<PAGE>
[graphic omitted]
- -------------------------------------------------------
COLONIAL INVESTMENT GRADE MUNICIPAL TRUST ANNUAL REPORT
- -------------------------------------------------------
December 31, 1998
<PAGE>
COLONIAL INVESTMENT GRADE MUNICIPAL TRUST HIGHLIGHTS
JANUARY 1, 1998 - DECEMBER 31, 1998
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.
PORTFOLIO MANAGER COMMENTARY: "During the past 12 months, interest rate
volatility and a near-record level of tax-exempt supply created challenging
conditions for investors. Despite these hurdles, the Trust generated attractive
net asset value returns relative to its peers.(1) We attribute this to the
portfolio's structure, which was comprised of a larger-than-average proportion
of bonds that tend to perform well during periods of declining interest rates,
such as bonds with good call protection. We also maintained a
longer-than-average duration in the Trust. Because these characteristics
increased the Trust's sensitivity to changes in interest rates, the portfolio
generated attractive price gains when rates fell.
-- Bill Loring
COLONIAL INVESTMENT GRADE MUNICIPAL TRUST PERFORMANCE
12-month distributions declared per share(2) $0.609
- --------------------------------------------------------------------------------
NAV MARKET PRICE
12-month total return, assuming
reinvestment of all distributions 6.23% 11.94%
- --------------------------------------------------------------------------------
Price per share on 12/31/98 $11.49 $11.19
TOP FIVE SECTORS(3) QUALITY BREAKDOWN(3)
(as of 12/31/98) (as of 12/31/98)
- -------------------------------- --------------------------------
Local General Obligation 12.4% AA: 12.3%
Hospital 8.5% AAA: 53.8%
State Appropriated 8.0% A: 7.0%
Refunded 7.6% BBB: 11.7%
Toll Facility 7.5% Short-term obligations: 1.1%
Non-rated: 14.1%
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.
(1) Please see page 3 for Lipper rankings.
(2) A portion of the Trust's income may be subject to the alternative minimum
tax.
(3) 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.
<PAGE>
PRESIDENT'S MESSAGE
TO FUND SHAREHOLDERS
[Photo of Stephen E. Gibson]
I am pleased to present the annual report for Colonial Investment Grade
Municipal Trust for the 12 months ended December 31, 1998.
Conditions for fixed-income investments varied considerably during the period.
While overall the environment for bonds was positive, a variety of domestic and
international factors created a volatile climate for bond investors. In the
U.S., the periodic fears of inflation that existed early in the period all but
vanished during the second half, as an increasing number of signs pointed toward
a gradually slowing U.S. economy. This environment set the stage for a series of
interest rate cuts by the Federal Reserve Board in the fall of 1998, helping
bond values end the period on a positive note.
The tax-exempt market generated a gain over the period, although it also
experienced volatility much like the broader bond market. In addition to the
trends mentioned above, supply and demand factors contributed to periods of
weakness in municipal bond prices as many tax-exempt issuers rushed to take
advantage of lower interest rates. At times, the market found it difficult to
absorb this unusually high level of supply. However, when the 12 months came to
a close, your Trust's performance was strong relative to its peers.(1)
For investors seeking competitive levels of tax-free income, the potential for
long-term price appreciation, and an opportunity to diversify their fixed-income
portfolio, Colonial Investment Grade Municipal Trust provides a solid investment
option. Thank you for choosing Colonial Investment Grade Municipal Trust and for
giving us the opportunity to serve your investment needs.
Respectfully,
/s/ Stephen E. Gibson
Stephen E. Gibson
President
February 11, 1999
Because market and economic conditions change, there can be no assurance that
the trends described above will continue.
(1) Source: Lipper, Inc. Lipper rankings are based on the Lipper General &
Insured UnleveragedMunicipal Fund Universe. As of 12/31/98 the Fund ranked
in the 1st quartile (rated 5 out of 21 funds) on a one-year basis, in the
1st quartile (rated 2 out of 21 funds) on a three-year basis and in the 1st
quartile (rated 1 out of 19 funds) on a five-year basis.
