[GRAPHIC OMITTED]
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COLONIAL INVESTMENT GRADE MUNICIPAL TRUST Annual Report
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December 31, 1997
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COLONIAL INVESTMENT GRADE MUNICIPAL TRUST HIGHLIGHTS
JANUARY 1, 1997 - DECEMBER 31, 1997
Investment Objective: Seeks as high a level of after-tax total return as is
consistent with prudent risk, by pursuing current income exempt from ordinary
federal income tax and opportunities for long-term appreciation from a portfolio
primarily invested in investment grade municipal bonds.
The Fund is Designed to Offer:
o Tax-free income
o Professional management
o Expert credit analysis
Portfolio Manager Commentary: "Despite declining interest rates, after-tax
yields for municipal bonds have been quite attractive, especially in a period of
low inflation. The number of new municipal bond issues increased somewhat toward
the end of the year, providing the Fund with more opportunities to seek value
for shareholders."
-- William Loring
Colonial Investment Grade Municipal Trust Performance
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Distributions declared per share(1) $0.635
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NAV Market Price
12-month total return, assuming
reinvestment of all distributions 11.61% 10.76%
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Price per share $11.43 $10.56
(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 (as of 12/31/97)
General Obligation ......... 14.7%
Housing .................... 11.2%
Turnpike ................... 10.8%
Special Non-property Tax ... 7.8%
State Appropriated ......... 7.6%
[The below percentages are represented by a pie-chart.]
Quality Breakdown
(as of 12/31/97)
[GRAPHIC OMITTED]
Non-rated: 15.6%
AAA: 53.2%
Short-term obligations 0.5%
BBB: 13.4%
A: 9.1%
AA: 8.2%
Sector and quality breakdowns are calculated as a percent of total investments,
including short-term obligations. 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.
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2
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PRESIDENT'S MESSAGE
TO FUND SHAREHOLDERS
[PHOTO]
I am pleased to present the annual report for Colonial Investment Grade
Municipal Trust. This report reflects on the investment environment for the 12
months ended December 31, 1997 and on the performance of your Fund.
The year just ended saw continued strong economic growth in the United States,
reflected by record highs in the stock market and the lowest unemployment rate
in a generation. In the first half of the year, concerns that this growth would
lead to renewed inflation led the Federal Reserve Board to raise short-term
interest rates. Inflation remained under control, and interest rates declined
through the second half of 1997, fueling a rally in the bond market. Our
economic expectations for 1998 include slowing economic growth and continued
subdued inflation.
Municipal bonds outperformed Treasurys during the first half of the year due to
short supply and strong retail demand. Supply increased later in the year due to
the usual seasonal surge and an increased number of refundings brought on by
lower interest rates. This caused the tax-exempt sector to fall behind
Treasurys, but the relatively attractive yields offered by the new issues
positioned the market for positive performance once the supply was absorbed.
Yield spreads between high and low quality bonds tightened as the year
progressed. That meant investors were not being rewarded for taking on the
additional risk associated with lower quality, non-rated issues. These bonds
also remained in short supply for most of the year, resulting in higher prices.
Even when the supply increased at the end of the year, the price of lower
quality bonds kept rising as investors increasingly "reached" for yield.
Municipal bond funds such as Colonial Investment Grade Municipal Trust offer
investors a number of attractive benefits including tax-exempt income that
compares favorably to inflation, and diversification of your fixed-income
portfolio.
We look forward to updating you on the Fund's performance six months from now,
in the semiannual report.
Respectfully,
/s/ Harold W. Cogger
Harold W. Cogger
President
February 9, 1998
Because market conditions change frequently, there can be no assurance that the
trends described herein will continue.
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3
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INVESTMENT PORTFOLIO
DECEMBER 31, 1997 (IN THOUSANDS)
MUNICIPAL BONDS - 97.8% PAR VALUE
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EDUCATION - 2.5%
Education - 1.2%
CA State Educational Facilities
Authority, Santa Clara University,
Series 1996,
5.000% 09/01/15 (a) $ 1,050 $ 1,047
MN University of Minnesota,
Series 1996 A,
5.750% 07/01/14 500 549
---------
1,596
---------
Student Loan - 1.3%
NE Higher Educational Loan Program,
Series 1993 A A-6,
6.450% 06/01/18 1,500 1,650
---------
...............................................................................
