INSURED MUNICIPAL INCOME FUND INC.
SEMIANNUAL REPORT
INSURED MUNICIPAL
INCOME FUND INC.
Investment Goal:
High level of current
income exempt from
federal income tax,
consistent with
preservation of capital
Portfolio Manager:
Elbridge T. Gerry, III
Mitchell Hutchins Asset Management Inc.
Commencement:
June 8, 1993
NYSE Symbol:
PIF
Dividend Payments:
Monthly
November 15, 2000
Dear Shareholder,
We are pleased to present you with the semiannual report for the Insured
Municipal Income Fund Inc. (the "Fund") for the six-month period ended September
30, 2000.
MARKET REVIEW
-------------------------------------------------------------------------------
[GRAPHIC OMITTED]
The six-month period ended September 30, 2000 provided a respite from what
had been a difficult time for fixed income investments, as investor concern was
focused on the volatility of the equity markets. Growth and inflation fears
began to subside somewhat as the economy headed toward a hoped-for soft landing.
The Federal Reserve (the "Fed") raised the Fed Funds rate (the rate the Fed
charges for overnight loans) to 6.5% in mid May, and although the Fed continued
to issue warnings that inflation might not yet be tamed, it left interest rates
unchanged in subsequent meetings. Additional uncertainty surrounded the
direction of the economy in the face of this fall's presidential election and
the continued rise in oil prices. As a result, investors turned to the relative
safety of fixed income investments. The Lehman Brothers Municipal Bond Index
returned 3.97% for the period, although new issues still remain flat compared to
recent years.
-------------------------------------------------------------------------------
PORTFOLIO REVIEW
AVERAGE ANNUAL RETURNS, PERIODS ENDED 9/30/00
Net Asset Value Returns Fund(1) Lipper Median(3)
--------------------------------------------------------------------------
6 Months 3.66% 4.02%
1 Year 5.59 5.73
5 Years 6.45 5.40
Since Inception 6/8/93 5.13 5.58
--------------------------------------------------------------------------
Market Price Returns Fund(2) Lipper Median(3)
--------------------------------------------------------------------------
6 Months 7.47% 7.72%
1 Year 6.06 5.60
5 Years 7.99 6.68
Since Inception 6/8/93 3.62 5.18
--------------------------------------------------------------------------
(1) NAV return assumes, for illustration only, that dividends were reinvested at
the net asset value on the payable dates.
(2) Market price return assumes dividends were reinvested under the Dividend
Reinvestment Plan.
(3) Lipper Insured Municipal Debt Funds (Leveraged) Median.
Past performance is no guarantee of future results. The Fund's share price and
investment return will vary so that an investor's shares may be worth more or
less than their original cost. NAV and market price returns for periods of less
than one year are not annualized and do not include brokerage commissions.
-------------------------------------------------------------------------------
1
<PAGE>
SEMIANNUAL REPORT
Share Price, Dividend and Yield 9/30/00
------------------------------------------------
Net Asset Value $14.68
Market Price $12.50
Current-Month Dividend $0.064
12-Mo. Dividend $0.768
Market Yield* 6.14%
NAV Yield* 5.23%
IPO Yield* 5.12%
------------------------------------------------
*Market yield is calculated by multiplying the current month's distribution by
12 and dividing by the month-end market price. NAV yield is calculated by
multiplying the current month's distribution by 12 and dividing by the
month-end net asset value. IPO yield is calculated by multiplying the current
month's distribution by 12 and dividing by the initial public offering price.
Prices and yields will vary.
-------------------------------------------------------------------------------
PORTFOLIO HIGHLIGHTS
-------------------------------------------------------------------------------
The Fund's net asset value returns and market price returns fell just short
of the Lipper peer-group median for the six-month period, although five-year
total returns in both categories outperformed the Lipper returns. Some of the
difference can be attributed to the Fund's weighted average duration (a measure
of a bond portfolio's sensitivity to interest-rate changes), which fell from 6.4
years at March 31, 2000 to 5.7 years at period-end. Shorter average duration
helped the Fund outperform the Lipper averages as interest rates rose repeatedly
prior to this latest period, but provided a slight drag on returns once rates
stabilized.
The Fund's top state holdings -- Illinois, Texas and Pennsylvania continued
to comprise about 40% of the Fund's holdings -- and top sectors remained
relatively unchanged. The one exception, although minor, is the makeup of the
Fund's sectors, where water has supplanted power as the number one sector.
Hospital, sales tax, and general obligation bonds continued to round out the top
five. During the period, the Fund purchased Colorado River Texas Municipal Water
(maturity January 1, 2021) attracted to its discount structure and we believed
mispriced 2003 call.
We continued to shy away from the healthcare and resource recovery sectors
during the period, and we recently avoided debt issued by the airline sector.
OUTLOOK
-------------------------------------------------------------------------------
As we approach 2001, we believe that lack of supply will continue to drive a
demand for municipal bonds, although national elections could alter this outlook
somewhat. If economic growth moderates and inflationary pressures and interest
rates stabilize in response to slowing growth, we will look to the long end of
the yield curve and its potential for solid returns. Should signs point toward
an economic slowdown, we anticipate extending the Fund's weighted average
duration.
In the near term, we believe that continued volatility of equity markets and
investors' search for a combination of security and value will continue to
bolster the municipal bond market.
2
<PAGE>
INSURED MUNICIPAL INCOME FUND INC.
