After an extended period of monetary easing, the Federal Reserve’s monetary policymaking committee raised its federal funds rate target from a four-decade low of 1.00% to 1.25% at the end of June — the Fed’ s first hike in four years. The increase marked a significant reversal from the Fed’s monetary policy position from June 2003, when it last slashed its rate target following a long series of accommodative rate cuts. The rate hike was widely anticipated due to comments from the Fed regarding the momentum behind the economy and signals that it was prepared to push rates higher from their near-historic lows. As a result, bond prices declined and yields rose sharply in April before prices stabilized somewhat in the early summer.

The Fed again raised its fed funds target by 0.25% in August and to 1.75% in September. Given that bond prices had already factored in rate hikes to a significant extent, and coupling this with a lack of inflationary pressures, bond prices held up and actually rose over the third quarter. In September and October, the bond market benefited from falling stock and rising oil prices, which encouraged investors to reallocate capital into fixed-income securities.

Yields on bonds rose as their prices dropped in reaction to an employment report issued in November that yielded surprisingly robust labor market results.^vii The Fed subsequently raised its fed funds rate target to 2.00% on November 10th and then again to 2.25% on December 14th. After the end of the fund’s reporting period, at their February meeting, the Fed once again raised the target rate by 0.25% to 2.50%.

Factors that Influenced Fund Performance

During the reporting period, yields on shorter-term municipal securities with maturities from one to seven years rose substantially, with the largest increase in issues with one to three year maturities. At the same time, yields on municipal securities in the 10-year area and those with maturities of 25 to 30 years were up only slightly. Surprisingly, yields on municipals with 15-20 year maturities declined slightly during the year.

Looking at the fiscal year as a whole, the fund’s results were enhanced by the strong performance of its exposure to the hospital sector. In this area, certain securities appreciated after their advance refunding. Generally speaking, an existing bond cannot be prematurely retired, or called, except on specific dates. However, through advance refunding, a security can be refinanced as long as the proceeds of the new bonds are held in reserve to pay the interest and principal on the old bonds until they become callable. In the case of the fund’s holdings in this area, the proceeds of the advance refunding are being held in escrow in high quality U.S. government securities. Another of the fund’s hospital securities also aided returns, as market perceptions of its underlying balance sheet improved.

 

Other areas contributing to performance were select fund holdings in the transportation sector and its toll road zero coupon bonds.

 

Conversely, several of the fund’s holdings in lifecare and multi-family housing (low income) sectors detracted from results. Our escrow-to-maturity bonds with very short average lives due to operating sinking funds, were a drag on performance as short-term interest rates rose, even as longer-term rates declined. Finally a short-position in U.S.Treasury futures, designed to hedge against a possible rise in rates, hurt results as yields on intermediate- and long-term bonds declined.

 

Looking for Additional Information?

 

The fund is traded under the symbol “SBI” and its closing market price is available in most newspapers under the AMEX listings. The daily NAV is available on-line under symbol XSBIX. Barron’s and The Wall Street Journal’s Monday editions carry closed-end fund tables that will provide additional information. In addition, the fund issues a quarterly press release that can be found on most major financial websites as well as www.citigroupassetmanagement.com.

 

In a continuing effort to provide information concerning the fund, shareholders may call 1-888-735-6507, Monday through Friday from 8:00 a.m. to 6:00 p.m. Eastern Time, for the fund’s current net asset value, market price, and other information.

 

Thank you for your investment in the Intermediate Muni Fund, Inc. As ever, we appreciate that you have chosen us to manage your assets and we remain focused on achieving the fund’s investment goals.

 

Sincerely.

Peter M. Coffey
Vice President
and Investment Officer

 

February 3, 2005

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Intermediate Muni Fund, Inc.

5

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The information provided is not intended to be a forecast of future events, a guarantee of future results or investment advice. Views expressed may differ from those of the firm as a whole.

 

RISKS: Keep in mind the fund’s investments are subject to interest rate and credit risks. As interest rates rise, bond prices fall, reducing the value of the Fund’s share price. Lower-rated, higher yielding bonds, known as “junk bonds”, are subject to greater credit risk, including the risk of default, than higher-rated obligations. The fund may use derivatives, such as options and futures, which can be illiquid, may disproportionately increase losses, and have a potentially large impact on fund performance.

 

All index performance reflects no deduction for fees, expenses or taxes. Please note that an investor cannot invest directly in an index.

 

i	Gross domestic product is the market value of goods and services produced by labor and property in a given country.
ii	The Fed is responsible for the formulation of a policy designed to promote economic growth, full employment, stable prices, and a sustainable pattern of international trade and payments.
iii	The federal funds rate is the interest rate that banks with excess reserves at a Federal Reserve district bank charge other banks that need overnight loans.
iv	NAV is calculated by subtracting total liabilities and outstanding preferred stock from the closing value of all securities held by the fund (plus all other assets) and dividing the result (total net assets) by the total number of the common shares outstanding. The NAV fluctuates with changes in the market prices of securities in which the fund has invested. However, the price at which an investor may buy or sell shares of the fund is at the fund’s market price as determined by supply of and demand for the fund’s shares.
v	Lipper, Inc. is a major independent mutual-fund tracking organization. Returns are based on the 12-month period ended December 31, 2004, including the reinvestment of dividends and capital gains, if any, calculated among the 65 funds in the fund’s Lipper category, and excluding sales charges.
vi	Source: Commerce Department (Bureau of Economic Analysis). Refers to quarterly growth of GDP.
vii	Source: Bureau of Labor Statistics based upon the growth of non-farm payroll jobs.
viii	Sources: Lehman Brothers. Inflation data based upon Consumer Price Index/deflation data.

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6	2004 Annual Report

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Take Advantage of the Fund’s Dividend Reinvestment Plan!

 

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. 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), PFPC Inc. (“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.

 

A more complete description of the current Plan appears in the section of this report beginning on page 39. To find out more detailed information about the Plan and about how you can participate, please call PFPC Inc. at (800) 331-1710.

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Intermediate Muni Fund, Inc.

7

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8	2004 Annual Report

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Schedule of Investments						December 31, 2004
	FACE
	AMOUNT     RATING(a)					SECURITY		VALUE
Alabama — 2.8%
$	3,000,000	AAA			Alabama State Public School & College Authority Revenue,
					5.125% due 11/1/15 (c)		$	3,216,720
	334,127	AAA			Birmingham, AL Medical Clinic Board Revenue, Baptist
					Medical Centers, 8.300% due 7/1/08 (d)			371,315
	1,000,000	NR			Rainbow City, AL Special Health Care Facilities Financing
					Authority, (Regency Pointe Inc.), Series B, 7.250% due 1/1/06			628,720
	1,000,000	AAA			Saraland, AL GO, MBIA-Insured, 5.250% due 1/1/15			1,093,990
								5,310,745
Alaska — 0.9%
	1,000,000	NR			Alaska Industrial Development & Export Authority Revenue,
					Williams Lynxs Alaska Cargoport, 8.000% due 5/1/23 (b)			1,054,880
	500,000	AAA			Anchorage, AK GO, Refunding, FGIC-Insured,
					6.000% due 10/1/14			593,740
								1,648,620
Arizona — 1.2%
	1,000,000	A2*			Arizona Educational Loan Marketing Corp., Educational Loan
					Revenue, Sub-Series, 6.625% due 9/1/05 (b)			1,006,470
					Maricopa County, AZ Hospital Revenue:
	130,000	AAA			Samaritan Health Service, 7.625% due 1/1/08 (d)			137,587
	794,000	AAA			St. Lukes Hospital Medical Center Project,
					8.750% due 2/1/10 (d)			913,473
	120,000	AAA			Pima County, AZ IDA, Single-Family Mortgage Revenue,
					Series A, GNMA/FNMA/FHLMC-Collateralized,
					7.100% due 11/1/29 (b)			125,206
								2,182,736
Arkansas — 1.5%
	1,500,000	BBB-			Arkansas State Development Finance Authority, Hospital
					Revenue, Washington Regional Medical Center,
					7.000% due 2/1/15			1,661,145
	1,000,000	BB+			Warren, AR Solid Waste Disposal Revenue, (Potlatch Corp.
					Project), 7.000% due 4/1/12 (b)			1,056,100
								2,717,245
California — 5.4%
	1,500,000	NR			Barona Band of Mission Indians, CA, 8.250% due 1/1/20			1,613,610
	3,000,000	AA-			California State Economic Recovery, Series A,
					5.000% due 7/1/17 (c)			3,192,870
	795,000	NR			California Statewide COP, Community Development Authority
					Revenue Refunding, Hospital Triad Healthcare,
					6.250% due 8/1/06 (d)			826,736
	15,000	NR			Loma Linda, CA Community Hospital Corporation Revenue,
					8.000% due 12/1/08 (d)			17,928
	1,200,000	NR			Los Angeles, CA COP, Hollywood Presbyterian Medical Center,
					9.625% due 7/1/13 (d)			1,545,360
	500,000	NR			Los Angeles, CA School District, MBIA-Insured,
					8.184% due 1/1/11 (e)			622,620
	1,450,000	AAA			Morgan Hill, CA School District, FGIC-Insured,
					5.750% due 8/1/17			1,667,877

See Notes to Financial Statements.

