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: 811-07096
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Investment Grade Municipal Income Fund Inc.
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(Exact name of registrant as specified in charter)
51 West 52nd Street, New York, New York 10019-6114
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(Address of principal executive offices) (Zip code)
Mark F. Kemper, Esq.
UBS Global Asset Management (US) Inc.
51 West 52nd Street
New York, NY 10019-6114
(Name and address of agent for service)
Copy to:
Jack W. Murphy, Esq.
Dechert LLP
1775 I Street, N.W.
Washington, DC 20006-2401
Registrant's telephone number, including area code: 212-882 5000
Date of fiscal year end: September 30
Date of reporting period: March 31, 2005
ITEM 1. REPORTS TO STOCKHOLDERS.
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[UBS GLOBAL ASSET MANAGEMENT LOGO]
INVESTMENT GRADE MUNICIPAL INCOME FUND INC.
Semiannual Report
March 31, 2005
Investment Grade Municipal Income Fund Inc.
May 26, 2005
DEAR SHAREHOLDER,
We present you with the semiannual report for Investment Grade Municipal Income
Fund Inc. (the "Fund") for the six months ended March 31, 2005.
PERFORMANCE
For the six-month period, the Fund's net asset value return was 1.22%. On a
market price basis, the Fund declined 4.11%. Over the same period, the Fund's
peer group, the Lipper General Municipal Debt Funds (Leveraged) median posted
net asset value and market price returns of 2.66% and -0.75%, respectively.
Finally, the Fund's benchmark, the Lehman Brothers U.S. Municipal Index (the
"Index"), returned 1.21%. (For more performance information, please refer to
"Performance At A Glance" on page 5). As the market price for both the Fund and
the median of its peer group moved down while net asset values appreciated,
discounts widened during the period.
The Fund continued to use leverage during the period, which was 41% of total
assets as of March 31, 2005. Leverage can magnify returns on the upside and on
the downside, and the degree of leverage can create wider dispersions of returns
within the Fund's peer group.
INVESTMENT GRADE MUNICIPAL INCOME FUND INC.
INVESTMENT GOAL:
High level of current income exempt from federal income tax, consistent with
preservation of capital.
PORTFOLIO MANAGER:
William Veronda
UBS Global Asset Management (US) Inc.
COMMENCEMENT:
November 6, 1992
NYSE SYMBOL:
PPM
DIVIDEND PAYMENTS:
Monthly
AN INTERVIEW WITH PORTFOLIO MANAGER WILLIAM VERONDA
Q. CAN YOU DESCRIBE THE ECONOMIC ENVIRONMENT DURING THE REPORTING PERIOD?
A. The US economy faced a number of challenges during the reporting period,
including record high oil prices, rising interest rates, a mixed job market,
uncertainty surrounding the presidential election and geopolitical events.
Despite these issues, the economy proved to be surprisingly resilient.
Following a robust 4.0% gain in the third quarter of 2004, gross domestic
product (GDP) growth was 3.8% in the fourth quarter. Preliminary estimates
for first quarter 2005 GDP growth were 3.5%.
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1
Investment Grade Municipal Income Fund Inc.
Q. HOW DID THE FED REACT TO THESE ECONOMIC CONDITIONS?
A. As expected, the Federal Reserve Board (the "Fed") continued to raise
interest rates over the period in an attempt to ward off a potential increase
in inflation. Following three rate hikes from June through September 2004,
the Fed increased its target for the federal funds rate (or "fed funds"
rate)-the rate that banks charge one another for funds they borrow on an
overnight basis-in 0.25% increments four times during the reporting period.
This series of seven rate hikes brought the fed funds rate from 1.00% in June
2003 to 2.75% by the end of March 2005.
Toward the end of the period, the Fed appeared to become increasingly
concerned about inflation. Coinciding with the March rate hike, the Fed
continued to say it expected to raise rates at a "measured" pace. However, it
also said that inflationary pressures "have picked up in recent months and
pricing power is more evident," whereas in February it stated that inflation
was "well contained." Many market participants believed this telegraphed the
potential for rate hikes larger than 0.25% in the future. The Fed raised
rates again after the period closed, bringing the rate to 3.0%.
Q: HOW DID YOU POSITION THE FUND'S PORTFOLIO DURING THE PERIOD?
A: Given our expectation that yields would rise in concert with the Fed's
tightening cycle, the Fund's duration was shorter than the benchmark during
the period. While this led to mixed results over the period, our yield curve
positioning generally enhanced results. Given our expectations that the yield
curve would flatten, whereby the gap between short- and long-term yields
narrows, we maintained a barbell strategy for the portfolio. In doing so, we
held relative overweights in both short-term and longer-term securities,
coupled with an underweight in the 2- to 8-year portion of the curve. This
positioning proved to be beneficial for results as longer-term securities
performed well, and the 2- to 8-year segment of the yield curve lagged the
overall market.
Q: COULD YOU DESCRIBE SOME NEW PURCHASES MADE FOR THE FUND OVER THE PERIOD?
A: We added Los Angeles Department of Water and Power bonds to the Fund's
portfolio. These securities offer a 5.0% coupon and mature in 2027. We also
purchased Massachusetts Bay Transportation bonds with a coupon of 5.0%,
maturing in 2032. These additions were consistent with our theme of
emphasizing bonds on the long end of the curve. We subsequently sold the
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2
Investment Grade Municipal Income Fund Inc.
Massachusetts Bay Transportation bonds as they performed well over the
period, and we believed became richly valued.
We also purchased New Jersey Educational Facilities Authority bonds, issued
on behalf of Princeton University. We felt these AAA-rated securities, which
offer a 5.0% coupon and mature in 2029, were compellingly priced.
Q: WERE THERE ANY STATES THAT YOU FOUND TO BE PARTICULARLY ATTRACTIVE?
A: We focused on states that we believed were exhibiting improved fiscal health
and whose municipal bonds were attractively valued. For example, we held
several blocks of bonds from the California tax-exempt market. Following its
financial crisis in 2003, there have been considerable improvements in the
state's fiscal situation. Our holdings in California enhanced results as the
state's bonds continued to outperform the overall market during the period.
Given this appreciation, we believe California municipal securities are
fairly valued given their underlying fundamental risks.
Q: WHAT IS YOUR VIEW ON THE HEALTHCARE AND TOBACCO SECTORS?
A: Given an environment of declining government reimbursements, we were negative
on the healthcare sector in general. However, as the period progressed we
selectively purchased certain hospital bonds we believed offered yields that
fairly compensated investors for their risks. This strategy proved beneficial
for the Fund. We continued to avoid tobacco settlement bonds as we maintain a
negative long-term outlook for the sector. This positioning detracted from
results over the period, as these more speculative tobacco bonds performed
well.
Q: WHICH SECTORS DID YOU EMPHASIZE OVER THE FISCAL YEAR?
A: The Fund's portfolio is highly diversified and is exposed to a wide variety
of sectors. Having said that, one area that we found attractive was the
airport sector. Unlike the troubled airline industry, airports have performed
well as the economy has improved. Both business and consumer flight trends
have surpassed their pre-September 11, 2001 levels.
Q: CAN YOU EXPLAIN HOW THE USE OF LEVERAGE CAN AFFECT THE FUND'S PORTFOLIO?
A: As of March 31, 2005, 41% of the Fund's total assets were leveraged. This
means that the Fund had "borrowed" money by issuing preferred shares. While
leverage can increase the Fund's short-term volatility, we believe it better
positions us to seek our goal of generating high current income that is
exempt from federal income tax, consistent with the preservation of capital.
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3
Investment Grade Municipal Income Fund Inc.
Q. HOW WAS THE FUND POSITIONED AT THE END OF THE REPORTING PERIOD?
A. At this point, it appears that US economic growth will be sustainable,
despite the increase in oil prices. In particular, consumer spending has
remained solid and corporate capital expenditures appear to be improving. In
terms of the Fund's portfolio, we expect to remain defensively positioned and
anticipate continuing to employ a barbell positioning structure. We will look
for opportunities where individual securities appear to be structurally
mispriced and focus on states with improving balance sheets whose bonds are
attractively valued.
We thank you for your continued support and welcome any comments or questions
you may have. For additional information on the UBS funds,* please contact your
financial advisor or visit us at www.ubs.com/globalam-us.
Sincerely,
/s/ W. Douglas Beck /s/ William Veronda
W. Douglas Beck, CFA William Veronda
President Portfolio Manager
Investment Grade Municipal Income Investment Grade Municipal Income Fund Inc.
Fund Inc. Executive Director
Executive Director UBS Global Asset Management (US) Inc.
UBS Global Asset Management (US) Inc.
This letter is intended to assist shareholders in understanding how the Fund
performed during the six months ended March 31, 2005. The views and opinions in
the letter were current as of May 26, 2005. They are not guarantees of
performance or investment results and should not be taken as investment advice.
Investment decisions reflect a variety of factors, and we reserve the right to
change our views about individual securities, sectors and the markets at any
time. As a result, the views expressed should not be relied upon as a forecast
of the Fund's future investment intent.
We encourage you to consult your financial advisor regarding your personal
investment program.
* Mutual funds are sold by prospectus only. You should read it carefully and
consider a fund's investment objectives, risks, charges, expenses and
other important information contained in the prospectus before investing.