SEMIANNUAL REPORT
PORTFOLIO STATISTICS
Characteristics* 9/30/00 3/31/00
-------------------------------------------------------------------------------
Net Assets ($mm) $452.9 $449.9
Weighted Avg Maturity 13.50 yrs 13.75 yrs
Weighted Avg Duration 5.66 yrs 6.40 yrs
Weighted Avg Coupon 5.84% 5.88%
AMT Paper 0% 0%
Leverage 33% 33%
Callable/Maturing Within Five Years 34.4% 31.3%
Callable/Maturing Beyond Five Years 65.6% 68.7%
-------------------------------------------------------------------------------
Top Ten States* 9/30/00 3/31/00
-------------------------------------------------------------------------------
Illinois 14.7% Illinois 16.1%
Texas 14.5 Texas 12.7
Pennsylvania 10.9 Pennsylvania 10.9
Rhode Island 7.0 Rhode Island 6.9
Nevada 5.7 Nevada 5.7
Indiana 4.8 Indiana 4.7
Kentucky 4.5 Kentucky 4.5
Alabama 3.2 Alabama 3.2
Louisiana 3.2 Louisiana 3.2
New Mexico 3.1 New Mexico 3.1
-------------------------------------------------------------------------------
Total 71.6 Total 71.0
Top Five Sectors* 9/30/00 3/31/00
-------------------------------------------------------------------------------
Water 21.4% Power 21.3%
Power 19.5 Water 19.7
Hospital 18.7 Healthcare 18.7
Sales Tax 11.8 Sales Tax 11.9
General Obligations 8.4 General Obligations 8.6
-------------------------------------------------------------------------------
Total 79.8 Total 80.2
Credit Quality* 9/30/00 3/31/00
-------------------------------------------------------------------------------
SP-1/VMIG-1 0.3% 0.2%
A1/P1 1.1 0.0
AAA/Aaa 98.6 99.8
-------------------------------------------------------------------------------
Total 100.0 100.0
* Weightings represent percentages of net assets as of the dates indicated. The
Fund's portfolio is actively managed and its composition will vary over time.
3
<PAGE>
SEMIANNUAL REPORT
Our ultimate objective in managing your investments is to help you
successfully meet your financial goals. We thank you for your continued support
and welcome any comments or questions you may have. For a QUARTERLY REVIEW on a
fund in the PaineWebber Family of Funds,(4) please contact your Financial
Advisor. For additional information, visit us at www.painewebber.com.
Sincerely,
/s/ BRIAN M. STORMS /s/ ELBRIDGE T. GERRY, III
------------------- --------------------------
Brian M. Storms Elbridge T. Gerry, III
Chief Executive Officer and President Chief Investment Officer--Municipals and
Mitchell Hutchins Asset Management Inc. Short-Term Investment Strategies
Mitchell Hutchins Asset Management Inc.
Portfolio Manager, Insured Municipal
Income Fund Inc.
This letter is intended to assist shareholders in understanding how the Fund
performed during the six-month period ended September 30, 2000, and reflects our
views at the time of its writing. Of course, these views may change in response
to changing circumstances. We encourage you to consult your Financial Advisor
regarding your personal investment program.
(4) Mutual funds are sold by prospectus only. The prospectuses for the
funds contain more complete information regarding risks, charges and
expenses, and should be read carefully before investing.
4
<PAGE>
INSURED MUNICIPAL INCOME FUND INC.
PORTFOLIO OF INVESTMENTS SEPTEMBER 30, 2000 (UNAUDITED)
<TABLE>
<CAPTION>
Principal
Amount Moody's S&P Maturity Interest
(000) Rating Rating Dates Rates Value
--------- ------ ------ ------- -------- -----
<S> <C> <C> <C> <C> <C>
LONG-TERM MUNICIPAL BONDS--97.14%
ALABAMA--3.20%
$ 1,590 Alabama Water Pollution Control Authority--
Revolving Fund Loan Series A (AMBAC Insured) ...........Aaa AAA 08/15/17 6.750 $ 1,704,750
5,400 Birmingham Special Care Facilities Finance Authority--
Birmingham Baptist Medical Center (MBIA Insured) .......Aaa AAA 08/15/23 5.500 5,182,596
8,000 Jefferson County Sewer Revenue Refunding
Water Series A (FGIC Insured) ..........................Aaa AAA 02/01/27 5.375 7,594,800
----------
14,482,146
----------
CALIFORNIA--2.26%
30 California State (FGIC Insured) ..........................Aaa AAA 11/01/12 7.000 33,319
970 California State (Pre-refunded with U.S. Government
Securities to 11/01/04 @ 102) (FGIC Insured) ...........Aaa AAA 11/01/12 7.000 1,088,165
1,585 Contra Costa Water District (FGIC Insured) ...............Aaa AAA 10/01/13 6.000 1,654,645
5,000 Los Angeles County Sales Tax Commission--
Sales Tax Revenue Series B (FGIC Insured) ..............Aaa AAA 07/01/15 6.500 5,176,200
2,250 Los Angeles Wastewater System (MBIA Insured) .............Aaa AAA 06/01/20 5.700 285,708
-----------
10,238,037
-----------
DELAWARE--2.22%
10,000 Delaware State Economic Development Authority
Delmarva Power (MBIA Insured) ..........................Aaa AAA 06/01/21 5.900 10,068,700
-----------
DISTRICT OF COLUMBIA--0.91%
4,000 District of Columbia Hospital Revenue Bonds--
Medlantic Health Care Group (MBIA Insured)............. Aaa AAA 08/15/14 5.750 4,135,840
----------
ILLINOIS--14.46%
4,000 Illinois Development Finance Authority Pollution Refunding
Commonwealth Edison Company Project
Series D (AMBAC Insured) .............................. Aaa AAA 03/01/15 6.750 4,327,160
4,500 Illinois Health Facilities Authority Franciscan Sisters
Health Care (MBIA Insured) ............................ Aaa AAA 09/01/18 5.750 4,632,165
3,000 Illinois Municipal Electric Agency (AMBAC Insured) ...... Aaa AAA 02/01/21 5.750 3,072,540
8,000 Central Lake County Joint Action Water Agency
(FGIC Insured) .........................................Aaa AAA 05/01/20 5.375 7,695,120
17,220 Chicago 911 System (FGIC Insured) ....................... Aaa AAA 01/01/23 5.625 17,918,615
11,400 Chicago--O'Hare International Airport (MBIA Insured) .... Aaa AAA 01/01/15 5.500 to 6.375 11,938,572
4,600 Chicago Public Building Commission (MBIA Insured) ....... Aaa AAA 12/01/18 5.750 4,836,578
8,000 Regional Transportation Authority (AMBAC Insured) ....... Aaa AAA 06/01/22 6.125 8,208,240
2,750 Regional Transportation Authority (FGIC Insured) ........ Aaa AAA 06/01/23 to 06/01/25 5.850 to 7.100 2,836,425
----------
65,465,415
----------
INDIANA--4.77%
2,500 Indiana Health Facilities Finance Authority--
Columbus Regional Hospital (CGIC Insured) ............. Aaa AAA 08/15/22 5.500 2,401,550
</TABLE>
5
<PAGE>
INSURED MUNICIPAL INCOME FUND INC.