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Intermediate Muni Fund, Inc.

9

---

 

Schedule of Investments (continued)

December 31, 2004

FACE

AMOUNT     RATING(a)

SECURITY

VALUE

California — 5.4% (continued)

$

395,000

AAA

San Francisco, CA Airport Improvement Corp. Lease Revenue,

United Airlines Inc., 8.000% due 7/1/13 (d)

$

483,279

130,000

AAA

San Leandro, CA Hospital Revenue, Vesper Memorial Hospital,

AMBAC-Insured, 11.500% due 5/1/11 (d)

168,151

10,138,431

Colorado — 4.2%

1,860,000

Aaa*

Broomfield, CO COP, Open Space Park & Recreational

Facilities, AMBAC-Insured, 5.500% due 12/1/20 (c)

2,051,635

Colorado Educational and Cultural Facilities Authority

Revenue:

Charter School:

1,000,000

Baa3*

Community Education Center, (Bromley East Project A),

7.000% due 9/15/20

1,041,500

500,000

Baa2*

University Lab School Project, (Call 6/1/11 @ 100),

6.125% due 6/1/21 (f)

586,925

1,350,000

AAA

University Lab School Project, 5.250% due 6/1/24

1,453,720

710,000

BBB

Denver, CO Health & Hospital Authority Healthcare Revenue,

Series A, 6.250% due 12/1/16

747,282

1,765,000

AAA

Pueblo, CO Bridge Waterworks, Water Revenue Improvement,

Series A, FSA-Insured, 6.000% due 11/1/14 (c)

2,038,716

7,919,778

Connecticut — 3.3%

2,000,000

AA

Connecticut State Health & Educational Facilities Authority

Revenue, Bristol Hospital, Series B, 5.500% due 7/1/21 (c)

2,212,820

1,855,000

A

Connecticut State Special Obligation, Parking Revenue,

Bradley International Airport, Series A, ACA-Insured,

6.375% due 7/1/12 (b)(c)

2,056,101

1,500,000

AAA

Connecticut State Special Tax Obligation Revenue,

FSA-Insured, FLAIRS, 8.184% due 10/1/09 (e)

1,842,540

6,111,461

District of Columbia — 0.7%

1,260,000

BBB

District of Columbia, Tobacco Settlement Financing Corp.,

6.250% due 5/15/24

1,252,881

Florida — 5.2%

235,000

AAA

Lee County, FL Southwest Florida Regional Airport Revenue,

MBIA-Insured, 8.625% due 10/1/09 (d)

271,973

1,625,000

NR

Lee Memorial Health System Board of Directors, FL Hospital

Revenue, FSA-Insured, FLAIRS, 8.888% due 4/1/10 (c)(e)

2,082,145

2,000,000

NR

Old Palm Community Development District FL, Palm Beach

Gardens, Series B, 5.375% due 5/1/14 (c)

2,009,600

Orange County, FL Health Facilities Authority Revenue:

Adventist Health Care:

1,500,000

A

6.250% due 11/15/24

1,672,095

545,000

AAA

Southern Adventist Hospital Project,

8.750% due 10/1/09 (d)

632,707

785,000

NR

First Mortgage, Health Care Facilities, 8.750% due 7/1/11

789,592

See Notes to Financial Statements.

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10	2004 Annual Report

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Schedule of Investments (continued)										December 31, 2004
	FACE
	AMOUNT     RATING(a)									SECURITY				VALUE
Florida — 5.2% (continued)
$		595,000		NR		Sanford, FL Airport Authority IDR, (Central Florida
									Terminals Inc. Project A), 7.500% due 5/1/06 (b)			$			491,934
		1,800,000		Aaa*		Sarasota County Florida Public Hospital Board Revenue,
									Sarasota Memorial Hospital, 2.250% due 7/1/37 (e)						1,800,000
															9,750,046
Georgia — 5.5%
		1,000,000		Aaa*		Athens, GA Housing Authority, Student Housing Lease
									Revenue, (University of Georgia - East Campus Project),
									AMBAC-Insured, 5.250% due 12/1/23						1,078,340
		2,120,000		AAA		Atlanta, GA Metropolitan Rapid Transit Authority, Sales Tax
									Revenue, Series E, 7.000% due 7/1/11 (c)(d)						2,525,747
		650,000		A-		Chatham County, GA Hospital Authority Revenue, Memorial
									Health Medical Center, Series A, 6.000% due 1/1/17						710,358
		2,895,000		AAA		Fulton County, GA Development Authority Revenue, Georgia
									Tech Athletic Association, 5.500% due 10/1/17 (c)						3,250,448
		1,000,000		AAA		Gainesville, GA Water & Sewer Revenue, FSA-Insured,
									5.375% due 11/15/20						1,089,880
		500,000		A		Georgia Municipal Electric Authority, Power System Revenue,
									Series X, 6.500% due 1/1/12						575,210
		1,000,000		AAA		Griffin, GA Combined Public Utility Revenue, AMBAC-Insured,
									5.000% due 1/1/21						1,069,770
															10,299,753
Illinois — 5.5%
		535,000		C*		Bourbonnais, IL IDR Refunding, (Kmart Corp. Project),
									6.600% due 10/1/06 (g)						107,000
		1,500,000		AAA		Chicago, IL O’Hare International Airport Revenue, Lien A-2,
									5.750% due 1/1/19 (b)						1,671,390
		1,080,000		AAA		Glendale Heights Illinois Hospital Revenue, (Glendale Heights
									Project), Series B, 7.100% due 12/1/15 (d)						1,310,764
		1,000,000		AA		Harvey, IL GO, Refunding, 6.700% due 2/1/09									1,012,880
						Illinois Development Finance Authority Revenue:
		500,000		BBB					Chicago Charter School Foundation Project A,
									5.250% due 12/1/12						520,640
		380,000		A					East St. Louis, 6.875% due 11/15/05						392,396
						Illinois Health Facilities Authority Revenue:
		530,000		AAA					Methodist Medical Center Project, 9.000% due 10/1/10 (d)						628,135
		515,000		AAA					Ravenswood Hospital Medical Center Project,
									7.250% due 8/1/06 (d)						540,807
		1,300,000		BB+		Illinois Health Facilities Authority Revenue Refunding,
									Friendship Village of Schaumburg, 6.650% due 12/1/06						1,308,255
		1,310,000		AAA		Kane County, IL GO, FGIC-Insured, 5.500% due 1/1/14									1,499,269
						Mount Vernon, IL Elderly Housing Corp., First Lien Revenue:
		215,000		Ba3*					7.875% due 4/1/05						215,260
		235,000		Ba3*					7.875% due 4/1/06						235,132
		250,000		Ba3*					7.875% due 4/1/07						250,303
		270,000		Ba3*					7.875% due 4/1/08						270,300

See Notes to Financial Statements.

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Intermediate Muni Fund, Inc.

11

---

 

Schedule of Investments (continued)

December 31, 2004

FACE

AMOUNT     RATING(a)

SECURITY

VALUE

Illinois — 5.5% (continued)

$

1,000,000

Aaa*

Will County, IL School District No 122, New Lenox Series D,

zero coupon bond to yield 5.049% due 11/1/24

$

372,100

10,334,631

Indiana — 1.9%

800,000

AAA

Ball State, University of Indiana, University Revenue, Series K,

FGIC-Insured, 5.750% due 7/1/20

900,184

De Kalb County, IN Industrial Redevelopment Authority

Revenue, (Mini-Mill Local Public Improvement Project)

Series A:

1,000,000

A-

(Call 1/15/05 @ 102), 6.250% due 1/15/08 (f)

1,021,200

1,350,000

A-

(Call 1/15/05 @ 102), 6.250% due 1/15/09 (f)

1,378,620

285,000

AAA

Madison County, IN Industrial Hospital Authority Facilities

Revenue, (Community Hospital of Anderson Project),

9.250% due 1/1/10 (d)

330,135

3,630,139

Iowa — 1.2%

1,000,000

A1*

Iowa Finance Authority Health Care Facilities Revenue,

Genesis Medical Center, 6.250% due 7/1/20

1,083,770

935,000

AAA

Muscatine, IA Electric Revenue, 9.700% due 1/1/13 (d)

1,191,246

2,275,016

Kansas — 0.6%

1,000,000

BBB

Burlington, KS Environmental Improvement Revenue,

(Kansas City Power & Light Project), 4.750% due 9/1/15

1,046,450

Louisiana — 1.5%

650,000

AAA

Calcasieu Parish, LA Memorial Hospital Service District

Hospital Revenue, (Lake Charles Memorial Hospital Project),

Series A, CONNIE LEE-Insured, 7.500% due 12/1/05

678,542

150,000

AAA

Louisiana Public Facilities Authority Hospital Revenue

Refunding, (Southern Baptist Hospital Inc. Project),

8.000% due 5/15/12 (d)

177,407

1,690,000

AAA

Monroe, LA Sales & Use Tax Revenue, FGIC-Insured,

5.625% due 7/1/25

1,872,740

2,728,689

Maryland — 1.8%

1,000,000

AAA

Maryland State Health & Higher Education Facilities Authority

Revenue Refunding, (Mercy Medical Center Project),

FSA-Insured, 6.500% due 7/1/13

1,181,600

2,000,000

AAA

Montgomery County, MD GO, Refunding,

5.250% due 10/1/14 (c)

2,230,600

3,412,200

Massachusetts — 6.6%

875,000

AAA

Boston, MA Water & Sewer Community Revenue, (Escrowed

to maturity with state and local government securities),

10.875% due 1/1/09 (d)

1,021,659

1,130,000

Aaa*

Lancaster, MA GO, AMBAC-Insured, 5.375% due 4/15/17

1,252,277

See Notes to Financial Statements.

