UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM N-Q

QUARTERLY SCHEDULE OF PORTFOLIO HOLDINGS OF REGISTERED
MANAGEMENT INVESTMENT COMPANY

Investment Company Act file number: 811-07528
______________________________________________

Insured Municipal Income Fund Inc.
______________________________________________________________________________
(Exact name of registrant as specified in charter)

51 West 52nd Street, New York, New York 10019-6114
______________________________________________________________________________
(Address of principal executive offices) (Zip code)

Mark F. Kemper, Esq.
UBS Global Asset Management
51 West 52nd Street
New York, NY 10019-6114
(Name and address of agent for service)
 
Copy to:
Jack W. Murphy, Esq.
Dechert LLP
1775 I Street, N.W.
Washington, DC 20006-2401

Registrant’s telephone number, including area code: 212-882 5000

Date of fiscal year end: March 31

Date of reporting period: June 30, 2008

Item 1. Schedule of Investments

Insured Municipal Income Fund Inc.
Schedule of investments – June 30, 2008 (unaudited)

    Moody’s       S&P       Face        
    rating       rating       amount ($)       Value ($)
   
     
     
     
Long-term municipal bonds—169.16%                            
California — 32.25%                            
California State General Obligation (FGIC Insured),                            

7.000%, due 11/01/12

   A1       A+       30,000       30,436

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

                            

5.000%, due 08/01/25

   Aaa       Aaa       5,000,000       5,165,400

5.000%, due 06/01/26

   Aaa       Aaa       9,000,000       9,270,090

Los Angeles County Sanitation Districts Financing Authority Revenue-Capital Projects-Series A (FSA Insured),

                            

5.000%, due 10/01/20

   Aaa       Aaa       8,475,000       8,773,151

Los Angeles Wastewater System Revenue Refunding-Subseries A (MBIA Insured),

                            

5.000%, due 06/01/26

   A1       AA       11,625,000       11,786,355

Los Angeles Water & Power Revenue-Power System-Series A, Subseries A-2 (MBIA-IBC Insured),

                            

5.000%, due 07/01/30

   Aa3       AA       5,000,000       5,048,450
Los Angeles Water & Power Revenue-Power System-Series B (FSA Insured),                            

5.000%, due 07/01/25

   Aaa       Aaa       6,000,000       6,119,580
Manteca Financing Authority Water Revenue-Series A (MBIA Insured),                            

4.750%, due 07/01/33

   A2       AA       15,000,000       14,242,500

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

                            

5.000%, due 07/01/35

   Aaa       Aaa       10,000,000       10,117,700

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

                            

5.250%, due 06/01/34

   NR       A+       7,160,000       7,187,136

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

                            

5.000%, due 12/01/27

   Aa3       AA       10,000,000       10,091,400

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

                            

5.000%, due 11/01/25

   A1       AA       3,000,000       3,045,330
                           
                            90,877,528
                           
District of Columbia — 4.22%                            

District of Columbia Hospital Revenue Refunding-Medlantic Healthcare-Series A (Escrowed to Maturity) (MBIA Insured),

                            

5.750%, due 08/15/14

   A2       AA       4,000,000       4,015,680

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

                            

5.000%, due 10/01/33

   A1       AA-       6,000,000       5,840,100

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

                            

5.250%, due 10/01/16(1)

   Aa3       AA       2,000,000       2,041,160
                           
                            11,896,940
                           

Insured Municipal Income Fund Inc.
Schedule of investments – June 30, 2008 (unaudited)

    Moody’s       S&P       Face        
    rating       rating       amount ($)       Value ($)
   
     
     
     
Long-term municipal bonds—(continued)                            
Florida — 16.27%                            
Florida State Board of Education-Capital Outlay-Series E (FGIC Insured),                            

5.000%, due 06/01/24

   Aa1       Aaa       8,000,000       8,142,000
Florida State Board of Education Lottery Revenue-Series B (BHAC-CR MBIA Insured),                            