Prospectuses for most of our funds can be obtained from your financial
advisor, by calling UBS funds at 800-647 1568 or by visiting our Web site
at www.ubs.com/globalam-us.
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4
Investment Grade Municipal Income Fund Inc.
PERFORMANCE AT A GLANCE (UNAUDITED)
AVERAGE ANNUAL TOTAL RETURNS FOR PERIODS ENDED 3/31/05
<TABLE>
NET ASSET VALUE RETURNS 6 MONTHS 1 YEAR 5 YEARS 10 YEARS
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Investment Grade Municipal Income Fund Inc. 1.22% 3.68% 6.86% 6.51%
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Lipper General Municipal Debt Funds (Leveraged) median 2.66% 4.49% 8.14% 6.96%
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MARKET PRICE RETURNS
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Investment Grade Municipal Income Fund Inc. (4.11)% (8.45)% 8.24% 7.53%
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Lipper General Municipal Debt Funds (Leveraged) median (0.75)% (2.90)% 9.17% 6.90%
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</TABLE>
Past performance does not predict future performance. The return and value of an
investment will fluctuate, so that an investor's shares, when sold, may be worth
more or less than their original cost. NAV return assumes, for illustration
only, that dividends were reinvested at the net asset value on the payable
dates. NAV and market price returns for periods of less than one year are
cumulative. Returns do not reflect the deduction of taxes that a shareholder
could pay on Fund distributions.
Lipper peer group data calculated by Lipper Inc.; used with permission. The
Lipper median is the return of the fund that places in the middle of the peer
group.
<TABLE>
SHARE PRICE, DIVIDEND AND YIELDS AS OF 3/31/05
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Market Price $13.17
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Net Asset Value (per share applicable to common shareholders) $15.50
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12-Month Net Investment Income Dividend to Common Shareholders (period ended 3/31/05) $0.8375
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March 2005 Dividend $0.0625
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Market Yield* 5.69%
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NAV Yield* 4.84%
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</TABLE>
* Market yield is calculated by multiplying the March dividend by 12 and
dividing by the month-end market price. NAV yield is calculated by
multiplying the March dividend by 12 and dividing by the month-end net
asset value. Prices and yields will vary.
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5
Investment Grade Municipal Income Fund Inc.
PORTFOLIO STATISTICS (UNAUDITED)
<TABLE>
CHARACTERISTICS 3/31/05 9/30/04 3/31/04
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Net Assets Applicable to
Common Shareholders (mm) $160.5 $163.7 $164.5
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Weighted Average Maturity 11.5 yrs 11.7 yrs 11.2 yrs
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Weighted Average Duration 4.3 yrs 5.1 yrs 5.1 yrs
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Weighted Average Coupon 5.1% 5.5% 5.3%
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Leverage** 40.6% 39.4% 40.0%
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Callable/Maturing Within Five
Years* 19.5% 9.1% 6.0%
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Callable/Maturing Beyond Five
Years* 80.5% 90.9% 94.0%
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PORTFOLIO COMPOSITION*** 3/31/05 9/30/04 3/31/04
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Long-Term Municipal Bonds 147.9% 160.2% 155.1%
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Short-Term Municipal Notes 18.6 6.4 9.6
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Futures 0.1 (0.0)**** (0.1)
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Other Assets Less Liabilities 1.9 0.6 2.3
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Liquidation Value of auction
preferred shares (68.5) (67.2) (66.9)
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TOTAL 100.0% 100.0% 100.0%
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CREDIT QUALITY*** 3/31/05 9/30/04 3/31/04
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AAA 66.3% 59.2% 47.0%
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AA 27.5 40.3 46.4
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A 22.6 29.4 27.6
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BBB 18.2 18.0 20.7
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A1 18.6 6.4 9.6
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Nonrated 13.3 13.3 13.4
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Futures 0.1 (0.0)**** (0.1)
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Other Assets Less Liabilities 1.9 0.6 2.3
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Liquidation Value of auction
preferred shares (68.5) (67.2) (66.9)
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TOTAL 100.0% 100.0% 100.0%
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TOP FIVE STATES* 3/31/05 9/30/04 3/31/04
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California 19.8% California 17.7% New York 16.0%
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Texas 10.4 New York 11.4 California 12.7
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New York 9.9 Texas 10.7 Texas 11.6
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North Carolina 5.8 Florida 6.3 Indiana 6.3
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Indiana 5.6 Indiana 5.8 Illinois 5.0
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TOTAL 51.5% 51.9% 51.6%
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TOP FIVE SECTORS* 3/31/05 9/30/04 3/31/04
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Power 21.2% Power 22.0% Power 23.5%
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Hospital 10.9 Lease 12.4 Water & Sewer 15.7
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Lease 10.7 Water & Sewer 9.4 Lease 12.7
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Water 8.9 Hospital 6.8 Escrowed to Maturity 6.7
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University 7.9 Escrowed to Maturity 6.1 Pre-refunded 5.3
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TOTAL 59.6% 56.7% 63.9%
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</TABLE>
* Weightings represent percentages of total investments as of the dates
indicated. The Fund's portfolio is actively managed and its composition
will vary over time.
** As a percentage of total assets as of the dates indicated.
*** As a percentage of net assets applicable to common shareholders as of the
dates indicated. Credit quality ratings designated by Standard & Poor's
Rating Group, an independent rating agency.
**** Represents less than (0.05)% of net assets applicable to common
shareholders.
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6
Investment Grade Municipal Income Fund Inc.
PORTFOLIO OF INVESTMENTS-MARCH 31, 2005 (UNAUDITED)
<TABLE>
PRINCIPAL
AMOUNT MOODY'S S&P MATURITY INTEREST
(000) RATING RATING DATES RATES VALUE
- ------------------------------------------------------------------------------------------------------------
LONG-TERM MUNICIPAL BONDS - 147.91%
- ------------------------------------------------------------------------------------------------------------
ARIZONA - 1.59%
$ 2,380 Arizona State Transportation
Board Highway Revenue-
Series B Aa1 AAA 07/01/18 5.250% $ 2,559,000
- ------------------------------------------------------------------------------------------------------------
ARKANSAS - 1.05%
1,620 Little Rock Capital Improvement
Revenue Parks & Recreation
Projects-Series A NR NR 01/01/18 5.700 1,687,700
- ------------------------------------------------------------------------------------------------------------
CALIFORNIA - 33.02%
5,000 California State Department
Water Resources Revenue-
Series A A2 BBB+ 05/01/16 5.875 5,578,150
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5,000 California State Economic
Recovery General Obligation-
Series A (FGIC Insured) Aaa AAA 07/01/14 5.250 5,531,900
- ------------------------------------------------------------------------------------------------------------
4,000 California State Economic
Recovery General Obligation-
Series A (MBIA Insured) Aaa AAA 07/01/12 5.000 4,359,680
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3,000 California Statewide
Communities Development
Authority-Irvine Apartment
Communities-Series A-3 Baa2 BBB 05/15/25+ 5.100 3,135,000
- ------------------------------------------------------------------------------------------------------------
1,750 California Statewide
Communities Development
Authority Revenue-Kaiser
Permanente-Series H NR A 04/01/34+ 2.625++ 1,704,693
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2,150 Fontana Redevelopment Agency
Tax Allocation Jurupa Hills
Redevelopment Project A NR A- 10/01/17 5.500 2,260,574
- ------------------------------------------------------------------------------------------------------------
2,905 Inglewood Unified School District
1998 Election-Series C (FSA
Insured) Aaa AAA 10/01/28 5.000 3,006,646
- ------------------------------------------------------------------------------------------------------------
5,000 Los Angeles County Sanitation
Funding Authority Revenue-
Series A (FSA Insured) Aaa AAA 10/01/18 5.000 5,292,500
- ------------------------------------------------------------------------------------------------------------
3,000 Los Angeles Water & Power
Revenue Power Systems-
Series A (MBIA Insured) Aaa AAA 07/01/16 5.000 3,200,160
- ------------------------------------------------------------------------------------------------------------
3,200 Los Angeles Water & Power
Revenue Power Systems-
Series A-A-1 (FSA Insured) Aaa AAA 07/01/21 5.250 3,406,336
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5,000 Los Angeles Water & Power
Revenue Power Systems
Refunding-Series A, Subseries
A-2 (MBIA Insured) Aaa AAA 07/01/27 5.000 5,153,000
- ------------------------------------------------------------------------------------------------------------
6,000 Los Angeles Water & Power
Revenue Power Systems-
Series A-A-1 (MBIA Insured)# Aaa AAA 07/01/14 5.000 6,470,220
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3,500 Metropolitan Water District of
Southern California
Waterworks-Series A Aaa AAA 03/01/18 5.250 3,898,860
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52,997,719
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COLORADO - 1.11%
1,672 University of Colorado
Participation Interests NR A+ 12/01/13 6.000 1,779,422
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</TABLE>
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7
Investment Grade Municipal Income Fund Inc.
