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UNITED STATES
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SECURITIES AND EXCHANGE COMMISSION
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Washington, D.C. 20549
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FORM N-CSR
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CERTIFIED SHAREHOLDER REPORT OF REGISTERED
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MANAGEMENT INVESTMENT COMPANIES
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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)
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1285 Avenue of the Americas, New York, New York 10019-6028
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(Address of principal executive offices) (Zip code)
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Mark F. Kemper, Esq.
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UBS Global Asset Management
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1285 Avenue of the Americas
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New York, NY 10019-6028
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(Name and address of agent for service)
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Copy to:
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Jack W. Murphy, Esq.
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Dechert LLP
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1775 I Street, N.W.
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Washington, DC 20006-2401
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Registrant’s telephone number, including area code: 212-821 3000
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Date of fiscal year end: Fiscal year end had been September 30th. This filing relates to the semi-annual
report for the period ending March 31, 2010. After the end of the reporting period to which this filing
relates, the fiscal year end was changed to April 30.
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Date of reporting period: March 31, 2010
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Item 1. Reports to Stockholders.
Investment Grade Municipal
Income Fund Inc.
Semiannual Report
March 31, 2010
Investment Grade Municipal Income Fund Inc.
May 14, 2010
We present the semi-annual report
for Investment Grade Municipal Income Fund Inc. (the “Fund”) for the six months ended
March 31, 2010.
Performance
Over the six-month
period, the Fund declined 0.25% on a net asset value basis and generated a gain
of 3.76% on a market price basis. Over the same period, the Fund’s peer group,
the Lipper General Municipal Debt Funds (Leveraged) category, posted a median net
asset value gain of 0.33%, and a median market price gain of 5.05%. Finally, the
Fund’s benchmark, the Barclays Capital Municipal Bond Index, gained 0.28%.
(For more performance information, please refer to “Performance at a glance” on page 2.)
Fund liquidation
On February 23,
2010, the holders of the Fund’s common stock and auction preferred stock approved
a proposal to liquidate and dissolve the Fund pursuant to a Plan of Liquidation.
All of the auction preferred stock was redeemed in April, and the holders of common
stock were paid a liquidating distribution on or about May 10, 2010. The Fund was
delisted from the New York Stock Exchange and is in the process of winding up its
affairs.
In connection with the liquidation of the
Fund, the Fund has changed its tax and accounting (book) fiscal year end
from September 30 to April 30 to facilitate the satisfaction of certain tax law
requirements beneficial to shareholders.
1
Investment Grade Municipal Income Fund Inc.
Performance at a glance (unaudited)
Average annual total returns for common
stock for periods ended 03/31/10
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Net asset
value returns
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6 months
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1 year
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5 years
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10 years
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Investment Grade Municipal Income Fund Inc.
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(0.25
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)%
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20.33
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%
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4.52
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%
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5.68
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%
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Lipper General
Municipal Debt Funds
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(Leveraged)
median
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0.33
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24.76
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4.22
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5.92
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Market
price returns
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Investment Grade Municipal Income Fund Inc.
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3.76
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%
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36.74
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%
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8.46
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%
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8.35
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%
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Lipper General
Municipal Debt Funds
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(Leveraged)
median
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5.05
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36.12
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6.30
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7.90
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Index returns
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Barclays Capital
Municipal Bond Index
(1)
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0.28
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%
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9.69
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%
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4.58
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%
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5.58
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%
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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. The
Fund’s common stock net asset value (“NAV”) return assumes, for illustration
only, that dividends and other distributions, if any, were reinvested at the NAV
on the payable dates. The Fund’s common stock market price returns assume that
all dividends and other distributions, if any, were reinvested at prices obtained
under the Fund’s Dividend Reinvestment Plan. NAV and market price returns for
the period of less than one year have not been annualized. Returns do not reflect
the deduction of taxes that a shareholder could pay on Fund dividends and other
distributions, if any, or the sale of Fund shares.
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(1)
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The Barclays
Capital Municipal Bond Index is an unmanaged, unleveraged measure of the total return
for municipal bonds issued across the United States. Index returns do not include
reinvestment of dividends. Investors should note that indices do not reflect the
deduction of fees and expenses.
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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.
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Share price,
dividend and yields as of 03/31/10
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Market price
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$14.43
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Net asset
value (per share applicable to common shareholders)
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$14.58
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March 2010
dividend
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$0.0725
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Market yield
(1)
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6.03
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%
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NAV yield
(1)
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5.97
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%
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(1)
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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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2
Investment Grade Municipal Income Fund Inc.
Portfolio statistics (unaudited)
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Characteristics
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03/31/10
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09/30/09
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03/31/09
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Net assets applicable to
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common shareholders (mm)
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$151.0
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$155.9
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$133.4
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Weighted average
maturity
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6.5
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yrs
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14.8
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yrs
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15.0
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yrs
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Weighted average
modified duration
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3.4
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yrs
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5.1
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yrs
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7.4
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yrs
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Weighted average
coupon
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3.3
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%
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5.6
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%
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5.2
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%
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Leverage
(1)
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34.6
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%
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39.0
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%
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42.8
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%
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Securities
subject to Alternative
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Minimum Tax
(AMT)
(2)
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1.0
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%
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13.7
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%
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14.6
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%
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Maturing within
five years
(2)
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42.6
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%
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0.9
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%
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5.3
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%
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Maturing beyond
five years
(2)
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57.4
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%
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99.1
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%
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94.7
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%
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Portfolio
composition
(3)
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03/31/10
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09/30/09
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03/31/09
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Long-term
municipal bonds
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62.1%
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106.7%
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106.6%
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Short-term
municipal notes
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33.3
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0.3
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1.0
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Other assets
less liabilities
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4.6
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(7.0)
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(7.6)
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Total
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100.0%
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100.0%
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100.0%
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Credit quality
(2)
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03/31/10
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09/30/09
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03/31/09
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AAA
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26.1%
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16.1%
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12.6%
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AA
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23.2
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39.6
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41.3
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A
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4.8
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21.7
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15.4
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A-1+
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31.7
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0.3
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0.9
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BBB
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5.9
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14.8
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13.9
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Nonrated
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8.3
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7.5
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15.9
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Total
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100.0%
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100.0%
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100.0%
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(1)
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Includes leverage
attributable to both the Fund’s Auction Preferred Shares and the Tender Option
Bond Program as a percentage of total assets. Leverage was terminated in April 2010,
after the close of the reporting period.
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(2)
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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. Credit quality
ratings shown are designated by Standard & Poor’s Rating Group, an independent
rating agency.
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(3)
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As a percentage
of net assets applicable to common and preferred shareholders as of the dates indicated.
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3
Investment Grade Municipal Income Fund Inc.
Portfolio statistics (unaudited) (concluded)
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Top five states
(1)
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03/31/10
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09/30/09
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03/31/09
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California
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14.4
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%
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Texas
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13.0
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%
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California
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13.5
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%
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Texas
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11.0
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California
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12.2
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Texas
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12.4
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Illinois
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9.7
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Washington
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9.2
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Washington
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9.4
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Pennsylvania
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8.2
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Illinois
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8.2
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Illinois
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8.3
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Ohio
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7.8
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New York
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7.4
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New York
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8.3
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Total
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51.1
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%
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50.0
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%
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51.9
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%
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Top five
sectors
(1)
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03/31/10
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09/30/09
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03/31/09
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General obligations
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20.9
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%
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University
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15.9
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%
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University
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16.1
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%
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Hospital
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19.0
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Hospital
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15.2
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Airport
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15.2
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Water
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14.7
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Airport
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12.4
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Hospital
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15.1
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University
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6.0
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Power
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11.5
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Power
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10.6
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Power
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5.4
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Lease
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8.0
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Lease
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8.9
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Total
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66.0
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%
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63.0
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%
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65.9
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%
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(1)
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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.
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4
Investment Grade Municipal Income Fund Inc.
Portfolio of investments—March 31, 2010 (unaudited)
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Moody’s
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S&P
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Face
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Security
description
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rating
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rating
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amount
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Value
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Long-term municipal bonds—95.04%
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Alabama—3.53%
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Alabama Public School & College
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Authority
Capital Improvement
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5.000%, due
12/01/24
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Aa2
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AA
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$5,000,000
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$5,327,750
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Alaska—0.67%
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Alaska International
Airports Revenue
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Refunding-Series
A (NATL-RE Insured)
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5.000%, due
10/01/21
(1)
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Aa3
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A
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1,000,000
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1,012,170
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California—5.33%
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Sacramento
County Sanitation District
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Financing
Authority Revenue
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Refunding
(AMBAC Insured)
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5.000%, due
12/01/27
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A1
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AA
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8,000,000
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8,039,920
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Colorado—0.83%
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Colorado Health
Facilities Authority
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Revenue-Adventist
Health-Series E
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(Pre-refunded
with US Government
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Obligations
to 11/15/16 @ 100)
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5.125%, due
11/15/18
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A1
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AA-
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160,000
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186,971
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5.125%, due
11/15/19
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A1
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AA-
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160,000
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186,971
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University
of Colorado
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Participation
Interests
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6.000%, due
12/01/13
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NR
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A+
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853,141
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881,133
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1,255,075
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Connecticut—6.54%
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Connecticut
State Economic
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Recovery-Series
A
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5.000%, due
01/01/14
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Aa3
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AA
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|
8,800,000
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|
9,881,168
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Delaware—3.84%
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Delaware State-Series
2009C
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5.000%, due
10/01/15
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Aaa
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AAA
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|
5,000,000
|
|
5,800,200
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Georgia—3.85%
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|
|
|
|
|
|
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Georgia State
Refunding-Series I
|
|
|
|
|
|
|
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5.000%, due
07/01/20
|
|
Aaa
|
|
AAA
|
|
5,000,000
|
|
5,814,200
|
|
|
|
5
Investment Grade Municipal Income Fund Inc.