HEALTHCARE - 14.4%
Hospital - 6.8%
AL Alabama Special Care Facilities Authority,
Montgomery Healthcare,
Series 1989,
11.000% 10/01/19 945 964
FL Orange County Health Facilities Authority,
Orlando Regional Healthcare System,
Series 1996 C,
6.250% 10/01/13 2,460 2,826
IL Health Facility Authority,
Series 1992 B, RIB (variable rate),
9.365% 05/01/21 700 831
NH Higher Educational and Health Facilities
Catholic Medical Center, Series 1989,
6.000% 07/01/17 2,500 2,550
TN Metropolitan Government,
Nashville & Davidson Counties,
Meharry Medical College,
Series 1996,
6.000% 12/01/16 1,575 1,780
---------
8,951
---------
Intermediate Care Facilities - 2.0%
IN Wabash First Mortgage,
Hoosier Care, Inc.,
Series 1989-A,
9.750% 08/01/19 1,440 1,541
4
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Investment Portfolio/December 31, 1997
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TN Shelby County, Health, Education,
& Housing Facilities Board, Open Arms
Development Center:
Series 1992-A,
9.750% 08/01/19 $ 465 $ 553
Series 1992-C,
9.750% 08/01/19
465 553
---------
2,647
---------
Nursing Home - 5.6%
CO Health Care Facilities Authority,
Pioneer Health Care, Series 1989,
10.500% 05/01/19 1,710 1,772
DE State Economic Development Authority,
Churchman Village Project,
Series A,
10.000% 03/01/21 990 1,203
FL Broward County,
Beverly Enterprises, Inc.,
9.800% 11/01/10 265 294
FL Escambia County,
Beverly Enterprises-Florida, Inc.,
Series 1985,
9.800% 06/01/11 190 209
FL Leon County,
Beverly Enterprises, Inc.,
Series 1985,
9.800% 06/01/11 15 17
KY Jefferson County Health Facilities,
Beverly Enterprises, Inc.,
Series 1985-B,
9.750% 08/01/07 710 764
PA Chester County Industrial Development,
Pennsylvania Nursing Home, Inc.,
1st Mortgage, Series 1989,
10.125% 05/01/19 1,221 1,184
PA Delaware County Authority,
Main Line and Haverford Nursing,
Series 1992,
9.000% 08/01/22 600 683
WI State Health & Educational Facilities
Authority, Metro Health Foundation, Inc.,
Series 1993,
10.000% 11/01/22 (b) 1,300 1,300
---------
7,426
---------
5
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Investment Portfolio/December 31, 1997
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MUNICIPAL BONDS - CONT. PAR VALUE
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HOUSING - 11.1%
Assisted Living/Senior - 1.0%
FL Clearwater Housing Authority,
Hampton Apartments, Series 1994,
8.250% 05/01/24 $ 700 $ 752
TX Bell County Health Facilities Development
Corp., Care Institutions, Inc.,
9.000% 11/01/24 500 560
---------
1,312
---------
Multi-Family - 3.7%
FL Hialeah Housing Authority,
Series 1991,
9.500% 11/01/21 310 295
FL State Housing Finance Agency,
Windsong Apartments, Series 1993 C,
9.250% 01/01/19 240 192
MN White Bear Lake,
Birch Lake Townhomes Project:
Series 1989-A,
10.250% 07/15/19 775 788
Series 1989-B,
(c) 07/15/19 (d) 721 1,353
Resolution Trust Corp., Pass Through
Certificates, Series 1993-A,
8.500% 12/01/16 (e) 2,124 2,216
---------
4,844
---------
Single Family - 6.4%
IN State Housing Finance Authority,
Single Family Mortgage-GNMA,
Series 1990-D,
7.800% 01/01/22 165 172
LA Louisiana Housing Finance Agency,
Residual Lien Mortgage, Series 1992,
7.375% 09/01/13 (c) 805 846
MA State Housing Finance Agency,
Series 1988 B,
8.100% 08/01/23 255 267
NE State Investment Finance Authority,
7.550% 03/15/22 (a) 4,900 5,176
NY State Mortgage Agency, Series F,
8.000% 10/01/17 55 57
OH State Housing Finance Agency,
Series B-4, RIB (variable rate),
9.517% 03/31/31 1,665 1,861
---------
8,379
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6
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Investment Portfolio/December 31, 1997
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OTHER - 4.8%
Refunded/Escrowed (f) - 4.8%
CO Denver City and County Airport:
Series A,
8.500% 11/15/23 $ 175 $ 198
Series B,
7.250% 11/15/23 205 233
DC Hospital Revenue,
Washington Hospital Center Corp.,
Series 1990 A,
8.750% 01/01/15 615 702
