Smith Barney
---------------
Intermediate
Municipal Fund, Inc.
[GRAPHIC OMITTED]
Annual Report
December 31, 1998
<PAGE>
Smith Barney
Intermediate
Municipal
Fund, Inc.
[PHOTO OMITTED] [PHOTO OMITTED]
HEATH B. PETER M.
MCLENDON COFFEY
Chairman Vice President
Dear Shareholder:
We are pleased to provide the annual report for the Smith Barney Intermediate
Municipal Fund, Inc. ("Fund") for the year ended December 31, 1998. During the
past twelve months, the Fund distributed income dividends totaling $0.55 per
share. The table below shows the annualized distribution rates based on the
Fund's December 31, 1998 net asset value ("NAV") per share and its American
Stock Exchange ("AMEX") closing price.
Price Annualized Twelve-Month
Per Share Distribution Rates* Total Returns
-------------- ------------------- -------------
$10.61 (NAV) 4.98% 5.50%
$10.688 (AMEX) 4.94% 7.05%
The Fund's performance was roughly in-line with average total return of 5.80%
for closed-end municipal bond funds based on NAV for the same period, according
to Lipper Analytical Services, Inc. (Lipper is a major fund tracking
organization.)
Investment Strategy
During the course of the year, we slightly lengthened the Fund's average
weighted maturity to 10.1 years. In addition, we significantly raised the credit
quality of the portfolio. As of December 31, 1998, approximately 94.4% of the
Fund's holdings were rated investment grade and roughly 57% of the Fund's
investments were rated triple-A.
As of December 31, 1998, a major portion of the Fund's assets were allocated
among the following types of municipal bonds: multi-family housing bonds
(13.7%), hospital bonds (13.3%), education bonds (11.9%), escrowed-to-maturity
(10.1%) transportation (8.9%) and general obligation bonds (8.7%).
- ----------
* The annualized distribution rate assumes a current monthly income dividend
rate of $0.044 per share for twelve months.
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Smith Barney Intermediate Municipal Fund, Inc. 1
<PAGE>
Municipal Bond Market Update
Municipal bond yields remained relatively unchanged during the reporting period
as an unusually heavy new issuance volume outpaced the demand for tax-exempt
investments. Low inflation, declining interest rates and a healthy U.S. economy
helped to fill state and local coffers and encouraged many of these issuers to
take advantage of historically low interest rates.
In contrast, U.S. Treasury bond yields fell dramatically over the course of the
Fund's fiscal year as many investors sought shelter from troubled overseas
markets. More than a year after the Asian crisis first broke, key Asian
economies, including Japan, have yet to deliver the necessary reforms to restore
investor confidence in the region. Moreover, the sudden collapse of Russia's
currency last summer cast a pall over other developing economies as fears of a
similar crisis in Brazil began to surface. As a result of this shift in investor
sentiment, the yield on long-term U.S. Treasury bonds fell roughly 1% in the
past year.
Because foreign investors, who do not benefit from tax-free bonds, were large
buyers of U.S. Treasury bonds, the sharp drop in these yields was not followed
in the municipal bond market. Under typical market conditions, municipal bonds
generally yield approximately 85% of similar-maturity U.S. Treasury securities.
However, at the close of the period, long-term municipal bonds yielded as much
as 100% of U.S. Treasury bonds. Intermediate-term municipal bonds yielded nearly
93% of similar maturity U.S. Treasury bonds, reflecting the steeper yield curve
of municipal bonds. (The yield curve shows the difference in yields between
long- and shorter-term bonds.)
In order to help keep the U.S. economy moving, the Federal Reserve Board ("Fed")
lowered short-term interest rates by 0.75% in a series of actions over the
course of several weeks. Federal Reserve Chairman Alan Greenspan cited a
potential credit crunch as major reason for monetary policy change. Growing
uncertainties in the world's financial markets caused many creditors to avoid
any perception of risk and some companies suddenly encountered difficulty in
securing financing. The latest actions taken by the Fed helped calm concerned
investors and provided more liquidity in the banking system.
Municipal Bond Market Outlook
We believe that the lack of inflationary pressures and a healthy U.S. economy
should continue to provide favorable conditions for municipal bonds. Despite
financial troubles in many parts of the world, a number of key U.S. economic
indicators continue to point to a growing U.S. economy. In our view, ongoing
global weakness and falling commodity prices should help to offset any upward
wage pressures. In addition, we believe that as financial markets began to
stabilize further, U.S. Treasury security prices should move closer to their
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2 1998 Annual Report to Shareholders
<PAGE>
historical norm relative to municipal bonds. However, we also expect that the
heavy municipal bond issuance volume will likely continue in the coming year to
meet the demand for infrastructure improvements.
We remain positive on the prospects for municipal bonds and believe the Fund is
well positioned for the coming months.
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 3, 1999
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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 24. Below is a short summary of how the Plan
works.
Plan Summary
If you are a Plan participant who has not elected to receive your dividends in
the form of a cash payment, then your dividend and capital gain distributions
will be reinvested automatically in additional shares of the Fund.
