri State Housing Development Community
Mortgage Revenue, Series C, GNMA/FNMA-Collateralized,
7.450% due 9/1/27 540,500
Mount Vernon, IL Elderly Housing Corp., First Lien
Revenue Bonds, Section 8 Assisted, Series 1979:
160,000 Ba3* 7.875% due 4/1/01 161,090
170,000 Ba3* 7.875% due 4/1/02 170,758
185,000 Ba3* 7.875% due 4/1/03 185,825
200,000 Ba3* 7.875% due 4/1/04 200,892
215,000 Ba3* 7.875% due 4/1/05 215,959
235,000 Ba3* 7.875% due 4/1/06 236,048
250,000 Ba3* 7.875% due 4/1/07 251,115
270,000 Ba3* 7.875% due 4/1/08 271,204
</TABLE>
See Notes to Financial Statements.
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Smith Barney Intermediate Municipal Fund, Inc. 7
<PAGE>
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Schedule of Investments (unaudited) (continued) June 30, 1998
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<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY VALUE
===========================================================================================================
<S> <C> <C> <C>
Housing: Multi-Family -- 11.1% (continued)
$ 480,000 AAA Nevada Housing Division, Multi-Unit Housing,
(Austin Crest Project), FNMA-Collateralized,
5.500% due 10/1/09 $ 489,000
740,000 AAA San Jose, CA Multi-Family Housing, (Country Brook Project),
FNMA-Collateralized, 6.500% mandatory tender 4/1/02 779,775
905,000 Aa* Streamwood, IL Multi-Family Housing Revenue,
(Southgate Project), FHA-Insured, 6.200% due 11/1/07 957,037
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9,917,723
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Housing: Single-Family -- 3.4%
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) 433,156
410,000 AAA St. Louis County, MO Single-Family Mortgage Revenue,
MBIA-Insured, 6.750% due 4/1/10 410,332
1,000,000 AA+ Virginia State Housing Development Authority Commonwealth
Mortgage, Series H, 6.100% due 7/1/03 1,063,750
1,060,000 AA Wisconsin Housing & Education Development Authority,
Home Ownership Revenue, 6.350% due 3/1/01 1,103,725
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3,010,963
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Industrial Development -- 4.7%
1,000,000 A2* Alaska Individual Development Export Authority, Series A,
6.200% due 4/1/07(a) 1,091,250
1,000,000 A Kanawha, WV Commercial Development Revenue,
(May Department Store Project), 6.500% due 6/1/03 1,106,250
1,000,000 NR Newbern, TN Industrial Development Ltd. Obligation,
Newburn Rubber Inc., 7.900% due 3/1/00 1,050,000
900,000 NR Sussex County, DE Economic Development Revenue Refunding
Bonds, (Rehoboth Mall Project), Series 1992,
7.250% due 10/15/12 963,000
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4,210,500
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Miscellaneous -- 12.0%
670,000 AAA Cibola County, NM Gross Receipts, Tax Revenue,
AMBAC-Insured, 5.000% due 11/1/16 674,188
1,000,000 BBB- Clarksville, TN Natural Gas Acquisition Corp. Gas Revenue,
Series A, 7.500% due 11/1/04 1,053,750
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 1,110,000
1,000,000 AAA New Jersey Economic Development Authority Revenue Bonds,
FSA-Insured, 5.250% due 6/15/10 1,055,000
890,000 A3* New York, NY Series D, 7.300% due 2/1/01 956,750
100,000 VMIG 1* New York, NY Transitional Finance Authority Revenue Bonds,
Series C, 3.950% due 5/1/28(d) 100,000
1,075,000 AAA Oneida County, NY, FGIC-Insured, 5.250% due 3/15/10 1,140,844
1,000,000 A Puerto Rico Commonwealth Capital Appreciation,
Public Improvement, zero coupon due 7/1/14 452,500
</TABLE>
See Notes to Financial Statements.