PORTFOLIO OF INVESTMENTS-MARCH 31, 2005 (UNAUDITED)
<TABLE>
PRINCIPAL
AMOUNT MOODY'S S&P MATURITY INTEREST
(000) RATING RATING DATES RATES VALUE
- --------------------------------------------------------------------------------------------------------------
LONG-TERM MUNICIPAL BONDS - (CONTINUED)
- --------------------------------------------------------------------------------------------------------------
FLORIDA - 2.11%
$ 1,175 Gainesville Utilities Systems
Revenue-Series A Aa2 AA 10/01/20 5.250% $1,271,221
- --------------------------------------------------------------------------------------------------------------
2,000 Orlando Utilities Commission
Water & Electric Revenue-
Series A Aa1 AA 10/01/19 5.000 2,107,840
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3,379,061
- --------------------------------------------------------------------------------------------------------------
ILLINOIS - 0.94%
1,200 Illinois Educational Facilities
Authority Revenue-Augustana
College-Series A Baa1 NR 10/01/22 5.625 1,250,232
- --------------------------------------------------------------------------------------------------------------
250 Metropolitan Pier & Exposition
Authority A1 NR 06/15/27 6.500 251,213
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1,501,445
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INDIANA - 9.38%
1,000 Clark Pleasant Community School
Building Corp. First Mortgage
(AMBAC Insured) Aaa AAA 07/15/17 5.500 1,091,450
- --------------------------------------------------------------------------------------------------------------
4,480 Indiana Health Facility Financing
Authority Revenue Ascension
Health Subordinated
Credit-A# Aa3 AA- 04/01/10 5.000 4,738,406
- --------------------------------------------------------------------------------------------------------------
3,305 Indiana Transportation Financing
Authority Airport Facilities
Lease Revenue-Series A A1 AA- 11/01/12 5.500 3,429,169
- --------------------------------------------------------------------------------------------------------------
2,000 Indiana Transportation Financing
Authority Airport Facilities
Lease Revenue-Series A A1 AA- 11/01/17 5.500 2,075,140
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3,400 Marion County Convention &
Recreational Facilities Authority
Excise Tax Revenue-Series A
(MBIA Insured) Aaa AAA 06/01/17 5.500 3,714,908
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15,049,073
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KENTUCKY - 4.97%
7,750 Boone County Pollution Control
Revenue-Dayton Power &
Light Co.-Series A Baa2 BBB- 11/15/22 6.500 7,982,500
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MASSACHUSETTS - 6.32%
5,865 Massachusetts State
Consolidated Loan-Series A Aa2 AA 08/01/16 5.000 6,314,493
- --------------------------------------------------------------------------------------------------------------
1,305 University of Massachusetts
Building Authority Revenue
Refunding-Series 05-1
(AMBAC Insured) Aaa AAA 05/01/12 5.000 1,409,570
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1,235 University of Massachusetts
Building Authority Revenue
Refunding-Series 05-1
(AMBAC Insured) Aaa AAA 05/01/13 5.000 1,334,862
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1,000 University of Massachusetts
Building Authority Revenue
Refunding-Series 05-1
(AMBAC Insured) Aaa AAA 05/01/14 5.000 1,082,390
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10,141,315
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</TABLE>
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8
Investment Grade Municipal Income Fund Inc.
PORTFOLIO OF INVESTMENTS-MARCH 31, 2005 (UNAUDITED)
<TABLE>
PRINCIPAL
AMOUNT MOODY'S S&P MATURITY INTEREST
(000) RATING RATING DATES RATES VALUE
- --------------------------------------------------------------------------------------------------------------------
LONG-TERM MUNICIPAL BONDS - (CONTINUED)
- --------------------------------------------------------------------------------------------------------------------
MICHIGAN - 4.96%
$ 3,425 Michigan State Building Authority
Revenue Program-Series III Aa3 AA- 10/15/16 5.375% $ 3,728,832
- --------------------------------------------------------------------------------------------------------------------
2,055 Michigan State Hospital Finance
Authority Revenue Ascension
Health Subordinated Credit-A Aa3 AA- 05/01/12 5.000 2,184,506
- --------------------------------------------------------------------------------------------------------------------
2,000 Michigan State Strategic Fund
Limited Obligation
Revenue-Ford Motor Co.
Project-Series A Baa1 BBB- 02/01/06 7.100 2,052,500
- --------------------------------------------------------------------------------------------------------------------
7,965,838
- --------------------------------------------------------------------------------------------------------------------
MINNESOTA - 0.95%
1,500 Shakopee Health Care
Facilities-Saint Francis
Regional Medical Center
Revenue Refunding NR BBB 09/01/17 5.000 1,526,205
- --------------------------------------------------------------------------------------------------------------------
NEVADA - 4.22%
6,750 Clark County Pollution Control
Revenue-Nevada Power Co.
Project-Series B (FGIC Insured) Aaa AAA 06/01/19 6.600 6,773,557
- --------------------------------------------------------------------------------------------------------------------
NEW JERSEY - 6.47%
10,000 New Jersey State Educational
Facilities Authority Revenue
Princeton University-Series D# Aaa AAA 07/01/29 5.000 10,389,600
- --------------------------------------------------------------------------------------------------------------------
NEW MEXICO - 0.67%
1,000 University of New Mexico
Revenue Sub-Lien-Series A Aa3 AA 06/01/16 5.250 1,078,460
- --------------------------------------------------------------------------------------------------------------------
NEW YORK - 15.29%
4,030 Long Island Power Authority
Electric Systems Revenue-
Series C A3 A- 09/01/17 5.500 4,356,510
- --------------------------------------------------------------------------------------------------------------------
1,765 Metropolitan Transportation
Authority New York Dedicated
Tax Fund-Series A (FSA
Insured) Aaa AAA 11/15/24 5.250 1,879,072
- --------------------------------------------------------------------------------------------------------------------
2,500 New York City General
Obligation-Series G A1 A 08/01/13 5.000 2,661,875
- --------------------------------------------------------------------------------------------------------------------
1,625 Triborough Bridge & Tunnel
Authority Revenue-Series B Aa3 AA- 11/15/18 5.250 1,758,380
- --------------------------------------------------------------------------------------------------------------------
3,140 Triborough Bridge & Tunnel
Authority Revenue-Series B Aa3 AA- 11/15/19 5.250 3,390,164
- --------------------------------------------------------------------------------------------------------------------
3,350 Triborough Bridge & Tunnel
Authority Revenue-Series Y Aa3 AAA 01/01/12 6.000 3,770,492
- --------------------------------------------------------------------------------------------------------------------
6,400 Triborough Bridge & Tunnel
Authority Revenue-
Subordinate Bonds A1 A+ 11/15/30 5.250 6,730,240
- --------------------------------------------------------------------------------------------------------------------
24,546,733
- --------------------------------------------------------------------------------------------------------------------
NORTH CAROLINA - 9.61%
5,000 North Carolina Eastern Municipal
Power Agency-Series A
(Escrowed to Maturity) Baa2 BBB 01/01/11 5.500 5,362,950
- --------------------------------------------------------------------------------------------------------------------
2,000 North Carolina Eastern Municipal
Power Agency-Series A
(Escrowed to Maturity) Baa2 BBB 01/01/12 5.500 2,153,740
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
9
Investment Grade Municipal Income Fund Inc.
PORTFOLIO OF INVESTMENTS-MARCH 31, 2005 (UNAUDITED)
<TABLE>
PRINCIPAL
AMOUNT MOODY'S S&P MATURITY INTEREST
(000) RATING RATING DATES RATES VALUE
- -------------------------------------------------------------------------------------------------------------------
LONG-TERM MUNICIPAL BONDS - (CONTINUED)
- -------------------------------------------------------------------------------------------------------------------
NORTH CAROLINA - (concluded)
$ 3,065 North Carolina Eastern Municipal
Power Agency-Series A
(Escrowed to Maturity) Baa2 AAA 01/01/21 6.400% $ 3,701,692
- -------------------------------------------------------------------------------------------------------------------
4,545 North Carolina State Public
Improvement-Series A Aa1 AAA 03/01/24 4.000 4,213,670
- -------------------------------------------------------------------------------------------------------------------
15,432,052
- -------------------------------------------------------------------------------------------------------------------
OHIO - 6.67%
2,185 Ohio State Higher Education
-Series B Aa1 AA+ 11/01/17 5.250 2,358,533
- -------------------------------------------------------------------------------------------------------------------
8,000 Ohio State Water Development
Authority-Water Quality
Pollution Control Aaa AAA 06/01/24 5.000 8,346,160
- -------------------------------------------------------------------------------------------------------------------
10,704,693
- -------------------------------------------------------------------------------------------------------------------
OREGON - 0.67%
1,000 Portland Sewer Systems
Revenue-Series A Aaa AAA 06/01/18 5.250 1,079,000
- -------------------------------------------------------------------------------------------------------------------
PENNSYLVANIA - 5.08%
5,000 Northumberland County
Authority-Guaranteed Lease
Revenue-Mountain View
Manor Project NR NR 10/01/20 7.000 5,125,650
- -------------------------------------------------------------------------------------------------------------------
3,000 Susquehanna Area Regional
Airport Authority Airport
Systems Revenue-Subseries D Baa2 NR 01/01/18 5.375 3,021,480
- -------------------------------------------------------------------------------------------------------------------
8,147,130
- -------------------------------------------------------------------------------------------------------------------
PUERTO RICO - 8.85%
8,010 Puerto Rico Commonwealth
Refunding-Public
Improvement-Series C Baa1 A- 07/01/18 5.000 8,388,232
- -------------------------------------------------------------------------------------------------------------------
3,000 Puerto Rico Housing Finance
Authority-Capital Funding
Program (HUD Insured) Aa3 AA 12/01/18 5.000 3,146,010
- -------------------------------------------------------------------------------------------------------------------
2,425 Puerto Rico Public Buildings
Authority Revenue-
Guaranteed Government
Facilities-Series D
(Pre-refunded with U.S.
