COLONIAL
INVESTMENT
GRADE MUNICIPAL
TRUST
Semiannual Report
June 30, 1996
COLONIAL INVESTMENT GRADE MUNICIPAL TRUST HIGHLIGHTS
JANUARY 1, 1996 - JUNE 30, 1996
INVESTMENT OBJECTIVE: Colonial Investment Grade Municipal Trust seeks to provide
current income, generally exempt from federal income taxes, by investing
primarily in investment-grade municipal securities.
POLICY CHANGE: At a meeting held on February 16, 1996, the Trustees approved a
policy change to eliminate the Trust's 5% limit on investing in zero coupon
tax-exempt bonds.
THE FUND IS DESIGNED TO OFFER:
- Tax-free income
- Professional management
- Expert credit analysis
PORTFOLIO MANAGER COMMENTARY: "The past six months have been challenging for
fixed income investments. Reports of stronger than expected economic activity
early in the period caused long-term interest rates to reverse direction and
move sharply higher, increasing by almost 100 basis points through the end of
June. While municipal bond prices were depressed as a result of this economic
activity, we believe that tax-exempt bonds are slightly undervalued and may
present attractive opportunities at some point in 1996, rewarding investors
holding a long-term outlook."
- William Loring
COLONIAL INVESTMENT GRADE MUNICIPAL TRUST PERFORMANCE
<TABLE>
<S> <C>
Distributions declared per share(1) $ 0.303
Six-month total return, assuming
reinvestment of all distributions
- NAV (1.25%)
- Market Price 1.79%
Price per share
- NAV $ 10.59
- Market Price $ 9.75
</TABLE>
(1)A portion of the Fund's income may be subject to the alternative minimum tax.
TOP FIVE SECTORS
(as of 6/30/96)
<TABLE>
<S> <C>
Housing 14.36%
Education 11.31%
Nursing 8.94%
General Obligation 6.70%
Turnpike 6.48%
</TABLE>
QUALITY BREAKDOWN
(as of 6/30/96)
<TABLE>
<S> <C>
OTHER: 5.6%
NON-RATED: 19.2%
AAA: 45.0%
BBB: 16.7%
AA: 3.3%
A: 10.2%
</TABLE>
Because the Trust is actively managed, there can be no guarantee the Trust will
continue to maintain these quality weightings in the future.
The sector classifications used on this page are based upon Colonial's defined
criteria as used in the investment process.
2
PRESIDENT'S MESSAGE
TO FUND SHAREHOLDERS
I am pleased to present your Fund's semiannual
report for the period ended June 30, 1996. First, [PHOTO OF
however, I would like to extend my thanks to HAROLD W. COGGER]
President John A. McNeice, Jr., who has retired
after a career with Colonial that spanned 40
years. We look forward to his continued
involvement on the executive committee of the
board of directors at our parent company, Liberty
Financial Companies, Inc.
In my new position, I am directing Colonial's focus on the delivery of
investment performance over the long term. To achieve this mission, we will
continue to seek the optimal combination of talented people and effective
investment disciplines.
The receipt of your semiannual report is a good time to reflect on market
conditions and the performance of your Fund during the past six months. Interest
rates rose fairly steadily during the first half of 1996. This increase was
caused in part by unemployment statistics that proved to be lower than
anticipated, causing a decline in bond prices.
While there may be some current stock market volatility, we expect corporate
earnings to continue to make progress, but at a slower pace than in 1995. We
also anticipate growth opportunities in certain foreign markets.
With over 12 years of service at Colonial and more than 25 years in the
industry, I am enthusiastic about -- and dedicated to achieving -- Colonial's
mission of providing you with superior investment returns. In my new role, I
look forward to communicating with you about your Colonial investment. We
appreciate the opportunity to help you meet your investment goals.
Respectfully,
/s/ Harold W. Cogger
Harold W. Cogger
President
August 12, 1996
Because market conditions change frequently, there can be no assurance that the
trends described here will continue, come to pass or affect Fund performance.