The number of common stock shares in the Fund you will receive in lieu of a cash
dividend is determined in the following manner. If the market price of the
common stock is equal to or exceeds the net asset value per share ("NAV") on the
determination date, you will be issued shares by the Fund at a price reflecting
the NAV, or 95% of the market price, whichever is greater.
If the market price is less than the NAV at the time of valuation (the close of
business on the determination date), or if the Fund declares a dividend or
capital gains distribution payable only in cash, First Data Investor Services
Group, Inc. (the "Plan Agent") will buy common stock for your account in the
open market.
If the Plan Agent begins to purchase additional shares in the open market and
the market price of the shares subsequently rises above the previously
determined NAV before the purchases are completed, the Plan Agent will attempt
to terminate purchases and have the Fund issue the remaining dividend or
distribution in shares at the greater of the previously determined NAV or 95% of
the market price. In that case, the number of Fund shares you receive will be
based on the weighted average of prices paid for shares purchased in the open
market and the price at which the Fund issues the remaining shares.
Restated Plan Adopted
The descriptions herein are based on a restated version of the Plan, which was
recently adopted to reflect current practices of the Plan agent and for the
purpose of standardizing the terms among all closed-end mutual funds managed by
Mutual Management Corp.
To find out more detailed information about the Plan and about how you can
participate, please call First Data Investors Services Group, Inc. at (800)
331-1710.
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4 1998 Annual Report to Shareholders
<PAGE>
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Schedule of Investments December 31, 1998
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<TABLE>
<CAPTION>
FACE
AMOUNT RATING(a) SECURITY VALUE
================================================================================================
<S> <C> <C> <C>
Education -- 11.9%
$1,700,000 Aa2* Arizona Education Loan Marketing Corp.,
7.000% due 3/1/02(b)(c) $ 1,823,250
1,805,000 AAA Bastrop, TX ISD, PSFG, zero coupon due 2/15/18 690,413
2,500,000 AAA Chicago, IL Board of Education, Capital Appreciation,
Chicago School Reform, Series A, AMBAC-Insured,
zero coupon due 12/1/16 1,003,125
530,000 NR Idaho Student Loan Fund Refunding Marketing Association Inc.,
Student Loan Refunding, 6.400% due 10/1/99,
Sinking Fund Average Life 8/15/99 533,339
400,000 Aaa* Joshua, TX Independent School Board, Capital Appreciation,
Series C, PSFG, zero coupon due 2/15/12 216,500
290,000 AAA Massachusetts Education Loan Authority Issue E, Series A,
AMBAC-Insured, 6.850% due 1/1/04 (b) 309,213
540,000 A* Montana Higher Education Student Assistance Corp.,
Student Loan Revenue, 7.050% due 6/1/04,
Sinking Fund Average Life 3/1/03 571,725
1,000,000 Aaa* Nebraska, Income Revenue, Junior Subordinate,
Series A-6, MBIA-Insured, 6.450% due 6/1/18,
Sinking Fund Average Life 8/8/17 1,076,250
500,000 A3* New England Education Loan Marketing Corp.,
Massachusetts Refunding Student Loan Revenue,
6.900% due 11/1/09(b) 581,875
1,000,000 Aaa* Northwest, TX ISD, Capital Appreciation, PSFG,
zero coupon due 8/15/13 463,750
1,475,000 AAA Pennsylvania State Higher Educational Facilities Authority,
Health Services Revenue, Allegheny Delaware
Valley Obligation, Series A, 5.600% due 11/15/09 1,489,750
1,000,000 AAA Redford Michigan Unified School District,
AMBAC-Insured, 5.000% due 5/1/12 1,042,500
Vermont State Colleges Revenue, Capital Appreciation:
500,000 A Zero coupon due 7/1/09 300,000
500,000 A Zero coupon due 7/1/10 282,500
500,000 A Zero coupon due 7/1/11 265,625
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10,649,815
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Electric -- 3.0%
490,000 AAA Cleveland, OH Public Power System Revenue,
MBIA-Insured, 5.250% due 11/15/15 508,988
Washington Public Power Supply System Nuclear Power:
1,000,000 Aa1* Project #1, 7.750% due 7/1/03 1,155,000
1,000,000 Aa1* Series A, Project 2, 5.000%, due 7/1/12 1,015,000
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2,678,988
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Escrowed to Maturity (d) -- 10.1%
945,000 AAA Houston, TX Airport Systems Revenue, 5.500% due 7/1/12,
Sinking Fund Average Life 12/15/06 999,338
175,000 NR Los Angeles Hollywood, CA Presbyterian Single-Family Mortgage,
9.625% due 7/1/13, Sinking Fund Average Life 2/28/08 237,563
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</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 (continued) December 31, 1998
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<TABLE>
<CAPTION>
FACE
AMOUNT RATING(a) SECURITY VALUE
================================================================================================
<S> <C> <C> <C>
Escrowed to Maturity (d) -- 10.1% (continued)
$ 875,000 AAA Metropolitan Nashville, TN Airport Authority Revenue,
7.500% due 7/1/05, Sinking Fund Average Life 10/14/02 $ 973,437