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12	2004 Annual Report

---

 

Schedule of Investments (continued)

December 31, 2004

FACE

AMOUNT     RATING(a)

SECURITY

VALUE

Massachusetts — 6.6% (continued)

Massachusetts State Development Finance Agency Revenue:

$

500,000

A

Curry College, Series A, ACA-Insured, 6.000% due 3/1/20

$

528,750

370,000

AAA

Series A, GNMA-Collateralized, 6.700% due 10/20/21

427,246

1,500,000

AAA

Massachusetts State GO, MBIA-Insured, FLAIRS,

8.411% due 5/1/09 (e)

1,937,550

Massachusetts State Health & Educational Facilities Authority

Revenue:

Caritas Christi Obligation, Series B:

2,000,000

BBB

6.500% due 7/1/12 (c)

2,237,080

835,000

BBB

6.750% due 7/1/16

944,519

1,000,000

BBB-

Milford-Whitinsville Regional Hospital, Series D,

6.500% due 7/15/23

1,071,420

1,000,000

BBB

Winchester Hospital, Series E, (Call 7/1/10 @ 101),

6.750% due 7/1/30 (f)

1,186,190

1,160,000

AAA

Massachusetts State Industrial Finance Agency, Assisted

Living Facility Revenue, (Arbors at Amherst Project),

GNMA-Collateralized, 5.750% due 6/20/17 (b)

1,270,188

500,000

A3*

New England Education Loan Marketing Corp., MA Student

Loan Revenue, Sub-Issue H, 6.900% due 11/1/09 (b)

563,215

12,440,094

Michigan — 1.7%

1,000,000

AAA

Jenison, MI Public Schools, FGIC-Insured, 5.500% due 5/1/20

1,112,440

1,000,000

Aaa*

Memphis, MI GO, FGIC-Insured, 5.150% due 5/1/19

1,051,250

1,000,000

A

Michigan State Hospital Finance Authority Revenue, Oakwood

Obligated Group, 5.500% due 11/1/18

1,073,220

3,236,910

Missouri — 0.5%

405,000

NR

Lees Summit, MO IDA, Health Facilities Revenue, (John Knox

Village Project), 5.750% due 8/15/11

443,827

65,000

AAA

Missouri State Housing Development Community Mortgage

Revenue, Series C, GNMA/FNMA-Collateralized,

7.450% due 9/1/27 (b)

66,667

395,000

AAA

Nevada, MO, Waterworks System Revenue,

10.000% due 10/1/10 (d)

489,974

25,000

AAA

St. Louis County, MO Single-Family Mortgage Revenue,

MBIA-Insured, 6.750% due 4/1/10

25,998

1,026,466

Nebraska — 1.5%

NebHELP Inc. Revenue, NE, MBIA-Insured:

1,000,000

Aaa*

Jr. Sub.-Series A-6, 6.450% due 6/1/18 (b)

1,082,280

1,700,000

Aaa*

Sr. Sub.-Series A-5A, 6.200% due 6/1/13 (b)

1,817,606

2,899,886

Nevada — 0.7%

1,220,000

BBB+

Henderson, NV Health Care Facility Revenue, Catholic

Healthcare West, Series A, 6.200% due 7/1/09

1,356,799

See Notes to Financial Statements.

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Intermediate Muni Fund, Inc.

13

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Schedule of Investments (continued)

December 31, 2004

FACE

AMOUNT     RATING(a)

SECURITY

VALUE

New Hampshire — 0.6%

$

915,000

A-

New Hampshire Health & Educational Facilities Authority

Revenue, Covenant Healthcare System, 6.500% due 7/1/17

$

1,030,400

New Jersey — 0.1%

190,000

AAA

Ringwood Borough, NJ Sewer Authority Special Obligation,

9.875% due 7/1/13 (d)

244,272

New Mexico — 0.2%

335,000

NR

New Mexico Educational Assistance Foundation, Student

Loan Revenue, First Sub-Series A-2, 5.950% due 11/1/07 (b)

346,142

New York — 2.4%

1,015,000

NR

New York City, NY IDA, Civic Facilities Revenue Refunding,

(New York Community Hospital Brooklyn),

6.875% due 11/1/10

1,043,065

1,270,000

NR

Suffolk County, NY IDA, Civic Facility Revenue, (Eastern Long

Island Hospital Association Project A), 7.750% due 1/1/22

1,315,758

2,000,000

AA-

Tobacco Settlement Financing Corp., NY, Series C-1,

5.500% due 6/1/14 (c)

2,169,580

4,528,403

North Carolina — 1.6%

245,000

AAA

Charlotte, NC Mortgage Revenue Refunding, Double Oaks

Apartments, Series A, FHA-Insured, 7.300% due 11/15/07

261,104

1,000,000

BBB

North Carolina Eastern Municipal Power Agency, Power

Systems Revenue, Series D, 6.450% due 1/1/14

1,115,130

1,350,000

AAA

North Carolina Municipal Power Agency No. 1, Catawba

Electricity Revenue, 10.500% due 1/1/10 (d)

1,626,372

3,002,606

Ohio — 7.5%

1,370,000

AAA

Cleveland, OH Waterworks Revenue, Series K, FGIC-Insured,

(Call 1/1/12 @ 100), 5.250% due 1/1/21 (f)

1,540,975

1,520,000

BBB

Cuyahoga County, OH Hospital Facility Revenue, (Canton Inc.

Project), 6.750% due 1/1/10

1,683,446

1,855,000

Aaa*

Highland OH Local School District, FSA-Insured,

5.750% due 12/1/19 (c)

2,127,370

Lake County, OH Hospital Improvement Revenue:

255,000

AAA

Lake County Memorial Hospital Project,

8.625% due 11/1/09 (d)

295,777

135,000

NR

Ridgecliff Hospital Project, 8.000% due 10/1/09 (d)

153,855

180,000

AAA

Lima, OH Hospital Revenue, St. Rita Hospital of Lima,

7.500% due 11/1/06 (d)

191,376

1,500,000

BB+

Ohio State Air Quality Development Authority Revenue,

Pollution Control, (Cleveland Electric Illuminating Co.

Project), 6.000% due 12/1/13

1,595,670

3,010,000

AA+

Ohio State GO, (Conservation Projects), Series A,

5.250% due 9/1/13 (c)

3,322,077

Ohio State Water Development Authority Revenue:

2,315,000

AAA

9.375% due 12/1/10 (d)(h)

2,725,357

290,000

AAA

Safe Water, Series III, 9.000% due 12/1/10 (d)

340,660

13,976,563

See Notes to Financial Statements.

---

14	2004 Annual Report

---

 

Schedule of Investments (continued)

December 31, 2004

FACE

AMOUNT     RATING(a)

SECURITY

VALUE

Oklahoma — 0.8%

$

55,000

AAA

Oklahoma State Industrial Authority Revenue, Oklahoma

Health Care Corp., Series A, FGIC-Insured, (Call 5/1/07 @

100), 9.125% due 11/1/08 (f)

$

61,767

390,000

BBB‡

Tulsa, OK Housing Assistance Corp., Multi-Family Revenue,

7.250% due 10/1/07 (b)

390,694

Tulsa, OK Municipal Airport Revenue Refunding, American

Airlines, Series B:

500,000

B-

6.000% due 6/1/35, mandatory tender 12/1/08 (b)

481,975

500,000

B-

5.650% due 12/1/35, mandatory tender 12/1/08 (b)

476,095

1,410,531

Oregon — 1.6%

1,200,000

BBB

Klamath Falls, OR Intercommunity Hospital Authority Revenue,

(Merle West Medical Center Project), 8.000% due 9/1/08 (d)

1,322,064

1,500,000

NR

Wasco County, OR Solid Waste Disposal Revenue, (Waste

Connections Inc. Project), 7.000% due 3/1/12 (b)

1,614,030

2,936,094

Pennsylvania — 6.9%

970,000

AAA

Conneaut, PA School District, AMBAC-Insured,

9.500% due 5/1/12 (d)

1,183,885

1,855,000

AAA

Delaware River, Port Authority of Pennsylvania & New Jersey,

FSA-Insured, FLAIRS, 8.398% due 1/1/10 (c)(e)

2,321,273

1,000,000

Aaa*

Harrisburg, PA Parking Authority, Parking Revenue,

FSA-Insured, 5.500% due 5/15/20

1,110,930

1,365,000

AA

Northampton County, PA IDA Revenue, (Moravian Hall

Square Project), 5.500% due 7/1/19

1,489,270

1,000,000

AAA

Pennsylvania State IDR, Economic Development Revenue,

AMBAC-Insured, 5.500% due 7/1/21

1,114,670

Philadelphia, PA Hospitals Authority Revenue:

125,000

AAA

Thomas Jefferson University Hospital, 7.000% due 7/1/08 (d)

135,705

535,000

Aaa*

United Hospital Inc. Project, (Call 7/1/05 @ 100),

10.875% due 7/1/08 (f)

557,903

1,000,000

AAA

Philadelphia, PA School District, Series A, FSA-Insured,

(Call 2/1/12 @ 100), 5.500% due 2/1/23 (f)

1,141,800

2,000,000

AAA

Philadelphia, PA Water & Wastewater Revenue, Series B,

FGIC-Insured, 5.250% due 11/1/14 (c)

2,236,140

1,350,000

AAA

Pittsburgh, PA School District, FSA-Insured,

5.375% due 9/1/16

1,551,407

12,842,983

Puerto Rico — 0.9%

1,500,000

BBB+

Puerto Rico Housing Bank & Finance Agency,

7.500% due 12/1/06

1,591,560

Rhode Island — 0.6%

1,000,000

AA

Central Falls, RI GO, 5.875% due 5/15/15

1,126,760

See Notes to Financial Statements.