Government Securities to
07/01/12 @ 100) Baa1 A- 07/01/13 5.375 2,664,905
- -------------------------------------------------------------------------------------------------------------------
14,199,147
- -------------------------------------------------------------------------------------------------------------------
RHODE ISLAND - 0.09%
145 Rhode Island Housing &
Mortgage Finance Corp.
Homeownership Opportunity-
Series 10-A Aa2 AA+ 04/01/27 6.500 145,158
- -------------------------------------------------------------------------------------------------------------------
SOUTH CAROLINA - 0.67%
1,000 Greenville Waterworks Revenue Aa1 AAA 02/01/20 5.250 1,077,090
- -------------------------------------------------------------------------------------------------------------------
SOUTH DAKOTA - 2.88%
3,329 Lower Brule Sioux Tribe** NR NR 08/15/15 6.000 3,345,521
- -------------------------------------------------------------------------------------------------------------------
1,258 Standing Rock South Dakota
New Public Housing** NR NR 08/07/13 6.000 1,284,221
4,629,742
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
10
Investment Grade Municipal Income Fund Inc.
PORTFOLIO OF INVESTMENTS-MARCH 31, 2005 (UNAUDITED)
<TABLE>
PRINCIPAL
AMOUNT MOODY'S S&P MATURITY INTEREST
(000) Rating RATING DATES RATES VALUE
- -------------------------------------------------------------------------------------------------------------------
LONG-TERM MUNICIPAL BONDS - (CONCLUDED)
- -------------------------------------------------------------------------------------------------------------------
TENNESSEE - 1.66%
$ 2,500 Memphis-Shelby County Airport
Authority Special Facilities
Revenue-Federal Express Corp. Baa2 BBB 09/01/09 5.000% $ 2,672,225
- -------------------------------------------------------------------------------------------------------------------
TEXAS - 16.54%
2,475 Alvin Independent School District
School House-Series A Aaa AAA 02/15/17 5.375 2,668,347
- -------------------------------------------------------------------------------------------------------------------
4,000 Coastal Bend Health Facilities
Development-Incarnate Word
Health System (Escrowed to
Maturity) (AMBAC Insured) Aaa AAA 01/01/17 6.300 4,553,520
- -------------------------------------------------------------------------------------------------------------------
1,335 Eagle Mountain & Saginaw
Independent School District
Unlimited Tax-School Building Aaa AAA 08/15/14 5.375 1,451,893
- -------------------------------------------------------------------------------------------------------------------
2,825 Fort Worth Water & Sewer
Revenue Aa2 AA 02/15/16 5.625 3,150,383
- -------------------------------------------------------------------------------------------------------------------
6,921 Harris County Texas Lease@ NR NR 05/01/20 6.750 6,728,528
- -------------------------------------------------------------------------------------------------------------------
3,007 Houston Community College
System Certificates of
Participation@ NR NR 06/15/25 7.875 3,117,155
- -------------------------------------------------------------------------------------------------------------------
1,485 Lower Colorado River Authority
Transmission Contract Revenue Aaa AAA 05/15/20 5.250 1,580,916
- -------------------------------------------------------------------------------------------------------------------
3,000 San Antonio Electric & Gas
Revenue Aa1 AA 02/01/20 5.375 3,299,460
- -------------------------------------------------------------------------------------------------------------------
26,550,202
- -------------------------------------------------------------------------------------------------------------------
WASHINGTON - 2.14%
1,920 Metropolitan Park District Tacoma
(AMBAC Insured) Aaa AAA 12/01/14 6.000 2,169,850
- -------------------------------------------------------------------------------------------------------------------
1,115 Metropolitan Park District Tacoma
(AMBAC Insured) Aaa AAA 12/01/16 6.000 1,258,902
- -------------------------------------------------------------------------------------------------------------------
3,428,752
- -------------------------------------------------------------------------------------------------------------------
Total Long-Term Municipal Bonds (cost-$233,288,537) 237,422,819
- -------------------------------------------------------------------------------------------------------------------
SHORT-TERM MUNICIPAL NOTES - 18.56%
- -------------------------------------------------------------------------------------------------------------------
ALASKA - 2.68%
4,300 Valdez Marine Terminal Revenue
Refunding-Exxon Pipeline Co.
Project-Series C Aaa A-1+ 04/01/05 2.200* 4,300,000
- -------------------------------------------------------------------------------------------------------------------
GEORGIA - 1.81%
2,900 Hapeville Development Authority
Industrial Development
Revenue-Hapeville Hotel Ltd. P-1 NR 04/01/05 2.240* 2,900,000
- -------------------------------------------------------------------------------------------------------------------
KENTUCKY - 2.18%
3,500 Kentucky Economic Development
Finance Authority Hospital
Facilities Revenue Refunding-
Baptist Healthcare-Series C
(MBIA Insured) Aaa A-1 04/01/05 2.290* 3,500,000
- -------------------------------------------------------------------------------------------------------------------
MISSOURI - 1.80%
2,890 Missouri State Health &
Educational Facilities Authority
Revenue-Washington
University-Series A Aa1 A-1+ 04/01/05 2.300* 2,890,000
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
11
Investment Grade Municipal Income Fund Inc.
PORTFOLIO OF INVESTMENTS-MARCH 31, 2005 (UNAUDITED)
<TABLE>
PRINCIPAL
AMOUNT MOODY'S S&P MATURITY INTEREST
(000) RATING RATING DATES RATES VALUE
- ---------------------------------------------------------------------------------------------------------------------------
SHORT-TERM MUNICIPAL NOTES - (CONCLUDED)
- ---------------------------------------------------------------------------------------------------------------------------
NEW MEXICO - 2.43%
$ 3,900 Hurley Pollution Control Revenue
Updates-Kennecott Santa Fe P-1 A-1+ 04/01/05 2.300%* $ 3,900,000
- ---------------------------------------------------------------------------------------------------------------------------
NEW YORK - 1.18%
1,900 Port Authority New York & New
Jersey Special Obligation
Revenue Versatile Structure
Obligation-5 VMIG-1 A-1+ 04/01/05 2.300* 1,900,000
- ---------------------------------------------------------------------------------------------------------------------------
TEXAS - 0.81%
1,300 North Central Health Facility
Development Corp. Revenue
Methodist Hospitals Dallas-
Series B (MBIA Insured) Aaa A-1+ 04/01/05 2.300* 1,300,000
- ---------------------------------------------------------------------------------------------------------------------------
VIRGINIA - 5.67%
9,100 Roanoke Industrial Development
Authority Hospital Revenue
Refunding Carilion Health
Systems-Series D VMIG-1 A-1+ 04/01/05 2.300* 9,100,000
- ---------------------------------------------------------------------------------------------------------------------------
Total Short-Term Municipal Notes (cost-$29,790,000) 29,790,000
- ---------------------------------------------------------------------------------------------------------------------------
Total Investments (cost-$263,078,537)-166.47% 267,212,819
- ---------------------------------------------------------------------------------------------------------------------------
Other assets in excess of liabilities-2.06% 3,308,044
- ---------------------------------------------------------------------------------------------------------------------------
Liquidation value of auction preferred shares-(68.53)% (110,000,000)
- ---------------------------------------------------------------------------------------------------------------------------
Net Assets applicable to common shareholders-100.00% $ 160,520,863
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
+ The maturity date reflects the mandatory date bond will be put back to
issuer.
++ Floating rate security. The interest rate shown is the current rate as of
March 31, 2005.
# Entire or partial amount pledged as collateral for futures transactions.
* Variable rate demand notes are payable on demand. The maturity dates shown
are the next interest rate reset dates. The interest rates shown are the
current rates as of March 31, 2005.
** Security exempt from registration under Rule 144A of the Securities Act of
1933. These securities, which represent 2.88% of net assets applicable to
common shareholders as of March 31, 2005, are considered illiquid and
restricted. (See table below for more information).
<TABLE>
ACQUISITION MARKET
COST AS A VALUE AS A
PERCENTAGE PERCENTAGE
ILLIQUID AND ACQUISITION ACQUISITION OF COMMON MARKET OF COMMON
RESTRICTED SECURITIES DATE(S) COST NET ASSETS VALUE NET ASSETS
- -----------------------------------------------------------------------------------------------------
Lower Brule Sioux Tribe, 6.000%,
08/15/15 09/06/01 $3,328,712 2.07% $3,345,521 2.08%
- -----------------------------------------------------------------------------------------------------
Standing Rock South Dakota New
Public Housing, 6.000%,
08/07/13 08/08/02 1,257,770 0.78 1,284,221 0.80
- -----------------------------------------------------------------------------------------------------
$4,586,482 2.85% $4,629,742 2.88%
- -----------------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
12
Investment Grade Municipal Income Fund Inc.
