INSURED MUNICIPAL INCOME FUND INC. ANNUAL REPORT
May 15, 2000
Dear Shareholder,
We are pleased to present you with the annual report for Insured Municipal
Income Fund Inc. (the "Fund") for the fiscal year ended March 31, 2000.
MARKET REVIEW
================================================================================
[graphic omitted] The Fund's fiscal year was a difficult time for all fixed
income investors, including municipal investors. A number of
negative factors impacted municipal bonds: rising interest
rates, diversion of investment into technology stocks, surges of bond issuance
brought on by Y2K worries, and finally, the disruption caused by the U.S.
Treasury's announcement of a $30 billion buyback of long-term debt for
calendar-year 2000. In the final months of the fiscal year, however, new
issuance dropped off due to lack of economically feasible refundings and
municipality budget surpluses. Strong municipal price performance resulted from
the scarcity. The turbulent equity markets provided another boost, as investors
sought to take profits and protect capital. Municipal bonds ended up with a
slight loss of 0.08% for the 12 months ended March 31, 2000, as measured by the
Lehman Brothers Municipal Bond Index.
-----------------------------
INSURED MUNICIPAL
INCOME FUND INC.
INVESTMENT GOAL:
High 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
-----------------------------
PORTFOLIO REVIEW
================================================================================
[Graphic omitted]
AVERAGE ANNUAL RETURNS, PERIODS ENDED 3/31/00
NET ASSET VALUE RETURNS FUND1 LIPPER MEDIAN3
--------------------------------------------------------------------------------
6 Months 1.87% 1.83%
1 Year -1.68 -2.79
5 Years 7.03 5.83
Since Inception 6/8/93 4.96 5.43
--------------------------------------------------------------------------------
MARKET PRICE RETURNS FUND2 LIPPER MEDIAN3
--------------------------------------------------------------------------------
6 Months -1.35% -2.63%
1 Year -10.49 -11.72
5 Years 7.84 5.30
Since Inception 6/8/93 2.80 3.84
--------------------------------------------------------------------------------
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.
1
<PAGE>
ANNUAL REPORT
SHARE PRICE, DIVIDEND AND YIELD 3/31/00
--------------------------------------------------------------------------------
Net Asset Value $14.54
Market Price $12.00
Current-Month Dividend $0.064
12-Mo. Dividend $0.768
Market Yield 6.40%
NAV Yield 5.28%
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 outperformed its Lipper peer group median on both net-asset-value
and market-price bases, for all periods except since inception. The main reasons
for the Fund's outperformance were its duration and yield curve positions. The
Fund's duration--a measure of a bond portfolio's sensitivity to interest-rate
changes--remained below the Lipper peer-group average throughout the fiscal year
and helped performance as interest rates rose. The Fund's overweighting in the
15-20 year section of the yield curve also helped performance as the yield curve
steepened in January. The Fund's top sectors mostly remained the same through
the fiscal year.
We intend to pursue opportunities to lengthen the Fund's duration. As of this
writing, we prefer the longer end of the yield curve (20-25 years) and those
bonds with a premium coupon. We are targeting bonds with above-average total
return potential. We have been avoiding the healthcare and resource recovery
sectors, as consoli-dations and competition continue to hamper their
perfor-mance. We remain selectively positive on the power sector--still the
Fund's largest sector weighting--where uncertainty over deregulation has created
buying opportunities.
OUTLOOK
================================================================================
Going into the next fiscal year, we expect to continue to emphasize duration
positioning, sector allocation and security selection in an effort to achieve
competitive total returns. We intend to avoid the shorter-intermediate area of
the curve. Smaller buy- and-hold purchasers typically seek these high quality
areas of the curve, which generally don't compensate holders for the inherent
risks of the securities.
We believe that during the next fiscal period the municipal yield curve will
remain steep and credit spreads will stay wide, creating opportunities for total
returns. We also anticipate supply continuing to diminish. New issuance over the
next two years may drop 33%, providing additional opportunities in a
lower-liquidity environment. Market sentiment has clearly changed; however, the
fundamentals and inflationary threats that haunted us before are still a factor.
The Fed's response to the growing economy continues to be a work in progress.
2
<PAGE>
INSURED MUNICIPAL INCOME FUND INC. ANNUAL REPORT
Due to the particularly strong performance of the long Treasury, municipal
yields as a percentage of taxables are currently at 98%. The historical
five-year average is approximately 85%. As this investment opportunity becomes
more evident to the public, and while the equity markets continue to weather
turbulence, we expect this ratio to return to a more normal range.