<PAGE>
INVESTMENT PORTFOLIO
DECEMBER 31, 1998 (IN THOUSANDS)
MUNICIPAL BONDS - 97.9% PAR VALUE
- ------------------------------------------------------------------------------
EDUCATION - 7.7%
EDUCATION - 6.5%
CA State Educational Facilities
Authority, Santa Clara University,
Series 1996,
5.000% 09/01/15 (i) $ 1,050 $ 1,064
IL Chicago State University Trustees,
5.500% 12/01/23 1,085 1,154
MA State Industrial Finance Agency,
Tabor Academy,
Series 1998,
5.400% 12/01/28 1,000 1,007
MN University of Minnesota,
Series 1996-A:
5.750% 07/01/14 500 560
5.500% 07/01/21 2,000 2,167
NY State Lawrence University,
5.500% 07/01/13 1,465 1,582
RI Roger Williams University,
5.125% 11/15/12 1,000 1,040
--------
8,574
--------
STUDENT LOAN - 1.2%
NE Nebhelp, Inc.,
Series 1993 A A-6,
6.450% 06/01/18 1,500 1,625
--------
..............................................................................
HEALTHCARE - 14.8%
HOSPITAL - 8.4%
AL Alabama Special Care Facilities Authority,
Montgomery Healthcare,
Series 1989,
11.000% 10/01/19 935 949
FL Orange County Health Facilities Authority,
Orlando Regional Healthcare System,
Series 1996-C,
6.250% 10/01/13 2,460 2,892
IL Health Facility Authority,
Seires 1992-B, IFRN (variable rate),
9.872% 05/01/21 700 821
LA Jefferson Parish Hospital,
5.250% 07/01/12 (a) 1,000 1,052
MN Rochester,
Mayo Foundation,
Series 1998-A,
5.500% 11/15/27 1,000 1,046
NH Higher Educational and Health Facilities
Catholic Medical Center,
Series 1989, 6.000% 07/01/17 2,500 2,525
TN Metropolitan Government, Nashville
& Davidson Counties,
Meharry Medical College,
Series 1996,
6.000% 12/01/16 1,575 1,801
--------
11,086
--------
INTERMEDIATE CARE FACILITIES - 1.1%
IN Wabash First Mortgage, Hoosier
Care, Inc. ,
Series 1989-A,
9.750% 08/01/19 1,420 1,484
--------
NURSING HOME - 5.3%
CO Health Care Facilities Authority
Pioneer Health Care,
Series 1989,
10.500% 05/01/19 1,710 1,784
DE State Economic Development Authority,
Churchman Village Project,
Series A,
10.000% 03/01/21 975 1,226
FL Escambia County,
Beverly Enterprises-Florida, Inc.,
Series 1985,
9.800% 06/01/11 185 200
KY Jefferson County Health Facilities
Beverly Enterprises, Inc.,
Series 1985-B,
9.750% 08/01/07 680 715
PA Chester County Industrial Development,
Pennsylvania Nursing Home, Inc.,
Series 1989,
10.125% 05/01/19 (b) 1,204 1,107
PA Delaware County Authority,
Main Line and Haverford Nursing,
Series 1992,
9.000% 08/01/22 595 686
WI State Health & Educational Facilities
Authority, Metro Health Foundation, Inc.,
Series 1993,
8.000% 11/01/22 (c) 1,300 1,300
--------
7,018
--------
..............................................................................