5.000%, due 07/01/26

   Aaa       Aaa       14,000,000       14,422,240

Hillsborough County Port District Revenue-Tampa Port Authority Project-Series A (MBIA Insured),(1)

                            

5.750%, due 06/01/16

   A2       AA       1,060,000       1,103,534

5.750%, due 06/01/17

   A2       AA       1,115,000       1,155,943

5.750%, due 06/01/18

   A2       AA       1,175,000       1,213,904

5.750%, due 06/01/19

   A2       AA       1,240,000       1,277,051

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

                            

5.000%, due 10/01/18(1)

   A2       A-       10,000,000       9,523,200
Miami-Dade County Expressway Authority Toll System Revenue-Series B (FGIC Insured),                            

5.250%, due 07/01/26

   A3       A       3,000,000       3,066,540
Miami-Dade County School Board-Certificates of Participation-Series A (FGIC Insured),                            

5.000%, due 05/01/21

   A3       A       6,000,000       5,960,340
                           
                            45,864,752
                           
Georgia — 6.39%                            
Atlanta Airport Revenue Refunding-Series D (FGIC Insured),                            

5.250%, due 01/01/15(1)

   A1       A+       11,545,000       11,643,710
Columbus Building Authority Lease Revenue-Series A (FGIC Insured),                            

5.250%, due 01/01/16

   Aa3       AA       1,015,000       1,082,487

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

                            

5.750%, due 07/01/14(1)

   A2       AA       5,000,000       5,258,950

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

                            

10.000%, due 01/01/10

   A2       Aaa       15,000       16,616
                           
                            18,001,763
                           
Illinois — 23.53%                            
Chicago Board of Education-Series D (FSA Insured),                            

5.000%, due 12/01/21

   Aaa       Aaa       9,885,000       10,354,340

5.000%, due 12/01/25

   Aaa       Aaa       8,705,000       8,995,312
Chicago General Obligation-Unrefunded Balance-Series A (FSA Insured),                            

5.000%, due 01/01/25

   Aaa       Aaa       260,000       265,512

5.000%, due 01/01/26

   Aaa       Aaa       350,000       356,737
Chicago O’Hare International Airport Revenue,                            

Series A (FSA Insured),

                            

5.000%, due 01/01/19

                   8,960,000       9,317,325

Series B (FSA Insured),

                            

5.000%, due 01/01/18

   Aaa       Aaa       10,670,000       11,120,060

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

                            

5.250%, due 06/01/25

   Aaa       Aaa       6,000,000       6,288,120

5.250%, due 06/01/26

   Aaa       Aaa       6,500,000       6,796,335

Insured Municipal Income Fund Inc.
Schedule of investments – June 30, 2008 (unaudited)

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

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

                            

5.000%, due 01/01/25

   Aaa       Aaa       5,000,000       5,142,950

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

                            

5.750%, due 09/01/18

   A2       AA       4,500,000       4,989,735

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

                            

5.500%, due 12/15/23

   A1       Aaa       2,395,000       2,678,712
                           
                            66,305,138
                           
Indiana — 6.51%                            

Indiana Health & Educational Facilities Financing Authority Hospital Revenue Refunding-Clarian Health Obligation Group-Series B,

                            

5.000%, due 02/1 5/30

   A2       A+       5,000,000       4,697,800

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

                            

5.100%, due 01/15/17(1)

   Baa2       BBB       8,000,000       7,583,920

Indiana State Finance Authority Revenue-Ascension Health-Series E-8 (Mandatory Put 12/15/09 @ 100),

                            

3.500%, due 11/15/36(2)

   Aa1       AA+       5,000,000       5,012,350

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

                            

5.250%, due 08/01/18

   Aa1       AA       1,000,000       1,046,200
                           
                            18,340,270
                           
Maine — 5.29%                            

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

                            

5.500%, due 07/01/23

   Aaa       Aaa       4,785,000       4,855,100

Maine Health & Higher Educational Facilities Authority Revenue-Series A (MBIA Insured),