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Intermediate Muni Fund, Inc.

15

---

 

Schedule of Investments (continued)

December 31, 2004

FACE

AMOUNT     RATING(a)

SECURITY

VALUE

South Carolina — 4.3%

$

135,000

AAA

Anderson County, SC Hospital Facilities Revenue,

7.125% due 8/1/07 (d)

$

144,472

1,445,000

AA-

Charleston, SC Waterworks & Sewer Revenue,

5.250% due 1/1/16

1,574,298

5,000,000

B-

Connector 2000 Association, SC Toll Road Revenue, Capital

Appreciation, Series B, zero coupon bond to yield 8.581%

due 1/1/15

1,824,750

Greenville County, SC School District, Installment Purchase

Revenue, (Building Equity Sooner for Tomorrow Project):

2,000,000

AA-

5.875% due 12/1/19 (c)

2,266,560

2,000,000

AA-

6.000% due 12/1/21 (c)

2,286,280

8,096,360

South Dakota — 1.9%

2,400,000

Aa2*

Minnehaha County, SD GO, Limited Tax Certificates,

5.625% due 12/1/20 (c)

2,663,136

795,000

A

South Dakota Economic Development Finance Authority,

Economic Development Revenue APA Optics, Series A,

6.750% due 4/1/16 (b)

839,830

3,502,966

Tennessee — 0.7%

600,000

AAA

Jackson, TN Water and Sewer Revenue, 7.200% due 7/1/12 (d)

694,248

490,000

A2*

McMinnville, TN Housing Authority Revenue Refunding,

First Mortgage, Beersheba Heights, 6.000% due 10/1/09

519,611

145,000

AAA

Metropolitan Nashville, TN Airport Authority Tennessee

Airport Revenue, MBIA-Insured, 7.500% due 7/1/05 (d)

148,911

1,362,770

Texas — 10.2%

1,000,000

Baa1*

Bexar County, TX Housing Finance Corp., Multi-Family

Housing Revenue Refunding, Nob Hill Apartments,

Series A, 6.000% due 6/1/21

1,005,830

2,000,000

Aa3*

Brazos River, TX Harbor Navigation District, Brazoria County,

PCR, (BASF Corp. Project), 6.750% due 2/1/10 (c)

2,335,020

2,000,000

AAA

Dallas, TX Area Rapid Transit Sales Tax Revenue, Sr. Lien,

AMBAC-Insured, 5.375% due 12/1/16 (c)

2,207,560

Dallas/Fort Worth, TX International Airport Facility,

Improvement Corp. Revenue Refunding:

1,500,000

CCC

American Airlines Inc., Series C, 6.150% due 5/1/29,

mandatory tender 11/1/07 (b)

1,414,410

1,000,000

AAA

Series B, FSA-Insured, 5.500% due 11/1/20 (b)

1,097,770

1,000,000

AAA

El Paso, TX Water and Sewer Revenue Refunding and

Improvement, Series A, FSA-Insured, 6.000% due 3/1/15

1,169,400

El Paso County, TX Housing Finance Corp., Multi-Family

Housing Revenue:

360,000

A3*

American Village Communities, Series A,

6.250% due 12/1/24

370,822

280,000

Baa3*

La Plaza Apartments, Sub-Series C, 8.000% due 7/1/30

285,743

See Notes to Financial Statements.

---

16	2004 Annual Report

---

 

Schedule of Investments (continued)

December 31, 2004

FACE

AMOUNT     RATING(a)

SECURITY

VALUE

Texas — 10.2% (continued)

$

2,000,000

AA

Fort Worth, TX Water and Sewer Revenue,

5.625% due 2/15/17 (c)

$

2,249,340

585,000

AAA

Grand Prairie, TX Housing Finance Corp., Multi-Family

Housing Revenue, (Landings of Carrier Project A),

GNMA-Collateralized, 6.650% due 9/20/22

654,147

1,000,000

AAA

Harris County, TX Hospital District Revenue Refunding,

MBIA-Insured, 6.000% due 2/15/15

1,138,880

1,900,000

NR

IAH Public Facilities Corp Project Revenue, 7.000% due 5/1/15

1,876,459

1,175,000

A3*

Lubbock, TX Housing Finance Corp., Multi-Family Housing

Revenue, (Las Colinas Quality Creek Apartments),

6.000% due 7/1/22

1,207,759

1,000,000

AAA

Southwest Higher Education Authority Inc., TX, (Southern

Methodist University Project), AMBAC-Insured,

5.500% due 10/1/19

1,122,970

315,000

Aaa*

Tarrant County, TX Hospital Authority Revenue, Adventist

Health System-Sunbelt, 10.250% due 10/1/10 (d)

390,140

470,000

C*

Tarrant County, TX Housing Finance Corp. Revenue,

Multi-Family Housing, Westridge, Sub-Series C,

8.500% due 6/1/31 (g)

23,500

325,000

AAA

Texas State Department of Housing and Community Affairs,

Home Mortgage Revenue, RIBS, Series C-2, GMNA/FNMA/

FHLMC-Collateralized, 11.691% due 7/2/24 (b)(e)

325,200

255,000

NR

Tom Green County, TX Hospital Authority,

7.875% due 2/1/06 (d)

262,960

19,137,910

Utah — 0.9%

Spanish Fork City, UT Water Revenue, FSA-Insured:

350,000

Aaa*

Call 6/1/12 @ 100, 5.500% due 6/1/16 (f)

401,450

1,135,000

Aaa*

Unrefunded, 5.500% due 6/1/16

1,269,361

1,670,811

Virginia — 1.5%

4,560,000

BB

Pocahontas Parkway Association, VA Toll Road Revenue,

Capital Appreciation, Series B, zero coupon bond to yield

6.136% due 8/15/19

1,798,510

1,000,000

B2*

Rockbridge County, VA IDA Revenue, Virginia Horse Center,

Series C, 6.850% due 7/15/21

939,060

2,737,570

Washington — 1.9%

1,250,000

Aaa*

Cowlitz County Washington School District, No. 122 Longview,

5.500% due 12/1/19

1,386,762

2,000,000

AAA

Energy Northwest Washington Electric Revenue, (Project

No. 3), Series A, FSA-Insured, 5.500% due 7/1/18 (c)

2,208,340

3,595,102

Wisconsin — 1.1%

2,000,000

BBB

LaCrosse, WI Resource Recovery Revenue Refunding,

(Northern States Power Co. Project),

6.000% due 11/1/21 (b)(c)

2,113,160

See Notes to Financial Statements.

---

Intermediate Muni Fund, Inc.

17

---

 

Schedule of Investments (continued)

December 31, 2004

FACE

AMOUNT     RATING(a)

SECURITY

VALUE

West Virginia — 0.1%

$

135,000       AAA

Cabell, Putnam & Wayne Counties, WV Single-Family

Residence Mortgage Revenue, FGIC-Insured,

7.375% due 4/1/10 (d)

$

150,679

TOTAL INVESTMENTS — 100%

(Cost — $178,591,187**)

$187,122,618

 

(a)	All ratings are by Standard & Poor’s Ratings Service, except for those identified by an asterisk (*), which are rated by Moody’s Investors Service and those which are identified by a double dagger (‡), are rated by Fitch Ratings.
(b)	Income from this issue is considered a preference item for purposes of calculating the alternative minimum tax.
(c)	All or a portion of this security is segregated for open futures contracts.
(d)	Bonds are escrowed to maturity with U.S. government securities and are considered by the Manager to be triple-A rated even if the issuer has not applied for the new ratings.
(e)	Inverse floating rate security - coupon varies inversely with level of short-term tax-exempt interest rates.
(f)	Pre-Refunded bonds are escrowed with government securities and are considered by the Manager to be triple-A rated even if the issuer has not applied for new ratings.
(g)	Security is in default.
(h)	All or a portion of this security is held as collateral for open futures contracts.

