UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number: 811-5785
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Colonial Investment Grade Municipal Trust
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(Exact name of registrant as specified in charter)
One Financial Center, Boston, Massachusetts 02111
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(Address of principal executive offices) (Zip code)
Vincent Pietropaolo, Esq.
Columbia Management Group, Inc.
One Financial Center
Boston, MA 02111
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(Name and address of agent for service)
Registrant's telephone number, including area code: 1-617-772-3698
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Date of fiscal year end: 11/30/05
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Date of reporting period: 05/31/05
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Form N-CSR is to be used by management investment companies to file reports with
the Commission not later than 10 days after the transmission to stockholders of
any report that is required to be transmitted to stockholders under Rule 30e-1
under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may
use the information provided on Form N-CSR in its regulatory, disclosure review,
inspection, and policymaking roles.
A registrant is required to disclose the information specified by Form N-CSR,
and the Commission will make this information public. A registrant is not
required to respond to the collection of information contained in Form N-CSR
unless the Form displays a currently valid Office of Management and Budget
("OMB") control number. Please direct comments concerning the accuracy of the
information collection burden estimate and any suggestions for reducing the
burden to Secretary, Securities and Exchange Commission, 450 Fifth Street, NW,
Washington, DC 20549-0609. The OMB has reviewed this collection of information
under the clearance requirements of 44 U.S.C. Section 3507.
ITEM 1. REPORTS TO STOCKHOLDERS.
COLONIAL INVESTMENT GRADE MUNICIPAL TRUST SEMIANNUAL REPORT
MAY 31, 2005
[cover photo of domed building]
NOT FDIC INSURED
MAY LOSE VALUE
NO BANK GUARANTEE
PRESIDENT'S MESSAGE
Dear Shareholder:
In 2004, Colonial Funds became part of Columbia Management, the asset management
division of Bank of America, one of the largest, most respected financial
institutions in the United States. As a direct result of this merger, a number
of changes are in the works that we believe offer significant potential benefits
for our shareholders. First, some funds may be merged in order to eliminate
redundancies, others may be liquidated and fund management teams will be aligned
to maximize performance potential. You will receive more detailed information
about these changes if your fund is affected and you may be asked to vote on
certain fund changes. In this matter, your timely response will enable us to
implement the changes in 2005.
As a result of these changes, we believe we will offer shareholders an even
stronger lineup of investment options. What will not change as we enter this
next phase of consolidation is our commitment to the highest standards of
performance and our dedication to superior service. Change for the good has
another name: it's called improvement. It helps move us forward, and we believe
that it represents progress for all our shareholders in their quest for
long-term financial success.
In the pages that follow, you'll find a detailed report from the fund's manager
on key factors that influenced your fund's performance. We hope that you will
read the manager reports carefully and discuss any questions you might have with
your financial advisor.
As always, we thank you for choosing Colonial Funds. We appreciate your
continued confidence. And, we look forward to helping you keep your long-term
financial goals on target in the years to come.
Sincerely,
/s/ Christopher L. Wilson
Christopher L. Wilson
President, Columbia Funds
Christopher L. Wilson is Head of Mutual Funds for Columbia Management, President
of Columbia Funds, President & CEO of Nations Funds and President of Galaxy
Funds, responsible for the day-to-day delivery of mutual fund services to the
firm's investors. With the exception of distribution, Chris oversees all aspects
of the mutual fund services operation, including treasury, investment accounting
and shareholder and broker services. Chris joined Bank of America in August
2004.
The views expressed in the President's Message and Portfolio Manager's Report
reflect the current views of the respective parties. These views are not
guarantees of future performance and involve certain risks, uncertainties and
assumptions that are difficult to predict so actual outcomes and results may
differ significantly from the views expressed. These views are subject to change
at any time based upon economic, market or other conditions and the respective
parties disclaim any responsibility to update such views. These views may not be
relied on as investment advice and, because investment decisions for a Colonial
trust are based on numerous factors, may not be relied on as an indication of
trading intent on behalf of any particular Colonial trust. References to
specific company securities should not be construed as a recommendation or
investment advice.
PORTFOLIO MANAGER'S REPORT
For the six-month period ended May 31, 2005, Colonial Investment Grade Municipal
Trust generated a total return of 8.05%, based on its market price. The trust
returned 5.22%, based on investment at net asset value. By comparison, the
Lipper General Municipal Debt Funds (Leveraged) Category average returned 5.94%
for the same period.1 The trust benefited from its focus on longer-maturity
municipal bonds, which did well as long-term interest rates declined. We believe
the trust's shortfall relative to its peer group was the result of its sizable
stake in non-callable bonds, which fell out of favor during the period.
Non-callable bonds are bonds that cannot be "called" or redeemed by the issuer
before their due date.
Investment grade municipal bonds posted solid gains, fueled by good economic
growth that helped revenues. Lower quality issues were among the best
performers, benefiting as interest rates remained low and investors stretched
for yield. Longer-term bonds--those with maturities of 10 or more years--rallied
as their yields declined. By contrast, short-term bond yields rose, pressuring
short-term bond prices.
GAINS FROM ZERO COUPON BONDS
The trust's overweight in zero coupon muni bonds ("zeros") and other long-term
muni issues aided performance. Zeros carry no coupon and are bought at a steep
discount to face value. They tend to do well when bond yields fall. Investments
in the lower quality, higher-yielding airline and tobacco sectors further helped
returns. However, Treasury futures contracts, which were used to reduce the
duration of the trust, declined in value, offsetting some of the gains from the
trust's bonds. Tobacco bonds are issued by individual states, cities and
counties. These bonds are secured by revenues from a financial settlement with
the tobacco companies related to past and future tobacco-related health costs.
In addition to strong demand, positive litigation news made the sector more
attractive. Among airlines, US Airways bonds (0.3% of total investments) were
standouts.2
BOOSTED INCOME THROUGH NON-RATED AND LOWER QUALITY BONDS
We focused on adding income by building the trust's stake in a highly
diversified group of non-rated bonds, which totaled approximately 11% of assets
by period end. Bonds that are not rated by credit rating agencies tend to have
higher yields because they tend to be of lower quality. Our purchases included
bonds issued for the renovation of Heldrich Hotel in New Jersey (0.3% of total
investments), which had a sizable yield advantage over AAA-rated bonds. We also
added some AA-rated housing bonds as well as some South Carolina school district
bonds. Both offered attractive yields. To fund these purchases, we reduced the
trust's stake in lower-yielding bonds, including some bonds with very short
calls.
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1 Lipper Inc., a widely respected data provider in the industry, calculates
an average total return (assuming reinvestment of distributions) for mutual
funds with investment objectives similar to those of the trust. Lipper
makes no adjustment for the effect of sales loads.
2 Holdings are discussed as of May 31, 2005, and are subject to change.
(Sidebar)
PRICE PER SHARE
AS OF 05/31/05 ($)
Net asset value 11.36
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Market price 10.45
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6-MONTH (CUMULATIVE) TOTAL
RETURN AS OF 05/31/05 (%)
Net asset value 5.22
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Market price 8.05
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Lipper General Municipal
Debt Funds (Leveraged)
Category average 5.94
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All results shown assume
reinvestment of distributions.
DISTRIBUTIONS DECLARED
PER COMMON SHARE
12/01/04-05/31/05 ($)
0.35
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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 from their
original issue price. Some or all of this discount may be included in the
trust's ordinary income, and any market discount is taxable when distributed.
TOP 5 SECTORS
AS OF 05/31/05 (%)
Local general obligations 13.2
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Hospital 9.7
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State appropriated 7.7
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Investor owned 7.5
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Education 6.7
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QUALITY BREAKDOWN
AS OF 05/31/05 (%)
AAA 46.5
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AA 12.1
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A 8.5
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BBB 17.3
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BB 1.6
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B 0.7
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Non-rated 11.4
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Cash equivalents 1.9
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Sector and quality breakdowns are calculated as a percentage of total
investments. Ratings shown in the quality breakdown represent the rating
assigned to a particular bond by one of the following nationally-recognized
rating agencies: Standard & Poor's, a division of The McGraw-Hill Companies,
Inc., Moody's Investors Service, Inc. or Fitch Ratings Ltd.
The majority of the bonds that are non-rated are considered by the advisor to be
of non-investment grade quality.
Because the trust is actively managed, there is no guarantee that the trust will
continue to invest in these sectors or maintain this quality breakdown in the
future.
1
PORTFOLIO MANAGER'S REPORT (CONTINUED)
DECLINE IN DIVIDEND, BUT CONTINUED BENEFIT FROM LEVERAGE
Despite these efforts, the trust's dividend yield dropped as long-term rates
fell and rising short-term interest rates eroded some of the income derived from
leverage. The trust's leverage came from its preferred shares. We invested the
proceeds from the preferred shares in longer maturity bonds, and then paid out
to preferred shareholders a short-term rate that was influenced by the federal
funds rate--the overnight rate at which banks lend each other money. As the
federal funds rate climbed, the payout rate to preferred shareholders rose,
reducing the income available to the common shareholders. However, the leverage
still resulted in a higher dividend payment to the common shareholders than
would have been available without it.
POSITIVE OUTLOOK
We believe that long-term yields may go higher, but we don't expect a dramatic
increase. If we see continued increases in short-term interest rates, however,
we would probably see additional cuts in the trust's dividend. Going forward, we
plan to continue to employ lower quality muni bonds in an effort to add income.
/s/ Maureen G. Newman
Maureen G. Newman has been the portfolio manager of Colonial Investment Grade
Municipal Trust since January 2002. Ms. Newman has managed various other
municipal funds for Columbia Management Advisors, Inc. or its predecessors or
affiliate organizations since May 1996.
PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE AND CURRENT PERFORMANCE MAY
BE LOWER OR HIGHER. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS.
Investing in fixed-income securities may involve certain risks, including the
credit quality of individual issuers, possible prepayments, market or economic
developments and yield and share price fluctuations due to changes in interest
rates. When interest rates go up, bond prices typically drop, and vice versa.
Investing in high-yield or "junk bonds" offers the potential for higher income
than investments in investment-grade bonds but they also have a higher degree of
risk. Changes in economic conditions or other circumstances may adversely affect
a high-yield bond issuer's ability to make timely principal and interest
payments.
Tax-exempt investing offers current tax-exempt income, but it also
involves special risks. The value of the trust shares will be affected by
interest rate changes and the creditworthiness of issues held in the trust.
Interest income from certain tax-exempt bonds may be subject to certain state
and local taxes and, if applicable, the alternative minimum tax. Capital gains
are not exempt from income taxes.
2
INVESTMENT PORTFOLIO
May 31, 2005 (Unaudited)
MUNICIPAL BONDS - 141.0% PAR ($) VALUE ($)
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EDUCATION - 13.3%
EDUCATION - 9.7%
AL University of South Alabama,
Series 1999,
Insured: AMBAC
(a) 11/15/18 2,500,000 1,412,200
FL Broward County Educational
Facilities Authority, Nova
Southeastern University,
Series 2004 B,
5.500% 04/01/24 155,000 163,869
IL Chicago State University Auxiliary
Facilities, Series 1998,
Insured: MBIA
5.500% 12/01/23 1,085,000 1,285,313
MA Development Finance Agency,
Western New England College,
Series 2002,
6.125% 12/01/32 315,000 336,174
MN University of Minnesota:
Series 1996 A,
5.750% 07/01/14 500,000 583,485
Series 1999 A,
5.500% 07/01/21 2,000,000 2,361,120
NY St. Lawrence County Industrial
Development Agency, St. Lawrence
University, Series 1998 A,
Insured: MBIA
5.500% 07/01/13 1,465,000 1,592,880
PA Higher Education Facilities
Authority, Philadelphia University,
Series 2004 A,
5.125% 06/01/25 500,000 504,485
TN Metropolitan Government, Nashville
& Davidson County, Health &
Educational Facilities Board, Meharry
Medical College Project, Refunding,
Series 1996
Insured: AMBAC
6.000% 12/01/16 1,575,000 1,872,722
TX Texas Tech University,
Series 1999,
Insured: AMBAC
5.000% 02/15/29 2,500,000 2,600,900
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Education Total 12,713,148
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PREP SCHOOL - 1.1%
MA Industrial Finance Agency,
Tabor Academy,
Series 1998,
5.400% 12/01/28 1,000,000 1,040,850
NH Business Finance Authority,
Proctor Academy,
Series 1998 A,
5.400% 06/01/17 390,000 405,074
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Prep School Total 1,445,924
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PAR ($) VALUE ($)
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STUDENT LOAN - 2.5%
CT Higher Education Supplemental
Loan Authority, Senior Family
Education Loan Program,
Series A,
Insured: MBIA
4.250% 11/15/19 1,700,000 1,705,236
NE Nebhelp, Inc.,
Series 1993 A-6, AMT,
Insured: MBIA
6.450% 06/01/18 1,500,000 1,559,565
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Student Loan Total 3,264,801
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EDUCATION TOTAL 17,423,873
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HEALTH CARE - 23.1%
CONTINUING CARE RETIREMENT - 5.1%
CA La Verne,
Brethren Hillcrest Homes,
Series 2003 B,
6.625% 02/15/25 350,000 387,887
CT Development Authority,
Elim Park Baptist Home, Inc.,
Series 2003,
5.750% 12/01/23 250,000 266,958
FL Capital Projects Finance Authority,
Glenridge on Palmer Ranch,
Series 2002 A,
8.000% 06/01/32 500,000 553,320
FL Lee County Industrial Development
Authority, Shell Point Village Project,
Series 1999 A,
5.500% 11/15/29 175,000 178,717
GA Fulton County,
Canterbury Court Project,
Series 2004 A,
6.125% 02/15/34 250,000 253,643
IL Health Facilities Authority,
Lutheran Senior Ministries,
Series 2001,
7.375% 08/15/31 250,000 267,850
Washington & Jane Smith Community,
Series 2003 A,
7.000% 11/15/32 250,000 257,050
MD Westminster Economic Development,
Carroll Lutheran Village, Inc.,
Series 2004 A,
5.875% 05/01/21 500,000 520,015
MO Cole County Industrial Development
Authority, Lutheran Senior Services,
Heisinger Project, Series 2004,
5.500% 02/01/35 500,000 526,970
NJ Economic Development Authority,
Winchester Gardens,
Series 2004 A:
5.750% 11/01/24 350,000 373,026
5.800% 11/01/31 250,000 263,635
See Accompanying Notes to Financial Statements.