PORTFOLIO OF INVESTMENTS-MARCH 31, 2005 (UNAUDITED)
@ The securities detailed in the table below are considered illiquid and
restricted which represent 6.13% of net assets applicable to common
shareholders as of March 31, 2005.
<TABLE>
ACQUISITION MARKET
COST AS A VALUE AS A
PERCENTAGE PERCENTAGE
ILLIQUID AND ACQUISITION ACQUISITION OF COMMON MARKET OF COMMON
RESTRICTED SECURITIES DATE(S) COST NET ASSETS VALUE NET ASSETS
- -----------------------------------------------------------------------------------------------
Harris County Texas Lease,
6.750%, 05/01/20 09/07/00 $6,921,001 4.31% $6,728,528 4.19%
- -----------------------------------------------------------------------------------------------
Houston Community College
System Certicates of
Participation, 7.875%,
06/15/25 04/22/02 3,007,095 1.87 3,117,155 1.94
- -----------------------------------------------------------------------------------------------
$9,928,096 6.18% $9,845,683 6.13%
- -----------------------------------------------------------------------------------------------
</TABLE>
AMBAC - American Municipal Bond Assurance Corporation
FGIC - Financial Guaranty Insurance Company
FSA - Financial Security Assurance
HUD - Housing and Urban Development
MBIA - Municipal Bond Investors Assurance
NR - Not Rated
<TABLE>
NUMBER OF IN EXPIRATION UNREALIZED
CONTRACTS CONTRACTS TO RECEIVE EXCHANGE FOR DATE APPRECIATION
- ------------------------------------------------------------------------------------
FUTURES CONTRACTS
U.S. Treasury Note
90 5 Year Futures $9,703,901 June 2005 $ 65,464
- ------------------------------------------------------------------------------------
U.S. Treasury Note
145 10 Year Futures 15,969,376 June 2005 125,860
- ------------------------------------------------------------------------------------
$191,324
- ------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements
- --------------------------------------------------------------------------------
13
Investment Grade Municipal Income Fund Inc.
STATEMENT OF ASSETS AND LIABILITIES - MARCH 31, 2005 (UNAUDITED)
<TABLE>
ASSETS:
Investments in securities, at value (cost-$263,078,537) $ 267,212,819
- ---------------------------------------------------------------------------------------
Cash 60,597
- ---------------------------------------------------------------------------------------
Receivable for interest 3,512,747
- ---------------------------------------------------------------------------------------
Other assets 32,704
- ---------------------------------------------------------------------------------------
Total assets 270,818,867
- ---------------------------------------------------------------------------------------
LIABILITIES:
Payable to investment advisor and administrator 161,922
- ---------------------------------------------------------------------------------------
Payable for variation margin 111,328
- ---------------------------------------------------------------------------------------
Dividends payable to auction preferred shareholders 14,065
- ---------------------------------------------------------------------------------------
Accrued expenses and other liabilities 10,689
- ---------------------------------------------------------------------------------------
Total liabilities 298,004
- ---------------------------------------------------------------------------------------
Auction Preferred Shares Series A, B and C-2,200 non-participating
shares authorized, issued and outstanding; $0.001 par value;
$50,000 liquidation value per share 110,000,000
- ---------------------------------------------------------------------------------------
Net assets applicable to common shareholders $ 160,520,863
- ---------------------------------------------------------------------------------------
NET ASSETS APPLICABLE TO COMMON SHAREHOLDERS:
Common Stock-$0.001 par value; 199,998,400 shares authorized;
10,356,667 shares issued and outstanding 153,239,012
- ---------------------------------------------------------------------------------------
Undistributed net investment income 310,870
- ---------------------------------------------------------------------------------------
Accumulated net realized gain from investment activities and futures 2,645,375
- ---------------------------------------------------------------------------------------
Net unrealized appreciation of investments and futures 4,325,606
- ---------------------------------------------------------------------------------------
Net assets applicable to common shareholders $ 160,520,863
- ---------------------------------------------------------------------------------------
Net asset value per common share ($160,520,863 applicable to
10,356,667 common shares outstanding) $ 15.50
- ---------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements
- --------------------------------------------------------------------------------
14
Investment Grade Municipal Income Fund Inc.
STATEMENT OF OPERATIONS
<TABLE>
FOR THE SIX
MONTHS ENDED
MARCH 31, 2005
(UNAUDITED)
- ---------------------------------------------------------------------------------------
INVESTMENT INCOME:
Interest $6,277,187
- ----------------------------------------------------------------------------------------
EXPENSES:
Investment advisory and administration fees 1,228,212
- ----------------------------------------------------------------------------------------
Auction Preferred Shares expenses 159,803
- ----------------------------------------------------------------------------------------
Custody and accounting 81,881
- ----------------------------------------------------------------------------------------
Professional fees 33,639
- ----------------------------------------------------------------------------------------
Reports and notices to shareholders 32,755
- ----------------------------------------------------------------------------------------
Directors' fees 9,353
- ----------------------------------------------------------------------------------------
Transfer agency fees 8,868
- ----------------------------------------------------------------------------------------
Other expenses 34,481
- ----------------------------------------------------------------------------------------
1,588,992
- ----------------------------------------------------------------------------------------
Less: Fee waivers by investment advisor and administrator (272,936)
- ----------------------------------------------------------------------------------------
Net expenses 1,316,056
- ----------------------------------------------------------------------------------------
Net investment income 4,961,131
- ----------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAINS (LOSSES) FROM INVESTMENT ACTIVITIES:
Net realized gains from:
- ----------------------------------------------------------------------------------------
Investments 2,072,748
- ----------------------------------------------------------------------------------------
Futures 655,040
- ----------------------------------------------------------------------------------------
Net change in unrealized appreciation/depreciation of:
- ----------------------------------------------------------------------------------------
Investments (4,936,154)
- ----------------------------------------------------------------------------------------
Futures 252,649
- ----------------------------------------------------------------------------------------
Net realized and unrealized loss from investment activities (1,955,717)
- ----------------------------------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS TO AUCTION PREFERRED SHAREHOLDERS
FROM:
Net investment income (848,457) Net realized gain from investment activities (152,322)
- ----------------------------------------------------------------------------------------
Total dividends and distributions to auction preferred shareholders (1,000,779)
- ----------------------------------------------------------------------------------------
Net increase in net assets applicable to common shareholders resulting
from operations $2,004,635
- ---------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements
- --------------------------------------------------------------------------------
15
Investment Grade Municipal Income Fund Inc.
STATEMENT OF CHANGES IN NET ASSETS APPLICABLE TO COMMON SHAREHOLDERS
<TABLE>
For the Six
Months Ended For the
March 31, 2005 Year Ended
(unaudited) September 30, 2004
- ------------------------------------------------------------------------------------------------
FROM OPERATIONS:
Net investment income $ 4,961,131 $ 9,641,849
- ------------------------------------------------------------------------------------------------
Net realized gains from investment activities and futures 2,727,788 1,889,676
- ------------------------------------------------------------------------------------------------
Net change in unrealized appreciation/depreciation of
investments and futures (4,683,505) (316,692)
- ------------------------------------------------------------------------------------------------
COMMON SHARE EQUIVALENT OF DIVIDENDS AND
DISTRIBUTIONS TO AUCTION PREFERRED
SHAREHOLDERS FROM:
Net investment income (848,457) (863,818)
- ------------------------------------------------------------------------------------------------
Net realized gains from investment activities (152,322) (318,688)
- ------------------------------------------------------------------------------------------------
Total dividends and distributions paid to auction
preferred shareholders (1,000,779) (1,182,506)
- ------------------------------------------------------------------------------------------------
Net increase in net assets applicable to common
shareholders resulting from operations 2,004,635 10,032,327
- ------------------------------------------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS TO COMMON
SHAREHOLDERS FROM:
Net investment income (4,013,209) (9,631,721)
- ------------------------------------------------------------------------------------------------
Net realized gains from investment activities (1,207,587) (5,116,194)
- ------------------------------------------------------------------------------------------------
Total dividends and distributions to common
shareholders (5,220,796) (14,747,915)
- ------------------------------------------------------------------------------------------------
Auction preferred shares offering expenses -- (435,135)
- ------------------------------------------------------------------------------------------------
Net decrease in net assets applicable to common
shareholders (3,216,161) (5,150,723)
- ------------------------------------------------------------------------------------------------
NET ASSETS APPLICABLE TO COMMON SHAREHOLDERS:
Beginning of period 163,737,024 168,887,747
- ------------------------------------------------------------------------------------------------
End of period $ 160,520,863 $ 163,737,024
- ------------------------------------------------------------------------------------------------
Accumulated undistributed net investment income $ 310,870 $ 211,405
- ------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements
- --------------------------------------------------------------------------------
16
Investment Grade Municipal Income Fund Inc.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Investment Grade Municipal Income Fund Inc. (the "Fund") was incorporated in
Maryland on August 6, 1992, and is registered with the Securities and Exchange
Commission under the Investment Company Act of 1940, as amended, as a closed-end
diversified management investment company. The Fund's investment objective is to
achieve a high level of current income that is exempt from federal income tax,
consistent with the preservation of capital. There can be no assurance that the
Fund's investment objective will be achieved.
