UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number: 811-07528
-----------------------------------------------
Insured 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: March 31
Date of reporting period: September 30, 2006
ITEM 1. REPORTS TO STOCKHOLDERS.
--------------------------------
[LOGO OF UBS] UBS Global Asset
Management
INSURED MUNICIPAL INCOME
FUND INC.
SEMIANNUAL REPORT
SEPTEMBER 30, 2006
INSURED MUNICIPAL INCOME FUND INC.
November 15, 2006
DEAR SHAREHOLDER,
We are pleased to present you with the semiannual report for Insured Municipal
Income Fund Inc. (the "Fund") for the six-month period ended September 30, 2006.
PERFORMANCE
Over the six-month period ended September 30, 2006, the Fund returned 4.33% on a
net asset value basis and 2.10% on a market price basis. Over the same period,
the Fund's peer group, the Lipper Insured Municipal Debt Funds (Leveraged)
category, posted median net asset value and market price returns of 4.05% and
2.52%, respectively. Finally, the Fund's benchmark, the Lehman Brothers
Municipal Bond Index (the "Index") returned 3.44% over the semiannual period.
(For more performance information, please refer to "Performance at a glance" on
page 6.)
--------------------------------------------------------------------------------
INSURED MUNICIPAL INCOME FUND INC.
INVESTMENT GOAL:
High level of current income exempt from federal income tax, consistent with
preservation of capital.
PORTFOLIO MANAGER:
Kevin McIntyre
UBS Global Asset Management (Americas) Inc.
COMMENCEMENT:
June 8, 1993
NYSE SYMBOL:
PIF
DIVIDEND PAYMENTS:
Monthly
--------------------------------------------------------------------------------
The Fund continued to use leverage during the period, which helped performance
on an absolute basis. As of September 30, 2006, leverage accounted for
approximately 40% of the Fund's total assets. While short-term rates rose over
the period and increased the Fund's borrowing costs, the leverage still had a
positive effect on the Fund's income during the fiscal year, as the yields on
the Fund's longer-term bonds more than offset the borrowing costs. Leverage
magnifies returns on both the upside and on the downside.
AN INTERVIEW WITH PORTFOLIO MANAGER KEVIN McINTYRE
Q. HOW WOULD YOU DESCRIBE THE ECONOMIC ENVIRONMENT DURING THE REPORTING PERIOD?
A. Economic data were generally positive during the past six months, although
economic growth appears to be slowing from an above-average rate back to
historical norms. Although the housing market continued to cool, offsetting
that trend was a sharp decline in energy prices during the final two months
of the reporting period. Other economic
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1
INSURED MUNICIPAL INCOME FUND INC.
indicators were equally mixed; advance GDP data for the third quarter came
in below expectations, while unemployment remained low and consumer
confidence high.
Q. HOW DID THE FEDERAL RESERVE BOARD (THE "FED") REACT TO THESE ECONOMIC
CONDITIONS?
A. After raising short-term interest rates in 17 consecutive meetings dating
back to 2004, the Fed left rates unchanged at 5.25% in its past three
sessions, including its October meeting after the Fund's reporting period
ended. Future rate hikes remain a possibility, according to Fed releases, as
"some inflation risks remain." The extent and timing of any future firming,
or monetary easing for that matter, will likely be dependent on emerging
economic data.
Q. HOW DID THE MUNICIPAL BOND MARKET PERFORM IN THIS ENVIRONMENT?
A. The municipal bond market on the whole outperformed Treasuries throughout
the reporting period. Treasury yields rose, resulting in corresponding price
declines, while municipal securities with maturities of 10 years and longer
actually rallied during this same period. The difference in performance
versus Treasuries was greatest when comparing securities with maturities of
around 30 years.
Q. IN GENERAL TERMS, HOW DID YOU POSITION THE PORTFOLIO?
A. In terms of duration, our position remained neutral versus the Index during
this reporting period. (Duration is a measure of a fund's sensitivity to
interest rate changes and is related to the maturity of the bonds comprising
the portfolio.) Our position in longer-term maturities benefited the
portfolio on an absolute basis, as the longer end of the curve outperformed
every other area on the yield curve. Additionally, some changes to the
Fund's investment strategies benefited performance. The Fund has increased
its exposure to lower-quality securities and securities subject to the
alternative minimum tax (AMT). These changes were implemented to bring the
Fund's investment style more in line with that of its peers, with the goal
of making it more competitive. During the course of the period, we used
these to our advantage. We diversified away from higher grade securities to
increase the Fund's position in relatively lower-rated securities. We
likewise increased the Fund's position in AMT securities, to benefit from
the higher yields associated with these types of bonds.
Q. FROM A SECTOR STANDPOINT, WHAT WERE IMPORTANT POSITIONS FOR THE FUND?
A. We strive to maintain a well-diversified portfolio regardless of market
conditions. As a result, the Fund holds bonds in a number of different
--------------------------------------------------------------------------------
2
INSURED MUNICIPAL INCOME FUND INC.
sectors. During the reporting period, we have focused our research on
uncovering new opportunities in the water, airport and hospital sectors.
This research indicates that the water sector tends to have stronger revenue
and earnings stability than some other sectors of the municipal market, even
in changing economic climates. While we reduced the Fund's position in water
related bonds during the period in order to diversify into other areas, we
continued to view the sector positively, and it represented the Fund's
largest sector position at period end.
Meanwhile, the airport sector continued to rebound during the period. A
significant portion of airport sector bonds are subject to AMT and tend to
offer higher yields. The Fund owns NYC IDA revenue bonds for the Terminal
One Group Association, which have performed well over this period, helping
us to diversify the credit quality of the portfolio.
While our long-term outlook for the healthcare sector as a whole remains
negative, we see positive trends developing for certain healthcare providers
that have stable or improving finances and strong market share. With that in
mind, we have selectively added to our holdings in this sector, and
performance has been solid in recent months.
Although the tobacco sector posted very strong performance yet again during
the reporting period, we continued to avoid it, which detracted from
performance during the period. We do not believe the potential rewards in
the tobacco sector are commensurate with the risks our analysis indicates
these bonds entail. In an attempt to concentrate Fund assets on risks we
feel are likely to be compensated, we minimized our exposure to this sector.
Q. WERE THERE ANY STATES OR REGIONS THAT WERE AN AREA OF FOCUS FOR THE FUND?
A. From a regional standpoint, we continued to focus on states that exhibited
improved fiscal health and offered what we viewed as attractively valued
municipal bonds. Issues that we believe met that definition included
long-term California bonds and New York securities. While we
opportunistically reduced these positions where we were able to benefit
performance, they remained our largest single state exposures at period end.
Additionally, we have increased our exposure to New Jersey bonds, primarily
with the purchase of New Jersey Transportation Trust Fund Bonds, one of our
best-performing bonds over the period.
--------------------------------------------------------------------------------
3
INSURED MUNICIPAL INCOME FUND INC.
Q. WHAT IS YOUR OUTLOOK FOR THE ECONOMY AND THE MUNICIPAL FIXED INCOME MARKET?
A. We are generally more upbeat on the prospects for the economy than some
market prognosticators. Throughout 2006, corporate earnings have appeared
quite healthy, while employment and wage data have appeared strong.
Inflation, high energy prices and the prospect of a bursting housing bubble
represent the major hurdles facing the economy and the markets, and we find
it unlikely that any of the three represents enough of a threat to derail
what has been a period of solid, if not exceptional, economic growth. With
respect to the municipal bond market, we believe there continue to be
pockets of attractive valuations along the yield curve and within certain
sectors. Our in-house research should help position the Fund well in hopes
of taking advantage of those investment opportunities we identify in the
months and quarters that follow.
--------------------------------------------------------------------------------
4
INSURED MUNICIPAL INCOME FUND INC.
We thank you for your continued support and welcome any comments or questions
you may have. For additional information regarding your fund, please contact
your financial advisor, or visit us at www.ubs.com/globalam-us.
Sincerely,
/s/ Kai R. Sotorp
Kai R. Sotorp
President
Insured Municipal Income Fund Inc.
Head of the Americas
UBS Global Asset Management (Americas) Inc.
/s/ Kevin McIntyre
Kevin McIntyre
Portfolio Management Team
Insured Municipal Income Fund Inc.
Director
UBS Global Asset Management (Americas) Inc.
/s/ Elbridge T. Gerry
Elbridge T. Gerry III
Portfolio Management Team
Insured Municipal Income Fund Inc.
Managing Director
UBS Global Asset Management (Americas) Inc.
This letter is intended to assist shareholders in understanding how the Fund
performed during the six-month period ended September 30, 2006. The views and
opinions in the letter were current as of November 15, 2006. They are not
guarantees of performance or investment results and should not be taken as
investment advice. Investment decisions reflect a variety of factors, and we
reserve the right to change our views about individual securities, sectors and
markets at any time. As a result, the views expressed should not be relied upon
as a forecast of the Fund's future investment intent. We encourage you to
consult your financial advisor regarding your personal investment program.
--------------------------------------------------------------------------------
5
INSURED MUNICIPAL INCOME FUND INC.
PERFORMANCE AT A GLANCE (UNAUDITED)
AVERAGE ANNUAL TOTAL RETURNS FOR PERIODS ENDED 09/30/06
INSURED MUNICIPAL INCOME FUND INC. 6 MONTHS 1 YEAR 5 YEARS 10 YEARS
--------------------------------------------------------------------------------------------------
Net asset value 4.33% 5.41% 5.18% 5.95%
--------------------------------------------------------------------------------------------------
Market price 2.10% 5.24% 5.70% 7.12%
==================================================================================================
LIPPER INSURED MUNICIPAL DEBT FUNDS
(LEVERAGED) MEDIAN
--------------------------------------------------------------------------------------------------
Net asset value 4.05% 5.10% 6.34% 6.39%
--------------------------------------------------------------------------------------------------
Market price 2.52% 3.64% 6.58% 6.75%
==================================================================================================
LEHMAN BROTHERS MUNICIPAL
BOND INDEX 3.44% 4.45% 5.17% 5.90%
==================================================================================================
PAST PERFORMANCE DOES NOT PREDICT FUTURE PERFORMANCE. THE RETURN AND VALUE OF AN
INVESTMENT WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES, WHEN SOLD, MAY BE WORTH
MORE OR LESS THAN THEIR ORIGINAL COST. NAV RETURN ASSUMES, FOR ILLUSTRATION
ONLY, THAT DIVIDENDS WERE REINVESTED AT THE NET ASSET VALUE ON THE PAYABLE
DATES. NAV AND MARKET PRICE RETURNS FOR THE PERIOD OF LESS THAN ONE YEAR ARE
CUMULATIVE. RETURNS DO NOT REFLECT THE DEDUCTION OF TAXES THAT A SHAREHOLDER
COULD PAY ON FUND DISTRIBUTIONS.
Lipper peer group data calculated by Lipper Inc.; used with permission. The
Lipper median is the return of the fund that places in the middle of the peer
group.
SHARE PRICE, DIVIDEND AND YIELDS AS OF 09/30/06
-----------------------------------------------------------------------------------------
Market price $12.97
-----------------------------------------------------------------------------------------
Net asset value (per share applicable to common shareholders) $15.01
-----------------------------------------------------------------------------------------
Net investment income dividends paid to common shareholders during
the twelve months ended 09/30/06 $0.64
-----------------------------------------------------------------------------------------
September 2006 dividend $0.05
-----------------------------------------------------------------------------------------
Market yield* 4.63%
-----------------------------------------------------------------------------------------
NAV yield* 4.00%
=========================================================================================
* Market yield is calculated by multiplying the September dividend by 12 and
dividing by the month-end market price. NAV yield is calculated by multiplying
the September dividend by 12 and dividing by the month-end net asset value.