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8 1998 Semi-Annual Report to Shareholders
<PAGE>
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Schedule of Investments (unaudited) (continued) June 30, 1998
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<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY VALUE
===========================================================================================================
<S> <C> <C> <C>
Miscellaneous -- 12.0% (continued)
$ 800,000 A South Dakota Economic Development Finance Authority,
APA Optics, Series A, 6.750% due 4/1/16(a) $ 892,000
2,000,000 AAA Southern Illinois University Revenue Capital Appreciation,
Housing & Auxiliary Facilities, MBIA-Insured,
zero coupon due 4/1/12 1,012,500
1,000,000 AAA Texas State Department, Housing & Community Affairs
Home Mortgage Revenue, GNMA/FNMA/FHLMC-
Collateralized, 9.663% due 7/2/24(e) 1,250,000
1,000,000 AAA Turtle Run, FL Community Development, District Revenue,
MBIA-Insured, 5.000% due 5/1/11 1,031,250
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10,728,782
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Pollution Control -- 5.1%
1,000,000 Aa3* Brazos River, TX Navigation District Brazoria County PCR,
6.750% due 2/1/10 1,198,750
1,200,000 A- Erie County, PA Pollution Control (International Paper Company
Project), Series A, 5.300% due 4/1/12 1,246,500
1,000,000 AAA Monroe County, MI PCR, (Detroit Edison Co. Project),
AMBAC-Insured, 6.350% due 12/1/04(a) 1,106,250
1,000,000 A- Port Umpqua, OR Pollution Control (International Paper Company
Project), 5.200% due 6/1/11 1,017,500
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4,569,000
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Pre-Refunded (f) -- 0.2%
90,000 AAA Indiana University Revenue, Series 1983N, (Call 7/1/01 @ 100),
10.000% due 7/1/03, Sinking Fund Average Life 12/22/99 101,813
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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172,419
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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 1,471,500
1,000,000 AA- La Crosse, WI Resource Recovery Revenue, (Northern States
Power Co. Project), 6.000% due 11/1/21(a) 1,120,000
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2,591,500
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Solid Waste -- 4.1%
1,655,000 B1* Atlantic City, NJ Utility Authority Solid Waste Revenue,
7.000% due 3/1/02, Sinking Fund Average Life 4/20/00(b) 1,692,237
2,000,000 BB++ Union County, NJ Utility Authority Solid Waste Revenue,
6.850% due 6/15/02(a) 2,007,500
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3,699,737
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</TABLE>
See Notes to Financial Statements.
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Smith Barney Intermediate Municipal Fund, Inc. 9
<PAGE>
- --------------------------------------------------------------------------------
Schedule of Investments (unaudited) (continued) June 30, 1998
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<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY VALUE
===========================================================================================================
<S> <C> <C> <C>
Transportation -- 9.0%
$2,035,000 AAA Dallas Fort Worth, TX Regional Airport Revenue Refunding,
Series 1992A, FGIC-Insured, 7.750% due 11/1/03 $ 2,370,775
1,920,000 Baa1* Denver, CO City and County Airport Revenue, Series 1990A,
8.250% due 11/15/02(a) 2,112,000
1,000,000 AAA Georgia State Tollway Authority Revenue, (Georgia 400 Project),
5.000% due 7/1/10 1,046,250
500,000 A- Pittsfield Township, MI Economic Development Corp.
Revenue Refunding, (Airport Association Project),
Unconditional Guaranty-Lincoln National,
6.400% due 12/1/02 520,625
5,890,000 BBB- Pocahontas Parkway Association, VA Toll Road,
Capital Appreciation, Series B, zero coupon due 8/15/17 1,995,238
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8,044,888
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Utilities -- 3.2%
1,735,000 AAA Palo Duro River Authority, TX Refunding, CGIC-Insured,
zero coupon due 8/1/09 1,032,325
1,000,000 AAA Philadelphia, PA Gas Works Revenue Bonds,
Series A, FSA-Insured, 5.375% due 7/1/13 1,035,000
1,500,000 AAA Port St. Lucie, FL, Utility Revenue Capital Appreciation,
Series A, MBIA-Insured, zero coupon due 9/1/12 742,500
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2,809,825
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TOTAL INVESTMENTS -- 100%
(Cost-- $84,221,224**) $89,138,674
===========================================================================================================
</TABLE>
(a) Income from this issue 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 11 and 12 for definition of ratings and certain security
descriptions.
See Notes to Financial Statements.