3
INVESTMENT PORTFOLIO (CONTINUED)
May 31, 2005 (Unaudited)
MUNICIPAL BONDS (CONTINUED) PAR ($) VALUE ($)
-----------------------------------------------------------
HEALTH CARE (CONTINUED)
CONTINUING CARE RETIREMENT (CONTINUED)
PA Chartiers Valley Industrial & Commercial
Development Authority, Friendship
Village/South, Series 2003 A,
5.250% 08/15/13 500,000 515,770
PA Delaware County Authority,
Dunwoody Village,
Series 2003 A,
5.375% 04/01/17 250,000 267,012
PA Montgomery County Industrial
Development Authority, Whitemarsh
Continuing Care Retirement
Community, Series 2005,
6.250% 02/01/35 300,000 314,763
TN Johnson City Health & Educational
Facilities Authority, Appalachian
Christian Village Project,
Series 2004 A,
6.250% 02/15/32 250,000 254,605
TN Shelby County Health, Educational
& Housing Facilities Board,
Germantown Village,
Series 2003 A,
7.250% 12/01/34 150,000 158,181
TX Abilene Health Facilities Development
Corp., Sears Methodist Retirement
Center, Series 2003 A,
7.000% 11/15/33 500,000 531,055
VA Winchester Industrial Development
Authority, Westminster Canterbury,
Series 2005 A
5.300% 01/01/35(c) 250,000 252,063
WI Health & Educational Facilities
Authority:
Eastcastle Place, Inc.,
Series 2004,
6.125% 12/01/34 150,000 150,780
Three Pillars Senior Living Communities,
Series 2003,
5.600% 08/15/23 300,000 312,708
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Continuing Care Retirement Total 6,606,008
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HEALTH SERVICES - 0.4%
CO Health Facilities Authority, National
Jewish Medical & Research Center,
Series 1998 B,
5.375% 01/01/29 250,000 252,005
MA Health & Educational Facilities
Authority, Civic Investments, Inc.,
Series 2002 A,
9.000% 12/15/15 250,000 288,570
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Health Services Total 540,575
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PAR ($) VALUE ($)
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HOSPITALS - 14.1%
CA Health Facilities Financing,
Catholic Healthcare West,
Series 2004 I,
4.950% 07/01/26 200,000 211,844
CA Rancho Mirage Joint Powers Financing
Authority, Eisenhower Medical Center,
Series 2004,
5.625% 07/01/29 1,000,000 1,068,850
CA Statewide Communities Development
Authority, Kaiser Permanente,
Series 2004 I,
3.450% 04/01/35 250,000 247,605
CA Turlock Health Facilities Authority,
Emanuel Medical Center, Inc.,
Series 2004,
5.375% 10/15/34 500,000 521,195
CO Health Facilities Authority:
Parkview Medical Center,
Series 2004,
5.000% 09/01/25 250,000 256,690
Vail Valley Medical Center Project,
Series 2004,
5.000% 01/15/20 250,000 259,860
DE Health Facilities Authority,
Beebe Medical Center,
Series 2004 A,
5.000% 06/01/16 500,000 521,420
FL Orange County Health Facilities
Authority, Orlando Regional
Healthcare System:
Series 1996 C,
Insured: MBIA
6.250% 10/01/13 720,000 854,849
Series 1999,
6.000% 10/01/26 175,000 186,590
Series 2002,
5.750% 12/01/32 150,000 161,330
FL South Broward Hospital District,
Series 2002,
5.625% 05/01/32 1,000,000 1,085,340
GA Coffee County Hospital Authority,
Coffee Regional Medical Center, Inc.,
Series 2004,
5.000% 12/01/26 350,000 359,324
IL Southwestern Development Authority,
Anderson Hospital,
Series 1999,
5.375% 08/15/15 380,000 396,120
IL State Development Finance Authority,
Adventist Health System,
Series 1999,
5.500% 11/15/20 900,000 949,671
See Accompanying Notes to Financial Statements.
4
INVESTMENT PORTFOLIO (CONTINUED)
May 31, 2005 (Unaudited)
MUNICIPAL BONDS (CONTINUED) PAR ($) VALUE ($)
-----------------------------------------------------------
HEALTH CARE (CONTINUED)
HOSPITALS (CONTINUED)
IN Health Facility Financing Authority,
Community Foundation of Northwest
Indiana, Inc.,
Series 2004 A,
6.000% 03/01/34 150,000 160,824
KS University Hospital Authority,
Kansas University Health System,
Series 2002,
5.625% 09/01/32 500,000 524,965
LA Public Facilities Authority,
Touro Infirmary,
Series 1999 A,
5.625% 08/15/29 500,000 521,190
MA Health & Educational Facilities
Authority:
Milford-Whitinsville
Regional Hospital,
Series 1998 C,
5.750% 07/15/13 500,000 524,340
South Shore Hospital,
Series 1999 F,
5.750% 07/01/29 1,000,000 1,046,640
MD Health & Educational Facilities
Authority, Lifebridge Health,
Series 2004 A,
5.125% 07/01/34 250,000 260,702
MD Health & Higher Educational
Facilities Authority:
Adventist Healthcare,
Series 2003 A:
5.000% 01/01/16 250,000 259,350
5.750% 01/01/25 250,000 269,825
University of Maryland Medical System,
Series 2000,
6.750% 07/01/30 250,000 281,900
MI Hospital Finance Authority,
Oakwood Obligated Group,
Series 2003,
5.500% 11/01/18 400,000 433,936
MN St. Paul Housing & Redevelopment
Authority, HealthEast, Inc.:
Series 1993 B,
6.625% 11/01/17 230,000 231,187
Series 2001 A,
5.700% 11/01/15 250,000 251,393
MT Facilities Finance Authority,
Montana's Children's Home and Hospital,
Series 2005 B,
4.750% 01/01/24 250,000 251,712
NH Higher Education & Health Facilities
Authority, Catholic Medical Center,
Series 2002,
6.125% 07/01/32 500,000 537,945
PAR ($) VALUE ($)
-----------------------------------------------------------
NJ Health Care Facilities,
Capital Health Systems, Inc.,
Series 2003 A,
5.750% 07/01/23 350,000 380,100
NV Henderson Healthcare Facilities
Authority,
Catholic Healthcare West:
Series 1998,
5.375% 07/01/26 250,000 257,417
Series 1999 A,
6.750% 07/01/20 500,000 560,135
NY Dormitory Authority, North Shore -
Long Island Jewish Medical Center,
Series 2003,
5.500% 05/01/33 100,000 106,848
OH Lakewood Hospital Improvement
District, Lakewood Hospital Association,
Series 2003,
5.500% 02/15/14 385,000 418,822
RI Health & Education Building Corp.,
Hospital Foundation, Lifespan
Obligated Group,
6.375% 08/15/21 500,000 560,835
SC Jobs Economic Development Authority,
Bon Secours Health Systems, Inc.,
Series 2002 A,
5.500% 11/15/23 500,000 530,060
SC Lexington County Health Services
District, Lexington Medical Center
Project, Refunding,
Series 2003,
5.500% 11/01/23 500,000 534,690
SD Health & Educational Facilities
Authority, Sioux Valley Hospital
& Health System,
Series 2004 A,
5.250% 11/01/34 250,000 264,135
TX Comal County Health Facilities
Development Authority,
McKenna Memorial,
Series 2002 A,
6.250% 02/01/32 500,000 539,685
VA Augusta County Industrial
Development Authority,
Augusta Health Care, Inc.,
Series 2003,
5.250% 09/01/19 1,000,000 1,106,000
WI Health & Educational
Facilities Authority:
Aurora Health Care, Inc.,
Series 2003,
6.400% 04/15/33 175,000 195,253
Fort Healthcare, Inc.,
5.375% 05/01/18 385,000 409,852
------------
Hospitals Total 18,500,429
------------
See Accompanying Notes to Financial Statements.
5
INVESTMENT PORTFOLIO (CONTINUED)
May 31, 2005 (Unaudited)
MUNICIPAL BONDS (CONTINUED) PAR ($) VALUE ($)
-----------------------------------------------------------
HEALTH CARE (CONTINUED)
INTERMEDIATE CARE FACILITIES - 0.5%
IL Development Finance Authority,
Hoosier Care, Inc.,
Series 1999 A,
7.125% 06/01/34 460,000 408,089
MA Development Finance Agency,
Evergreen Center, Inc.,
Series 2005,
5.000% 01/01/24 250,000 250,555
------------
Intermediate Care Facilities 658,644
------------
NURSING HOMES - 3.0%
AK Juneau, St. Ann's Care
Center, Inc., Series 1999,
6.875% 12/01/25 500,000 510,675
CO Health Facilities Authority,
Pioneer Health Care,
Series 1989,
10.500% 05/01/19 1,540,000 1,207,807
DE Economic Development Authority,
Churchman Village Project,
Series 1991 A,
10.000% 03/01/21 865,000 876,228
PA Chester County Industrial Development,
Pennsylvania Nursing Home,
Series 2002,
8.500% 05/01/32 750,000 751,987
PA Delaware County Industrial
Development Authority,
Care Institute Main Line LLC,
Series 2003,
9.000% 08/01/31 540,000 520,166
WI Health & Educational Facilities Authority,
Metro Health Foundation, Inc.,
Series 1993,
11.000% 11/01/22(b) 1,031,563 62,925
------------
Nursing Homes Total 3,929,788
------------
HEALTH CARE TOTAL 30,235,444
------------
-----------------------------------------------------------
HOUSING - 7.0%
ASSISTED LIVING/SENIOR - 1.1%
NC Medical Care Commission Health Care
Facilities, DePaul Community Facilities,
Series 1998,
6.125% 01/01/28 500,000 464,400
NY Suffolk County Industrial Development
Agency, Gurwin-Jewish Phase II,
Series 2004,
6.700% 05/01/39 500,000 521,550
TX Bell County Health Facility
Development Corp.,
Care Institute, Inc.,
Series 1994,
9.000% 11/01/24 460,000 436,310
------------
Assisted Living / Senior Total 1,422,260
------------
PAR ($) VALUE ($)
-----------------------------------------------------------
MULTI-FAMILY - 4.6%
DC Housing Finance Agency,
Henson Ridge,
Series 2004 E, AMT,
Insured: FHA
5.100% 06/01/37 500,000 513,380
FL Broward County Housing Finance
Authority, Chaves Lake Apartment
Project, Series 2000 A, AMT,
7.500% 07/01/40 500,000 505,270
FL Clay County Housing Finance Authority,
Madison Commons Apartments,
Series 2000 A, AMT,
7.450% 07/01/40 250,000 253,397
MA Housing Finance Agency,
Series 2005 B:
5.000% 12/01/28 250,000 252,447
5.000% 06/01/30 455,000 462,253
ME Housing Authority, Mortgage Purchase
Series A-2,
Insured: FSA
4.950% 11/15/27 500,000 506,485
MN White Bear Lake,
Birch Lake Townhome Project:
Series 1989 A, AMT,
10.250% 07/15/19 775,000 775,899
Series 1989 B, AMT,
(a) 07/15/19 668,000 269,197
NC Medical Care Commission,
ARC Projects,
Series 2004 A,
5.800% 10/01/34 305,000 310,380
NJ Middlesex County Improvement
Authority, Street Student Housing
Project, Series 2004 A,
5.000% 08/15/18 300,000 314,877
Resolution Trust Corp.,
Pass-Through Certificates,
Series 1993 A,
8.500% 12/01/16 227,741 225,819
TN Chattanooga Health, Educational
& Housing Facility Board,
Refunding-CDFI Phase I LLC
Project, Senior A,
5.000% 10/01/25 500,000 501,570
WA Tacoma Housing Authority,
Redwood,
Series 2005, AMT,
Insured: GNMA
5.050% 11/20/37 1,040,000 1,057,753
------------
Multi-Family Total 5,948,727
------------
See Accompanying Notes to Financial Statements.
