UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM N-Q
 
QUARTERLY SCHEDULE OF PORTFOLIO HOLDINGS OF REGISTERED
MANAGEMENT INVESTMENT COMPANY
 
    Investment Company Act file number: 811-07528    
 
   
   
 
  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: June 30, 2009


Item 1. Schedule of Investments

Insured Municipal Income Fund Inc.
Schedule of investments – June 30, 2009 (unaudited)

    Moody’s   S&P   Face    
    rating   rating   amount ($)   Value ($)
   
 
 
 
Long-term municipal bonds—167.77%                
California — 21.28%                

Los Angeles Community College District Refunding-Election 2001-Series A (FSA Insured),

                

5.000%, due 08/01/25

   Aa2   AAA   5,000,000   5,059,900

5.000%, due 06/01/26

   Aa2   AAA   9,000,000   9,060,570

Los Angeles Water & Power Revenue-Power System-Series B (FSA Insured),

                

5.000%, due 07/01/25

   Aa3   AAA   6,000,000   6,075,900

Manteca Financing Authority Water Revenue-Series A (NATL-RE Insured),

                

4.750%, due 07/01/33

   A3   A+   15,000,000   13,327,950

Metropolitan Water District of Southern California Waterworks Revenue-Series A (FSA Insured),

                

5.000%, due 07/01/35

   Aa2   AAA   10,000,000   10,025,700

Oxnard Financing Authority Wastewater Revenue-Redwood Trunk Sewer & Headworks-Series A
(NATL-RE-FGIC Insured),

                

5.250%, due 06/01/34

   NR   A+   7,160,000   7,033,698

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

                

5.000%, due 12/01/27

   Aa3   AA   5,000,000   4,922,900

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

                

5.000%, due 11/01/25

   A1   AA-   3,000,000   3,024,540
               
                58,531,158
               
District of Columbia — 2.91%                

District of Columbia Water & Sewer Authority Public Utility Revenue-Subordinate Lien Revenue (NATL-RE-FGIC Insured),

                

5.000%, due 10/01/33

   A1   AA-   6,000,000   5,924,820

Metropolitan Washington, D.C. Airport Authority Airport System Revenue-Series A
(NATL-RE Insured),

                

5.250%, due 10/01/161

   Aa3   AA-   2,000,000   2,094,360
               
                8,019,180
               
Florida — 15.67%                

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

                

5.000%, due 06/01/24

   Aa1   AAA   8,000,000   8,099,680

Florida State Board of Education Lottery Revenue-Series B (BHAC-CR, NATL-RE),

                

5.000%, due 07/01/262,3

   Aa1   AAA   14,000,000   14,315,700

Hillsborough County Port District Revenue-Tampa Port Authority Project-Series A
(NATL-RE Insured),

                

5.750%, due 06/01/161

   A2   A   1,060,000   1,088,938

5.750%, due 06/01/171

   A2   A   1,115,000   1,137,244

5.750%, due 06/01/181

   A2   A   1,175,000   1,188,607

5.750%, due 06/01/191

   A2   A   1,240,000   1,253,615

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

                

5.000%, due 10/01/181

   A2   A-   7,500,000   7,102,650

Insured Municipal Income Fund Inc.
Schedule of investments – June 30, 2009 (unaudited)

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

Miami-Dade County Expressway Authority Toll System Revenue-Series B
(NATL-RE-FGIC Insured),

                

5.250%, due 07/01/26

   A3   A   3,000,000   3,022,290

Miami-Dade County School Board-Certificates of Participation-Series A (NATL-RE-FGIC Insured),

                

5.000%, due 05/01/21

   A3   A   6,000,000   5,901,780
               
                43,110,504
               
Georgia — 3.67%                

Atlanta Airport Revenue Refunding-Series D (NATL-RE-FGIC Insured),

                

5.250%, due 01/01/151

   A1   A+   5,000,000   5,015,900

George L Smith II World Congress Center Authority Revenue Refunding-Domed Stadium Project (NATL-RE Insured),

                