<TABLE>
<CAPTION>
Principal
Amount Moody's S&P Maturity Interest
(000) Rating Rating Dates Rates Value
--------- ------ ------ ------- -------- -----
<S> <C> <C> <C> <C> <C>
LONG-TERM MUNICIPAL BONDS--(CONTINUED)
INDIANA--(CONCLUDED)
$ 7,835 Indianapolis Gas & Utilities (FGIC Insured)...............Aaa AAA 06/01/21 5.375% $ 7,509,064
12,000 Marion County Convention Center (AMBAC Insured).......... Aaa AAA 06/01/21 5.500 11,667,120
-----------
21,577,734
-----------
IOWA--1.01%
4,625 Ames Hospital Authority--Mary Greeley Medical Center
(AMBAC Insured)........................................ Aaa AAA 08/15/22 5.750 4,589,943
-----------
KENTUCKY--4.49%
1,150 Kentucky Development Finance Authority Hospital
Revenue--St. Luke Hospital Incorporated
Series A (MBIA Insured)................................ Aaa AAA 10/01/21 7.000 1,201,577
17,530 Louisville & Jefferson County (AMBAC Insured)............ Aaa AAA 05/15/24 to 05/15/25 6.500 to 6.750 19,140,172
-----------
20,341,749
-----------
LOUISIANA--3.15%
10,500 Louisiana Public Facilities Authority--
Alton Oschner Hospital (MBIA Insured).................. Aaa AAA 05/15/11 to 05/15/17 5.750 to 6.000 10,603,555
1,710 Louisiana Public Facilities Authority--
Tulane University (FGIC Insured) Aaa AAA 02/15/18 5.750 1,721,696
1,870 Louisiana Public Facilities Authority--Tulane University
(Pre-refunded with U.S.Government Securities to
02/15/03 @ 102) (FGIC Insured)........................ Aaa AAA 02/15/18 5.750 1,953,963
-----------
14,279,214
-----------
MAINE--2.04%
3,105 Maine Health & Higher Educational Facilities
Authority Revenue (FSA Insured)....................... Aaa AAA 07/01/23 5.500 2,980,241
4,785 Maine Health & Higher Educational Facilities
Authority Revenue (Pre-refunded with
U.S. Government Securities to 07/01/12 @100)
(FSA Insured).......................................... Aaa AAA 07/01/23 5.500 4,610,252
1,500 Maine Health & Higher Educational Facilities
Authority Revenue (Pre-refunded with U.S.
Government Securities to 07/01/04 @ 102)
(FSA Insured)........................................... Aaa AAA 07/01/24 7.000 1,648,560
-----------
9,239,053
-----------
MASSACHUSETTS--2.29%
10,000 Massachusetts State Health & Educational Facility
Brigham & Woman's Hospital (MBIA Insured)................Aaa AAA 07/01/24 6.750 10,369,200
-----------
MICHIGAN--1.55%
7,020 Michigan State Housing Finance Authority
(AMBAC Insured)........................................ Aaa AAA 04/01/23 5.900 7,020,000
-----------
</TABLE>
6
<PAGE>
INSURED MUNICIPAL INCOME FUND INC.
<TABLE>
<CAPTION>
Principal
Amount Moody's S&P Maturity Interest
(000) Rating Rating Dates Rates Value
--------- ------ ------ ------- -------- -----
<S> <C> <C> <C> <C> <C>
LONG-TERM MUNICIPAL BONDS--(CONTINUED)
NEVADA--5.71%
$ 7,750 Clark County Airport-McCarran International Airport
(AMBAC Insured)........................................ Aaa AAA 07/01/22 6.000% $ 8,092,240
4,000 Clark County General Obligation Bonds
(AMBAC Insured).........................................Aaa AAA 06/01/16 6.000 4,096,600
2,000 Clark County Sanitation District (FGIC Insured)...........Aaa AAA 07/01/11 5.700 2,049,060
11,500 Washoe County Gas and Water Sierra Power
(MBIA Insured)......................................... Aaa AAA 06/01/23 5.900 11,608,100
-----------
25,846,000
-----------
NEW HAMPSHIRE--1.31%
5,000 New Hampshire Higher Education & Health Authority--
Lakes Region Hospital (FGIC Insured).................. Aaa AAA 01/01/17 5.500 4,925,650
1,000 New Hampshire Higher Education & Health Authority--
University of New Hampshire (MBIA Insured)............ Aaa AAA 07/01/24 5.750 1,000,390
-----------
5,926,040
-----------
NEW JERSEY--1.17%
5,000 Salem County Industrial Pollution Control Refunding
Public Service Electric and Gas Series D
(MBIA Insured)......................................... Aaa AAA 10/01/29 6.550 5,306,600
-----------
NEW MEXICO--3.12%
8,850 Gallup Pollution Control Revenue Plains Electric
(MBIA Insured)........................................ Aaa AAA 08/15/17 6.650 9,166,034
4,700 Santa Fe Water Revenue (AMBAC Insured)................... Aaa AAA 06/01/24 6.300 4,966,772
-----------
14,132,806
-----------
NEW YORK--1.16%
2,115 New York Series J (MBIA Insured)......................... Aaa AAA 08/01/13 5.375 2,141,438
1,250 New York State Thruway Authority Highway & Bridge
Trust Fund Series C (FGIC Insured).................... Aaa AAA 04/01/10 5.250 1,283,888
2,000 Long Island Power Authority New York Electric Systems
Revenue General Series A (FSA Insured).................Aaa AAA 12/01/22 5.125 1,844,300
-----------
5,269,626
-----------
OHIO--0.73%
3,000 Cleveland Public Power Systems Revenue--
First Mortgage Series A (MBIA Insured)................ Aaa AAA 11/15/24 7.000 3,322,200
-----------
PENNSYLVANIA--10.89%
16,435 Pennsylvania Intergovernmental Cooperative Authority
(MBIA Insured)......................................... Aaa AAA 6/15/15 to 06/15/23 5.600 to 5.625 16,885,949
2,675 Pennsylvania Intergovernmental Cooperative Authority
Philadelphia Funding Program (FGIC Insured)........... Aaa AAA 06/15/14 7.000 2,941,537
6,130 North Wales Water Authority (FGIC Insured)............... Aaa AAA 11/01/16 5.500 6,033,330
2,000 Philadelphia Pennsylvania (FSA Insured).................. Aaa AAA 3/15/13 to 03/15/14 5.250 1,990,450
</TABLE>
7
<PAGE>
INSURED MUNICIPAL INCOME FUND INC.