6
INVESTMENT PORTFOLIO (CONTINUED)
May 31, 2005 (Unaudited)
MUNICIPAL BONDS (CONTINUED) PAR ($) VALUE ($)
-----------------------------------------------------------
HOUSING (CONTINUED)
SINGLE-FAMILY - 1.3%
CO Housing Finance Authority,
Series 2000 B-2, AMT,
7.250% 10/01/31 100,000 103,024
IL Chicago,
Series 2000 A, AMT,
Guarantor: FNMA
7.150% 09/01/31 35,000 35,275
MT State Board of Housing,
Series 2005 A, AMT,
5.000% 06/01/36 1,000,000 1,018,280
WI Housing & Economic Development
Authority, Series 2005 C, AMT
4.875% 03/01/36(c) 500,000 505,605
------------
Single-Family Total 1,662,184
------------
HOUSING TOTAL 9,033,171
------------
-----------------------------------------------------------
INDUSTRIALS - 3.1%
FOOD PRODUCTS - 1.0%
MI Strategic Fund, Michigan Sugar Co.,
Carrollton Project,
Series 1998 C, AMT,
6.550% 11/01/25 250,000 240,642
NE Washington County Waste Water
Facilities Authority, Cargill, Inc.,
Series 2002, AMT,
5.900% 11/01/27 1,000,000 1,103,380
------------
Food Products Total 1,344,022
------------
FOREST PRODUCTS & PAPER - 1.1%
AL Camden Industrial Development Board,
Weyerhaeuser Co.,
Series 2003 B, AMT,
6.375% 12/01/24 275,000 301,224
AR Camden Environmental Improvement
Authority, International Paper Co.,
Series 2004 A, AMT,
5.000% 11/01/18 500,000 508,055
FL Escambia County Environmental
Improvement Authority,
Series 2003 A, AMT,
5.750% 11/01/27 250,000 260,388
MS Lowndes County Solid Waste
Disposal & Pollution Control,
Weyerhaeuser Company Project,
Series 1992 B,
6.700% 04/01/22 325,000 395,385
------------
Forest Products & Paper Total 1,465,052
------------
MANUFACTURING - 0.2%
MO Development Finance Board,
Procter & Gamble Co.,
Series 1999, AMT,
5.200% 03/15/29 250,000 278,903
------------
Manufacturing Total 278,903
------------
PAR ($) VALUE ($)
-----------------------------------------------------------
OIL & GAS - 0.8%
NJ Middlesex County Pollution Control
Authority, Amerada Hess Corp.,
Series 2004,
6.050% 09/15/34 175,000 187,121
NV Clark County Industrial Development
Authority, Southwest Gas Corp.,
Series 2003 E, AMT,
5.800% 03/01/38 250,000 269,437
TX Gulf Coast Industrial Development
Authority, Citgo Petroleum,
Series 1998, AMT,
8.000% 04/01/28 250,000 283,915
VI Public Finance Authority, Hovensa,
Series 2003, AMT,
6.125% 07/01/22 200,000 219,856
------------
Oil & Gas Total 960,329
------------
INDUSTRIALS TOTAL 4,048,306
------------
-----------------------------------------------------------
OTHER - 8.2%
OTHER - 0.5%
NY Convention Center Operating Corp.,
Yale Building Project,
Series 2003,
(a) 06/01/08 700,000 608,027
------------
Other Total 608,027
------------
POOL/BOND BANK - 1.4%
KS Development Finance Authority,
Water Pollution Control,
5.500% 11/01/17 1,125,000 1,316,531
OH Summit County Port Authority,
Seville Project,
Series A,
5.100% 05/15/25 500,000 504,575
------------
Pool/Bond Bank Total 1,821,106
------------
REFUNDED/ESCROWED (d) - 4.8%
FL Orange County Health Facilities
Authority, Orlando Regional Healthcare
System, Escrowed to Maturity,
Series 1996 C,
Insured: MBIA
6.250% 10/01/13 1,740,000 2,091,550
IL Health Facilities Authority,
Swedish American Hospital,
Series 2000,
Pre-refunded 05/15/10
6.875% 11/15/30 500,000 588,505
MO Health & Educational Facilities
Authority, Central Institute
for the Deaf, Series 1999,
Pre-refunded 01/01/10
Insured: RAD
5.850% 01/01/22 600,000 649,698
See Accompanying Notes to Financial Statements.
7
INVESTMENT PORTFOLIO (CONTINUED)
May 31, 2005 (Unaudited)
MUNICIPAL BONDS (CONTINUED) PAR ($) VALUE ($)
-----------------------------------------------------------
OTHER (CONTINUED)
REFUNDED/ESCROWED (d) (CONTINUED)
NC Lincoln County,
Lincoln County Hospital,
Series 1991,
Escrowed to Maturity,
9.000% 05/01/07 45,000 48,481
NC Municipal Power Agency,
Catawba No. 1,
Escrowed to Maturity,
Series 1986,
5.000% 01/01/20 1,670,000 1,885,113
NY New York City,
Series 1997 A,
7.000% 08/01/07 80,000 84,985
TN Shelby County Health, Educational
& Housing Facilities Board,
Open Arms Development Centers:
Series 1992 A,
Pre-refunded 08/01/07,
9.750% 08/01/12 405,000 474,040
Series 1992 C,
Pre-refunded 08/01/12,
9.750% 08/01/19 405,000 472,031
------------
Refunded/Escrowed Total 6,294,403
------------
TOBACCO - 1.5%
CA Golden State Tobacco
Securitization Corp.:
Series 2003 A-1,
6.250% 06/01/33 750,000 794,467
Series 2003 B,
5.500% 06/01/43 500,000 536,055
SC Tobacco Settlement Financing Corp.,
Series 2001 B,
6.375% 05/15/28 400,000 418,112
WI Badger Tobacco Asset
Securitization Corp.,
Series 2002,
6.375% 06/01/32 250,000 261,683
------------
Tobacco Total 2,010,317
------------
OTHER TOTAL 10,733,853
------------
-----------------------------------------------------------
OTHER REVENUE - 2.6%
HOTELS - 0.6%
MA Boston Industrial Development
Finance Authority,
Crosstown Center Project,
Series 2002, AMT,
6.500% 09/01/35 285,000 287,246
NJ Middlesex County Improvement
Authority, Heldrich Associates LLC,
Series 2005 B,
6.250% 01/01/37 500,000 498,720
------------
Hotels Total 785,966
------------
PAR ($) VALUE ($)
-----------------------------------------------------------
RECREATION - 1.6%
CA Cabazon Band Mission Indians,
Series 2004:
8.375% 10/01/15 (e) 110,000 113,740
8.750% 10/01/19 (e) 390,000 401,509
DC District of Columbia,
Smithsonian Institute,
Series 1997,
5.000% 02/01/28 1,000,000 1,024,480
FL Capital Trust Agency,
Seminole Tribe Convention Center,
Series 2002 A,
10.000% 10/01/33 (e) 500,000 555,310
------------
Recreation Total 2,095,039
------------
RETAIL - 0.4%
MN International Falls, Office Max,
Series 1999, AMT,
6.850% 12/01/29 500,000 543,580
------------
Retail Total 543,580
------------
OTHER REVENUE TOTAL 3,424,585
------------
-----------------------------------------------------------
RESOURCE RECOVERY - 3.0%
DISPOSAL - 1.2%
IL Development Finance Authority,
Waste Management, Inc.,
Series 1997, AMT,
5.050% 01/01/10 500,000 522,410
MA Industrial Finance Agency,
Peabody Monofill Associates,
Inc. Project,
Series 1994,
9.000% 09/01/05 45,000 45,255
MI Strategic Fund, Waste Management,
Series 1995, AMT,
5.200% 04/01/10 500,000 524,425
OH Solid Waste Republic Services,
Series 2004, AMT,
4.250% 04/01/33 500,000 497,425
------------
Disposal Total 1,589,515
------------
RESOURCE RECOVERY - 1.8%
MA Industrial Finance Agency,
Ogden Haverhill Project,
Series 1998 A, AMT,
5.450% 12/01/12 1,250,000 1,274,812
PA Delaware County Industrial
Development Authority, BFI,
Series 1997 A,
6.100% 07/01/13 1,000,000 1,050,100
------------
Resource Recovery Total 2,324,912
------------
RESOURCE RECOVERY TOTAL 3,914,427
------------
See Accompanying Notes to Financial Statements.
8
INVESTMENT PORTFOLIO (CONTINUED)
May 31, 2005 (Unaudited)
MUNICIPAL BONDS (CONTINUED) PAR ($) VALUE ($)
-----------------------------------------------------------
TAX-BACKED - 52.6%
LOCAL APPROPRIATED - 4.7%
CA Compton, Civic Center &
Capital Improvements,
Series 1997 A,
5.500% 09/01/15 500,000 522,855
CA Los Angeles County,
Series 1999 A,
Insured: AMBAC
(a) 08/01/21 2,135,000 1,018,651
SC Laurens County School
District No. 55,
Series 2005,
5.250% 12/01/30 (c) 350,000 362,579
MN Andover Economic Development
Authority, Andover Community Center,
5.000% 02/01/19 600,000 632,748
MN Hibbing Economic Development
Authority, Series 1997,
6.400% 02/01/12 335,000 342,199
MO Industrial Development Authority,
Convention Center Hotel,
Series 2000,
Insured: AMBAC
(a) 07/15/18 300,000 170,976
SC Berkeley County School District,
Series 2003,
5.000% 12/01/28 500,000 514,650
SC Dorchester County School
District No. 2,
Series 2004,
5.250% 12/01/29 250,000 263,378
SC Lancaster Educational Assistance
Program, Lancaster County
School District,
Series 2004,
5.000% 12/01/26 550,000 563,376
TX Houston Independent School District,
Series 1999 A,
Insured: AMBAC
(a) 09/15/13 2,500,000 1,800,825
------------
Local Appropriated Total 6,192,237
------------
LOCAL GENERAL OBLIGATIONS - 19.3%
AK North Slope Borough,
Series 2001 A,
Insured: MBIA
(a) 06/30/12 2,000,000 1,528,700
CA Las Virgenes Unified School District,
Series 2001 C,
Insured: FGIC
(a) 11/01/22 1,210,000 549,872
CA Modesto High School District,
Series 2002 A,
Insured: FGIC
(a) 08/01/19 1,350,000 728,514
PAR ($) VALUE ($)
-----------------------------------------------------------
CA Pomona Unified School District,
Series 2000 A,
Insured: MBIA
6.450% 08/01/22 1,000,000 1,294,490
CA Vallejo City Unified School District,
Series 2002 A,
Insured: MBIA
5.900% 08/01/25 2,000,000 2,446,540
CA West Contra Costa Unified
School District, Series 2001 B,
Insured: MBIA
6.000% 08/01/24 250,000 313,768
CO Highlands Ranch Metropolitan
District, Series 1996,
Insured: CGIC
6.500% 06/15/11 1,375,000 1,616,079
IL Chicago Board of Education,
Chicago School Reform,
GO, Series 1998 B-1:
Insured: FGIC
(a) 12/01/11 1,000,000 788,320
(a) 12/01/21 2,000,000 953,540
IL Chicago:
Series 1995 A-2,
Insured: AMBAC
6.250% 01/01/14 1,480,000 1,763,716
Series 1999,
Insured: FGIC
5.500% 01/01/23 1,000,000 1,178,310
Series 2001 A,
Insured: MBIA
(a) 01/01/15 3,000,000 2,027,610
IL Hoffman Estates Park District,
Debt Certificates,
5.000% 12/01/16 500,000 535,520
IL St. Clair County,
Series 1999,
Insured: FGIC
(a) 10/01/16 2,000,000 1,248,660
IL St. Clair County Public
Building Commission,
Series 1997 B,
Insured: FGIC
(a) 12/01/13 2,000,000 1,434,640
IL Will County School District No. 17,
Series 2001,
Insured: AMBAC
8.500% 12/01/15 1,400,000 1,979,264
MI Garden City School District,
Series 2001,
Insured: QSBLF
5.500% 05/01/16 325,000 359,401
MI St. John's Public School,
Series 1998,
Insured: FGIC
5.100% 05/01/25 1,000,000 1,130,780
See Accompanying Notes to Financial Statements.