PORTFOLIO STATISTICS
CHARACTERISTICS* 3/31/00 9/30/99
--------------------------------------------------------------------------------
Net Assets ($mm) $449.9 $452.5
Weighted Avg Maturity 13.75 yrs 13.71 yrs
Weighted Avg Duration 6.40 yrs 6.22 yrs
Weighted Avg Coupon 5.88% 5.95%
AMT Paper 0% 0%
Leverage 33% 33%
Callable/Maturing Within Five Years 31.3% 45.0%
Callable/Maturing Beyond Five Years 68.7% 55.0%
--------------------------------------------------------------------------------
TOP TEN STATES* 3/31/00 9/30/99
--------------------------------------------------------------------------------
Illinois 16.3% Illinois 16.2%
Texas 12.9 Texas 11.9
Pennsylvania 11.1 Pennsylvania 11.0
Rhode Island 7.0 Rhode Island 6.9
Nevada 5.8 Nevada 5.8
Indiana 4.8 Indiana 4.7
Kentucky 4.6 Kentucky 4.6
Alabama 3.2 South Carolina 3.9
Louisiana 3.2 West Virginia 3.7
New Mexico 3.2 Louisiana 3.2
--------------------------------------------------------------------------------
Total 72.1 Total 71.9
TOP TEN SECTORS* 3/31/00 9/30/99
--------------------------------------------------------------------------------
Power 21.6% Power 22.7%
Water 20.0 Water 20.4
Healthcare 19.0 Healthcare 19.0
Sales Tax 12.1 Sales Tax 12.0
General Obligations 8.7 General Obligations 10.6
Airport 5.4 Airport 5.4
Hotel 3.1 Hotel 3.0
Excise Tax 2.6 Excise Tax 2.5
Sewer 1.7 Gas Distribution 1.6
Gas Distribution 1.7 Housing 1.6
--------------------------------------------------------------------------------
Total 95.9 Total 98.8
* Weightings represent percentages of portfolio assets as of the dates
indicated. The Fund's portfolio is actively managed and its composition will
vary over time.
3
<PAGE>
ANNUAL REPORT
CREDIT QUALITY* 3/31/00 9/30/99
--------------------------------------------------------------------------------
SP-1/VMIG-1 0.2% 0.3%
A1/P1 0.0 0.1
AAA/Aaa 99.8 99.6
--------------------------------------------------------------------------------
Total 100.0 100.0
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.
Sincerely,
/s/ MARGO ALEXANDER /s/ ELBRIDGE T. GERRY, III
------------------- --------------------------
MARGO ALEXANDER ELBRIDGE T. GERRY, III
Chairman and Chief Executive Officer Senior Vice President
Mitchell Hutchins Asset Management Inc. Mitchell Hutchins Asset Management Inc.
Portfolio Manager, Insured Municipal
Income Fund Inc.
/s/ BRIAN M. STORMS
-------------------
BRIAN M. STORMS
President and Chief Operating Officer
Mitchell Hutchins Asset Management Inc.
This letter is intended to assist shareholders in understanding how the Fund
performed during the fiscal year ended March 31, 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.
* Weightings represent percentages of portfolio assets as of the dates
indicated. The Fund's portfolio is actively managed and its composition will
vary over time.
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 before investing.
4
<PAGE>
INSURED MUNICIPAL INCOME FUND INC.