199,000 AAA New Jersey State Turnpike Authority Revenue Refunding,
10.375% due 1/1/03, Sinking Fund Average Life 8/16/01 228,601
1,355,000 A- New York, NY GO, Series D, 7.300% due 2/1/01 1,453,237
1,855,000 BBB+ New York State Urban Development Corp. Revenue,
7.300% due 4/1/01 1,998,763
205,000 AAA Ohio State Water Development Authority Revenue,
Armco Steel Corp., 7.875% due 11/1/00,
Sinking Fund Average Life 5/2/00 214,738
1,430,000 AAA Ohio State Water Development Authority Safe Water, Series 2,
9.375% due 12/1/10, Sinking Fund Average Life 5/5/05 1,816,100
80,000 AAA Salt Lake City, UT Water Conservancy Distribution Revenue,
Series A, MBIA-Insured, 10.875% due 10/1/02,
Sinking Fund Average Life 5/17/01 91,300
1,000,000 NR Southwestern Illinios, Development Authority Hospital
Revenue, (Wood River Hosipital Project),
6.875% due 8/1/03, Sinking Fund Average Life 9/19/01 1,091,250
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9,104,327
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Finance -- 0.9%
790,000 A-++ Tulsa, OK Housing Assistance Corp. Multi-Family Revenue,
HUD-Insured, 7.250% due 10/1/07
Sinking Fund Average Life 7/16/04 850,238
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General Obligation -- 8.7%
1,000,000 AAA Chicago, IL GO, AMBAC-Insured, 6.100% due 1/1/03(c) 1,078,750
885,000 AAA District of Columbia GO, MBIA-Insured, 6.750% due 6/1/01 902,886
Harris County, TX GO, Capital Appreciation, MBIA-Insured:
875,000 AAA Zero coupon due 8/15/12 462,656
1,250,000 AAA Zero coupon due 8/15/13 621,875
1,000,000 AA Harvey, IL GO Refunding, Asset Guaranty-Insured,
6.700% due 2/1/09, Sinking Fund Average Life 2/26/08 1,121,250
1,000,000 AAA Kenosha, WI GO, Capital Appreciation, Series B,
FSA-Insured, zero coupon due 10/15/08 653,750
500,000 AAA Laredo, TX GO, 5.125% due 8/15/13 514,375
1,000,000 AAA New Haven, CT GO, Series 1992A, 9.250% due 3/1/02,
Sinking Fund Average Life 8/30/00 1,103,750
145,000 A- New York, NY GO, Series D, 7.300% due 2/1/01 154,969
1,075,000 AAA Oneida County, NY GO, FGIC-Insured,
5.250% due 3/15/10 1,165,031
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7,779,292
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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,
Sinking Fund Average Life 6/6/11 1,598,025
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</TABLE>
See Notes to Financial Statements.
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6 1998 Annual Report to Shareholders
<PAGE>
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Schedule of Investments (continued) December 31, 1998
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<TABLE>
<CAPTION>
FACE
AMOUNT RATING(a) SECURITY VALUE
================================================================================================
<S> <C> <C> <C>
Hospital -- 13.3%
$1,500,000 BBB Colorado Health Facilities Authority Revenue,
Rocky Mountain Adventist, 6.250% due 2/1/04,
Sinking Fund Average Life 10/13/01 $ 1,586,250
620,000 A Defiance, OH Hospital Revenue Refunding, Defiance Hospital,
7.625% due 11/1/03, Sinking Fund Average Life 11/16/01(c) 630,137
1,000,000 A2* Indiana Health Facilities Authority Hospital Revenue
Refunding Bonds, St. Anthony Medical Center,
7.000% due 10/1/06, Sinking Fund Average Life 10/17/05 1,080,000
1,000,000 AAA Jefferson Parish, LA Hospital Service, District No. 2,
Hospital Revenue, FSA-Insured, 5.250% due 7/1/15 1,030,000
1,000,000 AAA Maryland Health & Higher Education Facility Authority Revenue,
(Mercy Medical Center Project), FSA-Insured,
6.500% due 7/1/13, Sinking Fund Average Life 3/7/11 1,198,750
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,
Sinking Fund Average Life 12/01/03 1,235,189
500,000 AAA FSA-Insured, FLAIRS, 6.370% due 11/15/07(f) 542,500
500,000 Aa2* Peninsula Ports Authority, Virginia Health Systems Revenue,
(Riverside Health System Project), 5.000% due 7/1/10 516,250
1,045,000 BBB+ Rhode Island State Health & Educational Building,
Corporation Revenue, Roger Williams Hospital
Financing, 5.400% due 7/1/13,
Sinking Fund Average Life 1/23/12 1,043,693
255,000 AA Taos County, NM Gross Receipts Tax Revenue,
Asset Guaranty-Insured, 6.125% due 12/1/01,
Sinking Fund Average Life 12/25/00 265,200
2,000,000 AAA Tarrant County, TX Health Facilities Development Corp.,
Health System Revenue, Series A, MBIA-Insured,
5.750% due 2/15/12 2,227,500
500,000 AAA Wisconsin State Health & Educational Facilities,
Authority Revenue, Children's Hospital of Wisconsin,
AMBAC-Insured, 5.625% due 2/15/16 543,125
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11,898,594
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Housing: Multi-Family -- 13.7%
905,000 AA Beaumont, TX Multi-Family Housing Finance, Regency
Place Apartments, Asset Guaranty-Insured,
7.000% mandatory tender 10/1/03,
Sinking Fund Average Life 7/21/03 925,363
610,000 AAA Charlotte, NC Mortgage Revenue Refunding, Double Oaks
Apartment, Series A, FHA-Insured, 7.300% due 11/15/07,
Sinking Fund Average Life 2/24/04 674,050
1,230,000 NR Connecticut State Housing Finance Authority,
Housing Mortgage Finance Program, Sub-series G-2,
5.200% due 11/15/15(b) 1,243,838
</TABLE>
See Notes to Financial Statements.