Portfolio of investments—March 31, 2010 (unaudited)
|
|
|
Moody’s
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S&P
|
|
Face
|
|
|
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|
Security
description
|
|
rating
|
|
rating
|
|
amount
|
|
Value
|
|
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|
|
Long-term municipal bonds—(continued)
|
|
|
|
|
|
|
|
|
|
|
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|
Illinois—7.49%
|
|
|
|
|
|
|
|
|
|
|
Chicago Transit
Authority Capital Grant
|
|
|
|
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|
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Receipts
Revenue Federal Transit
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Administration
Section 5309
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|
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|
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(Assured
Guaranty Insured)
|
|
|
|
|
|
|
|
|
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|
5.250%, due
06/01/24
|
|
Aa3
|
|
AAA
|
|
$1,500,000
|
|
$1,586,790
|
|
|
|
|
Illinois Municipal
Electric Agency
|
|
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|
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Power
Supply-Series A
|
|
|
|
|
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|
(NATL-RE-FGIC
Insured)
|
|
|
|
|
|
|
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|
|
5.250%, due
02/01/17
|
|
A1
|
|
A+
|
|
3,000,000
|
|
3,343,680
|
|
|
|
|
Illinois State
Toll Highway Authority
|
|
|
|
|
|
|
|
|
|
|
Toll
Highway Revenue-Series A-2
|
|
|
|
|
|
|
|
|
|
|
(Pre-refunded
with State and Local
|
|
|
|
|
|
|
|
|
|
|
Government
Securities to
|
|
|
|
|
|
|
|
|
|
|
07/01/16
@ 100) (AGM Insured)
|
|
|
|
|
|
|
|
|
|
|
5.000%, due
01/01/31
|
|
Aa3
|
|
AAA
|
|
5,500,000
|
|
6,370,100
|
|
|
|
|
|
|
|
|
|
|
|
|
11,300,570
|
|
|
|
|
Indiana—2.68%
|
|
|
|
|
|
|
|
|
|
|
Indiana Health & Educational Facilities
|
|
|
|
|
|
|
|
|
|
|
Financing
Authority Hospital
|
|
|
|
|
|
|
|
|
|
|
Revenue
Refunding-Clarian Health
|
|
|
|
|
|
|
|
|
|
|
Obligation
Group-Series B
|
|
|
|
|
|
|
|
|
|
|
5.000%, due
02/15/21
|
|
A2
|
|
A+
|
|
4,000,000
|
|
4,040,280
|
|
|
|
|
Kentucky—2.12%
|
|
|
|
|
|
|
|
|
|
|
Louisville & Jefferson County
|
|
|
|
|
|
|
|
|
|
|
Waterworks & Water System
|
|
|
|
|
|
|
|
|
|
|
Revenue
Refunding-Series A
|
|
|
|
|
|
|
|
|
|
|
5.000%, due
11/15/16
|
|
Aa1
|
|
AAA
|
|
2,775,000
|
|
3,200,491
|
|
|
|
|
Maryland—5.36%
|
|
|
|
|
|
|
|
|
|
|
Maryland State
Refunding-Series B
|
|
|
|
|
|
|
|
|
|
|
5.000%, due
03/01/18
|
|
Aaa
|
|
AAA
|
|
7,000,000
|
|
8,087,100
|
|
|
|
|
Massachusetts—4.17%
|
|
|
|
|
|
|
|
|
|
|
Massachusetts Health & Educational
|
|
|
|
|
|
|
|
|
|
|
Facilities
Authority Revenue-Harvard
|
|
|
|
|
|
|
|
|
|
|
University-Series
A
|
|
|
|
|
|
|
|
|
|
|
5.000%, due
12/15/31
|
|
Aaa
|
|
AAA
|
|
5,000,000
|
|
5,440,600
|
|
|
|
6
Investment Grade Municipal Income Fund Inc.
Portfolio of investments—March 31, 2010 (unaudited)
|
|
|
Moody’s
|
|
S&P
|
|
Face
|
|
|
|
|
Security
description
|
|
rating
|
|
rating
|
|
amount
|
|
Value
|
|
|
|
|
Long-term municipal bonds—(continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
Massachusetts—(concluded)
|
|
|
|
|
|
|
|
|
|
|
Massachusetts
Port Authority
|
|
|
|
|
|
|
|
|
|
|
Revenue-US
Airways Project
|
|
|
|
|
|
|
|
|
|
|
(NATL-RE
Insured)
|
|
|
|
|
|
|
|
|
|
|
6.000%, due
09/01/21
(1)
|
|
Baa1
|
|
A
|
|
$1,000,000
|
|
$862,090
|
|
|
|
|
|
|
|
|
|
|
|
|
6,302,690
|
|
|
|
|
Minnesota—1.00%
|
|
|
|
|
|
|
|
|
|
|
Shakopee Health
Care Facilities
|
|
|
|
|
|
|
|
|
|
|
Revenue-Saint
Francis
|
|
|
|
|
|
|
|
|
|
|
Regional
Medical Center
|
|
|
|
|
|
|
|
|
|
|
5.000%, due
09/01/17
|
|
NR
|
|
BBB
|
|
1,500,000
|
|
1,515,315
|
|
|
|
|
New Jersey—2.12%
|
|
|
|
|
|
|
|
|
|
|
Tobacco Settlement
Financing
|
|
|
|
|
|
|
|
|
|
|
Corp.-Series
1-A
|
|
|
|
|
|
|
|
|
|
|
4.500%, due
06/01/23
|
|
Baa3
|
|
BBB
|
|
3,365,000
|
|
3,197,692
|
|
|
|
|
North Carolina—6.32%
|
|
|
|
|
|
|
|
|
|
|
North Carolina
Eastern Municipal
|
|
|
|
|
|
|
|
|
|
|
Power
Agency Power System
|
|
|
|
|
|
|
|
|
|
|
Revenue-Series
A
|
|
|
|
|
|
|
|
|
|
|
(Escrowed
to Maturity)
|
|
|
|
|
|
|
|
|
|
|
6.400%, due
01/01/21
|
|
Baa1
|
|
AAA
|
|
3,065,000
|
|
3,793,520
|
|
|
|
|
North Carolina
State
|
|
|
|
|
|
|
|
|
|
|
Refunding-Series
A
|
|
|
|
|
|
|
|
|
|
|
5.000%, due
03/01/16
|
|
Aaa
|
|
AAA
|
|
5,000,000
|
|
5,754,650
|
|
|
|
|
|
|
|
|
|
|
|
|
9,548,170
|
|
|
|
|
Ohio—11.43%
|
|
|
|
|
|
|
|
|
|
|
Buckeye Tobacco
Settlement
|
|
|
|
|
|
|
|
|
|
|
Financing
Authority Asset-Backed
|
|
|
|
|
|
|
|
|
|
|
Senior
Turbo-Series A-2
|
|
|
|
|
|
|
|
|
|
|
5.125%, due
06/01/24
|
|
Baa3
|
|
BBB
|
|
8,955,000
|
|
8,261,704
|
|
|
|
|
Ohio State
Water Development
|
|
|
|
|
|
|
|
|
|
|
Authority
Water Pollution Control
|
|
|
|
|
|
|
|
|
|
|
Revenue
(Pre-refunded with
|
|
|
|
|
|
|
|
|
|
|
State
and Local Government
|
|
|
|
|
|
|
|
|
|
|
Securities
to 06/01/14 @ 100)
|
|
|
|
|
|
|
|
|
|
|
5.000%, due
06/01/24
|
|
Aaae
|
|
AAA
|
|
6,305,000
|
|
7,185,304
|
|
|
|
7
Investment Grade Municipal Income Fund Inc.