                            

5.000%, due 07/01/29

   Aa3       NR       10,200,000       10,056,486
                           
                            14,911,586
                           
Massachusetts — 2.71%                            

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

                            

6.000%, due 09/01/21(1)

   A2       AA       1,500,000       1,482,405

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

                            

5.000%, due 08/15/25

   Aaa       Aaa       6,000,000       6,155,100
                           
                            7,637,505
                           

Insured Municipal Income Fund Inc.
Schedule of investments – June 30, 2008 (unaudited)

    Moody’s       S&P       Face        
    rating       rating       amount ($)       Value ($)
   
     
     
     
Long-term municipal bonds—(continued)                            
Michigan — 4.08%                            

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

                            

5.000%, due 08/15/25

   Aa2       AA       5,525,000       5,524,668

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

                            

5.000%, due 12/01/26

   Aa2       AA       6,000,000       5,971,140
                           
                            11,495,808
                           
Minnesota — 1.80%                            

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

                            

6.000%, due 01/01/19(1),(3)

   NR       AA-       5,000,000       5,071,700
                           
Nevada — 2.75%                            

Clark County-Bond Bank-Unrefunded Balance (MBIA Insured),

                            

5.000%, due 06/01/32

   Aa1       AA+       7,820,000       7,755,016
                           
New Mexico — 3.02%                            

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

                            

5.000%, due 01/01/23

   Aaa       Aaa       4,130,000       4,200,623

5.000%, due 07/01/23

   Aaa       Aaa       4,230,000       4,302,333
                           
                            8,502,956
                           
New York — 15.43%                            

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

                            

5.250%, due 11/15/24

   Aaa       Aaa       5,650,000       5,869,898

New York City Industrial Development Agency Special Facilities Revenue-Terminal One Group Association Project,(1)

                            

5.500%, due 01/01/15

   A3       BBB+       5,000,000       5,216,200

5.500%, due 01/01/16

   A3       BBB+       6,685,000       6,959,820

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

                            

5.500%, due 01/01/18(1),(2)

   A3       BBB+       2,750,000       2,829,943

New York City Municipal Water Finance Authority Water & Sewer System Revenue-Series C (MBIA Insured),

                            

5.000%, due 06/15/26

   Aa2       AA+       7,000,000       7,185,920

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

                            

5.000%, due 01/01/26

   Aaa       Aaa       10,000,000       10,309,600

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

                            

5.125%, due 11/15/26

   Aa3       AA       5,000,000       5,104,400
                           
                            43,475,781
                           

Insured Municipal Income Fund Inc.
Schedule of investments – June 30, 2008 (unaudited)

    Moody’s       S&P       Face        
    rating       rating       amount ($)       Value ($)
   
     
     
     
Long-term municipal bonds—(continued)                            
Ohio — 3.12%                            

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

                            

5.125%, due 06/01/24

   Baa3       BBB       9,710,000       8,781,336
                           
Pennsylvania — 6.93%                            

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

                            

5.000%, due 12/01/23

   A2       AA       15,390,000       15,579,605

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

                            

5.500%, due 07/01/18(1)

   A2       A+       4,000,000       3,965,160
                           
                            19,544,765
                           
South Carolina — 3.72%                            

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

                            

5.250%, due 02/15/25

   A2       AA       2,500,000       2,556,275

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

                            

5.000%, due 10/01/33

   Aa3       NR       8,180,000       7,928,465
                           
                            10,484,740
                           
Tennessee — 0.71%                            

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

                            

6.000%, due 03/01/24(1)

   Aa3       AA       2,000,000       2,013,000
                           
Texas — 19.98%                            

Fort Bend Independent School District Refunding-Series A (PSF-GTD),

                            

5.250%, due 08/15/26

   NR       Aaa       5,170,000       5,330,632

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

                            

