SEC Form N-CSR filed by Western Asset Intermediate Muni Fund Inc

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM N-CSR

CERTIFIED SHAREHOLDER REPORT OF REGISTERED

MANAGEMENT INVESTMENT COMPANIES

Investment Company Act file number 811-6506

Western Asset Intermediate Muni Fund Inc.

(Exact name of registrant as specified in charter)

620 Eighth Avenue, 47th Floor, New York, NY 10018

(Address of principal executive offices) (Zip code)

George P. Hoyt

Franklin Templeton

100 First Stamford Place

Stamford, CT 06902

(Name and address of agent for service)

Registrant’s telephone number, including area code: 1-888-777-0102

Date of fiscal year end: November 30

Date of reporting period: November 30, 2023

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ITEM 1. REPORT TO STOCKHOLDERS.

The Annual Report to Stockholders is filed herewith.

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WESTERN ASSET

INTERMEDIATE MUNI

FUND INC. (SBI)

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Fund objective

The Fund’s investment objective is to provide common shareholders a high level of current income exempt from regular federal income taxes*, consistent with prudent investing.

Under normal market conditions, the Fund will invest at least 80% of its total assets in municipal obligations. In addition, under normal market conditions, the Fund will invest at least 80% of its total assets in debt securities that are, at the time of investment, rated investment grade by a nationally recognized statistical rating organization or, if unrated, of equivalent quality as determined by the investment manager. The Fund also maintains a dollar-weighted average effective maturity of between three and ten years.

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Letter from the chairman

Dear Shareholder,

We are pleased to provide the annual report of Western Asset Intermediate Muni Fund Inc. for the twelve-month reporting period ended November 30, 2023. Please read on for a detailed look at prevailing economic and market conditions during the Fund’s reporting period and to learn how those conditions have affected Fund performance.

As always, we remain committed to providing you with excellent service and a full spectrum of investment choices. We also remain committed to supplementing the support you receive from your financial advisor. One way we accomplish this is through our website, www.franklintempleton.com. Here you can gain immediate access to market and investment information, including:

We look forward to helping you meet your financial goals.

Sincerely,

Jane Trust, CFA

Chairman, President and Chief Executive Officer

December 29, 2023

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Fund overview

Q. What is the Fund’s investment strategy?

A. The Fund’s investment objective is to provide common shareholders a high level of current income exempt from regular federal income taxes consistent with prudent investing. Under normal market conditions, the Fund invests at least 80% of its total assets in municipal obligations. The Fund also maintains a dollar-weighted average effective maturity of between three and ten years. Under normal market conditions, the Fund will invest at least 80% of its total assets in debt securities that are, at the time of investment, rated investment grade by a nationally recognized statistical rating organization (“NRSRO”) or, if unrated, of equivalent quality as determined by the investment manager. In addition, up to 20% of the Fund’s total assets may be invested in debt securities that are, at the time of investment, rated below investment grade (commonly known as “high yield” or “junk” bonds) by an NRSRO or, if unrated, of equivalent quality as determined by the investment manager. The Fund may use a variety of derivative instruments as part of its investment strategy or for hedging and/or risk management purposes.

At Western Asset Management Company, LLC (“Western Asset”), the Fund’s subadviser, we utilize a fixed income team approach, with decisions derived from interaction among various investment management sector specialists. The sector teams are comprised of Western Asset’s senior portfolio management personnel, research analysts and an in-house economist. Under this team approach, management of client fixed income portfolios will reflect a consensus of interdisciplinary views within the Western Asset organization. The individuals responsible for development of investment strategy, day-to-day portfolio management, oversight and coordination of the Fund are S. Kenneth Leech, Robert E. Amodeo, David T. Fare and John Mooney.

Q. What were the overall market conditions during the Fund’s reporting period?

A. The overall U.S. fixed income market experienced periods of volatility and generated a modest return over the twelve-month reporting period ended November 30, 2023. The market was driven by several factors, including elevated inflation, aggressive Federal Reserve Board (the “Fed”) monetary policy tightening, repercussions from the war in Ukraine, unrest in the banking industry, and several geopolitical issues. The fixed income market rallied sharply toward the end of the reporting period given expectations for the end of Fed rate hikes.

Short-term U.S. Treasury yields moved higher as the Fed raised interest rates in an attempt to rein in elevated inflation. The yield for the two-year Treasury note began the reporting period at 4.38% and ended the period at 4.73%. The low of 3.75% took place on May 4, 2023, and the high of 5.19% occurred on October 17 and 18, 2023. Long-term U.S. Treasury yields also moved higher given stubbornly high inflation and Fed monetary policy tightening. The yield for the ten-year Treasury note began the reporting period at 3.68% and ended the period at 4.37%. The low of 3.30% occurred on April 5 and 6, 2023, and the high of 4.98% took place on October 19, 2023.

