UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM N-Q

QUARTERLY SCHEDULE OF PORTFOLIO HOLDINGS OF REGISTERED
MANAGEMENT INVESTMENT COMPANY

Investment Company Act file number: 811-07096
 
 
Investment Grade Municipal Income Fund Inc.
 
(Exact name of registrant as specified in charter)
 
51 West 52nd Street, New York, New York 10019-6114
 
(Address of principal executive offices) (Zip code)

Mark F. Kemper, Esq.
UBS Global Asset Management
51 West 52nd Street
New York, NY 10019-6114
(Name and address of agent for service)

Copy to:
Jack W. Murphy, Esq.
Dechert LLP
1775 I Street, N.W.
Washington, DC 20006-2401

Registrant’s telephone number, including area code: 212-882 5000

Date of fiscal year end: September 30

Date of reporting period: December 31, 2007

Item 1.   Schedule of Investments

Investment Grade Municipal Income Fund Inc.
Schedule of investments – December 31, 2007 (unaudited)

      Moody’s       S&P       Face          
      rating       rating       amount ($)   Value ($)  
                                 
Long-term municipal bonds—169.88%
Alaska — 2.02%                                

Alaska International Airports Revenue Refunding Series A (MBIA Insured)1

                                

5.000%, due 10/01/19

     Aaa       AAA       1,000,000       1,039,440  

5.000%, due 10/01/20

     Aaa       AAA       1,000,000       1,033,570  

5.000%, due 10/01/21

     Aaa       AAA       1,000,000       1,027,750  
                              3,100,760  
Arizona — 1.66%                                

Arizona State Transportation Board Highway Revenue-Series B

                                

5.250%, due 07/01/18

     Aa1       AAA       2,380,000       2,541,816  
Arkansas — 0.95%                                

Little Rock Capital Improvement Revenue Parks & Recreation Projects-Series A

                                

5.700%, due 01/01/18

     NR       NR       1,435,000       1,454,990  
California — 35.85%                                

California Educational Facilities Authority Revenue Refunding-Pepperdine University-
Series A (FGIC Insured)

                                

5.000%, due 09/01/33

     Aaa       AAA       5,000,000       5,080,750  

California Health Facilities Financing Authority Revenue-Kaiser
Permanente-Series A

                                

5.250%, due 04/01/39

     NR       A+       5,000,000       5,002,900  

California State Refunding

                                

5.000%, due 05/01/27

     A1       A+       5,000,000       5,085,600  

California State Refunding-Series 2,

                                

5.000%, due 09/01/27

     A1       A+       3,000,000       3,056,190  

California Statewide Communities Development Authority Apartment
Development Revenue Refunding-Irvine Apartment Communities-Series A-3
(Mandatory Put 05/17/10 @ 100)

                                

5.100%, due 05/15/252

     NR       NR       3,000,000       3,045,450  

California Statewide Communities Development Authority Revenue-Kaiser Permanente-Series H (Mandatory Put 05/01/08 @ 100)

                                

2.625%, due 04/01/342

     NR       A+       1,750,000       1,743,402  

Los Angeles Wastewater System Revenue Refunding-Series A (FSA Insured)

                                

5.000%, due 06/01/32

     Aaa       AAA       6,250,000       6,419,250  

Los Angeles Water & Power Revenue Power System-Series A, Subseries A-2
(MBIA Insured)

                                

5.000%, due 07/01/27

     Aaa       AAA       5,000,000       5,138,500  

Sacramento County Sanitation District Financing Authority Revenue Refunding
(AMBAC Insured)

                                

5.000%, due 12/01/27

     Aaa       AAA       10,000,000       10,306,200  

San Diego County Regional Airport Authority Airport Revenue Refunding
(AMBAC Insured)

                                

5.250%, due 07/01/161

     Aaa       AAA       2,600,000       2,800,200  

San Francisco City & County Public Utilities Commission Water Revenue-Series A
(MBIA Insured)

                                