HOUSING - 4.9%
ASSISTED LIVING/SENIOR - 0.4%
TX Bell County Health Facilities
Development Corp., Care Institutions, Inc.,
9.000% 11/01/24 500 573
--------
MULTI-FAMILY - 2.6%
FL State Housing Finance Agency,
Windsong Apartments,
Series 1993-C,
9.250% 01/01/19 240 216
MN White Bear Lake,
Birch Lake Townhome Project:
Series 1989-A,
10.250% 07/15/19 775 786
Series 1989-B,
(d) 07/15/19 709 213
Resolution Trust Corp., Pass Through
Certificates, Series 1993-A,
9.250% 12/01/16 (e) 2,124 2,188
--------
3,403
--------
SINGLE-FAMILY - 1.9%
IN State Housing Finance Authority
Single Family Mortgage-GNMA
Series 1990-D,
7.800% 01/01/22 110 115
LA Louisiana Housing Finance Agency,
Residual Lien Mortgage, Series 1992,
7.375% 09/01/13 (d) 550 584
<PAGE>
MA State Housing Finance Agency,
Series 1988-B,
8.100% 08/01/23 110 114
NE State Investment Finance Authority,
7.550% 03/15/22 100 104
OH State Housing Finance Agency,
Series B-4,
10.226% 03/31/31 1,415 1,579
--------
2,496
--------
..............................................................................
OTHER - 7.5%
REFUNDED/ESCROWED (f)
CA California State,
5.750% 03/01/19 1,930 2,141
CA San Joaquin Hills Transportation
Corridor Agency,
Series 1993,
(g) 01/01/23 5,250 1,571
CO Denver City and County Airport,
Series B,
7.250% 11/15/23 205 234
DC Hospital,
Washington Hospital Center,
Corp., Series 1990-A,
8.750% 01/01/15 615 687
DE State Economic Development Authority,
Riverside Hospital,
Series 1992-A,
9.500% 01/01/22 225 285
FL Clearwater Housing Authority,
Hampton Apartments,
Series 1994,
8.250% 05/01/24 700 860
MI Wayne County Building Authority,
Series 1992-A,
8.000% 03/01/17 250 286
MN Mille Lacs Capital Improvement Authority,
Mille Lacs Band of Chippewa,
Series 1992-A,
9.250% 11/01/12 245 298
NC Lincoln County,
Lincoln County Hospital,
9.000% 05/01/07 160 193
TN Metropolitan Government, Nashville &
Davidson Counties,
6.150% 05/15/25 1,000 1,095
TN Shelby County, Health, Education,
& Housing Facilities Board, Open Arms
Development Center:
Series 1992-A,
9.750% 08/01/19 455 642
Series 1992-C,
9.750% 08/01/19 455 642
TX Bexar Metropolitan Water District,
5.000% 05/01/19 1,000 1,037
--------
9,971
--------
..............................................................................
OTHER REVENUE - 1.6%
HOTELS - 0.3%
MN Minneapolis,
Holiday Inn Metrodome Project,
6.000% 12/01/01 350 354
--------
INDUSTRIAL - 1.3%
MN Brooklyn Park,
TL Systems Corp.,
Series 1991,
10.000% 09/01/16 905 1,101
MN Buffalo,
Von Ruden Manufacturing, Inc.,
Series 1989,
10.500% 09/01/14 520 550
--------
1,651
--------
..............................................................................
RESOURCE RECOVERY - 1.2%
DISPOSAL
MA State Industrial Finance Agency,
Peabody Landfill Associates, Inc.:
Ogden Hill Project,
Series 1995,
9.000% 09/01/05 220 243
Series 1998-A,
5.450% 12/01/12 1,250 1,280
--------
1,523
--------
..............................................................................