DE State Economic Development Authority,
Riverside Hospital,
Series 1992 A,
9.500% 01/01/22 230 300
FL Pinellas County Health Facilities
Sun Coast Health System,
Sun Coast Hospital,
Series 1990-A,
8.500% 03/01/20 840 933
MI Wayne County Building Authority,
Series 1992 A,
8.000% 03/01/17 250 289
MN Mille Lacs Capital Improvement Authority,
Mille Lacs Bond of Chippewa,
Series 1992 A,
9.250% 11/01/12 255 316
MO Hannibal Industrial Development Authority,
Regional Healthcare Systems,
Series 1992,
9.500% 03/01/22 250 306
NC Lincoln County,
Lincoln County Hospital,
9.000% 05/01/07 170 206
NY State Dormitory Authority,
City University,
Series 1990 A,
7.625% 07/01/20 750 827
NY State Medical Care Facilities
Finance Agency, Mental Health
Facilities Improvement,
Series 1991-A,
7.500% 02/15/21 900 1,006
TX Bexar Metropolitan Water District,
5.000% 05/01/19 1,000 1,013
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6,329
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7
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Investment Portfolio/December 31, 1997
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MUNICIPAL BONDS - CONT. PAR VALUE
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OTHER REVENUE - 1.6%
Hotels - 0.3%
MN Minneapolis,
Holiday Inn Metrodome Project,
6.000% 12/01/01 $ 350 $ 353
---------
Industrial - 1.3%
MN Brooklyn Park,
TL Systems Corp.,
Series 1991,
10.000% 09/01/16 925 1,147
MN Buffalo,
Von Ruden Manufacturing, Inc.,
Series 1989,
10.500% 09/01/14 535 584
---------
1,731
---------
................................................................................
RESOURCE RECOVERY - 0.2%
Disposal - 0.2%
MA State Industrial Finance Agency,
Peabody Monofill Associates, Inc.,
Series 1995,
9.000% 09/01/05 240 268
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................................................................................
TAX-BACKED - 31.1%
Local Appropriated - 0.7%
CA San Diego County,
Central Jail Project,
5.000% 10/01/25 1,000 980
---------
Local General Obligations - 10.5%
CO El Paso County School District No. 11,
Series 1996,
7.125% 12/01/19 1,870 2,398
CO Highlands Ranch Metropolitan District,
Series 1996,
6.500% 06/15/11 1,375 1,625
IL Chicago,
Series 1995 A-2,
6.250% 01/01/14 1,480 1,691
IL St. Clair County Public
Building Commission,
(g) 12/01/13 2,000 888
MI Grand Ledge Public School District,
Series 1995,
5.375% 05/01/24 1,750 1,776
8
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Investment Portfolio/December 31, 1997
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NY New York City,
Series 1997 A,
7.000% 08/01/07 $ 2,000 $ 2,328
PA Philadelphia School District,
Series B,
5.500% 09/01/18 2,000 2,053
TN Metropolitan Government,
Nashville & Davidson Counties,
6.150% 05/15/25 1,000 1,091
---------
13,850
---------
Special Non-Property Tax - 7.7%
FL Tampa Sports Authority,
Tampa Bay Arena Project,
Series 1995,
5.750% 10/01/25 1,000 1,106
NY New York City Transitional Finance
Authority, Series A,
5.125% 08/15/21 1,000 989
NY State Local Government Assistance Corp.,
Series 1993 E,
5.000% 04/01/21 3,000 3,012
PR Commonwealth of Puerto Rico
Infrastructure Financing Authority,
Series A,
5.000% 07/01/21 4,000 3,940
WV State Building Commission,
Series 1997 A,
5.250% 07/01/09 1,000 1,051
---------
10,098
---------
Special Property Tax - 0.8%
CA Contra Costa County
Public Financing Authority,
Series 1992 A,
7.100% 08/01/22 1,000 1,099
---------
State Appropriated - 7.5%
IN State Office Building Commission,
Women's Prison,
Series B,
6.250% 07/01/16 2,820 3,250
NY New York State Dormitory Authority,
Consolidation City University,
Series 1993-A,
5.750% 07/01/18 5,000 5,381
9
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Investment Portfolio/December 31, 1997
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MUNICIPAL BONDS - CONT. PAR VALUE
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TAX-BACKED - CONT.