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Smith Barney Intermediate Municipal Fund, Inc. 7
<PAGE>
- --------------------------------------------------------------------------------
Schedule of Investments (continued) December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT RATING(a) SECURITY VALUE
================================================================================================
<S> <C> <C> <C>
Housing: Multi-Family -- 13.7% (continued)
$ 865,000 AAA Hudson County, NJ Improvement Authority, Multi-Family
Housing Revenue Bonds, 6.600% due 6/1/04(b),
Sinking Fund Average Life 6/24/02 $ 935,281
1,770,000 AAA Maricopa County, AZ Individual Development Authority,
Multi-Family Housing Revenue, (National Health
Facilities II Project), Series A, FSA-Insured
5.500% due 1/1/18, Sinking Fund Average Life 11/10/15 1,878,413
915,000 A2* McMinnville, TN Housing Authority Revenue Refunding,
First Mortgage, Beersheba Heights, 6.000% due 10/1/09,
Sinking Fund Average Life 2/2/05 982,480
470,000 AAA Missouri State Housing Development Community
Mortgage Revenue, Series C, GNMA/FNMA-Collateralized,
7.450% due 9/1/27, Sinking Fund Average Life 12/9/22 535,213
Mount Vernon, IL Elderly Housing Corp., First Lien Revenue
Bonds, Section 8 Assisted, Series 1979:
160,000 Ba3* 7.875% due 4/1/01 160,163
170,000 Ba3* 7.875% due 4/1/02 170,173
185,000 Ba3* 7.875% due 4/1/03 185,189
200,000 Ba3* 7.875% due 4/1/04 200,204
215,000 Ba3* 7.875% due 4/1/05 215,219
235,000 Ba3* 7.875% due 4/1/06 235,240
250,000 Ba3* 7.875% due 4/1/07 250,255
270,000 Ba3* 7.875% due 4/1/08 270,275
480,000 AAA Nevada Housing Division, Multi-Unit Housing,
(Austin Crest Project), FNMA-Collateralized,
5.500% due 10/1/09, Sinking Fund Average Life 2/15/06 493,200
735,000 AAA San Jose, CA Multi-Family Housing, (Country Brook Project),
FNMA-Collateralized, 6.500% mandatory tender 4/1/02,
Sinking Fund Average Life 10/29/00 772,668
870,000 Aa* Streamwood, IL Multi-Family Housing Revenue,
(Southgate Project), FHA-Insured, 6.200% due 11/1/07 917,850
1,000,000 AAA Texas State Department Housing and Community Affairs,
Home Mortgage Revenue, Series C-2, GNMA, FNMA &
FHLMC-Insured, 5.000% due 7/2/24(f) 1,277,500
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12,322,574
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Housing: Single-Family -- 2.9%
410,000 AAA St. Louis County, MO Single-Family Mortgage Revenue,
MBIA-Insured, 6.750% due 4/1/10,
Sinking Fund average Life 5/20/07 410,430
1,000,000 AA+ Virginia State Housing Development Authority Commonwealth
Mortgage, Series H, 6.100% due 7/1/03 1,057,500
1,060,000 AA Wisconsin Housing & Education Development Authority,
Home Ownership Revenue, 6.350% due 3/1/01 1,098,425
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2,566,355
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</TABLE>
See Notes to Financial Statements.