TAX-BACKED - 31.4%
LOCAL APPROPRIATED - 0.9%
TX Houston Independent School District
Public Facilities Corp.,
Series 1998-A,
(g) 09/15/13 2,500 1,220
--------
LOCAL GENERAL OBLIGATIONS - 12.2%
CO El Paso County School District No. 11,
Series 1996,
7.125% 12/01/19 1,870 2,419
CO Highlands Ranch Metropolitan District,
Series 1996,
6.500% 06/15/11 1,375 1,647
IL Chicago,
Series 1995 A-2,
6.250% 01/01/14 1,480 1,732
IL St. Clair County Public
Building Commission,
(g) 12/01/13 2,000 969
MI Grand Ledge Public School District,
Series 1995,
5.375% 05/01/24 1,750 1,798
MI St. Johns Public School,
Series 1998,
5.100% 05/01/25 1,000 1,019
MN Minneapolis St Paul Airport,
5.250% 01/01/13 1,000 1,053
NY New York City,
Series 1997-A,
7.000% 08/01/07 2,000 2,373
PA Philadelphia School District,
Series B,
5.500% 09/01/18 2,000 2,081
TX La Joya Independent School District,
Series 1998,
5.500% 02/15/12 1,000 1,072
--------
16,163
--------
SPECIAL NON-PROPERTY TAX - 6.2%
FL Tampa Sports Authority,
Tampa Bay Arena Project,
Series 1995,
5.750% 10/01/25 1,000 1,122
NM Dona Ana County,
Series 1998,
5.500% 06/01/15 1,000 1,086
NY New York City Transitional Finance
Authority: Series A,
5.125% 08/15/21 1,000 999
Series 1998-C,
4.750% 05/01/23 1,000 951
NY State Local Government Assistance Corp.,
Series 1993-E,
5.000% 04/01/21 3,000 3,008
WV State Building Commission,
Series 1997-A,
5.250% 07/01/09 1,000 1,077
--------
8,243
--------
SPECIAL PROPERTY TAX - 1.0%
CA Contra Costa County
Public Financing Authority,
Series 1992-A,
7.100% 08/01/22 1,000 1,094
FL Lexington Oaks Community
Development District, Series 1998-B,
5.500% 05/01/05 250 249
--------
1,343
--------
STATE APPROPRIATED - 7.9%
IN State Office Building Commission,
Women's Prison,
Series B,
6.250% 07/01/16 (h)(i) 2,820 3,291
NY New York State Dormitory Authority
Consolidation City University
Series 1993-A,
5.750% 07/01/18 5,000 5,483
NY State Medical Care Facilities
Finance Agency, Mental Health Services
Facilities Improvement,
Series 1991-A,
7.500% 02/15/21 100 109
NY State Urban Development Corp.,
5.600% 04/01/15 1,000 1,086
WV State Building Commission,
Series 1998 A,
5.375% 07/01/18 500 529
--------
10,498
--------
STATE GENERAL OBLIGATIONS - 3.2%
CA State,
5.750% 03/01/19 70 76
CT State,
Series 1996-C,
5.400% 11/01/14 1,000 1,061
MA Massachusetts Bay Transportation
Authority, Series A,
5.000% 03/01/19 1,000 996
PR Commonwealth of Puerto Rico
Aqueduct & Sewer Authority:
6.250% 07/01/12 1,000 1,186
6.250% 07/01/13 750 889
--------
4,208
--------
<PAGE>
..............................................................................
TRANSPORTATION - 11.1%
AIR TRANSPORTATION - 1.7%
IN Indianapolis Airport Authority,
Federal Express Corp.,
Series 1994,
7.100% 01/15/17 1,000 1,119
NY Port Authority of New York & New Jersey,
JFK International Air Terminal, Series 6,
6.250% 12/01/08 1,000 1,154
--------
2,273
--------
AIRPORT - 1.0%
CO Denver City and County Airport,
Series B,
7.250% 11/15/23 795 878
MN Minneapolis-St. Paul Metropolitan
Airport Commission,
Series 1998-A,
5.000% 01/01/22 500 497
--------
1,375
--------
TOLL FACILITIES - 7.4%
CA Foothill/Eastern Transportation
Corridor Agency,
Series 1995-A,
5.000% 01/01/35 1,000 954
CA San Joaquin Hills Transportation
Corridor Agency,
Series A,
(g) 01/15/15 2,000 910
CO State Public Highway Authority,
E-470, Series B,
(g) 09/01/11 2,000 1,117
FL Orlando & Orange County Expressway
Authority, Series 1998,
5.000% 07/01/21 2,500 2,487
IL Chicago,
Skyway Bridge,
Series 1996,
5.375% 01/01/16 1,750 1,819
MA State Turnpike Authority,
Series C,
(g) 01/01/18 3,000 1,159
NH State Turnpike Systems,
Series 1991-C, IFRN (variable rate),
10.159% 11/01/17 (i) 1,000 1,341
--------
9,787
--------
TRANSPORTATION - 1.0%
IL Regional Transportation Authority,
Series C,
7.750% 06/01/20 1,000 1,363
--------
..............................................................................