State Appropriated - Cont.
NY State Medical Care Facilities Finance
Agency, Mental Health Services Facilities
Improvement, Series 1991-A,
7.500% 02/15/21 $ 100 $ 111
NY State Urban Development Corp.,
5.600% 04/01/15 1,000 1,055
--------
9,797
--------
State General Obligations - 3.9%
CA State,
5.750% 03/01/19 2,000 2,097
MA Massachusetts Bay Transportation
Authority, Series A,
5.000% 03/01/19 1,000 986
PR Commonwealth of Puerto Rico
Aqueduct & Sewer Authority:
6.250% 07/01/12 1,000 1,163
6.250% 07/01/13 750 878
--------
5,124
--------
................................................................................
TRANSPORTATION - 15.7%
Air Transportation - 1.8%
IN Indianapolis Airport Authority,
Federal Express Corp.,
Series 1994,
7.100% 01/15/17 1,000 1,126
NY Port Authority of New York & New Jersey,
JFK International Air Terminal, Series 6,
6.250% 12/01/08 1,000 1,145
--------
2,271
--------
Airport - 2.2%
CO Denver City and County Airport:
Series A,
8.500% 11/15/23 1,825 2,051
Series B,
7.250% 11/15/23 795 888
---------
2,939
---------
Toll Facilities - 10.7%
CA Foothill/Eastern Transportation
Corridor Agency,
Series 1995 A,
5.000% 01/01/35 1,000 945
10
<PAGE>
Investment Portfolio/December 31, 1997
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CA San Joaquin Hills Transportation
Corridor Agency:
Series A,
(g) 01/15/15 $ 2,000 $ 835
Series 1993:
(g) 01/01/23 5,250 1,463
6.750% 01/01/32 500 564
CO State Public Highway Authority,
Arapahoe Co., E-470, Series B,
(g) 09/01/11 2,000 1,023
FL Orlando & Orange County Expressway,
Series A,
5.125% 07/01/20 5,000 5,000
IL Chicago,
Skyway Bridge,
Series 1996,
5.375% 01/01/16 1,750 1,778
MA State Turnpike Authority,
Series C,
(g) 01/01/18 3,000 1,080
NH State Turnpike Systems,
Series 1991-C, RIB (variable rate),
9.627% 11/01/17 1,000 1,323
--------
14,011
--------
Transportation - 1.0%
IL Regional Transportation Authority,
Series C,
7.750% 06/01/20 1,000 1,361
--------
................................................................................
UTILITY - 16.4%
Individual Power Producer - 1.3%
FL Martin County Industrial
Development Authority,
Indiantown Cogeneration Project,
Series 1994 A,
7.875% 12/15/25 1,000 1,169
NY IFA Brooklyn Navy Yard Bonds,
5.750% 10/01/36 500 503
--------
1,672
--------
Investor Owned - 3.2%
IN Petersburg Pollution Control,
Indianapolis Power & Light Co.,
Series 1993-B,
5.400% 08/01/17 3,000 3,109
11
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Investment Portfolio/December 31, 1997
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MULTIPLE BONDS - CONT. PAR VALUE
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UTILITY - CONT.
Investor Owned - Cont.