Prices and yields will vary.
--------------------------------------------------------------------------------
6
INSURED MUNICIPAL INCOME FUND INC.
PORTFOLIO STATISTICS (UNAUDITED)
CHARACTERISTICS 09/30/06 03/31/06 09/30/05
----------------------------------------------------------------------------------------------------
Net assets applicable to common
shareholders (mm) $309.6 $303.3 $311.0
----------------------------------------------------------------------------------------------------
Weighted average maturity 15.0 yrs 15.4 yrs 14.3 yrs
----------------------------------------------------------------------------------------------------
Weighted average duration 4.9 yrs 5.2 yrs 4.2 yrs
----------------------------------------------------------------------------------------------------
Weighted average coupon 5.1% 5.1% 5.0%
----------------------------------------------------------------------------------------------------
Leverage** 40.1% 39.7% 40.1%
----------------------------------------------------------------------------------------------------
Securities subject to alternative
minimum tax (AMT)* 14.8% 8.6% 1.4%
----------------------------------------------------------------------------------------------------
Callable/maturing within five years* 13.6% 12.3% 11.6%
----------------------------------------------------------------------------------------------------
Callable/maturing beyond five years* 86.4% 87.7% 88.4%
----------------------------------------------------------------------------------------------------
PORTFOLIO COMPOSITION*** 09/30/06 03/31/06 09/30/05
----------------------------------------------------------------------------------------------------
Long-term municipal bonds 89.0% 91.2% 89.7%
----------------------------------------------------------------------------------------------------
Short-term municipal notes 10.6 8.0 8.4
----------------------------------------------------------------------------------------------------
Futures and swaps (0.1) 0.0+ 0.5
----------------------------------------------------------------------------------------------------
Other assets less liabilities 0.5 0.8 1.4
----------------------------------------------------------------------------------------------------
Total 100.0% 100.0% 100.0%
====================================================================================================
CREDIT QUALITY* 09/30/06 03/31/06 09/30/05
----------------------------------------------------------------------------------------------------
AAA 71.0% 82.8% 89.2%
----------------------------------------------------------------------------------------------------
AA 8.7 1.1 -
----------------------------------------------------------------------------------------------------
A 2.2 1.2 -
----------------------------------------------------------------------------------------------------
BBB 4.9 4.6 -
----------------------------------------------------------------------------------------------------
A-1 9.8 8.1 8.6
----------------------------------------------------------------------------------------------------
Nonrated 3.4 2.2 2.2
----------------------------------------------------------------------------------------------------
Total 100.0% 100.0% 100.0%
====================================================================================================
* Weightings represent percentages of total investments as of the dates
indicated. The Fund's portfolio is actively managed and its composition
will vary over time.
** As a percentage of total assets as of the dates indicated.
*** As a percentage of net assets applicable to common and preferred
shareholders as of the dates indicated. Credit quality ratings shown are
designated by Standard & Poor's Rating Group, an independent rating agency.
+ Represents less than 0.05% of net assets applicable to common and preferred
shareholders as of the date indicated.
--------------------------------------------------------------------------------
7
INSURED MUNICIPAL INCOME FUND INC.
PORTFOLIO STATISTICS (UNAUDITED) (CONCLUDED)
TOP FIVE STATES* 09/30/06 03/31/06 09/30/05
----------------------------------------------------------------------------------------------
California 26.3% California 30.5% California 38.1%
----------------------------------------------------------------------------------------------
New York 13.4 Texas 15.5 Texas 13.4
----------------------------------------------------------------------------------------------
Florida 7.4 New York 14.2 New York 7.3
----------------------------------------------------------------------------------------------
Texas 7.0 Florida 7.4 Washington 6.4
----------------------------------------------------------------------------------------------
South Carolina 6.5 South Carolina 4.9 Georgia 5.4
----------------------------------------------------------------------------------------------
Total 60.6% 72.5% 70.6%
==============================================================================================
TOP FIVE SECTORS* 09/30/06 03/31/06 09/30/05
----------------------------------------------------------------------------------------------
Water 20.8% Water 25.4% Water 24.9%
----------------------------------------------------------------------------------------------
Power 14.5 Power 17.5 Power 19.3
----------------------------------------------------------------------------------------------
Airport 12.1 Airport 8.4 Hospital 5.0
----------------------------------------------------------------------------------------------
Hospital 9.1 Hospital 4.0 Lease 4.2
----------------------------------------------------------------------------------------------
Transportation 7.3 University 2.5 Airport 3.3
----------------------------------------------------------------------------------------------
Total 63.8% 57.8% 56.7%
==============================================================================================
* 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.
--------------------------------------------------------------------------------
8
INSURED MUNICIPAL INCOME FUND INC.
PORTFOLIO OF INVESTMENTS--SEPTEMBER 30, 2006 (UNAUDITED)
PRINCIPAL
AMOUNT MOODY'S S&P MATURITY INTEREST
(000) RATING RATING DATES RATES VALUE
-----------------------------------------------------------------------------------------------------
LONG-TERM MUNICIPAL BONDS--149.28%
-----------------------------------------------------------------------------------------------------
CALIFORNIA--43.71%
$3,000 California State
Department of
Water Resources
Revenue-Central
Valley Project-Series
AC (MBIA Insured) Aaa AAA 12/01/27 5.000% $3,170,760
-----------------------------------------------------------------------------------------------------
4,000 California State
General Obligation A1 A[PLUS] 02/01/33 5.000 4,151,440
-----------------------------------------------------------------------------------------------------
30 California State
General Obligation
(FGIC Insured) Aaa AAA 11/01/12 7.000 30,087
-----------------------------------------------------------------------------------------------------
7,000 California State
General Obligation
Refunding-Series 2 A1 A[PLUS] 09/01/27 5.000 7,387,170
-----------------------------------------------------------------------------------------------------
3,305 Chino Valley Unified
School District-Series A
(FSA Insured) Aaa AAA 08/01/26 5.000 3,470,581
-----------------------------------------------------------------------------------------------------
4,400 Inglewood Unified
School District-1998
Election-Series C
(FSA Insured) Aaa AAA 10/01/28 5.000 4,619,868
-----------------------------------------------------------------------------------------------------
2,000 Long Beach Finance
Authority Lease
Revenue-Aquarium
of the South Pacific
(AMBAC Insured) Aaa AAA 11/01/15 5.500 2,178,100
-----------------------------------------------------------------------------------------------------
5,000 Long Beach
Harbor Revenue
Refunding-Series A
(FGIC Insured)++ Aaa AAA 05/15/13 6.000 5,606,250
-----------------------------------------------------------------------------------------------------
5,000 Los Angeles Community
College District
Refunding-Election
2001-Series A
(FSA Insured) Aaa AAA 08/01/25 5.000 5,322,950
-----------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------
9
INSURED MUNICIPAL INCOME FUND INC.
PORTFOLIO OF INVESTMENTS--SEPTEMBER 30, 2006 (UNAUDITED)
PRINCIPAL
AMOUNT MOODY'S S&P MATURITY INTEREST
(000) RATING RATING DATES RATES VALUE
-----------------------------------------------------------------------------------------------------
LONG-TERM MUNICIPAL BONDS--(CONTINUED)
-----------------------------------------------------------------------------------------------------
CALIFORNIA--(CONTINUED)
$9,000 Los Angeles Community
College District
Refunding-Election
2001-Series A
(FSA Insured) Aaa AAA 06/01/26 5.000% $9,560,700
-----------------------------------------------------------------------------------------------------
6,000 Los Angeles County
Sanitation Districts
Financing Authority
Revenue-Capital
Projects-District
No.14-Subseries B
(FGIC Insured) NR AAA 10/01/28 5.000 6,370,680
-----------------------------------------------------------------------------------------------------
8,475 Los Angeles County
Sanitation Districts
Financing Authority
Revenue-Capital
Projects-Series A
(FSA Insured) Aaa AAA 10/01/20 5.000 9,111,557
-----------------------------------------------------------------------------------------------------
3,000 Los Angeles Unified
School District-Series A
(FSA Insured) Aaa AAA 07/01/20 5.250 3,269,910
-----------------------------------------------------------------------------------------------------
11,625 Los Angeles Wastewater
System Revenue
Refunding-Subseries A
(MBIA Insured) Aaa AAA 06/01/26 5.000 12,195,090
-----------------------------------------------------------------------------------------------------
5,000 Los Angeles Water &
Power Revenue-Power
System-Series
A-Subseries A-2
(MBIA-IBC Insured) Aaa AAA 07/01/30 5.000 5,229,850
-----------------------------------------------------------------------------------------------------
6,000 Los Angeles Water &
Power Revenue-Power
System-Series B
(FSA Insured) Aaa AAA 07/01/25 5.000 6,345,600
-----------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------
10
INSURED MUNICIPAL INCOME FUND INC.
PORTFOLIO OF INVESTMENTS--SEPTEMBER 30, 2006 (UNAUDITED)
PRINCIPAL
AMOUNT MOODY'S S&P MATURITY INTEREST
(000) RATING RATING DATES RATES VALUE
-----------------------------------------------------------------------------------------------------
LONG-TERM MUNICIPAL BONDS--(CONTINUED)
-----------------------------------------------------------------------------------------------------
CALIFORNIA--(CONCLUDED)
$7,160 Oxnard Financing
Authority Wastewater
Revenue-Redwood
Trunk Sewer &
Headworks-Series A
(FGIC Insured) Aaa AAA 06/01/34 5.250% $7,658,981
-----------------------------------------------------------------------------------------------------
10,000 Sacramento County
Sanitation District
Financing Authority
Revenue Refunding
(AMBAC Insured) Aaa AAA 12/01/27 5.000 10,352,800
-----------------------------------------------------------------------------------------------------
7,000 Sacramento Municipal
Utility District Electric
Revenue-Municipal
Utility District-Series R
(MBIA Insured) Aaa AAA 08/15/19 5.000 7,517,090
-----------------------------------------------------------------------------------------------------
5,000 Sacramento Municipal
Utility District Electric
Revenue-Municipal
Utility District-Series R
(MBIA Insured) Aaa AAA 08/15/33 5.000 5,227,450
-----------------------------------------------------------------------------------------------------
4,000 San Francisco City &
County Airports
Commission International
Airport Revenue
Refunding-Second
Series 27B
(FGIC Insured) Aaa AAA 05/01/15 5.250 4,264,560
-----------------------------------------------------------------------------------------------------
7,910 San Jose Libraries,
Parks & Public Safety
Project (MBIA Insured) Aaa AAA 09/01/27 5.000 8,320,371
-----------------------------------------------------------------------------------------------------
3,825 Walnut Energy
Center Authority
Revenue-Series A
(AMBAC Insured) Aaa AAA 01/01/34 5.000 3,978,038
-----------------------------------------------------------------------------------------------------
135,339,883
=====================================================================================================
--------------------------------------------------------------------------------
11
INSURED MUNICIPAL INCOME FUND INC.