3
INVESTMENT PORTFOLIO
JUNE 30, 1996 (UNAUDITED, IN THOUSANDS)
<TABLE>
<CAPTION>
MUNICIPAL BONDS - 94.7% PAR VALUE
- --------------------------------------------------------------------------------
<S> <C> <C>
EDUCATION - 11.9%
MA State Health & Educational
Facilities Authority, Harvard
University, Series N,
6.250% 04/01/20 $4,000 $ 4,260
NE Higher Educational Loan Program,
Series 1993-A,
6.450% 06/01/18 1,000 999
NH State Higher Educational & Health
Facilities Authority, Dartmouth College,
5.375% 06/01/23 4,000 3,700
NY New York State Dormitory Authority,
City University:
Series 1990-A,
7.625% 07/01/20 750 843
Series 1993-A,
5.750% 07/01/18 5,000 4,731
-------
14,533
-------
- --------------------------------------------------------------------------------
GENERAL OBLIGATIONS - 10.3%
CA State of California,
5.750% 03/01/19 2,000 1,950
CO Highlands Ranch, Metropolitan District 2,
Series 1996,
6.500% 06/15/11 1,375 1,482
IL Chicago, Series 1995-A-2,
6.250% 01/01/14 (a) 1,480 1,552
MI Grand Ledge Public School District,
Series 1995,
5.375% 05/01/24 1,750 1,625
NY New York City,
7.000% 08/01/07 (b) 2,000 2,113
PA Philadelphia, Series B,
5.500% 09/01/18 2,000 1,910
TN Metropolitan Government, Nashville &
Davidson County:
(c) 05/15/09 1,825 871
6.150% 05/15/25 1,000 1,016
-------
12,519
-------
- --------------------------------------------------------------------------------
</TABLE>
4
Investment Portfolio/June 30, 1996
<TABLE>
- --------------------------------------------------------------------------------
<S> <C> <C>
HEALTH - 15.9%
HOSPITALS - 4.6%
AL Special Care Facilities Authority,
Montgomery Health Care, Series 1989,
11.000% 10/01/19 $ 1,145 $ 1,168
DE State Economic Development Authority,
Riverside Hospital, Series 1992-A,
9.500% 01/01/22 240 312
IL Health Facilities Authority,
Edgewater Medical Center:
Series A,
9.250% 07/01/24 215 232
RIB (variable rate), Series 1992-B,
9.821% 05/01/21 700 774
MO Hannibal Industrial Development,
Medical Systems of Northeast Missouri,
Series 1992,
9.500% 03/01/22 500 571
NC Lincoln County,
Lincoln County Hospital Project,
9.000% 05/01/07 180 216
NH Higher Educational and Health Facilities,
Catholic Medical Center, Series 1989,
6.000% 07/01/17 2,500 2,341
--------
5,614
--------
HUMAN SERVICES PROVIDERS - 2.4%
IN Wabash First Mortgage, Hoosier
Care, Inc., Series 1989-A,
9.750% 08/01/19 1,480 1,565
NY State Medical Care Facilities
Finance Agency, Mental Health Services
Facilities Improvement, Series 1991-A,
7.500% 02/15/21 270 298
TN Shelby County, Health, Education,
& Housing Facilities Board, Open Arms
Development Center:
Series 1992-A,
9.750% 08/01/19 475 539
Series 1992-C,
9.750% 08/01/19 475 539
--------
2,941
--------
</TABLE>
5
Investment Portfolio/June 30, 1996
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
MUNICIPAL BONDS - CONT. PAR VALUE
- --------------------------------------------------------------------------------
<S> <C> <C>
HEALTH - CONT.
NURSING HOMES - 8.9%
CO Health Care Facilities Authority:
Denver Health Care,
10.500% 05/01/19 (d) $1,710 $ 1,659
Pioneer Health Care, Series 1989,
10.500% 05/01/19 (e) 1,400 964
DE State Economic Development Authority,
Churchman Village Project, Series A,
10.000% 03/01/21 1,000 1,160
FL Broward County Industrial
Development, Beverly Enterprises,
9.800% 11/01/10 265 292
FL Escambia County Industrial
Development, Beverly Enterprises,
Series 1985-I,
9.800% 06/01/11 200 220
FL Leon County Industrial Development,
Beverly Enterprises, Series 1985,
9.800% 06/01/11 20 22
IA State Finance Authority,
Care Initiatives Project, Series 1996,
9.250% 07/01/25 2,500 2,734
KY Jefferson County Health Facilities,
Beverly Enterprises, Inc., Series 1985-B,
9.750% 08/01/07 740 807
PA Chester County Industrial Development,
Pennsylvania Nursing Home, Inc.,
Series 1989,
10.125% 05/01/19 1,237 1,276
PA Delaware County Development
Authority, Main Line and Haverford
Nursing Home, Series 1992,
9.000% 08/01/22 600 643
WI State Health and Educational Facilities,
Metro Health Foundation, Inc.,
10.000% 11/01/22 (e) 1,300 1,040
-------
10,817
-------
- --------------------------------------------------------------------------------
HOUSING - 15.7%
ASSISTED LIVING/SENIOR - 0.5%
TX Bell County Health Facilities
Development Corp., Care Institute, Inc.,
9.000% 11/01/24 500 533
-------
</TABLE>
6
Investment Portfolio/June 30, 1996
<TABLE>
- --------------------------------------------------------------------------------
<S> <C> <C>
MULTI-FAMILY - 5.9%
FL Clearwater Housing Authority,
Hampton Apartments, Series 1994,
8.250% 05/01/24 $ 700 $ 726
FL Hialeah Housing Authority,
Series 1991,
9.500% 11/01/21 500 514
FL State Housing Finance Agency,
Windsong Apartments, Series 1993-C,
9.250% 01/01/19 240 239
MN White Bear Lake Multi-family Housing
Revenue, Birch Lake Townhome Project:
Series 1989-A,
10.250% 07/15/19 775 773
Series 1989-B,
(c) 07/15/19 780 1,284
NC Durham Urban Development Authority,
Durham Hosiery Mill Project, Series 1987,
7.500% 08/01/29 1,175 1,247
Resolution Trust Corp., Pass Through
Certificates, Series 1993-A,
8.500% 12/01/16 (f) 2,124 2,164
VA Roanoke Redevelopment & Housing
Authority, First Mortgage, Mountain
Ridge,
9.250% 11/01/22 (e) 300 285
------
7,232
------
SINGLE-FAMILY - 9.3%
IN State Housing Finance Authority,
Single-family Mortgage GNMA,
Series 1990-D,
7.800% 01/01/22 165 170
LA Housing Financing Agency:
Residual Lien Mortgage, Series 1992,
7.375% 09/01/13 1,100 1,118
Series 1988,
8.300% 11/01/20 1,175 1,212
MA State Housing Finance Agency,
Series 1988-B,
8.100% 08/01/23 255 267
NE State Single-family Mortgage Revenue,
RIB (variable rate),
7.550% 03/15/22 (a) 6,100 6,336
</TABLE>
7
Investment Portfolio/June 30, 1996
<TABLE>
- --------------------------------------------------------------------------------
MUNICIPAL BONDS - CONT. PAR VALUE
- --------------------------------------------------------------------------------
<S> <C> <C>
HOUSING - CONT.