 

**	Aggregate cost for federal income tax purposes is $178,286,339.

 

See pages 19 and 20 for definitions of ratings and certain abbreviations.

 

 

Summary of Investments by Sector*
Education	16.1	%
Hospitals	14.7
Escrowed to Maturity	12.6
Transportation	10.0
General Obligation	8.7
Water & Sewer	6.2
Pre-Refunded	5.2
Pollution Control	3.8
Lifecare Systems	3.3
Utilities	3.2
Multi-Family Housing	2.7
Industrial Development	2.4
Other	11.1
	100.0	%

 

*	As a percentage of total investments. Please note that Fund holdings are as of December 31, 2004 and are subject to change.

 

See Notes to Financial Statements.

---

18	2004 Annual Report

---

 

Bond Ratings (unaudited)

The definitions of the applicable rating symbols are set forth below:

 

Standard & Poor’s Ratings Service (“Standard & Poor’s”) — Ratings from “AA” to “CCC” 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, B	—  Bonds rated “BB”, “B”, “CCC” and “CC” are regarded, on balance, as predominantly
CCC and CC	speculative and with respect to capacity to pay interest and repay principal in
	accordance with the terms of the obligation. “BB” represents a lower degree of
	speculation than “B”, and “CC” the highest degree of speculation. 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 (“Moody’s”) — Numerical modifiers 1, 2, and 3 may be applied to each generic rating from “Aa” to “Caa”, 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.
Caa	—  Bonds rated “Caa” are of poor standing. These issues may be in default, or there may
	be present elements of danger with respect to principal or interest.

 

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Intermediate Muni Fund, Inc.

19

---

 

Bond Ratings (unaudited) (continued)

 

 

Ca	— Bonds rated “Ca” represent obligations which are speculative in a high degree. Such
		issues are often in default or have other marked shortcomings.
C	—	Bonds rated “C” are the lowest rated class of bonds, and issues so rated can be regarded
		as having extremely poor prospects of ever attaining any real investment standing.

 

Fitch Ratings (“Fitch”) — Ratings from “AA” to “BBB” may be modified by the addition of a plus (+) sign or minus (–) sign to show relative standings within the major ratings categories.

 

AA	—	Bonds rated “AA” are considered to be investment-grade and of very high credit quality.
		The obligor’s ability to pay interest and/or dividends and repay principal is very strong.
A	— Bonds and preferred stock considered to be investment-grade and of high credit
		quality. The obligor’s ability to pay interest and/or dividends and repay principal is
		considered to be strong, but may be more vulnerable to adverse changes in economic
		conditions and circumstances than debt or preferred securities with higher ratings.
BBB	— Bonds rated “BBB” are considered to be investment-grade and of satisfactory credit
		quality. The obligor’s ability to pay interest or dividends and repay principal is con-
		sidered to be adequate. Adverse changes in economic conditions and circumstances,
		however, are more likely to have adverse impact on these securities and, therefore,
		impair timely payment. The likelihood that the ratings of these bonds will fall below
		investment grade is higher than for securities with higher ratings.
NR	—  Indicates that the bond is not rated by Standard & Poor’s, Moody’s or Fitch.

 

 

Short-Term Security Ratings (unaudited)

 

SP-1	—	Standard & Poor’s highest rating indicating very strong or strong capacity to pay principal
		and interest; those issues determined to possess overwhelming safety characteristics are
		denoted with a plus (+) sign.
A-1	—	Standard & Poor’s highest commercial paper and variable-rate demand obligation (“VRDO”)
		rating indicating that the degree of safety regarding timely payment is either overwhelming
		or very strong; those issues determined to possess overwhelming safety characteristics are
		denoted with a plus (+) sign.
VMIG 1	—	Moody’s highest rating for issues having a demand feature — VRDO.

 

Abbreviations* (unaudited)

ACA	— American Capital Assurance	GIC	— Guaranteed Investment Contract
AMBAC	— Ambac Assurance Corporation	GNMA	— Government National Mortgage
CGIC	— Capital Guaranty Insurance Company		Association
CONNIE	— College Construction Loan	GO	— General Obligation
LEE	Insurance Association	HFA	— Housing Finance Authority
COP	— Certificate of Participation	IDA	— Industrial Development Agency
FGIC	— Financial Guaranty Insurance	IDR	— Industrial Development Revenue
	Company	INDLC	— Industrial Indemnity Company
FHA	— Federal Housing Administration	ISD	— Independent School District
FHLB	— Federal Home Loan Bank	LOC	— Letter of Credit
FHLMC	— Federal Home Loan Mortgage	MBIA	— Municipal Bond Investors Assurance
	Corporation		Corporation
FLAIRS	— Floating Adjustable Interest Rate	PCFA	— Pollution Control Financing Authority
	Securities	PCR	— Pollution Control Revenue
FNMA	— Federal National Mortgage	PSFG	— Permanent School Fund Guaranty
	Association	RIBS	— Residual Interest Bonds
FSA	— Financial Security Assurance	VRDD	— Variable Rate Daily Demand

 

_____________

* Abbreviations may or may not appear in the Schedule of Investments.

---

20	2004 Annual Report

---

 

Statement of Assets and Liabilities

December 31, 2004

 

 

ASSETS:
Investments, at value (Cost — $178,591,187)		$	187,122,618
Cash			34,263
Interest receivable			3,270,266
Receivable for securities sold			805,124
Prepaid expenses			9,607
Total Assets			191,241,878
LIABILITIES:
Payable to broker — variation margin on open futures contracts			375,000
Dividends payable			130,308
Management fee payable			96,994
Distributions payable to Municipal Auction Rate Cumulative
Preferred Stockholders			10,490
Directors’ fees payable			8,362
Accrued expenses			77,339
Total Liabilities			698,493
Series M Municipal Auction Rate Cumulative Preferred Stock
(2,000 shares authorized and issued at $25,000 per share) (Note 4)			50,000,000
Total Net Assets		$	140,543,385
NET ASSETS:
Par value of capital shares		$	14,033
Capital paid in excess of par value			141,521,690
Undistributed net investment income			1,132,007
Accumulated net realized loss from investment transactions and
futures contracts			(9,155,776	)
Net unrealized appreciation of investments and futures contracts			7,031,431
Total Net Assets
(Equivalent to $10.02 per share on 14,032,784 capital shares of
$	0.001 par value outstanding; 100,000,000 capital shares authorized)	$	140,543,385

 

See Notes to Financial Statements.

 

---

Intermediate Muni Fund, Inc.

21

---

 

Statement of Operations     For the Year Ended December 31, 2004

 

INVESTMENT INCOME:
Interest	$	10,542,400
EXPENSES:
Management fee (Note 2)		1,153,582
Auction participation fees (Note 4)		125,000
Audit and legal		62,311
Transfer agency services		50,950
Custody		38,450
Shareholder communications		30,378
Stock exchange listing fees		21,808
Rating agency fees		16,500
Auction agency fees		6,500
Directors’ fees		5,490
Insurance fees		5,102
Other		6,000

Total Expenses		1,522,071
Net Investment Income		9,020,329
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
AND FUTURES CONTRACTS (NOTES 1 AND 3):
Realized Gain (Loss) From:
Investment transactions		419,974
Futures contracts		(3,291,918	)
Net Realized Loss		(2,871,944	)
Net Change in Unrealized Appreciation/Depreciation of
Investments and Futures Contracts		(401,750	)
Net Loss on Investments and Futures Contracts		(3,273,694	)
Dividends Paid to Municipal Auction Rate Cumulative Preferred
Stockholders From Net Investment Income		(586,119	)
Increase in Net Assets From Operations	$	5,160,516

 

See Notes to Financial Statements.

---

22	2004 Annual Report

---

 

Statements of Changes in Net Assets

 

	For the Years Ended December 31,
		2004			2003
OPERATIONS:
Net investment income	$	9,020,329		$	9,401,893
Net realized loss		(2,871,944	)		(462,620	)
Net change in unrealized appreciation/depreciation		(401,750	)		(70,343	)
Dividends paid to Municipal Auction Rate Cumulative
Preferred Stockholders from net investment income		(586,119	)		(501,981	)
Increase in Net Assets From Operations		5,160,516			8,366,949
DIVIDENDS PAID TO COMMON STOCK
SHAREHOLDERS FROM (NOTE 1):
Net investment income		(8,585,218	)		(8,570,907	)
Decrease in Net Assets From Dividends
Paid to Common Stock Shareholders		(8,585,218	)		(8,570,907	)
FUND SHARE TRANSACTIONS (NOTE 5):
Net asset value of shares issued for reinvestment of dividends		287,921			—
Increase in Net Assets From Fund Share Transactions		287,921			—
Decrease in Net Assets		(3,136,781	)		(203,958	)
NET ASSETS:
Beginning of year		143,680,166			143,884,124
End of year*	$	140,543,385		$	143,680,166
* Includes undistributed net investment income of:	$	1,132,007		$	1,284,893

 

See Notes to Financial Statements.

---

Intermediate Muni Fund, Inc.