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10 1998 Semi-Annual Report to Shareholders
<PAGE>
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Bond Ratings (unaudited)
- --------------------------------------------------------------------------------
All ratings are by Standard & Poor's Ratings Service ("Standard &Poor's"),
except that those identified by an asterisk (*) are rated by Moody's Investors
Service, Inc. ("Moody's"), and those which are identified by a double dagger
(++) are rated by Fitch IBCA, Inc. ("Fitch"). The definitions of the applicable
rating symbols are set forth below:
Standard & Poor's -- Ratings from "AA" to "BB" may be modified by the addition
of a plus (+) or a minus (-) sign to show relative standings within the major
rating categories.
AAA -- Bonds rated "AAA" have the highest rating assigned by Standard &
Poor's. Capacity to pay interest and repay principal is extremely
strong.
AA -- Bonds rated "AA" have a very strong capacity to pay interest and
repay principal and differs from the highest rated issue only in a
small degree.
A -- Bonds rated "A" have a strong capacity to pay interest and repay
principal although it is somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than debt
in higher rated categories.
BBB -- Bonds rated "BBB" are regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate
protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay
interest and repay principal for debt in this category than in higher
rated categories.
BB -- Bonds rated "BB" are regarded, on balance, as predominantly
speculative with respect to the issuer's capacity to pay interest and
repay principal in accordance with the terms of the obligation. While
such bonds will likely have some quality and protective
characteristics, these are outweighed by large uncertainties or major
risk exposures to adverse conditions.
Moody's -- Numerical modifiers 1, 2, and 3 may be applied to each generic rating
from "Aa" to "B", where 1 is the highest and 3 the lowest rating within its
generic category.
Aaa -- Bonds rated "Aaa" are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as
"gilt edge." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be
visualized are most unlikely to impair the fundamentally strong
position of such issues.
Aa -- Bonds rated "Aa" are judged to be of high quality by all standards.
Together with the Aaa group they comprise what are generally known as
high grade bonds. They are rated lower than the best bonds because
margins of protection may not be as large as in Aaa securities or
fluctuation of protective elements may be of greater amplitude or there
may be other elements present which make the long-term risks appear
somewhat larger than in Aaa securities.
A -- Bonds rated "A" possess many favorable investment attributes and are
to be considered as upper medium grade obligations. Factors giving
security to principal and interest are considered adequate but elements
may be present which suggest a susceptibility to impairment some time
in the future.
Baa -- Bonds rated "Baa" are considered as medium grade obligations, i.e.,
they are neither highly protected nor poorly secured. Interest payments
and principal security appear adequate for the present but certain
protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack outstanding
investment characteristics and in fact have speculative characteristics
as well.
Ba -- Bonds rated "Ba" are judged to have speculative elements; their
future cannot be considered as well assured. Often the protection of
interest and principal payments may be very moderate, and therefore not
well safeguarded during both good and bad times over the future.
Uncertainty of position characterizes bonds in this class.
B -- Bonds rated "B" generally lack characteristics of the desirable
investments. Assurance of interest and principal payments or
maintenance of other terms of the contract over any long period of time
may be small.
- --------------------------------------------------------------------------------
Smith Barney Intermediate Municipal Fund, Inc. 11
<PAGE>
- --------------------------------------------------------------------------------
Bond Ratings (unaudited) (continued)
- --------------------------------------------------------------------------------
Fitch -- Ratings may be modified by the addition of a plus (+) or minus (-) sign
to show relative standings within the major rating categories.
A -- Bonds rated "A" by Fitch are considered to have a low expectation of
credit risk. The capacity for timely payment of financial commitments
is considered to be strong, but may be more vulnerable to changes in
economic conditions and circumstances than bonds with higher ratings.
BB -- Bonds rated "BB" by Fitch carry the possibility of credit risk
developing, particularly as the result of adverse economic change over
time. Business or financial alternatives may, however, be available to
allow financial commitments to be met. Securities rated in this
category are not considered by Fitch to be investment grade.
NR -- Indicates that the bond is not rated by Standard & Poor's or
Moody's.
- --------------------------------------------------------------------------------
Short-Term Securities Ratings (unaudited)
- --------------------------------------------------------------------------------
VMIG 1 -- Moody's highest rating for issues having a demand feature -- VRDO.