5.750%, due 07/01/141

   Baa1   A   5,000,000   5,071,100

Georgia Municipal Electric Authority Power Revenue-Series Y (Escrowed to Maturity)
(NATL-RE-IBC Insured),

                

10.000%, due 01/01/10

   NR   AA   15,000   15,718
               
                10,102,718
               
Illinois — 26.30%                

Chicago Board of Education-Series D (FSA Insured),

                

5.000%, due 12/01/21

   Aa3   AAA   9,885,000   10,253,117

5.000%, due 12/01/25

   Aa3   AAA   8,705,000   8,927,761

Chicago General Obligation-Unrefunded Balance-Series A (FSA Insured),

                

5.000%, due 01/01/25

   Aa3   AAA   260,000   263,975

5.000%, due 01/01/26

   Aa3   AAA   350,000   354,358

Chicago O’Hare International Airport Revenue,

                

Series A (FSA Insured),

                

5.000%, due 01/01/19

   Aa3   AAA   8,960,000   9,228,890

Series B (FSA Insured),

                

5.000%, due 01/01/18

   Aa3   AAA   10,670,000   11,075,353

Chicago Transit Authority Capital Grant Receipts Revenue-Federal Transit Administration Section 5309 (Assured Guaranty Insured),

                

5.250%, due 06/01/26

   Aa2   AAA   6,500,000   6,767,410

Chicago Transit Authority Capital Grant Receipts Revenue-Federal Transit Administration Section 5309-Series A (Assured Guaranty Insured),

                

6.000%, due 06/01/24

   Aa2   AAA   11,000,000   12,364,660

Chicago Wastewater Transmission Revenue Refunding-Second Lien-Series B (FSA-CR, FGIC Insured),

                

5.000%, due 01/01/25

   Aa3   AAA   5,000,000   5,193,200

Illinois Health Facilities Authority Revenue-Franciscan Sisters Health Care-Series C (Escrowed to Maturity) (NATL-RE Insured),

                

5.750%, due 09/01/18

   NR   A   4,500,000   5,190,705

Insured Municipal Income Fund Inc.
Schedule of investments – June 30, 2009 (unaudited)

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

Metropolitan Pier & Exposition Authority Dedicated State Tax-Series A-2002 (Escrowed to Maturity) (FGIC Insured),

                

5.500%, due 12/15/23

   A2   AAA   2,395,000   2,732,216
               
                72,351,645
               
Indiana — 3.02%                

Indiana University Revenue-Student Fee-Series O (NATL-RE-FGIC Insured),

                

5.250%, due 08/01/18

   Aa1   AA   1,000,000   1,078,520

Indianapolis Airport Authority Revenue Refunding-Special Facilities-Fed Ex Corp. Project,

                

5.100%, due 01/15/171

   Baa2   BBB   8,000,000   7,225,120
               
                8,303,640
               
Maine — 5.51%                

Maine Health & Higher Educational Facilities Authority Revenue-Series A
(Escrowed to Maturity) (FSA Insured),

                

5.500%, due 07/01/23

   Aa3   AAA   4,785,000   4,872,422

(NATL-RE Insured),

                

5.000%, due 07/01/29

   Aa3   NR   10,200,000   10,273,542
               
                15,145,964
               
Massachusetts — 2.67%                

Massachusetts State Port Authority Revenue-US Airways Project (NATL-RE Insured),

                

6.000%, due 09/01/211

   Baa1   A   1,500,000   1,131,330

Massachusetts State School Building Authority Dedicated Sales Tax Revenue-Series A (FSA Insured),

                

5.000%, due 08/15/25

   Aa2   AAA   6,000,000   6,220,500
               
                7,351,830
               
Michigan — 3.99%                

Detroit Sewer Disposal Revenue Refunding-Senior Lien-Series C-1 (FSA Insured),

                

7.000%, due 07/01/27

   Aa3e   AAAe   5,000,000   5,573,150

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

                