NY State Energy Research & Development
Authority, Consolidated Edison Co.,
Series 1991 A,
7.500% 01/01/26 $ 1,000 $ 1,071
--------
4,180
--------
Joint Power Authority - 3.2%
IN State Municipal Power Agency,
Series B,
6.000% 01/01/12 2,000 2,248
MN Southern Minnesota
Municipal Power Agency,
Series A,
5.000% 01/01/16 1,000 979
UT Intermountain Power Agency,
State Power Supply,
Series A,
5.000% 07/01/23 1,000 971
--------
4,198
--------
Municipal Electric - 3.3%
CA Sacramento Municipal Utilities District,
Series L,
5.125% 07/01/22 1,850 1,832
NC University of North Carolina at
Chapel Hill,
(g) 08/01/14 1,000 436
OH Cleveland,
Series 1996 1,
5.000% 11/15/24 1,000 981
TN Metropolitan Government,
Nashville & Davidson Counties,
Series 1996 A,
(g) 05/15/09 1,825 1,079
--------
4,328
--------
Water & Sewer - 5.4%
MA State Water Resources Authority,
Series 1993-B,
5.000% 03/01/22 1,000 976
MS V Lakes Utility District,
8.250% 07/15/24 140 112
PA Erie Sewer Authority,
5.625% 06/01/17 1,500 1,582
12
<PAGE>
Investment Portfolio/December 31, 1997
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SC Chester Metropolitan Water District,
5.000% 03/01/15 $ 1,000 $ 998
TX Houston Water & Sewer System,
Series D,
5.000% 12/01/17 2,000 1,975
TX Nueces River Authority,
Corpus Christi Lake Texana Project,
5.250% 07/15/17 1,500 1,517
--------
7,160
---------
TOTAL MUNICIPAL BONDS (cost of $117,138)(h) 128,554
---------
SHORT-TERM OBLIGATIONS - 0.5%
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VARIABLE RATE DEMAND NOTES (i)
ID State Health Facilities Authority,
St. Lukes Regional Medical Facility,
Series 1995,
5.100% 05/01/22 $ 300 $ 300
IN Portage Economic Development Revision,
Pedcor Investments,
Series A,
4.250% 08/01/30 200 200
NC Craven County Industrial Facilities &
Pollution Control Financing Authority,
John Hancock Resource Recovery, Inc.,
Series C,
5.150% 05/01/11 200 200
---------
TOTAL SHORT-TERM OBLIGATIONS 700
---------
OTHER ASSETS & LIABILITIES, NET - 1.7% 2,249
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NET ASSETS - 100.0% $131,503
---------
NOTES TO INVESTMENT PORTFOLIO:
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(a) These securiuties, or a portion thereof, with a total market value of
$3,465 are being used to collateralize the open futures contracts.
(b) This is a restricted security which was acquired on February 25, 1996 at a
cost of $1,432. This security represents 1.0% of the Fund's net assets as of
December 31, 1997.
(c) Accrued intrest accumulates in the value of the security and is payable at
redemption.
(d) The value of this security represents fair value as determined under
procedures approved by the Trustees.
(e) Securities 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,
1997, the value of these securities amounted to $2,216 or 1.7% of net
assets.
13
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Investment Portfolio/December 31, 1997
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NOTES TO INVESTMENT PORTFOLIO - CONT.
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(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 $117,139.
(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, 1997.
Acronym Name
------- ----
RIB Residual Interest Bond
Short futures contracts open at December 31, 1997:
Par value Unrealized
covered by Expiration depreciation
Type contracts month at 12/31/97
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Treasury Bond $ 2,500 March $ 40
See notes to financial statements.
14
<PAGE>
STATEMENT OF ASSETS & LIABILITIES
DECEMBER 31, 1997
(in thousands except for per share amount)
ASSETS
Investments at value (cost $117,138) $ 128,554
Short-term obligations 700
-----------
129,254
Cash $ 39
Receivable for:
Interest 2,232
Investments sold 5
Other 2 2,278
--------- -----------
Total Assets 131,532
LIABILITIES
Payable for variation
margin on futures 15
Accrued:
Deferred Trustees fees 2
Other 12
---------
Total Liabilities 29
-----------
NET ASSETS at value for 11,509
shares of beneficial interest
outstanding $ 131,503
-----------
Net asset value per share $11.43
-----------
COMPOSITION OF NET ASSETS
Capital paid in $ 127,931
Undistributed net investment income 107
Accumulated net realized loss (7,911)
Net unrealized appreciation
(depreciation) on:
Investments 11,416
Open futures contracts (40)
-----------
$ 131,503
===========
See notes to financial statements.
15
<PAGE>
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
(in thousands)
INVESTMENT INCOME
Interest $ 8,156
EXPENSES
Management fee $ 821
Transfer agent 50
Bookkeeping fee 36
Trustees fee 16
Custodian fee 4
Audit fee 32
Legal fee 16
Reports to shareholders 10
Other 58 1,043
--------- -----------
Net Investment Income 7,113
-----------
NET REALIZED & UNREALIZED GAIN (LOSS) ON
PORTFOLIO POSITIONS
Net realized gain
(loss) on:
Investments 1,657
Closed futures contracts (7)
----------
Net Realized Gain 1,650
Net unrealized appreciation (depreciation)
during the period on:
Investments 4,957
Open futures contracts (40)
----------
Net Unrealized Appreciation 4,917
------------
Net Gain 6,567
------------
Increase in Net Assets from Operations $ 13,680
============
See notes to financial statements.