5.000%, due 11/01/25

     Aaa       AAA       2,000,000       2,079,160  

University of California Revenue-Series A (AMBAC Insured)

                                

5.000%, due 05/15/283

     Aaa       AAA       5,000,000       5,141,950  
                              54,899,552  

Investment Grade Municipal Income Fund Inc.
Schedule of investments – December 31, 2007 (unaudited)

      Moody’s       S&P       Face          
      rating       rating       amount ($)   Value ($)  
                                 
Long-term municipal bonds—(continued)
Colorado — 4.90%                                

Colorado Health Facilities Authority Revenue Refunding-Adventist Health/Sunbelt-Series E2

                                

5.125%, due 11/15/18

     A2       A+       3,000,000       3,131,280  

5.125%, due 11/15/19

     A2       A+       3,000,000       3,109,080  

University of Colorado Participation Interests

                                

6.000%, due 12/01/13

     NR       A+       1,209,677       1,266,968  
                              7,507,328  
Florida — 4.10%                                

Florida State Board of Education Capital Outlay-Series E (FGIC Insured)

                                

5.000%, due 06/01/24

     Aaa       AAA       3,350,000       3,483,464  

Miami-Dade County Aviation Revenue Refunding-Miami International
Airport-Series B (XLCA Insured)

                                

5.000%, due 10/01/181

     Aaa       AAA       2,700,000       2,792,691  
                              6,276,155  
Illinois — 14.53%                                

Chicago O’Hare International Airport Revenue-General-Third Lien-Series D
(MBIA Insured)

                                

5.000%, due 01/01/261

     Aaa       AAA       11,270,000       11,322,631  

Illinois Educational Facilities Authority Revenue Refunding-Augustana
College-Series A

                                

5.625%, due 10/01/22

     Baa1       NR       1,200,000       1,229,736  

Illinois Finance Authority Revenue-University of Chicago-Series A

                                

5.000%, due 07/01/34

     Aa1       AA       6,000,000       6,167,460  

Illinois Municipal Electric Agency Power Supply-Series A (FGIC Insured)

                                

5.250%, due 02/01/17

     Aaa       AAA       3,000,000       3,287,460  

Metropolitan Pier & Exposition Authority Dedicated State Tax Revenue

                                

6.500%, due 06/15/27

     A1       AAA       250,000       250,440  
                              22,257,727  
Indiana — 5.26%                                

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       4,020,720  

Indianapolis Airport Authority Revenue Refunding-Special Facilities-FedEx Corp. Project

                                

5.100%, due 01/15/171

     Baa2       BBB       4,000,000       4,038,560  
                              8,059,280  
Kentucky — 1.43%                                

Kenton County Airport Board Airport Revenue-Cincinnati/Northern
Kentucky-Series B (MBIA Insured)

                                

5.500%, due 03/01/181

     Aaa       AAA       2,080,000       2,189,491  
Massachusetts — 4.67%                                

Massachusetts Health & Educational Facilities Authority Revenue-Harvard University-
Series DD

                                

5.000%, due 07/15/35

     Aaa       AAA       6,000,000       6,117,480  

Massachusetts Port Authority Revenue-US Airways Project (MBIA Insured)

                                

6.000%, due 09/01/211

     Aaa       AAA       1,000,000       1,035,000  
                              7,152,480  

Investment Grade Municipal Income Fund Inc.
Schedule of investments – December 31, 2007 (unaudited)

      Moody’s       S&P       Face          
      rating       rating       amount ($)   Value ($)  
                                 
Long-term municipal bonds—(continued)                                
Michigan — 5.31%                                

Michigan State Hospital Finance Authority Revenue Refunding-Trinity Health Credit Group-Series D

                                

5.000%, due 08/15/25

     Aa2       AA-       5,000,000       5,085,300  

Michigan State Hospital Finance Authority Revenue-Trinity Health Credit
Group-Series A

                                