5.000%, due 08/15/25

   Aa2   AA   5,525,000   5,416,821
               
                10,989,971
               
Minnesota — 1.83%                

Minneapolis & St. Paul Metropolitan Airport Commission Airport Revenue-Series B
(NATL-RE-FGIC Insured),

                

6.000%, due 01/01/191

   NR   AA-   5,000,000   5,037,750
               
Nevada — 2.68%                

Clark County-Bond Bank-Unrefunded Balance (NATL-RE Insured),

                

5.000%, due 06/01/32

   Aa1   AA+   7,820,000   7,381,767
               

Insured Municipal Income Fund Inc.
Schedule of investments – June 30, 2009 (unaudited)

    Moody’s   S&P   Face    
    rating   rating   amount ($)   Value ($)
   
 
 
 
Long-term municipal bonds—(continued)                
New Mexico — 3.05%                

University of New Mexico Revenue-Hospital Mortgage (FSA-FHA Insured),

                

5.000%, due 01/01/23

   Aa3   AAA   4,130,000   4,142,679

5.000%, due 07/01/23

   Aa3   AAA   4,230,000   4,240,194
               
                8,382,873
               
New York — 22.52%                

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

                

5.250%, due 11/15/24

   Aa3   AAA   5,650,000   5,765,034

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

                

5.500%, due 01/01/151

   A3   BBB+   5,000,000   4,816,400

5.500%, due 01/01/161

   A3   BBB+   6,685,000   6,369,000

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

                

5.500%, due 01/01/181,4

   A3   BBB+   2,750,000   2,631,255

New York State Dormitory Authority Revenue-Secondarily Insured-City University-Series B (BHAC-CR Insured),

                

5.000%, due 07/01/21

   Aa1   AAA   10,000,000   10,800,800

New York State Thruway Authority General Revenue-Series G (FSA Insured),

                

5.000%, due 01/01/26

   Aa3   AAA   10,000,000   10,113,600

Triborough Bridge & Tunnel Authority Revenue-Series D (BHAC-CR Insured),

                

5.000%, due 11/15/242,3

   NR   AAA   15,465,000   16,370,270

Triborough Bridge & Tunnel Authority Revenue-Subordinate Bonds (AMBAC Insured),

                

5.125%, due 11/15/26

   Aa3   A+   5,000,000   5,084,850
               
                61,951,209
               
Ohio — 2.62%                

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

                

5.125%, due 06/01/24

   Baa3   BBB   8,960,000   7,212,800
               
Pennsylvania — 7.06%                

Allegheny County Sanitation Authority Sewer Revenue Refunding-Series A (NATL-RE Insured),

                

5.000%, due 12/01/23

   Baa1   A   15,390,000   15,481,724

Philadelphia Authority For Industrial Development Airport Revenue-Philadelphia Airport System Project-Series A (NATL-RE-FGIC Insured),

                

5.500%, due 07/01/181

   A2   A+   4,000,000   3,940,120
               
                19,421,844
               
Rhode Island — 1.99%                

Rhode Island State Health & Educational Building Corp. Revenue Hospital Financing-Lifespan Obligation-Series A (Assured Guaranty Insured),

                

7.000%, due 05/15/39

   Aa2   AAA   5,000,000   5,482,850
               

Insured Municipal Income Fund Inc.
Schedule of investments – June 30, 2009 (unaudited)

    Moody’s   S&P   Face    
    rating   rating   amount ($)   Value ($)
   
 
 
 
Long-term municipal bonds—(continued)                
South Carolina — 3.79%                

Medical University of South Carolina Hospital Authority-Hospital Facilities Revenue
Refunding-Series A (NATL-RE-FHA Insured),

                

5.250%, due 02/15/25

   Baa1   A   2,500,000   2,509,875

South Carolina Transportation Infrastructure Bank Revenue-Series A (AMBAC Insured),

                

5.000%, due 10/01/33

   A1   NR   8,180,000   7,922,494
               
                10,432,369
               
Tennessee — 0.73%                

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

                

