<PAGE>
[GRAPH OF FLAG]
COLONIAL
INVESTMENT
GRADE MUNICIPAL
TRUST
ANNUAL REPORT
DECEMBER 31, 1996
<PAGE>
COLONIAL INVESTMENT GRADE MUNICIPAL TRUST HIGHLIGHTS
JANUARY 1, 1996 - DECEMBER 31, 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:
X Tax-free income
X Professional management
X Expert credit analysis
PORTFOLIO MANAGER COMMENTARY: "The past 12 months have been volatile for fixed
income investments, with long-term interest rates ranging from a low of 5.95% to
a high of 7.19%. We saw the pace of economic activity moderate, and interest
rates decline during October and November. Investors' perception of a pick-up in
economic growth during the last several weeks of 1996 lead us to take a cautious
outlook as we wait to see firmer evidence of the market's direction."
- William Loring
COLONIAL INVESTMENT GRADE MUNICIPAL TRUST PERFORMANCE
<TABLE>
<S> <C>
Distributions declared per share(1) $0.617
</TABLE>
<TABLE>
<CAPTION>
NAV MARKET PRICE
<S> <C> <C>
12-month total return, assuming
reinvestment of all distributions 4.60% 9.06%
Price per share $10.87 $10.13
</TABLE>
(1) A portion of the Trust's income may be subject to the alternative minimum
tax.
The Trust may at times purchase tax-exempt securities at a discount, and some or
all of this discount may be included in the Trust's ordinary income which will
be taxable when distributed.
TOP FIVE SECTORS QUALITY BREAKDOWN
(as of 12/31/96) (as of 12/31/96)
Education ................. 12.9% NET CASH: 2.6%
Housing ................... 12.7% NON-RATED: 15.3%
Turnpike .................. 10.6% BBB: 15.5%
Hospital .................. 7.9% A: 12.0%
General Obligation ........ 6.9% AAA: 49.1%
AA: 5.5%
Sector and quality breakdowns are calculated as a percent of total net assets.
Because the Trust is actively managed, there can be no guarantee the Trust will
continue to maintain these quality weightings or invest in these sectors in the
future. Industry sectors in the following financial statements are based upon
the standard industrial classifications (SIC) published by the U.S. Office of
Management and Budget. The sector classifications used on this page are based
upon Colonial's defined criteria as used in the investment process.
2
<PAGE>
PRESIDENT'S MESSAGE
TO FUND SHAREHOLDERS
I am pleased to present your Fund's annual report for the fiscal year ended
December 31, 1996. This report reflects on the investment environment of the
past 12 months and on the performance of your Fund.
[PHOTO OF HAROLD W. COGGER]
The economy grew at a comfortable pace through the end of 1995 and into 1996.
The Federal Reserve Board lowered short-term interest rates in December 1995 and
again in January 1996, but stronger-than-expected economic indicators in
February 1996 brought the Fed easing trend to a halt. However, recently released
economic data confirm that economic growth has slowed to a pace well within the
"comfort zone" of the Federal Reserve Board, lessening the market's fears of a
Fed tightening. We are hopeful that the volatility that has characterized the
fixed income market during the past year will be somewhat reduced in the months
ahead.
While market conditions put pressure on municipal bond prices, technical
dynamics, such as low supply and strong retail market support, enabled
tax-exempt bonds to outperform Treasury bonds for much of the year. The
post-election conditions should promote a period of stability for the municipal
market as the flat tax initiative is now a receding memory.
Our economic expectations include growth continuing at a slower, but more
sustainable, rate and our outlook for 1997 is relatively bright. Lower mortgage
rates increased consumer spending power and accelerating exports lead us to
believe that the current economic expansion could continue through the year
ahead.
As always, we thank you for the opportunity to help you meet your investment
goals through the Colonial family of funds.