5.000%, due 08/15/30

   Aaa       Aaa       10,000,000       10,080,900

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

                            

5.250%, due 05/15/23

   A1       AA       13,500,000       13,682,925

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

                            

5.250%, due 05/15/25

   A1       AA       5,665,000       5,796,768

Jefferson County General Obligation Refunding (FGIC Insured),

                            

5.250%, due 08/01/20

   A1       A+       2,000,000       2,051,580

San Antonio Electric & Gas System,

                            

5.000%, due 02/01/24

   Aa1       AA       10,000,000       10,330,400

Wylie Independent School District Refunding (PSF-GTD),

                            

5.000%, due 08/15/30

   Aaa       Aaa       9,000,000       9,051,120
                           
                            56,324,325
                           

Insured Municipal Income Fund Inc.
Schedule of investments – June 30, 2008 (unaudited)

    Moody’s       S&P       Face          
    rating       rating       amount ($)       Value ($)  
   
     
     
     
 
Long-term municipal bonds—(concluded)                              
Washington — 10.04%                              

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

                              

6.050%, due 07/01/32(1)

   Aa2       AA       15,000,000       15,393,000  

Cowlitz County School District No. 458 Kelso-Unrefunded Balance (FSA Insured),

                              

5.750%, due 12/01/15

   Aaa       NR       865,000       933,015  

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

                              

5.000%, due 12/01/18

   A1       AA       1,500,000       1,551,180  

5.000%, due 12/01/19

   A1       AA       2,095,000       2,150,371  

Washington State-Series 2007A (FSA Insured),

                              

5.000%, due 07/01/24

   Aaa       Aaa       8,000,000       8,260,880  
                           
                            28,288,446  
                           
Wisconsin — 0.41%                              
Ladysmith-Hawkins School District Refunding (FGIC Insured),                              

5.500%, due 04/01/20

   NR       NR       1,105,000       1,156,537  
                           
Total long-term municipal bonds (cost — $490,910,735)                           476,729,892  
                           
Short-term municipal note(4)—2.48%                              
Massachusetts — 2.48%                              
Massachusetts Health & Educational Facilities Authority Revenue (Harvard University)-Series R,                              

1.550%, due 07/01/08 (cost — $7,000,000)

   VMIG-1       A-1+       7,000,000       7,000,000  
                           
Total investments (cost — $497,910,735)(5),(6) — 171.64%                           483,729,892  
                           
Other assets in excess of liabilities — 2.87%                           8,101,273  
                           
Liquidation value of auction preferred shares — (74.51)%                           (210,000,000 )
                           
Net assets applicable to common shareholders — 100.00%                           281,831,165  
                           

(1)   Security subject to Alternative Minimum Tax.
     
(2)   Floating rate security. The interest rate shown is the current rate as of June 30, 2008.
     
(3)   Entire amount delivered to broker as collateral for futures transactions.
     
(4)   Variable rate demand notes are payable on demand. The maturity date shown is the next interest rate reset date. The interest rate shown is the current rate as of June 30, 2008.
     
(5)   Cost of investments shown approximates cost for federal income tax purposes. Gross unrealized appreciation of investments and gross unrealized depreciation of investments at June 30, 2008 were $1,190,296 and $15,371,139, respectively, resulting in net unrealized depreciation of investments of $14,180,843.
     
