UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant
Filed by a Party other than the Registrant
Check the appropriate box:
o Preliminary Proxy Statement
o Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
o Definitive Proxy Statement
(x) Definitive Additional Materials
o Soliciting Material Pursuant to 240.14a-12
Insured Municipal Income Fund Inc.
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(Name of Registrant as Specified In Its Charter)
Bulldog Investors General Partnership
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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Bulldog Investors General Partnership,
Park 80 West - Plaza Two, Saddle Brook, NJ 07663
(201) 556-0092 // Fax: (201)556-0097 // info@bulldoginvestors.com
June 23, 2008
Dear Preferred Shareholder of Insured Municipal Income Fund:
We are common shareholders of Insured Municipal Income Fund.
We know you are suffering from the failure of the preferred
auctions and we have a solution. Our plan is to open-end the Fund.
That will get you liquidity since your shares will be redeemed at
$25,000 per share plus accrued interest. Open-ending will
also eliminate the trading discount for our common shares.
Thus, open-ending will benefit both the preferred and common shareholders.
The board says it has a better plan for you. Here it is:
We will not permit the preferred or common shareholders
to vote to open-end the Fund. We will get around to
dealing with the illiquidity of the preferred shares
whenever we feel like it. Until then, the preferred and
common shareholders can sell their shares but only at
a discount.
The directors say they are completely independent of UBS but
each makes at least $135,000 per year by serving on many
boards of funds managed by UBS, the Funds investment advisor
and administrator. If the Fund open-ends, it will shrink and so
will UBSs fees. How likely are the incumbent directors to bite
the hand that feed them? Press reports like the attached article
have criticized UBS for deceiving its own clients,
i.e., investors like you, into buying auction preferred stock as an
alternative to a money market investment. Ask yourself why not
one director is willing to stand up to UBS and do the right thing.
That says volumes about their claim of independence.
The plain truth is that if you want liquidity for your shares
at their full value, you need to do it yourself by voting the
enclosed Green proxy online at WWW.PROXYVOTE.COM or
by telephone at 1-800-454-8683. Alternatively, you can mail
the GREEN proxy card in the enclosed envelope but
please do it today.
Very truly yours,
Phillip Goldstein
Holders of Auction-Rate Debt Have Choices, but Few Solutions
By LIZ RAPPAPORT
June 12, 2008; Page D1
Following her broker's advice, Cecilia Walsh put her entire
$375,000 divorce settlement into auction-rate securities last
December, planning on using the money for her day-to-day
needs.Yet before she ever withdrew a penny from the
account, the auction-rate-debt market froze up, and Ms. Walsh,
a 47-year-old actor in Delray Beach, Fla., was unable to
withdraw any of her money. Her broker, UBS AG, gave her a
margin loan secured by her account so that Ms. Walsh
could pay her living expenses. But UBS later marked down
the value of the securities in her account and has demanded
that she repay part of the loan.
In the four months since auction-rate securities stopped
trading normally, investors like Ms. Walsh have been taking
out loans, selling their securities at big discounts,
filing arbitration cases against their brokers, or simply
waiting and hoping that the market will start functioning
again. The one thing they haven't found is an easy way to
get their money back.For decades, individuals and companies
bought auction-rate debt from municipalities, charitable
organizations, student lenders and closed-end mutual funds.
The securities had long-term maturities but functioned
like a short-term investment, paying interest rates that were
reset in weekly or monthly auctions conducted by Wall Street firms.
Brokerage firms and financial advisers pitched them to investors
as a safe place to stash ones cash and collect a higher yield than
a money-market fund offered, often tax-free. As a result, the $330
billion auction-rate securities market attracted many investors
who were risk-averse or, like Ms. Walsh, knew they would need the
money in the near future. But beginning in February, as the
subprime-lending crisis spread to affect nearly all areas of the credit
markets, auctions failed to attract sufficient bidders. Wall Street
firms stopped supporting the market, causing it to freeze up
and blindsiding thousands of small investors.In Ms. Walsh's case,
UBS first marked down the value of her $375,000 account by about 26%,
or $96,200, as of March 31, using proprietary models that in part
compared these securities unfavorably to long-term bonds. Ms. Walsh
took out the margin loan on April 2, amounting to $202,000, or about
73% of the new marked-down value of her securities. Within three weeks
she got a margin call, meaning UBS wanted some of its money back because
the auction-rate securities in Ms. Walsh's account had fallen further
in value. She had to return $7,757 immediately. She received another
margin-call notice last week after UBS marked down the value of her
auction-rate securities to about $187,500, or 50% of their original
value. Ms. Walsh says she has yet to receive details on
how much money she owes."This has affected every area of my life,"
Ms. Walsh says. "It feels like a heist."Ms. Walsh has filed an
arbitration claim against UBS through the Miami-based law firm
Dimond Kaplan & Rothstein, seeking the full value of her
original investment, plus $1.125 million in punitive damages.