Respectfully,
/s/ Harold W. Cogger
- --------------------
Harold W. Cogger
President
February 10, 1997
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
<PAGE>
<TABLE>
INVESTMENT PORTFOLIO
DECEMBER 31, 1996 (IN THOUSANDS)
<CAPTION>
MUNICIPAL BONDS - 96.2% PAR VALUE
- ----------------------------------------------------------------------------------
<S> <C> <C> <C>
EDUCATION - 12.6%
CA State Educational Facilities
Authority, Santa Clara University,
Series 1996,
5.000% 09/01/15 $1,050 $ 987
MA State Health & Educational
Facilities, Harvard University,
Series N,
6.250% 04/01/20 4,000 4,390
MN University of Minnesota,
Series 1996 A,
5.750% 07/01/14(a) 500 517
NE Higher Educational Loan Program,
Series 1993 A,
6.450% 06/01/18 1,000 1,039
NH State Higher Educational & Health
Facilities Authority, Dartmouth College,
5.375% 06/01/23 4,000 3,855
NY New York State Dormitory Authority
City University, Series 1993 A,
5.750% 07/01/18 5,000 4,962
-------
15,750
-------
- ----------------------------------------------------------------------------------
GENERAL OBLIGATIONS - 11.4%
CA State of California,
5.750% 03/01/19 2,000 2,010
CO El Paso County School District No. 11,
Series 1996,
7.125% 12/01/19 1,870 2,246
CO Highlands Ranch Metropolitan District 2,
Series 1996,
6.500% 06/15/11 1,375 1,542
IL Chicago, Series A-2,
6.250% 01/01/14 1,480 1,602
MI Grand Ledge Public School District,
Series 1995,
5.375% 05/01/24 1,750 1,702
NY New York City, Series 1997 A,
7.000% 08/01/07 2,000 2,197
PA Philadelphia, Series B,
5.500% 09/01/18 2,000 1,970
TN Metropolitan Government, Nashville &
Davidson County,
6.150% 05/15/25 1,000 1,039
-------
14,308
-------
</TABLE>
4
<PAGE>
<TABLE>
Investment Portfolio/December 31, 1996
- ----------------------------------------------------------------------------------
<CAPTION>
<S> <C> <C> <C>
HEALTH - 15.8%
HOSPITALS - 7.7%
AL Special Care Facilities Authority,
Montgomery Health Care,
Series 1989,
11.000% 10/01/19 $1,045 $1,066
DE State Economic Development Authority,
Riverside Hospital, Series 1992 A,
9.500% 01/01/22 235 307
FL Orange County Health Facilities
Authority, Orlando Regional Healthcare
Series 1996 C,
6.250% 10/01/13 2,460 2,666
IL Health Facility Authority,
RIB (variable rate), Series 1992 B,
9.831% 05/01/21 700 811
MO Hannibal Industrial Development,
Medical Systems of Northeast Missouri,
Series 1992,
9.500% 03/01/22 500 624
NH Higher Educational and Health
Facilities, Catholic Medical Center,
Series 1989,
6.000% 07/01/17 2,500 2,431
TN Metropolitan Government, Nashville
& Davidson Counties, Meharry Medical
College, Series 1996,
6.000% 12/01/16 1,575 1,677
------
9,582
------
HUMAN SERVICE PROVIDERS - 2.3%
IN Wabash First Mortgage, Hoosier
Care, Inc., Series 1989 A,
9.750% 08/01/19 1,460 1,551
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% 08/01/19 475 547
Series 1992 C,
9.750% 08/01/19 475 547
------
2,943
------
</TABLE>
5
<PAGE>
<TABLE>
Investment Portfolio/December 31, 1996
<CAPTION>
- ----------------------------------------------------------------------------------
MUNICIPAL BONDS - CONT. PAR VALUE
- ----------------------------------------------------------------------------------
<S> <C> <C> <C>
HEALTH - CONT.