Single-family - cont.
NY State Mortgage Agency, Series F,
8.000% 10/01/17 $ 180 $ 189
OH Housing Finance Agency, Single-family
Mortgage Revenue, RIB (variable rate),
Series B-4,
9.855% 03/31/31 2,015 2,088
-------
11,380
-------
- --------------------------------------------------------------------------------
MANUFACTURING - 1.5%
MEASURING & ANALYZING INSTRUMENTS - 1.0%
MN Brooklyn Park Industrial Development,
TL Systems Corp., Series 1991,
10.000% 09/01/16 965 1,189
-------
TRANSPORTATION EQUIPMENT - 0.5%
MN Buffalo,
Von Ruden Manufacturing, Inc.,
Series 1989,
10.500% 09/01/14 565 632
-------
- --------------------------------------------------------------------------------
POLLUTION CONTROL REVENUE - 2.3%
IN Petersburg Pollution Control,
Indianapolis Power & Light Co.,
Series 1993-B,
5.400% 08/01/17 3,000 2,805
-------
- --------------------------------------------------------------------------------
PUBLIC FACILITIES IMPROVEMENT - 2.1%
MN Mille Lacs Capital Improvement
Infrastructure, Band of Chippewa,
Series 1992-A,
9.250% 11/01/12 275 305
NY State Urban Development Corp.,
5.600% 04/01/15 1,000 940
SC State Public Service Authority,
Series C,
5.000% 01/01/18 1,500 1,337
-------
2,582
-------
- --------------------------------------------------------------------------------
</TABLE>
8
Investment Portfolio/June 30, 1996
<TABLE>
- --------------------------------------------------------------------------------
<S> <C> <C>
PUBLIC INFRASTRUCTURE - 11.1%
AIRPORTS - 4.6%
CO Denver City and County Airport,
Stapleton International Airport:
Series 1990-A,
8.500% 11/15/23 $2,000 $2,292
Series 1992-B,
7.250% 11/15/23 1,000 1,060
IL Regional Transportation Authority,
Series C,
7.750% 06/01/20 1,000 1,235
IN Indianapolis Airport Authority,
Federal Express Project,
7.100% 01/15/17 1,000 1,051
------
5,638
------
TURNPIKES/TOLL ROADS/BRIDGES - 6.5%
CA Foothill Eastern Transportation
Corridor Agency, State Toll Road,
Senior Lien, Series 1995-A,
5.000% 01/01/35 1,000 812
CA San Joaquin Hills Transportation
Agency, Senior Lien Toll Road,
Series 1993, Capital Appreciation
Bonds:
(c) 01/01/23 5,250 873
6.750% 01/01/32 500 509
FL Orlando & Orange County Expressway,
Series A,
5.125% 07/01/20 5,000 4,525
NH State Turnpike Systems,
RIB (variable rate), Series 1991-C,
9.777% 11/01/17 1,000 1,131
------
7,850
------
- --------------------------------------------------------------------------------
REFUNDED/ESCROW/SPECIAL OBLIGATIONS (g) - 2.3%
DC District Of Columbia Hospital,
Washington Hospital Center Corp.,
Series 1990-A,
8.750% 01/01/15 615 714
DE Wilmington, Riverside Hospital,
Series 1988-A,
10.000% 10/01/03 50 56
FL Pinellas County Health Facilities,
Sun Coast Hospital, Series 1990-A,
8.500% 03/01/20 840 962
</TABLE>
9
Investment Portfolio/June 30, 1996
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
MUNICIPAL BONDS - CONT. PAR VALUE
- --------------------------------------------------------------------------------
<S> <C> <C>
REFUNDED/ESCROW/SPECIAL OBLIGATIONS (g) - CONT.