PORTFOLIO OF INVESTMENTS MARCH 31, 2000
<TABLE>
<CAPTION>
PRINCIPAL MOODY'S S&P
AMOUNT RATING RATING MATURITY INTEREST
(000) (UNAUDITED) (UNAUDITED) DATES RATES VALUE
-------- ---------- ---------- ------- ------- ---------
<S> <C> <C> <C> <C> <C> <C>
LONG-TERM MUNICIPAL BONDS--98.28%
ALABAMA--3.18%
$ 1,590 Alabama Water Pollution Control
Authority--Revolving Fund Loan
Series A (AMBAC Insured) .............. Aaa AAA 08/15/17 6.750% $ 1,689,566
5,400 Birmingham Special Care Facilities
Finance Authority--Birmingham
Baptist Medical Center (MBIA Insured).. Aaa AAA 08/15/23 5.500 5,088,420
8,000 Jefferson County Sewer Revenue Refunding
Water Series A (FGIC Insured) ......... Aaa AAA 02/01/27 5.375 7,518,880
-----------
14,296,866
-----------
CALIFORNIA--2.27%
30 California State (FGIC Insured) ......... Aaa AAA 11/01/12 7.000 32,869
970 California State (Pre-refunded with U.S.
Government Securities to 11/01/04 @ 102)
(FGIC Insured) ........................ Aaa AAA 11/01/12 7.000 1,085,624
1,585 Contra Costa Water District
(FGIC Insured) ........................ Aaa AAA 10/01/13 6.000 1,647,766
5,000 Los Angeles County Sales Tax Commission--
Sales Tax Revenue Series B
(FGIC Insured) ........................ Aaa AAA 07/01/15 6.500 5,200,650
2,250 Los Angeles Wastewater System
(MBIA Insured) ........................ Aaa AAA 06/01/20 5.700 2,259,180
-----------
10,226,089
-----------
DELAWARE--2.22%
10,000 Delaware State Economic Development
Authority
Delmarva Power (MBIA Insured) ......... Aaa AAA 06/01/21 5.900 10,001,700
-----------
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 4,099,880
-----------
ILLINOIS--16.07%
4,000 Illinois Development Finance Authority
Pollution Refunding
Commonwealth Edison Company Project
Series D (AMBAC Insured) .............. Aaa AAA 03/01/15 6.750 4,273,880
4,500 Illinois Health Facilities Authority
Franciscan Sisters
Health Care (MBIA Insured) ............ Aaa AAA 09/01/18 5.750 4,587,075
10,000 Illinois Municipal Electric Agency
(AMBAC Insured) ....................... Aaa AAA 02/01/21 5.750 10,319,800
8,000 Central Lake County Joint Action Water
Agency (FGIC Insured) ................. Aaa AAA 05/01/20 5.375 7,581,120
17,220 Chicago 911 System (FGIC Insured) ....... Aaa AAA 01/01/23 5.625 17,891,924
11,400 Chicago--O'Hare International Airport
(MBIA Insured) ........................ Aaa AAA 01/01/15 5.500 to 6.375 11,781,012
4,600 Chicago Public Building Commission
(MBIA Insured) ........................ Aaa AAA 12/01/18 5.750 4,819,144
8,000 Regional Transportation Authority
(AMBAC Insured) ....................... Aaa AAA 06/01/22 6.125 8,231,120
2,750 Regional Transportation Authority
(FGIC Insured) ........................ Aaa AAA 06/01/23 to 06/01/25 5.850 to 7.100 2,810,375
------------
72,295,450
------------
</TABLE>
5
<PAGE>
INSURED MUNICIPAL INCOME FUND INC.
<TABLE>
<CAPTION>
PRINCIPAL MOODY'S S&P
AMOUNT RATING RATING MATURITY INTEREST
(000) (UNAUDITED) (UNAUDITED) DATES RATES VALUE
-------- ---------- ---------- ------- ------- ---------
<S> <C> <C> <C> <C> <C> <C>
LONG-TERM MUNICIPAL BONDS (CONTINUED)
INDIANA--4.73%
$ 2,500 Indiana Health Facilities Finance
Authority--Columbus Regional Hospital
(CGIC Insured) ......................... Aaa AAA 08/15/22 5.500% $ 2,370,525
7,835 Indianapolis Gas & Utilities
(FGIC Insured) ......................... Aaa AAA 06/01/21 5.375 7,403,997
12,000 Marion County Convention Center
(AMBAC Insured) ........................ Aaa AAA 06/01/21 5.500 11,520,960
-----------
21,295,482
-----------
IOWA--1.01%
4,625 Ames Hospital Authority--Mary Greeley
Medical Center (AMBAC Insured) ......... Aaa AAA 08/15/22 5.750 4,527,829
-----------
KENTUCKY--4.51%
1,150 Kentucky Development Finance Authority
Hospital Revenue--St. Luke Hospital
Incorporated Series A (MBIA Insured) ... Aaa AAA 10/01/21 7.000 1,212,939
17,530 Louisville & Jefferson County
(AMBAC Insured) ........................ Aaa AA 05/15/24 to
05/15/25 6.500 to 6.750 19,061,408
-----------
20,274,347
-----------
LOUISIANA--3.17%
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 10,590,585
1,710 Louisiana Public Facilities Authority--
Tulane University (FGIC Insured) ......... Aaa AAA 02/15/18 5.750 1,717,062
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 1,950,672
-----------
14,258,319
-----------
MAINE--2.03%
3,105 Maine Health & Higher Educational
Facilities Authority Revenue
(FSA Insured) .......................... Aaa AAA 07/01/23 5.500 2,933,666
4,785 Maine Health & Higher Educational
Facilities Authority Revenue
(Pre-refunded with U.S. Government
Securities to 07/01/12 @ 100)
(FSA Insured) .......................... NR AAA 07/01/23 5.500 4,544,075
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 1,646,835
-----------
9,124,576
-----------
MASSACHUSETTS--2.33%
10,000 Massachusetts State Health & Educational
Facility Brigham & Woman's Hospital
(MBIA Insured) ......................... Aaa AAA 07/01/24 6.750 10,481,300
-----------
</TABLE>
6
<PAGE>
INSURED MUNICIPAL INCOME FUND INC.