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Fund overview (cont’d)

The municipal bond market produced a positive absolute return and outperformed its taxable bond counterpart during the twelve-month reporting period. Over that time, the Bloomberg Municipal Bond Indexⁱ and the Bloomberg U.S. Aggregate Indexⁱⁱ returned 4.28% and 1.18%, respectively. Returns in both the taxable and tax-free bond markets were limited given the negative impact from rising interest rates.

Q. How did we respond to these changing market conditions?

A. We increased the Fund’s duration during the reporting period. From a sector positioning perspective, we increased the Fund’s exposure to the industrial revenue sector and reduced its exposure to pre-refunded securities. Looking at the Fund’s quality positioning, we increased its allocation to securities rated A, while reducing its allocation to securities rated AA.

During the reporting period, we utilized leverage in the Fund. This contributed to performance over the Fund’s fiscal year. We ended the period with leverage from preferred shares as a percentage of total assets of roughly 26% versus approximately 27% when the period began.

Performance review

For the twelve months ended November 30, 2023, Western Asset Intermediate Muni Fund Inc. returned 2.65% based on its net asset value (“NAV”)ⁱⁱⁱ and 0.54% based on its New York Stock Exchange (“NYSE”) market price per share. The Fund’s unmanaged benchmark, the Bloomberg 1-15 Year Municipal Bond Index^iv, returned 3.79% for the same period.

Certain investors may be subject to the federal alternative minimum tax, and state and local taxes will apply. Capital gains, if any, are fully taxable. Please consult your personal tax or legal adviser.

The Fund has a practice of seeking to maintain a relatively stable level of distributions to shareholders. This practice has no impact on the Fund’s investment strategy and may reduce the Fund’s NAV. The Fund’s manager believes the practice helps maintain the Fund’s competitiveness and may benefit the Fund’s market price and premium/discount to the Fund’s NAV.

During the twelve-month period, the Fund made distributions to shareholders totaling $0.28 per share, of which $0.06 will be treated as return of capital for tax purposes.* The performance table shows the Fund’s twelve-month total return based on its NAV and market price as of November 30, 2023. Past performance is no guarantee of future results.

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All figures represent past performance and are not a guarantee of future results.

** Total returns are based on changes in NAV or market price, respectively. Returns reflect the deduction of all Fund expenses, including management fees, operating expenses, and other Fund expenses. Returns do not reflect the deduction of brokerage commissions or taxes that investors may pay on distributions or the sale of shares.

† Total return assumes the reinvestment of all distributions, including returns of capital, at NAV.

‡ Total return assumes the reinvestment of all distributions, including returns of capital, in additional shares in accordance with the Fund’s Dividend Reinvestment Plan.

Q. What were the leading contributors to performance?

A. The largest contributor to the Fund’s relative performance during the reporting period was its security selection within certain sectors. In particular, selection within special tax obligation and transportation sectors contributed to returns. Additionally, overweights to the industrial revenue and transportation sectors were additive for results. From a quality perspective, an overweight to lower investment-grade securities, along with security selection within AA rated securities, contributed to performance.

Q. What were the leading detractors from performance?

A. The largest detractor from the Fund’s relative performance was its security selection within the power sector. Additionally, an overweight to duration modestly detracted from returns, as yields were volatile but generally rose over the reporting period. An overweight to pre-refunded securities was also a headwind for returns.

Looking for additional information?

The Fund is traded under the symbol “SBI” and its closing market price is available in most newspapers under the NYSE listings. The daily NAV is available online under the symbol “XSBIX” on most financial websites. Barron’s and The Wall Street Journal’s Monday edition both carry closed-end fund tables that 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.franklintempleton.com.

In a continuing effort to provide information concerning the Fund, shareholders may call 1-888-777-0102 (toll free), Monday through Friday from 8:00 a.m. to 5:30 p.m. Eastern Time, for the Fund’s current NAV, market price and other information.

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Fund overview (cont’d)