MI Wayne County, Limited Tax General
Obligation Building Authority, Series 1992-A,
8.000% 03/01/17 $ 250 $ 291
NY State Medical Care Facilities, Finance
Agency, Mental Health Services, Series 1991-A,
7.500% 02/15/21 730 824
------
2,847
------
- --------------------------------------------------------------------------------
SALES & EXCISE TAX - 0.8%
FL Tampa Sports Authority, Tampa
Bay Arena Project, Series 1995,
5.750% 10/01/25 1,000 1,003
------
- --------------------------------------------------------------------------------
SOLID WASTE - 2.6%
LAND FILL - 0.2%
MA State Industrial Finance Agency,
Peabody Monofill Associates, Inc.,
Series 1995,
9.000% 09/01/05 250 261
------
RESOURCE RECOVERY - 2.4%
SC Charleston County Recovery,
Foster Wheeler, Series 1987-A,
9.250% 01/01/10 2,640 2,855
------
- --------------------------------------------------------------------------------
STATE & COMMUNITY LEASE - 3.2%
CA State Public Works Board,
Department of Corrections,
Series 1996-A,
5.500% 01/01/17 1,000 962
IN State Office Building Commission,
Women's Prison, Series B,
6.250% 07/01/16 2,820 2,929
------
3,891
------
- --------------------------------------------------------------------------------
TAX ALLOCATION - 3.0%
CA Contra Costa County Public Financing
Authority, Series 1992-A,
7.100% 08/01/22 1,000 1,035
NY State Local Government Assistance
Corp., Series 1993-E,
5.000% 04/01/21 3,000 2,670
------
3,705
------
- --------------------------------------------------------------------------------
</TABLE>
10
Investment Portfolio/June 30, 1996
<TABLE>
- --------------------------------------------------------------------------------
<S> <C> <C>
UTILITY - 4.9%
CO-GENERATION - 0.9%
FL Martin County Industrial Development
Authority, Indiantown Co-Generation
Project, Series 1994-A,
7.875% 12/15/25 $1,000 $ 1,116
--------
MUNICIPAL ELECTRIC - 4.0%
IN State Municipal Power Agency,
Series B,
6.000% 01/01/12 2,000 2,060
MN Southern Minnesota Municipal Power
Agency, Series A,
5.000% 01/01/16 1,000 876
NY State Energy Research & Development
Authority, Consolidated Edison Co.,
Series 1991-A,
7.500% 01/01/26 1,000 1,074
UT Intermountain Power Agency,
State Power Supply, Series 1993-A,
5.000% 07/01/23 1,000 871
--------
4,881
--------
- --------------------------------------------------------------------------------
WATER & SEWER - 7.1%
CA West Sacramento Finance Authority,
Water System Improvement Project,
5.500% 08/01/24 2,000 1,860
FL Dade County Water & Sewer System:
5.500% 10/01/15 1,000 962
5.500% 10/01/25 1,500 1,425
MA State Water Resources Authority,
Series 1993-B,
5.000% 03/01/22 1,000 869
MS Five Lakes Utility District,
8.250% 07/15/24 140 141
PR Commonwealth, Aqueduct &
Sewer Authority, Series 1995:
6.250% 07/01/12 1,000 1,054
6.250% 07/01/13 750 787
TX Bexar Metropolitan Water District,
5.000% 05/01/19 1,775 1,602
--------
8,700
--------
TOTAL MUNICIPAL BONDS (cost of $112,067 ) (h) 115,524
--------
</TABLE>
11
Investment Portfolio/June 30, 1996
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
SHORT-TERM OBLIGATIONS - 5.6% PAR VALUE
- --------------------------------------------------------------------------------
<S> <C> <C>
VARIABLE RATE DEMAND NOTES (i)
AZ Pinal County Industrial Development
Authority, Magna Copper Co.,
3.600% 12/01/09 $ 400 $ 400
IL State Health Facilities Authority,
Palos Community Hospital, Series 1985-B,
3.500% 12/01/15 1,000 1,000
IN Capital Access Health Facility,
3.550% 12/01/10 2,500 2,500
MI Flint Hospital Building Authority,
Hurley Medical Center, Series 1995-B,
3.550% 07/01/15 165 165
MS Perry County,
Leaf River Forest Project,
3.550% 03/01/02 1,800 1,800
NY State,
3.750% 08/15/22 900 900
---------
TOTAL SHORT-TERM OBLIGATIONS 6,765
---------
OTHER ASSETS & LIABILITIES, NET - (0.3)% (381)
- --------------------------------------------------------------------------------
NET ASSETS - 100% $ 121,908
---------
</TABLE>
NOTES TO INVESTMENT PORTFOLIO:
- --------------------------------------------------------------------------------
(a) These securities, with a total market value of $7,888, are being used to
collateralize the delayed delivery purchase indicated in note (b) below
and open futures contracts.