UTILITY - 17.7%
INDEPENDENT POWER PRODUCER - 0.9%
FL Martin County Industrial
Development Authority,
Indiantown Cogeneration Project,
Series 1994-A,
7.875% 12/15/25 1,000 1,148
--------
INVESTOR OWNED - 3.2%
IN Petersburg Pollution Control,
Indianapolis Power & Light Company,
Series 1993-B,
5.400% 08/01/17 3,000 3,189
MS State Business Finance Corp.,
Systems Energy Resources Project,
Series 1998,
5.875% 04/01/22 1,000 998
--------
4,187
--------
JOINT POWER AUTHORITY - 2.4%
IN State Municipal Power Agency,
Series B,
6.000% 01/01/12 (i) 2,000 2,293
MN Southern Minnesota
Municipal Power Agency,
Series A,
5.000% 01/01/16 150 150
NC State Municipal Power Agency,
Catawba Electric No. 1,
Series 1998-A,
5.500% 01/01/15 640 696
--------
3,139
--------
MUNICIPAL ELECTRIC - 5.7%
CA Sacramento Municipal Utilities District,
Series L,
5.125% 07/01/22 1,850 1,860
NC University of North Carolina at
Chapel Hill,
(g) 08/01/14 1,000 476
NE Public Power District,
Series 1998-A,
5.250% 01/01/11 1,000 1,064
NY Long Island Power Authority:
Series 1998-A,
5.000% 12/01/18 1,500 1,496
Series 1998,
5.125% 04/01/12 500 523
OH Cleveland,
Series 1996 1,
5.000% 11/15/24 500 494
TN Metropolitan Government, Nashville
& Davidson Counties,
Series 1996-A,
(g) 05/15/09 (i) 1,825 1,166
TX San Antonio,
Series 1998-A,
4.500% 02/01/21 500 465
--------
7,544
--------
WATER & SEWER - 5.5%
MA State Water Resources Authority,
Series 1993-B,
5.000% 03/01/22 1,000 974
MS V Lakes Utility District,
8.250% 07/15/24 140 112
PA Erie Sewer Authority,
5.625% 06/01/17 1,500 1,590
SC Chester Metropolitan Water District,
5.000% 03/01/15 1,000 1,022
TX Houston Water & Sewer System,
Series D,
5.000% 12/01/17 2,000 2,002
TX Nueces River Authority,
Corpus Christi Lake Texana Project,
5.250% 07/15/17 (i) 1,500 1,546
--------
7,246
--------
TOTAL MUNICIPAL BONDS (cost of $ 119,359) (j) $129,495
--------
SHORT-TERM OBLIGATIONS - 1.1%
- ------------------------------------------------------------------------------
VARIABLE RATE DEMAND NOTES (k)
ID State Health Facilities Authority,
St. Luke's Regional Medical Facility,
Series 1995,
5.100% 05/01/22 400 400
IN Portage,
Pedcor Investments, Series B,
4.100% 08/01/30 245 245
LA State Offshore Terminal Authority,
Loop, Inc.,
5.100% 09/01/06 100 100
NM Farmington,
Arizona Public Service Co.,
Four Corners Project, Series 1994-B,
5.100% 09/01/24 100 100
NY New York City, General Obligation,
Series B,
5.000% 10/01/22 650 650
--------
TOTAL SHORT-TERM OBLIGATIONS 1,495
--------
OTHER ASSETS & LIABILITIES, NET - 1.0% 1,252
- ------------------------------------------------------------------------------
NET ASSETS - 100.0% $132,242
--------
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 date.