9
INVESTMENT PORTFOLIO (CONTINUED)
May 31, 2005 (Unaudited)
MUNICIPAL BONDS (CONTINUED) PAR ($) VALUE ($)
-----------------------------------------------------------
TAX-BACKED (CONTINUED)
LOCAL GENERAL OBLIGATIONS (CONTINUED)
NY New York City,
Series 2003 J,
5.500% 06/01/18 500,000 551,275
OH Kenston Local School District,
Series 2003,
Insured: MBIA
5.000% 12/01/23 1,000,000 1,078,050
TX Brenham,
Series 2001,
Insured: FSA
5.375% 08/15/16 1,040,000 1,146,340
TX Dallas County Flood Control District,
Series 2002,
7.250% 04/01/32 500,000 522,035
------------
Local General Obligations Total 25,175,424
------------
SPECIAL NON-PROPERTY TAX - 6.4%
FL Tampa Sports Authority,
Tampa Bay Arena Project,
Series 1995,
Insured: MBIA
5.750% 10/01/25 1,000,000 1,224,480
NJ Economic Development Authority,
Cigarette Tax,
Series 2004,
5.750% 06/15/29 500,000 540,200
NM Dona Ana County,
Series 1998,
Insured: AMBAC
5.500% 06/01/15 1,000,000 1,155,020
NY New York City Transitional Finance
Authority, Series 1998 A,
5.000% 11/15/26 1,960,000 2,071,014
NY State Local Government Assistance
Corp., Series 1993 E,
5.000% 04/01/21 3,000,000 3,319,440
------------
Special Non-Property Tax Total 8,310,154
------------
SPECIAL PROPERTY TAX - 3.1%
CA Huntington Beach Community
Facilities District, Grand Coast Resort,
Series 2001-1,
6.450% 09/01/31 300,000 316,218
CA Lincoln Community Facilities
District No. 2003-1,
Series 2004,
5.550% 09/01/18 500,000 508,550
CA Oakdale Public Financing Authority,
Central City Redevelopment Project,
Series 2004,
5.375% 06/01/33 500,000 512,000
FL Celebration Community Development
District, Series 2003 A,
6.400% 05/01/34 245,000 261,880
PAR ($) VALUE ($)
-----------------------------------------------------------
FL Double Branch Community
Development District,
Series 2002 A,
6.700% 05/01/34 330,000 360,205
FL Seven Oaks Community
Development District:
Series 2004 A,
5.875% 05/01/35 500,000 509,175
Series 2004 B,
5.000% 05/01/09 250,000 252,320
IL Chicago,
Pilsen Redevelopment,
Series 2004 B,
6.750% 06/01/22 610,000 641,439
IL Lincolnshire Special Services Area No. 1,
Sedgebrook Project,
Series 2004,
6.250% 03/01/34 225,000 238,426
MO Riverside,
L-385 Levee Project,
Series 2004,
5.250% 05/01/20 500,000 519,165
------------
Special Property Tax Total 4,119,378
------------
STATE APPROPRIATED - 11.3%
IN State Office Building Commission,
Women's Prison,
Series 1995 B,
Insured: AMBAC
6.250% 07/01/16 2,820,000 3,406,757
KY State Property & Buildings
Commission, Project No. 73,
Series 2001,
5.500% 11/01/14 455,000 509,737
NY Dormitory Authority:
City University, Series 1993 A,
5.750% 07/01/18 5,000,000 5,862,700
State University,
Series 2000 C,
Insured: FSA
5.750% 05/15/17 1,000,000 1,190,190
NY Urban Development Corp.,
5.600% 04/01/15 1,000,000 1,142,660
UT Building Ownership Authority
Facilities, Master Lease,
Series 1998 C,
Insured: FSA
5.500% 05/15/19 1,750,000 2,040,885
WV Building Commission,
Series 1998 A,
Insured: AMBAC
5.375% 07/01/18 500,000 570,585
------------
State Appropriated Total 14,723,514
------------
See Accompanying Notes to Financial Statements.
10
INVESTMENT PORTFOLIO (CONTINUED)
May 31, 2005 (Unaudited)
MUNICIPAL BONDS (CONTINUED) PAR ($) VALUE ($)
-----------------------------------------------------------
TAX-BACKED (CONTINUED)
STATE GENERAL OBLIGATIONS - 7.8%
CA State,
Series 1995,
5.750% 03/01/19 70,000 71,068
DC District of Columbia,
Series 1999 A,
Insured: FSA
5.375% 06/01/18 890,000 964,386
MA State,
Series 1998 C,
5.250% 08/01/17 1,000,000 1,137,020
NJ State,
Series H, GO
Insured: MBIA
5.250% 07/01/16 2,000,000 2,275,800
PR Commonwealth of Puerto Rico:
Series 2004 A, GO,
5.000% 07/01/30 300,000 320,625
Aqueduct & Sewer Authority,
Series 1995:
Insured: MBIA
6.250% 07/01/12 1,000,000 1,186,330
6.250% 07/01/13 750,000 901,118
Series 2001,
Insured: FSA
5.500% 07/01/17 1,000,000 1,179,430
TX State,
Series 1999 ABC,
5.500% 08/01/35 2,000,000 2,144,100
------------
State General Obligations Total 10,179,877
------------
TAX-BACKED TOTAL 68,700,584
------------
-----------------------------------------------------------
TRANSPORTATION - 10.5%
AIR TRANSPORTATION - 2.9%
IL Chicago O'Hare International Airport,
United Air Lines, Inc.,
Series 2000 A, AMT,
6.750% 11/01/11(b) 800,000 304,576
IN Indianapolis Airport Authority,
Fed Ex Corp.,
Series 2004, AMT,
5.100% 01/15/17 250,000 265,638
MN Minneapolis & St. Paul Metropolitan
Airports Commission,
Northwest Airlines, Inc.,
Series 2001 A, AMT,
7.000% 04/01/25 350,000 327,740
NC Charlotte Douglas International
Airport, US Airways, Inc.,
Series 1998, AMT,
5.600% 07/01/27 (f) 500,000 300,315
Series 2000, AMT,
7.750% 02/01/28 (f) 500,000 352,250
PAR ($) VALUE ($)
-----------------------------------------------------------
NJ Economic Development Authority,
Continental Airlines, Inc.,
Series 1999, AMT,
6.250% 09/15/19 900,000 788,571
NY Port Authority of New York &
New Jersey, JFK International
Air Terminal,
Series 1997, AMT,
Insured: MBIA
6.250% 12/01/08 1,000,000 1,093,200
TX Houston Industrial Development
Corp., United Parcel Services,
Series 2002, AMT,
6.000% 03/01/23 375,000 392,812
------------
Air Transportation Total 3,825,102
------------
AIRPORTS - 0.9%
MA Port Authority,
Series 1999, IFRN,
Insured: FGIC
8.650% 07/01/29 (g) 1,000,000 1,233,240
------------
Airports Total 1,233,240
------------
TOLL FACILITIES - 4.3%
CA Foothill/Eastern Transportation
Corridor Agency,
Series 1995 A,
5.000% 01/01/35 (h) 1,000,000 944,010
CA San Joaquin Hills Transportation
Corridor Agency, Series 1997 A,
Insured: MBIA
(a) 01/15/15 2,000,000 1,361,860
CO E-470 Public Highway Authority,
Series 1997 B,
Insured: MBIA
(a) 09/01/11 2,000,000 1,590,140
CO Northwest Parkway Public Highway
Authority, Series 2001 D,
7.125% 06/15/41 500,000 540,740
NH Turnpike Systems,
Series 1991 C, IFRN,
Insured: FGIC
11.540% 11/01/17 (g) 1,000,000 1,140,760
------------
Toll Facilities Total 5,577,510
------------
TRANSPORTATION - 2.4%
IL Regional Transportation Authority,
Series 1994 C,
Insured: FGIC
7.750% 06/01/20 1,000,000 1,417,120
NV Department of Business & Industry,
Las Vegas Monorail Project,
Series 2000:
7.375% 01/01/30 250,000 263,647
7.375% 01/01/40 250,000 262,278
See Accompanying Notes to Financial Statements.
11
INVESTMENT PORTFOLIO (CONTINUED)
May 31, 2005 (Unaudited)
MUNICIPAL BONDS (CONTINUED) PAR ($) VALUE ($)
-----------------------------------------------------------
TRANSPORTATION (CONTINUED)
TRANSPORTATION (CONTINUED)
OH Toledo-Lucas County Port Authority,
CSX Transportation, Inc.,
Series 1992,
6.450% 12/15/21 1,000,000 1,170,510
------------
Transportation Total 3,113,555
------------
TRANSPORTATION TOTAL 13,749,407
------------
-----------------------------------------------------------
UTILITIES - 17.6%
INDEPENDENT POWER PRODUCERS - 1.4%
MI Midland County Economic
Development Corp.,
Series 2000 A, AMT,
6.875% 07/23/09 600,000 629,394
NY New York City Industrial Development
Agency, Brooklyn Navy Yard Partners,
Series 1997, AMT,
5.650% 10/01/28 200,000 198,712
NY Suffolk County Industrial Development
Authority, Nissequogue Cogeneration
Partners Facilities,
Series 1998, AMT,
5.500% 01/01/23 550,000 545,534
PA Carbon City Industrial Development
Authority, Panther Creek Partners Project,
Series 2000, AMT,
6.650% 05/01/10 125,000 135,629
PR Commonwealth of Puerto Rico
Industrial, Tourist, Educational,
Medical & Environmental,
AES Project,
Series 2000, AMT,
6.625% 06/01/26 320,000 347,619
------------
Independent Power Producers Total 1,856,888
------------
INVESTOR OWNED - 10.9%
AZ Maricopa County Pollution Control
Corp., El Paso Electric Co.,
Series 2002 A,
6.250% 05/01/37 500,000 502,835
CA Chula Vista Industrial Development
Authority, San Diego Gas & Electric,
Series 1996, AMT,
5.500% 12/01/21 625,000 675,387
FL Polk County Industrial Development
Authority, Tampa Electric Co. Project,
Series 1996, AMT,
5.850% 12/01/30 500,000 512,525
IN Petersburg,
Indiana Power & Light Co.,
Series 1993 B,
Insured: MBIA
5.400% 08/01/17 2,500,000 2,844,775
PAR ($) VALUE ($)
-----------------------------------------------------------
MI Strategic Fund,
Detroit Edison Co.,
Series 1998 A, AMT,
Insured: MBIA
5.550% 09/01/29 3,000,000 3,193,980
MS Business Finance Corp.,
Systems Energy Resources Project,
Series 1998,
5.875% 04/01/22 1,000,000 1,016,790
MT Forsyth Pollution Control,
Portland General,
Series 1998 A,
5.200% 05/01/33 150,000 157,577
NV Clark County Industrial Development,
Nevada Power Co.:
Series 1995 B, AMT,
5.900% 10/01/30 250,000 250,130
Series 1997 A, AMT,
5.900% 11/01/32 250,000 250,190
OH Air Quality Development Authority,
Cleveland Electric Illuminating Company,
Series 2002 A,
6.000% 12/01/13 650,000 690,761
PA Economic Development Financing
Authority, Reliant Energy, Inc.,
Series 2001 A, AMT,
6.750% 12/01/36 200,000 214,670
TX Brazos River Authority:
TXU Electric Co.,
Series 1999, AMT,
7.700% 04/01/33 250,000 296,895
TXU Energy Co. LLC:
Series 2001 C, AMT,
5.750% 05/01/36 100,000 107,183
Series 2003 C, AMT,
6.750% 10/01/38 270,000 301,493
TX Matagorda County Navigation
District No. 1,
Houston Light & Power Co.,
Series 1997, AMT,
Insured: AMBAC
5.125% 11/01/28 2,000,000 2,206,500
WY Campbell County,
Black Hills Power, Inc.,
Series 2004,
5.350% 10/01/24 500,000 515,225
WY Converse County,
PacifiCorp,
Series 1988,
3.900% 01/01/14 500,000 491,255
------------
Investor Owned Total 14,228,171
------------
See Accompanying Notes to Financial Statements.
12
INVESTMENT PORTFOLIO (CONTINUED)
May 31, 2005 (Unaudited)
MUNICIPAL BONDS (CONTINUED) PAR ($) VALUE ($)
-----------------------------------------------------------
UTILITIES (CONTINUED) JOINT POWER AUTHORITY - 3.8%
MA Municipal Wholesale
Electric Co.,
Power Supply System, Project 6-A,
Insured: MBIA
5.250% 07/01/14 1,000,000 1,113,530
NC Eastern Municipal Power Agency,
Series 2003 F,
5.500% 01/01/16 285,000 308,262
NC Municipal Power Agency,
Catawba Electric No. 1:
Series 1998 A,
Insured: MBIA
5.500% 01/01/15 640,000 731,110
Series 2003 A,
Insured: MBIA
5.250% 01/01/18 2,500,000 2,735,100
------------
Joint Power Authority Total 4,888,002
------------
WATER & SEWER - 1.5%
MS V Lakes Utility District,
Series 1994,
8.250% 07/15/24 140,000 141,448
WA King County,
Series 1999,
Insured: FGIC
5.250% 01/01/30 1,750,000 1,857,363
------------
Water & Sewer Total 1,998,811
------------
UTILITIES 22,971,872
------------
TOTAL MUNICIPAL BONDS
(cost of $172,605,768) 184,235,522
------------
INVESTMENT COMPANY - 0.0% SHARES
-----------------------------------------------------------
Dreyfus Tax-Exempt Cash
Management Fund 64 64
------------
TOTAL INVESTMENT COMPANY
(cost of $64) 64
------------
MUNICIPAL PREFERRED STOCKS - 1.2% PAR ($)
-----------------------------------------------------------
HOUSING- 1.2%
MULTI-FAMILY - 1.2%
Charter Municipal Mortgage Acceptance Co.,
AMT:
6.300% 04/30/19 500,000 539,220
7.600% 11/30/10 (e) 500,000 574,620
GMAC Municipal Mortgage Trust, AMT,
5.600% 10/31/39 (e) 500,000 519,670
------------
Multi-Family Total 1,633,510
------------
HOUSING TOTAL 1,633,510
------------
TOTAL MUNICIPAL PREFERRED STOCKS
(cost of $1,500,000) 1,633,510
------------
SHORT-TERM OBLIGATIONS - 3.2% PAR ($) VALUE ($)
-----------------------------------------------------------
VARIABLE RATE DEMAND NOTES (i) - 3.2%
FL Orange County School Board,
Certificates of Participation
Series 2002 B,
2.000% 08/01/27 200,000 200,000
FL Pinellas County Health Facilities
Authority, Pooled Hospital
Loan Program, Series 1985
LOC: Wachovia Bank N.A.