<TABLE>
<CAPTION>
PRINCIPAL MOODY'S S&P
AMOUNT RATING RATING MATURITY INTEREST
(000) (UNAUDITED) (UNAUDITED) DATES RATES VALUE
-------- ---------- ---------- ------- ------- ---------
<S> <C> <C> <C> <C> <C> <C>
LONG-TERM MUNICIPAL BONDS (CONTINUED)
MICHIGAN--1.50%
$ 7,020 Michigan State Housing Finance Authority
(AMBAC Insured) ........................ Aaa AAA 04/01/23 5.900% $ 6,763,700
-----------
NEVADA--5.73%
7,750 Clark County Airport-McCarran International
Airport (AMBAC Insured) ................ Aaa AAA 07/01/22 6.000 8,099,990
4,000 Clark County General Obligation Bonds
(AMBAC Insured) ........................ Aaa AAA 06/01/16 6.000 4,102,880
2,000 Clark County Sanitation District
(FGIC Insured) ......................... Aaa AAA 07/01/11 5.700 2,044,320
11,500 Washoe County Gas and Water Sierra Power
(MBIA Insured) ......................... Aaa AAA 06/01/23 5.900 11,533,350
-----------
25,780,540
-----------
NEW HAMPSHIRE--1.31%
5,000 New Hampshire Higher Education & Health
Authority--Lakes Region Hospital
(FGIC Insured) ......................... Aaa AAA 01/01/17 5.500 4,882,000
1,000 New Hampshire Higher Education & Health
Authority--University of New Hampshire
(MBIA Insured) ......................... Aaa AAA 07/01/24 5.750 989,580
-----------
5,871,580
-----------
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 5,246,400
-----------
NEW MEXICO--3.12%
8,850 Gallup Pollution Control Revenue Plains
Electric (MBIA Insured) ................ Aaa AAA 08/15/17 6.650 9,094,879
4,700 Santa Fe Water Revenue (AMBAC Insured) ... Aaa AAA 06/01/24 6.300 4,953,565
-----------
14,048,444
-----------
NEW YORK--1.15%
2,115 New York Series J (MBIA Insured) ......... Aaa AAA 08/01/13 5.375 2,123,989
1,250 New York State Thruway Authority
Highway & Bridge Trust Fund Series C
(FGIC Insured) ......................... Aaa AAA 04/01/10 5.250 1,255,800
2,000 Long Island Power Authority New York
Electric Systems Revenue General Series A
(FSA Insured) .......................... Aaa AAA 12/01/22 5.125 1,805,140
-----------
5,184,929
-----------
NORTH CAROLINA--0.91%
4,000 Piedmont Triad Airport Authority
Airport Revenue Series A (MBIA Insured). Aaa AAA 07/01/16 6.750 4,100,080
-----------
</TABLE>
7
<PAGE>
INSURED MUNICIPAL INCOME FUND INC.
<TABLE>
<CAPTION>
PRINCIPAL MOODY'S S&P
AMOUNT RATING RATING MATURITY INTEREST
(000) (UNAUDITED) (UNAUDITED) DATES RATES VALUE
-------- ---------- ---------- ------- ------- ---------
<S> <C> <C> <C> <C> <C> <C>
LONG-TERM MUNICIPAL BONDS (CONTINUED)
OHIO--0.74%
$ 3,000 Cleveland Public Power Systems Revenue--
First Mortgage Series A (MBIA Insured).. Aaa AAA 11/15/24 7.000% $ 3,314,700
-----------
PENNSYLVANIA--10.91%
16,435 Pennsylvania Intergovernmental Cooperative
Authority (MBIA Insured) ............... Aaa AAA 06/15/15 to 06/15/23 5.600 to 5.62 516,840,375
2,675 Pennsylvania Intergovernmental Cooperative
Authority Philadelphia Funding Program
(FGIC Insured) ......................... Aaa AAA 06/15/14 7.000 2,930,088
6,130 North Wales Water Authority
(FGIC Insured) ......................... Aaa AAA 11/01/16 5.500 5,992,872
2,000 Philadelphia Pennsylvania (FSA Insured) .. Aaa AAA 03/15/13 to 03/15/14 5.250 1,969,440
3,750 Philadelphia Pennsylvania School District
Series A (MBIA Insured) ................ Aaa AAA 04/01/16 5.250 3,612,487
10,530 Philadelphia Water & Waste Water Revenue
(FSA Insured) .......................... Aaa AAA 06/15/15 5.500 10,507,571
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 7,237,230