NURSING HOMES - 5.8%
CO Health Care Facilities Authority,
Pioneer Health Care, Series 1989,
10.500% 05/01/19 $1,710 $1,659
DE State Economic Development Authority,
Churchman Village Project, Series A,
10.000% 03/01/21 1,000 1,179
FL Broward County Industrial Development,
Beverly Enterprises,
9.800% 11/01/10 265 294
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
KY Jefferson County Health Facilities
Beverly Enterprises, Inc., Series 1985 B,
9.750% 08/01/07 740 806
PA Chester County Industrial Development,
Pennsylvania Nursing Home, Inc., Series 1989,
10.125% 05/01/19 1,237 1,285
PA Delaware County Development Authority,
Main Line and Haverford Nursing Home,
Series 1992,
9.000% 08/01/22 600 655
WI State Health and Educational Facilities
Metro Health Foundation Inc.,
10.000% 11/01/22(b) 1,300 1,170
------
7,290
------
- --------------------------------------------------------------------------------
HOUSING - 13.4%
ASSISTED LIVING/SENIOR - 0.4%
TX Bell County Health Facilities
Development Corp., Care Institute Inc.,
9.000% 11/01/24 500 542
------
MULTI-FAMILY - 4.6%
FL Clearwater Housing Authority,
Hampton Apartments, Series 1994,
8.250% 05/01/24 700 734
FL Hialeah Housing Authority, Series 1991,
9.500% 11/01/21 500 475
FL State Housing Finance Agency,
Windsong Apartments, Series 1993 C,
9.250% 01/01/19 240 241
</TABLE>
6
<PAGE>
<TABLE>
Investment Portfolio/December 31, 1996
<CAPTION>
- -----------------------------------------------------------------------------------
<S> <C> <C> <C>
MN White Bear Lake, Multi-family Housing
Revenue, Birch Lake Townhomes Project:
Series 1989 A,
10.250% 07/15/19 $ 775 $ 779
Series 1989 B,
(c) 07/15/19 735 1,316
Resolution Trust Corp., Pass Through
Certificates, Series 1993 A,
8.500% 12/01/16(d) 2,124 2,172
------
5,717
------
SINGLE-FAMILY - 8.4%
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 1,005 1,030
Series 1988,
8.300% 11/01/20 1,090 1,127
MA State Housing Finance Agency,
Series 1988 B,
8.100% 08/01/23 255 267
NE State Single-family Mortgage
Revenue,
7.550% 03/15/22 5,500 5,789
NY State Mortgage Agency, Series F,
8.000% 10/01/17 55 57
OH Housing Finance Agency, Single-family
Mortgage Revenue, RIB (variable rate),
Series B-4,
9.849% 03/31/31 1,915 2,030
------
10,470
------
- ----------------------------------------------------------------------------------
MANUFACTURING -1.4%
MEASURING & ANALYZING INSTRUMENTS - 0.9%
MN Brooklyn Park Industrial Development,
TL Systems Corp., Series 1991,
10.000% 09/01/16 945 1,168
------
TRANSPORTATION EQUIPMENT - 0.5%
MN Buffalo,
Von Ruden Manufacturing, Inc.,
10.500% 09/01/14 550 612
------
</TABLE>
7
<PAGE>
<TABLE>
Investment Portfolio/December 31, 1996
<CAPTION>
- ----------------------------------------------------------------------------------
MUNICIPAL BONDS - CONT. PAR VALUE
- ----------------------------------------------------------------------------------
<S> <C> <C> <C>
POLLUTION CONTROL REVENUE - 2.3%
IN Petersburg Pollution Control,
Indianapolis Power & Light Co., Series 1993 B,
5.400% 08/01/17 $3,000 $2,884
------
- ----------------------------------------------------------------------------------
PUBLIC FACILITIES IMPROVEMENT - 1.0%
MN Mille Lacs Capital Improvement
Infrastructure, Band of Chippewa,
Series 1992 A,
9.250% 11/01/12 265 295
NY State Urban Development Corp.,
5.600% 04/01/15 1,000 980
------
1,275
------
- ----------------------------------------------------------------------------------
PUBLIC INFRASTRUCTURE - 14.9%
AIRPORTS - 4.6%
CO Denver City and County Airport,
Stapleton International Airport:
Series 1990 A,
8.500% 11/15/23 2,000 2,300
Series 1992 B,
7.250% 11/15/23 1,000 1,091
IL Regional Transportation Authority,
Series C,
7.750% 06/01/20 1,000 1,283
IN Indianapolis Airport Authority,
Federal Express Project, Series 1994,
7.100% 01/15/17 1,000 1,081
------
5,755
------
TURNPIKES/TOLL ROADS/BRIDGES - 10.3%
CA Foothill/Eastern Transportation
Corridor Agency, State Toll Road Senior Lien,
5.000% 01/01/35 1,000 849
CA San Joaquin Hills Transportation
Agency, Senior Lien Toll Road, Series 1993,
Capital Appreciation Bonds
(c) 01/01/23 5,250 1,043
6.750% 01/01/32 500 529
FL Orlando & Orange County Expressway,
Series A
5.125% 07/01/20 5,000 4,688
IL Chicago, Skyway Bridge, Series 1996,
5.375% 01/01/16 1,750 1,689
NH State Turnpike Systems,
RIB (variable rate), Series 1991 C,
9.779% 11/01/17 1,000 1,228
</TABLE>
8
<PAGE>
<TABLE>
Investment Portfolio/December 31, 1996
- ----------------------------------------------------------------------------------
<CAPTION>
<S> <C> <C> <C>
TURNPIKES/TOLL ROADS/BRIDGES - CONT.