(b) This security has been purchased on a delayed delivery basis for
settlement at a future date beyond the customary settlement time.
(c) Accrued interest accumulates in the value of the security and is payable
at redemption.
(d) The Fund and the other bondholders caused foreclosure on the underlying
assets. A portion of the proceeds of the foreclosure were received prior
to June 30, 1996, and were applied against the interest receivable on the
bonds, with the remainder credited to an other liability account. Once
final proceeds of the foreclosure are received, the bond will be removed
from the portfolio, a loss representing the cost less the total
non-interest proceeds received will be recorded, and the other liability
will be reversed at that time.
12
Investment Portfolio/June 30, 1996
- --------------------------------------------------------------------------------
NOTES TO INVESTMENT PORTFOLIO - CONT.
- --------------------------------------------------------------------------------
(e) This issuer is in default of certain debt covenants. Income is not being
accrued.
(f) This security is exempt from registration under Rule 144A of the
Securities Act of 1933. This security may be resold in transactions exempt
from registration, normally to qualified institutional buyers. At June 30,
1996, the value of this security amounted to $2,164 or 1.8% of net assets.
(g) The Fund has been informed that the issuer has placed direct obligations
of the U.S. Government in an irrevocable trust, solely for the payment of
the interest and principal.
(h) Cost for federal income tax purposes is the same.
(i) Variable rate demand notes are considered short-term obligations. Interest
rates change periodically on specified dates. These securities are payable
on demand and are secured by either letters of credit or other credit
support agreements from banks. The rates listed are as of June 30, 1996.
Acronym Name
----------- ----------------------------------
RIB Residual Interest Bonds
Short futures contracts open at June 30, 1996:
<TABLE>
<CAPTION>
Par value Unrealized
covered by Expiration depreciation
Type contracts month at 6/30/96
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Treasury bond $ 4,000 September $ (68)
</TABLE>
See notes to financial statements.
13
STATEMENT OF ASSETS & LIABILITIES
JUNE 30, 1996 (UNAUDITED)
(in thousands except for per share amount)
<TABLE>
ASSETS
<S> <C> <C>
Investments at value (cost $112,067) $ 115,524
Short-term obligations 6,765
---------
122,289
Receivable for:
Interest $ 2,342
Investments sold 364
Other 99 2,805
--------- ---------
Total Assets 125,094
LIABILITIES
Payable for:
Investments purchased 2,098
Variation margin on futures 45
Accrued:
Deferred Trustees fees 2
Other 1,041
---------
Total Liabilities 3,186
---------
NET ASSETS at value for 11,509 shares
of beneficial interest outstanding $ 121,908
---------
Net asset value per share $ 10.59
---------
COMPOSITION OF NET ASSETS
Capital paid in $ 127,935
Undistributed net investment income 78
Accumulated net realized loss (9,494)
Net unrealized appreciation (depreciation) on:
Investments 3,457
Open futures contracts (68)
---------
$ 121,908
---------
</TABLE>
See notes to financial statements.
14
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1996 (UNAUDITED)
<TABLE>
(in thousands)
<S> <C> <C>
INVESTMENT INCOME
Interest $ 4,135
EXPENSES
Management fee $ 400
Transfer agent 24
Bookkeeping fee 18
Trustees fee 9
Custodian fee 2
Audit fee 19
Legal fee 220
Reports to shareholders 6
Other 13 711
------- -------
Net Investment Income 3,424
-------
NET REALIZED & UNREALIZED GAIN (LOSS) ON PORTFOLIO POSITIONS
Net realized gain (loss) on:
Investments (1,581)
Closed futures contracts 77
-------
Net Realized Loss (1,504)
Net unrealized depreciation during the period on:
Investments (3,580)
Open futures contracts (68)
-------
Net Unrealized Depreciation (3,648)
-------
Net Loss (5,152)
-------
Net Decrease in Net Assets from Operations $(1,728)
-------
</TABLE>
See notes to financial statements.
15
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
(Unaudited)
Six months Year ended
(in thousands) ended June 30 December 31
--------- ---------
INCREASE (DECREASE) IN NET ASSETS 1996 1995
<S> <C> <C>
Operations:
Net investment income $ 3,424 $ 7,375
Net realized loss (1,504) (2,659)
Net unrealized appreciation (depreciation) (3,648) 15,444
--------- ---------
Net Increase (Decrease) from Operations (1,728) 20,160
Distributions:
From net investment income (3,482) (7,302)
--------- ---------
Total Increase (Decrease) (5,210) 12,858
--------- ---------
NET ASSETS
Beginning of period 127,118 114,260
--------- ---------
End of period (including undistributed
net investment income of $78 and $125,
respectively) $ 121,908 $ 127,118
--------- ---------
NUMBER OF FUND SHARES
Outstanding at end of period 11,509 11,509
--------- ---------
</TABLE>
See notes to financial statements.