-----------
49,090,063
-----------
RHODE ISLAND--6.90%
14,000 Rhode Island Convention Center Authority
(AMBAC Insured) ........................ Aaa AAA 05/15/27 5.750 13,657,420
5,140 Rhode Island Depositors Economic Protection
Corporation (FSA Insured) .............. NR AAA 08/01/14 5.750 5,338,352
4,860 Rhode Island Depositors Economic Protection
Corporation (FSA Insured) .............. Aaa AAA 08/01/14 5.750 5,067,328
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 6,993,770
-----------
31,056,870
-----------
SOUTH CAROLINA--2.78%
10,000 South Carolina Public Services Authority
(MBIA Insured) ......................... Aaa AAA 07/01/21 to
07/01/31 5.500 to 6.000 9,877,600
2,625 Charleston County Hospital Facilities
Authority--
Bon Secours Health System (FSA Insured). Aaa AAA 08/15/25 5.625 2,620,223
-----------
12,497,823
-----------
TENNESSEE--1.10%
5,000 Sullivan County Health Education and Housing
Facilities Board--Holston Valley Health
(MBIA Insured) ......................... Aaa AAA 02/15/20 5.750 4,952,900
-----------
</TABLE>
8
<PAGE>
INSURED MUNICIPAL INCOME FUND INC.
<TABLE>
<CAPTION>
PRINCIPAL MOODY'S S&P
AMOUNT RATING RATING MATURITY INTEREST
(000) (UNAUDITED) (UNAUDITED) DATES RATES VALUE
-------- ---------- ---------- ------- ------- ---------
<S> <C> <C> <C> <C> <C> <C>
LONG-TERM MUNICIPAL BONDS (CONCLUDED)
TEXAS--12.67%
$ 7,000 Austin Utilities System (AMBAC Insured).. Aaa AAA 11/15/16 5.750% $ 7,034,930
7,945 Bexar Metropolitan Water District
Waterworks Systems Revenue
(MBIA Insured) ........................ Aaa AAA 05/01/22 5.875 7,955,884
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 6,068,013
7,000 Houston Water and Sewer Systems Revenue
Junior Lien Series C (FGIC Insured) ... Aaa AAA 12/01/22 5.250 6,475,770
3,620 Lower Colorado River Authority Texas
Revenue Refunding ..................... Aaa AAA 05/15/13 6.000 3,804,693
10,000 Lubbock Health Facilities--Methodist
Hospital (AMBAC Insured) .............. Aaa AAA 12/01/22 5.900 10,488,800
9,005 Matagorda County Navigation District 1
Revenue--Houston Light & Power
(AMBAC Insured) ....................... Aaa AAA 03/01/27 6.700 9,416,168
4,955 San Antonio Water Revenue (MBIA Insured). Aaa AAA 05/15/16 6.000 5,000,685
720 San Antonio Water Revenue
(Pre-refunded with U.S. Government
Securities to 05/15/11 @ 100)
(MBIA Insured) ........................ Aaa AAA 05/15/16 6.000 757,512
-----------
57,002,455
-----------
WASHINGTON--2.10%
4,000 Washington State Health Care Facilities--
Tacoma Hospital (FGIC Insured) ........ Aaa AAA 08/15/22 5.750 4,156,200
5,000 Metropolitan Seattle Sewer (MBIA Insured) Aaa AAA 01/01/33 6.300 5,279,450
-----------
9,435,650
-----------
WEST VIRGINIA--2.70%
2,245 West Virginia State Water Development
Authority (FSA Insured) ............... Aaa AAA 11/01/29 5.750 2,213,458
10,000 Marshall County Pollution Authority
Ohio Power (MBIA Insured) ............. Aaa AAA 04/01/22 5.900 9,936,700
-----------
12,150,158
-----------
WISCONSIN--1.06%
1,500 Wisconsin Health & Educational Facilities--
Bellin Memorial Hospital (AMBAC Insured) Aaa AAA 02/15/19 5.500 1,437,075
3,500 Wisconsin State Health & Educational
Facilities--
Hospital Sisters Health System
(MBIA Insured) ........................ Aaa AAA 06/01/18 5.375 3,315,200
-----------
4,752,275
-----------
Total Long-Term Municipal Bonds (cost--$431,201,361) 442,130,405
-----------
</TABLE>
9
<PAGE>
INSURED MUNICIPAL INCOME FUND INC.