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8 1998 Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Schedule of Investments (continued) December 31, 1998
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<TABLE>
<CAPTION>
FACE
AMOUNT RATING(a) SECURITY VALUE
================================================================================================
<S> <C> <C> <C>
Industrial Development -- 4.5%
$1,000,000 A2* Alaska Individual Development Export Authority, Series A,
6.200% due 4/1/07(b) $1,102,500
1,000,000 A Kanawha, WV Commercial Development Revenue,
(May Department Store Project), 6.500% due 6/1/03 1,098,750
1,000,000 NR Newbern, TN Industrial Development Ltd. Obligation,
Newburn Rubber Inc., 7.900% due 3/1/00 1,040,000
800,000 NR Sussex County, DE Economic Development Revenue Refunding
Bonds, (Rehoboth Mall Project), Series 1992,
7.250% due 10/15/12, Sinking Fund Average Life 5/30/07 761,000
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4,002,250
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Miscellaneous -- 8.0%
1,250,000 AA Bernalillo County, NM Gross Receipts, Tax Revenue,
5.125% due 4/1/16 1,292,187
670,000 AAA Cibola County, NM Gross Receipts, Tax Revenue,
AMBAC-Insured, 5.000%, due 11/1/16 670,837
1,000,000 BBB- Clarksville, TN Natural Gas Acquisition Corp. Gas Revenue,
Series A, 7.500% due 11/1/04, Sinking Fund Average Life 9/7/04 1,048,750
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 1,118,750
800,000 A South Dakota Economic Development Finance Authority,
APA Optics, Series A, 6.750% due 4/1/16,
Sinking Fund Average Life 7/7/13(b) 893,000
2,000,000 AAA Southern Illinois University Revenue Capital
Appreciation, Housing & Auxiliary Facilities, MBIA-Insured,
zero coupon due 4/1/12 1,060,000
1,000,000 AAA Turtle Run, FL Community Development, District Revenue,
MBIA-Insured, 5.000% due 5/1/11,
Sinking Fund Average Life 6/6/09 1,060,000
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7,143,524
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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 1,192,500
1,200,000 A3* Erie County, PA Pollution Control (International Paper Company
Project), Series A, 5.300% due 4/1/12 1,248,000
1,000,000 AAA Monroe County, MI PCR, (Detroit Edison Co. Project),
AMBAC-Insured, 6.350% due 12/1/04(b) 1,121,250
1,000,000 A3* Port Umpqua, OR Pollution Control (International Paper Company
Project), 5.200% due 6/1/11 1,023,750
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4,585,500
- -----------------------------------------------------------------------------------------------
Pre-Refunded(d) -- 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
12/22/00 100,238
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 70,469
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170,707
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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 (continued) December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT RATING(a) SECURITY VALUE
================================================================================================
<S> <C> <C> <C>
Public Facilities -- 2.9%
$1,350,000 A Dekalb County, IN Redevelopment Authority Revenue,
Mini-Mill Public Improvement, 6.250% due 1/15/09 $ 1,478,250
1,000,000 AA- La Crosse, WI Resource Recovery Revenue, (Northern States
Power Co. Project), 6.000% due 11/1/21(b) 1,125,000
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2,603,250
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Short-Term (e) -- 1.0%
900,000 NR Pinellas County, FL Industrial Council, Individual Development
Revenue, (Molex-Etc. Inc. Project), 5.000% due 3/1/11 900,000
- ------------------------------------------------------------------------------------------------
Solid Waste -- 1.9%
1,655,000 B1* Atlantic City, NJ Utility Authority Solid Waste Revenue,
7.000% due 3/1/02, Sinking Fund Average Life 10/1/00 1,688,100
- ------------------------------------------------------------------------------------------------
Transportation -- 8.9%
1,000,000 AAA Central Puget Sound, WA Regional Transportation Authority,
Sales Tax & Motor Revenue, FGIC-Insured, 5.250% due 2/1/15 1,053,750
1,800,000 AAA Chicago, IL Midway Airport Revenue, Series C,
MBIA-Insured, 5.500% due 1/1/16 1,923,750
2,035,000 AAA Dallas Fort Worth, TX Regional Airport Revenue
Refunding, Series 1992A, FGIC-Insured, 7.750% due 11/1/03 2,378,405
1,920,000 BBB+ Denver, CO City and County Airport Revenue, Series 1990A,
8.250% due 11/15/02(b) 2,088,000
500,000 A- Pittsfield Township, MI Economic Development Corp.
Revenue Refunding, (Airport Association Project),
Unconditional Guaranty-Lincoln National,
6.400% due 12/1/02 519,375
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7,963,280
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Utilities -- 1.2%
1,735,000 AAA Palo Duro River Authority, TX Refunding, CGIC-Insured,
zero coupon due 8/1/09 1,088,713
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TOTAL INVESTMENTS -- 100%
(Cost - $84,551,404**) $89,593,532
================================================================================================
</TABLE>
(a) All ratings are by Standard & Poor's Ratings Service, except those which
are identified by an asterisk (*) are rated by Moody's Investors Service,
Inc. and those identified by a double dagger (++) are rated by Fitch
Investor Services, Inc.
(b) Income from these issues is considered a preference item for purposes of
calculating the alternative minimum tax.
(c) Security segregated by custodian for open purchase commitments.
(d) Bonds are escrowed to maturity by with U.S. Government Securities and are
considered by the Manager to be triple-A rated even if issuer has not
applied for new ratings.
(e) Variable rate obligation payable at par on demand at any time on no more
than seven day notice.
(f) Inverse floating rate security - coupon varies inversely with level of
short-term tax-exempt interest rates.