PORTFOLIO OF INVESTMENTS--SEPTEMBER 30, 2006 (UNAUDITED)
PRINCIPAL
AMOUNT MOODY'S S&P MATURITY INTEREST
(000) RATING RATING DATES RATES VALUE
-----------------------------------------------------------------------------------------------------
LONG-TERM MUNICIPAL BONDS--(CONTINUED)
-----------------------------------------------------------------------------------------------------
DISTRICT OF COLUMBIA--4.04%
$4,000 District of Columbia
Hospital Revenue
Refunding-Medlantic
Healthcare-Series A
(Escrowed to Maturity)
(MBIA Insured) Aaa AAA 08/15/14 5.750% $4,086,320
-----------------------------------------------------------------------------------------------------
6,000 District of Columbia
Water & Sewer
Authority Public
Utility Revenue-
Subordinate Lien
Revenue (FGIC Insured) Aaa AAA 10/01/33 5.000 6,240,660
-----------------------------------------------------------------------------------------------------
2,000 Metropolitan Washington,
D.C. Airport Authority
Airport System
Revenue-Series A
(MBIA Insured)++ Aaa AAA 10/01/16 5.250 2,186,220
-----------------------------------------------------------------------------------------------------
12,513,200
=====================================================================================================
FLORIDA--12.28%
8,000 Florida State Board
of Education-Capital
Outlay-Series E
(FGIC Insured) Aaa AAA 06/01/24 5.000 8,422,720
-----------------------------------------------------------------------------------------------------
10,220 Florida State Board
of Education-Public
Education-Series A
(FSA Insured) Aaa AAA 06/01/27 5.000 10,721,189
-----------------------------------------------------------------------------------------------------
1,060 Hillsborough County
Port District Revenue-
Tampa Port Authority
Project-Series A
(MBIA Insured)++ Aaa AAA 06/01/16 5.750 1,160,011
-----------------------------------------------------------------------------------------------------
1,115 Hillsborough County
Port District Revenue-
Tampa Port Authority
Project-Series A
(MBIA Insured)++ Aaa AAA 06/01/17 5.750 1,220,200
-----------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------
12
INSURED MUNICIPAL INCOME FUND INC.
PORTFOLIO OF INVESTMENTS--SEPTEMBER 30, 2006 (UNAUDITED)
PRINCIPAL
AMOUNT MOODY'S S&P MATURITY INTEREST
(000) RATING RATING DATES RATES VALUE
-----------------------------------------------------------------------------------------------------
LONG-TERM MUNICIPAL BONDS--(CONTINUED)
-----------------------------------------------------------------------------------------------------
FLORIDA--(CONCLUDED)
$1,175 Hillsborough County
Port District Revenue-
Tampa Port Authority
Project-Series A
(MBIA Insured)++ Aaa AAA 06/01/18 5.750% $1,285,861
-----------------------------------------------------------------------------------------------------
1,240 Hillsborough County
Port District Revenue-
Tampa Port Authority
Project-Series A
(MBIA Insured)++ Aaa AAA 06/01/19 5.750 1,356,994
-----------------------------------------------------------------------------------------------------
10,000 Miami-Dade County
Aviation Revenue
Refunding-Miami
International
Airport-Series B
(XLCA Insured)++ Aaa AAA 10/01/18 5.000 10,610,100
-----------------------------------------------------------------------------------------------------
3,000 Miami-Dade County
Expressway Authority
Toll System
Revenue-Series B
(FGIC Insured) Aaa AAA 07/01/26 5.250 3,260,250
-----------------------------------------------------------------------------------------------------
38,037,325
=====================================================================================================
GEORGIA--7.42%
11,545 Atlanta Airport Revenue
Refunding-Series D
(FGIC Insured)++ Aaa AAA 01/01/15 5.250 12,385,245
-----------------------------------------------------------------------------------------------------
1,015 Columbus Building
Authority Lease
Revenue-Series A
(FGIC Insured) Aaa AAA 01/01/16 5.250 1,114,622
-----------------------------------------------------------------------------------------------------
15 Georgia Municipal
Electric Authority
Power Revenue-Series Y
(Escrowed to Maturity)
(MBIA-IBC Insured) Aaa AAA 01/01/10 10.000 17,903
-----------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------
13
INSURED MUNICIPAL INCOME FUND INC.
PORTFOLIO OF INVESTMENTS--SEPTEMBER 30, 2006 (UNAUDITED)
PRINCIPAL
AMOUNT MOODY'S S&P MATURITY INTEREST
(000) RATING RATING DATES RATES VALUE
-----------------------------------------------------------------------------------------------------
LONG-TERM MUNICIPAL BONDS--(CONTINUED)
-----------------------------------------------------------------------------------------------------
GEORGIA--(CONCLUDED)
$4,515 Georgia Municipal
Electric Authority Power
Revenue-Unrefunded
Balance-Series Y
(FSA-CR Insured)+ Aaa AAA 01/01/10 10.000% $5,382,467
-----------------------------------------------------------------------------------------------------
3,410 Georgia Municipal Electric
Authority Power
Revenue-Unrefunded
Balance-Series Y
(MBIA-IBC Insured) Aaa AAA 01/01/10 10.000 4,065,163
-----------------------------------------------------------------------------------------------------
22,965,400
=====================================================================================================
ILLINOIS--3.75%
1,500 Chicago General
Obligation-Series A
(FSA Insured) Aaa AAA 01/01/25 5.000 1,577,160
-----------------------------------------------------------------------------------------------------
2,000 Chicago General
Obligation-Series A
(FSA Insured) Aaa AAA 01/01/26 5.000 2,100,320
-----------------------------------------------------------------------------------------------------
4,500 Illinois Health
Facilities Authority
Revenue-Franciscan
Sisters Health
Care-Series C
(Escrowed to Maturity)
(MBIA Insured) Aaa AAA 09/01/18 5.750 5,123,790
-----------------------------------------------------------------------------------------------------
2,395 Metropolitan Pier &
Exposition Authority
Dedicated State
Tax-Series A-2002
(Pre-refunded with US
Government Securities
to 06/15/19 @ 100)
(FGIC Insured) Aaa AAA 12/15/23 5.500 2,822,268
-----------------------------------------------------------------------------------------------------
11,623,538
=====================================================================================================
INDIANA--2.05%
1,000 Indiana University
Revenues-Student Fee-
Series O (FGIC Insured) Aaa AAA 08/01/18 5.250 1,084,050
-----------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------
14
INSURED MUNICIPAL INCOME FUND INC.
PORTFOLIO OF INVESTMENTS--SEPTEMBER 30, 2006 (UNAUDITED)
PRINCIPAL
AMOUNT MOODY'S S&P MATURITY INTEREST
(000) RATING RATING DATES RATES VALUE
-----------------------------------------------------------------------------------------------------
LONG-TERM MUNICIPAL BONDS--(CONTINUED)
-----------------------------------------------------------------------------------------------------
INDIANA--(CONCLUDED)
$5,000 Indianapolis Airport
Authority Revenue
Refunding-Special
Facilities-Fed Ex Corp.
Project (Federal Express
Co. Insured)++ Baa2 BBB 01/15/17 5.100% $5,273,350
-----------------------------------------------------------------------------------------------------
6,357,400
=====================================================================================================
MAINE--1.56%
4,785 Maine Health &
Higher Educational
Facilities Authority
Revenue-Series A
(Escrowed to Maturity)
(FSA Insured) NR AAA 07/01/23 5.500 4,828,926
=====================================================================================================
MICHIGAN--1.87%
5,525 Michigan State
Hospital Finance
Authority Revenue
Refunding-Trinity
Health Credit-Series D Aa3 AA- 08/15/25 5.000 5,795,173
=====================================================================================================
MISSOURI--1.66%
1,740 St. Louis Airport
Revenue-Capital
Improvement
Program-Series A
(MBIA Insured) Aaa AAA 07/01/15 5.375 1,879,443
-----------------------------------------------------------------------------------------------------
2,035 St. Louis Airport
Revenue-Capital
Improvement
Program-Series A
(MBIA Insured) Aaa AAA 07/01/16 5.375 2,193,710
-----------------------------------------------------------------------------------------------------
1,000 St. Louis Airport
Revenue-Capital
Improvement
Program-Series A
(MBIA Insured) Aaa AAA 07/01/18 5.375 1,075,860
-----------------------------------------------------------------------------------------------------
5,149,013
=====================================================================================================
--------------------------------------------------------------------------------
15
INSURED MUNICIPAL INCOME FUND INC.
PORTFOLIO OF INVESTMENTS--SEPTEMBER 30, 2006 (UNAUDITED)
PRINCIPAL
AMOUNT MOODY'S S&P MATURITY INTEREST
(000) RATING RATING DATES RATES VALUE
-----------------------------------------------------------------------------------------------------
LONG-TERM MUNICIPAL BONDS--(CONTINUED)
-----------------------------------------------------------------------------------------------------
NEVADA--5.75%
$6,000 Clark County-Bond
Bank (MBIA Insured) Aaa AAA 06/01/32 5.000% $6,235,080
-----------------------------------------------------------------------------------------------------
4,000 Washoe County Gas &
Water Facilities
Revenue Refunding-
Sierra Pacific Power
Co. Project-Series B
(MBIA Insured) Aaa AAA 06/01/23 5.900 4,042,480
-----------------------------------------------------------------------------------------------------
7,500 Washoe County Water
Facilities Revenue
Refunding-Sierra
Pacific Power Co.
Project-Series A
(MBIA Insured) Aaa AAA 06/01/23 5.900 7,513,425
-----------------------------------------------------------------------------------------------------
17,790,985
=====================================================================================================
NEW JERSEY--8.33%
3,150 New Jersey Economic
Development Authority
Revenue-Cigarette Tax
(FGIC Insured) Aaa AAA 06/15/09 5.000 3,265,259
-----------------------------------------------------------------------------------------------------
20,000 New Jersey Transportation
Trust Fund Authority-
Transportation
System-Series A A1 AA- 12/15/20 5.250 22,526,400
-----------------------------------------------------------------------------------------------------
25,791,659
=====================================================================================================
NEW MEXICO--2.85%
4,130 University of New
Mexico Revenues-
Hospital Mortgage
(FSA-FHA Insured) Aaa AAA 01/01/23 5.000 4,366,112
-----------------------------------------------------------------------------------------------------
4,230 University of New
Mexico Revenues-
Hospital Mortgage
(FSA-FHA Insured) Aaa AAA 07/01/23 5.000 4,471,829
-----------------------------------------------------------------------------------------------------
8,837,941
=====================================================================================================
--------------------------------------------------------------------------------
16
INSURED MUNICIPAL INCOME FUND INC.
PORTFOLIO OF INVESTMENTS--SEPTEMBER 30, 2006 (UNAUDITED)
PRINCIPAL
AMOUNT MOODY'S S&P MATURITY INTEREST
(000) RATING RATING DATES RATES VALUE
-----------------------------------------------------------------------------------------------------
LONG-TERM MUNICIPAL BONDS--(CONTINUED)
-----------------------------------------------------------------------------------------------------
NEW YORK--21.99%
$3,000 New York State
Dormitory Authority
Revenues-Memorial
Sloan Kettering
Center-Series 1
(MBIA Insured) Aaa AAA 07/01/16 5.000% $3,203,340
-----------------------------------------------------------------------------------------------------
1,360 Long Island Power
Authority Electric
System Revenue-
Series A-Unrefunded
Balance (FSA Insured) Aaa AAA 12/01/22 5.125 1,409,028
-----------------------------------------------------------------------------------------------------
5,650 Metropolitan
Transportation Authority
Dedicated Tax Fund-
Series A (FSA Insured) Aaa AAA 11/15/24 5.250 6,100,248
-----------------------------------------------------------------------------------------------------
5,000 New York City General
Obligation-Series J-
Subseries J-1 A1 AA- 06/01/27 5.000 5,274,300
-----------------------------------------------------------------------------------------------------
6,000 New York City General
Obligation-Series O A1 AA- 06/01/24 5.000 6,314,340
-----------------------------------------------------------------------------------------------------
4,615 New York City General
Obligation-Subseries F-1 A1 AA- 09/01/25 5.000 4,862,641
-----------------------------------------------------------------------------------------------------
1,710 New York City Industrial
Development Agency
Special Facilities
Revenue-Terminal One
Group Association
Project++ A3 BBB[PLUS] 01/01/07 5.000 1,714,942
-----------------------------------------------------------------------------------------------------
5,000 New York City Industrial
Development Agency
Special Facilities
Revenue-Terminal
One Group Association
Project++ A3 BBB[PLUS] 01/01/15 5.500 5,434,650
-----------------------------------------------------------------------------------------------------
6,685 New York City Industrial
Development Agency
Special Facilities
Revenue-Terminal One
Group Association
Project++ A3 BBB[PLUS] 01/01/16 5.500 7,297,079
-----------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------
17
INSURED MUNICIPAL INCOME FUND INC.