NY State Thruway Authority,
Highway & Bridging Trust Fund,
Series 1995 B,
5.125% 04/01/15(e) $3,000 $ 2,861
-------
12,887
-------
- ----------------------------------------------------------------------------------
REFUNDED/ESCROW/SPECIAL OBLIGATIONS (f) - 3.1%
DC District of Columbia Hospital,
Washington Hospital Center Corp.,
Series 1990 A,
8.750% 01/01/15 615 713
DE Wilmington, Riverside Hospital,
Series 1988 A,
10.000% 10/01/03 50 55
FL Pinellas County Health Facilities
Sun Coast Hospital, Series 1990 A,
8.500% 03/01/20 840 957
MI Wayne County, Limited Tax General
Obligation Building Authority, Series 1992 A,
8.000% 03/01/17 250 292
NC Lincoln County, Lincoln County Hospital,
9.000% 05/01/07 180 214
NY State Dormitory Authority,
City University, Series 1990 A,
7.625% 07/01/20 750 843
NY State Medical Care Facilities
Finance Agency, Mental Health Services,
Series 1991 A
7.500% 02/15/21 730 825
-------
3,899
-------
- ----------------------------------------------------------------------------------
SALES & EXCISE TAX - 0.8%
FL Tampa Sports Authority, Tampa
Bay Arena Project,
Series 1995,
5.750% 10/01/25 1,000 1,039
-------
- ----------------------------------------------------------------------------------
SOLID WASTE - 2.5%
LAND FILL - 0.2%
MA State Industrial Finance Agency,
Peabody Monofill Associates, Inc.,
Series 1995,
9.000% 09/01/05 240 254
-------
RESOURCE RECOVERY - 2.3%
</TABLE>
9
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
SC Charleston County Recovery
Foster Wheeler Series 1987 A,
9.250% 01/01/10 2,640 2,823
Investment Portfolio/December 31, 1996
<CAPTION>
- ----------------------------------------------------------------------------------
MUNICIPAL BONDS - CONT. PAR VALUE
- ----------------------------------------------------------------------------------
<S> <C> <C> <C>
STATE & COMMUNITY LEASE - 3.2%
CA State Public Works Board,
Department of Corrections, Series 1996 A,
5.500% 01/01/17 $1,000 $ 991
IN State Office Building Commission,
Women's Prison, Series B,
6.250% 07/01/16(e) 2,820 3,014
------
4,005
------
- ----------------------------------------------------------------------------------
TAX ALLOCATION - 3.1%
CA Contra Costa County Public Financing
Authority, Series 1992 A,
7.100% 08/01/22 1,000 1,073
NY State Local Government Assistance Corp.,
Series 1993 E,
5.000% 04/01/21 3,000 2,779
------
3,852
------
- ----------------------------------------------------------------------------------
UTILITY - 6.4%
CO-GENERATION - 0.9%
FL Martin County Industrial
Development Authority,
Indiantown Co-Generation Project,
7.875% 12/15/25 1,000 1,140
------
MUNICIPAL ELECTRIC - 5.5%
IN State Municipal Power Agency,
Series B,
6.000% 01/01/12(e) 2,000 2,108
MN Southern Minnesota Municipal Power
Agency, Series A,
5.000% 01/01/16 1,000 919
NY State Energy Research & Development
Authority, Consolidated Edison Co.,
Series 1991 A,
7.500% 01/01/26 1,000 1,078
OH Cleveland Public Power System,
Series 1996
5.000% 11/15/24 1,000 920
TN Metropolitan Government, Nashville
& Davidson Counties,
Series 1996 A,
(g) 05/15/09 1,825 935
UT Intermountain Power Agency,
Series 1993 A,
5.000% 07/01/23 1,000 904
------
6,864
------
</TABLE>
10
<PAGE>
<TABLE>
Investment Portfolio/December 31, 1996
- ----------------------------------------------------------------------------------
<CAPTION>
WATER & SEWER - 4.3%