(b) This issuer is in default of certain debt covenants. Income is not being
accrued.
(c) 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, 1998.
(d) Accrued interest accumulates in the value of the security and is payable at
redemption.
(e) 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 December 31,
1998, the value of this security amounted to $2,188 or 1.7% of net assets.
(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) This security, or a portion thereof, with a total market value of $1,156, is
being used to collateralize the delayed delivery purchases indicated in note
(a) above and open futures contracts.
(i) These securities, or a portion thereof, with a total market value of $6,618
are being used to collateralize open futures contracts.
(j) Cost for federal income tax purposes is approximately the same.
(k) 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, 1998.
Acronym Name
------- ----
IFRN Inverse Floating Rate Note
Short futures contracts open at December 31, 1998:
Par value Unrealized
covered by Expiration depreciation
Type contracts month at 12/31/98
----------------------------------------------------------------------------
Treasury Bond $ 4,500 March $ 20
See notes to financial statements.
<PAGE>
STATEMENT OF ASSETS & LIABILITIES
DECEMBER 31, 1998
(in thousands except for per share amount)
ASSETS
Investments at value (cost $119,359) $ 129,495
Short-term obligations 1,495
----------
130,990
Receivable for:
Interest $ 2,126
Investments sold 72
Variation margin on futures 6
Other 107 2,311
-------- ----------
Total Assets 133,301
LIABILITIES
Investments purchased 1,052
Accrued:
Deferred Trustees fees 4
Other 3
--------
Total Liabilities 1,059
----------
NET ASSETS at value for 11,509
shares of beneficial interest outstanding $ 132,242
----------
Net asset value per share $11.49
----------
COMPOSITION OF NET ASSETS
Capital paid in $ 127,930
Accumulated net realized loss (5,804)
Net unrealized appreciation (depreciation) on:
Investments 10,136
Open futures contracts (20)
----------
$ 132,242
----------
See notes to financial statements.
<PAGE>
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
(in thousands)
INVESTMENT INCOME
Interest $ 7,894
EXPENSES
Management fee $ 854
Transfer agent 25
Bookkeeping fee 37
Trustees fee 4
Custodian fee (a)
Audit fee 29
Legal fee 6
Reports to shareholders 10
Other 52 1,017
-------- --------
Net Investment Income 6,877
--------
NET REALIZED & UNREALIZED GAIN (LOSS) ON PORTFOLIO POSITIONS
Net realized gain on:
Investments 1,997
Closed futures contracts 134
--------
Net Realized Gain 2,131
Change in net unrealized appreciation (depreciation)
during the period on:
Investments (1,280)
Open futures contracts 20
--------
Net Change in Unrealized Depreciation (1,260)
--------
Net Gain 871
--------
Increase in Net Assets from Operations $ 7,748
--------
(a) Rounds to less than one.
See notes to financial statements.
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
Year ended
(in thousands) December 31
------------------------
INCREASE (DECREASE) IN NET ASSETS 1998 1997
Operations:
Net investment income $ 6,877 $ 7,113
Net realized gain 2,131 1,650
Net unrealized appreciation (depreciation) (1,260) 4,917
---------- ----------
Net Increase from Operations 7,748 13,680
Distributions:
From net investment income (6,984) (7,302)
In excess of net investment income (25) -
---------- ----------
Total Increase 739 6,378
NET ASSETS
Beginning of period 131,503 125,125
---------- ----------
End of period (including undistributed net
investment income of none and $107, respectively) $ 132,242 $ 131,503
---------- ----------
NUMBER OF FUND SHARES
Outstanding at end of period 11,509 11,509
---------- ----------
See notes to financial statements.
<PAGE>
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
NOTE 1. ACCOUNTING POLICIES
...............................................................................