PORTFOLIO OF INVESTMENTS--SEPTEMBER 30, 2006 (UNAUDITED)
PRINCIPAL
AMOUNT MOODY'S S&P MATURITY INTEREST
(000) RATING RATING DATES RATES VALUE
-----------------------------------------------------------------------------------------------------
LONG-TERM MUNICIPAL BONDS--(CONTINUED)
-----------------------------------------------------------------------------------------------------
NEW YORK--(CONCLUDED)
$2,750 New York City Industrial
Development Agency
Special Facilities
Revenue-Terminal
One Group Association
Project++ A3 BBB[PLUS] 01/01/18 5.500(++)% $2,986,472
-----------------------------------------------------------------------------------------------------
7,000 New York City Municipal
Water Finance Authority
Water & Sewer System
Revenue-Series C
(MBIA Insured) Aaa AAA 06/15/26 5.000 7,441,350
-----------------------------------------------------------------------------------------------------
10,080 New York City Municipal
Water Finance
Authority Water &
Sewer System
Revenue-Series C
(MBIA Insured) Aaa AAA 06/15/27 5.000 10,707,984
-----------------------------------------------------------------------------------------------------
5,000 Triborough Bridge &
Tunnel Authority
Revenues-Subordinate
Bonds (AMBAC Insured) Aaa AAA 11/15/26 5.125 5,329,650
-----------------------------------------------------------------------------------------------------
68,076,024
=====================================================================================================
NORTH CAROLINA--0.87%
2,500 North Carolina Eastern
Municipal Power Agency
Power System Revenue
Refunding-Series A Baa2 BBB 01/01/12 5.500 2,687,025
=====================================================================================================
OHIO--1.70%
5,000 Cleveland Airport
System Revenue-
Series A (FSA Insured) Aaa AAA 01/01/14 5.250 5,265,550
=====================================================================================================
PENNSYLVANIA--5.31%
15,390 Allegheny County
Sanitation Authority
Sewer Revenue
Refunding-Series A
(MBIA Insured) Aaa AAA 12/01/23 5.000 16,426,978
=====================================================================================================
--------------------------------------------------------------------------------
18
INSURED MUNICIPAL INCOME FUND INC.
PORTFOLIO OF INVESTMENTS--SEPTEMBER 30, 2006 (UNAUDITED)
PRINCIPAL
AMOUNT MOODY'S S&P MATURITY INTEREST
(000) RATING RATING DATES RATES VALUE
-----------------------------------------------------------------------------------------------------
LONG-TERM MUNICIPAL BONDS--(CONTINUED)
-----------------------------------------------------------------------------------------------------
SOUTH CAROLINA--10.86%
$2,500 Medical University
of South Carolina
Hospital Authority
Hospital Facilities
Revenue Refunding-
Series A (MBIA-FHA
Insured) Aaa AAA 02/15/25 5.250% $2,681,325
-----------------------------------------------------------------------------------------------------
1,000 Myrtle Beach Water
& Sewer Revenue
System Refunding
(FGIC Insured) Aaa AAA 03/01/15 5.375 1,098,710
-----------------------------------------------------------------------------------------------------
20,000 South Carolina Public
Service Authority
Revenue-Santee
Cooper-Series A
(MBIA Insured) Aaa AAA 01/01/25 5.000 21,341,800
-----------------------------------------------------------------------------------------------------
8,180 South Carolina
Transportation
Infrastructure Bank
Revenue-Series A Aaa NR 10/01/33 5.000 8,488,959
-----------------------------------------------------------------------------------------------------
33,610,794
=====================================================================================================
TEXAS--10.48%
5,170 Fort Bend Independent
School District
Refunding-Series A
(PSF-GTD) NR AAA 08/15/26 5.250 5,606,400
-----------------------------------------------------------------------------------------------------
13,500 Houston Utility System
Revenue Refunding-
First Lien-Series A
(FGIC Insured) Aaa AAA 05/15/23 5.250 14,608,485
-----------------------------------------------------------------------------------------------------
2,000 Jefferson County
General Obligation
Refunding (FGIC Insured) Aaa AAA 08/01/20 5.250 2,148,300
-----------------------------------------------------------------------------------------------------
720 San Antonio Water
Revenue (Pre-refunded
with US Government
Securities to 05/15/07 @
100) (MBIA Insured) Aaa AAA 05/15/16 6.000 806,313
-----------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------
19
INSURED MUNICIPAL INCOME FUND INC.
PORTFOLIO OF INVESTMENTS--SEPTEMBER 30, 2006 (UNAUDITED)
PRINCIPAL
AMOUNT MOODY'S S&P MATURITY INTEREST
(000) RATING RATING DATES RATES VALUE
-----------------------------------------------------------------------------------------------------
LONG-TERM MUNICIPAL BONDS--(CONCLUDED)
-----------------------------------------------------------------------------------------------------
TEXAS--(CONCLUDED)
$9,000 Wylie Independent School
District Refunding
(PSF-GTD) Aaa AAA 08/15/30 5.000% $9,290,160
-----------------------------------------------------------------------------------------------------
32,459,658
=====================================================================================================
WASHINGTON--2.40%
2,220 Cowlitz County School
District No. 458 Kelso
(FSA Insured) Aaa NR 12/01/15 5.750 2,455,586
-----------------------------------------------------------------------------------------------------
1,000 Cowlitz County School
District No. 458 Kelso
(FSA Insured) Aaa NR 12/01/18 5.750 1,099,670
-----------------------------------------------------------------------------------------------------
1,500 King County Public
Hospital District No. 2
Refunding-Evergreen
Healthcare
(MBIA Insured) Aaa AAA 12/01/18 5.000 1,616,595
-----------------------------------------------------------------------------------------------------
2,095 King County Public
Hospital District No. 2
Refunding-Evergreen
Healthcare
(MBIA Insured) Aaa AAA 12/01/19 5.000 2,248,794
-----------------------------------------------------------------------------------------------------
7,420,645
=====================================================================================================
WISCONSIN--0.40%
1,105 Ladysmith-Hawkins
School District Refunding
(FGIC Insured) Aaa NR 04/01/20 5.500 1,245,236
-----------------------------------------------------------------------------------------------------
Total long-term municipal bonds (cost--$453,942,344) 462,222,353
=====================================================================================================
SHORT-TERM MUNICIPAL NOTES--17.78%
-----------------------------------------------------------------------------------------------------
CALIFORNIA--0.20%
600 Access to Loans
for Learning
Student Loan Corp.
Revenue-Student Loan
Program-Series V-A-4
(AMBAC Insured)++ VMIG-1 A-1[PLUS] 10/02/06 3.890* 600,000
=====================================================================================================
--------------------------------------------------------------------------------
20
INSURED MUNICIPAL INCOME FUND INC.
PORTFOLIO OF INVESTMENTS--SEPTEMBER 30, 2006 (UNAUDITED)
PRINCIPAL
AMOUNT MOODY'S S&P MATURITY INTEREST
(000) RATING RATING DATES RATES VALUE
-----------------------------------------------------------------------------------------------------
SHORT-TERM MUNICIPAL NOTES--(CONTINUED)
-----------------------------------------------------------------------------------------------------
GEORGIA--0.39%
$1,200 Monroe County
Development
Authority Pollution
Control Revenue-
Oglethorpe Power
Corp. Project
(AMBAC Insured) NR A-1[PLUS] 10/02/06 3.790%* $1,200,000
=====================================================================================================
ILLINOIS--6.04%
7,900 Illinois Health
Facilities Authority
Revenue-University
of Chicago Hospitals
Project-Series C
(MBIA Insured) VMIG-1 A-1[PLUS] 10/02/06 3.820* 7,900,000
-----------------------------------------------------------------------------------------------------
6,000 Chicago Board
of Education-
Dedicated
Revenues-Series D-2
(CIFG Insured) VMIG-1 A-1[PLUS] 10/02/06 3.860* 6,000,000
-----------------------------------------------------------------------------------------------------
4,800 Chicago Midway
Airport Revenue-Second
Lien-Series B
(MBIA Insured)++ VMIG-1 A-1[PLUS] 10/02/06 3.890* 4,800,000
-----------------------------------------------------------------------------------------------------
18,700,000
=====================================================================================================
KENTUCKY--1.45%
4,500 Lexington-Fayette
Urban County
Airport Corp.
Revenue-1st
Mortgage-Series A
(MBIA Insured)++ VMIG-1 NR 10/02/06 3.930* 4,500,000
=====================================================================================================
MASSACHUSETTS--0.60%
1,840 Massachusetts Health &
Educational Facilities
Authority Revenue-Capital
Asset Program-Series C
(MBIA Insured) VMIG-1 A-1[PLUS] 10/02/06 3.800* 1,840,000
=====================================================================================================
--------------------------------------------------------------------------------
21
INSURED MUNICIPAL INCOME FUND INC.
PORTFOLIO OF INVESTMENTS--SEPTEMBER 30, 2006 (UNAUDITED)
PRINCIPAL
AMOUNT MOODY'S S&P MATURITY INTEREST
(000) RATING RATING DATES RATES VALUE
-----------------------------------------------------------------------------------------------------
SHORT-TERM MUNICIPAL NOTES--(CONTINUED)
-----------------------------------------------------------------------------------------------------
MISSOURI--3.10%
$9,600 Missouri Health &
Educational Facilities
Authority Health
Facilities Revenue-Cox
Health Systems
(AMBAC Insured) VMIG-1 A-1[PLUS] 10/02/06 3.850%* $9,600,000
=====================================================================================================
NEVADA--1.45%
4,500 Clark County School
District-Series A
(FSA Insured) VMIG-1 A-1[PLUS] 10/02/06 3.750* 4,500,000
=====================================================================================================
NEW YORK--0.32%
1,000 New York City
Municipal Water
Finance Authority
Water & Sewer
Systems Revenue-
Series A
(FGIC Insured) VMIG-1 A-1[PLUS] 10/02/06 3.750* 1,000,000
=====================================================================================================
TEXAS--1.23%
3,800 Harris County
Health Facilities
Development Corp.
Hospital Revenue-
Texas Childrens
Hospital-Series B-1
(MBIA Insured) VMIG-1 A-1[PLUS] 10/02/06 3.860* 3,800,000
=====================================================================================================
VIRGINIA--0.45%
1,400 Roanoke Industrial
Development
Authority Hospital
Revenue-Carilion
Health Systems-
Series C-1
(FSA Insured) VMIG-1 A-1[PLUS] 10/02/06 3.820* 1,400,000
=====================================================================================================
--------------------------------------------------------------------------------
22
INSURED MUNICIPAL INCOME FUND INC.