5.000%, due 12/01/26

     Aa2       AA-       3,000,000       3,047,340  
                              8,132,640  
Minnesota — 0.99%                                

Shakopee Health Care Facilities Revenue-Saint Francis Regional Medical Center

                                

5.000%, due 09/01/17

     NR       BBB       1,500,000       1,515,990  
New Jersey — 6.06%                                

New Jersey Transportation Trust Fund Authority Transportation System-Series A

                                

5.250%, due 12/15/20

     A1       AA-       5,000,000       5,568,050  

Tobacco Settlement Financing Corp.-Series 1-A

                                

4.500%, due 06/01/23

     Baa3       BBB       4,045,000       3,710,843  
                              9,278,893  
New York — 15.54%                                

Metropolitan Transportation Authority New York Dedicated Tax Fund-Series A
(FSA Insured)

                                

5.250%, due 11/15/24

     Aaa       AAA       1,765,000       1,883,432  

New York City General Obligation-Series O

                                

5.000%, due 06/01/24

     A1       AA-       3,315,000       3,418,428  

New York City Industrial Development Agency Special Facilities Revenue-Terminal One Group Association Project

                                

5.500%, due 01/01/151

     A3       BBB+       2,000,000       2,118,960  

New York City Industrial Development Agency Special Facilities Revenue-Terminal One Group Association Project (Mandatory Put 01/01/16 @ 100)

                                

5.500%, due 01/01/171,2

     A3       BBB+       2,750,000       2,906,558  

5.500%, due 01/01/18

     A3       BBB+       3,250,000       3,415,067  

Triborough Bridge & Tunnel Authority Revenue Refunding-Series B

                                

5.250%, due 11/15/19

     Aa2       AA-       3,140,000       3,365,169  

Triborough Bridge & Tunnel Authority Revenue-Subordinate Bonds

                                

5.250%, due 11/15/30

     Aa3       A+       6,400,000       6,685,248  
                              23,792,862  
North Carolina — 11.23%                                

North Carolina Eastern Municipal Power Agency Power System Revenue-Series A (Escrowed to Maturity)

                                

6.400%, due 01/01/21

     Baa2       AAA       3,065,000       3,707,516  

North Carolina Medical Care Commission Health Care Facilities Revenue-Novant Health Obligation Group

                                

5.000%, due 11/01/34

     Aa3       AA-       5,000,000       4,985,000  

North Carolina State Public Improvement-Series A

                                

4.000%, due 03/01/24

     Aa1       AAA       8,745,000       8,500,752  
                              17,193,268  

Investment Grade Municipal Income Fund Inc.
Schedule of investments – December 31, 2007 (unaudited)

      Moody’s       S&P       Face          
      rating       rating       amount ($)   Value ($)  
                                 
Long-term municipal bonds—(continued)
Ohio — 12.48%                                

Buckeye Tobacco Settlement Financing Authority Asset-Backed Senior
Turbo-Series A-2

                                

5.125%, due 06/01/24

     Baa3       BBB       10,000,000       9,452,800  

Ohio State Higher Education-Series B

                                

5.250%, due 11/01/17

     Aa1       AA+       1,185,000       1,274,242  

Ohio State Water Development Authority Water Pollution Control Revenue-Water Quality

                                

5.000%, due 06/01/24

     Aaa       AAA       8,000,000       8,393,120  
                              19,120,162  
Pennsylvania — 1.92%                                

Susquehanna Area Regional Airport Authority Airport System Revenue-Subseries D

                                

5.375%, due 01/01/18

     Ba1       NR       3,000,000       2,940,750  
Puerto Rico — 8.46%                                

Puerto Rico Commonwealth Highway & Transportation Authority Revenue
Refunding-Series N

                                

5.500%, due 07/01/22

     Baa3       BBB+       3,000,000       3,166,110  

Puerto Rico Housing Finance Authority-Capital Funding Program (HUD Insured)

                                

5.000%, due 12/01/18

     Aa3       AA       3,000,000       3,150,270  

University of Puerto Rico-Revenue System-Series Q

                                