2.000% 12/01/15 300,000 300,000
IA Woodbury County Educational Facility,
Siouxland Medical Educational Foundation,
Series 1996,
2.690% 11/01/16 100,000 100,000
MN Mankato,
Bethany Lutheran College, Inc.,
Series 2000 B,
2.050% 11/01/15 100,000 100,000
MO Health & Educational Facilities
Authority, Bethesda Health
Group of St. Louis, Inc.,
Series 2001 A,
2.050% 08/01/31 100,000 100,000
MS Jackson County,
Chevron U.S.A., Inc, Project:
Series 1992,
2.000% 12/01/16 200,000 200,000
Series 1992,
2.000% 06/01/23 1,500,000 1,500,000
WI State Health and Educational
Facilities Authority, Gundersen
Lutheran, Series B
Insured: FSA
LOC: Dexia Credit Local
2.000% 12/01/29 1,600,000 1,600,000
WY Uinta County Pollution Control,
Chevron U.S.A., Inc.,
Series 1997,
2.000% 04/01/10 100,000 100,000
------------
VARIABLE RATE DEMAND NOTES TOTAL 4,200,000
------------
TOTAL SHORT-TERM OBLIGATIONS
(cost of $4,200,000) 4,200,000
------------
TOTAL INVESTMENTS - 145.4%
(cost of $178,305,832)(j) 190,069,096
AUCTION PREFERRED SHARES PLUS
CUMULATIVE UNPAID DISTRIBUTIONS - (45.9)% (60,004,458)
OTHER ASSETS & LIABILITIES, NET - 0.5% 686,963
------------
NET ASSETS APPLICABLE TO
COMMON SHAREHOLDERS - 100.0% 130,751,601
------------
See Accompanying Notes to Financial Statements.
13
INVESTMENT PORTFOLIO (CONTINUED)
May 31, 2005 (Unaudited)
NOTES TO INVESTMENT PORTFOLIO:
--------------------------------------------------------------------------------
(a) Zero coupon bond.
(b) The issuer has filed for bankruptcy protection under Chapter 11, and is in
default of certain debt covenants. Income is not being accrued. As of May
31, 2005, the value of these securities amounted to $367,501 which
represents 0.3% of net assets.
(c) Security purchased on a delayed delivery basis.
(d) The Trust has been informed that each issuer has placed direct obligations
of the U.S. Government in an irrevocable trust, solely for the payment of
principal and interest.
(e) Security exempt from registration pursuant to Rule 144A under the Securities
Act of 1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At May 31, 2005,
these securities amounted to $2,164,849, which represents 1.7% of net
assets.
(f) The issuer has filed for bankruptcy under Chapter 11. Income is being
accrued. As of May 31, 2005, the value of these securities amounted to
$652,565, which represents 0.5% of net assets.
(g) The interest rate shown on floating rate or variable rate securities reflect
the rates at May 31, 2005.
(h) A portion of this security with a market value of $906,250 is pledged as
collateral for open future contracts.
(i) Variable rate demand notes. These securities are payable upon demand and
are secured by letters of credit or other credit support agreements from
banks. The interest rates change periodically and the interest rates shown
reflect the rates at May 31, 2005.
(j) Cost for federal income tax purposes is $177,993,160.
At May 31, 2005, the Trust held the following open short futures contract:
AGGREGATE EXPIRATION UNREALIZED
TYPE CONTRACTS VALUE FACE VALUE DATE (DEPRECIATION)
--------------------------------------------------------------------
U.S. Treasury
Notes 213 $24,125,578 $24,032,883 Sep-2005 $ (92,695)
U.S. Treasury
Bond 175 20,551,562 20,334,584 Sep-2005 (216,978)
---------
$(309,673)
---------
At May 31, 2005, the composition of the Trust by revenue source is as follows:
% OF
HOLDINGS BY REVENUE SOURCE NET ASSETS
-------------------------------------------------------------
Tax-Backed 52.6%
Health Care 23.1
Utilities 17.6
Education 13.3
Transportation 10.5
Other 8.2
Housing 7.0
Short-Term Obligations 3.2
Industrials 3.1
Resource Recovery 3.0
Other Revenue 2.6
Municipal Preferred Stocks 1.2
Auction Preferred Shares (45.9)
Other Assets and Liabilities, Net 0.5
-----
100.0%
-----
ACRONYM NAME
------------------------------------------------------------
AMBAC Ambac Assurance Corp.
AMT Alternative Minimum Tax
CGIC Capital Guaranty Insurance Corp.
FGIC Financial Guaranty Insurance Co.
FHA Federal Housing Administration
FNMA Federal National Mortgage Association
FSA Financial Security Assurance, Inc.
GNMA Government National Mortgage Association
GO General Obligation
IFRN Inverse Floating Rate Note
LOC Letter of Credit
MBIA MBIA Insurance Corp.
QSBLF Qualified State Bond Loan Fund
RAD Radian Asset Assurance, Inc.
See Accompanying Notes to Financial Statements.
14
STATEMENT OF ASSETS AND LIABILITIES
May 31, 2005 (Unaudited)
ASSETS:
Investments, at cost $178,305,832
------------
Investments, at value $190,069,096
Cash 25,000
Interest receivable 2,799,008
Expense reimbursement due from
Investment Advisor 417
Deferred Trustees' compensation plan 11,481
Other assets 3,626
------------
Total Assets 192,908,628
------------
LIABILITIES:
Payable for:
Investments purchased on a delayed
delivery basis 1,110,492
Futures variation margin 284,594
Distributions-- common shares 598,468
Distributions-- preferred shares 4,458
Investment advisory fee 102,497
Pricing and bookkeeping fees 10,446
Custody fee 1,146
Audit fee 16,389
Reports to shareholders 16,645
Preferred shares remarketing commissions 411
Deferred Trustees' fees 11,481
------------
Total Liabilities 2,157,027
------------
AUCTION PREFERRED SHARES (2,400 shares issued
and outstanding at $25,000 per share) $ 60,000,000
------------
COMPOSITION OF NET ASSETS APPLICABLE TO
COMMON SHARES:
Paid-in capital -- common shares $126,993,094
Undistributed net investment income 341,059
Accumulated net realized loss (8,036,143)
Net unrealized appreciation/depreciation on:
Investments 11,763,264
Futures contracts (309,673)
------------
Net assets at value applicable to 11,509,000
common shares of beneficial interest
outstanding $130,751,601
============
Net asset value per share $ 11.36
============
STATEMENT OF OPERATIONS
For the Period Ended May 31, 2005 (Unaudited)
INVESTMENT INCOME:
Interest $ 5,125,188
Dividends 103
------------
Total Investment Income 5,125,291
------------
EXPENSES:
Investment advisory fee 614,659
Transfer agent fee 22,589
Pricing and bookkeeping fees 53,195
Trustees' fees 5,566
Preferred shares remarketing commissions 74,880
Custody fee 7,353
Other expenses 59,426
------------
Total Expenses 837,668
Custody earnings debit (385)
------------
Net Expenses 837,283
------------
Net Investment Income 4,288,008
------------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS AND FUTURES CONTRACTS:
Net realized gain (loss) on:
Investments 1,339,163
Futures contracts (1,786,158)
------------
Net realized loss (446,995)
------------
Net change in unrealized appreciation/
depreciation on:
Investments 3,689,758
Futures contracts (261,546)
------------
Net change in unrealized appreciation/
depreciation 3,428,212
------------
Net Gain 2,981,217
------------
Net Increase in Net Assets from Operations 7,269,225
------------
LESS DISTRIBUTIONS DECLARED TO
PREFERRED SHAREHOLDERS:
From net investment income (600,495)
------------
Net Increase in Net Assets from Operations
Applicable to Common Shares $ 6,668,730
------------
See Accompanying Notes to Financial Statements.
15
STATEMENT OF CHANGES IN NET ASSETS
(UNAUDITED)
SIX MONTHS ENDED YEAR ENDED
MAY 31, NOVEMBER 30,
INCREASE (DECREASE) IN NET ASSETS: 2005 2004
---------------------------------------------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income $ 4,288,008 $ 8,475,756
Net realized loss on investments and futures contracts (446,995) 46,902
Net change in unrealized appreciation/depreciation on the investments and futures contracts 3,428,212 (3,871,849)
----------- -----------
Net Increase from Operations 7,269,225 4,650,809
----------- -----------
LESS DISTRIBUTIONS DECLARED TO PREFERRED SHAREHOLDERS:
From net investment income (600,495) (634,050)
----------- -----------
Increase in Net Assets from Operations Applicable to Common Shares 6,668,730 4,016,759
----------- -----------
LESS DISTRIBUTIONS DECLARED TO COMMON SHAREHOLDERS:
From net investment income (4,074,187) (7,826,122)
----------- -----------
Total Increase (Decrease) in Net Assets Applicable to Common Shares 2,594,543 (3,809,363)
NET ASSETS APPLICABLE TO COMMON SHARES:
Beginning of period 128,157,058 131,966,421
----------- -----------
End of period (including undistributed net investment income
of $341,059 and $727,733, respectively) $130,751,601 $128,157,058
=========== ===========
NUMBER OF TRUST SHARES:
Common Shares:
Outstanding at end of period 11,509,000 11,509,000
----------- -----------
Preferred Shares:
Outstanding at end of period 2,400 2,400
----------- -----------
See Accompanying Notes to Financial Statements.
16
NOTES TO FINANCIAL STATEMENTS
May 31, 2005 (Unaudited)
NOTE 1. ORGANIZATION
Colonial Investment Grade Municipal Trust (the "Trust") is a Massachusetts
business trust registered under the Investment Company Act of 1940 (the "Act"),
as amended, as a diversified, closed-end management investment company.
INVESTMENT GOAL
The Trust seeks as high a level of after-tax return as is consistent with
prudent risk, by pursuing current income generally exempt from ordinary federal
income tax and opportunities for long-term appreciation from a portfolio
primarily invested in investment grade municipal bonds.
TRUST SHARES
The Trust may issue an unlimited number of common shares. On August 26, 1999,
the Trust issued 2,400 Auction Preferred Shares ("APS").
NOTE 2. SIGNIFICANT ACCOUNTING POLICIES USE OF ESTIMATES
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America ("GAAP") requires management
to make estimates and assumptions that affect the reported amounts of assets and
liabilities, the disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenue and expenses during
the reporting period. Actual results could differ from those estimates. The
following is a summary of significant accounting policies consistently followed
by the Trust in the preparation of its financial statements.
SECURITY VALUATION
Debt securities generally are valued by pricing services approved by the Trust's
Board of Trustees, based upon market transactions for normal, institutional-size
trading units of similar securities. The services may use various pricing
techniques which take into account appropriate factors such as yield, quality,
coupon rate, maturity, type of issue, trading characteristics and other data, as
well as broker quotes. Debt securities for which quotations are readily
available are valued at an over-the-counter or exchange bid quotation. Certain
debt securities, which tend to be more thinly traded and of lesser quality, are
priced based on fundamental analysis of the financial condition of the issuer
and the estimated value of any collateral. Valuations developed through pricing
techniques may vary from the actual amounts realized upon sale of the
securities, and the potential variation may be greater for those securities
valued using fundamental analysis.
Short-term debt obligations maturing within 60 days are valued at amortized
cost, which approximates market value.
Investments in other investment companies are valued at net asset value.
Futures contracts are valued at the settlement price established each day by the
board of trade or exchange on which they are traded.
Investments for which market quotations are not readily available, or have
quotations which management believes are not appropriate, are valued at fair
value as determined in good faith under consistently applied procedures
established by and under the general supervision of the Board of Trustees.
SECURITY TRANSACTIONS
Security transactions are accounted for on the trade date. Cost is determined
and gains (losses) are based upon the specific identification method for both
financial statement and federal income tax purposes.
FUTURES CONTRACTS
The Trust may invest in municipal and U.S. Treasury futures contracts. 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 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 differing trading hours, or the temporary absence of
a liquid market, for either the instrument or the underlying securities, or (3)
an inaccurate prediction by Columbia Management Advisors, Inc. of the future
direction of interest rates. Any of these risks may involve amounts exceeding
the variation margin recorded in the Trust's Statement of Assets and Liabilities
at any given time.
Upon entering into a futures contract, the Trust deposits cash or securities
with the broker in an amount sufficient to meet the initial margin requirement.
Subsequent payments are made or received by the Trust equal to the daily change
in the contract value and are recorded as variation margin receivable or payable
and offset in unrealized gains or losses. The Trust also identifies portfolio
securities as segregated with the custodian in a separate account in an amount
equal to the futures contract. The Trust recognizes a realized gain or loss when
the contract is closed or expires.
DELAYED DELIVERY SECURITIES
The Trust may trade securities on other than normal settlement terms, including
securities purchased or sold on a "when-issued" basis. 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. The Trust identifies cash or
liquid portfolio securities in an amount equal to the delayed delivery
commitment.
17
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
May 31, 2005 (Unaudited)
INCOME RECOGNITION
Interest income is recorded on the accrual basis. Original issue discount is
accreted to interest income over the life of the security with a corresponding
increase in the cost basis. Premium and discount are amortized and accreted,
respectively, on all debt securities. Dividend income is recorded on ex-date.