PORTFOLIO OF INVESTMENTS--SEPTEMBER 30, 2006 (UNAUDITED)
PRINCIPAL
AMOUNT MOODY'S S&P MATURITY INTEREST
(000) RATING RATING DATE RATE VALUE
-----------------------------------------------------------------------------------------------------
SHORT-TERM MUNICIPAL NOTES--(CONCLUDED)
-----------------------------------------------------------------------------------------------------
WASHINGTON--2.55%
$7,900 Port Tacoma-
Subordinate Lien
(XLCA Insured)++ VMIG-1 A-1[PLUS] 10/02/06 3.900%* $7,900,000
=====================================================================================================
Total short-term municipal notes (cost--$55,040,000) 55,040,000
=====================================================================================================
Total investments (cost--$508,982,344)--167.06% 517,262,353
-----------------------------------------------------------------------------------------------------
Other assets in excess of liabilities--0.76% 2,359,788
-----------------------------------------------------------------------------------------------------
Liquidation value of auction preferred shares--(67.82)% (210,000,000)
-----------------------------------------------------------------------------------------------------
Net assets applicable to common shareholders--100.00% $309,622,141
=====================================================================================================
* 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 September 30, 2006.
+ Partial amount pledged as collateral for futures transactions.
++ Security subject to Alternative Minimum Tax.
(++) Floating rate security. The interest rate shown is the current rate as of
September 30, 2006.
AMBAC American Municipal Bond Assurance Corporation
CIFG CDC IXIS Financial Guaranty
CR Custodial Receipts
FGIC Financial Guaranty Insurance Company
FHA Federal Housing Authority
FSA Financial Security Assurance
GTD Guaranteed
IBC Insured Bond Certificate
MBIA Municipal Bond Investors Assurance
NR Not Rated
PSF Permanent School Fund
XLCA XL Capital Assurance
FUTURES CONTRACTS
NUMBER OF IN EXPIRATION UNREALIZED
CONTRACTS CONTRACTS TO DELIVER EXCHANGE FOR DATES DEPRECIATION
------------------------------------------------------------------------------------------------
80 US Treasury Bond
20 Year Futures $8,834,758 December 2006 $157,742
------------------------------------------------------------------------------------------------
110 US Treasury Note
10 Year Futures 11,777,321 December 2006 109,554
------------------------------------------------------------------------------------------------
$267,296
================================================================================================
See accompanying notes to financial statements
--------------------------------------------------------------------------------
23
INSURED MUNICIPAL INCOME FUND INC.
STATEMENT OF ASSETS AND LIABILITIES--SEPTEMBER 30, 2006 (UNAUDITED)
ASSETS:
Investments in securities, at value (cost-$508,982,344) $517,262,353
----------------------------------------------------------------------------------------
Receivable for interest 6,649,660
----------------------------------------------------------------------------------------
Receivable for variation margin 10,313
----------------------------------------------------------------------------------------
Other assets 11,713
----------------------------------------------------------------------------------------
Total assets 523,934,039
----------------------------------------------------------------------------------------
LIABILITIES:
Payable for investments purchased 3,848,056
----------------------------------------------------------------------------------------
Payable to investment advisor and administrator 210,357
----------------------------------------------------------------------------------------
Dividends payable to auction preferred shareholders 86,387
----------------------------------------------------------------------------------------
Payable to custodian 20,078
----------------------------------------------------------------------------------------
Accrued expenses and other liabilities 147,020
----------------------------------------------------------------------------------------
Total liabilities 4,311,898
----------------------------------------------------------------------------------------
Auction preferred shares Series A, B, C, D, E & F-4,200 non-participating
shares authorized, issued and outstanding; $0.001 par value per auction
preferred share; $50,000 liquidation value per auction preferred share 210,000,000
----------------------------------------------------------------------------------------
Net assets applicable to common shareholders $309,622,141
----------------------------------------------------------------------------------------
NET ASSETS APPLICABLE TO COMMON SHAREHOLDERS:
Common stock-$0.001 par value per common share; 199,995,800
shares authorized; 20,628,363 shares issued and outstanding $301,976,191
----------------------------------------------------------------------------------------
Distributions in excess of net investment income (132,565)
----------------------------------------------------------------------------------------
Accumulated net realized loss from investments, futures and swaps (234,198)
----------------------------------------------------------------------------------------
Net unrealized appreciation of investments and futures 8,012,713
----------------------------------------------------------------------------------------
Net assets applicable to common shareholders $309,622,141
----------------------------------------------------------------------------------------
Net asset value per common share ($309,622,141 applicable to
20,628,363 common shares outstanding) $15.01
========================================================================================
See accompanying notes to financial statements
--------------------------------------------------------------------------------
24
INSURED MUNICIPAL INCOME FUND INC.
STATEMENT OF OPERATIONS
FOR THE SIX
MONTHS ENDED
SEPTEMBER 30, 2006
(UNAUDITED)
------------------------------------------------------------------------------------------
INVESTMENT INCOME:
Interest $11,580,356
------------------------------------------------------------------------------------------
EXPENSES:
Investment advisory and administration fees 2,312,560
------------------------------------------------------------------------------------------
Auction preferred shares expenses 305,809
------------------------------------------------------------------------------------------
Custody and accounting fees 110,928
------------------------------------------------------------------------------------------
Reports and notices to shareholders 53,540
------------------------------------------------------------------------------------------
Professional fees 42,611
------------------------------------------------------------------------------------------
Transfer agency fees 15,984
------------------------------------------------------------------------------------------
Insurance fees 13,710
------------------------------------------------------------------------------------------
Stock exchange listing fees 12,301
------------------------------------------------------------------------------------------
Directors' fees 10,466
------------------------------------------------------------------------------------------
Other expenses 7,984
------------------------------------------------------------------------------------------
2,885,893
------------------------------------------------------------------------------------------
Less: Fee waivers by investment advisor and administrator (863,712)
------------------------------------------------------------------------------------------
Net expenses 2,022,181
------------------------------------------------------------------------------------------
Net investment income 9,558,175
------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAINS (LOSSES) FROM INVESTMENT ACTIVITIES:
Net realized gain (loss) from:
Investments (160,927)
------------------------------------------------------------------------------------------
Futures (961,236)
------------------------------------------------------------------------------------------
Swaps 628,333
------------------------------------------------------------------------------------------
Net change in unrealized appreciation/depreciation of:
Investments 8,098,907
------------------------------------------------------------------------------------------
Futures (267,982)
------------------------------------------------------------------------------------------
Swaps (413,608)
------------------------------------------------------------------------------------------
Net realized and unrealized gain from investment activities 6,923,487
------------------------------------------------------------------------------------------
Dividends paid to auction preferred shareholders from net investment income (3,655,476)
------------------------------------------------------------------------------------------
Net increase in net assets applicable to common shareholders
resulting from operations $12,826,186
==========================================================================================
See accompanying notes to financial statements
--------------------------------------------------------------------------------
25
INSURED MUNICIPAL INCOME FUND INC.
STATEMENT OF CHANGES IN NET ASSETS APPLICABLE TO COMMON SHAREHOLDERS
FOR THE SIX
MONTHS ENDED FOR THE
SEPTEMBER 30, 2006 YEAR ENDED
(UNAUDITED) MARCH 31, 2006
-----------------------------------------------------------------------------------------
FROM OPERATIONS:
Net investment income $9,558,175 $18,502,388
-----------------------------------------------------------------------------------------
Net realized gain (loss) from investments,
futures and swaps (493,830) 6,929,139
-----------------------------------------------------------------------------------------
Net change in unrealized appreciation/
depreciation of investments, futures and swaps 7,417,317 (6,284,086)
-----------------------------------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS PAID TO AUCTION
PREFERRED SHAREHOLDERS FROM:
Net investment income (3,655,476) (4,609,332)
-----------------------------------------------------------------------------------------
Net realized gains from investment activities - (1,383,754)
-----------------------------------------------------------------------------------------
Total dividends and distributions paid to auction
preferred shareholders (3,655,476) (5,993,086)
-----------------------------------------------------------------------------------------
Net increase in net assets applicable to common
shareholders resulting from operations 12,826,186 13,154,355
-----------------------------------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS PAID TO COMMON
SHAREHOLDERS FROM:
Net investment income (6,518,563) (13,490,950)
-----------------------------------------------------------------------------------------
Net realized gains from investment activities - (4,381,465)
-----------------------------------------------------------------------------------------
Total dividends and distributions paid to common
shareholders (6,518,563) (17,872,415)
-----------------------------------------------------------------------------------------
Net increase (decrease) in net assets applicable to
common shareholders 6,307,623 (4,718,060)
-----------------------------------------------------------------------------------------
NET ASSETS APPLICABLE TO COMMON SHAREHOLDERS:
Beginning of period 303,314,518 308,032,578
-----------------------------------------------------------------------------------------
End of period $309,622,141 $303,314,518
-----------------------------------------------------------------------------------------
Accumulated undistributed (distributions in
excess of) net investment income $(132,565) $483,299
=========================================================================================
See accompanying notes to financial statements
--------------------------------------------------------------------------------
26
INSURED MUNICIPAL INCOME FUND INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Insured Municipal Income Fund Inc. (the "Fund") was incorporated in Maryland on
February 18, 1993, and is registered with the Securities and Exchange
Commission under the Investment Company Act of 1940, as amended, as a
closed-end diversified management investment company. The Fund's investment
objective is to achieve a high level of current income that is exempt from
federal income tax, consistent with the preservation of capital. There can be
no assurance that the Fund's investment objective will be achieved.
In the normal course of business the Fund may enter into contracts that contain
a variety of representations or that provide indemnifications for certain
liabilities. The Fund's maximum exposure under these arrangements is unknown,
as this would involve future claims that may be made against the Fund that have
not yet occurred. However, the Fund has not had prior claims or losses pursuant
to these contracts and expects the risk of loss to be remote.
The preparation of financial statements in accordance with US generally
accepted accounting principles requires the Fund's management to make estimates
and assumptions that affect the reported amounts and disclosures in the
financial statements. Actual results could differ from those estimates. The
following is a summary of significant accounting policies:
VALUATION OF INVESTMENTS--The Fund calculates its net asset value based on the
current market value, where available, for its portfolio securities. The Fund
normally obtains market values for its securities from independent pricing
sources and broker-dealers. Independent pricing sources may use last reported
sale prices, current market quotations or valuations from computerized "matrix"
systems that derive values based on comparable securities. A matrix system
incorporates parameters such as security quality, maturity and coupon, and/or
research and evaluations by its staff, including review of broker-dealer market
price quotations, if available, in determining the valuation of the portfolio
securities. If a market value is not available from an independent pricing
source for a particular security, that security is valued at fair value as
determined in good faith by or under the direction of the Fund's Board of
Directors (the "Board"). 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
--------------------------------------------------------------------------------
27
INSURED MUNICIPAL INCOME FUND INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
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.
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--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
--------------------------------------------------------------------------------
28
INSURED MUNICIPAL INCOME FUND INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
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.
INTEREST RATE SWAP AGREEMENTS--The Fund may enter into interest rate swap
agreements for hedging purposes. This type of swap is an agreement that
obligates two parties to exchange a series of cash flows at specified intervals
based upon or calculated by reference to a specified interest rate(s) for a
specified amount. The payment flows are usually netted against each other, with
the difference being paid by one party to the other.
Risks may arise as a result of the failure of the counterparty to the swap
contract to comply with the terms of the contract. The loss incurred by the
failure of a counterparty is generally limited to the net interest payment to
be received by the Fund. Therefore, the Fund considers the creditworthiness of
the counterparty to a swap contract in evaluating potential credit risk.
The Fund accrues for interim payments on swap contracts on a daily basis, with
the net amount recorded within unrealized appreciation/depreciation of swap
contracts in the "Statement of assets and liabilities." Once interim payments
are settled in cash, the net amount is recorded as realized gain/loss on swaps,
in addition to realized gain/loss recorded upon the termination of swap
contracts in the "Statement of operations." Fluctuations in the value of swap
contracts are recorded for financial statement purposes as unrealized
appreciation or depreciation of swaps. At September 30, 2006, the Fund was not
invested in any interest rate swap agreements.