ORGANIZATION: Colonial Investment Grade Municipal Trust (the Trust), is a
Massachusetts business trust, registered under the Investment Company Act of
1940, as amended, as a diversified, closed-end management investment company.
The Trust'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
Trust 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 is a summary of
significant accounting policies consistently followed by the Trust 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 Trust 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 Trust to subsequently invest at less advantageous prices.
FEDERAL INCOME TAXES: Consistent with the Trust'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 Trust's capital
accounts to reflect income and gains available for distribution (or available
capital loss carryforwards) under income tax regulations.
OTHER: The Trust has an agreement with its custodian bank under which custodian
fees were reduced by balance credits of $277 applied during the year ended
December 31, 1998. The Trust could have invested a portion of the assets
utilized in connection with the expense offset arrangements in an income
producing asset if it had not entered into such agreements.
NOTE 2. FEES AND COMPENSATION PAID TO AFFILIATES
................................................................................
MANAGEMENT FEE: Colonial Management Associates, Inc. (the Advisor)
is the investment Advisor of the Trust and furnishes accounting and other
services and office facilities for a monthly fee equal to 0.65% annually of
the Trust's average weekly net assets.
BOOKKEEPING FEE: The Advisor provides bookkeeping and pricing services for
$18,000 per year plus 0.0233% of the Trust's average net assets over $50
million.
OTHER: The Trust pays no compensation to its officers, all of whom are employees
of the Advisor.
The Trust'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 Trust's assets.
NOTE 3. PORTFOLIO INFORMATION
...............................................................................
INVESTMENT ACTIVITY: During the six months ended December 31, 1998, purchases
and sales of investments, other than short-term obligations, were $31,777,388
and $30,349,809, respectively.
Unrealized appreciation (depreciation) at December 31, 1998, based on cost of
investments for both financial statement and federal income tax purposes was
approximately:
Gross unrealized appreciation $12,117,000
Gross unrealized depreciation (1,981,000)
-----------
Net unrealized appreciation $10,136,000
-----------
CAPITAL LOSS CARRYFORWARDS: At December 31, 1998, 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
--------------------- ------------------
2002 1,417,000
2003 2,611,000
2004 1,455,000
----------
$5,483,000
----------
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 Trust had greater than 10% of its net assets at December 31,
1998,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 Trust may focus its investments in certain industries, subjecting it to
greater risk than a fund that is more diversified.
The Trust may invest in municipal and Treasury bond futures contracts and
purchase and write options on futures. The Trust 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 Trust 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 Advisor of the future direction of interest
rates. Any of these risks may involve amounts exceeding the amount recognized in
the Trust's Statement of Assets and Liabilities at any given time.
<PAGE>
FINANCIAL HIGHLIGHTS
Selected per share data, total return, ratios and supplemental data throughout
each period are as follows:
Year ended December 31
--------------------------------------------
1998 1997 1996
---------- -------- --------
Net asset value -
Beginning of period $ 11.430 $ 10.870 $ 11.050
-------- -------- --------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.600 0.620 0.630
Net realized and
unrealized gain (loss) 0.069 0.575 (0.193)
-------- -------- --------
Total from Investment
Operations 0.669 1.195 0.437
-------- -------- --------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net investment income (0.607) (0.635) (0.617)
In excess of net investment
income (0.002) - -
-------- -------- --------
Total Distributions
Declared to Shareholders (0.609) (0.635) (0.617)
-------- -------- --------
Net asset value -
End of period $ 11.490 $ 11.430 $ 10.870
-------- -------- --------
Market price per share $ 11.187 $ 10.560 $ 10.130
-------- -------- --------
Total return - based on
net asset value (a) 6.23% 11.61% 4.60%
-------- -------- --------
Total return - based on market
value (b) 11.94% 10.76% 9.06%
-------- -------- --------
RATIOS TO AVERAGE NET ASSETS
Expenses (c) 0.77% 0.83% 0.88%
Net investment income (c) 5.24% 5.63% 5.80%
Portfolio turnover 24% 21% 20%
Net assets at end
of period (000) $132,242 $ 131,503 $ 125,125
(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.