** 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 Annual Report to Shareholders
<PAGE>
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Bond Ratings (unaudited)
- --------------------------------------------------------------------------------
The definitions of the applicable rating symbols are set forth below:
Standard & Poor's Rating Services ("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 Investors Service Inc. ("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 Investor Services, Inc. ("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 Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Statement of Assets and Liabilities December 31, 1998
- --------------------------------------------------------------------------------
ASSETS:
Investments, at value (Cost-- $84,551,404) $ 89,593,532
Cash 77,588
Receivable for securities sold 1,318,920
Interest receivable 1,280,947
- -------------------------------------------------------------------------------
Total Assets 92,270,987
- -------------------------------------------------------------------------------
LIABILITIES:
Payable for securities purchased 3,132,344
Dividends payable 309,533
Management fees payable 43,443
Accrued expenses 39,560
- -------------------------------------------------------------------------------
Total Liabilities 3,524,880
- -------------------------------------------------------------------------------
Total Net Assets $ 88,746,107
===============================================================================
NET ASSETS:
Par value of capital shares 8,364
Capital paid in excess of par value 83,651,965
Overdistributed net investment income (2,902)
Accumulated net realized gain on security transactions 46,552
Net unrealized appreciation of investments 5,042,128
- -------------------------------------------------------------------------------
Total Net Assets
(Equivalent to $10.61 a share on 8,364,165 shares of $0.001
par value outstanding; 100,000,000 shares authorized) $ 88,746,107
===============================================================================
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Smith Barney Intermediate Municipal Fund, Inc. 13
<PAGE>
- --------------------------------------------------------------------------------
Statement of Operations For the Year Ended December 31, 1998
- --------------------------------------------------------------------------------
INVESTMENT INCOME:
Interest $ 5,208,002
- -------------------------------------------------------------------------------
EXPENSES:
Management fees (Note 3) 532,649
Shareholder communications 44,184
Shareholder and system servicing fees 36,553
Audit and legal 19,677
Pricing service fees 14,354
Registration fees 8,297
Custody 4,640
Directors' fees 2,293
Other 10,651
- -------------------------------------------------------------------------------
Total Expenses 673,298
- -------------------------------------------------------------------------------
Net Investment Income 4,534,704
- -------------------------------------------------------------------------------
REALIZED AND UNREALIZED gain (loss) ON INVESTMENTS
AND FUTURES CONTRACTS (NOTES 4 and 5):
Realized Gain (Loss) From:
Security transactions (excluding short-term securities) 428,415
Futures contracts (29,831)
- -------------------------------------------------------------------------------
Net Realized Gain 398,584
- -------------------------------------------------------------------------------
Change in Net Unrealized Appreciation of Investments:
Beginning of year 5,323,366
End of year 5,042,128
- -------------------------------------------------------------------------------
Decrease in Net Unrealized Appreciation (281,238)
- -------------------------------------------------------------------------------
Net Gain on Investments 117,346
- -------------------------------------------------------------------------------
Increase in Net Assets From Operations $ 4,652,050
================================================================================
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
14 1998 Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets For the Years Ended December 31,
- --------------------------------------------------------------------------------
1998 1997
===============================================================================
OPERATIONS:
Net investment income $ 4,534,704 $ 4,736,796
Net realized gain 398,584 1,550,169
Increase (decrease) in net unrealized appreciation (281,238) 702,230
- -------------------------------------------------------------------------------
Increase in Net Assets From Operations 4,652,050 6,989,195
- -------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM (NOTE 2):
Net investment income (4,535,128) (4,742,383)
In excess of net investment income -- (39,390)
Net realized gains (350,696) (842,433)
- -------------------------------------------------------------------------------
Decrease in Net Assets From
Distributions to Shareholders (4,885,824) (5,624,206)
- -------------------------------------------------------------------------------
FUND SHARE TRANSACTIONS (NOTE 7):
Net asset value of shares issued
for reinvestment of dividends 373,399 426,918
- -------------------------------------------------------------------------------
Increase in Net Assets From
Fund Share Transactions 373,399 426,918
- -------------------------------------------------------------------------------
Increase in Net Assets 139,625 1,791,907
NET ASSETS:
Beginning of year 88,606,482 86,814,575
- -------------------------------------------------------------------------------
End of year* $88,746,107 $88,606,482
===============================================================================
* Includes overdistributed net investment income of: $(2,902) $(2,478)
===============================================================================
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Smith Barney Intermediate Municipal Fund, Inc. 15
<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 for which market quotations are
not available will be valued in good faith at fair market value by or under the
direction of the Board of Directors; (d) securities maturing within 60 days are
valued at cost plus accreted discount, or minus amortized premium, which
approximates value; (e) gains or losses on the sale of securities are calculated
by using the specific identification method; (f) interest income, adjusted for
amortization of premium and accretion of original issue discount, is recorded on
the accrual basis; market discount is recognized upon the disposition of the
security; (g) the Fund intends to comply with the applicable provisions of the
Internal Revenue Code of 1986, as amended, pertaining to regulated investment
companies and to make distributions of taxable income sufficient to relieve it
from substantially all Federal income and excise taxes; (h) dividends and
distributions to shareholders are recorded on the ex-dividend date; (i) 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, 1998, 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. Net investment income,
net realized gains and net assets were not affected by this change; and (j)
estimates and assumptions are required to be made regarding assets, liabilities
and changes in net assets resulting from operations when financial statements
are prepared. Changes in the economic environment, financial markets and any
other parameters used in determining these estimates could cause actual results
to differ.