<TABLE>
<CAPTION>
Principal
Amount Moody's S&P Maturity Interest
(000) Rating Rating Dates Rates Value
--------- ------ ------ ------- -------- -----
<S> <C> <C> <C> <C> <C>
LONG-TERM MUNICIPAL BONDS--(CONTINUED)
PENNSYLVANIA--(CONCLUDED)
$ 3,750 Philadelphia Pennsylvania School District Series A
(MBIA Insured)........................................ Aaa AAA 04/01/16 5.250% $ 3,664,500
10,530 Philadelphia Water & Waste Water Revenue
(FSA Insured) ........................................ Aaa AAA 06/15/15 5.500 10,546,321
6,970 Philadelphia Water & Waste Water Revenue
(Pre-refunded with U.S. Government Securities to
06/15/03 @102) (FSA Insured).......................... Aaa AAA 06/15/15 5.500 7,259,952
-----------
49,322,039
-----------
RHODE ISLAND--6.97%
14,000 Rhode Island Convention Center Authority
(AMBAC Insured)........................................ Aaa AAA 05/15/27 5.750 13,919,640
10,000 Rhode Island Depositors Economic Protection
Corporation (FSA Insured) Aaa AAA 08/01/14 5.750 10,516,900
7,000 Rhode Island Depositors Economic Protection
Corporation (Pre-refunded with U.S.
Government Securities to 02/01/11 @ 100)
(MBIA Insured)......................................... Aaa AAA 08/01/21 5.250 7,122,500
-----------
31,559,040
-----------
SOUTH CAROLINA--2.33%
8,000 South Carolina Public Services Authority
(MBIA Insured)......................................... Aaa AAA0 07/01/21 to 07/01/31 5.500 to 6.000 7,896,890
2,625 Charleston County Hospital Facilities Authority--
Bon Secours Health System (FSA Insured)............... Aaa AAA 08/15/25 5.625 2,645,396
-----------
10,542,286
----------
TENNESSEE--1.11%
5,000 Sullivan County Health Education and Housing
Facilities Board--Holston Valley Health
(MBIA Insured)......................................... Aaa AAA 02/15/20 5.750 5,005,350
-----------
TEXAS--14.43%
7,000 Austin Utilities System (AMBAC Insured).................. Aaa AAA 11/15/16 5.750 7,035,560
7,945 Bexar Metropolitan Water District
Waterworks Systems Revenue (MBIA Insured)............. Aaa AAA 05/01/22 5.875 8,024,371
5,730 Bexar Metropolitan Water District
Waterworks Systems Revenue (Pre-refunded with
U.S. Government Securities to 05/01/05 @102)
(MBIA Insured)........................................ NR AAA 05/01/22 5.875 6,112,076
8,720 Colorado River Texas Municipal Water District
Revenue (AMBAC Insured)............................... Aaa AAA 01/01/21 5.150 8,033,300
</TABLE>
8
<PAGE>
INSURED MUNICIPAL INCOME FUND INC.
<TABLE>
<CAPTION>
Principal
Amount Moody's S&P Maturity Interest
(000) Rating Rating Dates Rates Value
--------- ------ ------ ------- -------- -----
<S> <C> <C> <C> <C> <C>
LONG-TERM MUNICIPAL BONDS--(CONTINUED)
TEXAS--(CONCLUDED)
$ 7,000 Houston Water and Sewer Systems Revenue
Junior Lien Series C (FGIC Insured)................... Aaa AAA 12/01/22 5.250% $ 6,588,960
3,620 Lower Colorado River Authority Texas Revenue
Refunding............................................. Aaa AAA 05/15/13 6.000 3,834,087
10,000 Lubbock Health Facilities--Methodist Hospital
(AMBAC Insured)........................................ Aaa AAA 12/01/22 5.900 10,582,200
9,005 Matagorda County Navigation District 1 Revenue--
Houston Light & Power (AMBAC Insured)....................Aaa AAA 03/01/27 6.700 9,385,101
4,955 San Antonio Water Revenue (MBIA Insured)................. Aaa AAA 05/15/16 6.000 5,007,517
720 San Antonio Water Revenue
(Pre-refunded with U.S. Government Securities
to 05/15/11 @100) (MBIA Insured)...................... Aaa AAA 05/15/16 6.000 765,828
-----------
65,369,000
-----------
WASHINGTON--2.09%
4,000 Washington State Health Care Facilities--
Tacoma Hospital (FGIC Insured).........................Aaa AAA 08/15/22 5.750 4,163,160
5,000 Metropolitan Seattle Sewer (MBIA Insured)................ Aaa AAA 01/01/33 6.300 5,276,600
-----------
9,439,760
-----------
WEST VIRGINIA--2.71%
2,245 West Virginia State Water Development Authority
(FSA Insured).......................................... Aaa AAA 11/01/29 5.750 2,235,436
10,000 Marshall County Pollution Authority Ohio Power
(MBIA Insured)......................................... Aaa AAA 04/01/22 5.900 10,056,400
-----------
12,291,836
-----------
WISCONSIN--1.06%
1,500 Wisconsin Health & Educational Facilities--
Bellin Memorial Hospital (AMBAC Insured).............. Aaa AAA 02/15/19 5.500 1,456,035
3,500 Wisconsin State Health & Educational Facilities--
Hospital Sisters Health System (MBIA Insured)......... Aaa AAA 06/01/18 5.375 3,351,530
-----------
4,807,565
-----------
Total Long-Term Municipal Bonds (cost--$425,899,870) .............. 439,947,179
-----------
SHORT-TERM MUNICIPAL NOTES--1.40%
ALASKA--0.02%
100 Valdez Alaska Marine Term Revenue
Refunding--Exxon Pipeline Company Project C .......... VMIG-1 A1+ 10/02/00 5.500* 100,000
-----------
</TABLE>
9
<PAGE>
INSURED MUNICIPAL INCOME FUND INC.