- --------------------------------------------------------------------------------
Security Descriptions (unaudited)
- --------------------------------------------------------------------------------
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
- --------------------------------------------------------------------------------
12 1998 Semi-Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Statement of Assets and Liabilities (unaudited) June 30, 1998
- --------------------------------------------------------------------------------
ASSETS:
Investments, at value (Cost -- $84,221,224) $ 89,138,674
Cash 359,272
Receivable for securities sold 20,000
Interest receivable 1,246,606
- --------------------------------------------------------------------------------
Total Assets 90,764,552
- --------------------------------------------------------------------------------
LIABILITIES:
Payable for securities purchased 1,994,649
Dividends payable 104,311
Management fees payable 44,726
Accrued expenses 20,640
- --------------------------------------------------------------------------------
Total Liabilities 2,164,326
- --------------------------------------------------------------------------------
Total Net Assets $ 88,600,226
================================================================================
NET ASSETS:
Par value of capital shares $ 8,355
Capital paid in excess of par value 83,555,031
Overdistributed net investment income (57,813)
Accumulated net realized gains 177,203
Net unrealized appreciation of investments 4,917,450
- --------------------------------------------------------------------------------
Total Net Assets
(Equivalent to $10.60 a share on 8,355,028 shares of $0.001
par value outstanding; 100,000,000 shares authorized) $ 88,600,226
================================================================================
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Smith Barney Intermediate Municipal Fund, Inc. 13
<PAGE>
- --------------------------------------------------------------------------------
Statement of Operations (unaudited)
- --------------------------------------------------------------------------------
For the Six Months Ended June 30, 1998
INVESTMENT INCOME:
Interest $ 2,605,214
- --------------------------------------------------------------------------------
EXPENSES:
Management fees (Note 3) 263,277
Shareholder communications 24,795
Shareholder and system servicing fees 14,876
Audit and legal 7,289
Pricing service fees 6,545
Registration fees 2,976
Custody 2,728
Directors' fees 2,480
Other 6,398
- --------------------------------------------------------------------------------
Total Expenses 331,364
- --------------------------------------------------------------------------------
Net Investment Income 2,273,850
- --------------------------------------------------------------------------------
REALIZED AND UNREALIZED gain (LOSS) ON
INVESTMENTS (NOTE 4):
Realized Gain From Security Transactions
(excluding short-term securities):
Proceeds from sales 23,958,546
Cost of securities sold 23,780,007
- --------------------------------------------------------------------------------
Net Realized Gain 178,539
- --------------------------------------------------------------------------------
Change in Net Unrealized Appreciation of Investments:
Beginning of period 5,323,366
End of period 4,917,450
- --------------------------------------------------------------------------------
Decrease in Net Unrealized Appreciation (405,916)
- --------------------------------------------------------------------------------
Net Loss on Investments (227,377)
- --------------------------------------------------------------------------------
Increase in Net Assets From Operations $ 2,046,473
================================================================================
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
14 1998 Semi-Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
For the Six Months Ended June 30, 1998 (unaudited)
and the Year Ended December 31, 1997
1998 1997
================================================================================
OPERATIONS:
Net investment income $ 2,273,850 $ 4,736,796
Net realized gain 178,539 1,550,169
Increase (decrease) in net unrealized appreciation (405,916) 702,230
- --------------------------------------------------------------------------------
Increase in Net Assets From Operations 2,046,473 6,989,195
- --------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM (NOTE 2):
Net investment income (2,329,185) (4,742,383)
In excess of net investment income -- (39,390)
Net realized gains -- (842,433)
- --------------------------------------------------------------------------------
Decrease in Net Assets From
Distributions to Shareholders (2,329,185) (5,624,206)
- --------------------------------------------------------------------------------
FUND SHARE TRANSACTIONS (NOTE 7):
Net asset value of shares issued
for reinvestment of dividends 276,456 426,918
- --------------------------------------------------------------------------------
Increase in Net Assets From
Fund Share Transactions 276,456 426,918
- --------------------------------------------------------------------------------
Increase (Decrease) in Net Assets (6,256) 1,791,907
NET ASSETS:
Beginning of period 88,606,482 86,814,575
- --------------------------------------------------------------------------------
End of period* $88,600,226 $88,606,482
================================================================================
* Includes overdistributed net investment income of: $ (57,813) $ (2,478)
================================================================================
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Smith Barney Intermediate Municipal Fund, Inc. 15
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (unaudited)
- --------------------------------------------------------------------------------
1. Significant Accounting Policies
The Smith Barney Intermediate Municipal Fund, Inc. ("Fund"), a Maryland
corporation, is registered under the Investment Company Act of 1940, as amended,
as a diversified, closed-end management investment company.