5.000%, due 06/01/17

     Baa2       BBB       6,465,000       6,637,163  
                              12,953,543  
South Carolina — 9.19%                                

Charleston Educational Excellence Financing Corp. Revenue-Charleston County School District Project

                                

5.000%, due 12/01/24

     A1       AA-       7,570,000       7,805,881  

Greenville County School District Installment Purchase Refunding-Building Equity Sooner-Series AGC

                                

5.000%, due 12/01/24

     Aa3       AA-       5,000,000       5,185,500  

Greenville Waterworks Revenue

                                

5.250%, due 02/01/20

     Aa1       AAA       1,000,000       1,077,920  
                              14,069,301  
South Dakota — 0.58%                                

Standing Rock New Public Housing

                                

6.000%, due 08/07/134

     NR       NR       898,729       894,038  
Tennessee — 0.68%                                

Memphis-Shelby County Airport Authority Airport Revenue-Series D
(AMBAC Insured)

                                

6.000%, due 03/01/241

     Aaa       AAA       1,000,000       1,045,550  
Texas — 17.09%                                

Coastal Bend Health Facilities Development Corp.-Incarnate Word Health
System-Series A (Escrowed to Maturity) (AMBAC Insured)

                                

6.300%, due 01/01/17

     Aaa       AAA       3,700,000       4,134,343  

Harris County Texas Lease

                                

6.750%, due 05/01/205

     NR       NR       6,121,422       6,545,575  

Houston Community College System Participation Interests

                                

7.875%, due 06/15/255

     NR       NR       3,007,095       3,309,519  

Lamar Consolidated Independent School District Schoolhouse (PSF-GTD)

                                

5.000%, due 02/15/31

     Aaa       AAA       3,235,000       3,364,594  

Investment Grade Municipal Income Fund Inc.
Schedule of investments – December 31, 2007 (unaudited)

      Moody’s       S&P       Face          
      rating       rating       amount ($)   Value ($)  
                                 
Long-term municipal bonds—(continued)
Texas—(concluded)                                

Lower Colorado River Authority Transmission Contract Revenue-LCRA Transmission Services Corp. Project B (FSA Insured)

                                

5.250%, due 05/15/20

     Aaa       AAA       1,485,000       1,577,070  

San Leanna Educational Facilities Corp. Higher Educational Revenue
Refunding-Saint Edwards University Project

                                

5.000%, due 06/01/18

     Baa2       BBB+       2,000,000       2,028,420  

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       5,207,900  
                              26,167,421  
Washington — 3.02%                                

Chelan County Public Utility District No. 001 Consolidated Revenue
Refunding-Chelan Hydropower-Series A (MBIA Insured)

                                

6.050%, due 07/01/321

     Aaa       AAA       4,225,000       4,628,023  
Wyoming — 1.96%                                

Wyoming Student Loan Corp. Student Loan Revenue-RAMS-Senior Series A

                                

6.050%, due 06/01/351,2

     NR       AAA       3,000,000       3,000,000  
Total long-term municipal bonds (cost — $260,260,909)         260,172,020  
Total investments (cost — $260,260,909)6,7 — 169.88%         260,172,020  
Other assets in excess of liabilities — 1.94%         2,979,856  
Liquidation value of auction preferred shares — (71.82)%         (110,000,000 )
Net assets applicable to common shareholders — 100.00%         153,151,876  

1   Security subject to Alternative Minimum Tax.
     
2   Floating rate security. The interest rate shown is the current rate as of December 31, 2007.
     
3   Partial amount delivered to broker as collateral for futures transactions.
     
4   Security exempt from registration under Rule 144A of the Securities Act of 1933. This security, which represents 0.58% of net assets applicable to common shareholders as of December 31, 2007, 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 ($)   net assets (%)   12/31/07 ($)   net assets (%)
Standing Rock New Public Housing, 6.000%, 08/07/13   08/08/02   898,729   0.59   894,038   0.58

5   The securities detailed in the table below are considered illiquid and restricted and represent 6.43% of net assets applicable to common shareholders as of December 31, 2007.
     