In the normal course of business the Fund may enter into contracts that contain
a variety of representations or that provide indemnification for certain
liabilities. The Fund's maximum exposure under these arrangements is unknown, as
this would involve future claims that may be made against the Fund that have not
yet occurred. However, the Fund has not had prior claims or losses pursuant to
these contracts and expects the risk of loss to be remote.
The preparation of financial statements in accordance with U.S. generally
accepted accounting principles requires the Fund's management to make estimates
and assumptions that affect the reported amounts and disclosures in the
financial statements. Actual results could differ from those estimates. The
following is a summary of significant accounting policies:
VALUATION OF INVESTMENTS-The Fund calculates its net asset value based on the
current market value, where available, for its portfolio securities. The Fund
normally obtains market values for its securities from independent pricing
sources and broker-dealers. Independent pricing sources may use last reported
sale prices, current market quotations or valuations from computerized "matrix"
systems that derive values based on comparable securities. A matrix system
incorporates parameters such as security quality, maturity and coupon, and/or
research and evaluations by its staff, including review of broker-dealer market
price quotations, if available, in determining the valuation of the portfolio
securities. If a market value is not available from an independent pricing
source for a particular security, that security is valued at fair value as
determined in good faith by or under the direction of the Fund's Board of
Directors (the "Board"). The amortized cost method of valuation, which
approximates market value, generally is used to value short-term debt
instruments with sixty days or less remaining to maturity, unless the Board
determines that this does not represent fair value. Securities traded in the
over-the-counter ("OTC") market are valued at the last bid price available on
the valuation date prior to valuation.
INVESTMENT TRANSACTIONS AND INVESTMENT INCOME-Investment transactions are
recorded on the trade date. Realized gains and losses from investment
transactions
- --------------------------------------------------------------------------------
17
Investment Grade Municipal Income Fund Inc.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
are calculated using the identified cost method. Interest income is recorded on
an accrual basis. Discounts are accreted and premiums are amortized as
adjustments to interest income and the identified cost of investments.
FUTURES CONTRACTS-Upon entering into a financial futures contract, the Fund is
required to deposit in a segregated account with its custodian, in the name of
the futures broker through which the transaction was effected, an amount of cash
and/or municipal obligations equal to a certain percentage of the contract
amount. This amount is known as the "initial margin." Subsequent payments, known
as "variation margin" are made or received by the Fund each day, depending on
the daily fluctuations in the value of the underlying financial futures
contracts. Such variation margin is recorded for financial statement purposes on
a daily basis as unrealized gain or loss until the financial futures contract is
closed, at which time the net gain or loss is reclassified to realized gain or
loss on futures. Variation margin calls could be substantial in the event of
adverse price movements.
Using financial futures contracts involves various market risks. If the Fund was
unable to liquidate a futures position due to the absence of a liquid secondary
market or the imposition of price limits, it could incur substantial losses. The
Fund would continue to be subject to market risk with respect to the position.
In addition, the Fund would continue to be required to make variation margin
payments and might be required to maintain the position being hedged or to
maintain cash or securities in a segregated account. Furthermore, certain
characteristics of the futures market might increase the risk that movements in
the prices of the financial futures contracts might not correlate perfectly with
movements in the prices of the investments being hedged, including temporary
price distortion.
DIVIDENDS AND DISTRIBUTIONS-The Fund intends to pay monthly dividends to common
shareholders at a level rate that over time will result in the distribution of
all of the Fund's net investment income remaining after the payment of dividends
on any outstanding auction preferred shares. The dividend rate on the common
stock is adjusted as necessary to reflect the earnings rate of the Fund.
Dividends and distributions to common shareholders are recorded on the
ex-dividend date. Dividends to auction preferred shareholders are accrued daily.
The amount of dividends from net investment income and distributions from net
realized capital gains is determined in accordance with federal income tax
regulations, which may differ from U.S. generally accepted accounting
principles. These "book/tax" differences are either considered temporary or
permanent in nature. To the extent these differences are permanent in nature,
such amounts are reclassified within the capital accounts based on their federal
tax-basis treatment; temporary differences do not require reclassification.
- --------------------------------------------------------------------------------
18
Investment Grade Municipal Income Fund Inc.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
CONCENTRATION OF RISK
The Fund follows an investment policy of investing primarily in municipal
obligations of various states. Economic changes affecting those states and
certain of their public bodies and municipalities may affect the ability of the
issuers within those states to pay interest on, or repay principal of, municipal
obligations held by the Fund.
INVESTMENT ADVISOR AND ADMINISTRATOR
The Board has approved an investment advisory and administration contract
("Advisory Contract") with UBS Global Asset Management (US) Inc. ("UBS Global
AM"), under which UBS Global AM serves as investment advisor and administrator
of the Fund. UBS Global AM is an indirect wholly owned asset management
subsidiary of UBS AG, an internationally diversified organization with
headquarters in Zurich, Switzerland and operations in many areas of the
financial services industry. In accordance with the Advisory Contract, the Fund
pays UBS Global AM an investment advisory and administration fee, which is
accrued weekly and paid monthly, at the annual rate of 0.90% of the Fund's
average weekly net assets applicable to holders of common and auction preferred
shares. UBS Global AM has agreed to waive 0.20% of the advisory and
administration fee, so that the Fund's effective fee is 0.70% of average weekly
net assets applicable to holders of common and auction preferred shares. This
waiver will continue indefinitely unless the Board agrees to any change. At
March 31, 2005, the Fund owed UBS Global AM $161,922, which is $208,186
investment advisory and administration fees less fees waived of $46,264. For the
six months ended March 31, 2005, UBS Global AM waived $272,936 in investment
advisory and administration fees from the Fund.
ADDITIONAL INFORMATION REGARDING COMPENSATION TO AFFILIATE OF A BOARD MEMBER
Effective March 1, 2005, Professor Meyer Feldberg accepted the position of
senior advisor to Morgan Stanley, resulting in his becoming an interested
director of the Fund. The Fund has been informed that Professor Feldberg's role
at Morgan Stanley does not involve matters directly affecting any UBS funds. UBS
Global AM executes Fund portfolio transactions through Morgan Stanley based on
that firm's ability to provide best execution of the transactions. During the
six months ended March 31, 2005, the Fund purchased and sold certain securities
(e.g., fixed income securities) in principal trades with Morgan Stanley having
an aggregate value of $24,855,800. Morgan Stanley received compensation for
these trades in the form of a "mark-up" or "mark-down" of the price of the
securities. Although the precise amount of this compensation is not generally
known by UBS Global AM, UBS Global AM believes that under normal circumstances
it represents a small portion of the total value of the transactions.
- --------------------------------------------------------------------------------
19
Investment Grade Municipal Income Fund Inc.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
AUCTION PREFERRED SHARES
The Fund has issued 800 shares of auction preferred shares Series A, 800 shares
of auction preferred shares Series B, and 600 shares of auction preferred shares
Series C, which are referred to herein collectively as the "APS." All shares of
each series of APS have a liquidation preference of $50,000 per share plus an
amount equal to accumulated but unpaid dividends upon liquidation.
Dividends, which are cumulative, are generally reset every 7 days for each
Series of APS. Dividend rates ranged from 1.390% to 2.450% for the six months
ended March 31, 2005.
The Fund is subject to certain restrictions relating to the APS. Failure to
comply with these restrictions could preclude the Fund from declaring any
distributions to common shareholders or repurchasing common shares and/or could
trigger the mandatory redemption of APS at liquidation value.
The APS are entitled to one vote per share and, unless otherwise required by
law, will vote with holders of common stock as a single class, except that the
APS will vote separately as a class on certain matters, as required by law. The
holders of the APS have the right to elect two directors of the Fund.
The redemption of the Fund's APS is outside of the control of the Fund because
it is redeemable upon the occurrence of an event that is not solely within the
control of the Fund.
Offering expenses of $435,135 were charged to paid-in-capital of the Fund in
connection with the offering of APS during the year ended September 30, 2004.
PURCHASES AND SALES OF SECURITIES
For the six months ended March 31, 2005, aggregate purchases and sales of
portfolio securities, excluding short-term securities, were $54,774,785 and
$76,365,286 respectively.
FEDERAL TAX STATUS
The Fund intends to distribute substantially all of its tax-exempt income and
any taxable income and to comply with the other requirements of the Internal
Revenue Code applicable to regulated investment companies. Accordingly, no
provision for federal income taxes is required. In addition, by distributing
during each calendar year substantially all of its net investment income, net
realized capital gains and certain other amounts, if any, the Fund intends not
to be subject to a federal excise tax.
- --------------------------------------------------------------------------------
20
Investment Grade Municipal Income Fund Inc.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
The tax character of distributions paid during the fiscal year ended September
30, 2004 was as follows:
DISTRIBUTIONS PAID FROM: 2004
- -------------------------------------------
Tax-exempt income $10,491,297
- -------------------------------------------
Ordinary income 4,242
- -------------------------------------------
Net long-term capital gains 5,434,882
- -------------------------------------------
Total distributions paid $15,930,421
- -------------------------------------------
The tax character of distributions paid and the components of accumulated
earnings (deficit) on a tax basis for the current fiscal year will be calculated
after the Fund's fiscal year ending September 30, 2005.