The significant accounting policies consistently followed by the Fund are:(a)
security transactions are accounted for on 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.
- --------------------------------------------------------------------------------
16 1998 Semi-Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (unaudited) (continued)
- --------------------------------------------------------------------------------
2. Exempt-Interest Dividends and Other Distributions
The Fund intends to satisfy conditions that will enable interest from municipal
securities, which is exempt from Federal income tax and from designated state
income taxes, to retain such tax-exempt status when distributed to the
shareholders of the Fund.
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"), 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 six months ended June 30, 1998, the aggregate cost of purchases and
proceeds from sales of investments (including maturities, but excluding
short-term securities) were as follows:
================================================================================
Purchases $20,704,303
- --------------------------------------------------------------------------------
Sales 23,958,546
================================================================================
At June 30, 1998, aggregate gross unrealized appreciation and depreciation of
investments for Federal income tax purposes were substantially as follows:
================================================================================
Gross unrealized appreciation $4,921,206
Gross unrealized depreciation (3,756)
- --------------------------------------------------------------------------------
Net unrealized appreciation $4,917,450
================================================================================
- --------------------------------------------------------------------------------
Smith Barney Intermediate Municipal Fund, Inc. 17
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (unaudited) (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 June 30, 1998, 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 June 30, 1998, there were no open purchased call or put options contracts.
When a Fund writes a covered call or put option, an amount equal to the premium
received by the Fund is recorded as a liability, the value of which is
marked-to-market daily. When a written option expires, the Fund realizes a gain
equal to the amount of the premium received. When the Fund enters into a closing
purchase transaction, the Fund realizes a gain or loss depending upon whether
the cost of the closing transaction is greater or less than the premium
originally received without regard to any unrealized gain or loss on the
under-
- --------------------------------------------------------------------------------
18 1998 Semi-Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (unaudited) (continued)
- --------------------------------------------------------------------------------
lying 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 June 30, 1998, the Fund had no open written options contracts.
7. Capital Shares
During the six months ended June 30, 1998, capital stock transactions were as
follows:
Shares Amount
================================================================================
Shares issued on reinvestment 25,995 $276,456
================================================================================
- --------------------------------------------------------------------------------
Smith Barney Intermediate Municipal Fund, Inc. 19
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights (unaudited)
- --------------------------------------------------------------------------------
For a share of capital stock outstanding throughout each period:
<TABLE>
<CAPTION>
1998(1) 1997 1996 1995 1994(2) 1993(2)
=====================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period $ 10.64 $ 10.47 $ 10.66 $ 9.95 $ 10.81 $ 10.36
- -----------------------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment income 0.27 0.57 0.58 0.58 0.58 0.59
Net realized and unrealized
gain (loss) (0.03) 0.28 (0.17) 0.73 (0.84) 0.46
- -----------------------------------------------------------------------------------------------------
Total Income (Loss)
From Operations 0.24 0.85 0.41 1.31 (0.26) 1.05
- -----------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.28) (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 (0.28) (0.68) (0.60) (0.60) (0.60) (0.60)
- -----------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $ 10.60 $ 10.64 $ 10.47 $ 10.66 $ 9.95 $ 10.81
- -----------------------------------------------------------------------------------------------------
Total Return, Based on
Market Value* (2.70)%++ 13.42% 1.56% 15.93% (9.34)% 16.71%
- -----------------------------------------------------------------------------------------------------
Total Return, Based on
Net Asset Value* 2.37%++ 8.49% 4.13% 13.72% (2.33)% 10.30%
- -----------------------------------------------------------------------------------------------------
Net Assets,
End of Period (millions) $ 89 $ 89 $ 87 $ 88 $ 82 $ 89
- -----------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses 0.75%+ 0.74% 0.77% 0.72% 0.72% 0.73%
Net investment income 5.17+ 5.42 5.56 5.63 5.64 5.56
- -----------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 23% 58% 21% 13% 26% 10%
- -----------------------------------------------------------------------------------------------------
Market Price, End of Period $10.000 $10.563 $ 9.938 $10.375 $ 9.500 $11.125
=====================================================================================================
</TABLE>
(1) For the six months ended June 30, 1998 (unaudited).
(2) 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.