UBS declines to comment on individual accounts, but a spokeswoman
said the firm is working with "a small number" of clients who
have been affected by write-downs of student-loan auction-rate securities
to help them meet their margin calls. According to the Financial
Industry Regulatory Authority, the securities industry's
nongovernmental regulator, about 80 arbitration claims
tied to auction-rate securities have been filed to date.
Ms. Walsh's portfolio of auction-rate securities was entirely
student-loan backed. This $80 billion portion of the auction-rate market
was hit particularly hard because the interest rates reset to very
low levels -- in some cases to 0% -- when the auctions failed, leaving already
troubled student-loan companies little incentive to refinance.
The interest rates on other types of auction-rate securities,
such as those issued by mutual funds or municipalities,
have generally fared better. When an auction fails, rates on these
securities automatically reset to a set percentage above a benchmark
rate or to a high fixed interest rate.Some investors who hold
auction-rate securities have succeeded in dumping them, but
have taken a big haircut. Thirty-three-year old attorney
Laranne Breagy, who lives in Durango, Colo., came into a
$1.25 million windfall last fall but knew she would need
quick access for a tax payment. The money came from the
sale of stock in a start-up company, Momentum Energy Group Inc.,
she helped found.So Ms. Breagy opened a brokerage account
with A.G. Edwards Inc. last September to park her cash and
postpone the responsibility of handling so much new money until
after tax season. On the advice of her broker, she says, she put
her entire stash into auction-rate securities issued by
mutual-fund companies. In February, they stopped trading, and her
money was frozen. She took out a home-equity line of credit to pay
her taxes, but wasn't sleeping or eating from the stress.
Ms. Breagy moved her securities from A.G. Edwards to an independent
financial adviser, Laurie McRay, and her Houston-based firm,
McRay Money Management. The firm helped her sell her auction-rate
securities at a big discount on a secondary market called the
Restricted Stock Trading Network.The network found a California-based
hedge fund willing to purchase the entire batch at a discounted
priceof 87 cents on the dollar, or a $162,000 loss on Ms.
Breagy's investment.
Ms. Breagy paid off her home-equity loan and says she can now sleep at night.
She is considering filing an arbitration claim against A.G. Edwards for
her losses, she says. A.G. Edwards declined to comment on an individual account.
Some investors who don't need the cash are simply waiting it out, hoping the
situation improves. In some case, they've been rewarded. Some large issuers of
auction-rate securities, such as Nuveen Investments LLC, Eaton Vance Corp. and
many municipalities have redeemed the securities, paying their investors
in full. On Wednesday, Nuveen announced that its board approved plans to
redeem another $1.56 billion of its auction-rate debt.
In all, about $80 billion, or nearly a quarter of the entire
auction-rate securities market, has been redeemed.Jim Buchanan,
a 72-year-old Texas-based retired Shell Chemicals Ltd. employee,
is among those waiting it out. Mr. Buchanan had $150,000 in
auction-rate securities issued by mutual-fund companies in two accounts
with UBS. Fund company Calamos Holdings has redeemed $25,000 of the
securities held by Mr. Buchanan. Now he's stuck in $125,000
of auction-rate securities issued by Pacific Investment Management Co. and
Scudder Investments, which are paying him interest rates between 2.6% and 4.5%,
similar to what he was receiving prior to the auctions' failures.
The value of Mr. Buchanan's securities has been marked down by UBS by
about $2,000. Mr. Buchanan says the money is an emergency fund for him,
and he can afford to wait and hope for a resolution. He doesn't blame
his broker for putting him in the securities. "This is a lot bigger than she,"
says Mr. Buchanan about his auction-rate securities. "I'm willing to ride
with it for a while and see how things go."
Write to Liz Rappaport at liz.rappaport@wsj.com1