<S> <C> <C> <C>
FL Dade County Water & Sewer System,
5.500% 10/01/25 $1,500 $ 1,472
MA State Water Resources Authority,
Series 1993 B,
5.000% 03/01/22 1,000 903
MS Five Lakes Utility District,
8.250% 07/15/24 140 144
PR Commonwealth Aqueduct & Sewer
Authority, Series 1995:
6.250% 07/01/12 1,000 1,089
6.250% 07/01/13 750 811
TX Bexar Metropolitan Water District,
5.000% 05/01/19 1,000 930
--------
5,349
--------
TOTAL MUNICIPAL BONDS (cost of $113,949)(h) 120,408
--------
SHORT-TERM OBLIGATIONS - 2.4%
- ----------------------------------------------------------------------------------
VARIABLE RATE DEMAND NOTES (i)
MI Farmington Hills Hospital
Finance Authority,
Botsford General Hospital, Series 1991 B,
5.250% 02/15/16 800 800
MI Flint Hospital Building Authority,
Hurley Medical Center, Series 1995 B,
4.200% 07/01/15 900 900
MS Perry County,
Leaf River Forest Project,
5.000% 03/01/02 1,300 1,300
--------
TOTAL SHORT-TERM OBLIGATIONS 3,000
--------
OTHER ASSETS & LIABILITIES, NET - 1.4% 1,717
- ----------------------------------------------------------------------------------
NET ASSETS-100% $125,125
========
</TABLE>
NOTES TO INVESTMENT PORTFOLIO:
(a) This security has been purchased on a delayed delivery basis for
settlement at a future date beyond the customary settlement time.
(b) This is a restricted security which was acquired on February 25,
1996 at a cost of $1,432. This security represents 0.9% of the
Fund's net assets as of December 31, 1996.
11
<PAGE>
Investment Portfolio/December 31, 1996
- --------------------------------------------------------------------------------
NOTES TO INVESTMENT PORTFOLIO-CONT.
(c) Accrued interest accumulates in the value of the security and is
payable at redemption.
(d) Security exempt from registration under Rule 144-A of the
Securities Act of 1933. These securities may be resold in
transactions exempt from registration, normally to qualified
institutional buyers. At December 31, 1996, the value of this
security amounted to $2,172 or 1.7% of net assets.
(e) These securities, or a portion thereof, are being used to
collateralize the delayed delivery purchase indicated in note
(a) above.
(f) The Fund has been informed that each issuer has placed direct
obligations of the U.S. Government in an irrevocable trust,
solely for the payment of the principal and interest.
(g) Zero coupon bond.
(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 December 31, 1996.
Acronym Name
------- ----
RIB Residual Interest Bond
12
<PAGE>
<TABLE>
STATEMENT OF ASSETS & LIABILITIES
DECEMBER 31, 1996
<CAPTION>
(in thousands except for per share amount)
<S> <C> <C>
ASSETS
Investments at value (cost $113,949) $120,408
Short-term obligations 3,000
--------
123,408
Receivable for:
Interest $2,335
Investments sold 25
Other 2 2,362
------ --------
Total Assets 125,770
LIABILITIES
Payable for investments purchased 512
Payable to custodian bank 108
Accrued:
Deferred Trustees fees 2
Other 23
Total Liabilities ------ 645
--------
NET ASSETS at value for 11,509
shares of beneficial interest outstanding $125,125
========
Net asset value per share $ 10.87
========
COMPOSITION OF NET ASSETS
Capital paid in $127,935
Undistributed net investment income 277
Accumulated net realized loss (9,546)
Net unrealized appreciation 6,459
--------
$125,125
========
</TABLE>
See notes to financial statements.