<TABLE>
<CAPTION>
Principal
Amount Moody's S&P Maturity Interest
(000) Rating Rating Dates Rates Value
--------- ------ ------ ------- -------- -----
<S> <C> <C> <C> <C> <C>
SHORT-TERM MUNICIPAL NOTES--(CONTINUED)
GEORGIA--0.27%
$ 500 Burke County Georgia Development Authority Pollution
Control Revenue--Georgia Power Company.................VMIG-1 A1 10/02/00 5.600%* $ 500,000
700 Hapeville Georgia Development Authority Industrial
Development Revenue--Hapeville Hotel Limited........... P1 NR 10/02/00 5.550* 700,000
-----------
1,200,000
-----------
ILLINOIS--0.24%
800 Chicago--O'Hare International Airport Revenue--
American Airline Series B............................. P1 NR 10/02/00 5.600* 800,000
300 Joliet Regional Port District Marine Terminal
Refunding--Exxon Project.............................. P1 A1+ 10/02/00 5.500* 300,000
-----------
1,100,000
-----------
MASSACHUSETTS--0.02%
100 Massachusetts Health and Education Facilities Authority
Revenue (MBIA Insured)................................ VMIG-1 A1+ 10/02/00 5.550* 100,000
-----------
NEW JERSEY--0.63%
2,540 New Jersey Economic Development Authority Revenue
Refunding--Avalon Hotel Associates.................... NR A1 10/02/00 5.250* 2,540,000
300 New Jersey Economic Development Authority Revenue
Refunding--El Dorado Terminals Series A............... P1 NR 10/02/00 5.600* 300,000
-----------
2,840,000
-----------
NEW YORK--0.04%
100 New York Series A-8...................................... VMIG-1 A1+ 10/02/00 5.550* 100,000
100 New York City Municipal Water Finance Authority.......... VMIG-1 A1+ 10/02/00 5.550* 100,000
----------
200,000
----------
TEXAS--0.04%
100 Guadalupe-Blanco River Authority
Pollution Control Revenue............................... VMIG-1 A1+ 10/02/00 5.550* 100,000
100 Harris County Texas Health Facilities Development
Corporation Revenue--Young Mens Christian Association.... VMIG-1 NR 10/02/00 5.600* 100,000
----------
200,000
==========
</TABLE>
10
<PAGE>
INSURED MUNICIPAL INCOME FUND INC.
<TABLE>
<CAPTION>
Principal
Amount Moody's S&P Maturity Interest
(000) Rating Rating Dates Rates Value
--------- ------ ------ ------- -------- -----
<S> <C> <C> <C> <C> <C>
SHORT-TERM MUNICIPAL NOTES--(CONCLUDED)
Wisconsin--0.14%
$ 300 La Crosse Wisconsin Pollution Control Revenue--
Refunding Dairyland Power Cooperative A
(AMBAC Insured)........................................VMIG-1 A1+ 10/02/00 5.550%* $ 300,000
300 La Crosse Wisconsin Pollution Control Revenue--
Refunding Dairyland Power Cooperative C
(AMBAC Insured)........................................ VMIG-1 A1+ 10/02/00 5.550* 300,000
-----------
600,000
-----------
Total Short-Term Municipal Notes (cost--$6,340,000)................ 6,340,000
-----------
Total Investments (cost--$432,239,870)--98.54%..................... 446,287,179
Other assets in excess of liabilities--1.46%....................... 6,621,235
-----------
Net Assets--100.00%................................................. $452,908,414
============
</TABLE>
--------
* 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, 2000.
NR--Not Rated.
AMBAC--American Municipal Bond Assurance Corporation.
CGIC--Capital Guaranty Insurance Company.
FGIC--Financial Guaranty Insurance Company.
FSA --Financial Security Assurance Incorporated.
MBIA--Municipal Bond Investors Assurance.
See accompanying notes to financial statements
11
<PAGE>
INSURED MUNICIPAL INCOME FUND INC. SEMIANNUAL REPORT
STATEMENT OF ASSETS AND LIABILITIES SEPTEMBER 30, 2000 (UNAUDITED)
<TABLE>
ASSETS:
<S> <C>
Investments in securities, at value (cost--$432,239,870) ......................................... $ 446,287,179
Cash ............................................................................................. 34,392
Interest receivable .............................................................................. 7,436,189
Other assets ..................................................................................... 3,978
-------------
Total assets ..................................................................................... 453,761,738
-------------
LIABILITIES:
Dividends payable to preferred shareholders ...................................................... 289,035
Payable to investment adviser and administrator .................................................. 290,293
Accrued expenses and other liabilities ........................................................... 273,996
-------------
Total liabilities ................................................................................ 853,324
-------------
NET ASSETS:
Auction Preferred Shares Series A, B, C & D--3,000 non-participating shares authorized,
issued and outstanding; $0.001 par value; $50,000 liquidation value per share ................. 150,000,000
-------------
Common Stock--$0.001 par value; total authorized shares--199,997,000;
20,628,363 shares issued and outstanding ...................................................... 302,699,678
Undistributed net investment income .............................................................. 586,399
Accumulated net realized loss from investment transactions ....................................... (14,424,972)
Net unrealized appreciation of investments ....................................................... 14,047,309
--------------
Net assets applicable to common shareholders ..................................................... 302,908,414
-------------
Total net assets ................................................................................. $ 452,908,414
==============
Net asset value per common share ($302,908,414 applicable to 20,628,363 common shares outstanding) $14.68
======
</TABLE>
See accompanying notes to financial statements
12
<PAGE>
INSURED MUNICIPAL INCOME FUND INC.