- -----------------------------------------------------------------
Federal income tax information (unaudited)
All of the distributions will be treated as exempt income for
federal income tax purposes.
- -----------------------------------------------------------------
<PAGE>
FINANCIAL HIGHLIGHTS -- CONT.
Selected per share data, total return, ratios and supplemental data throughout
each period are as follows:
Year ended December 31
------------------------
1995 1994
------- --------
Net asset value -
Beginning of period $ 9.930 $ 11.050
------- --------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.644 0.673
Net realized and
unrealized gain (loss) 1.111 (1.121)
------- --------
Total from Investment
Operations 1.755 (0.448)
------- --------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net investment income (0.635) (0.672)
------- --------
Net asset value -
End of period $11.050 $ 9.930
------- --------
Market price per share $ 9.880 $ 9.250
------- --------
Total return - based on net
asset value (a) 18.63% (4.08)%
------- --------
Total return - based on market
value (b) 13.87% (8.12)%
------- --------
RATIOS TO AVERAGE NET ASSETS
Expenses 1.08% (c) 0.94%
Net investment income 6.08% (c) 6.46%
Portfolio turnover 37% 34%
Net assets at end
of period (000) $ 127,118 $ 114,260
(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.
<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 "Trust"), at December 31, 1998, 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 Trust'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, 1998 by correspondence with the custodian and brokers, provide a
reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Boston, Massachusetts
February 11, 1999
<PAGE>
DIVIDEND REINVESTMENT PLAN
As a shareholder in the Trust 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 Trust 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.
<PAGE>
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<PAGE>
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<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.
<PAGE>
TRUSTEES
ROBERT J. BIRNBAUM
Consultant (formerly Special Counsel, Dechert, Price & Rhoads; President and
Chief Operating Officer, New York Stock Exchange, Inc.; President, American
Stock Exchange, Inc.)
TOM BLEASDALE
Retired (formerly Chairman of the Board and Chief Executive Officer, Shore
Bank & Trust Company)
JOHN CARBERRY
Senior Vice President of Liberty Financial Companies, Inc.
(formerly Managing Director, Salomon Brothers)
LORA S. COLLINS
Attorney (formerly Attorney, Kramer, Levin, Naftalis & Frankel)
JAMES E. GRINNELL
Private Investor (formerly Senior Vice President-Operations, The Rockport
Company)
RICHARD W. LOWRY
Private Investor (formerly Chairman and Chief Executive Officer, U.S. Plywood
Corporation)
SALVATORE MACERA
Private Investor (formerly Executive Vice President of Itek Corp. and President
of Itek Optical & Electronic Industries, Inc.)
WILLIAM E. MAYER
Partner, Development Capital, LLC (formerly Dean, College of Business and
Management, University of Maryland; Dean, Simon Graduate School of Business,
University of Rochester; Chairman and Chief Executive Officer, CS First Boston
Merchant Bank; and President and Chief Executive Officer, The First Boston
Corporation)
JAMES L. MOODY, JR.
Retired (formerly Chairman of the Board, Chief Executive Officer and Director,
Hannaford Bros. Co.)
JOHN J. NEUHAUSER
Dean, Boston College School of Management
THOMAS E. STITZEL
Professor of Finance, College of Business, Boise State University; Business
Consultant and Author
ROBERT L. SULLIVAN
Retired Partner, KPMG LLP (formerly Management Consultant, Saatchi and Saatchi
Consulting Ltd. and Principal and International Practice Director, Management
Consulting, Peat Marwick Main & Co.)
ANNE-LEE VERVILLE
Consultant (formerly General Manager, Global Education Industry, and President,
Applications Solutions Division, IBM Corporation)
IG-02/473G-1298 (2/99) 99/108