* The total return calculation assumes that dividends are reinvested in
accordance with the Fund's dividend reinvestment plan.
++ Total return is not annualized, as it may not be representative of the
total return for the year.
+ Annualized.
- --------------------------------------------------------------------------------
20 1998 Semi-Annual Report to Shareholders
<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
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
1998
January 10.94 10.69 0.048 10.64
February 10.63 10.63 0.048 10.63
March 10.06 10.58 0.048 10.21
April 10.00 10.51 0.045 10.00
May 9.81 10.61 0.045 9.93
June 10.00 10.60 0.045 10.08
================================================================================
* On the last business day of the month.
+ Capital gain distribution.
- --------------------------------------------------------------------------------
Smith Barney Intermediate Municipal Fund, Inc. 21
<PAGE>
- --------------------------------------------------------------------------------
Additional Shareholder Information (unaudited)
- --------------------------------------------------------------------------------
On April 24, 1998, the annual meeting of shareholders of the Fund was held for
the purpose of voting on the following matters:
1. To vote on the election of Paul Hardin, Roderick C. Rasmussen and John P.
Toolan 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:
Shares Percentage Shares Percentage
Voted of Shares Voted of Shares
Directors* For Voted Against Voted
================================================================================
Paul Hardin 7,730,916 92.53% 71,662 0.86%
Roderick C. Rasmussen 7,737,287 92.61 65,291 0.78
John P. Toolan 7,737,947 92.62 64,631 0.77
================================================================================
The results of the vote on Proposal 2 were as follows:
Shares Percentage Shares Percentage Percentage
Voted of Shares Voted of Shares Shares of Shares
For Voted Against Voted Abstaining Abstained
================================================================================
7,746,921 92.72% 4,600 0.06% 51,058 0.61%
================================================================================
* The following Directors, representing the balance of the Board of
Directors, continue to serve: Donald R. Foley and Heath B. McLendon.
- --------------------------------------------------------------------------------
22 1998 Semi-Annual Report to Shareholders
<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 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.
- --------------------------------------------------------------------------------
Smith Barney Intermediate Municipal Fund, Inc. 23
<PAGE>
- --------------------------------------------------------------------------------
Dividend Reinvestment Plan (unaudited) (continued)
- --------------------------------------------------------------------------------
Participants in the Plan may withdraw from the Plan upon written notice to the
Plan Agent which must be received at least ten business days prior to the
distribution record date to become effective for that distribution. Shares in
the account of each Plan participant are held by the Plan Agent in
non-certificated form in the name of the Plan Agent or participant. When a
participant withdraws from the Plan or upon termination of the Plan as provided
below, certificates for whole Fund shares credited to his or her account under
the Plan are issued and a cash payment is made for any fraction of a Fund share
credited to such account.
The automatic reinvestment of distributions does not relieve participants to any
Federal income tax that may be payable on such distributions.
The Fund does not charge participants for reinvesting distributions. Any Plan
Agent's fees for the handling of reinvestment of distributions under the Plan
are paid by the Fund. There are no brokerage charges with respect to Common
Shares issued directly by the Fund as a result of distributions payable either
in stock or in cash. However, each participant pays a pro rata share of
brokerage commissions incurred with respect to the Plan Agent's open market
purchases in connection with the reinvestment of distributions.
Experience under the Plan may indicate that changes are desirable. Accordingly,
the Fund and the Plan Agent reserve the right to amend the Plan as applied to
any distribution paid subsequent to written notice of the change sent to all
shareholders of the Fund at least 90 days before the record date for the
distribution. The Plan also may be terminated by the Fund or the Plan Agent by
at least 30 days' written notice to all shareholders of the Fund. All
correspondence concerning the Plan should be directed to the Plan Agent at First
Data Investor Services Group, Inc., P.O. Box 8030, Boston, Massachusetts
02266-8030.
- --------------------------------------------------------------------------------
24 1998 Semi-Annual Report to Shareholders
<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
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 Intermediate Municipal Fund, Inc. It is not authorized for
distribution to prospective investors unless accompanied or preceded by a
current Prospectus for the Fund, which contains information concerning the
Fund's investment policies and expenses as well as other pertinent information.
SMITH BARNEY
INTERMEDIATE
MUNICIPAL FUND, INC.
388 Greenwich Street
New York, New York 10013
FD0633 8/98