23

---

 

Financial Highlights

 

For a share of capital stock outstanding throughout each year ended December 31:

 

		2004			2003			2002			2001			2000
Net Asset Value, Beginning of Year	$	10.26		$	10.27		$	10.21		$	10.20		$	9.89
Income (Loss) From Operations:
Net investment income		0.64			0.68			0.68			0.56	(1)		0.55
Net realized and unrealized gain (loss)		(0.23	)		(0.03	)		0.07			0.00	*(1)		0.28
Dividends paid to Municipal Auction
Rate Cumulative Preferred
Stockholders from net
investment income		(0.04	)		(0.05	)		(0.05	)		—			—
Total Income (Loss) From Operations		0.37			0.60			0.70			0.56			0.83
Gains From Repurchase of
Treasury Stock		—			—			—			0.00	*		0.02
Underwriting Commissions and
Expenses from the Issuance
of Municipal Auction Rate
Cumulative Preferred Stock		—			—			(0.06	)		—			—
Dividends Paid To Common Stock
Shareholders From:
Net investment income		(0.61	)		(0.61	)		(0.58	)		(0.55	)		(0.54	)
Net Asset Value, End of Year	$	10.02		$	10.26		$	10.27		$	10.21		$	10.20
Total Return, Based on Market Price(2)		(2.19	)%		13.33	%		4.03	%		17.17	%		11.90	%
Total Return, Based on Net Asset Value(2)		3.99	%		6.22	%		6.73	%		6.01	%		9.68	%
Net Assets, End of Year (millions)	$	141		$	144		$	144		$	143		$	143
Ratios to Average Net Assets Based on
Common Shares Outstanding(3):
Expenses		1.07	%		1.07	%		1.08	%		0.80	%		0.78	%
Net investment income		6.34			6.55			6.59			5.35	(1)		5.47
Portfolio Turnover Rate		32	%		21	%		49	%		36	%		45	%
Market Price, End of Year	$	9.36		$	10.19		$	9.56		$	9.75		$	8.81

 

See Notes to Financial Statements.

---

24	2004 Annual Report

---

 

Financial Highlights (continued)

 

		2004		2003		2002	2001	2000
Municipal Auction Rate
Cumulative Preferred Stock(4):
Total Amount Outstanding (000s)	$	50,000	$	50,000	$	50,000	—	—
Asset Coverage Per Share		95,272		96,840		96,942	—	—
Involuntary Liquidating
Preference Per Share(5)		25,000		25,000		25,000	—	—
Average Market Value Per Share(5)		25,000		25,000		25,000	—	—

 

(1)		Effective January 1, 2001, the Fund adopted a change in the accounting method that requires the Fund to amortize premiums and accrete all discounts. Without the adoption of this change, for the year ended December 31, 2001, the ratio of net investment income to average net assets would have been 5.31%. Per share information, ratios and supplemental data for the periods prior to January 1, 2001 have not been restated to reflect this change in presentation. In addition, the impact of this change to net investment income and net realized and unrealized gain was less than $0.01 per share.
(2)		The total return calculation assumes that dividends are reinvested in accordance with the Fund’s dividend reinvestment plan.
(3)		Calculated on basis of average net assets of common shareholders. Ratios do not reflect the effect of dividend payments to preferred shareholders.
(4)		On January 28, 2002, the Fund issued 2,000 shares of Series M Municipal Auction Rate Cumulative Preferred Stock at $25,000 a share.
	(5)		Excludes accumulated and unpaid dividends.
	*		Amount represents less than $0.01 per share.

See Notes to Financial Statements.

---

Intermediate Muni Fund, Inc.

25

---

 

Notes to Financial Statements

1. Organization and Significant Accounting Policies

 

The Intermediate Muni 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 following are significant accounting policies consistently followed by the Fund and are in conformity with U.S. generally accepted accounting principles (“GAAP”). 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.

 

(a) Investment Valuation. Securities are valued at the mean between the bid and asked 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. Securities for which market quotations are not readily available or where market quotations are determined not to reflect fair value, will be valued in good faith by or under the direction of the Fund’s Board of Directors. Short-term obligations with maturities of 60 days or less are valued at amortized cost, which approximates value.

 

(b) Futures Contracts. The Fund may enter into futures contracts to the extent permitted by its investment policies and objectives. Upon entering into a futures contract, the Fund is required to deposit cash or pledge securities as initial margin. Additional securities are also segregated up to the current market value of the futures contracts.Subsequent payments, which are dependent on the daily fluctuations in the value of the underlying financial instrument, are made or received by the Fund each day (daily variation margin) and are recorded as unrealized gains or losses until the contracts are closed. When the contracts are 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 contracts. The Fund enters into such contracts typically to hedge a portion of the portfolio. The risks associat ed with entering into futures contracts include the possibility that a change in the value of the contract may not correlate with the changes in the value of the underlying instruments. In addition, investing in futures contracts involves the risk that the Fund could lose more than the original margin deposit and subsequent payments required for a futures transaction.

 

(c) Security Transactions and Investment Income. Security transactions are accounted for on trade date. Interest income, adjusted for amortization of premium or accretion of discount, is recorded on the accrual basis. The cost of

---

26	2004 Annual Report

---

 

Notes to Financial Statements (continued)

investments sold is determined by use of the specific identification method for both financial reporting and income tax purposes.

 

(d) Dividends and Distributions to Shareholders. Dividends from net investment income for the Fund, if any, are declared and paid on a monthly basis. 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. Distributions of net realized gains to shareholders of the Fund, if any, are taxable and are declared at least annually. Dividends and distributions to shareholders of the Fund are recorded on the ex-dividend date for the shareholders of Common Stock and are determined in accordance with income tax regulations, which may differ from GAAP. In addition, the holders of the Municipal Auction Rate Cumulative Preferred Stock shall be entitled to receive dividends in accordance with an auction that will normally be held weekly and out of the funds legally available to shareholders.

 

(e) Net Asset Value. The net asset value of the Fund’s Common Stock is determined no less frequently than the close of business on the Fund’s last business day of each week (generally Friday) and on the last business day of the month. It is determined by dividing the value of the net assets available to Common Stock by the total number of shares of Common Stock outstanding. For the purpose of determining the net asset value per share of the Common Stock, the value of the Fund’s net assets shall be deemed to equal the value of the Fund’s assets less (1) the Fund’s liabilities, and (2) the aggregate liquidation value (i.e., $25,000 per outstanding share) of the Municipal Auction Rate Cumulative Preferred Stock.

 

(f) Federal and Other Taxes. It is the Fund’s policy to comply with the federal income and excise tax requirements of the Internal Revenue Code of 1986, as amended, applicable to regulated investment companies. Accordingly, the Fund intends to distribute substantially all of its taxable income and net realized gains on investments, if any, to shareholders each year. Therefore, no federal income tax provision is required.

 

(g) Reclassifications. GAAP requires that certain components of net assets be adjusted to reflect permanent differences between financial and tax reporting. Accordingly, during the current year, $1,878 has been reclassified between undistributed net investment income and accumulated net realized loss from investment transactions and futures contracts as a result of permanent differences attributable to differences between book and tax amortization of premium on fixed income securities. These reclassifications have no effect on net assets or net asset values per share.

---

Intermediate Muni Fund, Inc.

27

---

 

Notes to Financial Statements (continued)

 

2. Management Agreement and Other Transactions with Affiliates

 

Smith Barney Fund Management LLC (“SBFM”), an indirect wholly-owned subsidiary of Citigroup Inc. (“Citigroup”), acts as investment manager to the Fund. As compensation for its services, the Fund pays SBFM a management fee calculated at an annual rate of 0.60% of the Fund’s average daily net assets. For purposes of calculating the management fee, the liquidation value of any preferred stock of the Fund is not deducted in determining 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 Citigroup or its affiliates and do not receive compensation from the Fund.

 

3. Investments

 

During the year ended December 31, 2004, the aggregate cost of purchases and proceeds from sales of investments (but excluding short-term investments) were as follows:

 

Purchases	$	59,598,122
Sales		62,332,186

 

At December 31, 2004, the aggregate gross unrealized appreciation and depreciation of investments for federal income tax purposes were as follows:

 

Gross unrealized appreciation	$	10,777,383
Gross unrealized depreciation		(1,941,104	)
Net unrealized appreciation	$	8,836,279

 

At December 31, 2004, the Fund had the following open futures contracts:

 

	Number of	Expiration		Basis		Market		Unrealized
	Contracts	Date		Value		Value		Loss
Contracts to Sell:
U.S. 20 Year Treasury Note	500	3/05	$	54,750,000	$	56,250,000	$	(1,500,000	)

 

---

28	2004 Annual Report

---

 

Notes to Financial Statements (continued)

4. Municipal Auction Rate Cumulative Preferred Stock

 

On January 28, 2002, the Fund issued 2,000 shares of Series M Municipal Auction Rate Cumulative Preferred Stock (“ARCPS”). The underwriting discount of $500,000 and offering expenses of $278,731 associated with the ARCPS offering were recorded as a reduction of the capital paid in excess of par value of common stock for the year ended December 31, 2002. The ARCPS’ dividends are cumulative at a rate determined at an auction and the dividend period is typically 7 days. The dividend rates ranged from 0.80% to 1.90% during the year ended December 31, 2004. At December 31, 2004, the dividend rate was 1.86%.