2. Exempt-Interest Dividends and Other Distributions
The Fund intends to satisfy conditions that will enable interest from municipal
securities, which is exempt from Federal income tax and from designated state
- --------------------------------------------------------------------------------
16 1998 Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
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. ("SSBH"), 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 Salomon Smith Barney
Inc., another subsidiary of SSBH.
4. Investments
During the year ended December 31, 1998, the aggregate cost of purchases and
proceeds from sales of investments (including maturities, but excluding
short-term securities) were as follows:
================================================================================
Purchases $36,668,874
- --------------------------------------------------------------------------------
Sales 40,779,919
================================================================================
At December 31, 1998, aggregate gross unrealized appreciation and depreciation
of investments for Federal income tax purposes were substantially as follows:
================================================================================
Gross unrealized appreciation $5,109,936
Gross unrealized depreciation (67,808)
- --------------------------------------------------------------------------------
Net unrealized appreciation $5,042,128
================================================================================
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
- --------------------------------------------------------------------------------
Smith Barney Intermediate Municipal Fund, Inc. 17
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
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, 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 December 31, 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
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.
- --------------------------------------------------------------------------------
18 1998 Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
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, 1998, the Fund had no open written options contracts.
7. Capital Shares
During the years ended December 31, capital stock transactions were as follows:
1998 1997
------------------ ------------------
Shares Amount Shares Amount
================================================================================
Shares issued on reinvestment 35,132 $373,399 40,148 $426,918
================================================================================
- --------------------------------------------------------------------------------
Smith Barney Intermediate Municipal Fund, Inc. 19
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
For a share of capital stock outstanding throughout each year ended December 31:
<TABLE>
<CAPTION>
1998 1997 1996 1995 1994(1)
==============================================================================================
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $10.64 $10.47 $10.66 $ 9.95 $10.81
- ----------------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment income 0.55 0.57 0.58 0.58 0.58
Net realized and unrealized
gain (loss) 0.01 0.28 (0.17) 0.73 (0.84)
- ----------------------------------------------------------------------------------------------
Total Income (Loss) From Operations 0.56 0.85 0.41 1.31 (0.26)
- ----------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.55) (0.57) (0.60) (0.60) (0.60)
In excess of net investment income -- (0.01) -- -- --
Net realized gains (0.04) (0.10) -- -- --
- ----------------------------------------------------------------------------------------------
Total Distributions (0.59) (0.68) (0.60) (0.60) (0.60)
- ----------------------------------------------------------------------------------------------
Net Asset Value, End of Year $10.61 $10.64 $10.47 $10.66 $ 9.95
- ----------------------------------------------------------------------------------------------
Total Return, Based on Market Value* 7.05% 13.42% 1.56% 15.93% (9.34)%
- ----------------------------------------------------------------------------------------------
Total Return, Based on Net Asset Value* 5.50% 8.49% 4.13% 13.72% (2.33)%
- ----------------------------------------------------------------------------------------------
Net Assets, End of Year (millions) $89 $89 $87 $88 $82
- ----------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses 0.76% 0.74% 0.77% 0.72% 0.72%
Net investment income 5.10 5.42 5.56 5.63 5.64
- ----------------------------------------------------------------------------------------------
Portfolio Turnover Rate 42% 58% 21% 13% 26%
- ----------------------------------------------------------------------------------------------
Market Price, End of Year $10.688 $10.563 $9.938 $10.375 $9.500
==============================================================================================
</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.
* The total return calculation assumes that dividends are reinvested in
accordance with the Fund's dividend reinvestment plan.
- --------------------------------------------------------------------------------
20 1998 Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Independent Auditors' Report
- --------------------------------------------------------------------------------
To the Shareholders and Board of Directors
of the Smith Barney Intermediate Municipal Fund, Inc.:
We have audited the accompanying statement of assets and liabilities,
including the schedule of investments, of the Smith Barney Intermediate
Municipal Fund, Inc. as of December 31, 1998, 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, 1998 by correspondence with the custodian. As to securities
purchased or sold but not received or delivered, we performed other appropriate
auditing procedures. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of the
Smith Barney Intermediate Municipal Fund, Inc. as of December 31, 1998, the
results of its operations for the year then ended, the changes in its net assets
for each of the years in the two-year period then ended and the financial
highlights for each of the years in the five-year period then ended, in
conformity with generally accepted accounting principles.
/s/ KPMG LLP
New York, New York
February 8, 1999
- --------------------------------------------------------------------------------
Smith Barney Intermediate Municipal Fund, Inc. 21
<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
================================================================================
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
July 10.19 10.58 0.045 10.13
August 10.06 10.68 0.045 10.12
September 10.38 10.75 0.045 10.40
October 10.63 10.68 0.045 10.58
November 10.50 10.66 0.045 10.65
December 10.69 10.61 0.045 10.74
December+ 10.69 10.61 0.036 10.61
================================================================================
* On the last business day of the month.