FEDERAL INCOME TAX STATUS
The Trust intends to qualify each year as a "regulated investment company" under
Subchapter M of the Internal Revenue Code, as amended, and will distribute
substantially all of its taxable income, if any, for its tax year, and as such
will not be subject to federal income taxes. In addition, the Trust intends to
distribute in each calendar year substantially all of its net investment income,
capital gains and certain other amounts, if any, such that the Trust should not
be subject to federal excise tax. Therefore, no federal income or excise tax
provision is recorded.
DISTRIBUTIONS TO SHAREHOLDERS
Distributions to common shareholders are recorded on the ex-date. Distributions
to Auction Preferred shareholders are recorded daily and payable at the end of
each dividend period. Each dividend payment period for the APS is generally
seven days. The applicable dividend rate for the APS on May 31, 2005, was 2.81%.
For the six months ended May 31, 2005, the Trust declared dividends to Auction
Preferred shareholders amounting to $600,495, representing an average dividend
rate of 2.00% per APS.
NOTE 3. FEDERAL TAX INFORMATION
The tax character of distributions paid during the year ended November 30, 2004
was as follows:
NOVEMBER 30, 2004
----------------
Distributions paid from:
Tax-Exempt Income $8,451,630
Ordinary Income 8,542
Long-Term Capital Gains --
Unrealized appreciation and depreciation at May 31, 2005, based on cost of
investments for federal income tax purposes was:
Unrealized appreciation $17,237,552
Unrealized depreciation (5,161,616)
------------
Net unrealized appreciation $12,075,936
------------
The following capital loss carryforwards, determined as of November 30, 2004,
may be available to reduce taxable income arising from future net realized gains
on investments, if any, to the extent permitted by the Internal Revenue Code:
YEAR OF CAPITAL LOSS
EXPIRATION CARRYFORWARD
--------------------------------------
2008 $1,913,022
2010 1,238,884
------------
$3,151,906
------------
Capital loss carryforwards of $490,635 were utilized during the year ended
November 30, 2004 for the Trust.
NOTE 4. FEES AND COMPENSATION PAID TO AFFILIATES INVESTMENT ADVISORY FEE
Columbia Management Advisors, Inc. ("Columbia"), an indirect wholly owned
subsidiary of Bank of America Corporation ("BOA"), is the investment advisor to
the Trust and provides administrative and other services to the Trust. Columbia
receives a monthly investment advisory fee at the annual rate of 0.65% of the
Trust's average weekly net assets, including assets applicable to the APS.
PRICING AND BOOKKEEPING FEES
Columbia is responsible for providing pricing and bookkeeping services to the
Trust under a pricing and bookkeeping agreement. Under a separate agreement (the
"Outsourcing Agreement"), Columbia has delegated those functions to State Street
Corporation ("State Street"). As a result, Columbia pays the total fees received
to State Street under the Outsourcing Agreement.
Under its pricing and bookkeeping agreement with the Trust, Columbia receives
from the Trust an annual flat fee of $10,000 paid monthly, and in any month that
the Trust's average weekly net assets, including assets applicable to APS,
exceed $50 million, an additional monthly fee. The additional fee rate is
calculated by taking into account the fees payable to State Street under the
Outsourcing Agreement. This rate is applied to the average weekly net assets,
including assets applicable to APS, of the Trust for that month. The Trust also
pays additional fees for pricing services based on the number of securities held
by the Trust. For the six months ended May 31, 2005, the Trust's annualized
effective pricing and bookkeeping fee rate, inclusive of out-of-pocket expenses,
was 0.056% of the Trust's average weekly net assets, including assets applicable
to APS.
CUSTODY CREDITS
The Trust has an agreement with its custodian bank under which custody fees may
be reduced by balance credits. These credits are recorded as a reduction of
total expenses on the Statement of Operations. The Trust could have invested a
portion of the assets utilized in connection with the expense offset arrangement
in an income-producing asset if it had not entered into such an agreement.
18
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
May 31, 2005 (Unaudited)
FEES PAID TO OFFICERS AND TRUSTEES
With the exception of one officer, all officers of the Trust are employees of
Columbia or its affiliates and receive no compensation from the Trust. The Board
of Trustees appointed a Chief Compliance Officer to the Trust in accordance with
federal securities regulations. The Trust, along with other affiliated funds,
will pay its pro-rata share of the expenses associated with the Office of the
Chief Compliance Officer. The Trust's fee for the Office of the Chief Compliance
Officer will not exceed $15,000 per year.
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.
OTHER
Columbia provides certain services to the Trust related to Sarbanes-Oxley
compliance. For the six months ended May 31, 2005, the Trust paid $814 to
Columbia for such services. This amount is included in "Other expenses" on the
Statement of Operations.
NOTE 5. PORTFOLIO INFORMATION
For the six months ended May 31, 2005, the cost of purchases and proceeds from
sales of securities, excluding short-term obligations, were $12,866,288 and
$17,155,039 respectively.
NOTE 6. PREFERRED SHARES
The Trust currently has outstanding 2,400 APS. The APS are redeemable at the
option of the Trust on any dividend payment date at the redemption price of
$25,000 per share, plus an amount equal to any dividends accumulated on a daily
basis unpaid through the redemption date (whether or not such dividends have
been declared). Under the Act, the Trust is required to maintain asset coverage
of at least 200% with respect to the APS as of the last business day of each
month in which any APS are outstanding. Additionally, the Trust is required to
meet more stringent asset coverage requirements under the terms of the APS
Agreement and in accordance with the guidelines prescribed by the APS' rating
agencies. Should these requirements not be met, or should dividends accrued on
the APS not be paid, the Trust may be restricted in its ability to declare
dividends to common shareholders or may be required to redeem certain APS. At
May 31, 2005, there were no such restrictions on the Trust.
NOTE 7. DISCLOSURE OF SIGNIFICANT RISKS
AND CONTINGENCIES
CONCENTRATION OF CREDIT RISK
The Trust holds investments that are insured by private insurers who guarantee
the payment of principal and interest in the event of default or that are
supported by a letter of credit. Each of the Trust's insurers is rated AAA by
Moody's Investor Services, Inc., except for Radian Asset Assurance, Inc., which
is rated AA by Standard and Poor's. At May 31, 2005, private insurers who insure
greater than 5% of the total investments of the Trust were as follows:
% OF TOTAL
INSURER INVESTMENTS
-----------
MBIA Insurance Corp. 19.4%
Ambac Assurance Corp. 10.5
Financial Guaranty Insurance Corp. 7.9
GEOGRAPHIC CONCENTRATION
The Trust has greater than 5% of its total investments at May 31, 2005 invested
in debt obligations issued by the states of California, Florida, Illinois,
Indianapolis, Massachusetts, Missouri, New York, North Carolina and Texas and
their respective political subdivisions, agencies and public authorities. The
Trust is more susceptible to economic and political factors adversely affecting
issuers of the specific state's municipal securities than are municipal bond
funds that are not concentrated to the same extent in these issuers.
HIGH-YIELD SECURITIES
Investing in high-yield securities may involve greater credit risk and
considerations not typically associated with investing in U.S. government bonds
and other higher quality fixed income securities. These securities are
non-investment grade securities, often referred to as "junk bonds." Economic
downturns may disrupt the high yield market and impair the ability of issuers to
repay principal and interest. Also, an increase in interest rates would likely
have an adverse impact on the value of such obligations. Moreover, high-yield
securities may be less liquid to the extent that there is no established
secondary market.
LEGAL PROCEEDINGS
On February 9, 2005, Columbia and Columbia Funds Distributor, Inc.
(collectively, the "Columbia Group") entered into an Assurance of Discontinuance
with the New York Attorney General ("NYAG") (the "NYAG Settlement") and
consented to the entry of a cease-and-desist order by the Securities and
Exchange Commission ("SEC") (the "SEC Order"). The SEC Order and the NYAG
Settlement are referred to collectively as the "Settlements". The Settlements
contain substantially the same terms and conditions as outlined in the
agreements in principle which Columbia Group entered into with the SEC and NYAG
in March 2004.
Under the terms of the SEC Order, the Columbia Group has agreed among other
things, to: pay $70 million in disgorgement and $70 million in civil money
penalties; cease and desist from violations of the antifraud provisions and
certain other provisions of the federal securities laws; maintain certain
compliance and ethics oversight structures; retain an independent consultant to
review the Columbia Group's applicable supervisory, compliance, control and
other policies and procedures; and retain an independent distribution consultant
(see below). The Columbia Funds have also undertaken to implement certain
governance
19
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
May 31, 2005 (Unaudited)
measures designed to maintain the independence of their boards of trustees. The
NYAG Settlement also, among other things, requires Columbia and its affiliates,
Banc of America Capital Management, LLC and BACAP Distributors, LLC to reduce
certain Columbia Funds, Nations Funds and other mutual funds management fees
collectively by $32 million per year for five years, for a projected total of
$160 million in management fee reductions.
Pursuant to the procedures set forth in the SEC order, the $140 million in
settlement amounts described above will be distributed in accordance with a
distribution plan to be developed by an independent distribution consultant, who
is acceptable to the SEC staff and the Columbia Funds' independent trustees. The
distribution plan must be based on a methodology developed in consultation with
the Columbia Group and the Trust's independent trustees and not unacceptable to
the staff of the SEC. At this time, the distribution plan is still under
development. As such, any gain to the fund or its shareholders can not currently
be determined.
As a result of these matters or any adverse publicity or other developments
resulting from them, the market price of fund shares could decline.
A copy of the SEC Order is available on the SEC website at http://www.sec.gov. A
copy of the NYAG Settlement is available as part of the Bank of America
Corporation Form 8-K filing on February 10, 2005. In connection with events
described in detail above, various parties have filed suit against certain
funds, the Trustees of the Columbia Funds, FleetBoston Financial Corporation and
its affiliated entities and/or Bank of America Corporation and its affiliated
entities. More than 300 cases including those filed against entities
unaffiliated with the funds, their Boards, FleetBoston Financial Corporation and
its affiliated entities and/or Bank of America Corporation and its affiliated
entities have been transferred to the Federal District Court in Maryland and
consolidated in a multi-district proceeding (the "MDL").
The derivative cases purportedly brought on behalf of the Columbia Funds in the
MDL have been consolidated under the lead case. The fund derivative plaintiffs
allege that the funds were harmed by market timing and late trading activity and
seek, among other things, removal of the trustees of the Columbia Funds, removal
of the Columbia Group, disgorgement of all management fees and monetary damages.
On March 21, 2005 purported class action plaintiffs filed suit in Massachusetts
state court alleging that the conduct, including market timing, entitles Class B
shareholders in certain Columbia funds to an exemption from contingent deferred
sales charges upon early redemption (the "CDSC Lawsuit"). The CDSC Lawsuit has
been removed to federal court in Massachusetts and the federal Judicial Panel
has conditionally ordered its transfer to the MDL.
The MDL is ongoing. Accordingly, an estimate of the financial impact of this
litigation on any fund, if any, can not currently be made.
On January 11, 2005, a putative class action lawsuit was filed in federal
district court in Massachusetts against, among others, the Trustees of the
Columbia Funds and Columbia. The lawsuit alleges that defendants violated common
law duties to fund shareholders as well as sections of the Investment Company
Act of 1940, by failing to ensure that the Trust and other affiliated funds
participated in securities class action settlements for which the funds were
eligible. Specifically, plaintiffs allege that defendants failed to submit proof
of claims in connection with settlements of securities class action lawsuits
filed against companies in which the funds held positions.
In 2004, certain Columbia funds, advisers and affiliated entities were named as
defendants in certain purported shareholder class and derivative actions making
claims, including claims under the Investment Company and the Investment
Advisers Acts of 1940 and state law. The suits allege, inter alia, that the fees
and expenses paid by the funds are excessive and that the advisers and their
affiliates inappropriately used fund assets to distribute the funds and for
other improper purpose. On March 2, 2005, the actions were consolidated in the
Massachusetts federal court as In re Columbia Entities Litigation. The
plaintiffs filed a consolidated amended complaint on June 9, 2005.
The Trust and the other defendants to these actions, including Columbia and
various of its affiliates, certain other mutual funds advised by Columbia and
its affiliates, and various directors of such funds, have denied these
allegations and are contesting the plaintiffs' claims. These proceedings are
ongoing, however, based on currently available information, Columbia believes
that these lawsuits are without merit, that the likelihood they will have a
material adverse impact on any fund is remote, and that the lawsuits are not
likely to materially affect its ability to provide investment management
services to its clients, including the Trust.