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED
SEPTEMBER 30, 2000
(UNAUDITED)
------------------
INVESTMENT INCOME:
<S> <C>
Interest ........................................................ $ 12,930,554
------------
EXPENSES:
Investment advisory and administration .......................... 2,031,245
Auction Preferred Shares expenses ............................... 175,633
Custody and accounting .......................................... 110,426
Professional fees ............................................... 49,398
Reports and notices to shareholders ............................. 31,653
Transfer agency and service fees ................................ 17,013
Directors' fees ................................................. 5,250
Other expenses .................................................. 11,373
------------
2,431,991
Less: Fee waiver and reimbursement from adviser and administrator (282,139)
------------
Net expenses .................................................... 2,149,852
------------
Net investment income ........................................... 10,780,702
------------
Realized and unrealized gains from investment activities:
Net realized gains from investment transactions ................. 385,787
Net change in unrealized appreciation/depreciation of investments 3,118,265
------------
Net realized and unrealized gains from investment activities .... 3,504,052
------------
Net increase in net assets resulting from operations ............ $ 14,284,754
============
</TABLE>
See accompanying notes to financial statements
13
<PAGE>
INSURED MUNICIPAL INCOME FUND INC.
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED FOR THE YEAR
SEPTEMBER 30, 2000 ENDED
(UNAUDITED) MARCH 31, 2000
------------------ --------------
FROM OPERATIONS:
<S> <C> <C>
Net investment income ......................................................... $ 10,780,702 $ 21,445,731
Net realized gains (losses) from investment transactions ...................... 385,787 (22,336)
Net change in unrealized appreciation/depreciation of investments ............. 3,118,265 (21,741,401)
------------- ------------
Net increase (decrease) in net assets resulting from operations ............... 14,284,754 (318,006)
------------- ------------
DIVIDENDS FROM:
Net investment income--common stockholders .................................... (7,921,291) (15,842,583)
Net investment income--preferred stockholders ................................. (3,331,096) (5,324,084)
------------ ------------
Total dividends to stockholders ............................................... (11,252,387) (21,166,667)
------------ ------------
Net increase (decrease) in net assets ......................................... 3,032,367 (21,484,673)
NET ASSETS:
Beginning of period ........................................................... 449,876,047 471,360,720
------------ ------------
End of period (including undistributed net investment income of $586,399 and
$1,058,084, respectively) ..................................................... $452,908,414 $449,876,047
============ ============
</TABLE>
See accompanying notes to financial statements
14
<PAGE>
INSURED MUNICIPAL INCOME FUND INC
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED
SEPTEMBER 30, 2000
(UNAUDITED)
------------------
<S> <C>
CASH FLOWS PROVIDED BY OPERATING ACTIVITIES:
Interest received ........................................................ $ 12,925,623
Expenses paid (net of fee waivers) ....................................... (2,162,988)
Purchase of short-term portfolio investments, net ........................ (5,230,000)
Purchase of long-term portfolio investments .............................. (12,594,749)
Sale of long-term portfolio investments .................................. 18,346,399
------------
Net cash flows provided by operating activities .......................... 11,284,285
------------
CASH FLOWS USED IN FINANCING ACTIVITIES:
Dividends paid from net investment income to common stockholders ......... (7,921,291)
Dividends paid from net investment income to preferred stockholders ...... (3,369,614)
------------
Net cash flows used in financing activities .............................. (11,290,905)
------------
Net decrease in cash ..................................................... (6,620)
Cash at beginning of period .............................................. 41,012
------------
Cash at end of period .................................................... $ 34,392
============
RECONCILIATION OF NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS
TO NET CASH FLOWS PROVIDED BY OPERATING ACTIVITIES:
Net increase in net assets resulting from operations ..................... $ 14,284,754
------------
Increase in investments, at value ........................................ (3,046,774)
Decrease in interest receivable .......................................... 59,441
Decrease in other assets ................................................. 2
Decrease in payable to investment adviser and administrator .............. (2,772)
Decrease in accrued expenses and other liabilities ....................... (10,366)
------------
Total adjustments ........................................................ (3,000,469)
------------
Net cash flows provided by operating activities .......................... $ 11,284,285
============
</TABLE>
See accompanying notes to financial statements
15
<PAGE>
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 as a closed-end diversified management investment company.
The preparation of financial statements in accordance with accounting
principles generally accepted in the United States requires Fund 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 for its portfolio securities. The Fund normally obtains
market values for its securities from independent pricing sources. Independent
pricing sources may use reported last sale prices, current market quotations or
valuations from computerized "matrix" systems that derive values based on
comparable securities. Securities traded in the over-the-counter ("OTC") market
and listed on The Nasdaq Stock Market, Inc. ("Nasdaq") normally are valued at
the last sale price on Nasdaq prior to valuation. Other OTC securities are
valued at the last bid price available prior to valuation. Securities which are
listed on U.S. and foreign stock exchanges normally are valued at the last sale
price on the day the securities are valued or, lacking any sales on such day, at
the last available bid price. In cases where securities are traded on more than
one exchange, the securities are valued on the exchange designated as the
primary market by Mitchell Hutchins Asset Management Inc. ("Mitchell Hutchins"),
the investment adviser and administrator of the Fund. Mitchell Hutchins is a
wholly owned asset management subsidiary of PaineWebber Incorporated
("PaineWebber"), which is a wholly owned indirect subsidiary of UBS AG. 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").