13
<PAGE>
<TABLE>
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
<CAPTION>
(in thousands)
<S> <C> <C>
INVESTMENT INCOME
Interest $ 8,233
EXPENSES
Management fee $ 802
Transfer agent 47
Bookkeeping fee 35
Trustees fee 13
Custodian fee 3
Audit fee 41
Legal fee 73
Reports to shareholders 11
Other 55 1,080
------ -------
Net Investment Income 7,153
-------
NET REALIZED & UNREALIZED LOSS ON PORTFOLIO POSITIONS
Net realized loss on:
Investments (1,400)
Closed futures contracts (73)
------
Net Realized Loss (1,473)
Net unrealized depreciation during
the period (578)
-------
Net Loss (2,051)
-------
Net Increase in Net Assets from Operations $ 5,102
=======
</TABLE>
See notes to financial statements.
14
<PAGE>
<TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<CAPTION>
Year ended
(in thousands) December 31
=======================
INCREASE (DECREASE) IN NET ASSETS 1996 1995
<S> <C> <C>
Operations:
Net investment income $ 7,153 $ 7,375
Net realized loss (1,473) (2,659)
Net unrealized appreciation (depreciation) (578) 15,444
-----------------------
Net Increase from Operations 5,102 20,160
Distributions:
From net investment income (7,095) (7,302)
-----------------------
Total Increase (Decrease) (1,993) 12,858
NET ASSETS
Beginning of period 127,118 114,260
-----------------------
End of period (including undistributed net
investment income of $277 and $125, respectively) $125,125 $127,118
=======================
NUMBER OF FUND SHARES
Outstanding at end of period 11,509 11,509
=======================
</TABLE>
See notes to financial statements.
15
<PAGE>
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
NOTE 1. ACCOUNTING POLICIES
- -------------------------------------------------------------------------------
ORGANIZATION: Colonial Investment Grade Municipal Trust (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, by investing primarily in investment-grade municipal
securities. The Fund authorized 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 revenues and expenses during the reporting period.
Actual results could differ from those estimates. The following significant
accounting policies are 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.
Futures contracts are valued based on the difference between the last sale price
and the opening price of the contract.
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.
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.
FEDERAL INCOME TAXES: Consistent with the Fund's policy to qualify as a
regulated investment company and to distribute all of its taxable and tax-exempt
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.
16
<PAGE>
Notes to Financial Statements/December 31, 1996
- --------------------------------------------------------------------------------
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 2. 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
the Fund's assets.
NOTE 3. PORTFOLIO INFORMATION
- --------------------------------------------------------------------------------
INVESTMENT ACTIVITY: During the year ended December 31, 1996, purchases and
sales of investments, other than short-term obligations, were $24,173,589 and
$29,615,854, respectively.
<TABLE>
Unrealized appreciation (depreciation) at December 31, 1996, based on cost of
investments for both financial statement and federal income tax purposes was:
<S> <C>
Gross unrealized appreciation $7,165,918
Gross unrealized depreciation (706,586)
----------
Net unrealized appreciation $6,459,332
==========
CAPITAL LOSS CARRYFORWARDS: At December 31, 1996, capital loss carryforwards
available (to the extent provided in regulations) to offset future realized
gains were approximately as follows:
<CAPTION>
Year of Capital loss
expiration carryforward
---------- ------------
<S> <C>
1998 $ 629,000
2000 611,000
2001 2,041,000
2002 2,046,000
2003 2,611,000
2004 1,454,000
----------
$9,392,000
==========
</TABLE>
17
<PAGE>
Notes to Financial Statements/December 31, 1996
- --------------------------------------------------------------------------------
NOTE 3. PORTFOLIO INFORMATION - CONT.
- --------------------------------------------------------------------------------
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: The Fund had greater than 10% of its net assets at December 31, 1996,
invested in each of Florida and New York.
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.
18
<PAGE>
<TABLE>
FINANCIAL HIGHLIGHTS
<CAPTION>
Selected per share data, total return, ratios and supplemental data throughout
each period are as follows:
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 0.630 0.644 0.673
Net realized and
unrealized gain (loss) (0.193) 1.111 (1.121)
-------- -------- --------
Total from Investment
Operations 0.437 1.755 (0.448)
-------- -------- --------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net investment income (0.617) (0.635) (0.672)
-------- -------- --------
Net asset value -
End of period $ 10.870 $ 11.050 $ 9.930
======== ======== ========
Market price per share $ 10.125 $ 9.875 $ 9.250
======== ======== ========
Total return based on
market value (a) 9.06% 13.87% (8.12)%
======== ======== ========
RATIOS TO AVERAGE NET ASSETS
Expenses 0.88%(b) 1.08(b) 0.94%
Net investment income 5.80%(b) 6.08(b) 6.46%
Portfolio turnover 20% 37% 34%
Net assets at end
of period (000) $125,125 $127,118 $114,260
- ----------
<FN>
(a) Total return at market value assuming all distributions reinvested
and excluding brokerage commissions.