6.000%, due 03/01/241

   A2   A-   2,000,000   2,002,940
               
Texas — 19.55%                

Austin Electric Utilities System Revenue Refunding-Series A (AGC-ICC-AMBAC Insured),

                

5.000%, due 11/15/22

   Aa2   AAA   5,000,000   5,186,300

Dallas Civic Center Refunding & Improvement (Assured Guaranty Insured),

                

5.250%, due 08/15/34

   Aa2   AAA   3,000,000   2,974,980

Harris County Refunding-Senior Lien-Toll Road (FSA Insured),

                

5.000%, due 08/15/30

   Aa3   AAA   10,000,000   10,082,800

Houston Utility System Revenue Refunding-First Lien-Series A
(NATL-RE Insured),

                

5.250%, due 05/15/25

   A1   AA   5,665,000   5,846,337

(NATL-RE-FGIC Insured),

                

5.250%, due 05/15/23

   A1   AA   13,500,000   14,015,835

North Thruway Authority Revenue Refunding Systems-Series A (BHAC-CR Insured),

                

5.750%, due 01/01/48

   Aa1   AAA   5,000,000   5,192,250

San Antonio Texas Electric & Gas Systems

                

5.000%, due 02/01/242,3

   Aa1   AA   10,000,000   10,474,400
               
                53,772,902
               
Virginia — 1.66%                

Virginia Port Authority Facilities Revenue (FGIC-FSA-CR Insured),

                

5.000%, due 07/01/361

   Aa3   AAA   5,000,000   4,559,000
               
Washington — 14.87%                

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

                

6.050%, due 07/01/321

   Aa2   AA   15,000,000   14,690,250

Energy Northwest Electric Revenue Refunding-Columbia Station-Series A

                

5.000%, due 07/01/232,3

   Aaa   AA   13,660,000   14,153,536

King County Public Hospital District No. 2 Refunding-Evergreen Healthcare (NATL-RE Insured),

                

5.000%, due 12/01/18

   A1   AA-   1,500,000   1,538,055

5.000%, due 12/01/19

   A1   AA-   2,095,000   2,127,095

Insured Municipal Income Fund Inc.
Schedule of investments – June 30, 2009 (unaudited)

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

Washington State-Series 2007A (FSA Insured),

                  

5.000%, due 07/01/24

   Aa1   AAA   8,000,000   8,384,800  
               
 
                40,893,736  
               
 
Wisconsin — 0.40%                  

Ladysmith-Hawkins School District Refunding (NATL-RE-FGIC Insured),

                  

5.500%, due 04/01/20

   NR   NR   1,105,000   1,097,199  
               
 

Total long-term municipal bonds (cost — $476,728,109)

               461,535,849  
               
 
Short-term municipal note—2.47%                  
New York — 2.47%                  

New York City-Subseries A-6 (FSA Insured),

                  

0.180%, due 07/01/095 (cost — $6,780,000)

   Aa3   A-1   6,780,000   6,780,000  
               
 

Total investments (cost — $483,508,109)6 — 170.24%

               468,315,849  
               
 

Liabilities in excess of other assets — (13.90)%

               (38,221,398 )
               
 

Liquidation value of auction preferred shares — (56.34)%

               (155,000,000 )
               
 

Net assets applicable to common shareholders — 100.00%

               275,094,451  
               
 

Aggregate cost for federal income tax purposes was $444,274,924; and net unrealized depreciation consisted of:        
         
Gross unrealized appreciation   $ 3,463,652  
Gross unrealized depreciation     (19,262,727 )
   
 
Net unrealized depreciation   $ (15,799,075 )
   
 

The difference between book-basis and tax-basis unrealized appreciation/depreciation of investments is attributable to the tax treatment of certain tender option bond transactions.

1   Security subject to Alternative Minimum Tax.
     
2   Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities, which represent 20.11% of net assets as of June 30, 2009, are considered liquid and may be resold in transactions exempt from registration, normally to qualified institutional buyers.
     