16
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
Year ended
December 31
(in thousands) --------------------------
INCREASE (DECREASE) IN NET ASSETS 1997 1996
Operations:
Net investment income $ 7,113 $ 7,153
Net realized gain (loss) 1,650 (1,473)
Net unrealized appreciation (depreciation) 4,917 (578)
-------------------------
Net Increase from Operations 13,680 5,102
Distributions:
From net investment income (7,302) (7,095)
--------------------------
Total Increase (Decrease) 6,378 (1,993)
NET ASSETS
Beginning of period 125,125 127,118
--------------------------
End of period (including undistributed net
investment income of $107 and $277,
respectively) $ 131,503 $ 125,125
==========================
NUMBER OF FUND SHARES
Outstanding at end of period 11,509 11,509
==========================
See notes to financial statements.
17
<PAGE>
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997
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 seek as high a level of after-tax total
return as is consistent with prudent risk, by pursuing current income exempt
from ordinary federal income tax and opportunities for long-term appreciation
from a portfolio primarily invested in investment grade municipal bonds. 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 for which market quotations are not readily available 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.
18
<PAGE>
Notes to Financial Statements/December 31, 1997
- --------------------------------------------------------------------------------
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 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, 1997, purchases and
sales of investments, other than short-term obligations, were $27,564,912 and
$26,445,771, respectively.
Unrealized appreciation (depreciation) at December 31, 1997, based on cost of
investments for both financial statement and federal income tax purposes was:
Gross unrealized appreciation $12,077,497
Gross unrealized depreciation (662,790)
-----------------
Net unrealized appreciation $11,414,707
=================
19
<PAGE>
Notes to Financial Statements/December 31, 1997
- --------------------------------------------------------------------------------
NOTE 3. PORTFOLIO INFORMATION - CONT.
- --------------------------------------------------------------------------------
Capital loss carryforwards: At December 31, 1997, capital loss carryforwards
available (to the extent provided in regulations) to offset future realized
gains were approximately as follows:
Year of Capital loss
expiration carryforward
-------- -------------
2001 1,615,000
2002 2,046,000
2003 2,611,000
2004 1,454,000
------------
$ 7,726,000
============
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, 1997,
invested in 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 the 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.
20
<PAGE>
FINANCIAL HIGHLIGHTS
Selected per share data, total return, ratios and supplemental data throughout
each period are as follows:
Year ended December 31
-------------------------------------------
1997 1996 1995
----------- ----------- -----------
Net asset value -
Beginning of period $ 10.870 $ 11.050 $ 9.930
----------- ----------- -----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.620 0.630 0.644
Net realized and
unrealized gain(loss) 0.575 (0.193) 1.111
----------- ----------- -----------
Total from Investment
Operations 1.195 0.437 1.755
----------- ----------- -----------
LESS DISTRIBUTIONS DECLARED TO
SHAREHOLDERS:
From net investment income (0.635) (0.617) (0.635)
----------- ----------- -----------
Net asset value -
End of period $ 11.430 $ 10.870 $ 11.050
=========== =========== ===========
Market price per share $ 10.560 $ 10.130 $ 9.880
=========== =========== ===========
Total return based on
net asset value (a) 11.61% 4.60% 18.63%
=========== =========== ===========
Total return based on
market value (b) 10.76% 9.06% 13.87%
=========== =========== ===========
RATIOS TO AVERAGE NET ASSETS
Expenses (c) 0.83% 0.88% 1.08%
Net investment income (c) 5.63% 5.80% 6.08%
Portfolio turnover 21% 20% 37%
Net assets at end
of period (000) $131,503 $125,125 $127,118
(a) Total return at net asset value assuming all distributions reinvested.
(b) Total return at market value assuming all distributions reinvested and
excluding brokerage commissions.
(c) The benefits derived from custody credits and directed brokerage
arrangements had no impact. Prior years' ratios are net of benefits
received, if any.
21
<PAGE>
FINANCIAL HIGHLIGHTS - CONT.