20
FINANCIAL HIGHLIGHTS
Selected data for a share outstanding throughout each period is as follows
(common shares unless otherwise noted):
(UNAUDITED)
PERIOD PERIOD
ENDED YEAR ENDED NOVEMBER 30, ENDED
MAY 31, ------------------------------------------------------------------ NOVEMBER 30,
2005 2004 2003 2002 2001 2000 1999 (a)
---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 11.14 $ 11.47 $ 11.04 $ 11.06 $ 10.55 $ 10.31 $ 11.49
----------- ----------- ----------- ----------- ----------- ----------- -----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.37(b) 0.74(b) 0.74(b) 0.78(b)(c) 0.75(b) 0.81(d) 0.58
Net realized and unrealized gain
(loss) on investments
and futures contracts 0.25 (0.33) 0.42 (0.05)(c) 0.52 0.27 (1.12)
----------- ----------- ----------- ----------- ----------- ----------- -----------
Total from Investment Operations 0.62 0.41 1.16 0.73 1.27 1.08 (0.54)
----------- ----------- ----------- ----------- ----------- ----------- -----------
LESS DISTRIBUTIONS DECLARED TO
PREFERRED SHAREHOLDERS:
From net investment income (0.05) (0.06) (0.05) (0.08) (0.16) (0.22) (0.05)
----------- ----------- ----------- ----------- ----------- ----------- -----------
Total from Investment Operations
Applicable to Common
Shareholders 0.57 0.35 1.11 0.65 1.11 0.86 (0.59)
----------- ----------- ----------- ----------- ----------- ----------- -----------
LESS DISTRIBUTIONS DECLARED TO
COMMON SHAREHOLDERS:
From net investment income (0.35) (0.68) (0.68) (0.67) (0.60) (0.60) (0.52)
In excess of net investment income -- -- -- -- -- -- --
----------- ----------- ----------- ----------- ----------- ----------- -----------
Total Distributions Declared to
Common Shareholders (0.35) (0.68) (0.68) (0.67) (0.60) (0.60) (0.52)
----------- ----------- ----------- ----------- ----------- ----------- -----------
LESS SHARE TRANSACTIONS:
Commission and offering costs--
preferred shares -- -- -- -- -- (0.02) (0.07)
----------- ----------- ----------- ----------- ----------- ----------- -----------
NET ASSET VALUE, END OF PERIOD $ 11.36 $ 11.14 $ 11.47 $ 11.04 $ 11.06 $ 10.55 $ 10.31
=========== =========== =========== =========== =========== =========== ===========
Market price per share--
common shares $ 10.45 $ 10.01 $ 10.63 $ 10.09 $ 10.87 $ 8.92 $ 9.06
=========== =========== =========== =========== =========== =========== ===========
Total return--based on market
value--common shares (f) 8.05%(g) 0.64% 12.48% (1.10)% 29.28% 5.20% (14.64)%(g)
----------- ----------- ----------- ----------- ----------- ----------- -----------
RATIOS TO AVERAGE NET ASSETS/
SUPPLEMENTAL DATA:
Expenses (h)(i) 1.29%(j) 1.29% 1.31% 1.28% 1.28% 1.31% 1.03%(j)
Net investment income before
preferred stock dividend (h)(i) 6.65%(j) 6.55% 6.57% 7.06%(c) 6.80% 7.91% 5.75%(j)
Net investment income after
preferred stock dividend (h)(i) 5.72%(j) 6.06% 6.12% 6.38%(c) 5.38% 5.80% 5.26%(j)
Portfolio turnover rate 7%(g) 15% 13% 10% 31% 23% 25%(g)
Net assets, end of period (000's)--
common shares $ 130,752 $ 128,157 $ 131,966 $ 127,050 $ 127,273 $ 121,366 $ 118,660
(a) The Trust changed its fiscal year end from December 31 to November 30.
(b) Per share data was calculated using average shares outstanding during the
period.
(c) Effective December 1, 2001, the Trust adopted the provisions of the AICPA
Audit and Accounting Guide for Investment Companies and began accreting
market discount on all debt securities. The effect of this change for the
year ended November 30, 2002, was to increase net investment income per
share by $0.01, increase net realized and unrealized loss per share by
$0.01, increase the ratio of net investment income to average net assets
from 6.98% to 7.06% and increase the ratio of net investment income
(adjusted for dividend payments to preferred shareholders) from 6.30% to
6.38%. Per share data and ratios for periods prior to November 30, 2002
have not been restated to reflect this change in presentation.
(d) The per share net investment income amount does not reflect the period's
reclassification of differences between book and tax basis net investment
income.
(e) Rounds to less than $0.01 per share.
(f) Total return at market value assuming all distributions reinvested at
prices calculated in accordance with the Dividend Reinvestment Plan.
(g) Not annualized.
(h) The benefits derived from custody credits and directed brokerage
arrangements, if applicable, had an impact of less than 0.01%.
(i) Ratios reflect average net assets available to common shares only.
(j) Annualized.
21
FINANCIAL HIGHLIGHTS (CONTINUED)
Selected data for a share outstanding throughout each period is as follows
(common shares unless otherwise noted):
YEAR ENDED DECEMBER 31,
--------------------------------------------------------
1998 1997 1996 1995 1994
----------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 11.43 $ 10.87 $ 11.05 $ 9.93 $ 11.05
----------- ----------- ----------- ----------- -----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.60 0.62 0.63 0.64 0.67
Net realized and unrealized gain (loss) on investments
and futures contracts 0.07 0.58 (0.19) 1.11 (1.12)
----------- ----------- ----------- ----------- -----------
Total from Investment Operations 0.67 1.20 0.44 1.75 (0.45)
----------- ----------- ----------- ----------- -----------
LESS DISTRIBUTIONS DECLARED TO COMMON SHAREHOLDERS:
From net investment income (0.61) (0.64) (0.62) (0.63) (0.67)
In excess of net investment income --(a) -- -- -- --
----------- ----------- ----------- ----------- -----------
Total Distributions Declared to Common Shareholders (0.61) (0.64) (0.62) (0.63) (0.67)
----------- ----------- ----------- ----------- -----------
LESS SHARE TRANSACTIONS:
Commission and offering costs--preferred shares -- -- -- -- --
----------- ----------- ----------- ----------- -----------
NET ASSET VALUE, END OF PERIOD $ 11.49 $ 11.43 $ 10.87 $ 11.05 $ 9.93
----------- ----------- ----------- ----------- -----------
Market price per share-- common shares $ 11.19 $ 10.56 $ 10.13 $ 9.88 $ 9.25
----------- ----------- ----------- ----------- -----------
Total return--based on market value--common shares (b) 11.94% 10.76% 9.06% 13.87% (8.12)%
----------- ----------- ----------- ----------- -----------
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Expenses (c) 0.77% 0.83% 0.88% 1.08% 0.94%
Net investment income (c) 5.24% 5.63% 5.80% 6.08% 6.46%
Portfolio turnover rate 24% 21% 20% 37% 34%
Net assets, end of period (000's)-- common shares $ 132,242 $ 131,503 $ 125,125 $ 127,118 $ 114,260
(a)Rounds to less than $0.01 per share.
(b)Total return at market value assuming all distributions reinvested at prices
calculated in accordance with the Dividend Reinvestment Plan.
(c)The benefits derived from custody credits and directed brokerage
arrangements, if applicable, had an impact of less than 0.01%.
ASSET COVERAGE REQUIREMENTS
INVOLUNTARY
ASSET LIQUIDATING AVERAGE
TOTAL AMOUNT COVERAGE PREFERENCE MARKET VALUE
OUTSTANDING PER SHARE* PER SHARE PER SHARE
------------------------------------------------------------------------------------------------------------------------------
05/31/05** $60,000,000 $79,480 $25,002 $25,000
11/30/04 60,000,000 78,399 25,001 25,000
11/30/03 60,000,000 79,986 25,004 25,000
11/30/02 60,000,000 77,937 25,000 25,000
11/30/01 60,000,000 78,030 25,005 25,000
11/30/00 60,000,000 75,569 25,009 25,000
11/30/99*** 60,000,000 74,444 25,003 25,000
* Calculated by subtracting the Trust's total liabilities from the Trust's
total assets and dividing the amount by the number of APS outstanding.
** Unaudited.
*** On August 26, 1999, the Trust began offering Auction Preferred Shares.
22
SHAREHOLDER MEETING RESULTS
RESULTS OF THE ANNUAL MEETING OF SHAREHOLDERS
On May 25, 2005, the Annual Meeting of Shareholders of the Trust was held to
conduct a vote for or against the approval of the following Items listed on the
Trust's Proxy Statement for said Meeting. On March 10, 2005, the record date for
the Meeting, the Trust had 11,509,000 shares outstanding. The votes cast were as
follows:
PROPOSAL 1.
ELECTION OF TRUSTEES: FOR WITHHELD
------------------------------------------------------------------------------
Richard W. Lowry 10,408,816 121,853
Charles R. Nelson 10,410,747 119,922
Anne-Lee Verville 10,370,218 160,451
On March 10, 2005, the record date of the Meeting, the Trust had 2,400 preferred
shares outstanding. The votes cast were as follows:
PROPOSAL 2.
ELECTION OF TRUSTEES: FOR WITHHELD
------------------------------------------------------------------------------
Douglas A. Hacker 2,356 43
Richard W. Lowry 2,356 43
Charles R. Nelson 2,356 43
Thomas E. Stitzel 2,356 43
Anne-Lee Verville 2,356 43
23
DIVIDEND REINVESTMENT PLAN
COLONIAL INVESTMENT GRADE MUNICIPAL TRUST
Pursuant to the Trust's Dividend Reinvestment Plan (the "Plan"), all
shareholders whose shares are registered in their own names will have all
distributions reinvested automatically in additional shares of the Trust by
Computershare (the "Plan Agent") unless a shareholder elects to receive cash.
Shareholders whose shares are held in the name of a broker or nominee will have
distributions reinvested automatically by the broker or nominee in additional
shares under the Plan, unless the service is not provided by the broker or the
nominee or the shareholder elects to receive distributions in cash. If the
service is not available, such distributions will be paid in cash. Shareholders
whose shares are held in the name of a broker or nominee should contact the
broker or nominee for details. All distributions to shareholders who elect not
to participate in the Plan will be paid by check mailed directly to the
shareholder of record on the record date therefore by the Plan Agent as the
dividend disbursing agent.
Non-participants in the Plan will receive distributions in cash. Distributions
payable to participants in the Plan will be applied by the Plan Agent, acting as
agent for Plan participants, to the purchase of shares of the Trust. Such shares
will be purchased by the Plan Agent at the then current market price of such
shares in the open market, on the New York Stock Exchange or elsewhere, for the
participants' accounts.
Participants in the Plan may withdraw from the Plan upon written notice to the
Plan Agent. When a participant withdraws from the Plan or upon termination of
the Plan as provided below, certificates for whole shares credited to his
account under the Plan will be issued and a cash payment will be made for any
fraction of a share credited to such account. A shareholder's notice of election
to withdraw from the Plan must be received by the Plan Agent before the record
date for a dividend in order to be given effect with respect to that dividend.
In the case of shareholders such as banks, brokers or nominees holding shares
for others who are the beneficial owners of those shares, the Plan Agent will
administer the Plan on the basis of the number of shares certified from time to
time by the shareholder of record as representing the total amount registered in
such shareholder's name and held for the account of beneficial owners who are to
participate in the Plan.
There is no charge to Plan participants for reinvesting distributions. The Plan
Agent's fees for the handling of the reinvestment of distributions will be paid
by the Trust. Each participant in the Plan will pay a pro rata share of
brokerage commissions incurred with respect to the Plan Agent's open market
purchases in connection with the reinvestment of distributions. Purchase orders
from the participants in the Plan may be combined with those of other
participants and the price paid by any particular participant may be the average
of the price paid on various orders executed on behalf of groups of participants
in the Plan.
The automatic reinvestment of distributions will not relieve participants of any
income tax that may be payable on such dividends or distributions.
The Plan may be amended or terminated on 30 days written notice to Plan
participants. All correspondence concerning the Plan should be directed to
Computershare by mail at P.O. Box 43010, Providence, RI 02940-3010, or by phone
at 1-800-730-6001.
24
BOARD CONSIDERATION AND APPROVAL OF INVESTMENT ADVISORY AGREEMENT
Section 15(c) of the Investment Company Act of 1940 (the "1940 Act") requires
that the Board of Trustees/Directors (the "Board") of the Columbia Funds (the
"Funds"), including a majority of the Trustees and Directors (collectively, the
"Trustees") who are not "interested persons" of the Trusts, as defined in the
1940 Act (the "Independent Trustees"), annually review and approve the terms of
the Funds' investment advisory agreements. At a meeting held on October 13,
2004, the Board reviewed and approved the management contracts ("Advisory
Agreement") with Columbia Management Advisors, Inc. ("CMA") for the Fund.
At meetings held on September 23, 2004 and October 12, 2004, the Advisory Fees
and Expenses Committee (the "Committee") of the Board considered the factors
described below relating to the selection of CMA and the approval of the
Advisory Agreement. At a meeting held on October 13, 2004, the Board, including
the Independent Trustees (who were advised by their independent legal counsel),
considered these factors and reached the conclusions described below.
NATURE, EXTENT AND QUALITY OF SERVICES
The Board considered information regarding the nature, extent and quality of
services that CMA provides to the Fund under the Advisory Agreement. CMA
provided the most recent investment adviser registration form ("Form ADV") and
code of ethics for CMA to the Board. The Board reviewed information on the
status of Securities and Exchange Commission ("SEC") and New York Attorney
General ("NYAG") proceedings against CMA and certain of its affiliates,
including the agreement in principle entered into with the SEC and the NYAG on
March 15, 2004 to settle civil complaints filed by the SEC and the NYAG relating
to trading activity in mutual fund shares.1
The Board evaluated the ability of CMA, including its resources, reputation and
other attributes, to attract and retain highly qualified research, advisory and
supervisory investment professionals. The Board considered information regarding
CMA's compensation program for its personnel involved in the management of the
Fund.
Based on these considerations and other factors, including those referenced
below, the Board concluded that they were generally satisfied with the nature,
extent and quality of the investment advisory services provided to the Fund by
CMA.