 (6)   The Fund calculates its net asset value based on the current market value, where available, for its portfolio securities. The Fund normally obtains market values for its securities from independent pricing sources and broker-dealers. Independent pricing sources may use last reported sale prices, current market quotations or valuations from computerized “matrix” systems that derive values based on comparable securities. A matrix system incorporates parameters such as security quality, maturity and coupon, and/or research and evaluations by its staff, including review of broker-dealer market price quotations, if available, in determining the valuation of the portfolio securities. If a market value is not available from an independent pricing source for a particular security, that security is valued at fair value as determined in good faith by or under the direction of the Fund’s Board of Directors (the “Board”). Various factors may be reviewed in order to make a good faith determination of a security’s fair value. These factors may include, but are not limited to, the type and cost of the security; contractual or legal restrictions on resale of the security; relevant financial or business developments of the issuer; actively traded similar or related securities; conversion or exchange rights on the security; related corporate actions; and changes in overall market conditions. If events occur that materially affect the value of securities between the close of trading in those securities and the close of regular trading on the New York Stock Exchange, the securities are fair valued. The amortized cost method of valuation, which approximates market value, generally is used to value short-term debt instruments with sixty days or less remaining to maturity, unless the Board or its delegate determines that this does not represent fair value. Securities traded in the over-the-counter (“OTC”) market are valued at the last bid price available on the valuation date prior to valuation.
     
    In September 2006, the Financial Accounting Standards Board released Statement of Financial Accounting Standards No. 157 (“FAS 157”). FAS 157 requires disclosure surrounding the various inputs that are used in determining the value of the Fund’s investments. These inputs are summarized into the three broad levels listed below:
     
    Level 1 - Quoted prices in active markets for identical securities.
    Level 2 - Other significant observable inputs, including but not limited to, quoted prices for similar securities, interest rates, prepayment speeds and credit risks.
    Level 3 - Unobservable inputs inclusive of the Fund’s own assumptions in determining the value of investments.

The following is a summary of the inputs used as of June 30, 2008 in valuing the Fund’s assets:

                  Measurements at 06/30/08
            Quoted prices in              
            active markets for     Significant other        
            identical assets     observable inputs     Unobservable inputs  
Description     Total ($)   (Level 1) ($)     (Level 2) ($)     (Level 3) ($)  
   
   
   
   
 
Assets:                          
Securities     483,729,892     —     483,729,892     —  
     
   
   
   
 
                           
Liabilities:                          
Derivatives     141,392     141,392     —     —  
     
   
   
   
 

     
AMBAC   American Municipal Bond Assurance Corporation
     
BHAC   Berkshire Hathaway Assurance Corporation
     
CR   Custodial Receipts
     
FGIC   Financial Guaranty Insurance Company
     
FHA   Federal Housing Authority
     
FSA   Financial Security Assurance
     
GTD   Guaranteed
     
IBC   Insured Bond Certificate
     
MBIA   Municipal Bond Investors Assurance
     
NR   Not Rated
     
PSF   Permanent School Fund
     
XLCA   XL Capital Assurance

Futures contracts              
                           
Number of       Expiration         Current   Unrealized
contracts   Sale contracts   dates   Proceeds ($)   value ($)   depreciation ($)
  
 
 
 
   
50   US Treasury Bond 20 Year Futures   September 2008   5,692,109     5,779,688     (87,579 )
40   US Treasury Note 10 Year Futures   September 2008   4,503,062     4,556,875     (53,813 )
           
   
   
 
            10,195,171     10,336,563     (141,392 )
           
   
   
 

For more information regarding the Fund’s other significant accounting policies, please refer to the Fund’s annual report to shareholders dated March 31, 2008.


Item 2. Controls and Procedures.

(a)  
The registrant’s principal executive officer and principal financial officer have concluded that the registrant’s disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940, as amended (“Investment Company Act”)) are effective based on their evaluation of these controls and procedures as of a date within 90 days of the filing date of this document.
     
(b)  
The registrant’s principal executive officer and principal financial officer are aware of no changes in the registrant’s internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act) that occurred during the registrant’s last fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.

Item 3. Exhibits.

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

SIGNATURES

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

Insured Municipal Income Fund Inc.

By:   /s/ Kai R. Sotorp
    Kai R. Sotorp
    President
     
Date:   August 29, 2008

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

By:   /s/ Kai R. Sotorp
    Kai R. Sotorp
    President
     
Date:   August 29, 2008
     
By:   /s/ Thomas Disbrow
    Thomas Disbrow
    Vice President and Treasurer
     
Date:   August 29, 2008