            Acquisition        
            cost as a       Value as a
            percentage       percentage
Illiquid and   Acquisition   Acquisition   of common   Value at   of common
restricted securities   dates   cost ($)   net assets (%)   12/31/07 ($)   net assets (%)
Harris County Texas Lease,                    
6.750%, 05/01/20   09/07/00   6,121,422   4.00   6,545,575   4.27
Houston Community College System Participation Interests,
7.875%, 06/15/25		   04/22/02   3,007,095   1.96   3,309,519   2.16
        9,128,517   5.96   9,855,094   6.43

6   Cost of investments shown approximates cost for federal income tax purposes. Gross unrealized appreciation of investments and gross unrealized depreciation of investments at December 31, 2007 were $3,134,122 and $3,223,011 respectively, resulting in net unrealized depreciation of investments of $88,889.
     
7   The Fund calculates its net asset value based on the current market value, where available, for its portfolio securities. The Fund normally obtains market values for its securities from independent pricing sources and broker-dealers. Independent pricing sources may use last reported sale prices, current market quotations or valuations from computerized “matrix” systems that derive values based on comparable securities. A matrix system incorporates parameters such as security quality, maturity and coupon, and/or research and evaluations by its staff, including review of broker-dealer market price quotations, if available, in determining the valuation of the portfolio securities. If a market value is not available from an independent pricing source for a particular security, that security is valued at fair value as determined in good faith by or under the direction of the Fund’s Board of Directors (the “Board”). 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 (particularly non-US 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, unless the Board or its delegate determines that this does not represent fair value. Securities traded in the over-the-counter (“OTC”) market are valued at the last bid price available on the valuation date prior to valuation.
     
AMBAC   American Municipal Bond Assurance Corporation
     
FGIC   Financial Guaranty Insurance Company
     
FSA   Financial Security Assurance
     
GTD   Guaranteed
     
HUD   Housing and Urban Development
     
MBIA   Municipal Bond Investors Assurance
     
NR   Not Rated
     
PSF   Permanent School Fund
     
RAMS   Reset Auction Mode Securities
     
XLCA   XL Capital Assurance

Futures contracts                    
                        Unrealized
Number of     Expiration         Current   appreciation/
contracts   Sale contracts   dates   Proceeds ($)   value ($)   (depreciation) ($)
145   US Treasury Bond 30 Year Futures   March 2008   17,050,095     16,874,375     175,720  
15   US Treasury Note 10 Year Futures   March 2008   1,699,196     1,701,562     (2,366 )
            18,749,291     18,575,937     173,354  
For more information regarding the Fund’s other significant accounting policies, please refer to the Fund’s annual report to shareholders dated September 30, 2007.

Item 2.   Controls and Procedures.

 
(a)
  
The registrant’s principal executive officer and principal financial officer have concluded that the registrant’s disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940, as amended (“Investment Company Act”)) are effective based on their evaluation of these controls and procedures as of a date within 90 days of the filing date of this document.
       
 
(b)
  
The registrant’s principal executive officer and principal financial officer are aware of no changes in the registrant’s internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act) 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.

Item 3.   Exhibits.

 
(a)
  
Certifications of principal executive officer and principal financial officer of registrant pursuant to Rule 30a-2(a) under the Investment Company Act is attached hereto as Exhibit EX-99.CERT.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Investment Grade Municipal Income Fund Inc.

By:
  
/s/ Kai R. Sotorp
   
Kai R. Sotorp
   
President
     
Date:
  
February 29, 2008

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

By:
  
/s/ Kai R. Sotorp
   
Kai R. Sotorp
   
President
     
Date:
  
February 29, 2008
     
By:
  
/s/ Thomas Disbrow
   
Thomas Disbrow
   
Vice President and Treasurer
     
Date:
  
February 29, 2008