Portfolio of investments—March 31, 2010 (unaudited)
|
|
|
Moody’s
|
|
S&P
|
|
Face
|
|
|
|
|
Security
description
|
|
rating
|
|
rating
|
|
amount
|
|
Value
|
|
|
|
|
Long-term municipal bonds—(continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
Ohio—(concluded)
|
|
|
|
|
|
|
|
|
|
|
Ohio State
Water Development
|
|
|
|
|
|
|
|
|
|
|
Authority
Water Pollution Control
|
|
|
|
|
|
|
|
|
|
|
Revenue-Unrefunded
Balance
|
|
|
|
|
|
|
|
|
|
|
5.000%, due
06/01/24
|
|
Aaa
|
|
AAA
|
|
$1,695,000
|
|
$1,814,226
|
|
|
|
|
|
|
|
|
|
|
|
|
17,261,234
|
|
|
|
|
Pennsylvania—9.35%
|
|
|
|
|
|
|
|
|
|
|
Pennsylvania
State-Series A
|
|
|
|
|
|
|
|
|
|
|
5.000%, due
02/15/18
|
|
Aa2
|
|
AA
|
|
10,000,000
|
|
11,441,800
|
|
|
|
|
Susquehanna
Area Regional Airport
|
|
|
|
|
|
|
|
|
|
|
Authority
Airport System
|
|
|
|
|
|
|
|
|
|
|
Revenue-Subseries
D
|
|
|
|
|
|
|
|
|
|
|
5.375%, due
01/01/18
|
|
Ba1
|
|
NR
|
|
3,000,000
|
|
2,673,510
|
|
|
|
|
|
|
|
|
|
|
|
|
14,115,310
|
|
|
|
|
South Carolina—0.73%
|
|
|
|
|
|
|
|
|
|
|
Greenville
Waterworks Revenue
|
|
|
|
|
|
|
|
|
|
|
5.250%, due
02/01/20
|
|
Aa1
|
|
AAA
|
|
1,000,000
|
|
1,102,890
|
|
|
|
|
South Daktota—0.29%
|
|
|
|
|
|
|
|
|
|
|
Standing Rock
New Public Housing
|
|
|
|
|
|
|
|
|
|
|
6.000%, due
08/07/13
(2)
|
|
NR
|
|
NR
|
|
482,503
|
|
444,192
|
|
|
|
|
Tennessee—0.23%
|
|
|
|
|
|
|
|
|
|
|
Memphis-Shelby
County Airport
|
|
|
|
|
|
|
|
|
|
|
Authority
Airport Revenue-Series D
|
|
|
|
|
|
|
|
|
|
|
(AMBAC
Insured)
|
|
|
|
|
|
|
|
|
|
|
6.000%, due
03/01/24
(1)
|
|
A2
|
|
A-
|
|
350,000
|
|
353,549
|
|
|
|
|
Texas—10.02%
|
|
|
|
|
|
|
|
|
|
|
Coastal Bend
Health Facilities
|
|
|
|
|
|
|
|
|
|
|
Development
Corp.-Incarnate Word
|
|
|
|
|
|
|
|
|
|
|
Health
System-Series A (Escrowed
|
|
|
|
|
|
|
|
|
|
|
to
Maturity) (AMBAC Insured)
|
|
|
|
|
|
|
|
|
|
|
6.300%, due
01/01/17
|
|
NR
|
|
NR
|
|
2,730,000
|
|
3,163,470
|
|
|
|
|
Harris County
Texas Lease
|
|
|
|
|
|
|
|
|
|
|
6.750%, due
05/01/20
(3)
|
|
NR
|
|
NR
|
|
5,347,696
|
|
5,117,798
|
|
|
|
|
Lower Colorado
River Authority
|
|
|
|
|
|
|
|
|
|
|
Transmission
Contract Revenue-LCRA
|
|
|
|
|
|
|
|
|
|
|
Transmission
Services Corp.
|
|
|
|
|
|
|
|
|
|
|
Project
B (AGM Insured)
|
|
|
|
|
|
|
|
|
|
|
5.250%, due
05/15/20
|
|
Aa3
|
|
AAA
|
|
1,485,000
|
|
1,584,302
|
|
|
|
8
Investment Grade Municipal Income Fund Inc.
Portfolio of investments—March 31, 2010 (unaudited)
|
|
|
Moody’s
|
|
S&P
|
|
Face
|
|
|
|
|
Security
description
|
|
rating
|
|
rating
|
|
amount
|
|
Value
|
|
|
|
|
Long-term municipal bonds—(concluded)
|
|
|
|
|
|
|
|
|
|
|
|
|
Texas—(concluded)
|
|
|
|
|
|
|
|
|
|
|
Tarrant County
Cultural Education
|
|
|
|
|
|
|
|
|
|
|
Facilities
Finance Corp. Revenue
|
|
|
|
|
|
|
|
|
|
|
Refunding-Texas
Health
|
|
|
|
|
|
|
|
|
|
|
Resources-Series
A
|
|
|
|
|
|
|
|
|
|
|
5.000%, due
02/15/19
|
|
Aa3
|
|
AA-
|
|
$5,000,000
|
|
$5,266,900
|
|
|
|
|
|
|
|
|
|
|
|
|
15,132,470
|
|
|
|
|
Washington—4.99%
|
|
|
|
|
|
|
|
|
|
|
Energy Northwest
Electric Revenue
|
|
|
|
|
|
|
|
|
|
|
Refunding-Columbia
Station-Series A
|
|
|
|
|
|
|
|
|
|
|
5.000%, due
07/01/23
|
|
Aaa
|
|
AA
|
|
7,000,000
|
|
7,527,520
|
|
|
|
|
Wisconsin—2.15%
|
|
|
|
|
|
|
|
|
|
|
Wisconsin
State General
|
|
|
|
|
|
|
|
|
|
|
Revenue-Series
A
|
|
|
|
|
|
|
|
|
|
|
5.750%, due
05/01/33
|
|
A1
|
|
AA-
|
|
3,000,000
|
|
3,242,100
|
|
|
|
|
Total long-term
municipal bonds (cost—$144,119,391)
|
|
|
|
|
|
|
|
143,502,056
|
|
|
|
|
Short-term municipal notes—50.99%
|
|
|
|
|
|
|
|
|
|
|
|
|
Alaska—0.79%
|
|
|
|
|
|
|
|
|
|
|
Valdez Marine
Terminal Revenue
|
|
|
|
|
|
|
|
|
|
|
Refunding-BP
Pipelines, Inc.
|
|
|
|
|
|
|
|
|
|
|
Project-Series
A
|
|
|
|
|
|
|
|
|
|
|
0.300%, due
04/01/10
(4)
|
|
VMIG1
|
|
A-1+
|
|
1,200,000
|
|
1,200,000
|
|
|
|
|
California—15.66%
|
|
|
|
|
|
|
|
|
|
|
California
State Economic
|
|
|
|
|
|
|
|
|
|
|
Recovery-Series
C-3
|
|
|
|
|
|
|
|
|
|
|
0.290%, due
04/01/10
(4)
|
|
VMIG1
|
|
A-1e
|
|
5,000,000
|
|
5,000,000
|
|
|
|
|
California
Statewide Communities
|
|
|
|
|
|
|
|
|
|
|
Development
Authority Revenue-
|
|
|
|
|
|
|
|
|
|
|
John
Muir Health-Series C
|
|
|
|
|
|
|
|
|
|
|
0.280%, due
04/01/10
(4)
|
|
VMIG1
|
|
A-1+
|
|
4,240,000
|
|
4,240,000
|
|
|
|
|
Metropolitan
Water District Southern
|
|
|
|
|
|
|
|
|
|
|
California
Waterworks Revenue
|
|
|
|
|
|
|
|
|
|
|
Refunding-Series
A-1
|
|
|
|
|
|
|
|
|
|
|
0.270%, due
04/01/10
(4)
|
|
VMIG1
|
|
A-1+
|
|
7,000,000
|
|
7,000,000
|
|
|
|
|
Metropolitan
Water District Southern
|
|
|
|
|
|
|
|
|
|
|
California
Waterworks
|
|
|
|
|
|
|
|
|
|
|
Revenue-Series
B-3
|
|
|
|
|
|
|
|
|
|
|
0.240%, due
04/01/10
(4)
|
|
VMIG1
|
|
A-1+
|
|
3,000,000
|
|
3,000,000
|
|
|
|
9
Investment Grade Municipal Income Fund Inc.