DIVIDENDS AND DISTRIBUTIONS--The Fund intends to pay monthly dividends to
common shareholders at a rate level that over time will result in the
distribution of all of the Fund's net investment income remaining after the
payment of dividends on any outstanding auction preferred shares. The dividend
rate on the common stock is adjusted as necessary to reflect the earnings rate
of the Fund. Dividends and distributions to common shareholders are recorded on
the ex-dividend date. Dividends to auction preferred shareholders are accrued
daily. The amount of dividends from net investment income and distributions
from net realized capital gains is determined in accordance with federal income
tax regulations, which may differ from US generally accepted accounting
principles. These "book/tax" differences are either considered temporary or
permanent in nature. To the extent these differences are permanent in nature,
such amounts are reclassified within the capital
--------------------------------------------------------------------------------
29
INSURED MUNICIPAL INCOME FUND INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
accounts based on their federal tax-basis treatment; temporary differences do
not require reclassification.
CONCENTRATION OF RISK
The Fund follows an investment policy of investing primarily in municipal
obligations of various states. Economic changes affecting those states and
certain of their public bodies and municipalities may affect the ability of the
issuers within those states to pay interest on, or repay principal of,
municipal obligations held by the Fund.
INVESTMENT ADVISOR AND ADMINISTRATOR
The Board has approved an investment advisory and administration contract
("Advisory Contract") with UBS Global Asset Management (Americas) Inc. ("UBS
Global AM"), under which UBS Global AM serves as investment advisor and
administrator of the Fund. UBS Global AM is an indirect wholly owned asset
management subsidiary of UBS AG, an internationally diversified organization
with headquarters in Zurich and Basel, Switzerland and operations in many areas
of the financial services industry. In accordance with the Advisory Contract,
the Fund pays UBS Global AM an investment advisory and administration fee,
which is accrued weekly and paid monthly, at the annual rate of 0.90% of the
Fund's average weekly net assets applicable to holders of common and auction
preferred shares. For the period April 1, 2006 through July 31, 2006, UBS
Global AM had agreed to waive 0.30% of the advisory and administration fee, so
that the Fund's effective fee was 0.60% of average weekly net assets applicable
to holders of common and auction preferred shares. Effective August 1, 2006,
UBS Global AM agreed to further reduce the Fund's management fee so that the
Fund's effective fee for the period August 1, 2006 through September 30, 2006
was 0.83% of the Fund's average weekly net assets applicable only to holders of
common shares. This waiver will continue indefinitely unless the Board agrees
to any change. At September 30, 2006, the Fund owed UBS Global AM $210,357 in
investment advisory and administration fees, which is composed of $383,440 of
investment advisory and administration fees less fees waived of $173,083. For
the six months ended September 30, 2006, UBS Global AM waived $863,712 of
investment advisory and administration fees from the Fund.
ADDITIONAL INFORMATION REGARDING COMPENSATION TO AFFILIATE OF A BOARD MEMBER
Effective March 1, 2005, Professor Meyer Feldberg accepted the position of
senior advisor to Morgan Stanley, resulting in him becoming an interested
director of the Fund. The Fund has been informed that Professor Feldberg's
--------------------------------------------------------------------------------
30
INSURED MUNICIPAL INCOME FUND INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
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 September 30, 2006, the Fund purchased and sold certain securities
(e.g., fixed income securities) in principal trades with Morgan Stanley having
an aggregate value of $19,914,382. 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 therefore. 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
The Fund has issued 800 shares of auction preferred shares Series A, 800 shares
of auction preferred shares Series B, 800 shares of auction preferred shares
Series C, 600 shares of auction preferred shares Series D, 600 shares of
auction preferred shares Series E and 600 shares of auction preferred shares
Series F, which are referred to herein collectively as the "APS." All shares of
each series of APS have a liquidation preference of $50,000 per share plus an
amount equal to accumulated but unpaid dividends upon liquidation.
Dividends, and/or capital gain distributions, which are cumulative, are
generally reset every 7 days for each Series of APS. Dividend rates ranged from
2.900% to 4.000% for the six months ended September 30, 2006.
The Fund is subject to certain restrictions relating to the APS. Failure to
comply with these restrictions could preclude the Fund from declaring any
distributions to common shareholders or repurchasing common shares and/or could
trigger the mandatory redemption of APS at liquidation value.
The APS are entitled to one vote per share and, unless otherwise required by
law, will vote with holders of common stock as a single class, except that the
APS will vote separately as a class on certain matters, as required by law.
The holders of the APS have the right to elect two directors of the Fund.
--------------------------------------------------------------------------------
31
INSURED MUNICIPAL INCOME FUND INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
The redemption of the Fund's APS is outside of the control of the Fund because
it is redeemable upon the occurrence of an event that is not solely within the
control of the Fund.
PURCHASES AND SALES OF SECURITIES
For the six months ended September 30, 2006, aggregate purchases and sales of
portfolio securities, excluding short-term securities, were $88,623,036 and
$115,424,399, 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 March 31,
2006 was as follows:
DISTRIBUTIONS PAID FROM: 2006
-------------------------------------------------------------------------------
Tax-exempt income $18,093,862
-------------------------------------------------------------------------------
Ordinary income 763,385
-------------------------------------------------------------------------------
Net long-term capital gains 5,008,254
-------------------------------------------------------------------------------
Total distributions paid $23,865,501
===============================================================================
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 March 31, 2007.
For federal income tax purposes, which was substantially the same for book
purposes, the tax cost of investments and the components of net unrealized
appreciation of investments at September 30, 2006 were as follows:
Tax cost of investments $508,982,344
-------------------------------------------------------------------------------
Gross unrealized appreciation 8,686,883
-------------------------------------------------------------------------------
Gross unrealized depreciation (406,874)
-------------------------------------------------------------------------------
Net unrealized appreciation $8,280,009
===============================================================================
--------------------------------------------------------------------------------
32
INSURED MUNICIPAL INCOME FUND INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
On July 13, 2006, the Financial Accounting Standards Board (FASB) released FASB
Interpretation No. 48 "Accounting for Uncertainty in Income Taxes" (FIN 48).
FIN 48 provides guidance for how uncertain tax positions should be recognized,
measured, presented and disclosed in the financial statements. FIN 48 requires
the evaluation of tax positions taken or expected to be taken in the course of
preparing the Fund's tax returns to determine whether the tax positions are
"more-likely-than-not" of being sustained by the applicable tax authority. Tax
positions not deemed to meet the more-likely-than-not threshold would be
recorded as a tax benefit or expense in the current year. Adoption of FIN 48 is
required for fiscal years beginning after December 15, 2006 and is to be
applied to all open tax years as of the effective date. At this time,
management is evaluating the implications of FIN 48, and its impact on the
financial statements has not yet been determined.
--------------------------------------------------------------------------------
33
INSURED 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
SEPTEMBER 30, 2006
(UNAUDITED)
----------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $14.70
----------------------------------------------------------------------------------------------
Net investment income 0.46
----------------------------------------------------------------------------------------------
Net realized and unrealized gains (losses) from investment activities 0.34
----------------------------------------------------------------------------------------------
Common share equivalent of dividends and distributions paid to auction
preferred shareholders from:
Net investment income (0.17)
----------------------------------------------------------------------------------------------
Net realized gains from investment activities --
----------------------------------------------------------------------------------------------
Total dividends and distributions paid to auction preferred shareholders (0.17)
----------------------------------------------------------------------------------------------
Net increase from operations 0.63
----------------------------------------------------------------------------------------------
Dividends and distributions paid to common shareholders from:
Net investment income (0.32)
----------------------------------------------------------------------------------------------
Net realized gains from investment activities --
----------------------------------------------------------------------------------------------
Total dividends and distributions paid to common shareholders (0.32)
----------------------------------------------------------------------------------------------
Auction preferred shares offering expenses --
----------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $15.01
----------------------------------------------------------------------------------------------
MARKET VALUE, END OF PERIOD $12.97
----------------------------------------------------------------------------------------------
TOTAL INVESTMENT RETURN(1) 2.10%
----------------------------------------------------------------------------------------------
RATIO TO AVERAGE NET ASSETS ATTRIBUTABLE TO COMMON SHARES:
Total expenses, net of fee waivers by advisor 1.33%*
----------------------------------------------------------------------------------------------
Total expenses, before fee waivers by advisor 1.90%*
----------------------------------------------------------------------------------------------
Net investment income before auction preferred shares dividends 6.30%*
----------------------------------------------------------------------------------------------
Auction preferred shares dividends from net investment income 2.41%*
----------------------------------------------------------------------------------------------
Net investment income available to common shareholders 3.89%*
----------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA:
Net assets applicable to common shareholders, end of period (000's) $309,622
----------------------------------------------------------------------------------------------
Portfolio turnover 19%
----------------------------------------------------------------------------------------------
Asset coverage per share of auction preferred shares, end of period $123,720
==============================================================================================
* Annualized.
1 Total investment return is calculated assuming a $10,000 purchase of common
stock at the current market price on the first day of each period reported
and a sale at the current market price on the last day of each period
reported, and assuming reinvestment of dividends and other distributions to
common shareholders at prices obtained under the Fund's Dividend
Reinvestment Plan. Total investment return does not reflect brokerage
commissions and has not been annualized for the period of less than one
year. Returns do not reflect the deduction of taxes that a shareholder
could pay on Fund distributions.
# Amount represents less than $0.005 per common share.
--------------------------------------------------------------------------------
34
INSURED MUNICIPAL INCOME FUND INC.
FOR THE YEARS ENDED MARCH 31,
---------------------------------------------------------------------
2006 2005 2004 2003 2002
---------------------------------------------------------------------
$14.93 $15.39 $15.76 $15.15 $15.30
---------------------------------------------------------------------
0.90 0.83 0.84 0.97 1.01
---------------------------------------------------------------------
0.02 (0.31) 0.00# 0.58 (0.26)
---------------------------------------------------------------------
(0.22) (0.14) (0.07) (0.10) (0.17)
---------------------------------------------------------------------
(0.07) (0.01) (0.02) -- --
---------------------------------------------------------------------
(0.29) (0.15) (0.09) (0.10) (0.17)
---------------------------------------------------------------------
0.63 0.37 0.75 1.45 0.58
---------------------------------------------------------------------
(0.65) (0.76) (0.84) (0.84) (0.73)
---------------------------------------------------------------------
(0.21) (0.07) (0.24) -- --
---------------------------------------------------------------------
(0.86) (0.83) (1.08) (0.84) (0.73)
---------------------------------------------------------------------
-- -- (0.04) -- --
---------------------------------------------------------------------
$14.70 $14.93 $15.39 $15.76 $15.15
---------------------------------------------------------------------
$13.02 $12.71 $14.48 $13.98 $13.42
---------------------------------------------------------------------
9.51% (6.55)% 11.75% 10.61% 8.04%
---------------------------------------------------------------------
1.39% 1.51% 1.35% 1.41% 1.42%
---------------------------------------------------------------------
1.90% 1.96% 1.62% 1.60% 1.61%
---------------------------------------------------------------------
5.95% 5.52% 5.42% 6.23% 6.57%
---------------------------------------------------------------------
1.48% 0.90% 0.44% 0.61% 1.11%
---------------------------------------------------------------------
4.47% 4.62% 4.98% 5.62% 5.46%
---------------------------------------------------------------------
$303,315 $308,033 $317,568 $325,060 $312,552
---------------------------------------------------------------------
57% 50% 37% 24% 14%
---------------------------------------------------------------------
$122,218 $123,341 $125,612 $158,353 $154,184
=====================================================================
--------------------------------------------------------------------------------
35
INSURED MUNICIPAL INCOME FUND INC.