Selected per share data, total return, ratios and supplemental data throughout
each period are as follows:
Year ended December 31
------------------------------
1994 1993
------------- ------------
Net asset value -
Beginning of period $ 11.050 $ 10.960
------------ ------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.673 0.788
Net realized and
unrealized gain (loss) (1.121) 0.090
------------ ------------
Total from Investment
Operations (0.448) 0.878
------------ ------------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net investment
income (0.672) (0.788)
------------ ------------
Net asset value -
End of period $ 9.930 $ 11.050
=========== =============
Market price per share $ 9.250 $ 10.750
=========== =============
Total return based on
net asset value (a) (4.08)% 7.75%
=========== =============
Total return based on
market value (b) (8.12)% (2.16)%
=========== =============
RATIOS TO AVERAGE NET ASSETS
Expenses 0.94% 0.87%
Net investment income 6.46% 7.08%
Portfolio turnover 34% 35%
Net assets at end
of period (000) $ 114,260 $ 127,213
(a) Total return at net asset value assuming all distributions reinvested.
(b) Total return at market value assuming all distributions reinvested and
excluding brokerage commissions.
- --------------------------------------------------------------------------------
Federal income tax information (unaudited)
All of the distributions will be treated as exempt income for federal income tax
purposes.
22
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
T0 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, 1997, 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, 1997 by correspondence with the custodian and brokers, provide a
reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
Boston, Massachusetts
February 9, 1998
23
<PAGE>
- --------------------------------------------------------------------------------
NOTICE TO SHAREHOLDERS OF
COLONIAL INVESTMENT GRADE MUNICIPAL TRUST
At their meeting in August, 1997, the Trustees of your Trust amended the Trust's
Dividend Reinvestment Plan to conform the Plan more closely to those of the
other Colonial closed-end Funds.
The Amended Plan now provides that the Trust may issue new shares at the higher
of net asset value or 95% of market value for reinvestment of dividends, rather
than requiring the Plan Agent to purchase Trust shares in the open market. Under
the former Plan, the Plan Agent would reinvest dividends in shares purchased in
the open market, at market price. If, when the Plan Agent was reinvesting
dividends, the price of shares in the open market was at or above the Trust's
net asset value, shareholders would have received fewer shares than if the Trust
had issued new shares at the higher of net asset value or 95% of market value.
In the future, if shares of the Trust are trading in the open market at a
discount to net asset value greater than 5% when the Plan Agent is reinvesting
dividends, the Plan Agent will continue the current practice of buying shares at
market price for dividend reinvestment.
The Trustees also amended the Plan so that when future changes are made to the
Plan, shareholders will receive 30 (rather than 90) days' notice of the changes.
The 30-day requirement is consistent with the notice requirement (adopted in
1989) of other Plans for shareholders in other Colonial closed-end Funds.
- --------------------------------------------------------------------------------
24
<PAGE>
- --------------------------------------------------------------------------------
DIVIDEND REINVESTMENT PLAN
As a shareholder in the Fund you are eligible to participate in the Dividend
Reinvestment Plan.
The Trust generally distributes net investment income and net short-term capital
gains monthly and net long-term 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 will be mailed by check directly to the record holder by the
dividend paying agent.
If the market price of Fund shares on the distribution payment date is equal to
or greater than the net asset value, Plan participants will be issued shares at
the higher of net asset value or 95% of the market price. However, if the market
price of shares is less than the net asset value, shares will be bought as soon
as practicable (but no more than 30 days after the distribution, except as may
be required to comply with federal securities laws) in the open market for the
accounts of Plan participants. If, during this purchase period, the market price
surpasses the net asset value, the average per share price paid may exceed the
net asset value of the shares, resulting in the acquisition of fewer shares than
if the distribution had been in newly-issued shares. The aggregate market value
of the shares may constitute taxable income to shareholders for federal income
tax purposes.
All Plan accounts receive monthly written confirmations of all transactions.
Shares purchased under the Plan ordinarily are held in uncertificated form,
although each participant has the right to receive certificates for whole shares
owned by the participant. 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.
There is no charge to Plan participants for reinvesting distributions. Fees and
expenses of the Plan other than brokerage charges are paid by the Trust.
Participants bear a pro-rata share of brokerage charges incurred on open market
purchases of shares issued under the Plan.
A shareholder may elect not to participate or terminate his or her participation
in the Plan by written notice to the Plan administrator. Such notice must be
received by the Plan administrator before the dividend record date in order to
be effective with respect to that dividend. The Plan may be amended or
terminated on 30 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 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.
- --------------------------------------------------------------------------------
25
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26
<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
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.
27
<PAGE>
- --------------------------------------------------------------------------------
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.
Retired (formerly Chairman of the Board and 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
Retired Partner, Peat Marwick Main & Co. (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
IG-02/690E-1297 M (2/98)
- --------------------------------------------------------------------------------