Portfolio of investments—March 31, 2010 (unaudited)
|
|
|
Moody’s
|
|
S&P
|
|
Face
|
|
|
|
|
Security
description
|
|
rating
|
|
rating
|
|
amount
|
|
Value
|
|
|
|
|
Short-term municipal notes—(continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
California—(concluded)
|
|
|
|
|
|
|
|
|
|
|
Whittier Health
Facilities
|
|
|
|
|
|
|
|
|
|
|
Revenue-Presbyterian
|
|
|
|
|
|
|
|
|
|
|
Intercommunity-Series
A
|
|
|
|
|
|
|
|
|
|
|
0.260%, due
04/07/10
(4)
|
|
VMIG1
|
|
A-1+
|
|
$4,400,000
|
|
$4,400,000
|
|
|
|
|
|
|
|
|
|
|
|
|
23,640,000
|
|
|
|
|
Colorado—0.86%
|
|
|
|
|
|
|
|
|
|
|
Denver City & County Certificates of
|
|
|
|
|
|
|
|
|
|
|
Participation
Refunding-Series A3
|
|
|
|
|
|
|
|
|
|
|
0.280%, due
04/01/10
(4)
|
|
VMIG1
|
|
NR
|
|
1,300,000
|
|
1,300,000
|
|
|
|
|
Georgia—4.64%
|
|
|
|
|
|
|
|
|
|
|
Private Colleges & Universities
|
|
|
|
|
|
|
|
|
|
|
Authority
Revenue-Emory
|
|
|
|
|
|
|
|
|
|
|
University-Series
C5
|
|
|
|
|
|
|
|
|
|
|
0.270%, due
04/01/10
(4)
|
|
VMIG1
|
|
A-1+
|
|
7,000,000
|
|
7,000,000
|
|
|
|
|
Illinois—6.62%
|
|
|
|
|
|
|
|
|
|
|
Chicago Sales
Tax Revenue Refunding
|
|
|
|
|
|
|
|
|
|
|
0.280%, due
04/01/10
(4)
|
|
VMIG1
|
|
A-1+
|
|
5,000,000
|
|
5,000,000
|
|
|
|
|
Illinois Development
Finance
|
|
|
|
|
|
|
|
|
|
|
Authority
Revenue-Evanston
|
|
|
|
|
|
|
|
|
|
|
Northwestern-Series
C
|
|
|
|
|
|
|
|
|
|
|
0.270%, due
04/01/10
(4)
|
|
VMIG1
|
|
NR
|
|
5,000,000
|
|
5,000,000
|
|
|
|
|
|
|
|
|
|
|
|
|
10,000,000
|
|
|
|
|
Massachusetts—5.30%
|
|
|
|
|
|
|
|
|
|
|
Massachusetts Health & Educational
|
|
|
|
|
|
|
|
|
|
|
Facilities
Authority Revenue-Partners
|
|
|
|
|
|
|
|
|
|
|
Healthcare-Series
I-1
|
|
|
|
|
|
|
|
|
|
|
0.290%, due
04/01/10
(4)
|
|
VMIG1
|
|
A-1+
|
|
8,000,000
|
|
8,000,000
|
|
|
|
|
New Jersey—1.65%
|
|
|
|
|
|
|
|
|
|
|
Union County
Industrial Pollution
|
|
|
|
|
|
|
|
|
|
|
Control
Financing Authority
|
|
|
|
|
|
|
|
|
|
|
Pollution
Control Revenue
|
|
|
|
|
|
|
|
|
|
|
Refunding-ExxonMobil
Project
|
|
|
|
|
|
|
|
|
|
|
0.220%, due
04/01/10
(4)
|
|
VMIG1
|
|
A-1+
|
|
2,500,000
|
|
2,500,000
|
|
|
|
|
Pennsylvania—2.65%
|
|
|
|
|
|
|
|
|
|
|
Pittsburgh Water & Sewer Authority
|
|
|
|
|
|
|
|
|
|
|
Water & Sewer System
|
|
|
|
|
|
|
|
|
|
|
Revenue-1st
Lien-Series B2
|
|
|
|
|
|
|
|
|
|
|
0.290%, due
04/01/10
(4)
|
|
VMIG1
|
|
A-1
|
|
4,000,000
|
|
4,000,000
|
|
|
|
10
Investment Grade Municipal Income Fund Inc.
Portfolio of investments—March 31, 2010 (unaudited)
|
|
|
Moody’s
|
|
S&P
|
|
Face
|
|
|
|
|
Security
description
|
|
rating
|
|
rating
|
|
amount
|
|
Value
|
|
|
|
|
Short-term municipal notes—(concluded)
|
|
|
|
|
|
|
|
|
|
|
|
|
Texas—6.03%
|
|
|
|
|
|
|
|
|
|
|
Harris County
Cultural Education
|
|
|
|
|
|
|
|
|
|
|
Facilities
Finance Corp.
|
|
|
|
|
|
|
|
|
|
|
Revenue-Methodist
|
|
|
|
|
|
|
|
|
|
|
Hospital-Subseries
C-1
|
|
|
|
|
|
|
|
|
|
|
0.280%, due 04/01/10
(4)
|
|
NR
|
|
A-1+
|
|
$3,500,000
|
|
$3,500,000
|
|
|
|
|
Harris County
Cultural Education
|
|
|
|
|
|
|
|
|
|
|
Facilities
Finance Corp.
|
|
|
|
|
|
|
|
|
|
|
Revenue-YMCA
of Greater
|
|
|
|
|
|
|
|
|
|
|
Houston-Series
C
|
|
|
|
|
|
|
|
|
|
|
0.300%, due
04/01/10
(4)
|
|
VMIG1
|
|
NR
|
|
600,000
|
|
600,000
|
|
|
|
|
Texas Water
Development Board
|
|
|
|
|
|
|
|
|
|
|
Revenue
Refunding-State
|
|
|
|
|
|
|
|
|
|
|
Revolving-Sub
Lien-Series A
|
|
|
|
|
|
|
|
|
|
|
0.360%, due
04/01/10
(4)
|
|
VMIG1
|
|
A-1+
|
|
5,000,000
|
|
5,000,000
|
|
|
|
|
|
|
|
|
|
|
|
|
9,100,000
|
|
|
|
|
Wisconsin—4.64%
|
|
|
|
|
|
|
|
|
|
|
Wisconsin
Health & Educational
|
|
|
|
|
|
|
|
|
|
|
Facilities
Authority Revenue-Aurora
|
|
|
|
|
|
|
|
|
|
|
Health
Care-Series B
|
|
|
|
|
|
|
|
|
|
|
0.260%, due
04/07/10
(4)
|
|
NR
|
|
A-1+
|
|
7,000,000
|
|
7,000,000
|
|
|
|
|
Wyoming—2.15%
|
|
|
|
|
|
|
|
|
|
|
Uinta County
Pollution Control
|
|
|
|
|
|
|
|
|
|
|
Revenue
Refunding-Chevron
|
|
|
|
|
|
|
|
|
|
|
USA, Inc. Project
|
|
|
|
|
|
|
|
|
|
|
0.270%, due
04/01/10
(4)
|
|
P-1
|
|
A-1+
|
|
3,250,000
|
|
3,250,000
|
|
|
|
|
Total short-term
municipal notes (cost—$76,990,000)
|
|
|
|
|
|
|
|
76,990,000
|
|
|
|
|
Total investments
(cost—$221,109,391)—146.03%
|
|
|
|
|
|
|
|
220,492,056
|
|
|
|
|
Other assets
in excess of liabilities—6.95%
|
|
|
|
|
|
|
|
10,498,058
|
|
|
|
|
Liquidation
value of auction preferred shares—(52.98)%
|
|
|
|
|
|
|
|
(80,000,000
|
)
|
|
|
|
Net assets
applicable to common shareholders—100.00%
|
|
|
|
|
|
|
|
$150,990,114
|
|
|
|
Aggregate cost for federal income tax purposes,
which was substantially the same for book purposes, was $221,109,391; and net unrealized
depreciation consisted of:
|
Gross unrealized appreciation
|
|
$2,113,541
|
|
|
|
|
Gross unrealized
depreciation
|
|
(2,730,876
|
)
|
|
|
|
Net unrealized
depreciation
|
|
$(617,335
|
)
|
|
|
11
Investment Grade Municipal Income Fund Inc.
Portfolio of investments—March 31, 2010 (unaudited)
|
(1)
|
|
Security subject
to Alternative Minimum Tax.
|
|
(2)
|
|
Security exempt
from registration pursuant to Rule 144A under the Securities Act of 1933. This security,
which represents 0.29% of net assets applicable to common shareholders as of March
31, 2010, is considered illiquid and restricted (See table below for more information).
|
|
|
|
|
|
|
|
Acquisition
|
|
|
|
|
|
|
|
|
|
|
|
cost as
a
|
|
|
|
Value as
a
|
|
|
|
|
|
|
|
percentage
|
|
|
|
percentage
|
|
Illiquid
and
|
|
Acquisition
|
|
Acquisition
|
|
of common
|
|
Value at
|
|
of common
|
|
restricted
security
|
|
date
|
|
cost
|
|
net assets
|
|
03/31/10
|
|
net assets
|
|
|
Standing Rock
New
|
|
|
|
|
|
|
|
|
|
|
|
Public Housing,
|
|
|
|
|
|
|
|
|
|
|
|
6.000%, due
08/07/13
|
|
08/08/02
|
|
$482,503
|
|
0.32%
|
|
$444,192
|
|
0.29%
|
|
|
(3)
|
|
The security
detailed in the table below is considered illiquid and restricted and represents
3.39% of net assets applicable to common shareholders as of March 31, 2010.
|
|
|
|
|
|
|
|
Acquisition
|
|
|
|
|
|
|
|
|
|
|
|
cost as
a
|
|
|
|
Value as
a
|
|
|
|
|
|
|
|
percentage
|
|
|
|
percentage
|
|
Illiquid
and
|
|
Acquisition
|
|
Acquisition
|
|
of common
|
|
Value at
|
|
of common
|
|
restricted
security
|
|
date
|
|
cost
|
|
net assets
|
|
03/31/10
|
|
net assets
|
|
|
Harris County
Texas Lease
|
|
|
|
|
|
|
|
|
|
|
|
6.750%, due
05/01/20
|
|
09/07/00
|
|
$5,347,696
|
|
3.54%
|
|
$5,117,798
|
|
3.39%
|
|
|
(4)
|
|
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,
2010.
|
|
|
|
|
|
AGM
|
|
Assured Guaranty
Municipal Corporation
|
|
AMBAC
|
|
American Municipal
Bond Assurance Corporation
|
|
FGIC
|
|
Financial
Guaranty Insurance Company
|
|
NATL-RE
|
|
National Reinsurance
|
|
NR
|
|
Not Rated
|
12
Investment Grade Municipal Income Fund Inc.