GENERAL INFORMATION (UNAUDITED)
THE FUND
Insured Municipal Income Fund Inc. (the "Fund") is a diversified, closed-end
management investment company whose shares trade on the New York Stock Exchange
("NYSE"). The Fund's investment objective is to achieve a high level of current
income that is exempt from federal income tax, consistent with the preservation
of capital. The Fund's NYSE trading symbol is "PIF." Comparative net asset
value and market price information about the Fund is available weekly in
various publications. Effective as of April 1, 2006, the Fund's investment
advisor and administrator is UBS Global Asset Management (Americas) Inc., an
indirect wholly owned asset management subsidiary of UBS AG.
QUARTERLY FORM N-Q PORTFOLIO SCHEDULE
The Fund will file its complete schedule of portfolio holdings with the
Securities and Exchange Commission ("SEC") for the first and third quarters of
each fiscal year on Form N-Q. The Fund's Forms N-Q are available on the SEC's
Web site at http://www.sec.gov. The Fund's Forms N-Q may be reviewed and copied
at the SEC's Public Reference Room in Washington, D.C. Information on the
operation of the SEC's Public Reference Room may be obtained by calling
1-800-SEC 0330. Additionally, you may obtain copies of Forms N-Q from the Fund
upon request by calling 1-800-647 1568.
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).
SHAREHOLDER MEETING INFORMATION
An annual meeting of shareholders of the Fund was held on July 20, 2006. At the
meeting, Richard Q. Armstrong, David J. Beaubien, Alan S. Bernikow, Richard R.
Burt, Meyer Feldberg, Bernard H. Garil and Heather R. Higgins were elected to
serve as directors until the next annual meeting of shareholders, or until
their successors are duly elected and
--------------------------------------------------------------------------------
36
INSURED MUNICIPAL INCOME FUND INC.
GENERAL INFORMATION (UNAUDITED)
qualified or until they retire, resign or are earlier removed. The shares were
voted as indicated below:
COMMON STOCK AND APS SHARES VOTING AS A SINGLE CLASS:
SHARES
TO VOTE FOR OR WITHHOLD AUTHORITY SHARES WITHHOLD
IN THE ELECTION OF: VOTED FOR AUTHORITY
-----------------------------------------------------------------------------
Richard Q. Armstrong 18,368,783.510 644,267.040
-----------------------------------------------------------------------------
David J. Beaubien 18,370,213.510 642,867.040
-----------------------------------------------------------------------------
Alan S. Bernikow 18,378,487.510 634,593.040
-----------------------------------------------------------------------------
Bernard H. Garil 18,386,407.510 626,673.040
-----------------------------------------------------------------------------
Heather R. Higgins 18,379,678.510 633,402.040
-----------------------------------------------------------------------------
AUCTION PREFERRED SHARES:
SHARES
TO VOTE FOR OR WITHHOLD AUTHORITY SHARES WITHHOLD
IN THE ELECTION OF: VOTED FOR AUTHORITY
-----------------------------------------------------------------------------
Meyer Feldberg 3,892 0
-----------------------------------------------------------------------------
Richard R. Burt 3,892 0
-----------------------------------------------------------------------------
The Fund is not aware of any broker non-votes. (Broker non-votes are shares
held in street name for which the broker indicates that instructions have not
been received from the beneficial owners or other persons entitled to vote and
for which the broker does not have discretionary voting authority.) At the end
of September 2006, Mr. Beaubien retired from the Fund's board.
DIVIDEND REINVESTMENT PLAN
The Fund's Board has established a Dividend Reinvestment Plan (the "Plan")
under which all common shareholders whose shares are registered in their own
names, or in the name of UBS Financial Services Inc. or its nominee, will have
all dividends and other distributions on their shares of common stock
automatically reinvested in additional shares of common stock, unless such
common shareholders elect to receive cash. Common shareholders who elect to
hold their shares in the name of another broker or nominee should contact such
broker or nominee to determine whether, or how, they may participate in the
Plan. The ability of such shareholders to participate in the Plan may change if
their shares are transferred into the name of another broker or nominee.
A common shareholder may elect not to participate in the Plan or may terminate
participation in the Plan at any time without penalty, and common shareholders
who have previously terminated participation in
--------------------------------------------------------------------------------
37
INSURED MUNICIPAL INCOME FUND INC.
GENERAL INFORMATION (UNAUDITED)
the Plan may rejoin it at any time. Changes in elections must be made in
writing to the Fund's transfer agent and should include the shareholder's name
and address as they appear on the share certificate or in the transfer agent's
records. An election to terminate participation in the Plan, until such
election is changed, will be deemed an election by a common shareholder to take
all subsequent distributions in cash. An election will be effective only for
distributions declared and having a record date at least ten days after the
date on which the election is received.
Additional shares of common stock acquired under the Plan will be purchased in
the open market, on the NYSE or otherwise, at prices that may be higher or
lower than the net asset value per share of the common stock at the time of the
purchase. The number of shares of common stock purchased with each dividend
will be equal to the result obtained by dividing the amount of the dividend
payable to a particular shareholder by the average price per share (including
applicable brokerage commissions) that the transfer agent was able to obtain in
the open market. The Fund will not issue any new shares of common stock in
connection with the Plan. There currently is no charge to participants for
reinvesting dividends or other distributions. The transfer agent's fees for
handling the reinvestment of distributions will be paid by the Fund. However,
each participant pays a pro rata share of brokerage commissions incurred with
respect to the transfer agent's open market purchases of common stock in
connection with the reinvestment of distributions. The automatic reinvestment
of dividends and other distributions in shares of common stock does not relieve
participants of any income tax that may be payable on such distributions.
Experience under the Plan may indicate that changes are desirable.
Accordingly, the Fund reserves the right to amend or terminate the Plan with
respect to any dividend or other distribution if notice of the change is sent
to Plan participants at least 30 days before the record date for such
distribution. The Plan also may be amended or terminated by the transfer agent
by at least 30 days' written notice to all Plan participants. Additional
information regarding the Plan may be obtained from, and all correspondence
concerning the Plan should be directed to, the transfer agent at PFPC Inc.,
P.O. Box 43027, Providence, Rhode Island 02940-3027. For further information
regarding the Plan, you may also contact the transfer agent directly at
1-800-331 1710.
--------------------------------------------------------------------------------
38
INSURED MUNICIPAL INCOME FUND INC.
BOARD APPROVAL OF INVESTMENT ADVISORY AND ADMINISTRATION AGREEMENT (UNAUDITED)
BACKGROUND--At a meeting of the board of Insured Municipal Income Fund Inc.
(the "Fund") on July 19, 2006, the members of the board, including the
directors who are not "interested persons" of the Fund ("Independent
Directors"), as defined in the Investment Company Act of 1940, as amended (the
"1940 Act"), considered and approved the continuance of the Investment Advisory
and Administration Agreement of the Fund with UBS Global Asset Management
(Americas) Inc. ("UBS Global AM"). In preparing for the meeting, the board
members had requested and received extensive information from UBS Global AM to
assist them, including performance and expense information for other investment
companies with similar investment objectives. The board received and considered
a variety of information about UBS Global AM, as well as the advisory and
administrative arrangements for the Fund. The Independent Directors discussed
the materials initially provided by management prior to the scheduled board
meeting in a session with their independent legal counsel and requested, and
received from management, supplemental materials to assist them in their
consideration of the Investment Advisory and Administration Agreement. The
board received materials detailing the administrative services provided to the
Fund by UBS Global AM, which include providing accounting and financial
analysis, ensuring that all financial and tax regulatory reporting requirements
were met, certifying required Securities and Exchange Commission documentation
and monitoring the performance of the Fund's service providers.
The Independent Directors also met for several hours the evening before the
board meeting and met again after management's presentation was completed to
review the disclosure that had been made to them at the meeting. At all of
these sessions the Independent Directors met in session with their independent
legal counsel. The Independent Directors also received a memorandum from their
independent legal counsel discussing the duties of board members in considering
approval of advisory and administration agreements.
In its consideration of the approval of the Investment Advisory and
Administration Agreement, the board considered the following factors:
NATURE, EXTENT AND QUALITY OF THE SERVICES UNDER THE INVESTMENT ADVISORY AND
ADMINISTRATION AGREEMENT--The board received and considered information
regarding the nature, extent and quality of management services provided to the
Fund by UBS Global AM (and its
--------------------------------------------------------------------------------
39
INSURED MUNICIPAL INCOME FUND INC.
BOARD APPROVAL OF INVESTMENT ADVISORY AND ADMINISTRATION AGREEMENT (UNAUDITED)
predecessor, UBS Global Asset Management (US) Inc.) under the Investment
Advisory and Administration Agreement during the past year. The board also
received a description of the administrative and other services rendered to the
Fund and its shareholders by UBS Global AM. The board considered the nature,
extent and quality of administrative and shareholder services performed by UBS
Global AM and its affiliates. The board also considered the resources devoted
to, and the record of compliance with, the Fund's compliance policies and
procedures. The board noted that it received information at regular meetings
throughout the year regarding the services rendered by UBS Global AM concerning
the management of the Fund's affairs and UBS Global AM's role in coordinating
providers of other services to the Fund, including custody, accounting and
transfer agency services. The board's evaluation of the services provided by
UBS Global AM took into account the board's knowledge and familiarity gained as
board members of funds in the UBS New York Fund complex, including the scope
and quality of UBS Global AM's investment management and other capabilities and
the quality of its administrative and other services. The board observed that
the scope of services provided by UBS Global AM had expanded over time as a
result of regulatory and other developments, including maintaining and
monitoring its own and the Fund's expanded compliance programs.
The board had available to it the qualifications, backgrounds and
responsibilities of the Fund's senior personnel at UBS Global AM and had
received information regarding the persons primarily responsible for the
day-to-day portfolio management of the Fund and recognized that the Fund's
senior personnel at UBS Global AM report to the board regularly, some at every
board meeting, and that at each regular meeting the board receives a report on
the Fund's performance. The board also considered, based on its knowledge of
UBS Global AM and its affiliates, the financial resources available to UBS
Global AM and its parent organization, UBS AG. In that regard, the board
received extensive financial information regarding UBS Global AM and noted that
it was a wholly owned, indirect subsidiary of one of the largest financial
services firms in the world. It was also noted that UBS Global AM had well over
$100 billion in assets under management and was part of the UBS Global Asset
Management Division, which had over $600 billion of assets under management
worldwide.
--------------------------------------------------------------------------------
40
INSURED MUNICIPAL INCOME FUND INC.
BOARD APPROVAL OF INVESTMENT ADVISORY AND ADMINISTRATION AGREEMENT (UNAUDITED)
The board reviewed how transactions in Fund assets are effected. The board also
reviewed the Fund's brokerage policies and practices, the standards applied in
seeking best execution, policies and practices regarding soft dollars, the use
of a broker affiliated with UBS Global AM and the existence of quality controls
applicable to brokerage allocation procedures. In addition, UBS Global AM also
reported to the board on, among other things, its disaster recovery plans and
portfolio manager compensation plan.
The board concluded that, overall, it was satisfied with the nature, extent and
quality of services provided (and expected to be provided) to the Fund under
the Investment Advisory and Administration Agreement.
ADVISORY FEES AND EXPENSE RATIOS--The board reviewed and considered the
contractual management fee ("Contractual Management Fee") payable by the Fund
to UBS Global AM in light of the nature, extent and quality of the advisory and
administrative services provided by UBS Global AM. The board also reviewed and
considered the fee waiver arrangement in place for the Fund and considered the
actual fee rate (after taking any waivers into account) (the "Actual Management
Fee"). Additionally, the board received and considered information comparing
the Fund's Contractual Management Fee, Actual Management Fee and overall
expenses with those of funds in a group of funds selected and provided by
Lipper, Inc. ("Lipper"), an independent provider of investment company data
(the "Expense Group").