<TABLE>
<CAPTION>
PRINCIPAL MOODY'S S&P
AMOUNT RATING RATING MATURITY INTEREST
(000) (UNAUDITED) (UNAUDITED) DATES RATES VALUE
-------- ---------- ---------- ------- ------- ---------
<S> <C> <C> <C> <C> <C> <C>
SHORT-TERM MUNICIPAL NOTES--0.25%
MICHIGAN--0.02%
$ 100 University Michigan University Revenues
Refunding Hospital Series A ........... VMIG1 A1+ 04/03/00 5.050%* $ 100,000
------------
NEW JERSEY--0.19%
810 New Jersey Economic Development Authority
Revenue Economic Growth Series B ...... VMIG1 NR 04/03/00 5.400* 810,000
------------
NEW YORK--0.02%
100 New York Series A-8 ..................... VMIG1 A1+ 04/03/00 3.750* 100,000
------------
TEXAS--0.02%
100 Guadalupe-Blanco River Authority
Pollution Control Revenue ............. VMIG1 A1+ 04/03/00 3.800* 100,000
------------
Total Short-Term Municipal Notes
(cost--$1,110,000) 1,110,000
------------
Total Investments
(cost--$432,311,361)--98.53% .......... 443,240,405
Other assets in excess of liabilities--1.47% 6,635,642
------------
Net Assets--100.00% .............................. $449,876,047
============
</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 March 31, 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
10
<PAGE>
INSURED MUNICIPAL INCOME FUND INC.
STATEMENT OF ASSETS AND LIABILITIES MARCH 31, 2000
<TABLE>
<CAPTION>
ASSETS:
<S> <C>
Investments in securities, at value (cost--$432,311,361) ..................... $443,240,405
Cash ......................................................................... 41,012
Interest receivable .......................................................... 7,495,630
Other assets ................................................................. 3,980
------------
Total assets ................................................................. 450,781,027
------------
LIABILITIES:
Dividends payable to preferred shareholders .................................. 327,553
Payable to investment adviser and administrator .............................. 293,065
Accrued expenses and other liabilities ....................................... 284,362
------------
Total liabilities ............................................................ 904,980
------------
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 .......................................... 1,058,084
Accumulated net realized loss from investment transactions ................... (14,810,759)
Net unrealized appreciation of investments ................................... 10,929,044
------------
Net assets applicable to common shareholders ................................. 299,876,047
------------
Total net assets ............................................................. $449,876,047
============
Net asset value per common share ($299,876,047 applicable to 20,628,363 common
shares outstanding) ....................................................... $14.54
======
</TABLE>
See accompanying notes to financial statements
11
<PAGE>
INSURED MUNICIPAL INCOME FUND INC.
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE YEAR
ENDED
MARCH 31, 2000
--------------
<S> <C>
INVESTMENT INCOME:
Interest ................................................................... $ 25,828,894
------------
EXPENSES:
Investment advisory and administration ..................................... 4,089,518
Auction Preferred Shares expenses .......................................... 382,851
Custody and accounting ..................................................... 230,997
Legal and audit ............................................................ 98,698
Reports and notices to shareholders ........................................ 68,182
Transfer agency and service fees ........................................... 42,071
Directors' fees ............................................................ 10,500
Other expenses ............................................................. 28,335
------------
4,951,152
Less: Fee waiver from adviser and administrator ............................ (567,989)
------------
Net expenses ............................................................... 4,383,163
------------
Net investment income ...................................................... 21,445,731
------------
REALIZED AND UNREALIZED LOSSES FROM INVESTMENT TRANSACTIONS:
Net realized losses from investment transactions ........................... (22,336)
Net change in unrealized appreciation/depreciation of investments .......... (21,741,401)
------------
NET REALIZED AND UNREALIZED LOSSES FROM INVESTMENT TRANSACTIONS ............ (21,763,737)
------------
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS ....................... $ (318,006)
============
</TABLE>
See accompanying notes to financial statements
13
<PAGE>
INSURED MUNICIPAL INCOME FUND INC.
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
MARCH 31,
-----------------------------
2000 1999
------------- -------------
<S> <C> <C>
FROM OPERATIONS:
Net investment income ........................................... $ 21,445,731 $ 21,110,115
Net realized gains (losses) from investment transactions ........ (22,336) 14,887
Net change in unrealized appreciation/depreciation of investments (21,741,401) 3,450,143
------------ ------------
Net increase (decrease) in net assets resulting from operations.. (318,006) 24,575,145
------------ ------------
DIVIDENDS FROM:
Net investment income--common stockholders ...................... (15,842,583) (15,842,583)
Net investment income--preferred stockholders ................... (5,324,084) (5,133,034)
------------ ------------
Total dividends to stockholders ................................. (21,166,667) (20,975,617)
------------ ------------
Net increase (decrease) in net assets ........................... (21,484,673) 3,599,528
NET ASSETS:
Beginning of year ............................................... 471,360,720 467,761,192
------------ ------------
End of year (including undistributed net investment income
of $1,058,084 and $781,273, respectively) ...................... $449,876,047 $471,360,720
============ ============
</TABLE>
See accompanying notes to financial statements
13
<PAGE>
INSURED MUNICIPAL INCOME FUND INC.