Portfolio of investments—March 31, 2010 (unaudited)
The following is a summary of the fair valuations
according to the inputs used as of March 31, 2010 in valuing the Fund’s investments:
|
|
|
Unadjusted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
quoted prices in
|
|
Other
|
|
|
|
|
|
|
|
|
|
|
active markets
|
|
significant
|
|
|
|
|
|
|
|
|
|
|
for identical
|
|
observable
|
|
Unobservable
|
|
|
|
|
|
|
investments
|
|
inputs
|
|
inputs
|
|
|
|
|
|
|
(Level 1)
|
|
(Level 2)
|
|
(Level 3)
|
|
Total
|
|
|
Long-term
municipal bonds
|
|
$
|
—
|
|
|
$
|
143,502,056
|
|
|
$
|
—
|
|
|
$
|
143,502,056
|
|
|
Short-term
municipal bonds
|
|
|
—
|
|
|
|
76,990,000
|
|
|
|
—
|
|
|
|
76,990,000
|
|
|
Total
|
|
$
|
—
|
|
|
$
|
220,492,056
|
|
|
$
|
—
|
|
|
$
|
220,492,056
|
|
See accompanying notes to financial statements
13
Investment Grade Municipal Income Fund Inc.
Statement of assets and liabilities—March 31, 2010 (unaudited)
|
Assets:
|
|
|
|
|
|
|
Investments
in securities, at value (cost—$221,109,391)
|
|
|
$
|
220,492,056
|
|
|
|
|
Cash
|
|
|
|
58,029
|
|
|
|
|
Receivable
for investments sold
|
|
|
|
8,914,953
|
|
|
|
|
Receivable
for interest
|
|
|
|
1,716,150
|
|
|
|
|
Other assets
|
|
|
|
17,462
|
|
|
|
|
Total assets
|
|
|
|
231,198,650
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
Payable to
investment advisor and administrator
|
|
|
|
78,071
|
|
|
|
|
Dividends
payable to auction preferred shareholders
|
|
|
|
16,422
|
|
|
|
|
Payable for
interest expense and fees on floating rate notes
|
|
|
|
5,295
|
|
|
|
|
Accrued expenses
and other liabilities
|
|
|
|
108,748
|
|
|
|
|
Total liabilities
|
|
|
|
208,536
|
|
|
|
|
Auction preferred
shares Series A, B and C—1,600 non-participating
|
|
|
|
|
|
|
shares authorized,
issued and outstanding; $0.001 par value per auction
|
|
|
|
|
|
|
preferred
share; $50,000 liquidation value per auction preferred share
|
|
|
|
80,000,000
|
|
|
|
|
Net assets
applicable to common shareholders
|
|
|
$
|
150,990,114
|
|
|
|
|
|
|
|
|
|
|
|
Net assets
applicable to common shareholders:
|
|
|
|
|
|
|
Common stock—$0.001 par value per common share; 199,998,400
|
|
|
|
|
|
|
shares authorized;
10,356,667 shares issued and outstanding
|
|
|
$
|
153,238,767
|
|
|
|
|
Accumulated
undistributed net investment income
|
|
|
|
242,529
|
|
|
|
|
Accumulated
net realized loss from investments
|
|
|
|
(1,873,847
|
)
|
|
|
|
Net unrealized
depreciation of investments
|
|
|
|
(617,335
|
)
|
|
|
|
Net assets
applicable to common shareholders
|
|
|
$
|
150,990,114
|
|
|
|
|
Net asset
value per common share ($150,990,114 applicable to
|
|
|
|
|
|
|
10,356,667
common shares outstanding)
|
|
|
|
$14.58
|
|
|
|
|
See accompanying notes to financial statements
|
|
|
14
|
|
|
Investment Grade Municipal Income Fund Inc.
Statement of operations
|
|
|
|
|
For the
|
|
|
|
|
|
six months ended
|
|
|
|
|
|
March 31, 2010
|
|
|
|
|
|
(unaudited)
|
|
|
Investment
income:
|
|
|
|
|
|
|
Interest
|
|
|
|
$5,550,600
|
|
|
|
|
|
|
|
|
|
|
Expenses:
|
|
|
|
|
|
|
Investment
advisory and administration fees
|
|
|
|
1,038,014
|
|
|
|
Professional
fees
|
|
|
|
204,978
|
|
|
|
Reports and
notices to shareholders
|
|
|
|
114,263
|
|
|
|
Auction preferred
shares expenses
|
|
|
|
60,876
|
|
|
|
Custody and
accounting fees
|
|
|
|
26,283
|
|
|
|
Stock exchange
listing fees
|
|
|
|
21,187
|
|
|
|
Interest expense
and fees on floating rate notes
|
|
|
|
19,947
|
|
|
|
Directors’ fees
|
|
|
|
13,148
|
|
|
|
Transfer agency
fees
|
|
|
|
6,335
|
|
|
|
Insurance
fees
|
|
|
|
4,856
|
|
|
|
Other expenses
|
|
|
|
12,294
|
|
|
|
|
|
|
|
1,522,181
|
|
|
|
Less: Fee
waivers by investment advisor and administrator
|
|
|
|
(585,347
|
)
|
|
|
Net expenses
|
|
|
|
936,834
|
|
|
|
Net investment
income
|
|
|
|
4,613,766
|
|
|
|
|
|
|
|
|
|
|
Net realized
and unrealized gains (losses) from investment activities:
|
|
|
|
|
|
|
Net realized
gain from:
|
|
|
|
|
|
|
Investments
|
|
|
|
900,206
|
|
|
|
Net change
in unrealized appreciation/depreciation of:
|
|
|
|
|
|
|
Investments
|
|
|
|
(5,797,202
|
)
|
|
|
Net realized
and unrealized loss from investment activities
|
|
|
|
(4,896,996
|
)
|
|
|
Dividends
paid to auction preferred shareholders from
|
|
|
|
|
|
|
net investment
income
|
|
|
|
(151,884
|
)
|
|
|
Net decrease
in net assets applicable to common shareholders
|
|
|
|
|
|
|
resulting
from operations
|
|
|
|
$(435,114
|
)
|
|
|
See accompanying notes to financial statements
|
|
|
|
|
15
|
Investment Grade Municipal Income Fund Inc.
Statement of changes in net assets applicable
to common shareholders
|
|
|
|
For the six
|
|
|
|
|
|
|
|
|
|
|
months ended
|
|
|
|
For the
|
|
|
|
|
March 31, 2010
|
|
|
|
year ended
|
|
|
|
|
(unaudited)
|
|
|
|
September 30, 2009
|
|
|
From operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investment
income
|
|
|
|
$4,613,766
|
|
|
|
|
|
$9,416,823
|
|
|
|
|
Net realized
gains (losses) from investment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
activities
and futures
|
|
|
|
900,206
|
|
|
|
|
|
(1,616,818
|
)
|
|
|
|
Net change
in unrealized appreciation/depreciation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
of investments
and futures
|
|
|
|
(5,797,202
|
)
|
|
|
|
|
25,760,971
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends
paid to auction preferred
|
|
|
|
|
|
|
|
|
|
|
|
|
|
shareholders
from:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investment
income
|
|
|
|
(151,884
|
)
|
|
|
|
|
(1,098,654
|
)
|
|
|
|
Net increase (decrease) in
net assets applicable to
|
|
|
|
|
|
|
|
|
|
|
|
|
|
common shareholders
resulting from operations
|
|
|
|
(435,114
|
)
|
|
|
|
|
32,462,322
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends
paid to common shareholders from:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investment
income
|
|
|
|
(4,505,150
|
)
|
|
|
|
|
(8,259,442
|
)
|
|
|
|
Net increase
(decrease) in net assets applicable to
|
|
|
|
|
|
|
|
|
|
|
|
|
|
common shareholders
|
|
|
|
(4,940,264
|
)
|
|
|
|
|
24,202,880
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net assets
applicable to common shareholders:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning
of period
|
|
|
|
155,930,378
|
|
|
|
|
|
131,727,498
|
|
|
|
|
End of period
|
|
|
$
|
150,990,114
|
|
|
|
|
|
$155,930,378
|
|
|
|
|
Accumulated
undistributed net investment income
|
|
|
|
$242,529
|
|
|
|
|
|
$285,797
|
|
|
|
|
See accompanying notes to financial statements
|
|
|
16
|
|
|
(This page has been left blank intentionally)
Investment Grade Municipal Income Fund Inc.