16
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1996 (UNAUDITED)
NOTE 1. INTERIM FINANCIAL STATEMENTS
In the opinion of management of Colonial Investment Grade Municipal Trust (the
Fund), the accompanying financial statements contain all normal and recurring
adjustments necessary for the fair presentation of the financial position of the
Fund at June 30, 1996, and the results of its operations, the changes in its net
assets and the financial highlights for the six months then ended.
NOTE 2. ACCOUNTING POLICIES
ORGANIZATION: The Fund is a Massachusetts business trust, registered under the
Investment Company Act of 1940, as amended, as a diversified, closed-end
management investment company. The Fund's investment objective is to provide
current income, generally exempt from Federal income taxes. The Fund may issue
an unlimited number of shares.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenue and expenses during the reporting period. Actual
results could differ from those estimates. The following is a summary of
significant accounting policies consistently followed by the Fund in the
preparation of its financial statements.
SECURITY VALUATION AND TRANSACTIONS: Debt securities generally are valued by a
pricing service based upon market transactions for normal, institutional-size
trading units of similar securities. When management deems it appropriate, an
over-the-counter or exchange bid quotation is used.
Short-term obligations with a maturity of 60 days or less are valued at
amortized cost.
Portfolio positions which cannot be valued as set forth above are valued at fair
value under procedures approved by the Trustees.
Futures contracts are valued based on the difference between the last sale price
and the opening price of the contract.
Security transactions are accounted for on the date the securities are
purchased, sold or mature.
Cost is determined and gains (losses) are based upon the specific identification
method for both financial statement and federal income tax purposes.
The Fund may trade securities on other than normal settlement terms. This may
increase the risk if the other party to the transaction fails to deliver and
causes the Fund to subsequently invest at less advantageous prices.
17
Notes to Financial Statements/June 30, 1996
FEDERAL INCOME TAXES: Consistent with the Fund's policy to qualify as a
regulated investment company and to distribute all of its taxable income, no
federal income tax has been accrued.
INTEREST INCOME, DEBT DISCOUNT AND PREMIUM: Interest income is recorded on the
accrual basis. Original issue discount is accreted to interest income over the
life of a security with a corresponding increase in the cost basis; market
discount is not accreted. Premium is amortized against interest income with a
corresponding decrease in the cost basis.
DISTRIBUTIONS TO SHAREHOLDERS: Distributions to shareholders are
recorded on the ex-date.
The amount and character of income and gains to be distributed are determined in
accordance with income tax regulations which may differ from generally accepted
accounting principles. Reclassifications are made to the Fund's capital accounts
to reflect income and gains available for distribution (or available capital
loss carryforwards) under income tax regulations.
NOTE 3. FEES AND COMPENSATION PAID TO AFFILIATES
MANAGEMENT FEE: Colonial Management Associates, Inc. (the Adviser)
is the investment Adviser of the Fund and furnishes accounting and other
services and office facilities for a monthly fee equal to 0.65% annually of
the Fund's average weekly net assets.
BOOKKEEPING FEE: The Adviser provides bookkeeping and pricing services for
$18,000 per year plus 0.0233% of the Fund's average net assets over $50 million.
OTHER: The Fund pays no compensation to its officers, all of whom
are employees of the Adviser.
The Fund's Trustees may participate in a deferred compensation plan which may be
terminated at any time. Obligations of the plan will be paid solely out of the
Fund's assets.
NOTE 4. PORTFOLIO INFORMATION
INVESTMENT ACTIVITY: During the six months ended June 30, 1996, purchases and
sales of investments, other than short-term obligations, were $10,208,200 and
$17,207,058, respectively.
Unrealized appreciation (depreciation) at June 30, 1996, based on cost of
investments for both financial statement and federal income tax purposes was:
<TABLE>
<S> <C>
Gross unrealized appreciation $ 5,325,167
Gross unrealized depreciation (1,868,181)
-----------
Net unrealized appreciation $ 3,456,986
-----------
</TABLE>
18
Notes to Financial Statements/June 30, 1996
NOTE 4. PORTFOLIO INFORMATION - CONT.
CAPITAL LOSS CARRYFORWARDS: At December 31, 1995, capital loss carryforwards
available (to the extent provided in regulations) to offset future realized
gains were approximately as follows:
<TABLE>
<CAPTION>
Year of Capital loss
expiration carryforward
------------ -----------------
<S> <C> <C>
1998 $ 629,000
2000 611,000
2001 2,041,000
2002 2,046,000
2003 2,611,000
----------
$7,938,000
----------
</TABLE>
Expired capital loss carryforwards, if any, are recorded as a reduction of
capital paid in.
To the extent loss carryforwards are used to offset any future realized gains,
it is unlikely that such gains would be distributed since they may be taxable to
shareholders as ordinary income.
OTHER: At June 30, 1996, the Fund had greater than 10% of its net
assets invested in New York and Indiana.