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 determines that this does not represent
fair value.
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 securities.
DIVIDENDS AND DISTRIBUTIONS--The Fund intends to pay monthly cash dividends
to common stockholders at a level rate 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 preferred stock. Dividends and
distributions to common stockholders are recorded on the ex-dividend date.
Dividends to preferred stockholders are accrued daily. Dividends from net
investment income and distributions from realized capital gains from investment
transactions are determined in accordance with federal income tax regulations
which may differ from 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 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 ADVISER AND ADMINISTRATOR
The Fund's board has approved an investment advisory and administration
contract ("Advisory Contract") with Mitchell
16
<PAGE>
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
Hutchins, under which Mitchell Hutchins serves as investment adviser and
administrator of the Fund. In accordance with the Advisory Contract, Mitchell
Hutchins receives compensation from the Fund, computed weekly and paid monthly,
at the annual rate of 0.90% of the Fund's average weekly net assets. For the six
months ended September 30, 2000, Mitchell Hutchins voluntarily waived $282,139
in investment advisory and administration fees from the Fund.
INVESTMENTS IN SECURITIES
For federal income tax purposes, the cost of securities owned at September
30, 2000 was substantially the same as the cost of securities for financial
statement purposes.
At September 30, 2000, the components of the net unrealized appreciation of
investments were as follows:
<TABLE>
<S> <C>
Gross appreciation (from investments having an excess of value over cost)..... $14,876,662
Gross depreciation (from investments having an excess of cost over value)..... (829,353)
-----------
Net unrealized appreciation of investments ............................... $14,047,309
===========
</TABLE>
For the six months ended September 30, 2000, total aggregate purchases and
sales of portfolio securities, excluding short-term securities, were $12,594,749
and $18,346,399, 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,
capital gains and certain other amounts, if any, the Fund intends not to be
subject to a federal excise tax.
At March 31, 2000, the Fund had a net capital loss carryforward of
$14,774,575 which is available as a reduction, to the extent provided in the
regulations, of future net realized capital gains and will expire by March 31,
2003. To the extent that such losses are used to offset future capital gains, it
is probable that the gains so offset will not be distributed.
CAPITAL STOCK
COMMON STOCK--There are 199,997,000 shares of $0.001 par value common stock
authorized. Of the 20,628,363 common shares outstanding, 18,386 shares are owned
by Mitchell Hutchins.
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 and 600 shares of Auction
Preferred Shares, Series D, 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, which are cumulative, are generally reset every 364 days for APS
Series A, 28 days for APS Series B, three months for APS Series C and 7 days for
APS Series D. Dividend rates ranged from 3.700% to 6.000% for the six months
ended September 30, 2000.
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 preferred shares will vote separately as a class on certain matters, as
required by law. The holders of the preferred shares have the right to elect two
directors of the Fund.
17
<PAGE>
INSURED MUNICIPAL INCOME FUND INC.
FINANCIAL HIGHLIGHTS
Selected data for a share of common stock outstanding throughout each period
is presented below:
<TABLE>
<CAPTION>
FOR THE
SIX MONTHS
ENDED FOR THE YEARS ENDED MARCH 31,
SEPTEMBER 30, 2000 ----------------------------------------------------
(UNAUDITED) 2000 1999 1998 1997 1996
----------- ---- ----- ---- ----- -----
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period ........................ $ 14.54 $ 15.58 $ 15.40 $ 14.10 $ 14.11 $ 13.42
-------- -------- -------- -------- -------- -------
Net investment income ....................................... 0.52 1.04 1.02 1.03 1.05 1.06
Net realized and unrealized gains (losses) from investments . 0.16 (1.05) 0.18 1.30 (0.03) 0.67
-------- -------- -------- -------- -------- -------
Net increase (decrease) from investment operations .......... 0.68 (0.01) 1.20 2.33 1.02 1.73
-------- -------- -------- -------- -------- --------
Dividends:
From net investment income--common stockholders ........... (0.38) (0.77) (0.77) (0.77) (0.77) (0.76)
From net investment income--preferred stockholders ........ (0.16) (0.26) (0.25) (0.26) (0.26) (0.28)
-------- -------- -------- -------- -------- -------
Total dividends to stockholders ............................. (0.54) (1.03) (1.02) (1.03) (1.03) (1.04)
-------- -------- -------- -------- -------- -------
Net asset value, end of period .............................. $ 14.68 $ 14.54 $ 15.58 $ 15.40 $ 14.10 $ 14.11
======= ======== ======== ======== ======== ========
Per share market value, end of period ....................... $ 12.50 $ 12.00 $ 14.25 $ 13.56 $ 12.00 $ 12.13
======= ======== ======== ======== ======== ========
Total investment return(1) .................................. 7.47% (10.49) 10.96% 19.70% 5.45% 16.13%
======= ======== ======== ======== ======== =========
Ratios to average net assets attributable to common shares:
Total expenses net of waivers from adviser ............... 1.43%* 1.44% 1.46% 1.49% 1.38% 1.33%
Total expenses before waivers from adviser ............... 1.62%* 1.63% 1.65% 1.74% 1.76% 1.65%
Net investment income before preferred stock dividends ... 7.16%* 7.05% 6.58% 6.84% 7.37% 7.45%
Preferred stock dividends ................................ 2.21%* 1.75% 1.60% 1.75% 1.81% 1.97%
Net investment income available to common stockholders ... 4.95%* 5.30% 4.98% 5.09% 5.56% 5.48%
Supplemental data:
Net assets, end of period (000's) ........................ $452,908 $449,876 $471,361 $467,761 $440,758 $441,040
Portfolio turnover rate .................................. 3% 8% 5% 6% 0% 4%
Asset coverage per share of preferred stock, end of
period................................................... $150,969 $149,959 $157,120 $155,920 $146,919 $147,013
</TABLE>
---------------
* Annualized
(1) Total investment return is calculated assuming a purchase of common
stock at the current market price on the first day 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
stockholders at prices obtained under the Fund's Dividend Reinvestment
Plan. Total investment return for the period of less than one year has
not been annualized. Total investment return does not reflect brokerage
commissions.