Financial highlights
Selected data for a share of common stock
outstanding throughout each period is presented below:
|
|
|
|
For the six
|
|
|
|
|
months ended
|
|
|
|
|
March 31, 2010
|
|
|
|
|
(unaudited)
|
|
|
Net asset
value, beginning of period
|
|
|
|
$15.06
|
|
|
|
|
Net investment
income
|
|
|
|
0.45
|
(1)
|
|
|
|
Net realized
and unrealized gains (losses) from investment activities
|
|
|
|
(0.48
|
)
|
|
|
|
Common share
equivalent of dividends and distributions paid to
|
|
|
|
|
|
|
|
auction preferred
shareholders from:
|
|
|
|
|
|
|
|
Net investment
income
|
|
|
|
(0.01
|
)
|
|
|
|
Net realized
gains from investment activities
|
|
|
|
—
|
|
|
|
|
Total dividends
and distributions paid to auction preferred shareholders
|
|
|
|
(0.01
|
)
|
|
|
|
Net increase
(decrease) from operations
|
|
|
|
(0.04
|
)
|
|
|
|
Dividends
and distributions paid to common shareholders from:
|
|
|
|
|
|
|
|
Net investment
income
|
|
|
|
(0.44
|
)
|
|
|
|
Net realized
gains from investment activities
|
|
|
|
—
|
|
|
|
|
Total dividends
and distributions paid to common shareholders
|
|
|
|
(0.44
|
)
|
|
|
|
Net asset
value, end of period
|
|
|
|
$14.58
|
|
|
|
|
Market
value, end of period
|
|
|
|
$14.43
|
|
|
|
|
Total net
asset value return
(2)
|
|
|
|
(0.25
|
)%
|
|
|
|
Total market
price return
(3)
|
|
|
|
3.76
|
%
|
|
|
|
Ratio to
average net assets attributable to common shares:
|
|
|
|
|
|
|
|
Total expenses,
net of fee waivers by advisor and including interest
|
|
|
|
|
|
|
|
expense on
floating rate notes
|
|
|
|
1.24
|
%
(4),(5)
|
|
|
|
Total expenses,
before fee waivers by advisor and including interest
|
|
|
|
|
|
|
|
expense on
floating rate notes
|
|
|
|
2.02
|
%
(4),(5)
|
|
|
|
Total expenses,
net of fee waivers by advisor and excluding interest
|
|
|
|
|
|
|
|
expense on
floating rate notes
|
|
|
|
1.22
|
%
(4)
|
|
|
|
Net investment
income before auction preferred shares dividends
|
|
|
|
6.12
|
%
(4)
|
|
|
|
Auction preferred
shares dividends from net investment income
|
|
|
|
0.20
|
%
(4)
|
|
|
|
Net investment
income available to common shareholders
|
|
|
|
5.92
|
%
(4)
|
|
|
|
Supplemental
data:
|
|
|
|
|
|
|
|
Net assets
applicable to common shareholders, end of period (000’s)
|
|
|
$
|
150,990
|
|
|
|
|
Portfolio
turnover
|
|
|
|
75
|
%
|
|
|
|
Asset coverage
per share of auction preferred shares, end of period
|
|
|
$
|
144,369
|
|
|
|
|
For the years ended September 30,
|
|
|
2009
|
|
|
|
2008
|
|
|
|
2007
|
|
|
|
2006
|
|
|
|
2005
|
|
|
|
|
$12.72
|
|
|
|
|
$15.10
|
|
|
|
|
$15.39
|
|
|
|
|
$15.66
|
|
|
|
|
$15.81
|
|
|
|
|
|
0.91
|
(1)
|
|
|
|
1.01
|
(1)
|
|
|
|
1.02
|
(1)
|
|
|
|
0.98
|
|
|
|
|
0.95
|
|
|
|
|
|
2.34
|
|
|
|
|
(2.20
|
)
|
|
|
|
(0.29
|
)
|
|
|
|
0.27
|
|
|
|
|
(0.02
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(0.11
|
)
|
|
|
|
(0.34
|
)
|
|
|
|
(0.39
|
)
|
|
|
|
(0.27
|
)
|
|
|
|
(0.21
|
)
|
|
|
|
|
—
|
|
|
|
|
(0.07
|
)
|
|
|
|
—
|
|
|
|
|
(0.11
|
)
|
|
|
|
(0.01
|
)
|
|
|
|
|
(0.11
|
)
|
|
|
|
(0.41
|
)
|
|
|
|
(0.39
|
)
|
|
|
|
(0.38
|
)
|
|
|
|
(0.22
|
)
|
|
|
|
|
3.14
|
|
|
|
|
(1.60
|
)
|
|
|
|
0.34
|
|
|
|
|
0.87
|
|
|
|
|
0.71
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(0.80
|
)
|
|
|
|
(0.66
|
)
|
|
|
|
(0.63
|
)
|
|
|
|
(0.73
|
)
|
|
|
|
(0.74
|
)
|
|
|
|
|
—
|
|
|
|
|
(0.12
|
)
|
|
|
|
—
|
|
|
|
|
(0.41
|
)
|
|
|
|
(0.12
|
)
|
|
|
|
|
(0.80
|
)
|
|
|
|
(0.78
|
)
|
|
|
|
(0.63
|
)
|
|
|
|
(1.14
|
)
|
|
|
|
(0.86
|
)
|
|
|
|
|
$15.06
|
|
|
|
|
$12.72
|
|
|
|
|
$15.10
|
|
|
|
|
$15.39
|
|
|
|
|
$15.66
|
|
|
|
|
|
$14.34
|
|
|
|
|
$11.28
|
|
|
|
|
$13.60
|
|
|
|
|
$13.95
|
|
|
|
|
$13.44
|
|
|
|
|
|
25.73
|
%
|
|
|
|
(11.07
|
)%
|
|
|
|
2.24
|
%
|
|
|
|
5.87
|
%
|
|
|
|
4.57
|
%
|
|
|
|
|
35.91
|
%
|
|
|
|
(11.90
|
)%
|
|
|
|
2.08
|
%
|
|
|
|
13.05
|
%
|
|
|
|
0.42
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1.79
|
%
(5)
|
|
|
|
1.36
|
%
(5)
|
|
|
|
1.28
|
%
|
|
|
|
1.58
|
%
|
|
|
|
1.66
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2.63
|
%
(5)
|
|
|
|
2.06
|
%
(5)
|
|
|
|
1.91
|
%
|
|
|
|
1.97
|
%
|
|
|
|
1.99
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1.66
|
%
|
|
|
|
1.33
|
%
|
|
|
|
1.28
|
%
|
|
|
|
1.58
|
%
|
|
|
|
1.66
|
%
|
|
|
|
|
6.93
|
%
|
|
|
|
6.99
|
%
|
|
|
|
6.68
|
%
|
|
|
|
6.43
|
%
|
|
|
|
6.04
|
%
|
|
|
|
|
0.81
|
%
|
|
|
|
2.32
|
%
|
|
|
|
2.56
|
%
|
|
|
|
1.74
|
%
|
|
|
|
1.34
|
%
|
|
|
|
|
6.12
|
%
|
|
|
|
4.67
|
%
|
|
|
|
4.12
|
%
|
|
|
|
4.69
|
%
|
|
|
|
4.70
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
155,930
|
|
|
|
$
|
131,727
|
|
|
|
$
|
156,402
|
|
|
|
$
|
159,430
|
|
|
|
$
|
162,159
|
|
|
|
|
|
9
|
%
|
|
|
|
20
|
%
|
|
|
|
27
|
%
|
|
|
|
54
|
%
|
|
|
|
49
|
%
|
|
|
|
$
|
147,456
|
|
|
|
$
|
123,182
|
|
|
|
$
|
121,092
|
|
|
|
$
|
122,468
|
|
|
|
$
|
123,709
|
|
|
|
Investment Grade Municipal Income Fund Inc.
Financial highlights
|
(1)
|
Calculated
using the average shares method.
|
|
(2)
|
Total net
asset value return is calculated assuming a $10,000 purchase of common stock at the
current net asset value on the first day of each period reported and a sale at the
current net asset value on the last day of each period reported, and assuming reinvestment
of dividends and other distributions at the net asset value on the payable date.
Total investment return based on net asset value has not been annualized for the
period of less than one year and is hypothetical as investors can not purchase or
sell Fund shares at net asset value but only at market prices. Returns do not reflect
the deduction of taxes that a shareholder could pay on Fund dividends and other
distributions, if any, or the sale of Fund shares.
|
|
(3)
|
Total market
price 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 dividends and distributions, if any, or the sale of Fund shares.
|
|
(4)
|
Annualized.
|
|
(5)
|
Interest expense
represents interest and fees on short term floating rate notes issued in conjunction
with inverse floating rate securities. Interest income from such transactions is
included in income from investment operations.
|
|
See accompanying notes to financial statements
|
|
|
20
|
|
|
Investment Grade Municipal Income Fund Inc.
Notes to financial statements
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.
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.
In June 2009, the Financial Accounting Standards
Board (“FASB”) established the FASB Accounting Standards Codification
TM
(“Codification”) as the single source of authoritative accounting
principles recognized by the FASB in the preparation of financial statements in
conformity with US generally accepted accounting principles (“GAAP”).
The Codification supersedes existing and nongrandfathered, non-SEC accounting
and reporting standards. The Codification did not change GAAP but rather organized
it into a hierarchy where all guidance within the Codification carries an equal
level of authority. The Codification became effective on July 1, 2009. The Codification
did not have a material effect on the Fund’s financial statements.