For federal income tax purposes, which was substantially the same for book
purposes, the tax cost of investments and the components of net unrealized
appreciation of investments at March 31, 2005 were as follows:
Tax cost of investments $263,078,537
- -------------------------------------------
Gross unrealized appreciation 5,435,834
- ------------------------------ ------------
Gross unrealized depreciation (1,301,552)
- -------------------------------------------
Net unrealized appreciation $4,134,282
- -------------------------------------------
- --------------------------------------------------------------------------------
21
Investment Grade Municipal Income Fund Inc.
FINANCIAL HIGHLIGHTS
Selected data for a share of common stock outstanding throughout each period is
presented below:
<TABLE>
FOR THE SIX
MONTHS ENDED
MARCH 31, 2005
(UNAUDITED)
- ----------------------------------------------------------------------------------------------------
NET ASSET VALUE,
BEGINNING OF PERIOD $15.81
- ----------------------------------------------------------------------------------------------------
Net investment income 0.48
- ----------------------------------------------------------------------------------------------------
Net realized and unrealized gains (losses) from investment activities (0.19)
- ----------------------------------------------------------------------------------------------------
Common share equivalent of dividends and distributions paid to auction preferred
shareholders from:
Net investment income (0.08)
- ----------------------------------------------------------------------------------------------------
Net realized gains from investment activities (0.01)
- ----------------------------------------------------------------------------------------------------
Total dividends and distributions paid to auction preferred shareholders (0.09)
- ----------------------------------------------------------------------------------------------------
Net increase from operations 0.20
- ----------------------------------------------------------------------------------------------------
Dividends and distributions paid to common shareholders from:
Net investment income (0.39)
- ----------------------------------------------------------------------------------------------------
Net realized gains from investment activities (0.12)
- ----------------------------------------------------------------------------------------------------
Total dividends and distributions paid to common shareholders (0.51)
- ----------------------------------------------------------------------------------------------------
Auction preferred shares offering expenses -
- ----------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $15.50
- ----------------------------------------------------------------------------------------------------
MARKET VALUE, END OF PERIOD $13.17
- ----------------------------------------------------------------------------------------------------
TOTAL INVESTMENT RETURN(2) (4.11)%
- ----------------------------------------------------------------------------------------------------
RATIO TO AVERAGE NET ASSETS ATTRIBUTABLE TO COMMON SHARES:
Total expenses, net of fee waivers by advisor 1.61%
- ----------------------------------------------------------------------------------------------------
Total expenses, before fee waivers by advisor 1.95%
- ----------------------------------------------------------------------------------------------------
Net investment income before auction preferred shares dividends 6.08%
- ----------------------------------------------------------------------------------------------------
Auction preferred shares dividends from net investment income 1.04%
- ----------------------------------------------------------------------------------------------------
Net investment income available to common shareholders, net of fee waivers by advisor 5.04%
- ----------------------------------------------------------------------------------------------------
Net investment income available to common shareholders, before fee waivers by advisor 4.70%
- ----------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA:
Net assets applicable to common shareholders, end of period (000's) $160,521
- ----------------------------------------------------------------------------------------------------
Portfolio turnover 21%
- ----------------------------------------------------------------------------------------------------
Asset coverage per share of auction preferred shares, end of period $122,964
- ----------------------------------------------------------------------------------------------------
</TABLE>
(1) Distribution equal to $0.0042 per share.
(2) Total investment return is calculated assuming a $10,000 purchase of
common stock at the current market price on the first day of each period
reported and a sale at the current market price on the last day of each
period reported, and assuming reinvestment of dividends and other
distributions to common shareholders at prices obtained under the Fund's
Dividend Reinvestment Plan. Total investment return does not reflect
brokerage commissions and has not been annualized for the period of less
than one year. Returns do not reflect the deduction of taxes that a
shareholder could pay on Fund distributions.
- --------------------------------------------------------------------------------
22
Investment Grade Municipal Income Fund Inc.
<TABLE>
FOR THE YEARS ENDED SEPTEMBER 30,
- ----------------------------------------------------------------------------
2004 2003 2002 2001 2000
- ----------------------------------------------------------------------------
$16.31 $16.46 $16.15 $15.91 $16.09
- ----------------------------------------------------------------------------
0.93 0.95 1.11 1.17 1.18
- ----------------------------------------------------------------------------
0.14 0.13 0.29 0.46 (0.13)
- ----------------------------------------------------------------------------
(0.08) (0.07) (0.12) (0.23) (0.31)
- ----------------------------------------------------------------------------
(0.03) (0.02) (0.01) (0.07) (0.00)(1)
- ----------------------------------------------------------------------------
(0.11) (0.09) (0.13) (0.30) (0.31)
- ----------------------------------------------------------------------------
0.96 0.99 1.27 1.33 0.74
- ----------------------------------------------------------------------------
(0.93) (0.96) (0.93) (0.90) (0.90)
- ----------------------------------------------------------------------------
(0.49) (0.18) (0.03) (0.19) (0.02)
- ----------------------------------------------------------------------------
(1.42) (1.14) (0.96) (1.09) (0.92)
- ----------------------------------------------------------------------------
(0.04) - - - -
- ----------------------------------------------------------------------------
$15.81 $16.31 $16.46 $ 16.15 $15.91
- ----------------------------------------------------------------------------
$14.25 $14.86 $15.60 $ 15.39 $13.75
- ----------------------------------------------------------------------------
5.57% 2.76% 7.96% 20.59% 5.90%
- ----------------------------------------------------------------------------
1.53% 1.45% 1.48% 1.49% 1.52%
- ----------------------------------------------------------------------------
1.86% 1.66% 1.67% 1.68% 1.71%
- ----------------------------------------------------------------------------
5.91% 5.89% 6.89% 7.30% 7.48%
- ----------------------------------------------------------------------------
0.53% 0.44% 0.73% 1.42% 1.99%
- ----------------------------------------------------------------------------
5.38% 5.45% 6.16% 5.88% 5.49%
- ----------------------------------------------------------------------------
5.05% 5.24% 5.97% 5.69% 5.30%
- ----------------------------------------------------------------------------
$163,737 $168,888 $170,454 $167,295 $164,769
- ----------------------------------------------------------------------------
45% 51% 21% 8% 14%
- ----------------------------------------------------------------------------
$124,426 $155,555 $156,534 $154,559 $152,980
- ----------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
23
Investment Grade Municipal Income Fund Inc.
GENERAL INFORMATION (UNAUDITED)
THE FUND
Investment Grade Municipal Income Fund Inc. (the "Fund") is a diversified,
closed-end management investment company whose shares trade on the New York
Stock Exchange ("NYSE"). The Fund's investment objective is to achieve a high
level of current income that is exempt from federal income tax, consistent with
the preservation of capital. The Fund's investment advisor and administrator is
UBS Global Asset Management (US) Inc. ("UBS Global AM"), an indirect wholly
owned asset management subsidiary of UBS AG, which had approximately $50.7
billion in assets under management as of March 31, 2005.
SHAREHOLDER INFORMATION
The Fund's NYSE trading symbol is "PPM." Comparative net asset value and market
price information about the Fund is published weekly in The Wall Street Journal,
The New York Times and Barron's, as well as in numerous other publications.
An annual meeting of shareholders of the Fund was held on January 20, 2005. At
the meeting Margo N. Alexander, Richard Q. Armstrong, David J. Beaubien, Richard
R. Burt, Meyer Feldberg, Carl W. Schafer and William D. White were elected to
serve as directors until the next annual meeting of shareholders, or until their
successors are elected and qualified or until they resign or are otherwise
removed. The shares were voted as indicated below:
COMMON STOCK AND APS SHARES VOTING AS A SINGLE CLASS
<TABLE>
SHARES FOR AS A SHARES
TO VOTE FOR OR WITHHOLD SHARES % OF TOTAL WITHHOLD
AUTHORITY IN THE ELECTION OF: VOTED FOR SHARES VOTED AUTHORITY
- ---------------------------------------------------------------------------------------
Richard Q. Armstrong 9,626,381.372 92.9289% 236,538.439
- ---------------------------------------------------------------------------------------
David J. Beaubien 9,626,785.372 92.9328% 236,134.439
- ---------------------------------------------------------------------------------------
Richard R. Burt 9,623,713.372 92.9031% 239,206.439
- ---------------------------------------------------------------------------------------
Carl W. Schafer 9,623,273.372 92.8989% 239,646.439
- ---------------------------------------------------------------------------------------
William D. White 9,626,785.372 92.9328% 236,134.439
- ---------------------------------------------------------------------------------------
</TABLE>
AUCTION PREFERRED SHARES
<TABLE>
SHARES FOR AS A SHARES
TO VOTE FOR OR WITHHOLD SHARES % OF TOTAL WITHHOLD
AUTHORITY IN THE ELECTION OF: VOTED FOR SHARES VOTED AUTHORITY
- ------------------------------------------------------------------------------
Margo N. Alexander 1,870 85.000% 0
- ------------------------------------------------------------------------------
Meyer Feldberg 1,870 85.000% 0
- ------------------------------------------------------------------------------
</TABLE>
The Fund is not aware of any broker non-votes. (Broker non-votes are shares held
in street name for which the Broker indicates that instructions have not been
received from the beneficial owners or other persons entitled to vote and for
which the broker does not have discretionary voting authority.)