FUND PERFORMANCE AND EXPENSES
CMA provided the Board with relative performance and expense information for the
Fund in a report prepared by Lipper Inc. ("Lipper") an independent provider of
investment company data. The Board considered the total return performance
information, which included the ranking of the Fund within a performance
universe made up of funds with the same Lipper investment classification and
objective (the "Performance Universe") by total return for one-year, three-year,
five-year, ten-year or life of fund periods, as applicable. They also considered
the Fund's performance in comparison to the performance results of a group (the
"Performance Peer Group") of funds selected by Lipper based on similarities in
fund type (e.g. open-end), investment classification and objective, asset size,
load type and 12b-1/service fees and other expense features, and to the
performance results of the Fund's benchmark index. The Board reviewed a
description of Lipper's methodology for selecting the mutual funds in the Fund's
Performance Peer Group and Performance Universe.
The Board considered statistical information regarding the Fund's total expenses
and certain components thereof, including management fees (both actual
management fees based on expenses for advisory and administrative fees including
any reductions for fee waivers and expense reimbursements as well as contractual
management fees that are computed for a hypothetical level of assets), actual
non-management expenses, and fee waivers/caps and expense reimbursements. They
also considered comparisons of these expenses to the expense information for
funds within a group (the "Expense Peer Group") selected by Lipper based on
similarities in fund type (e.g. open-end), investment classification and
objective, asset size, load type and 12b-1/service fees and other expense
features (but which, unlike the Performance Peer Group,may include funds with
several different investment classifications and objectives) and an expense
universe ("Expense Universe") selected by Lipper based on the criteria for
determining the Expense Peer Group other than asset size. The expense
information in the Lipper report took into account all existing fee waivers and
expense reimbursements as well as all voluntary advisory fee reductions
applicable to certain Funds that were being proposed by management in order to
reduce the aggregate advisory fees received from mutual funds advised by CMA and
Banc of America Capital Management, LLC ("BACAP") by $32 million per year for
five years as contemplated by the agreement in principle with the NYAG.
The Committee also considered the projected impact on expenses of these Funds
resulting from the overall cost reductions that management anticipated would
result from the proposed shift to a common group of service providers for
transfer agency, fund accounting and custody services for mutual funds advised
by Bank of America affiliates.
The Board also considered information in the Lipper report that ranked each Fund
based on (i) each Fund's one-year performance and actual management fees, (ii)
each Fund's one-year performance and total expenses and (iii) each Fund's 3-year
performance and total expenses. Based on these comparisons and expense and
performance rankings of the Fund in the Lipper Report, CMA determined an overall
score for the Fund. The Committee and the Board also considered projected
savings to the Fund that would result from certain modifications in soft dollar
arrangements.
The Committee also considered more detailed information relating to certain
Funds, including the Fund that were
----------------
1 On February 9, 2005, CMA and its affiliate, Columbia Funds Distributor,
Inc., entered into settlement agreements with the SEC and the NYAG that
contain substantially the terms outlined in the agreements in principle.
25
BOARD CONSIDERATION AND APPROVAL OF INVESTMENT ADVISORY AGREEMENT (CONTINUED)
highlighted for additional review based upon the fact that they ranked poorly in
terms of overall expense or management fees, maintained poor performance or
demonstrated a combination of below average to poor performance while
maintaining below average or poor expense rankings. At its September 23, 2004
meeting, the Committee discussed these Funds with management and in executive
session. The Committee requested additional information from management
regarding the cause(s) of the below-average relative performance of these Funds,
any remedial actions management recommended to improve performance and the
general standards for review of portfolio manager performance. At its October
12, 2004 meeting, the Committee considered additional information provided by
management regarding these Funds. The Fund was identified for further review
based on poor relative one- and three-year relative performance against total
expenses and poor relative one-year performance against actual management fees.
Management noted that the Fund's third quintile yield ranking as of August 31,
2004 within its Lipper performance group. Management also noted the Fund's other
expenses included in the total expense ratio were expected to improve due to
projected lower fund accounting expenses. The Board also considered management's
proposal to merge or liquidate some of these Funds.
Based on these considerations and other factors, the Board concluded that the
overall performance and expense results supported by the approval of the
Advisory Agreements for each Fund.
INVESTMENT ADVISORY FEE RATES
The Board reviewed and considered the proposed contractual investment advisory
fee rates (the "Advisory Agreement Rates") payable by the Funds to CMA for
investment advisory services. In addition, the Board reviewed and considered the
existing and proposed fee waiver and reimbursement arrangements applicable to
the Advisory Agreement Rates and considered the Advisory Agreement Rates after
taking the fee waivers and reimbursements into account (the "Net Advisory
Rates"). At previous meetings, the Committee had separately considered
management's proposal to reduce annual investment advisory fees for certain
Funds under the NYAG agreement in principle and the impact of these reductions
on each affected Fund. Additionally, the Board considered information comparing
the Advisory Agreement Rates and Net Advisory Rates (both on a stand-alone basis
and on a combined basis with the Funds' administration fee rates) with those of
the other funds in the Expense Peer Group. The Board concluded that the Advisory
Agreement Rates and Net Advisory Rates represented reasonable compensation to
CMA, in light of the nature, extent and quality of the services provided to the
Funds, the fees paid and expenses borne by comparable funds and the costs that
CMA incurs in providing these services to the Funds.
PROFITABILITY
The Board considered a detailed profitability analysis of CMA based on 2003
financial statements, adjusted to take into account advisory fee reductions
implemented in November 2003 and proposed reductions under the NYAG proposed
settlement. The Board concluded that, in light of the costs of providing
investment management and other services to the Funds, the profits and other
ancillary benefits that CMA and its affiliates received for providing these
services to the Funds were not unreasonable.
ECONOMIES OF SCALE
In evaluating potential economies of scale, the Board considered CMA's proposal
to implement a standardized breakpoint schedule for combined advisory and
administrative fees for the majority of the funds of the same general asset type
within the Columbia Funds complex (other than index and closed-end funds). The
Board noted that the standardization of the breakpoints would not result in a
fee increase for any Fund. The Board concluded that any actual or potential
economies of scale are, or will be, shared fairly with Fund shareholders,
including most particularly through Advisory Agreement Rate breakpoints at
current and reasonably foreseeable asset levels.
INFORMATION ABOUT SERVICES TO OTHER CLIENTS
In evaluating the proposed fee reductions under the NYAG agreement in principle,
the Board considered information regarding the advisory fee rates charged by
BACAP for the Nations Funds. Members of the Committee and the Board had also
separately reviewed advisory fee rates for variable insurance product funds
advised by CMA. This information assisted the Board in assessing the
reasonableness of fees paid under the Advisory Agreements in light of the
nature, extent and quality of services provided under those agreements.
OTHER BENEFITS TO CMA
The Board considered information regarding potential "fall-out" or ancillary
benefits received by CMA and its affiliates as a result of their relationship
with the Funds. These benefits could include benefits directly attributable to
the relationship of CMA with the Funds (such as soft dollar credits) and
benefits potentially derived from an increase in the business of CMA as a result
of their relationship with the Funds (such as the ability to market to
shareholders other financial products offered by CMA and its affiliates).
OTHER FACTORS AND BROADER REVIEW
The Board reviews detailed materials provided by CMA annually as part of the
approval process under Section 15(c) of the 1940 Act. The Board also regularly
reviews and assesses the quality of the services that the Funds receive
throughout the year. In this regard, the Board reviews information provided by
CMA at their regular meetings, including, among other things, a detailed
portfolio review, and detailed fund performance reports. In addition, the Board
interviews the heads of each investment area at each regular meeting of the
Board and selected portfolio managers of the Funds at various times throughout
the year. After considering the above-described factors and based on the
deliberations and their evaluation of the information provided to them, the
Board concluded that re-approval of the Advisory Agreements for each of the
Funds was in the best interest of the Funds and their shareholders. Accordingly,
the Board unanimously approved the Advisory Agreements.
26
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TRANSFER AGENT
IMPORTANT INFORMATION ABOUT THIS REPORT
The Transfer Agent for Colonial Investment Grade Municipal Trust is:
Computershare
P.O. Box 43010
Providence, RI 02940-3010
The trust mails one shareholder report to each shareholder address. Shareholders
can order additional reports by calling 800-730-6001. In addition,
representatives at that number can provide shareholders information about the
trust.
Financial advisors who want additional information about the trust may speak to
a representative at 800-426-3750.
A description of the trust's proxy voting policies and procedures is available
(i) at www.columbiamanagement.com; (ii) on the Securities and Exchange
Commission's website at www.sec.gov, and (iii) without charge, upon request, by
calling 800-730-6001. Information regarding how the trust voted proxies relating
to portfolio securities during the 12-month period ended June 30, 2004 is
available from the SEC's website. Information regarding how the trust voted
proxies relating to portfolio securities is also available at
www.columbiamanagement.com.
The trust files a complete schedule of portfolio holdings with the SEC for the
first and third quarters of each fiscal year on Form N-Q. The trust's Form N-Q
is available on the SEC's website at www.sec.gov and may be reviewed and copied
at the SEC's Public Reference Room in Washington, DC. Information on the
operation of the Public Reference Room may be obtained by calling
1-800-SEC-0330.
Annual Certifications -- As required, on June 13, 2005, the trust submitted to
the New York Stock Exchange ("NYSE") the annual certification of the trust's
Chief Executive Officer certifying that he is not aware of any violation of the
NYSE's Corporate Governance listing standards. The trust also has included the
certifications of the trust's Chief Executive Officer and Chief Financial
Officer required by Section 302 of the Sarbanes-Oxley Act of 2002 as exhibits to
the trust's Form N-CSR filed with the Securities and Exchange Commission for the
annual period.
This report has been prepared for shareholders of Colonial Investment Grade
Municipal Trust.
COLONIAL INVESTMENT GRADE MUNICIPAL TRUST SEMIANNUAL REPORT
SHC-44/87065-0605 (07/05) 05/6541
ITEM 2. CODE OF ETHICS.
Not applicable at this time.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
Not applicable at this time.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Not applicable at this time.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable.
ITEM 6. SCHEDULE OF INVESTMENTS
The registrant's "Schedule I - Investments in securities of unaffiliated
issuers" (as set forth in 17 CFR 210.12-12) is included in Item 1 of this Form
N-CSR.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
Registrant Purchases of Equity Securities*
(a) (b) (c) (d)
Total Number of Maximum Number of
Shares Purchased as Shares that May Yet
Period Total Number Average Price Part of Publicly Be Purchased Under
of Shares Purchased Paid Per Share Announced Plans or Programs the Plans or Programs
-------------------------------------------------------------------------------------------------------------------------------
12/01/04 through 12/31/04 8,763 $10.12 8,763 N/A
01/01/05 through 01/31/05 12,476 $10.03 12,476 N/A
02/01/05 through 02/28/05 8,142 $10.30 8,142 N/A
03/01/05 through 03/31/05 7,711 $10.25 7,711 N/A
04/01/05 through 04/30/05 7,606 $10.19 7,606 N/A
05/01/05 through 05/31/05 7,126 $10.42 7,126 N/A
-------------------------------------------------------------------------------------------------------------------------------
Total 51,824 $10.20 51,824 N/A
-------------------------------------------------------------------------------------------------------------------------------
* Includes shares purchased by the Dividend Reinvestment Agent pursuant to
the Registrant's Dividend Reinvestment Plan.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
There have not been any material changes to the procedures by which shareholders
may recommend nominees to the registrant's board of directors, since those
procedures were last disclosed in response to the requirements of Item
7(d)(2)(ii)(G) of Schedule 14A or this Item.
ITEM 11. CONTROLS AND PROCEDURES.
(a) The registrant's principal executive officer and principal financial
officers, based on their evaluation of the registrant's disclosure
controls and procedures as of a date within 90 days of the filing of
this report, have concluded that such controls and procedures are
adequately designed to ensure that information required to be
disclosed by the registrant in Form N-CSR is accumulated and
communicated to the registrant's management, including the principal
executive officer and principal financial officer, or persons
performing similar functions, as appropriate to allow timely decisions
regarding required disclosure.
(b) There were no changes in the registrant's internal control over
financial reporting that occurred during the registrant's second
fiscal quarter of the period covered by
this report that has materially affected, or is reasonably likely to
materially affect, the registrant's internal control over financial
reporting.
ITEM 12. EXHIBITS.
(a)(1) Code of ethics required to be disclosed under Item 2 of Form N-CSR: Not
applicable at this time.
(a)(2) Certifications pursuant to Rule 30a-2(a) under the Investment Company Act
of 1940 (17 CFR 270.30a-2(a)) attached hereto as Exhibit 99.CERT.
(a)(3) Not applicable.
(b) Certification pursuant to Rule 30a-2(b) under the Investment Company Act of
1940 (17 CFR 270.30a-2(b)) attached hereto as Exhibit 99.906CERT.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
(registrant) Colonial Investment Grade Municipal Trust
-------------------------------------------------------------------
By (Signature and Title) /S/ Christopher L. Wilson
--------------------------------------------------------
Christopher L. Wilson, President
Date July 28, 2005
----------------------------------------------------------------------------
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By (Signature and Title) /S/ Christopher L. Wilson
--------------------------------------------------------
Christopher L. Wilson, President
Date July 28, 2005
----------------------------------------------------------------------------
By (Signature and Title) /S/ J. Kevin Connaughton
--------------------------------------------------------
J. Kevin Connaughton, Treasurer
Date July 28, 2005
----------------------------------------------------------------------------