The preparation of financial statements
in accordance with GAAP 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, official market closing price, 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
Investment Grade Municipal Income Fund Inc.
Notes to financial statements
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”). Various factors may be reviewed in order
to make a good faith determination of a security’s fair value. These factors
may include, but are not limited to, the type and cost of the security; contractual
or legal restrictions on resale of the security; relevant financial or business
developments of the issuer; actively traded similar or related securities; conversion
or exchange rights on the security; related corporate actions; and changes in overall
market conditions. If events occur that materially affect the value of securities
between the close of trading in those securities and the close of regular trading
on the New York Stock Exchange, the securities are fair valued. 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. Securities
traded in the over-the-counter (“OTC”) market are valued at the last bid
price available on the valuation date prior to valuation.
GAAP requires disclosure surrounding the
various inputs that are used in determining the value of the Fund’s investments.
These inputs are summarized into the three broad levels listed below:
Level 1—Unadjusted quoted prices in
active markets for identical investments.
Level 2—Other significant observable
inputs, including but not limited to, quoted prices for similar investments, interest
rates, prepayment speeds and credit risks.
Level 3—Unobservable inputs inclusive
of the Fund’s own assumptions in determining the fair value of investments.
In accordance with the requirements of GAAP,
a fair value hierarchy has been included near the end of the Fund’s Portfolio
of investments.
In January 2010, FASB issued Accounting Standards
Update (“ASU”) No. 2010-06 “Improving Disclosures about Fair Value
Measurements”. ASU No. 2010-06 will require reporting entities to make new
disclosures about amounts and reasons for significant transfers in and out of Level
1 and Level 2 fair value measurements as well as inputs and valuation techniques
used to measure fair value for both recurring and nonrecurring fair value
Investment Grade Municipal Income Fund Inc.
Notes to financial statements
measurements that fall in either Level 2
or Level 3, and information on purchases, sales, issuances and settlements on a
gross basis in the reconciliation of activity in Level 3 fair value measurements.
The new and revised disclosures are required to be implemented for fiscal years
beginning after December 15, 2009 except for the disclosures surrounding purchases,
sales, issuances and settlements on a gross basis in the reconciliation of Level
3 fair value measurements, which are effective for fiscal years beginning after
December 15, 2010. Management is currently evaluating the impact the adoption of
ASU No. 2010-06 may have on the Fund’s financial statement disclosures.
Repurchase agreements
—The Fund
may purchase securities or other obligations from a bank or securities dealer (or
its affiliate), subject to the seller’s agreement to repurchase them at an
agreed upon date (or upon demand) and price. The Fund maintains custody of the underlying
obligations prior to their repurchase, either through its regular custodian or through
a special “tri-party” custodian or sub-custodian that maintains a separate
account for both the Fund and its counterparty. The underlying collateral is valued
daily to ensure that the value, including accrued interest, is at least equal to
the repurchase price. In the event of default of the obligation to repurchase, the
Fund generally has the right to liquidate the collateral and apply the proceeds
in satisfaction of the obligation. Repurchase agreements involving obligations other
than US government securities (such as commercial paper, corporate bonds and mortgage
loans) may be subject to special risks and may not have the benefit of certain protections
in the event of counterparty insolvency. If the seller (or seller’s guarantor,
if any) becomes insolvent, the Fund may suffer delays, costs and possible losses
in connection with the disposition or retention of the collateral. Under certain
circumstances, in the event of default or bankruptcy by the other party to the agreement,
realization and/or retention of the collateral may be subject to legal proceedings.
The Fund may participate in joint repurchase agreement transactions with other funds
managed, advised or sub-advised by UBS Global Asset Management (Americas) Inc. (“UBS Global AM”).
Floating-rate notes issued in conjunction
with securities held—Tender option bond program
The Fund may sell a fixed-rate bond (“Fixed-Rate
Bond”) to a broker who deposits the Fixed-Rate Bond into a special-purpose
entity from which are issued floating-rate notes (“Floating-Rate Notes”)
that are sold to third parties. The Floating-Rate Notes have interest rates that
reset weekly and
Investment Grade Municipal Income Fund Inc.
Notes to financial statements
the holders of the Floating-Rate Notes have
the option to tender their notes to the broker at par at each reset date. A residual
certificate (an “Inverse Floater”), which pays interest based on the difference
between the Fixed-Rate Bond and the Floating-Rate Notes (after certain costs are
taken into account), is also issued by the special-purpose entity. The Inverse Floater
also gives the holder the right to cause the Floating-Rate Note to be called at
par and to require transfer of the Fixed-Rate Bond to the holder of the Inverse
Floater, thereby liquidating the special-purpose entity. In certain transactions,
the Fund ultimately receives the Inverse Floater plus the cash equivalent of the
proceeds raised from the issuance of the Floating-Rate Notes in exchange for the
Fixed-Rate Bonds, less fees and expenses.
Although the Fund physically holds the Inverse
Floater, the transaction is accounted for as a secured borrowing pursuant to GAAP
because of its unilateral right to cause the liquidation of the special-purpose
entity and recover the Fixed-Rate Bond it originally sold to the broker. In accordance
with GAAP, the Fund includes the Fixed-Rate Bond on the Portfolio of investments
and recognizes the Floating-Rate Notes as a liability on the Statement of assets
and liabilities.
The Fund maintained a tender option bond
program until March 2010, when such program was terminated. The range of rates on
the liability for Floating Rate notes was 0.140% to 0.320%, at a weighted average
rate of 0.218% for the six months ended March 31, 2010.
Investment transactions and investment income
—Investment transactions are recorded on the trade date. Realized
gains and losses from investment transactions 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
—The Fund may
purchase and sell municipal bond index futures and other interest rate futures.
The Fund may use futures as a substitute for taking a position in an underlying
security or other asset and/or as part of a strategy designed to reduce exposure
to other risks, such as interest rate risk. The Fund also may use futures to add
leverage to the portfolio and/or to hedge against increases in the Fund’s costs
associated with the dividend payments on the preferred stock. Futures strategies
also can be used to manage the average duration of the Fund’s
Investment Grade Municipal Income Fund Inc.
Notes to financial statements
portfolio. If UBS Global AM wishes to shorten
the average duration of the Fund, the Fund may sell a futures contract. If UBS Global
AM wishes to lengthen the average duration of the Fund, the Fund may buy a futures
contract.
Upon entering into a financial futures contract,
the Fund is required to deliver to a broker an amount of cash and/or securities
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 and 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 separate 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. The separate account for margin will be maintained at the futures counterparty
and may be subject to risks or delays if the counterparty becomes insolvent. At
March 31, 2010, the Fund had no futures contracts outstanding.
Dividends and distributions
—The
Fund intended to pay monthly dividends to common shareholders at a rate level that
over time would result in the distribution of substantially 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
Investment Grade Municipal Income Fund Inc.
Notes to financial statements
net realized capital gains is determined
in accordance with federal income tax regulations, which may differ from GAAP. 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.
Concentration of risk
The Fund
followed 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”), 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
and Basel, Switzerland and operations in many areas of the financial services industry.
In accordance with the Advisory Contract, the Fund is obligated to pay UBS Global
AM an investment advisory and administration fee, which is accrued weekly and paid
monthly, at an annual rate of 0.90% of the Fund’s average weekly net assets
attributable to holders of common and auction preferred shares (“APS”).
UBS Global AM has agreed to waive a portion of the advisory and administration fee
so that the Fund’s effective fee is 0.60% of average weekly net assets attributable
only to holders of common shares. This waiver will continue indefinitely unless
the Board agrees to any change. At March 31, 2010, the Fund owed UBS Global AM $78,071
for investment advisory and administration fees, which is composed of $178,257 of
investment advisory and administration fees less fees waived of $100,186. For the
six months ended March 31, 2010, UBS Global AM waived $585,347 of investment advisory
and administration fees from the Fund.
Additional information regarding compensation
to affiliate of a board member
Professor Meyer Feldberg serves as a senior
advisor to Morgan Stanley, resulting in him being an interested director of the
Fund. The Fund has
Investment Grade Municipal Income Fund Inc.
Notes to financial statements
been informed that Professor Feldberg’s
role at Morgan Stanley does not involve matters directly affecting any UBS funds.
Fund transactions are executed through Morgan Stanley based on that firm’s
ability to provide best execution of the transactions. During the six months ended
March 31, 2010, the Fund purchased and sold certain securities (e.g., fixed income
securities) in principal trades with Morgan Stanley having an aggregate value of
$51,085,149. Morgan Stanley received compensation in connection with these trades,
which may have been in the form of a “mark-up” or “mark-down”
of the price of the securities, a fee from the issuer for maintaining a commercial
paper program, or some other form of compensation. 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. In addition, Morgan Stanley may participate as a broker-dealer
in auctions for the Fund’s Auction Preferred Shares and receive compensation.
Amounts received by Morgan Stanley, if any, will vary depending upon that firm’s
participation in an auction, and such amounts are calculated and paid by the auction
agent from money provided by the Fund.