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

Sincerely,

Western Asset Management Company, LLC

December 13, 2023

RISKS: The Fund is a diversified closed-end management investment company designed primarily as a long-term investment and not as a trading vehicle. The Fund is not intended to be a complete investment program and, due to the uncertainty inherent in all investments, there can be no assurance that the Fund will achieve its investment objective. The Fund’s common stock is traded on the New York Stock Exchange. Similar to stocks, the Fund’s share price will fluctuate with market conditions and, at the time of sale, may be worth more or less than the original investment. Shares of closed-end funds often trade at a discount to their net asset value. Diversification does not assure against market loss. The Fund’s investments are subject to a number of risks, including interest rate risk, credit risk, leveraging risk and management risk. As interest rates rise, bond prices fall, reducing the value of the fixed income securities held by the Fund. Lower rated, higher yielding bonds, known as “junk bonds”, are subject to greater liquidity and credit risk, including the risk of default, than higher rated obligations. Municipal securities purchased by the Fund may be adversely affected by changes in the financial condition of municipal issuers and insurers, regulatory and political developments, uncertainties and public perceptions, and other factors. 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. The Fund may invest in securities of other investment companies. To the extent it does, Fund stockholders will indirectly pay a portion of the operating costs of such companies, in addition to the expenses that the Fund bears directly in connection with its own operation. Investing in securities issued by other investment companies, including exchange-traded funds (“ETFs”) that invest primarily in municipal securities, involves risks similar to those of investing directly in the securities in which those investment companies invest. Leverage may result in greater volatility of NAV and market price of common shares and increases a shareholder’s risk of loss. The Fund may enter into tender option bond (“TOB”) transactions, which expose the Fund to leverage and credit risk, and generally involve greater risk than investments in fixed rate municipal bonds, including the risk of loss of principal. The interest payments that the Fund would typically receive on inverse floaters acquired in such transactions vary inversely with short-term interest rates and will be reduced (and potentially eliminated) when short-term interest rates increase. Inverse floaters will generally underperform the market for fixed rate municipal securities when interest rates rise. The value and market for inverse floaters can be volatile, and inverse floaters can have limited liquidity. Investments in inverse floaters issued in TOB transactions are derivative instruments and, therefore, are also subject to the risks generally applicable to investments in derivatives. The market values of securities or other assets will fluctuate, sometimes sharply and unpredictably, due to changes in general market conditions, overall economic trends or events, governmental actions or intervention,

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actions taken by the U.S. Federal Reserve or foreign central banks, market disruptions caused by trade disputes or other factors, political developments, armed conflicts, economic sanctions and countermeasures in response to sanctions, major cybersecurity events, investor sentiment, the global and domestic effects of a pandemic, and other factors that may or may not be related to the issuer of the security or other asset. The Fund may also invest in money market funds, including funds affiliated with the Fund’s manager and subadviser. For more information on risks, see Summary of information regarding the Fund — Principal Risk Factors in this report.

The mention of sector breakdowns is for informational purposes only and should not be construed as a recommendation to purchase or sell any securities. The information provided regarding such sectors is not a sufficient basis upon which to make an investment decision. Investors seeking financial advice regarding the appropriateness of investing in any securities or investment strategies discussed should consult their financial professional. Portfolio holdings are subject to change at any time and may not be representative of the portfolio managers’ current or future investments. The Fund’s portfolio composition is subject to change at any time.

All investments are subject to risk including the possible loss of principal. Past performance is no guarantee of future results. All index performance reflects no deduction for fees, expenses or taxes. Please note that an investor cannot invest directly in an index.

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.

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Fund at a glance^† (unaudited)

Investment breakdown (%) as a percent of total investments

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Fund performance (unaudited)

All figures represent past performance and are not a guarantee of future results. Returns reflect the deduction of all Fund expenses, including management fees, operating expenses, and other Fund expenses. Returns do not reflect the deduction of brokerage commissions or taxes that investors may pay on distributions or the sale of shares.

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Fund performance (unaudited) (cont’d)

Historical performance

Value of $10,000 invested in

Western Asset Intermediate Muni Fund Inc. vs. Bloomberg 1–15 Year Municipal Bond Index† — November 2013 - November 2023

All figures represent past performance and are not a guarantee of future results. Returns reflect the deduction of all Fund expenses, including management fees, operating expenses, and other Fund expenses. Returns do not reflect the deduction of brokerage commissions or taxes that investors may pay on distributions or the sale of shares.

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Schedule of investments

November 30, 2023

Western Asset Intermediate Muni Fund Inc.

(Percentages shown based on Fund net assets)

See Notes to Financial Statements.

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Schedule of investments (cont’d)

November 30, 2023

Western Asset Intermediate Muni Fund Inc.

(Percentages shown based on Fund net assets)

See Notes to Financial Statements.

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Western Asset Intermediate Muni Fund Inc.

(Percentages shown based on Fund net assets)

See Notes to Financial Statements.

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Schedule of investments (cont’d)

November 30, 2023

Western Asset Intermediate Muni Fund Inc.

(Percentages shown based on Fund net assets)

See Notes to Financial Statements.

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Western Asset Intermediate Muni Fund Inc.

(Percentages shown based on Fund net assets)

See Notes to Financial Statements.

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Schedule of investments (cont’d)

November 30, 2023

Western Asset Intermediate Muni Fund Inc.

(Percentages shown based on Fund net assets)

See Notes to Financial Statements.

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Western Asset Intermediate Muni Fund Inc.

(Percentages shown based on Fund net assets)

See Notes to Financial Statements.

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Schedule of investments (cont’d)

November 30, 2023

Western Asset Intermediate Muni Fund Inc.

(Percentages shown based on Fund net assets)

See Notes to Financial Statements.

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Western Asset Intermediate Muni Fund Inc.

(Percentages shown based on Fund net assets)

See Notes to Financial Statements.

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Schedule of investments (cont’d)

November 30, 2023

Western Asset Intermediate Muni Fund Inc.

(Percentages shown based on Fund net assets)

See Notes to Financial Statements.

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Western Asset Intermediate Muni Fund Inc.

(Percentages shown based on Fund net assets)