There are certain risks arising from geographic concentration in any state.
Certain revenue or tax related events in a state may impair the ability of
certain issuers of municipal securities to pay principal and interest on their
obligations.
The Fund may focus its investments in certain industries, subjecting it to
greater risk than a fund that is more diversified.
The Fund may invest in municipal and Treasury bond futures contracts and
purchase and write options on futures. The Fund will invest in these instruments
to hedge against the effects of changes in value of portfolio securities due to
anticipated changes in interest rates and/or market conditions, for duration
management, or when the transactions are economically appropriate to the
reduction of risk inherent in the management of the Fund and not for trading
purposes. The use of futures contracts and options involves certain risks, which
include (1) imperfect correlation between the price movement of the instruments
and the underlying securities, (2) inability to close out positions due to
different trading hours, or the temporary absence of a liquid market, for either
the instrument or the underlying securities or (3) an inaccurate prediction by
the Adviser of the future direction of interest rates. Any of these risks may
involve amounts exceeding the amount recognized in the Fund's Statement of
Assets and Liabilities at any given time.
19
Notes to Financial Statements/June 30, 1996
NOTE 5. RESULTS OF ANNUAL SHAREHOLDER MEETING
On May 31, 1996, the Annual Meeting of Shareholders of the Fund was held to
elect four Trustees and to ratify the selection of Price Waterhouse LLP as
independent accountants for the fiscal year ending December 31, 1996. On March
4, 1996, the record date of the Meeting, the Fund had outstanding 11,509,000
shares of beneficial interest. The votes cast at the Meeting were as follows:
Election of four Trustees:
<TABLE>
<CAPTION>
FOR AGAINST
--- -------
<S> <C> <C>
Robert J. Birnbaum 10,213,637 195,480
Lora S. Collins 10,220,500 188,616
James E. Grinnell 10,221,573 187,544
William D. Ireland, Jr 10,203,298 205,818
</TABLE>
The Board of Trustees also consists of Tom Bleasdale, Richard W. Lowry, William
E. Mayer, James L. Moody, Jr., John J. Neuhauser, George L. Shinn, Robert L.
Sullivan and Sinclair Weeks, Jr.
Ratification of the selection of Price Waterhouse LLP as independent
accountants:
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN
--- ------- -------
<S> <C> <C>
10,172,206 53,478 392,363
</TABLE>
20
FINANCIAL HIGHLIGHTS
Selected per share data, total return, ratios and supplemental data throughout
each period are as follows:
<TABLE>
<CAPTION>
(Unaudited)
Six
months ended
June 30 Year ended December 31
------------ ------------------------------------
1996 1995 1994
------------ ------------ ------------
<S> <C> <C> <C>
Net asset value -
Beginning of period $ 11.050 $ 9.930 $ 11.050
------------ ------------ ------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.299 0.644 0.673
Net realized and
unrealized gain (loss) (0.456) 1.111 (1.121)
------------ ------------ ------------
Total from Investment
Operations (0.157) 1.755 (0.448)
------------ ------------ ------------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net investment
income (0.303) (0.635) (0.672)
------------ ------------ ------------
Net asset value -
End of period $ 10.590 $ 11.050 $ 9.930
------------ ------------ ------------
Market price per share $ 9.750 $ 9.875 $ 9.250
------------ ------------ ------------
Total return based on
market value (a) 1.79%(b) 13.87% (8.12)%
------------ ------------ ------------
RATIOS TO AVERAGE NET ASSETS
Expenses 1.16%(c)(d) 1.08%(c) 0.94%
Net investment income 5.56%(c)(d) 6.08%(c) 6.46%
Portfolio turnover 8%(b) 37% 34%
Net assets at end
of period (000) $ 121,908 $ 127,118 $ 114,260
</TABLE>
(a) Total return at market value assuming all distributions reinvested and
excluding brokerage commissions.
(b) Not annualized.
(c) The benefits derived from custody credits and directed brokerage
arrangements had no impact. Prior years' ratios are net of benefits
received, if any.
(d) Annualized.
21
FINANCIAL HIGHLIGHTS - CONT.
Selected per share data, total return, ratios and supplemental data
throughout each period are as follows:
<TABLE>
<CAPTION>
Year ended December 31
------------------------------------------------------
1993 1992 1991
------------ ------------ ------------
<S> <C> <C> <C>
Net asset value -
Beginning of period $ 10.960 $ 11.090 $ 10.850
------------ ------------ ------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.788 0.848 0.886
Net realized and
unrealized gain (loss) 0.090 (0.132) 0.248
------------ ------------ ------------
Total from Investment
Operations 0.878 0.716 1.134
------------ ------------ ------------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net investment
income (0.788) (0.846) (0.894)
------------ ------------ ------------
Net asset value -
End of period $ 11.050 $ 10.960 $ 11.090
------------ ------------ ------------
Market price per share $ 10.750 $ 11.750 $ 11.750
------------ ------------ ------------
Total return based on
market value (a) (2.16)% 7.43% 12.55%
------------ ------------ ------------
RATIOS TO AVERAGE NET ASSETS
Expenses 0.87% 0.86% 0.87%
Net investment income 7.08% 7.76% 8.11%
Portfolio turnover 35% 18% 15%
Net assets at end
of period (000) $ 127,213 $ 126,169 $ 127,589
</TABLE>
(a) Total return at market value assuming all distributions reinvested and
excluding brokerage commissions.