18
<PAGE>
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 YorkStock 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 investment adviser and administrator is Mitchell Hutchins
Asset Management Inc., a wholly owned asset management subsidiary of PaineWebber
Incorporated, which has over $68 billion in assets under management as of
October 31, 2000.
SHAREHOLDER INFORMATION
The Fund's NYSE trading symbol is "PIF." Weekly comparative net asset value
and market price information about the Fund is published each Monday in THE WALL
STREET JOURNAL, each Sunday in THE NEW YORK TIMES and each week in BARRON'S, as
well as in numerous other newspapers.
An annual meeting of shareholders of the Fund was held on July 20, 2000. At
the meeting Margo N. Alexander, Richard Q. Armstrong, E. Garrett Bewkes, Jr.,
Richard R. Burt, Mary C. Farrell, Meyer Feldberg, George W. Gowen, Frederic V.
Malek, and Carl W. Schafer and Brian M. Storms were elected to serve as
directors until the next annual meeting of shareholders, or until their
successors are elected and qualified; and Ernst & Young, LLP was ratified as
independent auditors for the Fund for the fiscal year ended March 31, 2001. Such
shares represent 96.79% of the outstanding shares of common stock of the Fund
entitled to vote at this meeting, including a quorum of the Fund's APS with
respect to the election of the two directors to be elected by the APS, and
constitute a quorum for the conduct of business at this meeting. The following
shares were voted for the proposal indicated below:
ALL SHARES VOTING AS A SINGLE CLASS:
PROPOSAL 1
-----------
Shares Voted For as
To Vote for or Against Shares a % of Total Shares Withhold
the Election of: Voted for Shares Voted Authority
--------- ------------------ ---------------
Richard Q. Armstrong ...... 19,548,598 97.90% 419,476
E. Garrett Bewkes, Jr. .... 19,514,865 97.73 453,207
Richard R. Burt ........... 19,553,246 97.92 414,828
Mary C. Farrell ........... 19,529,343 97.82 435,876
George W. Gowen ........... 19,532,197 97.78 443,610
Frederick V. Malek ........ 19,542,994 97.87 425,079
Carl W. Schafer ........... 19,552,120 97.92 415,952
Brian M. Storms ........... 19,554,024 97.93 414,049
19
<PAGE>
INSURED MUNICIPAL INCOME FUND INC.
GENERAL INFORMATION (CONCLUDED)
PROPOSAL 2
-----------
<TABLE>
<CAPTION>
Shares Voted For as
Shares a % of Total Shares Voted Shares
Voted for Shares Voted Against Abstain
----------- -------------------- ------------- ------------
<S> <C> <C> <C> <C>
Ratification of the selection
of Ernst & Young LLP as
the independent auditors of
Insured Municipal Income
Fund Inc. for the fiscal year
ending March 31, 2001 19,810,991 99.23% 71,654 82,572
</TABLE>
AUCTION PREFERRED SHARES:
PROPOSAL 3
----------
<TABLE>
<CAPTION>
Shares Voted For as
To vote for or against Shares a % of Total Shares Withhold
the election of: Voted for Shares Voted Authority
---------- ------------------- ----------------
<S> <C> <C> <C>
Margo N. Alexander ...................... 2,855 100.00% --
Meyer Feldberg .......................... 2,814 98.56 41
</TABLE>
DISTRIBUTION POLICY
The Fund's Board of Directors has established a Dividend Reinvestment Plan
(the "Plan") under which all common stockholders whose shares are registered in
their own names, or in the name of PaineWebber Incorporated or its nominee, have
all dividends and other distributions on their shares of common stock
automatically reinvested in additional shares of common stock, unless such
common stockholders elect to receive cash.Common stockholders 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 stockholders to participate in the Plan may change if their
shares are transferred into the name of another broker or nominee. A stockholder
may elect not to participate in the Plan or may terminate participation in the
Plan at any time without penalty, and stockholders who have previously
terminated participation in the Plan may rejoin at any time.
Changes in elections must be made in writing to the Fund's transfer agent
and should include the stockholder's name and address as they appear on that
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 stockholder 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, 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 stockholder 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 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. See "Tax Information."
Additional information regarding the Plan may be obtained from, and all
correspondence concerning the Plan should be directed to, the transfer agent at
PNCBank, National Association, c/o PFPC Inc., P.O. Box 8030, Boston, MA
02266-8030.
20
<PAGE>
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21
<PAGE>
[This Page Intentionally Left Blank]
22
<PAGE>
------------------------------------------------------------------------------
DIRECTORS
E. Garrett Bewkes, Jr. Meyer Feldberg
Chairman George W. Gowen
Margo N. Alexander Frederic V. Malek
Richard Q. Armstrong Carl W. Schafer
Richard R. Burt Brian M. Storms
PRINCIPAL OFFICERS
Brian M. Storms Paul H. Schubert
President Vice President and Treasurer
Amy R. Doberman Elbridge T. Gerry, III
Vice President Vice President
Dianne E. O'Donnell
Vice President and Secretary
INVESTMENT ADVISER AND
ADMINISTRATOR
MITCHELL HUTCHINS ASSET MANAGEMENT INC.
51 WEST 52ND STREET
NEW YORK, NEW YORK 10019-6114
THE FINANCIAL INFORMATION INCLUDED HEREIN IS TAKEN FROM RECORDS OF THE FUND
WITHOUT EXAMINATION BY INDEPENDENT AUDITORS 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 THE USE IN THE
PURCHASE OR SALE OF SHARES OF THE FUND OR OF ANY SECURITIES MENTIONED IN THIS
REPORT.
<PAGE>
---------------------------------
INSURED
MUNICIPAL
INCOME FUND
INC.
S E M I A N N U A L R E P O R T
SEPTEMBER 30, 2000
PAINEWEBBER
(c) PaineWebber Incorporated
All rights reserved.