+ Capital gain distribution.
- --------------------------------------------------------------------------------
22 1998 Annual Report to Shareholders
<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 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.
- --------------------------------------------------------------------------------
Tax Information (unaudited)
- --------------------------------------------------------------------------------
For Federal tax purposes, the Fund hereby designates for the fiscal year ended
December 31, 1998:
o 99.70% of the dividends paid by the Fund from net investment income
as tax-exempt for regular Federal income tax purposes.
o Total long-term capital gain distributions paid of $110,286.
- --------------------------------------------------------------------------------
Smith Barney Intermediate Municipal Fund, Inc. 23
<PAGE>
- --------------------------------------------------------------------------------
Dividend Reinvestment Plan (unaudited)
- --------------------------------------------------------------------------------
Under the Fund's Dividend Reinvestment Plan ("Plan"), a shareholder whose shares
of common stock are registered in his own name will have all distributions from
the fund reinvested automatically by "First Data" Investor Services Inc. as
purchasing agent under the plan, unless the shareholder elects to receive cash.
Distributions with respect to shares registered in the name of a broker-dealer
or other nominee (that is, in street name) will be reinvested by the broker or
nominee in additional shares under the Plan, unless the service is not provided
by the broker or nominee or the shareholder elects to receive distributions in
cash. Investors who own common stock registered in street name should consult
their broker-dealers for details regarding reinvestment. All distributions to
shareholders who do not participate in the plan will be paid by check mailed
directly to the record holder by or under the direction of First Data as
dividend paying agent.
The number of shares of common stock distributed to participants in the plan in
lieu of a cash dividend is determined in the following manner. When the market
price of the common stock is equal to or exceeds the net asset value per share
of the common stock on the determination date (generally, the record date for
the distribution), Plan participants will be issued shares of common stock by
the fund at a price equal to the greater of net asset value determined as
described below under "Net Asset Value" or 95% of the market price of the common
stock.
If the market price of the common stock is less than the net asset value of the
common stock at the time of valuation (which is the close of business on the
determination date), or if the Fund declares a dividend or capital gains
distribution payable only in cash, First Data will buy common stock in the open
market, on the AMEX or elsewhere, for the participants' accounts. If following
the commencement of the purchases and before First Data has completed its
purchases, the market price exceeds the net asset value of the common stock as
of the valuation time, First Data will attempt to terminate purchases in the
open market and cause the fund to issue the remaining portion of the dividend or
distribution in shares at a price equal to the greater of (a) net asset value as
of the valuation time or (b) 95% of the then current market price. In this case,
the number of shares received by a Plan participant will be based on the
weighted average of prices paid for shares purchased in the open market and the
price at which the fund issues the remaining shares. To the extent First Data is
unable to stop open market purchases and cause the Fund to issue the remaining
shares, the average per share purchase price paid by First Data may exceed the
net asset value of the common stock as of the valuation time, resulting in the
acquisition of fewer shares than if the dividend or capital gains distribution
had been paid
- --------------------------------------------------------------------------------
24 1998 Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Dividend Reinvestment Plan (unaudited) (continued)
- --------------------------------------------------------------------------------
in common stock issued by the Fund at such net asset value. First Data will
begin to purchase common stock on the open market as soon as practicable after
the determination date for the dividend or capital gains distribution, but in no
event shall such purchases continue later than 30 days after the payment date
for such dividend or distribution, or the record date for a succeeding dividend
or distribution, except when necessary to comply with applicable provisions of
the federal securities laws.
First Data maintains all shareholder accounts in the Plan and furnishes written
confirmations of all transactions in each account, including information needed
by a shareholder for personal and tax records. The automatic reinvestment of
dividends and capital gains distributions will not relieve plan participants of
any income tax that may be payable on the dividends or capital gains
distributions. Common stock in the account of each plan participant will be held
by First Data in uncertificated form in the name of the plan participant.
Plan participants are subject to no charge for reinvesting dividends and capital
gains distributions under the Plan. First Data's fees for handling the
reinvestment of dividends and capital gains distributions will be paid by the
fund. No brokerage charges apply with respect to shares of common stock issued
directly by the fund under the Plan. Each plan participant will, however, bear a
proportionate share of any brokerage commissions actually incurred with respect
to any open market purchases made under the plan.
Experience under the Plan may indicate that changes to it are desirable. The
Fund reserves the right to amend or terminate the plan as applied to any
dividend or capital gains distribution paid subsequent to written notice of the
change sent to participants at least 30 days before the record date for the
dividend or capital gains distribution. The plan also may be amended or
terminated by First Data, with the fund's prior written consent, on at least 30
days' written notice to plan participants. All correspondence concerning the
plan should be directed by mail to First Data Investor Services Group Inc., P.O.
Box 8030, Boston, Massachusetts 02266-8030 or by telephone at 1-800-451-2010.
- --------------------------------------------------------------------------------
Smith Barney Intermediate Municipal Fund, Inc. 25
<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
Paul A. Brook
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
FD1067 2/99