 

The ARCPS are redeemable under certain conditions by the Fund, or subject to mandatory redemption (if the Fund is in default of certain coverage requirements) at a redemption price equal to the liquidation preference, which is the sum of $25,000 per share plus accumulated and unpaid dividends.

 

The Fund is required to maintain certain asset coverages with respect to the ARCPS. If the Fund fails to maintain these coverages and does not cure any such failure within the required time period, the Fund is required to redeem a requisite number of the ARCPS in order to meet the applicable requirement. Additionally, failure to meet the foregoing asset coverage requirements would restrict the Fund’s ability to pay dividends to common shareholders.

 

Citigroup Global Markets Inc. (“CGM”) another indirect wholly-owned subsidiary of Citigroup, also currently acts as a broker/dealer in connection with the auction of ARCPS. After each auction, the auction agent will pay to each broker/dealer, from monies the Fund provides, a participation fee at the annual rate of 0.25% of the purchase price of the ARCPS that the broker/dealer places at the auction. For the year ended December 31, 2004, CGM earned $125,000 as a participating broker/dealer.

 

5. Capital Shares

 

Capital stock transactions were as follows:

 

	Year Ended			Year Ended
	December 31, 2004			December 31, 2003
	Shares		Amount	Shares	Amount
Shares issued on reinvestment	28,034	$	287,921	—	—

 

---

Intermediate Muni Fund, Inc.

29

---

Notes to Financial Statements (continued)

 

6. Income Tax Information and Distribution to Shareholders

 

The tax character of distributions paid during the fiscal years ended December 31, was as follows:

 

		2004		2003
Distributions paid from:
Tax-exempt income	$	9,102,913	$	9,072,888
Ordinary income		68,424		—
Total distributions paid	$	9,171,337	$	9,072,888

 

As of December 31, 2004, the components of accumulated earnings/losses on a tax basis were as follows:

 

Undistributed tax exempt	$	771,683
Total undistributed earnings		771,683
Capital loss carryforward		(10,593,613	)*
Other book/tax temporary differences		1,493,313	**
Unrealized appreciation		7,336,279	***
Total Accumulated Losses	$	(992,338	)

 

*	On December 31, 2004, the Fund had a net capital loss carryforward of $10,593,613, of which $37,946 expires in 2006, $1,896,634 expires in 2007, $513,580 expires in 2008, $4,046,539 expires in 2010, $569,469 expires in 2011, and $3,529,445 expires in 2012. This amount will be available to offset any future taxable gains.
**	Other book/tax temporary differences are attributable primarily to the realization for tax purposes of unrealized losses on certain futures contracts and differences in the book/tax treatment of various items.
***	The difference between book-basis and tax-basis unrealized/depreciation is attributable primarily to the tax deferral of losses on wash sales and the difference between book and tax amortization methods for premiums and discounts on fixed income securities.

 

7. Additional Information

 

In connection with an investigation previously disclosed by Citigroup, the Staff of the Securities and Exchange Commission (“SEC”) has notified Citigroup Asset Management (“CAM”), the Citigroup business unit that includes the funds’ investment manager and other investment advisory companies; Citicorp Trust Bank (“CTB”), an affiliate of CAM; Thomas W. Jones, the former CEO of CAM; and three other individuals, one of whom is an employee and two of whom are former employees of CAM, that the SEC Staff is considering recommending a civil injunctive action and/or an administrative proceeding against each of them relating to the creation and operation of an internal transfer agent unit to serve various CAM-managed funds.

 

In 1999, CTB entered the transfer agent business. CTB hired an unaffiliated subcontractor to perform some of the transfer agent services. The subcontractor, in exchange, had signed a separate agreement with CAM in 1998 that guaranteed investment management revenue to CAM and investment banking revenue to a

---

30	2004 Annual Report

---

 

Notes to Financial Statements (continued)

 

CAM affiliate. The subcontractor’s business was later taken over by PFPC Inc., and at that time the revenue guarantee was eliminated and a one-time payment was made by the subcontractor to a CAM affiliate.

 

CAM did not disclose the revenue guarantee when the boards of various CAM-managed funds hired CTB as transfer agent. Nor did CAM disclose to the boards of the various CAM-managed funds the one-time payment received by the CAM affiliate when it was made. As previously disclosed, CAM has already paid the applicable funds, primarily through voluntary fee waivers, a total of approximately $17 million (plus interest), which is the amount of the revenue received by Citigroup relating to the revenue guarantee.

 

In addition, the SEC Staff has indicated that it is considering recommending action based on the adequacy of the disclosures made to the fund boards that approved the transfer agency arrangement, CAM’s initiation and operation of, and compensation for, the transfer agent business and CAM’s retention of, and agreements with, the subcontractor.

 

Citigroup is cooperating fully in the SEC’s investigation and is seeking to resolve the matter in discussions with the SEC Staff. On January 20, 2005, Citigroup stated that it had established an aggregate reserve of $196 million ($25 million in the third quarter of 2004 and $171 million in the fourth quarter of 2004) related to its discussions with the SEC Staff. Settlement negotiations are ongoing and any settlement of this matter with the SEC will require approval by the Citigroup Board and acceptance by the Commission.

 

Unless and until any settlement is consummated, there can be no assurance that any amount reserved by Citigroup will be distributed. Nor is there at this time any certainty as to how the proceeds of any settlement would be distributed, to whom any such distribution would be made, the methodology by which such distribution would be allocated, and when such distribution would be made.

 

Although there can be no assurance, Citigroup does not believe that this matter will have a material adverse effect on the funds. The Fund did not implement the contractual arrangement described above and therefore will not receive any portion of such payment.

 

---

Intermediate Muni Fund, Inc.

31

---

 

Report of Independent Registered Public Accounting Firm

 

The Shareholders and Board of Directors of

Intermediate Muni Fund, Inc.:

 

We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of Intermediate Muni Fund, Inc. (“Fund”) as of December 31, 2004, and 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 the standards of the Public Company Accounting Oversight Board (United States). 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, 2004, by correspondence with the custodian and brokers. 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 Intermediate Muni Fund, Inc. as of December 31, 2004, and 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 the U.S. generally accepted accounting principles.

 

                                                                           

 

New York, New York

February 18, 2005

---

32	2004 Annual Report

---

 

Financial Data (unaudited)

 

For a share of capital stock outstanding throughout each period:

 

		AMEX			Net Asset		Dividends		Reinvestment
Period	Closing Price*				Value*		Paid		Price
Fiscal Year 2003
January			$  9.45		$10.18		$0.051		$   9.47
February			9.47		10.25		0.051		9.60
March			9.48		10.19		0.051		9.53
April			9.75		10.24		0.051		9.70
May			10.09		10.40		0.051		10.01
June			9.98		10.31		0.051		10.03
July			9.61		10.12		0.051		10.12
August			10.02		10.09		0.051		10.01
September			10.15		10.24		0.051		10.19
October			10.22		10.21		0.051		10.25
November			10.39		10.28		0.051		10.32
December			10.19		10.26		0.051		10.31
Fiscal Year 2004
January			10.41		10.27		0.051		10.29
February			10.49		10.36		0.051		10.41
March			10.49		10.19		0.051		10.25
April			9.20		10.08		0.051		9.24
May			9.57		10.02		0.051		9.60
June			9.23		9.99		0.051		9.39
July			9.65		10.06		0.051		9.61
August			9.64		10.12		0.051		9.59
September			9.37		10.10		0.051		9.67
October			9.55		10.09		0.051		9.69
November			9.40		10.02		0.051		9.65
December			9.36		10.02		0.051		9.45

 

  * On the last business day of the month.

 

---

Intermediate Muni Fund, Inc.

33

---

 

Additional Information (unaudited)

Information about Directors and Officers

 

The business and affairs of the Intermediate Muni Fund, Inc. (“Fund”) are managed under the direction of the Board of Directors. Information pertaining to the Directors and Officers of the Fund is set forth below. The Statement of Additional Information includes additional information about Directors and is available, without charge, upon request by calling the Fund’s transfer agent (PFPC Inc. at 1-800-331-1710).