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE YEAR
ENDED
MARCH 31, 2000
--------------
<S> <C>
CASH FLOWS PROVIDED BY OPERATING ACTIVITIES:
Interest received ........................................................... $25,711,774
Expenses paid (net of fee waivers) .......................................... (5,030,313)
Sale of short-term portfolio investments, net ............................... 1,383,000
Purchase of long-term portfolio investments ................................. (35,742,087)
Sale of long-term portfolio investments ..................................... 34,810,971
-----------
Net cash flows provided by operating activities ............................. 21,133,345
-----------
CASH FLOWS USED IN FINANCING ACTIVITIES:
Dividends paid from net investment income to common stockholders ............ (15,842,583)
Dividends paid from net investment income to preferred stockholders ......... (5,249,750)
-----------
Net cash flows used in financing activities ................................. (21,092,333)
-----------
Net increase in cash ........................................................ 41,012
Cash at beginning of year ................................................... --
-----------
Cash at end of year ......................................................... $ 41,012
===========
RECONCILIATION OF NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS TO NET
CASH FLOWS PROVIDED BY OPERATING ACTIVITIES:
Net decrease in net assets resulting from operations ........................ $ (318,006)
-----------
Decrease in investments, at value ........................................... 22,126,706
Increase in interest receivable ............................................. (28,205)
Decrease in other assets .................................................... 543
Decrease in payable to investment adviser and administrator ................. (17,242)
Decrease in payable to Custodian ............................................ (580,895)
Decrease in accrued expenses and other liabilities .......................... (49,556)
-----------
Total adjustments ........................................................... 21,451,351
-----------
Net cash flows provided by operating activities ............................. $21,133,345
===========
</TABLE>
See accompanying notes to financial statements
14
<PAGE>
NOTES TO FINANCIAL STATEMENTS
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 generally
accepted accounting principles 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"),
a wholly owned subsidiary of PaineWebber Incorporated ("PaineWebber") and
investment adviser and administrator of the fund. 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 of directors has approved an investment advisory and
administration contract ("Advisory Contract") with Mitchell Hutchins, under
which Mitchell Hutchins serves as investment adviser and administrator of the
Fund. In accordance
15
<PAGE>
NOTES TO FINANCIAL STATEMENTS
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 year ended March 31, 2000, Mitchell
Hutchins voluntarily waived $567,989 in investment advisory and administration
fees from the Fund.
INVESTMENTS IN SECURITIES
For federal income tax purposes, the cost of securities owned at March 31,
2000 was substantially the same as the cost of securities for financial
statement purposes.
At March 31, 2000, the components of the net unrealized appreciation of
investments were as follows:
Gross appreciation (from investments having an excess
of value over cost) .............................. $13,173,896
Gross depreciation (from investments having an excess
of cost over value) .............................. (2,244,852)
-----------
Net unrealized appreciation of investments .......... $10,929,044
===========
For the year ended March 31, 2000, total aggregate purchases and sales of
portfolio securities, excluding short-term securities, were $35,742,087 and
$34,810,971, 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.
To reflect reclassifications for the Fund arising from permanent "book/tax"
differences for the year ended March 31, 2000, undistributed net investment
income was decreased by $2,253 and paid-in-capital was increased by $2,253.
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, 17,821 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 2.990% to 5.900% for the year ended
March 31, 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.
16
<PAGE>
INSURED MUNICIPAL INCOME FUND INC.