3   Security represents underlying bond transferred to a special-purpose entity established in a tender option bond transaction in which the Fund acquired the inverse floater. These securities serve as collateral in a financing transaction. As of June 30, 2009, the aggregate principal amount of the inverse floaters and the floating rate notes are $13,285,000 and $39,840,000, respectively.
     
4   Floating rate security. The interest rate shown is the current rate as of June 30, 2009.
     
5   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 June 30, 2009.


6   The Fund calculates its net asset value based on the current market value, where available, for its portfolio securities. The Fund normally obtains market values for its securities from independent pricing sources and broker-dealers. Independent pricing sources may use last reported sale prices, current market quotations or valuations from computerized “matrix” systems that derive values based on comparable securities. A matrix system incorporates parameters such as security quality, maturity and coupon, and/or research and evaluations by its staff, including review of broker-dealer market price quotations, if available, in determining the valuation of the portfolio securities. If a market value is not available from an independent pricing source for a particular security, that security is valued at fair value as determined in good faith by or under the direction of the Fund’s Board of Directors (the “Board”). Various factors may be reviewed in order to make a good faith determination of a security’s fair value. These factors may include, but are not limited to, the type and cost of the security; contractual or legal restrictions on resale of the security; relevant financial or business developments of the issuer; actively traded similar or related securities; conversion or exchange rights on the security; related corporate actions; and changes in overall market conditions. If events occur that materially affect the value of securities 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.

On April 1, 2008, the Fund adopted the Financial Accounting Standards Board (“FASB”) Statement of Financial Accounting Standards No. 157, “Fair Value Measurements” (“FAS 157”). FAS 157 requires disclosure surrounding the various inputs that are used in determining the value of the Fund’s investments. These inputs are summarized into the three broad levels listed below:

Level 1—Quoted prices in active markets for identical investments.
Level 2—Other significant observable inputs, including but not limited to, quoted prices for similar investments, interest rates, prepayment speeds and credit risks.
Level 3—Unobservable inputs inclusive of the Fund’s own assumptions in determining the value of investments.

The following is a summary of the inputs used as of June 30, 2009 in valuing the Portfolio’s investments.

    Quoted prices in   Significant        
    active markets   other        
    for identical   observable   Unobservable    
    investments   inputs   inputs    
    (Level 1)   (Level 2)   (Level 3)   Total
   
 
 
 
Long-term municipal bonds   $—       $461,535,849       $—       $461,535,849  
Short-term municipal note   —     6,780,000     —     6,780,000  
   
 
 
 
Total   $—     $468,315,849     $—     $468,315,849  
   
 
 
 

AGC   Associated General Contrators
     
AMBAC   American Municipal Bond Assurance Corporation
     
BHAC   Berkshire Hathaway Assurance Corporation
     
CR   Custodial Receipts
     
FGIC   Financial Guaranty Insurance Company
     
FHA   Federal Housing Authority
     
FSA   Financial Security Assurance
     
IBC   Insured Bond Certificate
     
ICC   International Code Council
     
NATL-RE   National Reinsurance
     
NR   Not Rated
     
XLCA   XL Capital Assurance

For more information regarding the Fund’s other significant accounting policies, please refer to the Fund’s annual report to shareholders dated March 31, 2009.


Item 2. Controls and Procedures.

(a)  The registrant’s principal executive officer and principal financial officer have concluded that the registrant’s disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940, as amended (“Investment Company Act”)) are effective based on their evaluation of these controls and procedures as of a date within 90 days of the filing date of this document.

(b)  The registrant’s principal executive officer and principal financial officer are aware of no changes in the registrant’s internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act) that occurred during the registrant’s last fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.

Item 3. Exhibits.

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


SIGNATURES

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

Insured Municipal Income Fund Inc.

By:   /s/ Kai R. Sotorp
    Kai R. Sotorp
    President
     
Date:   August 28, 2009

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

By:   /s/ Kai R. Sotorp
    Kai R. Sotorp
    President
     
Date:   August 28, 2009
     
By:   /s/ Thomas Disbrow
    Thomas Disbrow
    Vice President and Treasurer
     
Date:   August 28, 2009