22
DIVIDEND REINVESTMENT PLAN
The Trust generally distributes net investment income monthly and capital gains
annually. Under the Trust's Dividend Reinvestment Plan (the "Plan") all
distributions are reinvested automatically in additional shares of the Trust,
unless the shareholder elects to receive cash or the shares are held in broker
or nominee name and a reinvestment service is not provided by the broker or
nominee.
All cash distributions are paid by check and mailed directly to the record
holder by the dividend paying agent.
Distributions payable to Plan participants will be applied as soon as
practicable by the dividend paying agent to the purchase of Trust shares in the
open market for the Plan participants' accounts.
All Plan accounts receive monthly written confirmations of all transactions.
Shares purchased under the Plan are ordinarily held in uncertificated form,
although participants have the right to receive certificates for whole shares
held in their account.
Each shareholder's proxy includes shares purchased pursuant to the Plan. The
automatic reinvestment of distributions does not relieve participants of any
income tax payable on the distributions. Participants may recognize capital gain
or ordinary income for federal income tax purposes in an amount equal to the
market value of shares received under the Plan.
Fees and expenses of the Plan other than brokerage charges will be paid by the
Trust. Participants will bear a pro-rata share of brokerage charges incurred on
open market purchases.
A Plan participant may terminate his or her participation by written notice to
the Plan administrator. The Plan may be amended or terminated on 90 days written
notice to the Plan participants. Upon withdrawal by any participant or any
termination of the Plan, certificates for whole shares will be issued and cash
payments will be made for any fractional shares. All correspondence concerning
the Plan, including requests for information, should be directed to The First
National Bank of Boston, the Trust's dividend disbursing agent and administrator
of the Plan, at P.O. Box 1681, Boston, Massachusetts 02105, Attention: Dividend
Reinvestment Department.
23
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26
IMPORTANT INFORMATION ABOUT THIS REPORT
The Transfer Agent for Colonial Investment Grade Municipal Trust is:
The First National Bank of Boston
100 Federal Street
Boston, MA 02110
1-617-575-2900
Colonial Investment Grade Municipal Trust mails one shareholder report to each
shareholder address. If you would like more than one report, please call our
Literature Department at 1-800-248-2828 and additional reports will be sent to
you.
This report has been prepared for shareholders of Colonial Investment Grade
Municipal Trust.
27
[Colonial Mutual Funds Logo]
Mutual Funds for
Planned Portfolios
TRUSTEES
ROBERT J. BIRNBAUM
Trustee (formerly Special Counsel, Dechert, Price & Rhoads; President and Chief
Operating Officer, New York Stock Exchange, Inc.)
TOM BLEASDALE
Trustee (formerly Chairman of the Board and Chief Executive Officer, Shore Bank
& Trust Company)
LORA S. COLLINS
Attorney, Kramer, Levin, Naftalis, Nessen, Kamin & Frankel
JAMES E. GRINNELL
Private Investor (formerly Senior Vice President-Operations, The Rockport
Company)
WILLIAM D. IRELAND, JR.
Trustee (formerly Chairman of the Board, Bank of New England-Worcester)
RICHARD W. LOWRY
Private Investor (formerly Chairman and Chief Executive Officer, U.S. Plywood
Corporation)
WILLIAM E. MAYER
Dean, College of Business and Management, University of Maryland (formerly Dean,
Simon Graduate School of Business, University of Rochester; Chairman and Chief
Executive Officer, C.S. First Boston Merchant Bank; and President and Chief
Executive Officer, The First Boston Corporation)
JAMES L. MOODY, JR.
Chairman of the Board, Hannaford Bros. Co. (formerly Chief Executive Officer,
Hannaford Bros. Co.)
JOHN J. NEUHAUSER
Dean, Boston College School of Management
GEORGE L. SHINN
Financial Consultant (formerly Chairman, Chief Executive Officer and Consultant,
The First Boston Corporation)
ROBERT L. SULLIVAN
Management Consultant (formerly Management Consultant, Saatchi and Saatchi
Consulting Ltd. and Principal and International Practice Director, Management
Consulting, Peat Marwick Main & Co.)
SINCLAIR WEEKS, JR.
Chairman of the Board, Reed & Barton Corporation
COLONIAL INVESTMENT SERVICES, INC., Distributor (C) 1996
One Financial Center, Boston, Massachusetts 02111-2621, 617-426-3750
IG-03/466C-0696 M (8/96)