In connection with its consideration of the Fund's advisory fees, the board
also received information on UBS Global AM's standard institutional account
fees for accounts of a similar investment type to the Fund. The board noted
that, in general, these fees were lower than the Contractual Management Fee and
Actual Management Fee for the Fund, but also noted management's explanation
that comparisons with such accounts may be of limited relevance given the
different structures and regulatory requirements of mutual funds versus such
accounts and the differences in the levels of services required by mutual funds
and such accounts. The board also received information on fees charged to other
mutual funds managed by UBS Global AM.
In addition to the Contractual and Actual Management Fees, the board also
reviewed and considered the total expenses for the Fund. The comparative
--------------------------------------------------------------------------------
41
INSURED MUNICIPAL INCOME FUND INC.
BOARD APPROVAL OF INVESTMENT ADVISORY AND ADMINISTRATION AGREEMENT (UNAUDITED)
Lipper information showed that the Fund's Contractual Management Fee, Actual
Management Fee and total expenses were in the fifth quintile in the Fund's
Expense Group for the comparison periods utilized in the Lipper report (with
the first quintile representing that fifth of the funds in the Expense Group
with the lowest level of fees or expenses, as applicable, and the fifth
quintile representing that fifth of the funds in the Expense Group with the
highest level of fees or expenses, as applicable). In light of the level of the
Fund's fees and expenses, management proposed a revision in the management fee
such that the management fee will be calculated only on the value of the net
assets attributable to the Fund's common shares, rather than the net assets
attributable to both the Fund's common and preferred shares. Management noted
that this change should result in an anticipated reduction in the Fund's Actual
Management Fee to 0.83% of net assets applicable to common shares from its
current level of 1.005%, which would be at the median of its Expense Group.
Management also explained that it had negotiated a reduction in the Fund's
custodian fees such that the custodian fee rate will be based only on assets
attributable to common shares and not on assets attributable to both common and
preferred shares. Combined, these modifications should result in an anticipated
reduction in the Fund's total expenses to approximately 0.99% of net assets
applicable to common shares from its current level of 1.199%, which is below
the median of its Expense Group.
Taking all of the above into consideration, including the proposed reductions
in the advisory fee and custodian fees, the board determined that the
management fee was reasonable in light of the nature, extent and quality of the
services provided to the Fund under the Investment Advisory and Administration
Agreement.
FUND PERFORMANCE--The board received and considered performance information of
the Fund compared to other funds (the "Performance Universe") selected by
Lipper over the one-, three-, five-, ten-year and since inception periods ended
April 30, 2006. The board was provided with a description of the methodology
Lipper used to determine the similarity of the Fund with the funds included in
its Performance Universe. The board also noted that it had received
information throughout the year at periodic intervals with respect to the
Fund's performance, including in most cases with respect to its benchmark index.
--------------------------------------------------------------------------------
42
INSURED MUNICIPAL INCOME FUND INC.
BOARD APPROVAL OF INVESTMENT ADVISORY AND ADMINISTRATION AGREEMENT (UNAUDITED)
The comparative Lipper information showed that the Fund's performance was in
the fourth quintile for the one-, three-, five- and ten-year periods and in the
fifth quintile since inception (with the first quintile representing that fifth
of the funds in the Performance Universe with the highest performance and the
fifth quintile representing that fifth of the funds in the Performance Universe
with the lowest performance). In its review, the board noted the Fund's
performance as compared to the average return for the Fund's Performance
Universe and benchmark index, taking the volatility in returns for the
Performance Universe and the index into account. In addition, the board noted
that in the past the Fund has been managed with a more conservative view when
compared to its Performance Universe. Management noted that, as had been
approved by the Board, it had taken certain steps to increase the Fund's
exposure to interest rates by increasing the average life of the investments
that it holds by one year. Management also noted that the Fund has increased
its investment in lower quality issues within its allotted 20% non-insured,
investment grade "bucket" and added approximately 8% exposure to AMT
securities. Management explained that it believed that these initiatives were
positive contributors to the Fund's performance and should make the Fund more
competitive in the future as compared to its Performance Group. Management
also noted that over the trailing 12 months, as of May 31, 2006, the Fund
outperformed the Lipper median by 10 basis points before fees. Based on its
review, and management's explanation and changes to the investment strategies
of the Fund, the board concluded that the Fund's investment performance was
acceptable.
ADVISER PROFITABILITY--The board received and considered a profitability
analysis of UBS Global AM and its affiliates in providing services to the Fund.
The board also received profitability information with respect to the UBS New
York fund complex as a whole. In addition, the board received information with
respect to UBS Global AM's allocation methodologies used in preparing this
profitability data. UBS Global AM's profitability was considered not excessive
in light of the nature, extent and quality of the services provided to the Fund.
ECONOMIES OF SCALE--The board received and considered information from
management regarding whether it has achieved economies of scale with respect to
the management of the Fund, whether the Fund has appropriately benefited from
any economies of scale, and whether there is potential realization of further
economies of scale. The board considered
--------------------------------------------------------------------------------
43
INSURED MUNICIPAL INCOME FUND INC.
BOARD APPROVAL OF INVESTMENT ADVISORY AND ADMINISTRATION AGREEMENT (UNAUDITED)
whether economies of scale in the provision of services to the Fund were being
passed along to shareholders. The board also considered whether alternative fee
structures (such as breakpoints) would be more appropriate or reasonable taking
into consideration economies of scale or other efficiencies.
In conducting its review, the board noted that the Fund's Contractual
Management Fee did not contain any breakpoints. Further, the board noted that
advisory agreements of closed-end funds usually do not contain breakpoints.
Management informed the board that the Fund, as a closed-end investment
company, was not expected to materially increase in size; thus, UBS Global AM
would not benefit from economies of scale. The Board members considered whether
economies of scale could be realized because UBS Global AM advises other
similar funds, and, based on their experience, the board accepted UBS Global
AM's explanation that significant economies of scale would not be realized
because the nature of the market in which the Fund invests did not provide
significant savings.
OTHER BENEFITS TO UBS GLOBAL AM--The board considered other benefits received
by UBS Global AM and its affiliates as a result of its relationship with the
Fund, including the opportunity to offer additional products and services to
Fund shareholders.
In light of the costs of providing investment management, administrative and
other services to the Fund and UBS Global AM's ongoing commitment to the Fund,
the profits and other ancillary benefits that UBS Global AM and its affiliates
received were considered reasonable.
In light of all of the foregoing, the board approved the Advisory and
Administration Agreement to continue for another year.
In making its decision, the board identified no single factor as being
determinative in approving the Investment Advisory and Administration
Agreement. The Independent Directors were advised by separate independent legal
counsel throughout the entire process. The board discussed the proposed
continuance of the Investment Advisory and Administration Agreement in a
private session with their independent legal counsel at which no
representatives of UBS Global AM were present.
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DIRECTORS
Richard Q. Armstrong Meyer Feldberg
Chairman
Bernard H. Garil
Alan S. Bernikow
Richard R. Burt Heather R. Higgins
PRINCIPAL OFFICERS
Kai R. Sotorp EIbridge T. Gerry III
President Vice President
Mark F. Kemper Kevin McIntyre
Vice President and Secretary Vice President
Thomas Disbrow
Vice President and Treasurer
INVESTMENT ADVISOR AND ADMINISTRATOR
UBS Global Asset Management (Americas) Inc.
51 West 52nd Street
New York, New York 10019-6114
The financial information included herein is taken from the records of the Fund
without examination by independent registered public accountants who do not
express an opinion thereon.
Notice is hereby given in accordance with Section 23(c) of the Investment
Company Act of 1940 that from time to time the Fund may purchase shares of its
common stock in the open market at market prices.
This report is sent to the shareholders of the Fund for their information. It
is not a prospectus, circular or representation intended for use in the
purchase or sale of shares of the Fund or of any securities mentioned in this
report.
(C) 2006 UBS Global Asset Management (Americas) Inc. All rights reserved.
[LOGO OF UBS] UBS
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PRESORTED
STANDARD
U.S. POSTAGE
PAID
COMPUTERSHARE
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UBS GLOBAL ASSET MANAGEMENT (AMERICAS) INC.
51 West 52nd Street
New York, New York 10019-6114
ITEM 2. CODE OF ETHICS.
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Form N-CSR disclosure requirement not applicable to this filing of a semi-annual
report.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
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Form N-CSR disclosure requirement not applicable to this filing of a semi-annual
report.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
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Form N-CSR disclosure requirement not applicable to this filing of a semi-annual
report.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
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Form N-CSR disclosure requirement not applicable to this filing of a semi-annual
report.
ITEM 6. SCHEDULE OF INVESTMENTS.
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Included as part of the report to shareholders filed under Item 1 of this form.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
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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.
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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
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COMPANY AND AFFILIATED PURCHASERS.
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There were no purchases made by or on behalf of the registrant or any
"affiliated purchaser," as defined in Rule 10b-18(a)(3) under the Securities
Exchange Act of 1934, as amended, of shares of the registrant's equity
securities made in the period covered by this report.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
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The registrant's Board has established a Nominating and Corporate Governance
Committee. The Nominating and Corporate Governance Committee will consider
nominees recommended by shareholders
if a vacancy occurs among those board members who are not "interested persons"
as defined in Section 2(a)(19) of the Investment Company Act of 1940, as
amended. In order to recommend a nominee, a shareholder should send a letter to
the chairperson of the Nominating and Corporate Governance Committee, Richard R.
Burt, care of the Secretary of the registrant at UBS Global Asset Management, 51
West 52nd Street, New York, New York 10019-6114, and indicate on the envelope
"Nominating and Corporate Governance Committee." The shareholder's letter should
state the nominee's name and should include the nominee's resume or curriculum
vitae, and must be accompanied by a written consent of the individual to stand
for election if nominated for the Board and to serve if elected by shareholders.
ITEM 11. CONTROLS AND PROCEDURES.
---------------------------------
(a) The registrant's principal executive officer and principal financial
officer have concluded that the registrant's disclosure controls and
procedures (as defined in Rule 30a-3(c) under the Investment Company Act
of 1940, as amended) are effective based on their evaluation of these
controls and procedures as of a date within 90 days of the filing date
of this document.
(b) The registrant's principal executive officer and principal financial
officer are aware of no changes in the registrant's internal control
over financial reporting (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.
ITEM 12. EXHIBITS.
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(a) (1) Code of Ethics - Form N-CSR disclosure requirement not applicable to
this filing of a semi-annual report.
(a) (2) Certifications of principal executive officer and principal
financial officer pursuant to Section 302 of the Sarbanes-Oxley Act of
2002 is attached hereto as Exhibit EX-99.CERT.
(a) (3) Written solicitation to purchase securities under Rule 23c-1 under
the Investment Company Act of 1940 sent or given during the period
covered by the report by or on behalf of the registrant to 10 or more
persons - The registrant has not engaged in such a solicitation during
the period covered by this report.
(b) Certifications of principal executive officer and principal financial
officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 is
attached hereto as Exhibit EX-99.906CERT.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
Insured Municipal Income Fund Inc.
By: /s/ Kai R. Sotorp
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Kai R. Sotorp
President
Date: November 29, 2006
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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.
By: /s/ Kai R. Sotorp
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Kai R. Sotorp
President
Date: November 29, 2006
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By: /s/ Thomas Disbrow
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Thomas Disbrow
Vice President and Treasurer
Date: November 29, 2006
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