 

				Number of
		Term of		Portfolios
		Office*	Principal	in Fund	Other Board
	Position(s)	and Length	Occupation(s)	Complex	Memberships
Name, Address	Held with	of Time	During Past	Overseen	Held by
and Birth Year	Fund	Served	Five Years	by Director	Director
Non-Interested Directors:
Lee Abraham	Director	Since	Retired; Former Director	27	None
13732 LeHavre Drive		1999	of Signet Group PLC
Frenchman’s Creek
Palm Beach Gardens,
FL 33410
Birth Year: 1927
Jane F. Dasher	Director	Since	Controller of PBK	27	None
Korsant Partners		1999	Holdings Inc., a family
283 Greenwich Avenue			investment company
Greenwich, CT 06830
Birth Year: 1949
Donald R. Foley	Director	Since	Retired	27	None
3668 Freshwater Drive		1993
Jupiter, FL 33477
Birth Year: 1922
Richard E. Hanson, Jr.	Director	Since	Retired; Former Head of	27	None
2751 Vermont Route 140		1999	the New Atlanta Jewish
Poultney, VT 05764			Community High School
Birth Year: 1941
Paul Hardin	Director	Since	Professor of Law &	34	None
12083 Morehead		1996	Chancellor Emeritus at
Chapel Hill, NC			the University of
27514-8426			North Carolina
Birth Year: 1931
Roderick C. Rasmussen	Director	Since	Investment Counselor	27	None
9 Cadence Court		1993
Morristown, NJ 07960
Birth Year: 1926
John P. Toolan	Director	Since	Retired	27	John Hancock
13 Chadwell Place		1993			Funds
Morristown, NJ 07960
Birth Year: 1930

---

34	2004 Annual Report

---

 

Additional Information (unaudited) (continued)
					Number of
		Term of			Portfolios
		Office*		Principal	in Fund	Other Board
	Position(s)	and Length		Occupation(s)	Complex	Memberships
Name, Address	Held with	of Time		During Past	Overseen by	Held by
and Birth Year	Fund	Served		Five Years	Director	Director
Interested Director:
R. Jay Gerken, CFA**	Chairman,	Since		Managing Director of	219	None
Citigroup Asset	President	2002		Citigroup Global
Management (“CAM”)	and Chief			Markets Inc. (“CGM”);
399 Park Avenue	Executive			Chairman, President
4th Floor	Officer			and Chief Executive
New York, NY 10022				Officer of Smith Barney
Birth Year: 1951				Fund Management LLC
				(“SBFM”), Travelers
				Investment Adviser, Inc.
				(“TIA”) and Citi Fund
				Management, Inc.
				(“CFM”); President and
				Chief Executive Officer
				of certain mutual
				funds associated
				with Citigroup Inc.
				(“Citigroup”);
				Formerly Portfolio
				Manager of Smith
				Barney Allocation
				Series Inc. (from 1996
				to 2001) and Smith
				Barney Growth and
				Income Fund (from
				1996 to 2000)
Officers:
Andrew B. Shoup	Senior Vice	Since		Director of CAM; Senior	N/A	N/A
CAM	President	2003		Vice President and
125 Broad Street	and Chief			Chief Administrative
11th Floor	Administrative			Officer of mutual funds
New York, NY 10004	Officer			associated with
Birth Year: 1956				Citigroup; Head of
				International Funds
				Administration of CAM
				(from 2001 to 2003);
				Director of Global
				Funds Administration
				of CAM (from 2000 to
				2001); Head of U.S.
				Citibank Funds
				Administration of CAM
				(from 1998 to 2000)

---

Intermediate Muni Fund, Inc.

35

---

Additional Information (unaudited) (continued)

				Number of
		Term of		Portfolios
		Office*	Principal	in Fund	Other Board
	Position(s)	and Length	Occupation(s)	Complex	Memberships
Name, Address	Held with	of Time	During Past	Overseen by	Held by
and Birth Year	Fund	Served	Five Years	Director	Director
Robert J. Brault	Chief	Since	Director of CGM; Chief	N/A	N/A
CAM	Financial	2004	Financial Officer and
125 Broad Street	Officer and		Treasurer of certain
11th Floor	Treasurer		mutual funds associated
New York, NY 10004			with Citigroup;
Birth Year: 1965			Director of Internal
			Control for CAM
			U.S. Mutual Fund
			Administration (from
			2002 to 2004); Director
			of Project Management
			& Information Systems
			for CAM U.S. Mutual
			Fund Administration
			(from 2000 to 2002);
			Vice President, of
			Mutual Fund Adminis-
			tration at Investors
			Capital Services (from
			1999 to 2000)
Peter M. Coffey	Vice	Since	Managing Director	N/A	N/A
CAM	President	1992	of CGM; Investment
399 Park Avenue	and		Officer of SBFM
4th Floor	Investment
New York, NY 10022	Officer
Birth Year: 1944

---

36	2004 Annual Report

---

 

Additional Information (unaudited) (continued)

 

				Number of
		Term of		Portfolios
		Office*	Principal	in Fund	Other Board
	Position(s)	and Length	Occupation(s)	Complex	Memberships
Name, Address	Held with	of Time	During Past	Overseen by	Held by
and Birth Year	Fund	Served	Five Years	Director	Director
Andrew Beagley	Chief	Since	Director of CGM (since	N/A	N/A
CAM	Compliance	2004	2000); Director of
399 Park Avenue	Officer		Compliance, North
4th Floor			America, CAM (since
New York, NY 10022			2000); Chief Anti-
Birth Year: 1962			Money Laundering
			Compliance Officer,
			Chief Compliance
			Officer and Vice
			President of certain
			mutual funds
			associated with
			Citigroup; Director of
			Compliance, Europe,
			the Middle East
			and Africa, Citigroup
			Asset Management
			(from 1999 to 2000);
			Chief Compliance Officer,
			SBFM, CFM, TIA, Salomon
			Brothers Asset
			Management Limited,
			Smith Barney Global
			Capital Management
			Inc.
Robert I. Frenkel	Secretary	Since	Managing Director and	N/A	N/A
CAM	and Chief	2003	General Counsel of
300 First Stamford Place	Legal Officer		Global Mutual Funds
4th Floor			for CAM and its
Stamford, CT 06902			predecessor (since
Birth Year: 1954			1994); Secretary and Chief
			Legal Officer of mutual
			funds associated with
			Citigroup

 

*	Each Director and Officer serves until his or her successor has been duly elected and qualified.
**	Mr. Gerken is a Director who is an “interested person” of the Fund as defined in the Investment Company Act of 1940, as amended, because Mr. Gerken is an officer of SBFM and certain of its affiliates.

---

Intermediate Muni Fund, Inc.

37

---

 

Important Tax Information (unaudited)

 

All of the net investment income distributions paid monthly by the Fund to shareholders from January to November 2004 qualify as tax-exempt interest dividends for federal income tax purposes. Additionally, 90.89% of the net investment income distribution paid to common shareholders of record on December 28, 2004 qualifies as tax-exempt interest dividends for federal income tax purposes. Finally, 94.15% of the net investment income distributions paid to municipal auction rate cumulative preferred shareholders in December 2004 qualifies as tax-exempt interest dividends for federal income tax purposes.

 

Please retain this information for your records.

---

38	2004 Annual Report

---

 

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 PFPC Inc. (“PFPC”), 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), PFPC 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 PFPC has completed its purchases, the market price exceeds the net asset value of the common stock as of the valuation time, PFPC 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 PFPC is unable to stop open market purchases and cause the Fund to issue the remaining shares, the average per share purchase price paid by PFPC 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 in common stock issued by the Fund at such net asset value. PFPC 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.

 

---

Intermediate Muni Fund, Inc.

39

---

 

Dividend Reinvestment Plan (unaudited) (continued)

 

PFPC 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 PFPC 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. PFPC’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 PFPC, 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 PFPC Inc., P.O. Box 8030, Boston, Massachusetts 02266-8030 or by telephone at (800) 331-1710.

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The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission for the first and third quarters of each fiscal year on Form N-Q. The Fund’s Forms N-Q are available on the Commission’s website at www.sec.gov. The Fund’s Forms N-Q may be reviewed and copied at the Commission’s Public Reference Room in Washington, D.C., and information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. To obtain information on Form N-Q from the Fund, shareholders can call 1-800-451-2010.

 

Information on how the Fund voted proxies relating to portfolio securities during the 12-month period ended June 30, 2004 and a description of the policies and procedures that the Fund uses to determine how to vote proxies relating to portfolio securities is available (1) without charge, upon request, by calling 1-800-451-2010, (2) on the Fund’s website at www.citigroupAM.com and (3) on the SEC’s website at www.sec.gov.

 

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40	2004 Annual Report

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DIRECTORS	INVESTMENT MANAGER
Lee Abraham	Smith Barney Fund Management LLC
Jane F. Dasher
Donald R. Foley	CUSTODIAN
R. Jay Gerken, CFA	State Street Bank and Trust Company
Chairman
Richard E. Hanson, Jr.
Paul Hardin	SHAREHOLDER
Roderick C. Rasmussen	SERVICING AGENT
John P. Toolan	PFPC Inc.
	P.O. Box 8030
OFFICERS	Boston, Massachusetts 02266-8030
R. Jay Gerken, CFA
President and Chief	This report is intended only for the
Executive Officer	shareholders of Intermediate Muni
	Fund, Inc. It is not a Prospectus,
Andrew B. Shoup	circular or representation intended
Senior Vice President and	for use in the purchase or sale of
Chief Administrative Officer	shares of the Fund or any securities
Robert J. Brault	mentioned in the report.
Chief Financial Officer
and Treasurer	INTERMEDIATE
	MUNI FUND, INC.
Peter M. Coffey	125 Broad Street
Vice President	10th Floor, MF-2
and Investment Officer	New York, New York 10004
Andrew Beagley
Chief Compliance Officer
Robert I. Frenkel
Secretary and	FD1067 2/05
Chief Legal Officer	05-7894

 

SBI
Listed on the American
Stock Exchange

 

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