- --------------------------------------------------------------------------------
24
Investment Grade Municipal Income Fund Inc.
GENERAL INFORMATION (UNAUDITED)
PROXY VOTING POLICIES AND PROCEDURES AND RECORD
You may obtain a description of the Fund's proxy voting policies and procedures
(and information regarding how the Fund voted any proxies related to portfolio
securities during the 12-month period ended June 30, 2004), without charge, upon
request by contacting the Fund directly at 1-800-647-1568, online on the Fund's
Web site: www.ubs.com/ubsglobalam-proxy, or on the EDGAR Database on the SEC's
Web site (http://www.sec.gov).
QUARTERLY FORM N-Q PORTFOLIO SCHEDULE
The Fund will file its complete schedule of portfolio holdings with the
Securities and Exchange Commission ("SEC") for the first and third quarters of
each fiscal year on Form N-Q. The Fund's Forms N-Q are available on the SEC's
Web site at http://www.sec.gov. The Fund's Forms N-Q may be reviewed and copied
at the SEC's Public Reference Room in Washington, D.C. Information on the
operation of the SEC's Public Reference Room may be obtained by calling
1-800-SEC-0330. Additionally, you may obtain copies of Forms N-Q from the Fund
upon request by calling 1-800-647-1568.
DIVIDEND REINVESTMENT PLAN
The Fund's Board has established a Dividend Reinvestment Plan (the "Plan") under
which all common shareholders whose shares are registered in their own names, or
in the name of UBS Financial Services Inc. or its nominee, will have all
dividends and other distributions on their shares of common stock automatically
reinvested in additional shares of common stock, unless such common shareholders
elect to receive cash. Common shareholders who elect to hold their shares in the
name of another broker or nominee should contact such broker or nominee to
determine whether, or how, they may participate in the Plan. The ability of such
shareholders to participate in the Plan may change if their shares are
transferred into the name of another broker or nominee.
A common shareholder may elect not to participate in the Plan or may terminate
participation in the Plan at any time without penalty, and common shareholders
who have previously terminated participation in the Plan may rejoin it at any
time. Changes in elections must be made in writing to the Fund's transfer agent
and should include the shareholder's name and address as they appear on the
share certificate or in the transfer agent's records. An election to terminate
participation in the Plan, until such election is changed, will be deemed an
election by a common shareholder to take all subsequent distributions in cash.
An election will be effective only for distributions declared and having a
record date at least ten days after the date on which the election is received.
- --------------------------------------------------------------------------------
25
Investment Grade Municipal Income Fund Inc.
GENERAL INFORMATION (UNAUDITED)
DIVIDEND REINVESTMENT PLAN (CONCLUDED)
Additional shares of common stock acquired under the Plan will be purchased in
the open market, on the NYSE or otherwise, at prices that may be higher or lower
than the net asset value per share of the common stock at the time of the
purchase. The number of shares of common stock purchased with each dividend will
be equal to the result obtained by dividing the amount of the dividend payable
to a particular shareholder by the average price per share (including applicable
brokerage commissions) that the transfer agent was able to obtain in the open
market. The Fund will not issue any new shares of common stock in connection
with the Plan. There currently is no charge to participants for reinvesting
dividends or other distributions. The transfer agent's fees for handling the
reinvestment of distributions will be paid by the Fund. However, each
participant pays a pro rata share of brokerage commissions incurred with respect
to the transfer agent's open market purchases of common stock in connection with
the reinvestment of distributions. The automatic reinvestment of dividends and
other distributions in shares of common stock does not relieve participants of
any income tax that may be payable on such distributions.
Experience under the Plan may indicate that changes are desirable. Accordingly,
the Fund reserves the right to amend or terminate the Plan with respect to any
dividend or other distribution if notice of the change is sent to Plan
participants at least 30 days before the record date for such distribution. The
Plan also may be amended or terminated by the transfer agent by at least 30
days' written notice to all Plan participants. Additional information regarding
the Plan may be obtained from, and all correspondence concerning the Plan should
be directed to, the transfer agent at PFPC Inc., P.O. Box 43027, Providence,
Rhode Island 02940-3027. For further information regarding the Plan, you may
also contact the transfer agent directly at 1-800-331-1710.
- --------------------------------------------------------------------------------
26
DIRECTORS
Richard Q. Armstrong Meyer Feldberg
Chairman
Carl W. Schafer
Margo N. Alexander William D. White
David J. Beaubien
Richard R. Burt
PRINCIPAL OFFICERS
W. Douglas Beck Elbridge T. Gerry III
President Vice President
Mark F. Kemper William Veronda
Vice President and Secretary Vice President
Thomas Disbrow
Vice President and Treasurer
INVESTMENT ADVISOR AND
ADMINISTRATOR
UBS Global Asset Management (US) Inc.
51 West 52nd Street
New York, New York 10019-6114
The financial information included herein is taken from the records of the Fund
without examination by independent registered public accountants who do not
express an opinion thereon.
Notice is hereby given in accordance with Section 23(c) of the Investment
Company Act of 1940 that from time to time the Fund may purchase shares of its
common stock in the open market at market prices.
This report is sent to the shareholders of the Fund for their information. It is
not a prospectus, circular or representation intended for use in the purchase or
sale of shares of the Fund or of any securities mentioned in this report.
(copyright) 2005 UBS Global Asset Management (US) Inc. All rights reserved.
-------------
[UBS LOGO] Presorted
Standard
UBS Global Asset Management (US) Inc. US Postage
51 West 52nd Street PAID
New York, NY 10019-6114 Smithtown, NY
Permit 700
-------------
ITEM 2. CODE OF ETHICS.
- ------------------------
Form N-CSR disclosure requirement not applicable to this filing of a semi-annual
report.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
- ------------------------------------------
Form N-CSR disclosure requirement not applicable to this filing of a semi-annual
report.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
- ------------------------------------------------
Form N-CSR disclosure requirement not applicable to this filing of a semi-annual
report.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
- ----------------------------------------------
Form N-CSR disclosure requirement not applicable to this filing of a semi-annual
report.
ITEM 6. SCHEDULE OF INVESTMENTS.
- ---------------------------------
Included as part of the report to shareholders filed under Item 1 of this form.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
- --------------------------------------------------------------------------
MANAGEMENT INVESTMENT COMPANIES.
- --------------------------------
Form N-CSR disclosure requirement not applicable to this filing of a semi-annual
report.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
- --------------------------------------------------------------------------
Form N-CSR disclosure requirement not yet effective with respect to the
registrant.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
- ---------------------------------------------------------------------------
COMPANY AND AFFILIATED PURCHASERS.
- ----------------------------------
There were no purchases made by or on behalf of the registrant or any
"affiliated purchaser," as defined in Rule 10b-18(a)(3) under the Securities
Exchange Act of 1934, as amended, of shares of the registrant's equity
securities made in the period covered by this report.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
- --------------------------------------------------------------
The registrant's Board has established a Nominating and Corporate Governance
Committee. The Nominating and Corporate Governance Committee will consider
nominees recommended by shareholders if a vacancy occurs among those board
members who are not "interested persons" as defined in Section 2(a)(19) of the
Investment Company Act of 1940, as amended. In order to recommend a nominee, a
shareholder should send a letter to the chairperson of the Nominating and
Corporate Governance Committee, Richard R. Burt, care of the Secretary of the
registrant at UBS Global Asset Management (US) Inc., 51 West 52nd Street, New
York, New York 10019-6114, and indicate on the envelope "Nominating and
Corporate Governance Committee." The shareholder's letter should state the
nominee's name and should include the nominee's resume or curriculum vitae, and
must be accompanied by a written consent of the individual to stand for election
if nominated for the Board and to serve if elected by shareholders.
ITEM 11. CONTROLS AND PROCEDURES.
- ----------------------------------
(a) The registrant's principal executive officer and principal financial
officer have concluded that the registrant's disclosure controls and
procedures (as defined in Rule 30a-3(c) under the Investment Company
Act of 1940, as amended) are effective based on their evaluation of
these controls and procedures as of a date within 90 days of the filing
date of this document.
(b) The registrant's principal executive officer and principal financial
officer are aware of no changes in the registrant's internal control
over financial reporting that occurred during the registrant's most
recent fiscal half-year 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 - Form N-CSR disclosure requirement not applicable
to this filing of a semi-annual report.
(a) (2) Certifications of principal executive officer and principal
financial officer pursuant to Section 302 of the Sarbanes-Oxley Act of
2002 is attached hereto as Exhibit EX-99.CERT.
(a) (3) Written solicitation to purchase securities under Rule 23c-1 under
the Investment Company Act of 1940 sent or given during the period
covered by the report by or on behalf of the registrant to 10 or more
persons - The registrant has not engaged in such a solicitation during
the period covered by this report.
(b) Certifications of principal executive officer and principal financial
officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 is
attached hereto as Exhibit EX-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.
Investment Grade Municipal Income Fund Inc.
By: /s/ W. Douglas Beck
--------------------
W. Douglas Beck
President
Date: June 8, 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: /s/ W. Douglas Beck
--------------------
W. Douglas Beck
President
Date: June 8, 2005
------------
By: /s/ Thomas Disbrow
------------------
Thomas Disbrow
Vice President and Treasurer
Date: June 8, 2005
------------