Auction preferred shares related services
fees
UBS Financial Services Inc., an affiliate of UBS Global AM, provides
certain services to the Fund and the holders of the outstanding APS pursuant to
an agreement with Deutsche Bank, the Fund’s auction agent for APS. For the
six months ended March 31, 2010, UBS Financial Services Inc. received from Deutsche
Bank $20,925 (paid indirectly by the Fund) for these services.
Restricted securities
The Fund
may invest in securities that are subject to legal or contractual restrictions on
resale. These securities generally may be resold in transactions exempt from registration
or to the public if the securities are registered. Disposal of these securities
may involve time-consuming negotiations and expense, and prompt sale at an acceptable
price may be difficult. Information regarding restricted securities is included
at the end of the Fund’s Portfolio of investments.
Auction preferred shares
The Fund
had outstanding 582 shares of auction preferred shares Series A, 582 shares of auction
preferred shares Series B, and 436 shares of auction
Investment Grade Municipal Income Fund Inc.
Notes to financial statements
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.
The APS are entitled to one vote per share
and, unless otherwise required by law, will vote with the 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 APS have the right to elect two directors
of the Fund.
Dividends, which are cumulative, are generally
reset every 7 days for each Series of APS. Dividend rates as of March 31, 2010 for
each Series of APS were as follows and reflect the “maximum rates” under
the governing instruments as a result of “failed auctions” in which sufficient
clearing bids were not received:
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Series A
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0.442
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%
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Series B
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0.442
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%
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Series C
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0.457
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%
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For the six months ended March 31, 2010,
the average dividend rates for each Series of APS were 0.381%, 0.379%, and 0.376%
for Series A, B and C, respectively.
On March 16, 2010, the Fund announced the
timing of the redemption in full of all of its outstanding APS in connection with
the liquidation of the Fund pursuant to a Plan of Liquidation approved by stockholders
on February 23, 2010. The Fund redeemed in full all of its outstanding APS and paid
APS holders their liquidation preference of $50,000 per share (plus accumulated
but unpaid dividends up to and including the date of redemption) based on the following
schedule:
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Series of
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Aggregate
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Number of shares
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Redemption
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APS
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principal
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redeemed
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payment date
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Series A
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$
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29,100,000
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582
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April 16, 2010
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Series B
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29,100,000
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582
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April 19, 2010
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Series C
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21,800,000
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436
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April 20, 2010
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The Fund was subject to certain restrictions
relating to the APS. Failure to comply with these restrictions could have precluded
the Fund from declaring
Investment Grade Municipal Income Fund Inc.
Notes to financial statements
any distributions to common shareholders
or repurchasing common shares and/or could have triggered the mandatory redemption
of APS at liquidation value.
The redemption of the Fund’s APS was
deemed to be outside of the control of the Fund because the APS had been redeemable
among other circumstances, upon the occurrence of an event such as described above
that was not solely within the control of the Fund.
Purchases and sales of securities
For the six months ended March 31, 2010, aggregate purchases and sales of portfolio
securities, excluding short-term securities, were $168,872,144 and $215,087,153,
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.
The tax character of distributions paid
during the fiscal year ended September 30, 2009 was as follows:
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Distributions paid from:
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2009
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Tax-exempt
income
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$9,350,108
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Ordinary income
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7,988
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Total distributions
paid
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$9,358,096
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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 on April
30, 2010 (recently changed from a September 30th fiscal year end).
As of and during the period ended March 31,
2010, the Fund did not have any liabilities for any unrecognized tax positions.
The Fund recognizes interest and penalties, if any, related to unrecognized tax
positions as income tax expense in the Statement of operations. During the six months
ended March 31, 2010, the Fund did not incur any interest or penalties.
Investment Grade Municipal Income Fund Inc.
Notes to financial statements
Each of the tax years in the four year period
ended September 30, 2009, remains subject to examination by the Internal Revenue
Service and state taxing authorities.
Subsequent events
Management has
evaluated the effect of subsequent events on the Fund’s financial statements
through the date of issuance of the Fund’s financial statements. Management
has determined that there were no material subsequent events that would require
disclosure in or adjustment to the Fund’s financial statements other than the
following: (1) liquidation of the Fund by means of the redemption of all APS in
April 2010 and payment of a liquidating distribution to all common shareholders
in May 2010; (2) a change in the Fund’s fiscal year end from September 30th
to April 30th to facilitate the Fund’s liquidation; (3) the ceasing of trading
of the Fund’s common stock on the New York Stock Exchange; and (4) the Fund’s filing of a termination of registration of its common stock with the US Securities
and Exchange Commission.
Investment Grade Municipal Income Fund Inc.
General information (unaudited)
The Fund
Investment Grade Municipal
Income Fund Inc. (the “Fund”) was a diversified, closed-end management
investment company whose common shares had traded on the New York Stock Exchange
(“NYSE”). The Fund’s NYSE trading symbol was “PPM.”
Quarterly Form N-Q portfolio schedule
The Fund filed 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.
Shareholder meeting information
On February 23, 2010, the holders of the Fund’s common stock and auction preferred
stock (“APS”) voted together at a Special Meeting of Shareholders on a
proposal to liquidate and dissolve the Fund pursuant to a Plan of Liquidation (the
“Liquidation Proposal”). The Liquidation Proposal received greater than
the required vote of a majority of the votes entitled to be cast at the meeting:
5,733,384 votes were cast “FOR” the Liquidation Proposal; 398,622 votes
were cast “AGAINST” the Liquidation Proposal; and 132,005 votes were cast
“ABSTAIN.” There were no “broker non-votes.”
Proxy voting policies, procedures and
record
You may obtain a description of the Fund’s (1) proxy voting policies,
(2) proxy voting procedures and (3) information regarding how the Fund voted any proxies
related to portfolio securities during the most recent 12-month period ended June 30
for which an SEC filing has been made, 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).
Dividend reinvestment plan
The
Fund’s Board had established a Dividend Reinvestment Plan (the “Plan”)
under which all common shareholders whose shares were registered in their own names,
or in the name of UBS Financial Services Inc. or its
Investment Grade Municipal Income Fund Inc.
General information (unaudited)
nominee, would have all dividends and other
distributions on their shares of common stock automatically reinvested in additional
shares of common stock, unless such common shareholders elected to receive cash.
Common shareholders who elected to hold their shares in the name of another broker
or nominee should have contacted such broker or nominee to determine whether, or
how, they may have participated in the Plan. Given that there are no shares remaining
outstanding as of May 10, 2010, it is no longer possible to participate in the Plan.
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Directors
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Richard Q.
Armstrong
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Meyer Feldberg
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Chairman
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Bernard H.
Garil
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Alan S. Bernikow
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Heather R.
Higgins
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Richard R.
Burt
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Principal
Officers
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Mark E. Carver
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Thomas Disbrow
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President
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Vice President
and Treasurer
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Mark F. Kemper
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Kevin Mclntyre
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Vice President
and Secretary
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Vice President
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Investment
Advisor and Administrator
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UBS Global
Asset Management (Americas) Inc.
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1285 Avenue
of the Americas
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New York,
New York 10019-6028
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The financial
information included herein is taken from the records of the Fund
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without examination
by independent registered public accountants who do not
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express an
opinion thereon.
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© 2010 UBS
Global Asset Management (Americas) Inc. All rights reserved.
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UBS Global Asset Management (Americas)
Inc.
1285 Avenue of the Americas
New York, New York 10019-6028
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. Investments.
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(a)
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Included as part of the report to shareholders filed under Item 1 of this form.
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(b)
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Not applicable.
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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 applicable to this filing of a semi-annual report.
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 that are registered by the Registrant pursuant to Section 12 of the Exchange Act made in
the period covered by this report.
Item 10. Submission of Matters to a Vote of Security Holders.
The registrant is in the process of winding up its affairs pursuant to a shareholder approved Plan of
Liquidation. As of the date of this filing, the registrant has no shares outstanding; therefore, it is not
possible to submit a matter to a vote of security holders as there are none.
Item 11. Controls and Procedures.
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(a)
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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.
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(b)
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The registrant’s principal executive officer and principal financial officer are aware of no
changes in the registrant’s internal control over financial reporting (as defined in Rule 30a-3(d)
under the Investment Company Act of 1940, as amended) that occurred during the registrant’s
last fiscal quarter that has materially affected, or is reasonably likely to materially affect, the
registrant’s internal control over financial reporting.
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Item 12. Exhibits.
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(a)
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(1) Code of Ethics – Form N-CSR disclosure requirement not applicable to this filing of a semiannual
report.
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(a)
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(2) Certifications of principal executive officer and principal financial officer pursuant to Section
302 of the Sarbanes-Oxley Act of 2002 are attached hereto as Exhibit EX-99.CERT.
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(a)
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(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.
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(b)
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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.
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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.
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By:
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/s/ Mark E. Carver
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Mark E. Carver
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President
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Date:
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June 9, 2010
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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.
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By:
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/s/ Mark E. Carver
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Mark E. Carver
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President
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Date:
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June 9, 2010
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By:
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/s/ Thomas Disbrow
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Thomas Disbrow
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Vice President and Treasurer
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Date:
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June 9, 2010
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