(b) The benefits derived from custody credits and directed brokerage
arrangements had no impact. Prior years' ratios are net of benefits
received, if any.
</TABLE>
19
<PAGE>
<TABLE>
FINANCIAL HIGHLIGHTS - CONT.
<CAPTION>
Selected per share data, total return, ratios and supplemental data throughout
each period are as follows:
Year ended December 31
===========================
1993 1992
======== ========
<S> <C> <C>
Net asset value -
Beginning of period $ 10.960 $ 11.090
-------- --------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.788 0.848
-------- --------
Net realized and
unrealized gain (loss) 0.090 (0.132)
-------- --------
Total from Investment
Operations 0.878 0.716
-------- --------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net investment income (0.788) (0.846)
-------- --------
Net asset value -
End of period $ 11.050 $ 10.960
======== ========
Market price per share $ 10.750 $ 11.750
======== ========
Total return based on
market value (a) (2.16)% 7.43%
======== ========
RATIOS TO AVERAGE NET ASSETS
Expenses 0.87% 0.86%
Net investment income 7.08% 7.76%
Portfolio turnover 35% 18%
Net assets at end
of period (000) $127,213 $126,169
- ----------
<FN>
(a) Total return at market value assuming all distributions reinvested and
excluding brokerage commissions.
</TABLE>
- ------------------------------------------------------------------------------
Federal income tax information (unaudited)
All of the distributions will be treated as exempt income for federal income tax
purposes.
- ------------------------------------------------------------------------------
20
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE TRUSTEES AND SHAREHOLDERS OF COLONIAL INVESTMENT GRADE MUNICIPAL TRUST
In our opinion, the accompanying statement of assets and liabilities,
including the investment portfolio, and the related statements of operations and
of changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Colonial Investment Grade Municipal
Trust (the Fund) at December 31, 1996, the results of its operations, the
changes in its net assets and the financial highlights for the periods
indicated, in conformity with generally accepted accounting principles. These
financial statements and the financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Fund's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with generally accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits, which included confirmation of portfolio positions
at December 31, 1996 by correspondence with the custodian and brokers, and the
application of alternative auditing procedures where confirmations from brokers
were not received, provide a reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
Boston, Massachusetts
February 10, 1997
21
<PAGE>
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.
22
<PAGE>
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
1-617-575-3120
1-800-730-6001
Colonial Investment Grade Municipal Trust mails one shareholder report to each
shareholder address. If you would like more than one report, please call
Colonial at 1-800-426-3750 and additional reports will be sent to you.
This report has been prepared for shareholders of Colonial Investment Grade
Municipal Trust.
23
<PAGE>
[COLONIAL LOGO]
Mutual Funds for
Planned Portfolios
TRUSTEES
ROBERT J. BIRNBAUM
Retired (formerly Special Counsel, Dechert, Price & Rhoads; President and Chief
Operating Officer, New York Stock Exchange, Inc.)
TOM BLEASDALE
Retired (formerly Chairman of the Board and Chief Executive Officer, Shore Bank
& Trust Company)
LORA S. COLLINS
Attorney (formerly Attorney, Kramer, Levin, Naftalis, Nessen, Kamin & Frankel)
JAMES E. GRINNELL
Private Investor (formerly Senior Vice President-Operations, The Rockport
Company)
WILLIAM D. IRELAND, JR.
Retired (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
Partner, Development Capital, L.L.C. (formerly Dean, College of Business and
Management, University of Maryland; 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) 1997
A Liberty Financial Company (NYSE:L)
One Financial Center, Boston, Massachusetts 02111-2621, 617-426-3750
IG-02/263D-1296 M (2/97)
[RECYCLE LOGO] Printed on recycled paper