FINANCIAL HIGHLIGHTS
Selected data for a share of common stock outstanding throughout each year is
presented below:
<TABLE>
<CAPTION>
FOR THE YEARS ENDED MARCH 31,
--------------------------------------------------
2000 1999 1998 1997 1996
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year .......................... $ 15.58 $ 15.40 $ 14.10 $ 14.11 $ 13.42
------- ------- ------- ------- -------
Net investment income ....................................... 1.04 1.02 1.03 1.05 1.06
Net realized and unrealized gains (losses) from investments . (1.05) 0.18 1.30 (0.03) 0.67
------- ------- ------- ------- -------
Net increase (decrease) from investment operations .......... (0.01) 1.20 2.33 1.02 1.73
------- ------- ------- ------- -------
Dividends:
From net investment income--common stockholders .......... (0.77) (0.77) (0.77) (0.77) (0.76)
From net investment income--preferred stockholders ....... (0.26) (0.25) (0.26) (0.26)` (0.28)
------- ------- ------- ------- -------
Total dividends to stockholders ............................. (1.03) (1.02) (1.03) (1.03) (1.04)
------- ------- ------- ------- -------
Net asset value, end of year ................................ $ 14.54 $ 15.58 $ 15.40 $ 14.10 $ 14.11
======= ======= ======= ======= =======
Per share market value, end of year ......................... $ 12.00 $ 14.25 $ 13.56 $ 12.00 $ 12.13
======= ======= ======= ======= =======
Total investment return(1) .................................. (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 ............... 1.44% 1.46% 1.49% 1.38% 1.33%
Total expenses before waivers from adviser ............... 1.63% 1.65% 1.74% 1.76% 1.65%
Net investment income before preferred stock dividends ... 7.05% 6.58% 6.84% 7.37% 7.45%
Preferred stock dividends ................................ 1.75% 1.60% 1.75% 1.81% 1.97%
Net investment income available to common stockholders ... 5.30% 4.98% 5.09% 5.56% 5.48%
Supplemental data:
Net assets, end of year (000's) .......................... $449,876 $471,361 $467,761 $440,758 $441,040
Portfolio turnover rate 8% 5% 6% 0% 4%
Asset coverage per share of preferred stock, end of year.. $149,959 $157,120 $155,920 $146,919 $147,013
</TABLE>
--------------
(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 year 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 does
not reflect brokerage commissions.
17
<PAGE>
INSURED MUNICIPAL INCOME FUND INC.
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
To Board of Directors and Stockholders
Insured Municipal Income Fund Inc.
We have audited the accompanying statement of assets and liabilities of Insured
Municipal Income Fund Inc., including the portfolio of investments, as of March
31, 2000, and the related statements of operations and cash flows for the year
then ended, the statement of changes in net assets for each of the two years in
the period then ended, and the financial highlights for each of the periods
indicated therein. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the
audits to obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements and financial highlights. Our procedures included
confirmation of securities owned as of March 31, 2000 by correspondence with the
custodian. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material aspects, the financial position of Insured
Municipal Income Fund Inc. at March 31, 2000, the results of its operations and
its cash flows for the year then ended, the changes in its net assets for each
of the two years in the period then ended, and the financial highlights for each
of the indicated periods, in conformity with accounting principles generally
accepted in the United States.
/s/ ERNST & YOUNG LLP
---------------------
New York, New York
May 15, 2000
18
<PAGE>
INSURED MUNICIPAL INCOME FUND INC.
TAX INFORMATION--(UNAUDITED)
We are required by subchapter M of the Internal Revenue Code of 1986, as
amended, to advise you within 60 days of the Fund's fiscal year end (March 31,
2000) as to the federal tax status of distributions received by stockholders
during such fiscal year. Accordingly, we are advising you that all dividends
paid during the period by the Fund were federal tax-exempt interest dividends.
The Fund did not invest in any securities which paid interest subject to the
federal alternative minimum tax for individual taxpayers during its fiscal year.
Therefore, none of the dividends paid by the Fund were subject to such tax.
Because the Fund's fiscal year is not the calendar year, another
notification will be sent in respect of calendar year 2000. The second
notification, which reflects the amount to be used by calendar year taxpayers on
their federal income tax returns, will be made in conjunction with Form 1099
DIVand will be mailed in January 2001. Stockholders are advised to consult their
own tax advisers with respect to the tax consequences of their investment in the
Fund.
19
<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 $69 billion in assets under management as of April
30, 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
WALLSTREET JOURNAL, each Sunday in THE NEW YORK TIMES and each week in BARRON'S,
as well as in numerous other newspapers.
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 8950, Wilmington,
Delaware 19899.
20
<PAGE>
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21
<PAGE>
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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
Mary C. Farrell
PRINCIPAL OFFICERS
Margo N. Alexander Paul H. Schubert
PRESIDENT VICE PRESIDENT AND TREASURER
Dianne E. O'Donnell Elbridge T. Gerry, III
VICE PRESIDENT AND SECRETARY VICE PRESIDENT
Dennis L. McCauley
Vice President
INVESTMENT ADVISER AND
ADMINISTRATOR
MITCHELL HUTCHINS ASSET MANAGEMENT INC.
51 WEST 52ND STREET
NEW YORK, NEW YORK 10019
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.
ANNUAL REPORT
PAINEWEBBER
@2000 PaineWebber Incorporated
All rights reserved.
Member SIPC
Annual Report
